<PAGE>
File Nos. 33-82646 and 811-5140
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[_]
PRE-EFFECTIVE AMENDMENT NO. [_]
[X]
POST-EFFECTIVE AMENDMENT NO. 4
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[X]
AMENDMENT NO. 16
(CHECK APPROPRIATE BOX OR BOXES.)
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT V
(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) 572-5060
SANDRA M. DADALT, ESQUIRE
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
JOHN HANCOCK PLACE
BOSTON, MA 02217
(NAME AND ADDRESS OF AGENT FOR SERVICE)
It is proposed that this filing become effective (check appropriate box)
[_] immediately upon filing pursuant to paragraph (b) of Rule 485
[_] on (date) pursuant to paragraph (b) of Rule 485
[X] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[_] on (date) pursuant to paragraph (a)(1) of Rule 485
If appropriate check the following box
[_] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Pursuant to the provisions of Rule 24f-2, Registrant has registered an
indefinite amount of the securities being offered.
================================================================================
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT V
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
Information................. Not Available
5. General Description of
Registrant, Depositor and
Portfolio Companies......... John Hancock, The Account and the Series
Fund; Voting Privileges
6. Deductions................... Charges Variable Annuity Contracts
7. General Description of
Variable Annuity Contracts.. The Contracts; The Accumulation Period; The
Annuity Period; 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
Values...................... The Contracts; The Accumulation Period;
Variable Account Valuation Procedures;
Performance
11. Redemptions.................. The Accumulation Period; Miscellaneous
Provisions
12. Taxes........................ Federal Income Taxes
13. Legal Proceedings............ Not Applicable
14. Table of Contents of
Statement of
Additional Information...... Table of Contents of Statement of
Additional Information
</TABLE>
<PAGE>
The purpose of this Amendment is to add a new prospectus and related materials
to this Registration Statement, but this Amendment does not supercede or delete
the prospectus in the Amendment to this Registration Statement filed April 30,
1997.
<PAGE>
[LOGO OF JOHN HANCOCK APPEARS HERE]
Mutual Life
Insurance Company
INDIVIDUAL COMBINATION FIXED/VARIABLE ANNUITY CONTRACTS
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT V
JOHN HANCOCK SERVICING OFFICE
P.O. Box 111
Boston, Massachusetts 02117
Telephone 800 REAL LIFE (800-732-5543)
Fax 617-572-5410
PROSPECTUS FEBRUARY , 1998
The individual deferred 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
V ("Account"), a fixed annuity account (the "Fixed Account"), or a combination
of the Fixed Account and up to nine of the subaccounts. The assets of each
subaccount will be invested in a corresponding Portfolio of John Hancock
Variable Series Trust I ("Fund"), a "series type" mutual fund advised by John
Hancock Mutual Life Insurance Company ("John Hancock"). The Fixed Account is a
part of the general account of John Hancock.
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 February , 1998, has been filed with the
Securities and Exchange Commission ("Commission") and is incorporated herein
by reference. This statement, the table of contents of which appears at page
36 of this prospectus, is available upon request and without charge from John
Hancock at the address or telephone number above.
Only the variable features of the Contracts are described in this
prospectus. For a summary of the fixed features, see "Appendix--The Fixed
Account and Fixed Account Value".
For additional information pertaining to the purchase of a Contract as an
Individual Retirement Annuity, see "Appendix--Variable Annuity Information for
Individual Retirement Annuities".
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: Managed, Growth & Income, Equity Index, Large Cap Value, Large
Cap Growth, Mid Cap Value, Mid Cap Growth, Special Opportunities, Real Estate
Equity, Small Cap Value, Small Cap Growth, International Balanced,
International Equities, International Opportunities, Short-Term U.S.
Government, Sovereign Bond, Strategic Bond, and Money Market.
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
IT IS NOT VALID UNLESS ATTACHED TO A CURRENT PROSPECTUS FOR THE FUND.
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SYNOPSIS OF EXPENSE INFORMATION............................................ 4
SPECIAL TERMS.............................................................. 7
SUMMARY INFORMATION........................................................ 8
THE VARIABLE ANNUITY....................................................... 12
JOHN HANCOCK, THE ACCOUNT AND THE SERIES FUND.............................. 12
CHARGES UNDER VARIABLE ANNUITY CONTRACTS................................... 16
Charges For Mortality And Expense Risks.................................. 16
Charges for Administrative Services...................................... 16
Withdrawal Charge........................................................ 16
Nursing Home Waiver...................................................... 18
Variations in Charges.................................................... 18
Premium or Similar Taxes................................................. 18
THE CONTRACTS.............................................................. 20
Purchase of Contracts.................................................... 20
THE ACCUMULATION PERIOD.................................................... 20
Accumulation Shares...................................................... 20
Value of Accumulation Shares............................................. 20
Transfers To or From Subaccounts......................................... 21
Dollar-Cost Averaging.................................................... 21
Surrender of Contract; Partial Withdrawals............................... 21
Systematic Withdrawal.................................................... 22
Death Benefit Before Date of Maturity.................................... 22
THE ANNUITY PERIOD......................................................... 24
Variable Monthly Annuity Payments........................................ 24
Assumed Investment Rate.................................................. 25
Calculation of Annuity Units............................................. 25
Annuity Options.......................................................... 25
Option A: Life Annuity with Five, Ten or Twenty Years Certain............ 25
Option B: Life Annuity Without Refund.................................... 25
Other Conditions......................................................... 26
VARIABLE ACCOUNT VALUATION PROCEDURES...................................... 26
MISCELLANEOUS PROVISIONS................................................... 27
Restriction on Assignment................................................ 27
Deferment of Payment..................................................... 27
Reservation of Rights.................................................... 27
Owner and Beneficiary.................................................... 27
FEDERAL INCOME TAXES....................................................... 27
The Account and John Hancock............................................. 27
Contracts Purchased Other Than to Fund a Tax Qualified Plan.............. 28
Diversification Requirements............................................. 29
Contracts Purchased to Fund a Tax Qualified Plan......................... 29
PERFORMANCE................................................................ 34
STATE REGULATION........................................................... 34
REPORTS.................................................................... 35
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
VOTING PRIVILEGES......................................................... 35
The Account............................................................. 35
John Hancock............................................................ 35
CHANGES IN APPLICABLE LAW--FUNDING AND OTHERWISE.......................... 35
LEGAL MATTERS............................................................. 35
DISTRIBUTION OF THE CONTRACTS............................................. 36
REGISTRATION STATEMENT.................................................... 36
EXPERTS................................................................... 36
FINANCIAL STATEMENTS...................................................... 36
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION.................. 36
APPENDIX--THE FIXED ACCOUNT AND FIXED ACCOUNT VALUE....................... 37
APPENDIX--VARIABLE ANNUITY INFORMATION FOR INDIVIDUAL RETIREMENT
ANNUITIES................................................................ 39
APPENDIX--ILLUSTRATIVE ACCUMULATED VALUE AND ANNUITY PAYMENT TABLES....... 40
</TABLE>
THE CONTRACTS OFFERED BY THIS PROSPECTUS MAY NOT BE AVAILABLE IN ALL STATES.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, SECURITIES IN ANY STATE TO ANY PERSON TO WHOM IT IS UNLAWFUL TO
MAKE OR SOLICIT AN OFFER IN THAT STATE.
3
<PAGE>
SYNOPSIS OF EXPENSE INFORMATION
The purpose of this 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 Account as well as those of the Fund.
This synopsis does not include any premium taxes that may be applicable. For a
more complete description of the Account charges, see "Charges under Variable
Annuity Contracts." 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.
CONTRACT EXPENSES
<TABLE>
<S> <C>
Maximum Withdrawal Charge (as a percentage of amount surrendered)/1/..... 7.00%
Annual Contract Fee (for Contracts having an Accumulated Value of $10,000
or less)/2/............................................................. $30
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
Mortality and Expense Risk Charge........................................ 1.10%
Administrative Services Charge........................................... 0.30%
----
Total Separate Account Annual Expenses................................... 1.40%
</TABLE>
ANNUAL FUND OPERATING EXPENSES (as a percentage of average daily net assets)
The figures in the following chart reflect the investment management fees
currently payable and the 1996 non-advisory expenses that would have been
allocated to the Fund under the allocation rules currently in effect.
<TABLE>
<CAPTION>
OTHER FUND OTHER FUND
EXPENSES EXPENSES
AFTER TOTAL ABSENT
MANAGE- EXPENSE FUND EXPENSE
MENT REIMBURSE- OPERATING REIMBURSE-
FUND NAME FEE MENT EXPENSES MENT/3/
--------- ------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Managed................................. 0.34% 0.03% 0.37% N/A
Growth & Income......................... 0.25% 0.03% 0.28% N/A
Equity Index............................ 0.20% 0.25% 0.45% 1.61%
Large Cap Value......................... 0.75% 0.25% 1.00% 1.89%
Large Cap Growth........................ 0.40% 0.05% 0.45% N/A
Mid Cap Value........................... 0.80% 0.25% 1.05% 2.15%
Mid Cap Growth.......................... 0.85% 0.25% 1.10% 2.34%
Special Opportunities................... 0.75% 0.12% 0.87% N/A
Real Estate Equity...................... 0.60% 0.11% 0.71% N/A
Small Cap Value......................... 0.80% 0.25% 1.05% 2.06%
Small Cap Growth........................ 0.75% 0.25% 1.00% 1.55%
International Balanced.................. 0.85% 0.25% 1.10% 1.44%
International Equities.................. 0.60% 0.18% 0.78% N/A
International Opportunities............. 1.00% 0.25% 1.25% 2.76%
Short-Term U.S. Government.............. 0.30% 0.25% 0.55% 0.79%
Sovereign Bond.......................... 0.25% 0.06% 0.31% N/A
Strategic Bond.......................... 0.75% 0.25% 1.00% 1.57%
Money Market............................ 0.25% 0.07% 0.32% N/A
</TABLE>
The following examples should not be considered representations of past or
future expenses; actual expenses may be greater than or less than those shown
above.
4
<PAGE>
EXAMPLES
If you surrender your contract at the end of the applicable time period, you
would pay the following current expenses on a $1,000 investment, assuming 5%
annual return on assets:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
MANAGED......................................... $82 $102 $126 $215
GROWTH & INCOME................................. $81 $ 99 $121 $205
EQUITY INDEX.................................... $82 $105 $130 $223
LARGE CAP VALUE................................. $88 $121 $158 $280
LARGE CAP GROWTH................................ $82 $105 $130 $223
MID CAP VALUE................................... $88 $123 $160 $285
MID CAP GROWTH.................................. $89 $124 $163 $290
SPECIAL OPPORTUNITIES........................... $87 $117 $151 $267
REAL ESTATE EQUITY.............................. $85 $113 $143 $250
SMALL CAP VALUE................................. $88 $123 $160 $285
SMALL CAP GROWTH................................ $88 $121 $158 $280
INTERNATIONAL BALANCED.......................... $89 $124 $163 $290
INTERNATIONAL EQUITIES.......................... $86 $115 $147 $257
INTERNATIONAL OPPORTUNITIES..................... $90 $129 $170 $304
SHORT-TERM US GOVERNMENT........................ $83 $108 $135 $234
SOVEREIGN BOND.................................. $81 $100 $123 $208
STRATEGIC BOND.................................. $88 $121 $158 $280
MONEY MARKET.................................... $81 $101 $123 $209
</TABLE>
If you annuitize at the end of the applicable time period, or if you do not
surrender your Contract, you would pay the following current expenses on a
$1,000 investment, assuming 5% annual return on assets:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
MANAGED......................................... $19 $ 58 $ 99 $215
GROWTH & INCOME................................. $18 $ 55 $ 94 $205
EQUITY INDEX.................................... $19 $ 60 $103 $223
LARGE CAP VALUE................................. $25 $ 77 $131 $280
LARGE CAP GROWTH................................ $19 $ 60 $103 $223
MID CAP VALUE................................... $25 $ 78 $134 $285
MID CAP GROWTH.................................. $26 $ 80 $136 $290
SPECIAL OPPORTUNITIES........................... $24 $ 73 $125 $267
REAL ESTATE EQUITY.............................. $22 $ 68 $116 $250
SMALL CAP VALUE................................. $25 $ 78 $134 $285
SMALL CAP GROWTH................................ $25 $ 77 $131 $280
INTERNATIONAL BALANCED.......................... $26 $ 80 $136 $290
INTERNATIONAL EQUITIES.......................... $23 $ 70 $120 $257
INTERNATIONAL OPPORTUNITIES..................... $27 $ 84 $143 $304
SHORT-TERM U.S. GOVERNMENT...................... $20 $ 63 $108 $234
SOVEREIGN BOND.................................. $18 $ 56 $ 96 $208
STRATEGIC BOND.................................. $25 $ 77 $131 $280
MONEY MARKET.................................... $18 $ 56 $ 96 $209
</TABLE>
5
<PAGE>
/1/ Actual Withdrawal Charges may be lower, as the Withdrawal Charge decreases
each year on each anniversary of the date of deposit and limited free partial
withdrawals are allowed.
<TABLE>
<CAPTION>
Years from date
of deposit to Withdrawal
date of withdrawal Charge
------------------ ----------
<S> <C>
7 or more..................................................... 0%
6 but less than 7............................................. 1%
5 but less than 6............................................. 2%
4 but less than 5............................................. 3%
3 but less than 4............................................. 4%
2 but less than 3............................................. 5%
1 but less than 2............................................. 6%
less than 1................................................... 7%
</TABLE>
An Owner may withdraw in any Contract Year up to 10% of the Accumulated
Value of the Contract as of the beginning of the Contract Year without any
charges.
/2/ The annual contract fee is deducted on Contracts having an Accumulated
Value of less than $10,000. The contract fee is deducted at the beginning of
each Contract year after the first and at a full surrender during a Contract
Year. The contract fee is assessed only during the Accumulation Period. In the
preceding Examples, the annual contract fee has been expressed as an annual
percentage of assets based on past experience concerning Contract fees
collected on other variable annuity contracts using the same Contract fee
provision. John Hancock reserves the right to increase the annual Contract Fee
up to $50, subject to applicable state regulations.
/3/ John Hancock reimburses a Portfolio when the Portfolio's Other Expenses
exceed 0.25% of its average daily net asset value.
6
<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,
contract lapse. The value of an Accumulation Share for each subaccount will
reflect the investment performance of that subaccount and will vary in dollar
amount.
ACCUMULATED VALUE OF A CONTRACT: total value of the Accumulation Shares in
that Contract plus the Fixed Account Value of that Contract, if any.
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 Ten 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.
BENEFICIARY: the person who receives the proceeds in the event of the death of
the Owner of the Annuitant.
CODE: The Internal Revenue Code of 1986, as amended.
CONTRACT YEAR: a period between anniversaries of the date of issue of the
Contract.
FIXED ACCOUNT: an account that is part of JHVLICO's general account in which
all or a part of the Accumulated Value may be held for accumulation at fixed
rates of interest (not less than 3%) declared by JHVLICO periodically at its
discretion.
OWNER: the person(s) or entity, usually the person(s) or entity to whom the
Contract is issued, who has the sole right to exercise all rights and
privileges under the Contract except as otherwise provided in the Contract.
DATE OF MATURITY OF A CONTRACT: the date elected by the Owner as of which
annuity payments will commence. The election is subject to certain conditions
described in "The Annuity Period".
MINIMUM DEATH BENEFIT: the undertaking of John Hancock under a Contract to
make a payment on the death of the Annuitant at any time before the date of
maturity equal to the greatest of (a) the Accumulated Value of the Contract
next determined following John Hancock's receipt of due proof of death, (b)
the aggregate amount of the purchase payments made under the Contract (reduced
to reflect partial withdrawals and withdrawal charges), or (c) in states where
permitted by law, the highest Accumulated Value of the Contract as of any
fifth interval Contract anniversary preceding the Contract anniversary nearest
the Annuitant's 81st birthday, plus the purchase payments made under the
Contract, adjusted for partial withdrawals and withdrawal charges, since such
Contract anniversary. See "The Accumulation Period--Death Benefit Before Date
of Maturity".
NET PURCHASE PAYMENT: the amount of any purchase payment reduced by applicable
taxes, if any, based on the amount of the purchase payment.
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, less any
Withdrawal Charge and contract fee.
SERVICING OFFICE: P.O. Box 111, Boston, MA 02117.
7
<PAGE>
SUMMARY INFORMATION
The Contracts are designed both for purchase by individuals doing their own
retirement planning, including plans and trusts that do not qualify for
special tax treatment under the Internal Revenue Code of 1986, as amended
("Code") and for purchase for persons participating 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 qualified under Sections 401(a) or
403(a) of the Code, known as "corporate plans", (3) plans qualifying under
Section 401(k) of the Code, (4) annuity purchase plans adopted under the
provisions of Section 403(b) of the Code by public school systems and certain
other tax-exempt organizations, (5) individual retirement annuity plans
satisfying the requirements of Section 408 of the Code, and (6) deferred
compensation plans maintained by a state or political subdivision or tax
exempt organizations 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
participating 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 John Hancock by calling 800 REAL LIFE (800-732-5543) or by
writing Servicing Office, P.O. Box 111, Boston, MA 02117.
THE CONTRACTS
The Contracts offered are deferred annuity Contracts under which purchase
payments may be made in a lump sum or at intervals until the maturity date
selected by the Owner, at which time annuity payments by John Hancock will
begin, if so elected by the Owner.
An application for a Contract is available from a marketing representative.
Upon completion, it is transmitted along with the purchase payment to John
Hancock's Servicing Office for review. (See "Distribution of the Contracts.")
John Hancock also issues variable life insurance policies and other variable
annuity contracts that charge a front-end sales load and other forms of
variable annuity contracts that charge a contingent deferred sales load. These
contracts and policies are offered by means of other prospectuses, but use the
same underlying Fund.
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT V
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: Managed, Growth &
Income, Equity Index, Large Cap Value, Large Cap Growth, Mid Cap Value, Mid
Cap Growth, Special Opportunities, Real Estate Equity, Small Cap Value, Small
Cap Growth, International Balanced, International Equities, International
Opportunities, Short-Term U.S. Government, Sovereign Bond, Strategic Bond, and
Money Market. The assets of each subaccount is invested in a corresponding
Portfolio of the Fund.
8
<PAGE>
Each Portfolio has a different investment objective. As stated below, John
Hancock receives a fee from the Fund for providing investment management
services. In turn, John Hancock pays a fee to certain sub-investment managers
for providing sub-investment management services to the various Portfolios as
follows:
<TABLE>
<CAPTION>
NAME OF FUND NAME OF SUB INVESTMENT MANAGER
------------ ------------------------------
<S> <C>
Managed Independence Investment Associates, Inc.
Growth & Income Independence Investment Associates, Inc.
Equity Index State Street Bank & Trust, N.A.
Large Cap Value T. Rowe Price Associates, Inc.
Large Cap Growth Independence Investment Associates, Inc.
Mid Cap Value Neuberger & Berman Management, LLC
Mid Cap Growth Janus Capital Corporation
Special Opportunities John Hancock Advisers, Inc.
Real Estate Equity Independence Investment Associates, Inc.
Small Cap Value INVESCO Management & Research, Inc.
Small Cap Growth John Hancock Advisers, Inc.
International Balanced Brinson Partners, Inc.
International Equities John Hancock Advisers, Inc.
International Opportunities Rowe Price-Fleming International, Inc.
Short-Term U.S. Government Independence Investment Associates, Inc.
Sovereign Bond John Hancock Advisers, Inc.
Strategic Bond J.P. Morgan Investment Management, Inc.
</TABLE>
Each sub-investment manager receives an annual percentage fee from John
Hancock for these services which in no way increases the costs borne by the
Fund, the Account, or Owners. For a full description of the Fund, see the
prospectus for the Fund following at the end of this prospectus.
PRINCIPAL UNDERWRITER OF THE ACCOUNT
John Hancock Distributors, Inc., a registered broker-dealer since 1968,
makes the Contracts available through its registered representatives licensed
to sell life insurance policies and annuity contracts.
INVESTMENT OF PURCHASE PAYMENTS
Purchase payments received under the Contracts, after deduction of premium
or similar taxes, if applicable, are allocated by John Hancock to one or more
of the variable subaccounts and the Fixed Account, as directed by the Owner.
Purchase payments should be mailed to the John Hancock Servicing Office,
Post Office Box 111, Boston, MA 02117.
MINIMUM AND MAXIMUM PURCHASE PAYMENTS
The initial purchase payment under a Contract must be at least $5,000
($1,000 for individual retirement accounts and $50 for all other qualified
plans); or $500 if made pursuant to the Annuity Direct Deposit Program;
thereafter any payment must be at least $50.
The maximum amount that can be deposited into a Contract per Contract Year
is $1,000,000. The maximum amount that can be deposited in or transferred to
the Fixed Account per Contract Year is $100,000, exclusive of the initial
deposit which can be as large as $500,000. Deposits in or transfers to the
Fixed Account can only be made during the first 10 Contract Years. No new
deposits may be made after the Annuitant's 85th birthday. These limits may be
waived by John Hancock.
9
<PAGE>
ACCOUNT FEES
The charges made directly to the Account aggregate 1.40% per annum of the
average daily net asset value of the Account and are made up of daily charges
aggregating 1.10% annually for mortality and expense risks assumed (0.45% on
an annual basis for mortality risks and 0.65% on an annual basis for expense
risks) and 0.30% for certain administrative services. (See "Charges Under
Variable Annuity Contracts--Charges for Administrative Services.")
FUND CHARGES
Investment management fees at annual rates ranging from 0.20% to 1.00% of
average daily net assets are paid by the Portfolios to John Hancock. The
Portfolios also incur charges for other expenses incurred in their operations.
Investment management fees and other expenses are reflected in the net asset
value of each Portfolio's shares. For a description of these charges and
expenses, see the prospectus for the Fund.
SALES DEDUCTIONS UPON WITHDRAWALS
A Withdrawal Charge (a contingent deferred sales charge), if applicable, is
deducted from amounts withdrawn prior to maturity. The aggregate Withdrawal
Charges assessed against a Contract will never exceed 7% of the total purchase
payments received. (See "Charges Under Variable Annuity Contracts-- Withdrawal
Charge.")
OTHER CHARGES OR DEDUCTIONS
Deductions are made for any applicable taxes based on the amount of a
purchase payment; currently such taxes in certain states are up to 5% of each
purchase payment. (See "Charges Under Variable Annuity Contracts--Premium or
Similar Taxes.")
Charges are made for any taxes or interest expense attributable to the
Account. An annual contract fee of $30 is deducted on Contracts having an
Accumulated Value of less than $10,000. John Hancock reserves the right to
increase the contract fee up to $50, subject to state regulations. (See
"Charges Under Variable Annuity Contracts--Charges for Administrative
Services.")
WITHDRAWAL OR SURRENDER PRIOR TO MATURITY
At any time before annuity payments begin, if the Annuitant is living, a
Contract may be surrendered in full for its Surrender Value or a portion of
the value of the Contract may be withdrawn, subject to certain limits. (See
"The Accumulation Period--Surrender of the Contract; Partial Withdrawal.") A
10% penalty tax may be applicable to the taxable portion (earnings) withdrawn
before the Owner attains age 59 1/2.
SYSTEMATIC WITHDRAWALS
The Owner may pre-authorize a periodic withdrawal plan. Payments may be
monthly, quarterly, semi-annual or annual, and may be for a specific dollar
amount. A minimum Accumulated Value of $25,000 is required to start the
program. (See "The Accumulation Period--Systematic Withdrawal.")
DOLLAR-COST AVERAGING
The Owner may elect to have amounts transferred automatically from any one
of the variable subaccounts into one or more of the other variable
subaccounts. Transfers may be made monthly, quarterly, semi-annually, or
annually for a minimum of $250. A minimum Accumulated Value of $15,000 is
required to start the program. (See "The Accumulation Period--Dollar-Cost
Averaging.")
10
<PAGE>
NURSING HOME WAIVER
If the Owner of the Contract becomes confined to a nursing home facility at
least 90 days after issue and prior to commencement of annuity payments and
such confinement continues for at least 90 consecutive days, then Withdrawal
Charges will be waived on any subsequent surrender or partial withdrawal that
is made prior to 90 days after discharge from the nursing home facility. This
benefit is subject to certain restrictions and may not be available in all
states. The benefit is not available for applicants over age 74.
GUARANTEED MINIMUM DEATH BENEFIT
Contracts include a death benefit payable on the death of the Annuitant
prior to annuitization that is the greatest of (a) the Accumulated Value of
the Contract, (b) the purchase payments made under the Contract, adjusted for
any prior partial withdrawals and withdrawal charges, or (c) in states where
permitted by law, the highest Accumulated Value of the Contract as of any
fifth interval Contract anniversary preceding the Contract anniversary nearest
the Annuitant's 81st birthday, plus the purchase payments made under the
Contract, adjusted for partial withdrawals and withdrawal charges, since such
Contract anniversary. (See "The Accumulation Period--Death Benefit Before Date
of Maturity.")
10 DAY FREE-LOOK PROVISION
An Owner may surrender the Contract for any reason within 10 days after its
receipt and receive in cash the Accumulated Value of the Contract, plus any
deductions previously made from purchase payments for premium or similar
taxes. Owners surrendering Contracts issued in Hawaii, Idaho, Missouri,
Nebraska, North Carolina, Oklahoma, Oregon, South Carolina, Washington, West
Virginia, and Utah, and all Contracts issued under an individual retirement
account, will receive gross purchase payments made. If the Contract is issued
in California to an Owner 60 years of age or older, the Owner may surrender
the Contract within 30 days after its receipt, and, in that event, the gross
purchase payments made will be refunded to the Owner. If the Contract is
issued in North Dakota, the Owner may surrender the Contract within 20 days
after its receipt and, in that event, the gross purchase payments made will be
refunded.
11
<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
investment gain or loss rather than the insurance company. While under a fixed
annuity the insurance company guarantees a specified interest rate and
specified monthly annuity payments, the amounts of annuity payments under a
variable annuity are not guaranteed and will vary with the investment
performance of the portfolio securities in the underlying Fund.
Based upon the Owner's investment objective, the Owner directs the
allocation of purchase payments and Accumulated Values among the subaccounts
on a continuing basis. 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 directly to customers or through a career
agency system, banks, or broker/dealers.
THE ACCOUNT
The Account is a separate account established under Massachusetts law on May
11, 1987. The Account, although an integral part of John Hancock, meets the
definition of a "separate account" under the Federal securities laws and is
registered as a unit investment trust under the Investment Company Act of
1940, as amended ("1940 Act").
The Account's assets are the property of John Hancock and the obligations
under 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 liabilities under the Contract with respect to the Account shall not be
chargeable with liabilities arising out of any other business John Hancock may
conduct. 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
making 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: Managed, Growth &
Income, Equity Index, Large Cap Value, Large Cap Growth, Mid Cap Value, Mid
Cap Growth, Special Opportunities, Real Estate Equity, Small Cap Value, Small
Cap Growth, International Balanced, International Equities, International
Opportunities, Short-Term U.S. Government, Sovereign Bond, Strategic Bond, and
Money Market. The assets in each are invested in a separate class of shares
issued by the Fund, but the assets of one subaccount are not necessarily
legally insulated from liabilities 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
12
<PAGE>
serves as the investment medium for the Account and other unit investment
trust separate accounts established by John Hancock and by John Hancock
Variable Life Insurance Company for variable life insurance policies and
variable annuity contracts. A full description of the Fund, its investment
objectives, policies and restrictions, its charges and 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.
The following is a brief summary of the investment objectives of each
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 equity investments, in bonds and
other fixed income securities and in money market instruments.
Growth & Income Portfolio
The investment objective of this Portfolio is to achieve intermediate and
long-term growth of capital, with income as a secondary consideration. This
objective will be pursued by investments principally in common stocks (and
securities convertible into or with rights to purchase common stocks) of
companies believed to offer growth potential over both the intermediate and
the long term.
Equity Index Portfolio
The investment objective of this Portfolio is to provide investment results
that correspond to the total return of the U.S. market as represented by the
S&P 500 utilizing common stocks that are publicly traded in the United States.
Large Cap Value Portfolio
The investment objective of this Portfolio is to provide substantial
dividend income, as well as long-term capital appreciation, through
investments in the common stocks of established companies believed to offer
favorable prospects for increasing dividends and capital appreciation.
Large Cap Growth Portfolio
The investment objective of this Portfolio is to achieve above-average
capital appreciation through the ownership of common stocks (and securities
convertible into with rights to purchase common stocks) of companies believed
to offer above-average capital appreciation opportunities. Current income is
not an objective of the Portfolio.
Mid Cap Value Portfolio
The investment objective of this Portfolio is to provide long-term growth of
capital primarily through investment in the common stocks of medium
capitalization companies believed to sell at a discount to their intrinsic
value.
13
<PAGE>
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.
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.
Real Estate Equity Portfolio
The investment objective of this Portfolio is to provide above-average
income and long-term growth of capital by investment principally in equity
securities of companies in the real estate and related industries.
Small Cap Value Portfolio
The investment objective of this Portfolio is to provide long-term growth of
capital by investing in a well diversified portfolio of equity securities of
small capitalization companies exhibiting value characteristics.
Small Cap Growth Portfolio
The investment objective of this Portfolio is to provide long-term growth of
capital through a diversified portfolio investing primarily in common stocks
of small capitalization emerging growth companies.
International Balanced Portfolio
The investment objective of this Portfolio is to maximize total U.S. dollar
return, consisting of capital appreciation and current income, through
investment in non-U.S. equity and fixed income securities.
International Equities Portfolio
The investment objective of this Portfolio is to achieve long-term growth of
capital by investing primarily in foreign equity 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.
Short-Term U.S. Government Portfolio
The investment objective of this Portfolio is to provide a high level of
current 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.
Sovereign Bond Portfolio
The investment objective of this Portfolio is to provide as high a level of
long-term total rate of return as is consistent with prudent investment risk,
through investment primarily in a diversified portfolio of freely marketable
debt securities. Total rate of return consists of current income, including
interest and discount accruals, and capital appreciation. Although the
Sovereign Bond Portfolio does not have a
14
<PAGE>
significant portion of its assets in high yield securities, further
information in this regard may be found under "Investment Objectives and
Policies" in the Fund prospectus.
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.
Money Market Portfolio
The investment objective of this Portfolio is to provide maximum current
income consistent with capital preservation and liquidity. It seeks to achieve
this objective by investing in a managed portfolio of high quality money
market instruments.
John Hancock acts as the investment manager for the Fund. Independence
Investment Associates, Inc. ("IIA"), an indirectly-owned subsidiary of John
Hancock with its principal place of business at 53 State Street, Boston, MA
02109, provides sub-investment advice with respect to the Growth & Income,
Large Cap Growth, Managed, Real Estate Equity, and Short-Term U.S. Government
Portfolios.
John Hancock Advisers, Inc., another directly-owned subsidiary, located at
101 Huntington Avenue, Boston, MA 02199, 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
Portfolio. John Hancock Advisers provides sub-investment advice with respect
to the Sovereign Bond, Small Cap Growth and Special Opportunities Portfolios.
State Street Bank & Trust, N.A., at Two International Place, Boston, MA
02110, is the sub-investment adviser to the Equity Index Portfolio. T. Rowe
Price Associates, Inc., located at 100 East Pratt St., Baltimore, MD 21202,
provides sub-investment advice with respect to the Large Cap Value Portfolio
and, its subsidiary, Rowe Price-Fleming International, Inc., also located at
100 East Pratt St., Baltimore, MD 21202, provides sub-investment advice with
respect to the International Opportunities Portfolio.
INVESCO Management & Research located at 101 Federal Street, Boston, MA
02110, is the sub-investment adviser to the Small Cap Value Portfolio. Janus
Capital Corporation, with its principal place of business at 100 Filmore
Street, Denver, CO 80206, is the sub-investment adviser to the Mid Cap Growth
Portfolio. Neuberger & Berman, LLC, of 605 Third Avenue, New York, NY 10158,
provides sub-investment advice to the Mid Cap Value Portfolio. J.P. Morgan
Investment Management Inc., located at 522 Fifth Avenue, New York, NY 10036,
provides 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.
15
<PAGE>
CHARGES UNDER VARIABLE ANNUITY CONTRACTS
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. John Hancock also provides a minimum death
benefit and waives Withdrawal Charges upon the death of the Annuitant.
In return for the assumption of these mortality and expense risks, John
Hancock charges the Account daily 0.001233% (0.45% on an annual basis) of the
current value of Account net assets for mortality risks and 0.001781% (0.65%
on an annual basis) for expense risks. John Hancock reserves the right to
revise the proportionate amounts of the charge as between mortality risks and
expense risks, should estimates change. Nevertheless, the aggregate charge
will not exceed 1.10% on an annual basis.
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 Accumulation Share values and
the values and interests determined thereby, as are required for each
subaccount. John Hancock makes disbursements from Account funds to pay
obligations chargeable 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 0.000822% (0.30% on an annual basis) of the current
value of its net assets and assesses, during the Accumulation Period, and a
contract fee of $30 on Contracts having an Accumulated Value of less than
$10,000. The contract fee will be deducted at the beginning of each Contract
Year after the first and at a full surrender during a Contract Year. John
Hancock reserves the right to increase this fee up to a maximum of $50 subject
to state regulations. The contract fee will be deducted from each subaccount
and the Fixed Account in the same proportion that the Accumulated Value of the
Contract in that subaccount or Fixed Account bears to the full Accumulated
Value of the Contract. However, the portion of the contract fee allocated to
the Fixed Account will not be deducted from the Fixed Account to the extent it
would result in an accumulation of purchase payments or other amounts
allocated to the Fixed Account at less than the guaranteed minimum rate of 3
percent. In such case, the unallocable portion of the contract fee allocable
to the Fixed Account will be deducted proportionately from the subaccounts, if
any.
The administrative services charges were not designed, nor are they
expected, to exceed John Hancock's cost in providing these services.
WITHDRAWAL CHARGE
A Withdrawal Charge, which is a contingent deferred sales charge, may be
assessed whenever a Contract is surrendered for cash prior to maturity
("surrender") or whenever an amount less than the total Accumulated Value of
the Contract is withdrawn from a Contract prior to maturity ("partial
withdrawal"). This charge is used to help defray expenses relating to the
sales of the Contracts, including commissions paid to marketing
representatives and other distribution costs.
An Owner may withdraw in any one Contract Year up to 10% of the Accumulated
Value of the Contract as of the beginning of the Contract Year without the
assessment of any charges. If, in any Contract Year, the Owner withdraws an
aggregate amount in excess of 10% of the Accumulated Value of the
16
<PAGE>
Contract as of the beginning of the Contract Year, the amount withdrawn in
excess of 10% subjects the Contract to a Withdrawal Charge to the extent that
the excess is attributable to purchase payments made within seven years of the
date of withdrawal or surrender. Amounts withdrawn to satisfy the minimum
distribution requirements for qualified plans attributable to any one Contract
are not subject to a Withdrawal Charge in any Contract Year. Amounts above the
minimum distribution requirements are subject to a Withdrawal Charge as
described above.
Withdrawal Charges are based upon the purchase payments made to date and are
assessed as follows:
<TABLE>
<CAPTION>
YEARS FROM
DATE OF
DEPOSIT TO
DATE OF WITHDRAWAL
WITHDRAWAL CHARGE
--------------------------------------------------------------- ----------
<S> <C>
7 or more...................................................... 0%
6 but less than 7.............................................. 1%
5 but less than 6.............................................. 2%
4 but less than 5.............................................. 3%
3 but less than 4.............................................. 4%
2 but less than 3.............................................. 5%
1 but less than 2.............................................. 6%
less than 1.................................................... 7%
</TABLE>
In no event will the aggregate Withdrawal Charges against a Contract ever
exceed 7% of the total purchase payments received.
Whenever a Withdrawal Charge is imposed, it is deducted from each of the
subaccounts and the Fixed Account as described in "Surrender of Contract;
Partial Withdrawals." All amounts withdrawn plus all contract fees and
Withdrawal Charges are assumed to be deducted first from the earliest purchase
payment, and then from the next earliest purchase payment, and so forth until
all payments have been exhausted, satisfying the first in--first out ("FIFO")
method of accounting. Further withdrawals will be deducted from earnings, to
which no Withdrawal Charge will apply. For a discussion of the taxation of
partial withdrawals, see "Federal Income Taxes--Partial Withdrawals Before
Annuity Starting Date."
To the extent that any Withdrawal Charge is applicable when a surrender is
requested, the Accumulated Value of the Contract will be reduced by the amount
of the Withdrawal Charge in addition to the actual dollar amount sent to the
recipient. The Withdrawal Charge is calculated based upon the full amount by
which the Accumulated Value is reduced, subject to the conditions noted above.
For example, assume a Contract is issued on January 1, 1998, that the Owner
makes purchase payments of $5,000 on January 1, 1998, $1,000 on January 1,
1999, and $1,000 on January 1, 2000. Assume that the Accumulated Value of the
Contract on January 1, 2001, is $9,000 and that a partial withdrawal is made
by the Owner in the amount of $6,000 (no tax withholding) on June 1, 2001. The
Withdrawal Charge in this case, assuming no prior partial withdrawals, would
equal $229.57.
In calculating the Withdrawal Charge under the FIFO method, the January 1,
1998, $5,000 purchase payment is first reduced by the three $30 Contract Fees
on January 1, 1999, 2000, and 2001, i.e., to $4,910. Ten percent of the
Accumulated Value on January 1, 2001, i.e., $900 is then deducted.
The remaining balance of the $5,000 January 1, 1999, purchase payment, i.e.,
$4,010, is then withdrawn in its entirety and is assessed a Withdrawal Charge
of $160.40 (.04 x $4,010). All of the $1,000 January 1, 1999, purchase payment
is to be withdrawn and is assessed a Withdrawal Charge of $50 (.05 x $1,000).
To make up the remainder of the $6,000 paid to the Owner, $319.57 is withdrawn
from the January 1, 2000, purchase payment. This is assessed a Withdrawal
Charge of $19.17 (.06 x $319.57).
Therefore, the total amount paid to the Owner is $6,000 and the total
Withdrawal Charge is $229.57.
17
<PAGE>
Withdrawals made prior to the Owner attaining age 59 1/2 may be subject to
certain adverse tax consequences. An IRS excise tax of 10% is generally
applicable to the taxable portion (earnings) of a premature withdrawal from
the Contract. (See "Federal Income Taxes--Penalty for Premature Withdrawals.")
To the extent that the proceeds from the Withdrawal Charges may be
insufficient to cover distribution costs, John Hancock may 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.
NURSING HOME WAIVER
If the Owner of the Contract becomes confined to a nursing home facility at
least 90 days after issue and prior to commencement of annuity payments and
receives skilled nursing care, intermediate care, or custodial care and such
confinement continues for at least 90 consecutive days, then Withdrawal
Charges will be waived on any subsequent surrender or partial withdrawal that
is made prior to 90 days after discharge from the nursing home facility.
JHVLICO must receive a written request for withdrawal and written proof of
confinement satisfactory to JHVLICO no later than 90 days after discharge from
the nursing home facility. In addition, the confinement must be prescribed by
a physician and medically necessary. The waiver is not available to Contract
applicants 74 years of age or older or to applicants who were confined to a
nursing home facility within the two years prior to the issue date of the
Contract. For a complete description of the terms, conditions, and benefits of
the waiver, reference should be made to the Contract.
VARIATIONS IN CHARGES
In the future, John Hancock may allow a reduction in or the elimination of
the Withdrawal Charges, the charges for mortality and expense risks, the
administrative services charge, or the annual contract fee assessed on
Contracts sold to groups or classes of individuals in a manner resulting in a
reduction in the expenses associated with the sale of such Contracts or the
costs associated with administering or maintaining such Contracts.
The entitlement to such a reduction in or elimination of charges and fees
will be determined by John Hancock based upon factors such as the following:
(1) the size of the initial purchase payment, (2) the size of the group or
class, (3) the total amount of purchase payments expected to be received from
the group or class and the manner in which purchase payments are remitted, (4)
the nature of the group or class for which the Contracts are being purchased
and the persistency expected from that group or class as well as the mortality
risks associated with that group or class, (5) the purpose for which the
Contracts are being purchased and whether that purpose makes it likely that
costs and expenses will be reduced, or (6) the level of commissions paid to
selling broker/dealers or marketing representatives with respect to Contracts
within the same group or class.
John Hancock will make any reduction in charges or fees according to its own
rules in effect at the time an application for a Contract is approved. John
Hancock reserves the right to change these rules from time to time. Any
variation in charges or fees will reflect differences in costs and services,
will apply uniformly to all prospective Contract purchasers in the group or
class, and will not be unfairly discriminatory to the interests of any Owner.
PREMIUM OR SIMILAR TAXES
Several states and local governments impose a premium or similar tax on
annuities. Currently, such taxes range up to 5% of the Accumulated Value
applied to an Annuity Option. Ordinarily, any state-imposed premium or similar
tax will be deducted from the Accumulated Value of the Contract only at the
time of annuitization.
18
<PAGE>
For Contracts issued in South Dakota, however, John Hancock pays a tax on
each premium payment at the time it is made. John Hancock will deduct a charge
for these taxes from the Accumulated Value of the Contract at the time of
annuitization, death, surrender, or withdrawal. Such a charge is equal to the
applicable premium tax percentage stated above times the amount of Accumulated
Value that is applied to an Annuity Option, surrendered, withdrawn, or at
death. The net economic effect of this procedure is not significantly
different than if John Hancock deducted the premium tax from each premium
payment when received.
The charges described above (exclusive of taxes) and the Contracts' annuity
purchase rates will apply for the duration of each Contract and, except as
noted above, will not be increased by John Hancock. However, these charges do
not include all of the expenses which may be incurred 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, capital gains of, assets in, or the
existence of, the Account and interest on funds borrowed. In addition, John
Hancock reserves the right to deduct premium taxes from premiums when paid.
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 briefly
under "Summary Information."
19
<PAGE>
THE CONTRACTS
The descriptions herein are 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 Contracts. Tax qualified plans are subject to several
requirements and limitations which may affect the terms of any particular
Contract or the advisability of taking certain action permitted thereby.
PURCHASE OF CONTRACTS
The marketing 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 Servicing
Office. If the application is complete and the Contract applied for is
suitable, the Contract will be issued and thereafter delivered by the
marketing representative. If the completed application is received in proper
order, the initial purchase payment accompanying the completed 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 complete the
issuance of the Contract.
The initial purchase payment must be at least $5,000 ($1,000 for individual
retirement accounts and $50 for all other qualified plans) or $500 if made
pursuant to the Annuity Direct Deposit Program; subsequent payments must be at
least $50 in amount, except where otherwise permitted by John Hancock. Maximum
transfers and payments to any one subaccount in a single Contract Year are
$500,000, ($100,000 into the Fixed Account after the initial premium).
Increases in purchase payments beyond the foregoing limits may be made only
with John Hancock's written consent. While the Annuitant is living and the
Contract is in force, purchase payments may be made at any time before
maturity, except that no new purchase payments may be made after the
Annuitant's 85th birthday. These limits may be waived by John Hancock.
THE ACCUMULATION PERIOD
ACCUMULATION SHARES
Net purchase payments are allocated by John Hancock to any one or more of
the subaccounts or the Fixed Account or allocated among the subaccounts and
the Fixed Account 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 Servicing Office of notice in form satisfactory to John
Hancock.
Each net purchase payment allocated to a subaccount purchases Accumulation
Shares of that subaccount at the value of such shares next determined after
the receipt of such net purchase payment at the Servicing Office of John
Hancock. See "Variable Account Valuation Procedures." The number of
Accumulation Shares of a subaccount purchased with a specific purchase payment
will be determined 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 Accumulation 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
Accumulation Shares in a subaccount which have been credited to a Contract can
be computed by multiplying the number of such Accumulation Shares by the
appropriate Accumulation Share Value in effect for such date.
20
<PAGE>
TRANSFERS TO OR FROM SUBACCOUNTS
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
subaccount or from one subaccount to the Fixed Account or from the Fixed
Account to a subaccount. Any such transfer will result in the redemption
and/or purchase of Accumulation Shares or Annuity Units, whichever is
applicable, on the basis of the respective values next determined after
receipt of notice satisfactory to John Hancock at its Servicing Office. No
transfer described in this paragraph may be made on or within 30 days prior to
the date of maturity. Up to 12 such transfers may be made in any Contract Year
without charge. JHVLICO reserves the right to assess a charge of up to $25 per
transfer for each additional transfer beyond the twelve free transfers.
Currently, the charge for additional transfers is zero. A transfer pursuant to
the dollar-cost averaging feature discussed below counts toward the twelve
free transfers per year. A maximum of $1,000,000 may be transferred from one
subaccount to another in any Contract Year. (For Fixed Account transfers, see
"Appendix--Fixed Account and Fixed Account Value.")
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 (800-732-5543) or
sending send a written request via the John Hancock fax machine at 617-572-
5410. 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
modify, suspend, or terminate telephone transfers at any time without notice
to the Owners. If the fax request option becomes unavailable, another mens of
telecommunication will be substituted.
An Owner who authorizes telephone transfers will be liable for any loss,
expense or cost arising out of any unauthorized or fraudulent telephone
transfer instructions which John Hancock reasonably believes to be genuine,
unless such loss, expense or cost is the result of John Hancock's mistake or
negligence. John Hancock employs procedures which provide safeguards against
the execution of unauthorized transfers, and which are reasonably designed to
confirm that transfer instructions received by telephone are genuine. These
procedures include requiring personal identification, tape recording calls,
and providing written confirmation to the Owner. If JHVLICO does not employ
reasonable procedures to confirm that instructions communicated by telephone
are genuine, it may be liable for any loss due to unauthorized or fraudulent
instructions.
DOLLAR-COST AVERAGING
The Owner may elect to have automatically transferred on a monthly,
quarterly, semi-annual or annual basis, at no cost, part of the Accumulation
Shares from any one of the variable subaccounts into one or more of the other
subaccounts. The minimum amount of each transfer is $250. Automatic transfers
into the Fixed Account are not permitted. To begin the program, the
Accumulated Value of the Contract must be at least $15,000. The program
continues until the earlier of 12, 24, or 36 (as chosen by the Owner) months
and full liquidation of the variable subaccount from which the transfers are
being made. Transfers may be made via telephone or facsimile machine provided
a telephone authorization form has been completed by the Owner. John Hancock
reserves the right to terminate the dollar-cost averaging program at any time.
The dollar-cost averaging feature cannot be elected if the Owner is currently
participating in the systematic withdrawal plan, discussed below.
SURRENDER OF CONTRACT; PARTIAL WITHDRAWALS
Prior to a Contract's date of maturity, if the Annuitant is living, an Owner
may (i) surrender the Contract for a cash payment representing all of the Sur-
render Value of the Contract or (ii) withdraw a portion of Accumulated Value
of the Contract. The appropriate number of Accumulation Shares will be re-
deemed at their value next determined after the receipt by John Hancock at its
Servicing Office of notice
21
<PAGE>
in form satisfactory to John Hancock. Unless directed otherwise by the Owner,
that portion of the Accumulated Value of the Contract redeemed in a partial
withdrawal (which includes any Withdrawal Charge) will be redeemed in each
subaccount and in the Fixed Account in the same proportion as the Accumulated
Value of the Contract is then allocated among the subaccounts and the Fixed
Account. The redemption value may be more or less than the net purchase pay-
ments applied under the Contract to purchase the Accumulation Shares, depend-
ing upon the market value of the Fund shares held in the subaccount at the
time. The cash payment the Owner will receive will be equal to the redemption
value minus any applicable Withdrawal Charge and any unpaid contract fees. The
cash payment will be made in a single sum, ordinarily within seven days after
receipt of such notice. As described under "Miscellaneous Provisions--Defer-
ment of Payment," however, redemption and payment may be delayed under certain
circumstances. See "Federal Income Taxes" for possible adverse tax conse-
quences of certain surrenders and partial withdrawals.
Any request for a surrender or partial withdrawal should be mailed to the
Servicing Office, Post Office Box 111, Boston, MA 02117.
A partial withdrawal is not permitted in an amount less than $100 or if the
total Accumulated Value of a Contract remaining after the withdrawal would be
less than $1000. A partial withdrawal is not a loan and, once made, cannot be
repaid.
In the event the Accumulated Value of the Contract becomes zero, the
Contract will terminate.
SYSTEMATIC WITHDRAWAL
The Owner may elect to participate in a systematic withdrawal plan, which
enables the Owner to pre-authorize a periodic exercise of the contractual
withdrawal rights described above. Owners entering into such a plan instruct
John Hancock to withdraw a level dollar amount from the Contract on a monthly,
quarterly, semi-annual, or annual basis. The amount deducted will result in
the cancellation of Accumulation Shares from each applicable subaccount in the
ratio that the value of each subaccount bears to the total Accumulated Value.
Currently, systematic withdrawal is available to Owners who have a Contract
Value of $25,000 or more. The Company reserves the right to modify the
eligibility rules or other terms and conditions of this program at any time,
without notice. The minimum withdrawal is $100. Systematic withdrawals are
subject to the Withdrawal Charge described above. The systematic withdrawal
will terminate upon cancellation by the Owner or in the event that the
Accumulated Value of the Contract becomes $5,000 or less or the minimum
withdrawal amount becomes less than $100. Systematic withdrawal is not
available to Contracts participating in the Dollar-Cost Averaging program.
There may be tax consequences associated with the systematic withdrawal plan.
(See "Federal Income Taxes.")
DEATH BENEFIT BEFORE DATE OF MATURITY
If the Annuitant dies before the date of maturity or the surrender or
termination of a Contract, a death benefit is payable. The death benefit will
be the greatest of (a) the Accumulated Value of the Contract next determined
following receipt at the Servicing Office of John Hancock of due proof of
death, together with any required instructions as to method of settlement, (b)
the amount of the purchase payments made under the Contract reduced by all
prior partial withdrawals (including Withdrawal Charges), if any, or (c) in
states where permitted by law, the highest Accumulated Value of the Contract
as of any fifth interval Contract anniversary preceding the Contract
anniversary nearest the Annuitant's 81st birthday, plus the purchase payments
made under the Contract, adjusted for partial withdrawals (including any
Withdrawal Charges), since such Contract anniversary.
In making the computation described in clause (c) of the preceding sentence,
the Accumulated Value on the fifth Contract anniversary, and on every fifth
anniversary thereafter (until the Contract anniversary preceding the Contract
anniversary that is closest to the Annuitant's 81st birthday) is adjusted for
22
<PAGE>
subsequent premium payments and withdrawals and Withdrawal Charges. The
highest such adjusted Accumulated Value is then compared to the amounts
described in clauses (a) and (b), above. The greatest of these three amounts
forms a minimum. This minimum or "floor" is first established on the fifth
Contract anniversary and may increase on future fifth interval Contract
anniversaries as a result of additional premium payments or favorable
investment performance, but it will never decrease unless partial withdrawals
are made. This "stepped-up" death benefit is provided at no additional cost to
the Owner. In the event that the Owner is different from the Annuitant, the
distribution rules required by the Code will apply, as discussed below.
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
optional 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 a
single sum in any event if the death benefit is less than $5000. (See "Annuity
Period--Annuity Options".) If there is no surviving beneficiary, the Owner, or
his or her estate is the beneficiary.
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. The
Code imposes comparable distribution requirements for Contracts used to fund
tax qualified plans. These required provisions for tax qualified plans will be
reflected by means of separate disclosures and endorsements furnished by John
Hancock to Owners.
The Code distribution requirements are expected to present no practical
problems when the Annuitant and Owner are the same person. Nevertheless, all
Owners of Contracts not used to fund a tax qualified plan and IRA Contract
Owners should be aware that the following 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 on or after annuity payments have begun, any remaining
benefit must be paid out at least as rapidly as under the method of making
annuity payments then in effect. If the Owner dies before annuity payments
have begun: (a) if the beneficiary is the surviving spouse of the Owner, the
beneficiary may continue the Contract in force as Owner; or (b) if the
beneficiary is not the surviving spouse of the Owner, or if the beneficiary is
the surviving spouse of the Owner but does not choose to continue the
Contract, 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 purchase of a life annuity on the beneficiary
with payments commencing within 1 year of the Owner's death.
The Code imposes comparable distribution requirements on tax qualified
plans.
If the Owner is not the Annuitant, "the entire interest in the Contract on
the date of death of the Owner" is equal to the Surrender Value if paid out in
full within five years of the Owner's death, or is equal to the Accumulated
Value if applied in full towards the purchase of a life annuity on the
beneficiary with payments commencing within one year of the Owner's death.
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.
23
<PAGE>
THE ANNUITY PERIOD
During the annuity period, the total value of any one Contract must be
allocated among no more than four "accounts" (i.e., the subaccounts and/or the
Fixed Account). Amounts allocated to the Fixed Account will provide annuity
payments on a fixed basis; amounts allocated to the subaccounts will provide
annuity payments on a variable basis. If more than four accounts are being
used on the maturity date, John Hancock will divide the total Accumulated
Value of the Contract proportionately among the four accounts with the largest
Accumulated Values. Only variable annuity payments are described in this
prospectus.
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 Contract
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 payments remaining in the ten-
year period will be made to the contingent payee, subject to the terms of any
supplementary agreement issued. (NOTE: The terminology used in a supplementary
agreement may differ from that used in a Contract. For example, in a
supplementary agreement, the term "payee" may be used to refer to the
Annuitant or to some other person named by the Annuitant or the Owner to
receive payments under the supplementary agreement in the event of the
Annuitant's death, and the term "contingent payee" may be used to refer to the
beneficiary.) A different form of annuity may be elected by the Owner, 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
$50, John Hancock may make a single sum payment equal to the total Surrender
Value of the Contract on the date the initial payment 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 Contract specifies a provisional date of maturity at the time of its
issuance, which date may be no earlier than six months after the date the
first payment is applied to the Contract. The Owner may subsequently elect a
different date of maturity, however. Unless otherwise permitted by John
Hancock, such subsequently-elected date may be no earlier than six months
after the date the first payment is applied to the Contract, nor later than
the maximum maturity age specified in the Contract. The election is made by
written notice received by John Hancock at its Servicing Office before the
provisional date of maturity and at least 31 days prior to the date of
maturity. 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 "Federal Income Taxes.")
VARIABLE MONTHLY ANNUITY PAYMENTS
Variable monthly annuity payments under a 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. See "Calculation of Annuity
Units."
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
investment return (after deducting all charges) of a subaccount during the
period 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
actual net investment return is less than the assumed investment rate, the
latter monthly payment will be smaller than the former.
24
<PAGE>
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 variable monthly annuity payment and the amount by
which subsequent 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 6%,
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
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 Accumulation Share Value as of
ten calendar days prior to the date the initial variable 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 age and possibly sex 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 initial
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.
ANNUITY OPTIONS
The Owner may elect an Annuity Option during the lifetime of the Annuitant
by written notice received by John Hancock at its Servicing Office prior to
the date of maturity of the Contract. If no option is selected, Option A with
Ten Years Certain will be used. A beneficiary entitled to payment of a death
benefit 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 Servicing Office prior to the date the proceeds become
payable. The Owner may also elect that the Surrender Value be applied to an
Annuity Option at the time of a full surrender of a Contract that has been
outstanding for at least 6 months. However, if the Accumulated Value of the
Contract to be applied is less than $5000 then (i) in the event of
annuitization, Option A With Ten Years Certain will be used and (ii) in the
event of death or surrender, no annuity option will be available. Among the
options available are the following two basic Annuity Options.
OPTION A: 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 period, whichever is
applicable, payments will continue for the remainder of the guaranteed period
to a contingent payee, subject to the terms of any supplementary agreement
issued.
OPTION B: 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.
"Option A: Life Annuity With Five Years Certain" and "Option B: Life Annuity
Without Refund" are not available if the Annuitant is more than 85 years of
age on the date of maturity of the Contract.
25
<PAGE>
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
individual retirement annuity plans provide that the period of years
guaranteed under Option A cannot be any greater than the joint life
expectancies of the payee and his or her designated beneficiary.
If the Owner dies 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. The Code imposes a comparable distribution re-
quirement for Contracts used to fund tax qualified plans.
VARIABLE ACCOUNT VALUATION PROCEDURES
VALUATION DATE--A Valuation Date is any date on which the New York Stock
Exchange is open for trading and on which the Fund values its shares. 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
Valuation Date.
ACCUMULATION SHARE VALUE--The Accumulation Share Value is calculated
separately for each subaccount. The value of one Accumulation Share on any
Valuation 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
adjustment factor so that the variable annuity payments will increase only if
the actual net investment rate of the subaccount exceeds 3 1/2% per year and
will decrease only if it is less than 3 1/2% per year.
NET INVESTMENT FACTOR--The Net Investment Factor for each subaccount for any
Valuation Period is equal to 1 plus the applicable net investment rate for
such Valuation Period. A Net Investment Factor may be more or less than 1. 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 0.003886% of the value of each
subaccount at the beginning of the Valuation Period, the result then being
divided by (c) the value of the total net assets of each subaccount at the
beginning of the Valuation Period.
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,
provided strict equity is preserved and the change does not otherwise affect
the benefits, provisions or investment return of the Contract.
26
<PAGE>
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, unless the Owner is the trustee of a trust described in Section 401(a)
of the Code. Because an assignment, pledge or other transfer may be a taxable
event an Owner should consult a competent tax adviser before taking any such
action.
DEFERMENT OF PAYMENT
Payment of the value of any Accumulation Shares in a single sum upon a
surrender or partial withdrawal will ordinarily be made within seven days
after receipt of the written request therefor by John Hancock at its Servicing
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
weekend 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 applicable, 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. Certain changes
may, under applicable laws and regulations, require notice to or approval 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
privileges 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 Servicing Office, subject to the rights of any assignee
of record, any action taken prior to receipt of the notice and certain other
conditions. While the Annuitant is alive, the Owner may be changed by written
notice. The beneficiary may be changed by written notice no later than receipt
of due proof of the death of the Annuitant. The change will take effect
whether or not the Owner or the Annuitant is then alive.
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
Contracts or the Account. No specific charge is currently made against the
Account for any such taxes. John Hancock pays such taxes out of its general
account assets which may consists of, among other things, proceeds derived
from mortality and expense risk charges deducted from 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
27
<PAGE>
expected to increase in the future, John Hancock reserves the right to make
such a separate 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 OWNER 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 Contract Value
until payments are made to the Owner or other payee under such Contract.
However, a Contract owned other than by a natural person is not generally an
annuity for tax purposes and any increase in 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 Owner or other payee as ordinary income
to the extent that such payment exceeds an allocable portion of the Owner's
"investment in the contract" (as defined in the Code). In general, an Owner'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
refund 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 Owner or other payee to the extent
it exceeds the Owner's "investment in the contract."
PARTIAL WITHDRAWALS BEFORE ANNUITY STARTING DATE
When a payment under a Contract, including a payment under a systematic
withdrawal plan, 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
payment (the partial withdrawal) may be taxed to the Owner 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.
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 may be subject to a 10-percent penalty tax. The penalty tax does
not apply to payments made to the Owner or other payee after the Owner attains
age 59 1/2, or on account of the Owner's death or disability. If the
withdrawal is made in substantially 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.
28
<PAGE>
DIVERSIFICATION REQUIREMENTS
Each of the Portfolios of the Fund intends to qualify as a regulated
investment company under Subchapter M of the Code and will have to meet the
investment 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 underlying Portfolios, causing the Owner to be taxed currently
on income credited 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
distribution will be reduced by the 20% mandatory income tax. Consult a
qualified tax adviser before taking such a distribution.
CONTRACTS PURCHASED UNDER INDIVIDUAL RETIREMENT ANNUITY PLANS (IRA)
In general, 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 spouse (including,
for example, a homemaker who does not work outside the home). 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
$2,000 for each spouse if their combined compensation is at least equal to the
contributed amount. However, not more than $2,000 can be allocated to either
person's account. If an individual and his or her spouse is an active
participant in an employer-sponsored retirement plan, the individual is
permitted to make a deductible purchase payment only if the adjusted gross
incomes of the individual and his or her spouse are below certain amounts.
No deduction is allowed for purchase payments made in or after the taxable
year in which the Owner has attained the age of 70 1/2 years nor is a
deduction 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 Owner attains age 70 1/2. The Owner may
incur adverse tax consequences if a distribution on surrender of the Contract
or by partial withdrawal is made prior to his attaining age 59 1/2, except in
the event of his death or total disability or certain other circumstances.
CONTRACTS PURCHASED UNDER SIMPLE RETIREMENT ACCOUNTS (SIMPLE IRAS)
In general, premium payments may be made to a SIMPLE IRA retirement plan
established by a small business employee who employs 100 or fewer employees on
any day during the preceding calendar year. An eligible employee may specify
the percentage of compensation the employee elects to contribute not to exceed
$6,000 a year. The employer must elect to make a matching contribution of up
to 3% of the employee's compensation or a non-elective contribution equal to
2% of the employee's compensation.
29
<PAGE>
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
annuity purchase arrangements described in Section 403(b) of the Code are not
taxable currently to the Owner, to the extent that the aggregate of such
amounts does not exceed the Owner's "exclusion allowance" (as defined in the
Code). In general, an Owner'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 Owner 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 Owner generally are limited to an aggregate of
$9500 annually.
When payments under a Contract are made in the form of an annuity, such
payments are taxed to the Owner or other payee under the same rules that apply
to such payments under corporate plans (discussed below) 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 Owner in a Section 403(b) plan does not have any "investment
in the contract" and, thus, any distribution is fully taxed as ordinary
income.
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) or (2) restrict withdrawals of certain
amounts attributable to pre-January 1, 1989, premium payments.
CONTRACT LOANS (SECTION 403(b) QUALIFIED CONTRACTS ONLY)
During the Accumulation Period, an Owner may request a loan from the
Accumulated Value of the Contract. If the loan meets the amount and repayment
requirements described below, it will not be reported to the Internal Revenue
Service as a taxable distribution. Forms provided by John Hancock must be used
to apply for a Contract loan. An Owner can obtain these forms by calling 800-
REAL LIFE (800-732-5543) or writing to the Servicing Office, P.O. Box 111,
Boston, MA 02117. At the time the loan is issued, John Hancock will provide
the Owner with a detailed loan agreement containing provisions to which the
loan will be subject.
Any loan will be secured by a security interest in the Contract. The loan
amount must be at least $2,500 and may not, at the date of the loan (defined
below), exceed the lesser of: (a) 50% of the Accumulated Value of the
Contract; (b) $50,000; or (c) the sum of 100% of the Accumulated Value of the
Subaccounts and 20% of the Fixed Account Value. That portion of the loan
amount up to 20% of the Accumulated Value of the Contract on the date of the
loan will be deducted from each Subaccount and the Fixed Account in the same
proportion as the Accumulated Value of the Contract is allocated among the
Subaccounts and the Fixed Account on the date of the loan. Any loan amount in
excess of 20% of the Accumulated Value of the Contract will be deducted from
each Subaccount in the same proportion as the Accumulated Value of such
Subaccount bears to the total Accumulated Value of all the Subaccounts on the
date of the loan.
The total loan amount will be transferred to the Loan Collateral Account on
the date of the loan. The Loan Collateral Account is held in John Hancock's
general investment account and will accrue interest at an effective rate that
is 1% less than the Loan Interest Rate described below. The interest accrued
on the
30
<PAGE>
Loan Collateral Account will be transferred back to the Subaccounts and the
Fixed Account on each Contract anniversary and will be allocated to each
Subaccount and the Fixed Account in the same proportion as the Accumulated
Value of the Contract is then allocated among the Subaccounts and the Fixed
Account.
The date of the loan will be the Valuation Date on which John Hancock
receives at its Home Office all necessary documentation assigning the Contract
as the security for the loan. If such receipt occurs on a date other than a
Valuation Date, the date of the loan will be the Valuation Date next following
the date on which such receipt occurs.
The Loan Interest Rate for this Contract will be determined annually by John
Hancock. Such determination will be made in the calendar month immediately
preceding the calendar month in which the Contract anniversary occurs. The
Loan Interest Rate will apply to any loan made during the Contract year
following the date of determination. Except as otherwise required by
applicable state law, the rate set will not exceed the greater of (a) Moody's
Corporate Bond Yield Average--Monthly Average Corporates, (as published by
Moody's Investors Service) or any successor thereto, for the calendar month
which is two months before the month in which the date of determination occurs
or (b) 5%. If Moody's Corporate Bond Yield Average--Monthly Average Corporates
is no longer published, John Hancock reserves the right to select a substitute
that it deems appropriate, subject to applicable law, regulation, or other
state requirement. When a new rate is determined: (a) John Hancock may
increase the previous rate if the increase would be at least 1/2%; and (b)
John Hancock must reduce the previous rate if the decrease would be at least
1/2%. John Hancock will notify the Owner of the applicable Loan Interest Rate
at the time a loan is made. The Loan Interest Rate for any given loan will be
fixed for the entire loan period. Accrued interest on a loan will be added to
the loan daily and will bear interest from that date at the Loan Interest
Rate.
Repayment of principal and interest will be amortized in level installments
payable no less frequently than quarterly over a period of no more than five
years, except as provided by law. The repayment due dates and installment
amounts will be provided in a repayment schedule sent to the Owner prior to
the first installment due date. The principal portion of each loan repayment
will be transferred back to the Subaccounts and the Fixed Account at the time
of each loan repayment, and will be allocated to each Subaccount and the Fixed
Account in the same proportion as the Accumulated Value of the Contract is
then allocated among the Subaccounts and the Fixed Account.
Prepayment of the entire loan will be permitted. In addition, loan
repayments in excess of regularly scheduled repayments that do not repay the
entire Loan Balance (outstanding loan amount plus loan interest accrued to
date) will be applied to reduce the length of the loan. Such excess loan
repayments do not replace the regularly scheduled loan payments.
If any scheduled loan repayment is not made within 90 calendar days after
the repayment due date, the Loan Balance or such other amount as required by
applicable law shall then be considered in default. To the extent that the
Accumulated Value contains (i) salary reduction contributions made on or
before December 31, 1988 and (ii) earnings credited on such contributions on
or before such date (together referred to as "pre-1988 contributions") at the
time of default, a foreclosure shall be made on such "pre-1988 contributions"
with regard to the default. That is, an amount equal to the amount in default
with respect to such "pre-1988 contributions" (including withdrawal charges
and any accrued and unpaid interest to the date of the default) will be
withdrawn from the Accumulated Value of the Contract to repay the amount in
default. To the extent that the amount in default exceeds the amount of "pre-
1988 contributions," no actual foreclosure on the loan security shall be made
until the earliest of the Owner attaining age 59 1/2, separating from service,
dying or becoming disabled (as defined in IRC section 72(m)(7)) and prior to
the occurrence of such an event, the excess shall be considered a deemed
distribution reportable to the Owner.
31
<PAGE>
If the Contract is surrendered while there is an outstanding Loan Balance or
if the Annuitant dies while there is an outstanding Loan Balance, an amount,
positive or negative, will be determined by subtracting the outstanding Loan
Balance from the Loan Collateral Account on the date of surrender or death. If
such amount is positive, it will be added to the Surrender Value or to the
Death Benefit, as applicable. If such amount is negative, it will be
subtracted from the Surrender Value or the Death Benefit, as applicable. If at
any time the Loan Balance exceeds the sum of the Surrender Value and the Loan
Collateral Account, the loan will be subject to the excessive loan balance
provisions set forth in the loan agreement.
Contract loans are subject to conditions and requirements under the Internal
Revenue Code and, where applicable, ERISA, as well as the terms of any
retirement plan in connection with which the Contract has been acquired. For
example, if loan payments are not made when due, or if John Hancock otherwise
finds it necessary to exercise its rights to use all or part of the value
under a Contract to repay a Contract loan, serious adverse tax consequences
may result. The tax and ERISA rules relating to Contract loans are complex and
in many cases unclear. For these reasons, and because the rules vary depending
on the individual circumstances of each Contract, John Hancock cautions that
employers and Owners should take particular care to consult with qualified
advisers before taking action with respect to Contract loans.
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 contract" is the aggregate amount of purchase payments made by him. If an
Annuitant 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. The calculation for
fixed annuity payments is somewhat different.
When payment under a Contract is made in a single sum or a 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 age 59 1/2, or on account of
his death, retirement 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.
CONTRACTS PURCHASED UNDER H.R. 10 PLANS (SELF-EMPLOYED)
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
payments 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
employees.
32
<PAGE>
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.
When payments under a Contract are made in the form of an annuity, such
payments are taxed to the Annuitant or other payee under the same rules that
apply to such payments under corporate plans (discussed earlier).
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 the "key employees" (as defined in the Code). Care
must be taken to consider the special limitations applicable to top-heavy
plans and the potentially adverse tax consequences to key employees.
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 by
tax-exempt organizations are permitted to exclude a portion of their
compensation from gross income. Amounts so deferred (including any income
thereon) shall be includible in gross income only for the taxable 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 $7500 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
service (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
single 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
nature and the amount of the distribution. John Hancock will notify the Owner
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 order
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 intended as tax advice.
Nor does it include a discussion of Federal estate and 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
33
<PAGE>
understand. Anything less than full compliance with the applicable rules, all
of which are subject to change from time to time, can have adverse tax
consequences. For example, premature withdrawals are generally subject to a
10-percent 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
adviser.
PERFORMANCE
The Account may, from time to time, advertise certain performance
information with respect to its subaccounts. THE PERFORMANCE INFORMATION IS
BASED ON HISTORICAL INVESTMENT EXPERIENCE OF THE SUBACCOUNTS AND DOES NOT
INDICATE OR REPRESENT 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 for the life of the applicable portfolio.
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 investment at the end of the period, assuming the deduction of
any Withdrawal Charge which would be payable 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 premium tax charges)--
Withdrawal Charge, mortality and expense risk charges, administrative service
charge, and the annual contract fee--and is therefore lower than total return
at the Fund level where no comparable charges have been deducted. Because the
Contracts were first offered in 1998, a total return figure does not
necessarily correspond to the total return actually earned by any Contract
Owner.
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
reinvested in the subaccount and thus compounded in the course of a 52-week
period. 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
annualization 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 annual contract fee but do not reflect any
premium tax charge or any Withdrawal Charge.
Performance information for the subaccounts may be compared to other
variable annuity separate accounts or other investment products surveyed by
Lipper Analytical Services, Inc., an independent service which monitors and
ranks the performance of investment companies, or tracked by other rating
services, companies, 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.
STATE REGULATION
John Hancock is subject to the provisions of the Massachusetts insurance
laws applicable to mutual life insurance companies and to regulation and
supervision by the Massachusetts Commissioner of Insurance. John Hancock is
also subject to the applicable insurance laws of all the other states and
jurisdictions in which it does an insurance business.
34
<PAGE>
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
qualifying variable annuity contracts or variable life insurance policies at
meetings of the Fund's shareholders in accordance with instructions received
from owners of such contracts or policies. Shares of the Fund held in the
Account which are not attributable to such contracts or policies (or other
variable annuity contracts issued by John Hancock) and those for which
instructions from owners are not received will be represented by John Hancock
at the meeting 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 such contracts and policies 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
Portfolio 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
instructions 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
auditors, 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
members 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 eliminate or restrict the need for such voting
privileges, John Hancock reserves the right to proceed in accordance with any
such revised requirements. John Hancock also reserves the right, subject to
compliance with applicable law, including approval of Owners if so required,
to transfer assets determined by John Hancock to be associated with the class
of contracts to which the Contracts belong from the Account to another
separate account or subaccount by withdrawing the same percentage of each
investment in the Account with appropriate adjustments to avoid odd lots and
fractions.
LEGAL MATTERS
Legal matters in connection with the Contracts and Federal laws and
regulations relating to their issue and sale have been passed upon by Ronald
J. Bocage, Vice President and Counsel of John Hancock.
35
<PAGE>
DISTRIBUTION OF THE CONTRACTS
John Hancock Distributors, Inc. ("Distributors"), a wholly-owned subsidiary
of John Hancock, located at 197 Clarendon Street, Boston, MA 02117, is
registered as a broker-dealer with the Commission under the Securities
Exchange Act of 1934 and is a member of the National Association of Securities
Dealers, Inc. Distributors acts as principal underwriter and distributor of
the Contracts pursuant to a distribution agreement it has entered into with
John Hancock and John Hancock Variable Life Insurance Company. The Contracts
may be purchased through either Distributors' registered representatives
licensed to sell John Hancock life insurance policies and annuity contracts or
other registered broker-dealers whose representatives are authorized by
applicable law to sell variable annuity contracts. The compensation paid to
such broker-dealers is not expected to exceed 3% of purchase payments.
Distributors' registered representatives are compensated for sales of the
Contracts on a commission and service fee basis by Distributors, and John
Hancock reimburses Distributors for such compensation and for other direct and
indirect expenses actually incurred in connection with the marketing and sale
of the Contracts. In addition, John Hancock performs certain insurance
underwriting and determines whether to accept or reject the application for a
Contract.
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
prescribed 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
Additional 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 12-13
Distribution Agreement and Other Services............... 1 16, 20, 36
Distribution Agreement................................ 1 36
Investment Advisory Agreement......................... 1 16
Custodian Agreement................................... 2 --
Independent Auditors.................................. 2 36
Calculation of Performance Data......................... 3 34
Calculation of Annuity Payments......................... 4 24-25
Financial Statements.................................... 6 36
</TABLE>
36
<PAGE>
Because of exemptive and exclusionary provisions, interests in John
Hancock's general account have not been registered under the Securities Act of
1933 and the general account has not been registered as an investment company
under the 1940 Act. Accordingly, neither the general account nor any interests
therein are subject to the provisions of these Acts, and John Hancock has been
advised that the staff of the Commission has not reviewed the disclosure in
this Prospectus relating to the Fixed Account. Disclosure regarding the Fixed
Account may, however, be subject to certain generally-applicable provisions of
the Federal securities laws relating to accuracy and completeness of
statements made in prospectuses.
APPENDIX--THE FIXED ACCOUNT AND FIXED ACCOUNT VALUE
INVESTMENTS IN THE FIXED ACCOUNT
Net purchase payments will be allocated to the Fixed Account in accordance
with the selection made by the Owner in the application. The Owner may change
such selection by notice satisfactory to John Hancock at its Servicing Office.
Any selection must specify what percentage of the purchase payment is to be
allocated to the Fixed Account. The percentage must be a whole number.
The Value in the Fixed Account, at any time prior to annuitization, is equal
to:
(a) net purchase payments allocated to the Fixed Account; plus
(b) Variable Account Value (amounts held in the subaccounts of the
Variable Account) transferred to the Fixed Account; plus
(c) interest credited on amounts held in the Fixed Account; less
(d) any prior partial withdrawals from the Fixed Account; less
(e) amounts transferred out of the Fixed Account to the Variable Account;
less
(f) any applicable charges deducted from the Fixed Account.
INTEREST TO BE CREDITED
Prior to annuitization, John Hancock will credit interest (calculated on a
compound basis) to purchase payments allocated to the Fixed Account at rates
declared by John Hancock, subject to a minimum rate of 3%. For purposes of
this section, Variable Account Value transferred to the Fixed Account shall be
treated as a purchase payment.
Under current practice, the interest rate credited to amounts held in the
Fixed Account will be based on the size of the initial payment to the
Contract. If the initial payment was $10,000 or more, a higher interest rate
will be credited. The rate of interest credited on each amount may vary based
upon when that amount was first allocated to the Fixed Account.
TRANSFER AND REDUCTIONS OF FIXED ACCOUNT VALUE
During the accumulation period, the Owner may transfer Fixed Account Value
to one or more subaccounts of the Variable Account or may transfer Variable
Account Value into the Fixed Account. The maximum amount that may be deposited
or transferred to the Fixed Account in a Contract Year is $100,000, exclusive
of any initial deposit made to the Fixed Account at the time the Contract is
issued; such initial deposit may be as large as $500,000. After the tenth
Contract Year, no deposits or transfers may be made into the Fixed Account.
John Hancock may waive these limits. Sums on deposit in the subaccounts may
not be transferred into the Fixed Account within six months of a transfer out
of the Fixed Account. Transfers out of the Fixed Account may be made once in a
Contract Year. During the first Contract Year, one transfer out of the Fixed
Account may be made at any time. During each subsequent Contract Year, one
transfer out of the Fixed Account may be made provided such transfer does not
occur until the later of (a) 180 days after the prior transfer and (b) the
onset of the following Contract Year. No more than
37
<PAGE>
20% of the Fixed Account Value may be transferred out of the Fixed Account per
Contract year. After annuitization, the amount of any fixed annuity allocation
may not be changed.
Up to 12 transfers into or out of subaccounts may be made in any Contract
Year without charge. (See "Transfers To or From Subaccounts.") Any transfer to
or from the Fixed Account will count toward the twelve free transfer limit.
Currently, the charge for transfers beyond twelve is $0; however, JHVLICO
reserves the right to assess a charge of up to $25 per transfer for each
additional transfer beyond the twelve free transfers.
Transfers will be made after receipt of notice satisfactory to John Hancock
at its Servicing Office. Transfer requests received by John Hancock before
4:00 p.m. Eastern Time on a business day will be valued as of the close of
that day. Any requests received after 4:00 p.m. or on a non-business day will
be valued as of the close of the next business day.
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 (800-732-5543) or
sending a written request to John Hancock via the John Hancock fax machine at
617-572-5410. Any written request should include the Owner's name, daytime
telephone number, and contract number as well as the names of the subaccounts
or Fixed Account from which and to which money will be transferred. John
Hancock reserves the right to modify, suspend, or terminate telephone
transfers at any time without notice to the Owners. If the fax request option
becomes unavailable, another means of telecommunication will be substituted.
An Owner who authorizes telephone transfers will be liable for any loss,
expense or cost arising out of any unauthorized or fraudulent telephone
transfer instructions which John Hancock reasonably believes to be genuine,
unless such loss, expense or cost is the result of John Hancock's mistake or
negligence. John Hancock employs procedures which provide adequate safeguards
against the execution of unauthorized transfers, and which are reasonably
designed to confirm that transfer instructions received by telephone are
genuine. These procedures include requiring personal identification, tape
recording calls, and providing written confirmation to the Owner. If JHVLICO
does not employ reasonable procedures to confirm that instructions
communicated by telephone are genuine, it may be liable for any loss due to
unauthorized or fraudulent instructions.
FIXED ANNUITY PAYMENT VALUES
The dollar amount of each fixed annuity payment will be determined by
dividing the amount applied under the fixed annuity option (net of any
applicable premium taxes) by $1,000 and multiplying the result by the greater
of: (a) the applicable factor shown in the appropriate table in the Contract;
or (b) the factor currently offered by John Hancock at the time of
annuitization. This current factor may be based on the sex of the payee unless
prohibited by law.
38
<PAGE>
APPENDIX--VARIABLE ANNUITY INFORMATION
FOR INDIVIDUAL RETIREMENT ANNUITIES
To help you understand your purchase of this Contract as an Individual
Retirement Annuity (IRA), we are providing the following summary.
I. Accumulation Shares--Each net purchase payment you make into your
Contract is allocated to the subaccounts you select, and Accumulation Shares
are purchased. This is the unit of measurement used to determine the value of
your Contract. The number of shares purchased in any subaccount is based on
the share value of that subaccount next determined after receipt of the
payment at our Servicing Office. The values of shares fluctuate with the
daily investment performance of the corresponding subaccount. The growth in
the value of your Contract, to the extent invested in the Separate Account,
is neither guaranteed nor projected and varies with the investment Portfolio
you have selected. Each net purchase payment allocated to the Fixed Account
will be credited interest, as determined by John Hancock. The minimum
guarantee rate is 3%. More details appear under "Accumulation Shares" in this
Prospectus and in the "Appendix--The Fixed Account and Fixed Account Value."
II. Separate Account and Series Fund Charges--The assets of the Separate
Account are charged for services and guarantees. The annualized charge equals
1.40%. Fees varying by Portfolio are charged against the Series Fund for
investment management and advisory services. Details appear under "Charges
Under the Annuity Contracts" in this Prospectus and "Management of the Fund"
in the accompanying Series Fund prospectus.
III. Deductions from the Contract--The full amount of each deposit is
applied to the Contract. At or after the purchase date, one or more of the
following charges may be made, depending on circumstances.
1. WITHDRAWAL CHARGE--In each Contract Year, you may withdraw as much as
10% of the Accumulated Value of your Contract as of the beginning of the
Contract Year without charge. Withdrawals in excess of this amount will be
subject to the following charges:
<TABLE>
<CAPTION>
YEARS FROM DATE OF
DEPOSIT WITHDRAWAL
TO DATE OF WITHDRAWAL CHARGE
--------------------- ----------
<S> <C>
7 or more...................................................... 0%
6 but less than 7.............................................. 1%
5 but less than 6.............................................. 2%
4 but less than 5.............................................. 3%
3 but less than 4.............................................. 4%
2 but less than 3.............................................. 5%
1 but less than 2.............................................. 6%
less than 1.................................................... 7%
</TABLE>
For the purpose of calculating the withdrawal charge, deposits are
considered to be withdrawn on a "first-in first-out" basis. Earnings are
considered to be withdrawn last and without charge. This is described in
more detail under "Withdrawal Charge" in this Prospectus.
2. CONTRACT FEE--John Hancock currently deducts $30 from the Accumulated
Value of the Contract as a contract fee if the Accumulated Value is less
than $10,000. This occurs annually or at the time of surrender. Please
refer to "Charges for Administrative Services" in this Prospectus.
3. STATE PREMIUM TAX--Some states and local governments impose a premium
or similar tax on annuities. John Hancock only deducts this tax when
required to do so. Please refer to "Premium or Similar Taxes" in this
Prospectus.
39
<PAGE>
APPENDIX--ILLUSTRATIVE ACCUMULATED VALUE
AND ANNUITY PAYMENT TABLES
The following Tables present illustrative periodic Accumulated 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
investment experience of the seven specified subaccounts, assuming investment
by each of those subaccounts in the related Portfolio in the Fund and its
predecessors during the periods shown. The other subaccounts are not
illustrated, because of the limited time that they and their related Fund
Portfolios have been available. The Contracts described in this prospectus
were first offered in 1998.
For years ended December 31, 1986, and prior thereto, values have been
calculated based upon the actual investment results of the three corresponding
variable life insurance managed separate accounts which were the predecessors
to the Growth & Income, Sovereign Bond, and Money Market Portfolios, as if the
Fund had been in existence prior to March 28, 1986, the date of its
reorganization.
The Tables assume investment of a single purchase payment of $10,000, net of
any deductions from purchase payments, and that charges under the Contracts
have been made at an annual rate of 1.40% for mortality and expense risks and
administrative services. The tables also reflect actual investment management
fees and other portfolio expenses for the periods illustrated. Absent expense
reimbursements by John Hancock to certain of the Portfolios for some periods,
the values illustrated would have been lower.
WHAT THE TABLES ILLUSTRATE
Subject to the foregoing, each Table I presents for the periods shown the
illustrative periodic Accumulated Values for each Account which would have
resulted at yearly intervals under a Contract where a net single purchase
payment of $10,000 was made, based upon the investment performance of the
applicable funding medium.
Subject to the foregoing, each Table II indicates, at annual intervals,
illustrative monthly variable annuity payments for each subaccount which would
have been received by an Annuitant or other payee, 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.
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
protect against depreciation in declining markets.
40
<PAGE>
GROWTH & INCOME SUBACCOUNT
ILLUSTRATIVE PERIODIC ACCUMULATED VALUES
AND ANNUITY PAYMENTS
TABLE I--ACCUMULATION PERIOD--ILLUSTRATIVE ACCUMULATED VALUES WHICH WOULD HAVE
RESULTED IF A $10,000 NET PURCHASE PAYMENT CONTRACT HAD BEEN ISSUED JANUARY 2,
1975
<TABLE>
<CAPTION>
ACCUMULATED VALUE
ON DECEMBER 31
CONTRACT YEAR COMMENCING OF THE SAME YEAR
------------------------ -----------------
<S> <C>
January 1975......................................... $12,768.53
January 1976......................................... 14,847.74
January 1977......................................... 13,070.47
January 1978......................................... 13,674.30
January 1979......................................... 15,670.05
January 1980......................................... 20,154.18
January 1981......................................... 20,054.68
January 1982......................................... 25,323.38
January 1983......................................... 30,428.51
January 1984......................................... 31,429.08
January 1985......................................... 41,769.30
January 1986......................................... 47,665.34
January 1987......................................... 49,262.49
January 1988......................................... 56,368.07
January 1989......................................... 71,995.40
January 1990......................................... 72,809.18
January 1991......................................... 90,446.27
January 1992......................................... 97,127.06
January 1993......................................... 108,553.53
January 1994......................................... 106,452.30
January 1995......................................... 140,886.25
January 1996......................................... 166,849.35
January 1997......................................... --
</TABLE>
TABLE II--ANNUITY PERIOD--ILLUSTRATIVE MONTHLY VARIABLE ANNUITY PAYMENTS--
GROWTH & INCOME SUBACCOUNT
This Table shows, at annual intervals, the illustrative monthly variable
annuity payments an Annuitant would have received 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................................................... 126.05
January 1977................................................... 139.99
January 1978................................................... 121.58
January 1979................................................... 123.59
January 1980................................................... 136.47
January 1981................................................... 168.49
January 1982................................................... 163.12
January 1983................................................... 198.05
January 1984................................................... 227.32
January 1985................................................... 228.10
January 1986................................................... 294.22
January 1987................................................... 331.86
January 1988................................................... 330.06
January 1989................................................... 363.60
January 1990................................................... 429.63
January 1991................................................... 432.97
January 1992................................................... 496.00
January 1993................................................... 543.10
January 1994................................................... 585.08
January 1995................................................... 556.35
January 1996................................................... 706.64
January 1997................................................... 813.93
</TABLE>
The amounts shown are based on the investment performance of the Growth &
Income Subaccount, the Growth & Income Portfolio, 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.
41
<PAGE>
SOVEREIGN BOND SUBACCOUNT
ILLUSTRATIVE PERIODIC ACCUMULATED VALUES
AND ANNUITY PAYMENTS
TABLE I--ACCUMULATION PERIOD--ILLUSTRATIVE ACCUMULATED VALUES WHICH WOULD HAVE
RESULTED IF A $10,000 NET PURCHASE PAYMENT CONTRACT HAD BEEN ISSUED JUNE 2,
1980
<TABLE>
<CAPTION>
ACCUMULATED VALUE
ON DECEMBER 31
CONTRACT YEAR COMMENCING OF THE SAME YEAR
------------------------ -----------------
<S> <C>
June 1980............................................ $10,229.93
June 1981............................................ 10,496.01
June 1982............................................ 13,331.26
June 1983............................................ 13,948.51
June 1984............................................ 15,749.99
June 1985............................................ 18,880.47
June 1986............................................ 21,134.54
June 1987............................................ 21,393.33
June 1988............................................ 22,818.87
June 1989............................................ 25,363.52
June 1990............................................ 26,898.56
June 1991............................................ 30,947.25
June 1992............................................ 32,856.05
June 1993............................................ 35,891.25
June 1994............................................ 34,484.11
June 1995............................................ 40,650.17
June 1996............................................ 41,731.05
June 1997............................................ --
</TABLE>
TABLE II--ANNUITY PERIOD--ILLUSTRATIVE MONTHLY VARIABLE ANNUITY PAYMENTS--
SOVEREIGN BOND SUBACCOUNT
This Table shows, at annual intervals, the illustrative monthly variable
annuity payments an Annuitant would have received 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...................................................... 96.02
June 1982...................................................... 104.33
June 1983...................................................... 124.70
June 1984...................................................... 119.06
June 1985...................................................... 142.91
June 1986...................................................... 161.39
June 1987...................................................... 161.44
June 1988...................................................... 166.85
June 1989...................................................... 175.39
June 1990...................................................... 179.74
June 1991...................................................... 192.24
June 1992...................................................... 205.19
June 1993...................................................... 219.34
June 1994...................................................... 212.72
June 1995...................................................... 224.64
June 1996...................................................... 228.63
June 1997...................................................... 235.28
</TABLE>
The amounts shown are based on the investment performance of the Sovereign
Subaccount, the Sovereign Portfolio, 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.
42
<PAGE>
MONEY MARKET SUBACCOUNT
ILLUSTRATIVE PERIODIC ACCUMULATED VALUES
AND ANNUITY PAYMENTS
TABLE I--ACCUMULATION PERIOD--ILLUSTRATIVE ACCUMULATED VALUES WHICH WOULD HAVE
RESULTED IF A $10,000 NET PURCHASE PAYMENT CONTRACT HAD BEEN ISSUED MAY 13,
1982
<TABLE>
<CAPTION>
ACCUMULATED VALUE
ON DECEMBER 31
CONTRACT YEAR COMMENCING OF THE SAME YEAR
------------------------ -----------------
<S> <C>
May 1982............................................. $10,454.08
May 1983............................................. 11,209.15
May 1984............................................. 12,215.99
May 1985............................................. 13,028.02
May 1986............................................. 13,707.73
May 1987............................................. 14,422.37
May 1988............................................. 15,314.17
May 1989............................................. 16,504.28
May 1990............................................. 17,639.99
May 1991............................................. 18,435.21
May 1992............................................. 18,841.95
May 1993............................................. 19,150.05
May 1994............................................. 19,657.28
May 1995............................................. 20,506.13
May 1996............................................. 21,299.24
May 1997............................................. --
</TABLE>
TABLE II--ANNUITY PERIOD--ILLUSTRATIVE MONTHLY VARIABLE ANNUITY PAYMENTS--
MONEY MARKET SUBACCOUNT
This Table shows, at annual intervals, the illustrative monthly variable
annuity payments an Annuitant would have received assuming that Annuitant
received a first annuity payment of $100 in May 1982.
<TABLE>
<CAPTION>
PAYMENT
MONTH FOR MONTH
----- ---------
<S> <C>
May 1982....................................................... $100.00
May 1983....................................................... 103.34
May 1984....................................................... 107.59
May 1985....................................................... 112.85
May 1986....................................................... 115.94
May 1987....................................................... 117.28
May 1988....................................................... 119.52
May 1989....................................................... 123.57
May 1990....................................................... 128.27
May 1991....................................................... 131.70
May 1992....................................................... 131.78
May 1993....................................................... 129.76
May 1994....................................................... 127.42
May 1995....................................................... 127.48
May 1996....................................................... 128.26
May 1997....................................................... 128.72
</TABLE>
The amounts shown are based on the investment performance of the Money
Market Subaccount, the Money Market Portfolio, 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.
43
<PAGE>
LARGE CAP GROWTH SUBACCOUNT
ILLUSTRATIVE PERIODIC ACCUMULATED VALUES
AND ANNUITY PAYMENTS
TABLE I--ACCUMULATION PERIOD--ILLUSTRATIVE ACCUMULATED VALUES WHICH WOULD HAVE
RESULTED IF A $10,000 NET PURCHASE PAYMENT HAD BEEN ISSUED NOVEMBER 24, 1987
<TABLE>
<CAPTION>
ACCUMULATED VALUE
ON DECEMBER 31
CONTRACT YEAR COMMENCING OF THE SAME YEAR
------------------------ -----------------
<S> <C>
November 1987........................................ $10,239.60
November 1988........................................ 11,531.81
November 1989........................................ 15,108.39
November 1990........................................ 15,668.24
November 1991........................................ 19,383.96
November 1992........................................ 21,015.39
November 1993........................................ 23,586.33
November 1994........................................ 23,031.38
November 1995........................................ 29,897.25
November 1996........................................ 34,867.83
November 1997........................................
</TABLE>
TABLE II--ANNUITY PERIOD--ILLUSTRATIVE MONTHLY VARIABLE ANNUITY PAYMENTS--
LARGE CAP GROWTH SUBACCOUNT
This Table shows, at annual intervals, the illustrative monthly variable
annuity payments an Annuitant would have received assuming the Annuitant
received a first annuity payment of $100 in November 1987.
<TABLE>
<CAPTION>
PAYMENT
MONTH FOR MONTH
----- ---------
<S> <C>
November 1987.................................................. $100.00
November 1988.................................................. 109.59
November 1989.................................................. 135.20
November 1990.................................................. 135.73
November 1991.................................................. 164.04
November 1992.................................................. 168.91
November 1993.................................................. 189.46
November 1994.................................................. 182.81
November 1995.................................................. 218.63
November 1996.................................................. 253.37
November 1997.................................................. 310.32
</TABLE>
The amounts shown are based on the investment performance of the Large Cap
Growth Subaccount and the Large Cap Growth Portfolio. 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 the Tables.
44
<PAGE>
MANAGED SUBACCOUNT
ILLUSTRATIVE PERIODIC ACCUMULATED VALUES
AND ANNUITY PAYMENTS
TABLE I--ACCUMULATION PERIOD--ILLUSTRATIVE ACCUMULATED VALUES WHICH WOULD HAVE
RESULTED IF A $10,000 NET PURCHASE PAYMENT HAD BEEN ISSUED NOVEMBER 9, 1987
<TABLE>
<CAPTION>
ACCUMULATED VALUE
ON DECEMBER 31
CONTRACT YEAR COMMENCING OF THE SAME YEAR
------------------------ -----------------
<S> <C>
November 1987........................................ $10,226.76
November 1988........................................ 11,240.26
November 1989........................................ 13,380.15
November 1990........................................ 13,629.51
November 1991........................................ 16,394.96
November 1992........................................ 17,414.83
November 1993........................................ 19,167.24
November 1994........................................ 18,479.74
November 1995........................................ 23,160.13
November 1996........................................ 25,285.76
November 1997........................................
</TABLE>
TABLE II--ANNUITY PERIOD--ILLUSTRATIVE MONTHLY VARIABLE ANNUITY PAYMENTS--
MANAGED SUBACCOUNT
This Table shows, at annual intervals, the illustrative monthly variable
annuity payments an Annuitant would have received assuming the Annuitant
received a first annuity payment of $100 in November 1987.
<TABLE>
<CAPTION>
PAYMENT
MONTH FOR MONTH
----- ---------
<S> <C>
November 1987.................................................. $100.00
November 1988.................................................. 109.87
November 1989.................................................. 121.52
November 1990.................................................. 114.66
November 1991.................................................. 136.05
November 1992.................................................. 142.02
November 1993.................................................. 156.17
November 1994.................................................. 146.42
November 1995.................................................. 168.78
November 1996.................................................. 180.91
November 1997.................................................. 201.84
</TABLE>
The amounts shown are based on the investment performance of the Managed
Subaccount and the Managed Portfolio. 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
the Tables.
45
<PAGE>
REAL ESTATE EQUITY SUBACCOUNT
ILLUSTRATIVE PERIODIC ACCUMULATED VALUES
AND ANNUITY PAYMENTS
TABLE I--ACCUMULATION PERIOD--ILLUSTRATIVE ACCUMULATED VALUES WHICH WOULD HAVE
RESULTED IF A $10,000 NET PURCHASE PAYMENT HAD BEEN ISSUED FEBRUARY 14, 1989
<TABLE>
<CAPTION>
ACCUMULATED VALUE
ON DECEMBER 31
CONTRACT YEAR COMMENCING OF THE SAME YEAR
------------------------ -----------------
<S> <C>
February 1989........................................ $10,442.26
February 1990........................................ 8,035.55
February 1991........................................ 10,579.75
February 1992........................................ 12,103.83
February 1993........................................ 14,001.34
February 1994........................................ 14,202.33
February 1995........................................ 15,728.80
February 1996........................................ 20,639.15
February 1997........................................
</TABLE>
TABLE II--ANNUITY PERIOD--ILLUSTRATIVE MONTHLY VARIABLE ANNUITY PAYMENTS--REAL
ESTATE EQUITY SUBACCOUNT
This Table shows, at annual intervals, the illustrative monthly variable
annuity payments an Annuitant would have received assuming the Annuitant
received a first annuity payment of $100 in February 1989.
<TABLE>
<CAPTION>
PAYMENT
MONTH FOR MONTH
----- ---------
<S> <C>
February 1989.................................................. $100.00
February 1990.................................................. 95.91
February 1991.................................................. 85.47
February 1992.................................................. 99.80
February 1993.................................................. 115.44
February 1994.................................................. 118.80
February 1995.................................................. 112.48
February 1996.................................................. 124.74
February 1997.................................................. 158.12
</TABLE>
The amounts shown are based on the investment performance of the Real Estate
Equity Subaccount and the Real Estate Equity Portfolio. 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 the Tables.
46
<PAGE>
INTERNATIONAL EQUITIES SUBACCOUNT
ILLUSTRATIVE PERIODIC ACCUMULATED VALUES
AND ANNUITY PAYMENTS
TABLE I--ACCUMULATION PERIOD--ILLUSTRATIVE ACCUMULATED VALUES WHICH WOULD HAVE
RESULTED IF A $10,000 NET PURCHASE PAYMENT HAD BEEN ISSUED FEBRUARY 10, 1989
<TABLE>
<CAPTION>
ACCUMULATED VALUE
ON DECEMBER 31
CONTRACT YEAR COMMENCING OF THE SAME YEAR
------------------------ -----------------
<S> <C>
February 1989........................................ $11,099.72
February 1990........................................ 10,051.49
February 1991........................................ 12,229.24
February 1992........................................ 11,861.11
February 1993........................................ 15,450.90
February 1994........................................ 14,305.70
February 1995........................................ 15,237.67
February 1996........................................ 16,406.62
February 1997........................................
</TABLE>
TABLE II--ANNUITY PERIOD--ILLUSTRATIVE MONTHLY VARIABLE ANNUITY PAYMENTS--
INTERNATIONAL EQUITIES SUBACCOUNT
This Table shows, at annual intervals, the illustrative monthly variable
annuity payments an Annuitant would have received assuming the Annuitant
received a first annuity payment of $100 in February 1989.
<TABLE>
<CAPTION>
PAYMENT
MONTH FOR MONTH
----- ---------
<S> <C>
February 1989.................................................. $100.00
February 1990.................................................. 96.77
February 1991.................................................. 89.90
February 1992.................................................. 103.84
February 1993.................................................. 98.31
February 1994.................................................. 123.78
February 1995.................................................. 103.66
February 1996.................................................. 114.78
February 1997.................................................. 115.51
</TABLE>
The amounts shown are based on the investment performance of the
International Equities Subaccount and the International Equities Portfolio.
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 the Tables.
47
<PAGE>
JOHN HANCOCK
MUTUAL LIFE INSURANCE COMPANY
[LOGO OF JOHN HANCOCK APPEARS HERE]
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
conditions 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,
(2) to change the allocation of future purchase payments to the
subaccounts, and
(3) change the allocation of my subaccount elections as they are applied
under the Dollar-Cost Averaging option (if available on my Contract).
I understand that John Hancock employs the following procedures reasonably
designed to confirm that the instructions received by telephone are genuine:
requiring disclosure of personal identification; tape recording calls; and
providing 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 unauthorized 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
Servicing Office or (b) John Hancock discontinues this service.
Signature(s) of Prospective
Contract Owner(s)
Date: /s/
------------------------------- ----------------------------------
Date: /s/
------------------------------- ----------------------------------
Questions call: 800 REAL LIFE (800-732-5543)
Mail to: John Hancock Servicing Office
P.O. Box 111
Boston, MA 02117
<PAGE>
[LOGO OF JOHN HANCOCK APPEARS HERE]
CONTRACTS ISSUED BY JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
200 CLARENDON STREET, BOSTON, MASSACHUSETTS 02117
S 2/98
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
INDIVIDUAL COMBINATION VARIABLE/FIXED
ANNUITY CONTRACTS
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT V
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 V, dated February , 1998.
A copy of the prospectus may be obtained from the John Hancock Servicing
Office, P.O. Box 111, Boston Massachusetts, 02117, telephone number (800) REAL
LIFE (800-732-5543), Fax (617) 572-5410.
This statement of additional information is dated February , 1998.
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT V
CROSS REFERENCE SHEET
----------------
<TABLE>
<CAPTION>
SECTION IN STATEMENT OF
FORM N-4 ITEM NO. ADDITIONAL INFORMATION
----------------- -----------------------
<C> <C> <S>
15. Cover Page............................ Cover Page
16. Table of Contents..................... Table of Contents
17. General Information and History....... Business History
Distribution Agreement and
18. Services.............................. Other Services
19. Purchase of Securities Being Offered.. Not Applicable (relevant
information in prospectus)
Distribution Agreement and
20. Underwriters.......................... Other Services
21. Calculation of Yield Quotations of Calculation of Performance
Money Market Subaccounts............. Data
Calculation of Annuity
22. Annuity Payments...................... 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 12-13
Distribution Agreement and Other Services............... 1 16, 20, 36
Distribution Agreement................................ 1 36
Investment Advisory Agreement......................... 1 16
Custodian Agreement................................... 2 --
Independent Auditors.................................. 2 36
Calculation of Performance Data......................... 3 34
Calculation of Annuity Payments......................... 4 24-25
Financial Statements.................................... 6 36
</TABLE>
<PAGE>
BUSINESS HISTORY
John Hancock Variable Annuity Account V (the "Account") is a separate
account of John Hancock Mutual Life Insurance Company ("John Hancock"),
established under the laws of the Commonwealth 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 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 combination fixed/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.
DISTRIBUTION AGREEMENT AND OTHER SERVICES
DISTRIBUTION AGREEMENT
Pursuant to a Distribution Agreement, dated May 1, 1997, John Hancock
Distributors, Inc. ("Distributors"), a registered broker-dealer, acts as
"principal underwriter" for the Account. Distributors is a member of the
National Association of Securities Dealers, Inc., and a member of the
Securities Investors Protection Corporation. Distributors' 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 Distributors is not obligated to sell any particular amount of
the Account's interests.
INVESTMENT ADVISORY AGREEMENT
The Fund, in which the Contracts are invested, has contracted with John
Hancock for investment advisory services. Pursuant to four Investment
Management Agreements (two dated as of April 12, 1988, one dated April 15,
1994, and one dated March 14, 1996) as amended, John Hancock, a registered
investment adviser under the Investment Advisers Act of 1940, advises the Fund
in connection with policy decisions; provides administration of day-to-day
operations; 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. 3/18/97
</TABLE>
1
<PAGE>
<TABLE>
<C> <S> <C>
Mid Cap Growth Janus Capital Corporation 3/29/96
Mid Cap Value Neuberger & Berman L.P. 5/02/96
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.
CUSTODIAN AGREEMENT
The Fund's custodian with respect to the Growth & Income, Money Market,
Large Cap Growth, Short-Term U.S. Government, and Real Estate Equity
Portfolios is Chemical Banking Corporation of 4 New York Plaza, New York, New
York, pursuant to a Custodian Agreement, dated January 15, 1986 and amended
April, 1988. The Fund's custodian with respect to the Sovereign Bond Portfolio
is Investors Bank & Trust Company of 24 Federal Street, Boston, Massachusetts,
pursuant to a Custodian Agreement, dated May 2, 1995. The Fund's custodian
with respect to all 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 custodians' 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.
2
<PAGE>
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 and 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 adjustments for all Fund and Contract level charges except premium
taxes, if any.
On that basis, the following table shows the average annual total return for
each Subaccount for the periods ended December 31, 1996:
<TABLE>
<CAPTION>
YEAR AVERAGE ANNUALIZED DATE**
TO ----------------------- OF
SUBACCOUNT*** DATE 1 YEAR 5 YEAR* 10 YEAR* INCEPTION
------------- ----- ------ ------- -------- ---------
<S> <C> <C> <C> <C> <C>
Managed................................. 3.7% 3.7% 8.7% 10.6% 11/09/87
Growth & Income......................... 13.0% 13.0% 12.7% 13.3% 04/03/72
Equity Index............................ 6.8% N/A N/A N/A 04/30/96
Large Cap Value......................... 6.4% N/A N/A N/A 04/30/96
Large Cap Growth........................ 11.2% 11.2% 12.2% 14.6% 11/24/87
Mid Cap Value........................... 8.7% N/A N/A N/A 04/30/96
Mid Cap Growth.......................... -4.7% N/A N/A N/A 04/30/96
Special Opportunities................... 23.2% 23.2% 25.1% N/A 09/23/94
Real Estate Equity...................... 25.9% 25.9% 14.0% 9.5% 02/01/89
Small Cap Value......................... 2.9% N/A N/A N/A 04/30/96
Small Cap Growth........................ -7.7% N/A N/A N/A 04/30/96
International Balanced.................. -0.7% N/A N/A N/A 04/30/96
International Equities.................. 2.2% 2.2% 5.7% 6.4% 02/01/89
International Opportunities............. -0.7% N/A N/A N/A 04/30/96
Short Term U.S. Government.............. -3.3% -3.3% 2.9% N/A 09/23/94
Sovereign Bond.......................... -2.8% -2.8% 5.8% 7.0% 06/02/80
Strategic Bond.......................... -0.7% N/A N/A N/A 04/30/96
Money Market............................ -1.6% -1.6% 2.5% 4.4% 05/13/82
</TABLE>
- --------
* or since inception of the applicable Portfolio or its predecessors.
** of the Portfolio or its predecessor.
*** Absent expense reimbursements from John Hancock to certain Portfolios for
some periods, total return figures for the related 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 administrative charges are reflected, but
Withdrawal Charge and any charge for premium taxes are not.
3
<PAGE>
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)/(365/7)/] - 1
For the 7-day period ending December 31, 1996, the Money Market Subaccount's
current yield was 3.98% and its effective yield was 4.06%.
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 reimbursements)
c = the average daily number of shares outstanding during the
period that were entitled to received 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 Share 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 periods 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 tables used as a basis for the annuity purchase rates are the
1983a Mortality Tables, with projections of mortality improvements and with
certain age adjustments based on the Contract Year of annuitization. The
mortality table 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 Female Annuity Table of the 1983a Mortality Tables.
The impact of this change will be lower benefits (5% to 15%) from a male's
viewpoint than would otherwise be the case.
4
<PAGE>
An illustration of the method of calculation of variable monthly annuity
payments and the number of Annuity Units under deferred Contracts is shown in
the outline that follows.
A. GENERAL FORMULAE TO DETERMINE ACCUMULATION SHARE VALUES AND ANNUITY UNIT
VALUES
<TABLE>
Net Investment Rate =
Subaccount Charges (0.003836%
per Day of the Value of the
Investment Capital Capital Taxes Subaccount at the Beginning
Income + Gains - Losses - (if any) - of the Valuation Period)
- -------------------------------------------------------------------------------
Value of the Subaccount at the Beginning of the Valuation Period
<S> <C> <C> <C> <C>
Net Investment
Factor = 1.00000000 + Net Investment Rate
Accumulation Accumulation Share Value on Net Investment
Share Value = Preceding Valuation Date X Factor
Annuity Unit Net Factor to Neutralize
Annuity Unit Value on Preceding Investment the Assumed
Value = Valuation Date X Factor X 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 $153.44 assuming a one day Valuation Period. The $153.44 was
computed by multiplying the beginning Subaccount value of $4,000,000 by the
factor 0.00003836. By substituting in the first formula above, the net
investment rate is equal to $3,846.56 ($2000 + $3000 - $1000 - $153.44)
divided by $4,000,000 or 0.0009616. The Net Investment Factor would then be
1.0009616.
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 $11.260818 ($11.250000 X 1.0009616). The value of an Annuity Unit at
the end of the Valuation Period would be $1.085941
($1.0850000 X 1.0009616 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.
5
<PAGE>
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 =
Number of First Monthly
Accumulation Accumulation Share Value Annuity
Shares Applied X 10 Days Before Maturity Date X Payment Factor
- -----------------------------------------------------
$1,000
Number of
Annuity Units = Amount of First Variable Annuity Payment
-----------------------------------------------------
Annuity Unit Value 10 Days Before Maturity Date
Amount of
Subsequent Annuity Unit Value
Variable Annuity 10 Days Before
Payment = Number of Annuity Units X 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. Assume also
that the Contract was issued to a male age 65 who elected a life annuity with
10 years guaranteed. The appropriate annuity purchase rate in the Contract for
an assumed investment rate of 3 1/2% is $5.47 per $1000 of proceeds for the
Annuity Option elected. The Annuitant's first monthly payment would then be
$262.56.
4000.000 X $12.000000 X 5.47
---------------------------------
$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 $187.543 ($262.56/$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 $263.50 (187,543 X
$1.405000).
FINANCIAL STATEMENTS
(Included on next page)
6
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT V
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
LARGE CAP SOVEREIGN INTERNATIONAL SMALL CAP INTERNATIONAL MID CAP LARGE CAP MONEY MID CAP
GROWTH BOND EQUITIES GROWTH BALANCED GROWTH VALUE MARKET VALUE
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ----------- ------------- ---------- ------------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investment in
shares of
portfolios of
John Hancock
Variable Series
Trust I, at
value........... $43,071,480 $63,635,745 $12,128,068 $2,652,760 $621,255 $3,331,665 $3,223,799 $26,747,316 $1,422,615
Receivable from
John Hancock
Variable Series
Trust I......... 72,380 34,658 20,997 12,301 2,289 9,982 28,273 337,541 633
----------- ----------- ----------- ---------- -------- ---------- ---------- ----------- ----------
Total assets.... 43,143,860 63,670,403 12,149,065 2,665,061 623,544 3,341,647 3,252,072 27,084,857 1,423,248
LIABILITIES
Payable to John
Hancock Mutual
Life Insurance
Company......... 70,741 32,361 20,546 12,198 2,264 9,850 28,144 336,517 576
Assets charges
payable......... 1,639 2,297 451 103 25 132 129 1,024 57
----------- ----------- ----------- ---------- -------- ---------- ---------- ----------- ----------
Total
liabilities..... 72,380 34,658 20,997 12,301 2,289 9,982 28,273 337,541 633
----------- ----------- ----------- ---------- -------- ---------- ---------- ----------- ----------
Net assets...... $43,071,480 $63,635,745 $12,128,068 $2,652,760 $621,255 $3,331,665 $3,223,799 $26,747,316 $1,422,615
=========== =========== =========== ========== ======== ========== ========== =========== ==========
</TABLE>
See accompanying notes.
7
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT V
STATEMENT OF ASSETS AND LIABILITIES--(CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
SHORT-TERM
SPECIAL REAL ESTATE GROWTH & U.S. SMALL CAP INTERNATIONAL EQUITY STRATEGIC
OPPORTUNITIES EQUITY INCOME MANAGED GOVERNMENT VALUE OPPORTUNITIES INDEX BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------- ----------- ------------ ------------ ---------- ---------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investment in
shares of
portfolios of
John Hancock
Variable Series
Trust I, at
value........... $32,202,831 $10,874,885 $158,202,995 $367,126,418 $7,807,472 $1,037,312 $1,678,594 $1,656,323 $1,228,784
Receivable from
John Hancock
Variable Series
Trust I......... 303,958 7,209 233,267 331,349 795 510 66 9,705 8,289
----------- ----------- ------------ ------------ ---------- ---------- ---------- ---------- ----------
Total assets.... 32,506,789 10,882,094 158,436,262 367,457,767 7,808,267 1,037,822 1,678,660 1,666,028 1,237,073
LIABILITIES
Assets charges
payable......... 302,677 6,818 227,366 318,038 477 469 -- 9,638 8,240
Payable to John
Hancock Mutual
Life Insurance
Company......... 1,281 391 5,901 13,311 318 41 66 67 49
----------- ----------- ------------ ------------ ---------- ---------- ---------- ---------- ----------
Total
liabilities..... 303,958 7,209 233,267 331,349 795 510 66 9,705 8,289
----------- ----------- ------------ ------------ ---------- ---------- ---------- ---------- ----------
Net assets...... $32,202,831 $10,874,885 $158,202,995 $367,126,418 $7,807,472 $1,037,312 $1,678,594 $1,656,323 $1,228,784
=========== =========== ============ ============ ========== ========== ========== ========== ==========
</TABLE>
See accompanying notes.
8
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT V
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
LARGE CAP SOVEREIGN INTERNATIONAL SMALL CAP INTERNATIONAL MID CAP LARGE CAP MONEY MID CAP
GROWTH BOND EQUITIES GROWTH BALANCED GROWTH VALUE MARKET VALUE
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT* SUBACCOUNT* SUBACCOUNT* SUBACCOUNT* SUBACCOUNT SUBACCOUNT*
---------- ----------- ------------- ----------- ------------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment
income:
Distributions
received from
the portfolios
of John Hancock
Variable Series
Trust I......... $6,346,188 $ 4,666,388 $134,001 $ 1,258 $ 8,357 $ 8,574 $ 59,766 $1,144,918 $ 29,774
Expenses:
Mortality and
expense risks... 477,758 795,929 140,829 12,428 2,394 13,250 11,264 302,126 5,354
---------- ----------- -------- -------- ------- ------- -------- ---------- --------
Net investment
income (loss).... 5,868,430 3,870,459 (6,828) (11,170) 5,963 (4,676) 48,502 842,792 24,420
Net realized and
unrealized gain
(loss) on
investments:
Net realized
gain (loss)..... 478,115 234,092 147,281 (11,683) 195 (24) 4,527 -- 1,638
Net unrealized
appreciation
(depreciation)
during the year. (830,544) (2,384,658) 647,349 (74,502) 16,955 35,740 117,692 -- 93,767
---------- ----------- -------- -------- ------- ------- -------- ---------- --------
Net realized and
unrealized gain
(loss) on
investments...... (352,429) (2,150,566) 794,630 (86,185) 17,150 35,716 122,219 -- 95,405
---------- ----------- -------- -------- ------- ------- -------- ---------- --------
Net increase
(decrease) in net
assets resulting
from operations.. $5,516,001 $ 1,719,893 $787,802 $(97,355) $23,113 $31,040 $170,721 $ 842,792 $119,825
========== =========== ======== ======== ======= ======= ======== ========== ========
</TABLE>
- -----
* From May 1, 1996 (commencement of operations).
See accompanying notes.
9
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT V
STATEMENT OF OPERATIONS--(CONTINUED)
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
SHORT-TERM
SPECIAL REAL ESTATE GROWTH & U.S. SMALL CAP INTERNATIONAL EQUITY
OPPORTUNITIES EQUITY INCOME MANAGED GOVERNMENT VALUE OPPORTUNITIES INDEX
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT* SUBACCOUNT* SUBACCOUNT*
------------- ----------- ----------- ------------ ---------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment
income:
Distributions
received from
the portfolios
of John Hancock
Variable Series
Trust I......... $1,237,991 $ 508,891 $19,586,646 $ 45,124,706 $336,519 $25,403 $ 4,888 $ 38,372
Expenses:
Mortality and
expense risks... 289,374 103,737 1,769,783 4,464,180 90,508 4,012 7,044 7,202
---------- ---------- ----------- ------------ -------- ------- ------- --------
Net investment
income (loss).... 948,617 405,154 17,816,863 40,660,526 246,011 21,391 (2,156) 31,170
Net realized and
unrealized gain
(loss) on
investments:
Net realized
gain (loss)..... 479,654 95,726 552,624 2,338,033 (7,429) 1,223 2,121 7,516
Net unrealized
appreciation
(depreciation)
during the year. 3,216,931 1,901,728 4,394,652 (11,935,373) (66,125) 46,285 72,186 90,134
---------- ---------- ----------- ------------ -------- ------- ------- --------
Net realized and
unrealized gain
(loss) on
investments...... 3,696,585 1,997,454 4,947,276 (9,597,340) (73,554) 47,508 74,307 97,650
---------- ---------- ----------- ------------ -------- ------- ------- --------
Net increase in
net assets
resulting from
operations....... $4,645,202 $2,402,608 $22,764,139 $ 31,063,186 $172,457 $68,899 $72,151 $128,820
========== ========== =========== ============ ======== ======= ======= ========
<CAPTION>
STRATEGIC
BOND
SUBACCOUNT*
-----------
<S> <C>
Investment
income:
Distributions
received from
the portfolios
of John Hancock
Variable Series
Trust I......... $36,420
Expenses:
Mortality and
expense risks... 4,163
-----------
Net investment
income (loss).... 32,257
Net realized and
unrealized gain
(loss) on
investments:
Net realized
gain (loss)..... 1,486
Net unrealized
appreciation
(depreciation)
during the year. (4,798)
-----------
Net realized and
unrealized gain
(loss) on
investments...... (3,312)
-----------
Net increase in
net assets
resulting from
operations....... $28,945
===========
</TABLE>
- -----
* From May 1, 1996 (commencement of operations).
See accompanying notes.
10
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT V
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
LARGE CAP SOVEREIGN INTERNATIONAL SMALL CAP
GROWTH BOND EQUITIES GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------------ ------------------------ ------------------------ ----------
1996 1995 1996 1995 1996 1995 1996*
----------- ----------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets:
From operations:
Net investment income
(loss)................. $ 5,868,430 $ 1,908,990 $ 3,870,459 $ 3,681,057 $ (6,828) $ (12,872) $ (11,170)
Net realized gain
(loss)................. 478,115 158,802 234,092 79,176 147,281 291,223 (11,683)
Net unrealized
appreciation
(depreciation) during
the year............... (830,544) 2,928,433 (2,384,658) 4,908,455 647,349 188,443 (74,502)
----------- ----------- ----------- ----------- ----------- ----------- ----------
Net increase (decrease)
in net assets resulting
from operations......... 5,516,001 4,996,225 1,719,893 8,668,688 787,802 466,794 (97,355)
From contractowner
transactions:
Net contributions from
contractowners......... 14,966,199 10,204,395 11,650,762 10,814,815 4,741,455 2,785,422 3,174,587
Net benefits to
contractowners......... (4,906,509) (1,948,870) (9,980,999) (7,227,709) (2,300,437) (2,128,690) (424,472)
----------- ----------- ----------- ----------- ----------- ----------- ----------
Net increase in net
assets from
contractowner
transactions............ 10,059,690 8,255,525 1,669,763 3,587,106 2,441,018 656,732 2,750,115
----------- ----------- ----------- ----------- ----------- ----------- ----------
Net increase in net
assets.................. 15,575,691 13,251,750 3,389,656 12,255,794 3,228,820 1,123,526 2,652,760
Net assets at beginning
of year................. 27,495,789 14,244,039 60,246,089 47,990,295 8,899,248 7,775,722 --
----------- ----------- ----------- ----------- ----------- ----------- ----------
Net assets at end of
year.................... $43,071,480 $27,495,789 $63,635,745 $60,246,089 $12,128,068 $ 8,899,248 $2,652,760
=========== =========== =========== =========== =========== =========== ==========
</TABLE>
- -----
* From May 1, 1996 (commencement of operations).
See accompanying notes.
11
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT V
STATEMENTS OF CHANGES IN NET ASSETS--(CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
INTERNATIONAL MID CAP LARGE CAP MID CAP
BALANCED GROWTH VALUE MONEY MARKET VALUE
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------- ---------- ---------- ------------------------- ----------
1996* 1996* 1996* 1996 1995 1996*
------------- ---------- ---------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets:
From operations:
Net investment income
(loss)................. $ 5,963 $ (4,676) $ 48,502 $ 842,792 $ 572,704 $ 24,420
Net realized gain
(loss)................. 195 (24) 4,527 -- -- 1,638
Net unrealized
appreciation during the
year................... 16,955 35,740 117,692 -- -- 93,767
-------- ---------- ---------- ------------ ----------- ----------
Net increase in net
assets resulting from
operations.............. 23,113 31,040 170,721 842,792 572,704 119,825
From contractowner
transactions:
Net contributions from
contractowners......... 602,530 3,454,735 3,117,307 29,572,298 13,230,728 1,364,695
Net benefits to
contractowners......... (4,388) (154,110) (64,229) (22,022,250) (6,951,455) (61,905)
-------- ---------- ---------- ------------ ----------- ----------
Net increase in net
assets from
contractowner
transactions............ 598,142 3,300,625 3,053,078 7,550,048 6,279,273 1,302,790
-------- ---------- ---------- ------------ ----------- ----------
Net increase in net
assets.................. 621,255 3,331,665 3,223,799 8,392,840 6,851,977 1,422,615
Net assets at beginning
of year................. -- -- -- 18,354,476 11,502,499 --
-------- ---------- ---------- ------------ ----------- ----------
Net assets at end of
year.................... $621,255 $3,331,665 $3,223,799 $ 26,747,316 $18,354,476 $1,422,615
======== ========== ========== ============ =========== ==========
</TABLE>
- -----
* From May 1, 1996 (commencement of operations).
See accompanying notes.
12
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT V
STATEMENTS OF CHANGES IN NET ASSETS--(CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
REAL ESTATE GROWTH &
SPECIAL OPPORTUNITIES EQUITY INCOME MANAGED
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------------------- ------------------------ -------------------------- --------------------------
1996 1995 1996 1995 1996 1995 1996 1995
----------- ---------- ----------- ----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease)
in net assets:
From operations:
Net investment
income............. $ 948,617 $ 154,221 $ 405,154 $ 373,688 $ 17,816,863 $ 8,955,736 $ 40,660,526 $ 26,263,651
Net realized gain
(loss)............. 479,654 45,102 95,726 (83,072) 552,624 163,924 2,338,033 1,220,544
Net unrealized
appreciation
(depreciation)
during the year.... 3,216,931 508,657 1,901,728 392,171 4,394,652 13,880,625 (11,935,373) 33,103,005
----------- ---------- ----------- ----------- ------------ ------------ ------------ ------------
Net increase in net
assets resulting
from operations..... 4,645,202 707,980 2,402,608 682,787 22,764,139 23,000,285 31,063,186 60,587,200
From contractowner
transactions:
Net contributions
from
contractowners..... 24,012,130 7,505,469 3,401,275 1,649,589 42,535,469 27,083,900 62,824,890 44,298,944
Net benefits to
contractowners..... (4,389,166) (285,472) (1,998,364) (1,915,596) (14,497,027) (8,942,609) (41,931,579) (28,755,044)
----------- ---------- ----------- ----------- ------------ ------------ ------------ ------------
Net increase
(decrease) in net
assets from
contractowner
transactions........ 19,622,964 7,219,997 1,402,911 (266,007) 28,038,442 18,141,291 20,893,311 15,543,900
----------- ---------- ----------- ----------- ------------ ------------ ------------ ------------
Net increase in net
assets.............. 24,268,166 7,927,977 3,805,519 416,780 50,802,581 41,141,576 51,956,497 76,131,100
Net assets at
beginning of year... 7,934,665 6,688 7,069,366 6,652,586 107,400,414 66,258,838 315,169,921 239,038,821
----------- ---------- ----------- ----------- ------------ ------------ ------------ ------------
Net assets at end of
year................ $32,202,831 $7,934,665 $10,874,885 $ 7,069,366 $158,202,995 $107,400,414 $367,126,418 $315,169,921
=========== ========== =========== =========== ============ ============ ============ ============
</TABLE>
See accompanying notes.
13
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT V
STATEMENTS OF CHANGES IN NET ASSETS--(CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
SHORT-TERM SMALL CAP INTERNATIONAL EQUITY
U.S. GOVERNMENT VALUE OPPORTUNITIES INDEX STRATEGIC BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------------------- ---------- ------------- ---------- --------------
1996 1995 1996* 1996* 1996* 1996*
----------- ---------- ---------- ------------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets:
From operations:
Net investment income
(loss)................. $ 246,011 $ 47,080 $ 21,391 $ (2,156) $ 31,170 $ 32,257
Net realized gain
(loss)................. (7,429) 3,462 1,223 2,121 7,516 1,486
Net unrealized
appreciation
(depreciation) during
the year............... (66,125) 18,455 46,285 72,186 90,134 (4,798)
----------- ---------- ---------- ---------- ---------- ----------
Net increase in net
assets resulting from
operations.............. 172,457 68,997 68,899 72,151 128,820 28,945
From contractowner
transactions:
Net contributions from
contractowners......... 6,095,377 3,330,813 1,026,699 1,716,141 1,730,492 1,371,974
Net benefits to
contractowners......... (1,653,919) (207,764) (58,286) (109,698) (202,989) (172,135)
----------- ---------- ---------- ---------- ---------- ----------
Net increase in net
assets from
contractowner
transactions............ 4,441,458 3,123,049 968,413 1,606,443 1,527,503 1,199,839
----------- ---------- ---------- ---------- ---------- ----------
Net increase in net
assets.................. 4,613,915 3,192,046 1,037,312 1,678,594 1,656,323 1,228,784
Net assets at beginning
of year................. 3,193,557 1,511 -- -- -- --
----------- ---------- ---------- ---------- ---------- ----------
Net assets at end of
year.................... $ 7,807,472 $3,193,557 $1,037,312 $1,678,594 $1,656,323 $1,228,784
=========== ========== ========== ========== ========== ==========
</TABLE>
- -----
* From May 1, 1996 (commencement of operations).
See accompanying notes.
14
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT V
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. ORGANIZATION
John Hancock Variable Annuity Account V (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. The Account is operated as a unit investment
trust registered under the Investment Company Act of 1940, as amended, and
currently consists of eighteen 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 eighteen Portfolios of the Fund
which are currently available are the Large Cap Growth, Sovereign Bond,
International Equities, Small Cap Growth, International Balanced, Mid Cap
Growth, Large Cap Value, Money Market, Mid Cap Value, Special Opportunities,
Real Estate Equity, Growth & Income, Managed, Short-Term U.S. Government,
Small Cap Value, International Opportunities, Equity Index, and Strategic Bond
Subaccounts. 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
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Valuation of Investments
Investment in shares of the Fund are valued at the reported net asset values
of the respective Portfolios. Investment transactions are recorded on the
trade date. Dividend income is recognized on the ex-dividend date. Realized
gains and losses on sales of Fund shares are determined on the basis of
identified cost.
Federal Income Taxes
The operations of the Account are included in the federal income tax return
of 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 provision 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 1.25% of net assets of the Account.
JHMLICO makes certain other deductions from contractowner payments for
premium taxes and sales and withdrawal charges, which are accounted for as a
reduction of net assets resulting from contractowner transactions.
15
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT V
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, 1996 were as follows:
<TABLE>
<CAPTION>
SHARES
PORTFOLIO OWNED COST VALUE
--------- ---------- ------------ ------------
<S> <C> <C> <C>
Large Cap Growth..................... 2,462,391 $ 40,517,515 $ 43,071,480
Sovereign Bond....................... 6,512,914 62,551,043 63,635,745
International Equities............... 720,579 11,301,395 12,128,068
Small Cap Growth..................... 267,030 2,727,262 2,652,760
International Balanced............... 59,776 604,300 621,255
Mid Cap Growth....................... 325,920 3,295,925 3,331,665
Large Cap Value...................... 290,708 3,106,107 3,223,799
Money Market......................... 2,674,732 26,747,316 26,747,316
Mid Cap Value........................ 125,357 1,328,848 1,422,615
Special Opportunities................ 1,949,099 28,476,998 32,202,831
Real Estate Equity................... 743,057 8,909,827 10,874,885
Growth & Income...................... 10,795,596 140,006,014 158,202,995
Managed.............................. 27,495,352 339,334,981 367,126,418
Short-Term U.S. Government........... 777,095 7,855,146 7,807,472
Small Cap Value...................... 96,673 991,027 1,037,312
International Opportunities.......... 158,401 1,606,408 1,678,594
Equity Index......................... 149,258 1,566,189 1,656,323
Strategic Bond....................... 120,963 1,233,582 1,228,784
</TABLE>
Purchases, including reinvestment of dividend distributions, and proceeds
from sales of shares in the Portfolios of the Fund during 1996, were as
follows:
<TABLE>
<CAPTION>
PORTFOLIO PURCHASES SALES
--------- ----------- -----------
<S> <C> <C>
Large Cap Growth.................................. $17,233,864 $ 1,305,744
Sovereign Bond.................................... 10,755,044 5,214,821
International Equities............................ 3,775,436 1,341,246
Small Cap Growth.................................. 3,002,920 263,975
International Balanced............................ 618,501 14,396
Mid Cap Growth.................................... 3,413,812 117,864
Large Cap Value................................... 3,216,920 115,339
Money Market...................................... 22,106,228 13,713,388
Mid Cap Value..................................... 1,387,328 60,188
Special Opportunities............................. 22,330,650 1,759,069
Real Estate Equity................................ 3,441,043 1,632,978
Growth & Income................................... 48,494,822 2,639,518
Managed........................................... 76,164,584 14,610,747
Short-Term U.S. Government........................ 5,948,334 1,260,865
Small Cap Value................................... 1,048,651 58,847
International Opportunities....................... 1,730,925 126,637
Equity Index...................................... 1,759,105 200,433
Strategic Bond.................................... 1,381,255 149,159
</TABLE>
16
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT V
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. NET ASSETS
Accumulation shares attributable to net assets of contractowners and
accumulation share values for each subaccount at December 31, 1996 were as
follows:
<TABLE>
<CAPTION>
ACCOMMODATOR INDEPENDENCE
------------------------- -------------------------
ACCUMULATION ACCUMULATION ACCUMULATION ACCUMULATION
SUBACCOUNT SHARES SHARE VALUES SHARES SHARE VALUES
---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Large Cap Growth........... 585,234 $35.344 1,504,358 $14.881
Sovereign Bond............. 2,370,591 19.962 1,370,328 11.957
International Equities..... 382,877 16.600 483,836 11.936
Small Cap Growth........... 56,355 9.867 212,844 9.851
International Balanced..... 8,997 10.584 49,785 10.566
Mid Cap Growth............. 41,390 10.183 286,257 10.166
Large Cap Value............ 41,297 11.296 244,514 11.277
Money Market............... 773,418 15.037 1,400,049 10.798
Mid Cap Value.............. 20,261 11.521 103,390 11.502
Special Opportunities...... 279,641 17.139 1,606,062 17.067
Real Estate Equity......... 354,780 20.884 233,153 14.865
Growth & Income............ 2,753,546 35.638 3,891,413 15.437
Managed.................... 10,707,288 25.633 6,865,907 13.497
Short-Term U.S. Government. 37,461 11.174 663,991 11.128
Small Cap Value............ 18,837 10.942 76,095 10.923
International Opportuni-
ties...................... 33,619 10.583 125,200 10.565
Equity Index............... 21,177 11.328 125,245 11.309
Strategic Bond............. 15,651 10.583 100,631 10.565
</TABLE>
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.
17
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Contractowners
John Hancock Variable Annuity Account V of John Hancock Mutual Life Insurance
Company
We have audited the accompanying statement of assets and liabilities of John
Hancock Variable Annuity Account V (the Account) (comprising, respectively,
the Large Cap Growth, Sovereign Bond, International Equities, Small Cap
Growth, International Balanced, Mid Cap Growth, Large Cap Value, Money Market,
Mid Cap Value, Special Opportunities, Real Estate Equity, Growth & Income,
Managed, Short-Term U.S. Government, Small Cap Value, International
Opportunities, Equity Index, and Strategic Bond Subaccounts) as of December
31, 1996, and the related statement of operations for the year then ended and
the statements of changes in net assets for each of the periods indicated
therein. These financial statements are the responsibility of the Account's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of each of the respective
subaccounts constituting John Hancock Variable Annuity Account V at December
31, 1996, and the results of their operations for the year then ended and the
changes in their net assets for each of the periods indicated, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Boston, Massachusetts
February 7, 1997
18
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Directors and Policyholders
John Hancock Mutual Life Insurance Company
We have audited the accompanying statutory-basis statements of financial
position of John Hancock Mutual Life Insurance Company as of December 31, 1996
and 1995, and the related statutory-basis summaries of operations, changes in
policyholders' contingency reserves and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
As described in Note 1 to the financial statements, the Company presents its
financial statements in conformity with accounting practices prescribed or
permitted by the Commonwealth of Massachusetts Division of Insurance, which
practices differ from generally accepted accounting principles. The variances
between such practices and generally accepted accounting principles also are
described in Note 1. The effects on the financial statements of these
variances are not reasonably determinable but are presumed to be material.
In our report dated February 7, 1996, we expressed an opinion that the 1995
financial statements of the Company fairly present, in all material respects,
the Company's financial position, results of operations, and cash flows 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. As described in Note
1, the accompanying statutory-basis financial statements are no longer
considered to be prepared in conformity with generally accepted accounting
principles. Accordingly, our present opinion on the 1995 financial statements,
as presented in the following paragraph, is different from that expressed in
our previous report.
In our opinion, because of the effects of the matter described in the second
preceding paragraph, the financial statements referred to above do not present
fairly, in conformity with generally accepted accounting principles, the
financial position of John Hancock Mutual Life Insurance Company at December
31, 1996 and 1995, or the results of its operations or its cash flows for the
years then ended.
Also, in our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of John
Hancock Mutual Life Insurance Company at December 31, 1996 and 1995, and the
results of its operations and its cash flows for the years then ended in
conformity with accounting practices prescribed or permitted by the
Commonwealth of Massachusetts Division of Insurance.
ERNST & YOUNG LLP
Boston, Massachusetts
February 14, 1997
19
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
December 31
-------------------
1996 1995
--------- ---------
(In millions)
<S> <C> <C>
ASSETS
Bonds--Note 6............................................... $22,467.0 $21,108.5
Stocks:
Preferred................................................. 416.2 338.8
Common.................................................... 249.8 130.9
Investments in affiliates................................. 1,268.9 1,265.3
--------- ---------
1,934.9 1,735.0
Mortgage loans on real estate--Note 6....................... 7,964.0 8,801.5
Real estate:
Company occupied.......................................... 372.1 377.4
Investment properties..................................... 2,042.3 1,949.5
--------- ---------
2,414.4 2,326.9
Policy loans................................................ 1,589.3 1,621.3
Cash items:
Cash in banks and offices................................. 348.4 286.6
Temporary cash investments................................ 1,068.3 254.1
--------- ---------
1,416.7 540.7
Premiums due and deferred................................... 278.4 234.0
Investment income due and accrued........................... 547.8 597.5
Other general account assets................................ 1,009.9 883.0
Assets held in separate accounts............................ 13,969.1 12,928.2
--------- ---------
TOTAL ASSETS................................................ $53,591.5 $50,776.6
========= =========
Obligations and Policyholders' Contingency Reserves
OBLIGATIONS
Policy reserves........................................... $18,544.0 $17,711.4
Policyholders' and beneficiaries' funds................... 14,679.3 14,724.8
Dividends payable to policyholders........................ 395.5 378.6
Policy benefits in process of payment..................... 236.3 217.1
Other policy obligations.................................. 210.5 159.6
Asset valuation reserve--Note 1........................... 1,064.8 1,014.3
Federal income and other accrued taxes--Note 1............ 125.1 250.5
Other general account obligations......................... 1,521.7 873.2
Obligations related to separate accounts.................. 13,958.2 12,913.6
--------- ---------
TOTAL OBLIGATIONS........................................... 50,735.4 48,243.1
Policyholders' Contingency Reserves
Surplus notes--Note 2..................................... 450.0 450.0
Special contingency reserve for group insurance........... 194.8 193.1
General contingency reserve............................... 2,211.3 1,890.4
--------- ---------
TOTAL POLICYHOLDERS' CONTINGENCY RESERVES................... 2,856.1 2,533.5
--------- ---------
TOTAL OBLIGATIONS AND POLICYHOLDERS' CONTINGENCY RESERVES... $53,591.5 $50,776.6
========= =========
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
20
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
STATUTORY-BASIS SUMMARY OF OPERATIONS AND CHANGES IN POLICYHOLDERS' CONTINGENCY
RESERVES
<TABLE>
<CAPTION>
Year ended December 31
------------------------
1996 1995
----------- -----------
(In millions)
<S> <C> <C>
Income
Premiums, annuity considerations and pension fund
contributions..................................... $ 8,003.1 $ 8,127.8
Net investment income--Note 4...................... 2,803.1 2,678.5
Other, net......................................... 68.6 90.8
----------- -----------
10,874.8 10,897.1
Benefits and Expenses
Payments to policyholders and beneficiaries:
Death benefits................................... 886.8 787.4
Accident and health benefits..................... 300.9 321.3
Annuity benefits................................. 1,539.4 1,342.7
Surrender benefits and annuity fund withdrawals.. 5,565.4 5,243.6
Matured endowments............................... 20.6 19.8
----------- -----------
8,313.1 7,714.8
Additions to reserves to provide for future
payments to policyholders and beneficiaries....... 880.5 1,497.0
Expenses of providing service to policyholders and
obtaining new insurance:
Field sales compensation and expenses............ 275.0 277.4
Home office and general expenses................. 514.8 455.8
Payroll, state premium and miscellaneous taxes..... 70.9 78.6
----------- -----------
10,054.3 10,023.6
----------- -----------
GAIN FROM OPERATIONS BEFORE DIVIDENDS TO
POLICYHOLDERS, FEDERAL INCOME TAXES AND NET
REALIZED CAPITAL GAINS (LOSSES)............... 820.5 873.5
Dividends to policyholders........................... 399.4 465.9
Federal income taxes--Note 1......................... 107.1 128.5
----------- -----------
506.5 594.4
----------- -----------
GAIN FROM OPERATIONS BEFORE NET REALIZED
CAPITAL GAINS (LOSSES)........................ 314.0 279.1
Net realized capital gains (losses)--Note 5.......... (43.6) 21.2
----------- -----------
NET INCOME..................................... 270.4 300.3
Other increases (decreases) in policyholders'
contingency reserves:
Net unrealized capital losses and other
adjustments--Note 5............................... $ 191.7 $ (85.1)
Valuation reserve changes--Note 1.................. (27.5) 0.0
Prior years' federal income taxes.................. (28.9) (36.8)
Other reserves and adjustments..................... (83.1) 25.19
----------- -----------
NET INCREASE IN POLICYHOLDERS' CONTINGENCY
RESERVES...................................... 322.6 203.5
Policyholders' contingency reserves at beginning of
year................................................ 2,533.5 2,330.0
----------- -----------
POLICYHOLDERS' CONTINGENCY RESERVES AT END OF YEAR... $ 2,856.1 $ 2,533.5
=========== ===========
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
21
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31
------------------------
1996 1995
----------- -----------
(In millions)
<S> <C> <C>
Cash Flows From Operating Activities:
Insurance premiums, annuity considerations and de-
posits............................................ $ 8,120.4 $ 8,280.3
Net investment income.............................. 2,965.5 2,756.9
Benefits to policyholders and beneficiaries........ (8,476.6) (7,917.6)
Dividends paid to policyholders.................... (382.6) (464.9)
Insurance expenses and taxes....................... (884.1) (795.1)
Net transfers from separate accounts............... 198.2 132.0
Other, net......................................... (602.7) (202.7)
----------- -----------
NET CASH PROVIDED FROM OPERATIONS................ 938.1 1,788.9
----------- -----------
Cash Flows Used In Investing Activities:
Bond purchases..................................... (7,590.7) (6,456.9)
Bond sales......................................... 2,812.4 2,874.9
Bond maturities and scheduled redemptions.......... 2,241.0 1,600.6
Bond prepayments................................... 1,223.2 795.9
Stock purchases.................................... (391.2) (224.3)
Proceeds from stock sales.......................... 573.2 131.4
Real estate purchases.............................. (447.7) (375.1)
Real estate sales.................................. 382.1 365.0
Other invested assets purchases.................... (214.7) (46.5)
Proceeds from the sale of other invested assets.... 183.6 251.1
Mortgage loans issued.............................. (1,582.7) (2,041.6)
Mortgage loan repayments........................... 2,247.3 1,277.9
Other, net......................................... 205.3 (506.6)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES............ (358.9) (2,354.2)
----------- -----------
Cash Flows From Financing Activities:
Issuance of short-term note payable................ 90.0 0.0
Issuance of REMIC notes payable.................... 292.0 213.1
Repayment of REMIC notes payable................... (85.2) 0.0
----------- -----------
NET CASH PROVIDED FROM FINANCING ACTIVITIES...... 296.8 213.1
----------- -----------
INCREASE (DECREASE) IN CASH AND TEMPORARY CASH
INVESTMENTS......................................... 876.0 (352.2)
Cash and temporary cash investments at beginning of
year................................................ 540.7 892.9
----------- -----------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF YEAR... $ 1,416.7 $ 540.7
=========== ===========
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
22
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS 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; Group Pension, which offers single premium annuity and guaranteed
investment contracts through both the general and separate accounts; and
Business Insurance, its group life, health, and long-term care operations
including administrative services provided to group customers. On October 10,
1996, the Company entered into an agreement to sell its group health and a
portion of its group life business to WellPoint Health Networks Inc. of
California during the first quarter of 1997. In addition, through its
subsidiaries and affiliates, the Company also offers a wide range of
investment management and advisory services and other related products
including life insurance products for the Canadian market, sponsorship and
distribution of mutual funds, real estate financing and management, and
various other financial services. Investments in these subsidiaries and other
affiliates are recorded on the statutory equity method.
The Company is domiciled in the Commonwealth of Massachusetts and licensed in
all fifty of the United States, the District of Columbia, Puerto Rico, Guam,
the US Virgin Islands, and Canada. The Company distributes its individual
products in North America primarily through a career agency system. The career
agency system is composed of company-owned, unionized branch offices and
independent general agencies. The Company also distributes its individual
products through several alternative distribution channels.
The Company markets pension and other investment-related products primarily to
sponsors of retirement and savings plans covering employees of private sector
companies, and plans covering public employees and collective bargaining
unions and non-profit organizations. Products are marketed and sold through a
combination of group pension field employee representatives, as well as
marketing personnel and investment professionals employed by the Company.
The Company distributes its group benefit products through group
representatives, who are John Hancock employees or through intermediaries, in
key markets nationwide.
The preparation of the financial statements requires management to make
estimates and assumptions that affect amounts reported in the financial
statements and accompanying notes. Such estimates and assumptions could change
in the future as more information becomes known, which could impact the
amounts reported and disclosed herein.
Basis of Presentation: The financial statements have been prepared using
accounting practices prescribed or permitted by the Commonwealth of
Massachusetts Division of Insurance and in conformity with the practices of
the National Association of Insurance Commissioners (NAIC), which practices
differ from generally accepted accounting principles (GAAP). The 1995
financial statements presented for comparative purposes were previously
described as being prepared in accordance with GAAP for mutual life insurance
companies. Pursuant to Financial Accounting Standards Board Interpretation 40,
"Applicability of Generally Accepted Accounting Principles to Mutual Life
Insurance and Other Enterprises" (FIN 40), as amended, which is effective for
1996 financial statements, financial statements based on statutory accounting
practices can no longer be described as prepared in conformity with GAAP.
Furthermore, financial statements prepared in conformity with statutory
accounting practices for periods prior to the effective date of FIN 40 are not
considered GAAP presentations when presented in comparative form with
financial statements for periods subsequent to the effective date.
Accordingly, the 1995 financial statements are no longer considered to be
presented in conformity with GAAP.
The significant differences from GAAP include: (1) policy acquisition costs
are charged to expense as incurred rather than deferred and amortized over the
related premium-paying period; (2) policy reserves are based on
23
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
statutory mortality, morbidity, and interest requirements without
consideration of withdrawals and Company experience; (3) certain assets
designated as "nonadmitted assets" are excluded from the balance sheet by
direct charges to surplus; (4) reinsurance recoverables are netted against
reserves and claim liabilities rather than reflected as an asset; (5) bonds
held as available for sale are recorded at amortized cost or market value as
determined by the NAIC rather than at fair value; (6) an Asset Valuation
Reserve and Interest Maintenance Reserve as prescribed by the NAIC are not
calculated under GAAP. Under GAAP, realized capital gains and losses are
reported in the income statement on a pretax basis as incurred and investment
valuation allowances are provided when there has been a decline in value
deemed other than temporary; (7) investments in affiliates are carried at
their net equity value with changes in value being recorded directly to
policyholders' contingency reserves rather than consolidated in the financial
statements; (8) no provision is made for the deferred income tax effects of
temporary differences between book and tax basis reporting; and (9) surplus
notes are reported as surplus rather than as liabilities. The effects of the
foregoing variances from GAAP have not been determined, but are presumed to be
material.
The significant accounting practices of the Company are as follows:
Pending Statutory Standards: The NAIC currently is in the process of
recodifying statutory accounting practices, the result of which is expected to
constitute the only source of prescribed statutory accounting practices.
Accordingly, that project, which is expected to be completed in 1999 will
likely change, to some extent, prescribed statutory accounting practices, and
may result in changes to the accounting practices that the Company uses to
prepare its statutory-basis financial statements. The impact of any such
changes on the Company's statutory surplus cannot be determined at this time
and could be material.
Revenues and Expenses: Premium revenues are recognized over the premium-paying
period of the policies whereas expenses, including the acquisition costs of
new business, are charged to operations as incurred and policyholder dividends
are provided as paid or accrued.
Cash and Temporary Cash Investments: Cash includes currency on hand and demand
deposits with financial institutions. Temporary cash investments are short-
term, highly-liquid investments both readily convertible to known amounts of
cash and so near maturity that there is insignificant risk of changes in value
because of changes in interest rates.
Valuation of Assets: General account investments are carried at amounts
determined on the following bases:
Bond and stock values are carried as prescribed by the NAIC; bonds
generally at amortized amounts or cost, preferred stocks generally at cost
and common stocks at 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. Accumulated depreciation
amounted to $393.5 million and $361.7 million at December 31, 1996 and
1995, respectively.
Real estate acquired in satisfaction of debt and held for sale, which is
classified with investment properties, is carried at the lower of cost or
fair value as of the date of foreclosure.
Policy loans are carried at outstanding principal balance, not in excess of
policy cash surrender value.
Other invested assets, which are classified with other general account
assets, include real estate and energy joint ventures and limited
partnerships and generally are valued based on the Company's equity in the
underlying net assets.
24
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
Asset Valuation and Interest Maintenance Reserves: The Asset Valuation Reserve
(AVR) is computed in accordance with the prescribed NAIC formula and
represents a provision for possible fluctuations in the value of bonds, equity
securities, mortgage loans, real estate and other invested assets. 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, 1996, the IMR, net of 1996 amortization of $18.9
million, amounted to $121.7 million which is included in other policy
obligations. The corresponding 1995 amounts were $16.4 million and $69.5
million, respectively.
Property and Equipment: Data processing equipment, which amounted to $41.6
million in 1996 and $52.9 million in 1995 and is included in other general
account assets, is reported at depreciated cost, with depreciation recorded on
a straight-line basis. Nonadmitted furniture and equipment also is depreciated
on a straight-line basis. The useful lives of these assets range from three to
twenty years. Depreciation expense was $31.0 million in 1996 and $38.0 million
in 1995.
Separate Accounts: Separate account assets and liabilities reported in the
accompanying statements of financial position represent funds that are
separately administered, principally for annuity contracts and variable life
insurance policies, and for which the contractholder, rather than the Company,
generally bears the investment risk. Separate account contractholders have no
claim against the assets of the general account of the Company. Separate
account assets are reported at market value. The operations of the separate
accounts are not included in the summary of operations; however, income earned
on amounts initially invested by the Company in the formation of new separate
accounts is included in other income.
Fair 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
25
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(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,
1996. The fair value for commitments to purchase real estate approximates
the amount of the initial commitment.
Fair values for the Company's guaranteed investment contracts are estimated
using discounted cash flow calculations, based on interest rates currently
being offered for similar contracts with maturities consistent with those
remaining for the contracts being valued. The fair value for fixed-rate
deferred annuities is the cash surrender value, which represents the
account value less applicable surrender charges. Fair values for immediate
annuities without life contingencies and supplementary contracts without
life contingencies are estimated based on discounted cash flow calculations
using current market rates.
Capital Gains and Losses: Realized capital gains and losses are determined
using the specific identification basis. Realized capital gains and losses,
net of taxes and amounts transferred to the IMR, are included in net income.
Unrealized gains and losses, which consist of market value and book value
adjustments, are shown as adjustments to policyholders' contingency reserves.
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: Life, annuity, and accident and health benefit reserves are
developed by actuarial methods and are determined based on published tables
using statutorily specified interest rates and valuation methods that will
provide, in the aggregate, reserves that are greater than or equal to the
minimum or guaranteed policy cash values or the amounts required by the
Commonwealth of Massachusetts Division of Insurance. Reserves for traditional
individual life insurance policies are maintained using the 1941, 1958 and
1980 Commissioner's Standard Ordinary and American Experience Mortality
Tables, with assumed interest rates ranging from 2 1/2% to 6%, and using
principally the net level premium method for policies issued prior to 1978 and
a modified preliminary term method for policies issued in 1979 and later.
Annuity and supplementary contracts with life contingency reserves are based
principally on modifications of the 1937 Standard Annuity Table, the Group
Annuity Mortality Tables for 1951, 1971 and 1983, the 1971 Individual Annuity
Mortality Table and the a-1983 Individual Annuity Mortality Table, with
interest rates 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.
26
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
The statement value and fair value for investment-type insurance contracts are
as follows:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
------------------- -------------------
Statement Fair Statement Fair
Value Value Value Value
--------- --------- --------- ---------
(In millions)
<S> <C> <C> <C> <C>
Guaranteed investment contracts........ $11,921.6 $11,943.2 $12,014.3 $12,325.3
Fixed-rate deferred and immediate
annuities............................. 3,909.3 3,886.1 3,494.5 3,478.6
Supplementary contracts without life
contingencies......................... 45.6 46.0 39.6 40.7
--------- --------- --------- ---------
$15,876.5 $15,875.3 $15,548.4 $15,844.6
========= ========= ========= =========
</TABLE>
Federal Income Taxes: Federal income taxes are reported in the financial
statements based on amounts determined to be payable as a result of operations
within the current accounting period. The operations of the Company and its
subsidiaries and affiliates are combined in filing a consolidated federal
income tax return for the group. The federal income taxes of the Company are
determined on a separate return basis with certain adjustments.
Income before taxes differs from taxable income principally due to tax-exempt
investment income, dividends-received tax deductions, the limitation placed on
the tax deductibility of mutual companies' policyholder dividends, accelerated
depreciation, differences in policy and contract liabilities for tax return
and financial statement purposes, capitalization of policy acquisition
expenses for tax purposes and other adjustments prescribed by the Internal
Revenue Code.
Amounts for disputed tax issues relating to prior years are charged or
credited directly to policyholders' contingency reserves. No provision is
generally recognized for temporary differences that may exist between
financial reporting and taxable income.
When determining its consolidated federal income tax expense, the Company uses
a number of estimated amounts that may change when the actual tax return is
completed. In addition, the Company must also use an estimated differential
earnings rate (DER) to compute the equity tax portion of its federal income
tax expense. Because the DER is set by the Internal Revenue Service in the
second subsequent year, a true-up adjustment (i.e., effect of the difference
between the estimated and final DER) is necessary.
Certain subsidiaries acquired by the Company have potential tax loss
carryforwards of $114.1 million expiring through 1998. These amounts 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 $309.9
million in 1996 and $211.5 million in 1995.
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 1996, the
Company refined certain actuarial assumptions inherent in the calculation of
reserves related to guaranteed investment contracts resulting in a $27.5
million decrease in policyholders' contingency reserves at December 31, 1996.
Reinsurance: Premiums, commissions, expense reimbursements, benefits and
reserves related to reinsured business are accounted for on bases consistent
with those used in accounting for the original policies issued and the terms
of the reinsurance contracts. Premiums ceded to other companies have been
reported as a reduction of premium income. Amounts applicable to reinsurance
ceded for future policy benefits, unearned premium reserves and claim
liabilities have been reported as reductions of these items.
27
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
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 1996 and 1995,
the Company paid $8.6 million and $32.9 million, respectively, under its
restructuring plan. The remaining liability for restructuring charges at
December 31, 1996 was $5.7 million.
Guaranty Fund Assessments: Guaranty fund assessments are accrued when the
Company receives notice that an amount is payable to a guaranty fund.
Reclassifications: Certain 1995 amounts have been reclassified to permit
comparison with the corresponding 1996 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 Commonwealth of
Massachusetts Division of Insurance and any payment of interest on and
principal of the notes may be made only with the prior approval of the
Commissioner of the Commonwealth of Massachusetts Division of Insurance.
Surplus notes are reported as part of policyholders' contingency reserves
rather than liabilities. Interest of $33.2 million was paid on the notes
during each of 1996 and 1995.
NOTE 3--BORROWED MONEY
At December 31, 1996, the Company had a $500 million syndicated line of
credit. There are 26 banks who are part of the syndicate which is under the
leadership of Morgan Guaranty Trust Company of New York. The banks will
commit, when requested, to loan funds at prevailing interest rates as
determined in accordance with the line of credit agreement, which terminates
on June 30, 2001. The agreement does not contain a material adverse change
clause. Under the terms of the agreement, the Company is required to maintain
certain minimum levels of net worth and comply with certain other covenants.
As of December 31, 1996, these covenants were met; however, 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. In
addition, the Company has guaranteed the timely payment of principal and
interest on the debt. The debt was issued in two notes of equal amounts 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 the monthly LIBOR rates plus 22 and 27 basis points,
respectively. The LIBOR rates were 5.50% and 5.9375%, respectively, at
December 31, 1996 and 1995. The outstanding balances of the notes totaled
$127.9 million and $213.1 million at December 31, 1996 and 1995, respectively,
and are included in other general account obligations.
In 1996, the Company issued $292.0 million of debt through a REMIC (REMIC II).
As collateral to the debt, the Company pledged $1,455.4 million of commercial
mortgages to the REMIC II Trust. The debt was issued in two notes. The class
A1 notes totaled $70.0 million with a last scheduled payment date of December
26, 1997. The class A2 notes totaled $222.0 million with a last scheduled
payment date of July 26, 1999. The interest rates on the two notes are
calculated on a floating basis, based on the monthly LIBOR rate plus 5 and 19
basis points, respectively. The outstanding balances of the notes totaled
$292.0 million at December 31, 1996 and are included in other general account
obligations.
On December 31, 1996, the Company had outstanding a short-term note of $90.0
million payable to an affiliate at 5.70%. The note, which is included in other
general account obligations, was repaid in early January 1997.
28
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4--NET INVESTMENT INCOME
Investment income has been reduced by the following amounts:
<TABLE>
<CAPTION>
1996 1995
------ ------
(In millions)
<S> <C> <C>
Investment expenses.............................................. $333.8 $332.9
Interest expense................................................. 48.1 38.3
Depreciation on real estate and other invested assets............ 73.3 62.7
Real estate and other investment taxes........................... 65.2 61.2
------ ------
$520.4 $495.1
====== ======
</TABLE>
NOTE 5--NET CAPITAL GAINS (LOSSES) AND OTHER ADJUSTMENTS
Net realized capital gains (losses) consist of the following items:
<TABLE>
<CAPTION>
1996 1995
------ -------
(In millions)
<S> <C> <C>
Net gains from asset sales and foreclosures................... $ 81.2 $ 118.6
Capital gains tax............................................. (53.7) (64.2)
Net capital gains transferred to the IMR...................... (71.1) (33.2)
------ -------
Net Realized Capital Gains (Losses)......................... $(43.6) $ 21.2
====== =======
</TABLE>
Net unrealized capital gains (losses) and other adjustments consist of the
following items:
<TABLE>
<CAPTION>
1996 1995
------ -------
(In millions)
<S> <C> <C>
Net gains from changes in security values and book value
adjustments.................................................. $242.2 $ 93.4
Increase in asset valuation reserve........................... (50.5) (178.5)
------ -------
Net Unrealized Capital Gains (Losses) and Other Adjustments. $191.7 $ (85.1)
====== =======
</TABLE>
29
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS 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, 1996
----------------------------
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies.......... $ 430.2 $ 8.8 $ 4.2 $ 434.8
Obligations of states and political
subdivisions....................... 175.2 8.8 3.9 180.1
Debt securities issued by foreign
governments........................ 203.5 30.1 0.0 233.6
Corporate securities................ 16,902.1 1,083.2 112.6 17,872.7
Mortgage-backed securities.......... 4,756.0 116.3 54.5 4,817.8
--------- -------- ------ ---------
Total bonds $22,467.0 $1,247.2 $175.2 $23,539.0
========= ======== ====== =========
<CAPTION>
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
governments........................ 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
--------- -------- ------ ---------
Total bonds....................... $21,108.5 $1,981.5 $ 95.0 $22,995.0
========= ======== ====== =========
</TABLE>
The statement value and fair value of bonds at December 31, 1996, by
contractual maturity, are shown below. Maturities will differ from contractual
maturities because eligible borrowers may exercise their right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Statement Fair
Value Value
--------- ---------
(In millions)
<S> <C> <C>
Due in one year or less............................... $ 1,430.4 $ 1,463.8
Due after one year through five years................. 5,987.3 6,226.8
Due after five years through ten years................ 5,421.9 5,732.3
Due after ten years................................... 4,871.4 5,298.3
--------- ---------
17,711.0 18,721.2
Mortgage-backed securities............................ 4,756.0 4,817.8
--------- ---------
$22,467.0 $23,539.0
========= =========
</TABLE>
Proceeds from sales of bonds during 1996 and 1995 were $2.8 billion and $2.9
billion, respectively. Gross gains of $43.8 million in 1996 and $69.7 million
in 1995 and gross losses of $27.6 million in 1996 and $44.3 million in 1995
were realized on these transactions.
The cost of common stocks was $136.1 million and $78.1 million at December 31,
1996 and 1995, respectively. At December 31, 1996, gross unrealized
appreciation on common stocks totaled $135.0 million, and gross unrealized
depreciation totaled $21.3 million. The fair value of preferred stock totaled
$416.2 million at December 31, 1996 and $338.8 million at December 31, 1995.
30
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
Mortgage loans with outstanding principal balances of $56.0 million, bonds
with amortized cost of $159.7 million and real estate with depreciated cost of
$23.0 million were nonincome producing for the twelve months ended December
31, 1996.
Restructured commercial mortgage loans aggregated $385.8 million and $466.0
million as of December 31, 1996 and 1995, 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
-----------------------
1996 1995
----------- -----------
(In millions)
<S> <C> <C>
Expected........................................... $ 46.3 $ 47.0
Actual............................................. 29.1 $ 26.8
</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, 1996, 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>
Property
Type Statement Value
-------- ---------------
(In millions)
<S> <C>
Apartments.............. $1,667.9
Hotels.................. 147.4
Industrial.............. 882.1
Office buildings........ 1,707.0
Retail.................. 1,489.8
1-4 Family.............. 7.4
Agricultural............ 1,608.1
Other................... 454.3
--------
$7,964.0
========
</TABLE>
<TABLE>
<CAPTION>
Property
Type Statement Value
-------- ---------------
(In millions)
<S> <C>
East North Central...... $ 734.6
East South Central...... 158.9
Middle Atlantic......... 1,543.3
Mountain................ 382.8
New England............. 843.9
Pacific................. 2,015.4
South Atlantic.......... 1,437.6
West North Central...... 240.6
West South Central...... 558.3
Other................... 48.6
--------
$7,964.0
========
</TABLE>
At December 31, 1996, the fair values of the commercial and agricultural
mortgage loan portfolios were $6.6 billion and $1.8 billion, respectively. The
corresponding amounts as of December 31, 1995 were approximately $7.6 billion
and $1.8 billion, respectively.
The maximum and minimum lending rates for mortgage loans during 1996 were
9.92% and 7.0% for agricultural loans, 9.25% and 6.75% for other properties,
and 8.05% and 7.0% for purchase money mortgages. Generally, the percentage of
any loan to the value of security at the time of the loan, exclusive of
insured or guaranteed or purchase money mortgages, is 75%. For city mortgages,
fire insurance is carried on all commercial and residential properties at
least equal to the excess of the loan over the maximum loan which would be
permitted by law on the land without the building, except as permitted by
regulations of the Federal Housing Commission on loans fully insured under the
provisions of the National Housing Act. For agricultural mortgage loans, fire
insurance is not normally required on land based loans except in those
instances where a building is critical to the farming operation. Fire
insurance is required on all agri-business facilities in an aggregate amount
equal to the loan balance.
31
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
NOTE 7--REINSURANCE
Premiums, benefits and reserves associated with reinsurance assumed in 1996
were $742.0 million, $317.8 million, and $14.2 million, respectively. The
corresponding amounts in 1995 were $455.2 million, $276.7 million, and $12.7
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 1996 were $304.0
million, $217.0 million and $251.2 million, respectively. The corresponding
amounts in 1995 were $281.0 million, $217.0 million and $185.4 million,
respectively.
Amounts recoverable on paid claims and funds held by reinsurers were as
follows:
<TABLE>
<CAPTION>
Year endedDecember 31
---------------------
1996 1995
---------- ----------
(In millions)
<S> <C> <C>
Reinsurance recoverables............................ $ 26.5 $ 30.7
Funds held by reinsurers............................ 23.4 2.6
</TABLE>
The Company has a coinsurance agreement with another insurer to cede 100% of
its individual disability business. Reserves ceded under this agreement,
included in the amount shown above, were $226.4 million at December 31, 1996
and $212.7 million at December 31, 1995.
Effective January 1, 1994, John Hancock Mutual Life Insurance Company
(Variable Life, a wholly-owned affiliate) entered into a modified coinsurance
agreement with the Company to reinsure 50% of Variable Life's 1996, 1995 and
1994 issues of flexible premium variable life insurance and scheduled premium
variable life insurance policies. In connection with this agreement, the
Company transferred $24.5 million and $32.7 million of cash for tax,
commission, and expense allowances to Variable Life, which decreased the
Company's net gain from operations by $15.7 million and $20.3 million in 1996
and 1995, respectively.
Effective January 1, 1996, Variable Life entered into a modified coinsurance
agreement with the Company to reinsure 50% of Variable Life's 1995 and 1996
issues of retail annuity contracts (Independence Preferred and Declaration).
In connection with this agreement, the Company transferred $23.2 million of
cash for surrender benefits, tax, reserve increase, commission, expense
allowances and premium to Variable Life, which decreased the Company's net
gain from operations by $15.1 million in 1996.
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.
No policies issued by the Company have been reinsured with a foreign company
which is controlled either directly or indirectly, by a party not primarily
engaged in the business of insurance.
The Company has not entered into any reinsurance agreements in which the
reinsurer may unilaterally cancel any reinsurance for reasons other than
nonpayment of premiums or other similar credits. The Company does not have any
reinsurance agreements in effect in which the amount of losses paid or accrued
through December 31, 1996 would result in a payment to the reinsurer of
amounts which, in the aggregate and allowing for offset of mutual credits from
other reinsurance agreements with the same reinsurer, exceed the total direct
premiums collected under the reinsured policies.
32
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
NOTE 8--BENEFIT PLANS
The Company provides retirement benefits to substantially all employees and
general agency personnel. These benefits are provided through both defined
benefit and defined contribution pension plans. Pension benefits under the
defined benefit plans are based on years of service and average compensation
generally during the five years prior to retirement. Benefits related to the
Company's defined pension plans paid to employees and retirees covered by
annuity contracts issued by the Company amounted to $84.4 million in 1996 and
$76.3 million in 1995. 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 $9,500 annually to the plan. The Company matches the first 2%
of pre-tax contributions and makes an additional annual profit sharing
contribution for employees who have completed at least two years of service.
Through SIP, marketing representatives, sales managers and agency managers are
eligible to contribute up to the lesser of 13% of their salary or $9,500. The
Company matches the first 3% of pretax contributions for marketing
representatives and the first 2% of pretax contributions for sales managers
and agency managers. The Company makes an annual profit sharing contribution
of up to 1% for sales managers and agency managers who have completed at least
two years of service.
The Company provides additional compensation to certain employees based on
achievement of annual and long-term corporate financial objectives.
Pension expense is summarized as follows:
<TABLE>
<CAPTION>
Year ended December 31
------------------------
1996 1995
----------- -----------
(In millions)
<S> <C> <C>
Defined benefit plans:
Service cost--benefits earned during the
period....................................... $ 32.4 $ 30.1
Interest cost on the projected benefit
obligation................................... 107.4 103.5
Actual return on plan assets.................. (225.1) (369.5)
Net amortization and deferral................. 85.0 260.5
----------- -----------
(0.3) 24.6
Defined contribution plans...................... 21.4 19.8
----------- -----------
Total pension expense........................... $ 21.1 $ 44.4
=========== ===========
</TABLE>
Assumptions used in accounting for the defined benefit pension plans were as
follows:
<TABLE>
<CAPTION>
1996 1995
----- -----
<S> <C> <C>
Discount rate.................................................. 7.25% 7.50%
Weighted rate of increase in compensation levels............... 4.78% 5.10%
Expected long-term rate of return on assets.................... 8.50% 7.75%
</TABLE>
33
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
The following table sets forth the funded status and actuarially determined
amounts related to the Company's defined benefit pension plans:
<TABLE>
<CAPTION>
Year ended December 31
------------------------
1996 1995
----------- -----------
(In millions)
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation..................... $ (1,344.8) $ (1,242.9)
=========== ===========
Accumulated benefit obligation................ $ (1,387.7) $ (1,300.3)
=========== ===========
Projected benefit obligation.................... $ (1,582.4) $ (1,480.0)
Plan assets fair value.......................... 1,787.6 1,645.3
----------- -----------
Excess of plan assets over projected benefit
obligation..................................... 205.2 165.3
Unrecognized net gain........................... (176.1) (139.1)
Prior service cost not yet recognized in net
periodic pension cost.......................... 42.8 50.0
Unrecognized net asset, net of amortization..... (95.9) (111.2)
----------- -----------
Net pension liability........................... $ (24.0) $ (35.0)
=========== ===========
</TABLE>
Since 1988, the Massachusetts Division of Insurance has provided the Company
with approval to recognize the pension plan prepaid expense, if any, in
accordance with the requirements of SFAS No. 87, "Employers' Accounting for
Pensions." The Company furnishes the Division of Insurance with an actuarial
certification of the prepaid expense computation on an annual basis.
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.
34
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
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, 1996, plan assets related
to non-union employees were comprised of an irrevocable health insurance
contract to provide future health benefits to retirees while plan assets
related to union employees were comprised of approximately 70% equity
securities and 30% fixed income investments. The following table shows the
plans' combined funding status for vested benefits reconciled with the amounts
recognized in the Company's statements of financial position.
<TABLE>
<CAPTION>
December 31
-------------------------------------
1996 1995
------------------ ------------------
Medical Medical
and Life and Life
Dental Insurance Dental Insurance
Plans Plans Plans Plans
------- --------- ------- ---------
(In millions)
<S> <C> <C> <C> <C>
Accumulated postretirement benefit
obligation:
Retirees............................... $(234.2) $(100.6) $(236.5) $ (89.2)
Fully eligible active plan
participants.......................... (46.4) (19.4) (42.9) (20.1)
------- ------- ------- -------
(280.6) (120.0) (279.4) (109.3)
Plan assets at fair value................ 132.4 0.0 96.9 0.0
------- ------- ------- -------
Accumulated postretirement benefit
obligation in excess of plan assets..... (148.2) (120.0) (182.5) (109.3)
Unrecognized prior service cost.......... 16.7 5.3 18.2 5.8
Unrecognized prior net gain.............. (93.0) 4.0 (84.2) (4.2)
Unrecognized transition obligation....... 256.8 78.4 272.9 83.3
------- ------- ------- -------
Accrued postretirement benefit cost...... $ 32.3 $ (32.3) $ 24.4 $ (24.4)
======= ======= ======= =======
</TABLE>
Net postretirement benefits costs for the years ended December 31, 1996 and
1995 were $47.4 million and $50.2 million, respectively, and include the
expected cost of such benefits for newly eligible or vested employees,
interest cost, and amortization of the transition liability.
Net periodic postretirement benefits cost included the following components:
<TABLE>
<CAPTION>
December 31
-------------------------------------
1996 1995
------------------ ------------------
Medical Medical
and Life and Life
Dental Insurance Dental Insurance
Plans Plans Plans Plans
------- --------- ------- ---------
(In millions)
<S> <C> <C> <C> <C>
Eligibility cost...................... $ 7.1 $ 1.8 $ 5.3 $ 1.5
Interest cost......................... 19.8 8.3 21.1 7.8
Actual return on plan assets.......... (15.9) 0.0 (15.5) 0.0
Net amortization and deferral......... 20.9 5.4 25.0 5.0
------ ----- ------ -----
Net periodic postretirement benefit
cost................................. $ 31.9 $15.5 $ 35.9 $14.3
====== ===== ====== =====
</TABLE>
The discount rate used in determining the accumulated postretirement benefit
obligation at December 31, 1996 was 7.25% (7.5% for 1995). The annual assumed
rate of increase in the health care cost trend rate for the medical
35
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
coverages is 8.0% for 1997 (8.25% was assumed for 1996) and is assumed to
decrease gradually to 5.25% 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,
1996 by $28.1 million and the aggregate of the eligibility and interest cost
components of net periodic postretirement benefit cost by $2.9 million for
1996 and $3.6 million for 1995.
Postretirement welfare benefits for non-vested employees are not reflected in
the above expenses or accumulated postretirement benefit obligations. As of
December 31, 1996, the accumulated postretirement benefit obligations for non-
vested employees amounted to $69.4 million for medical and dental plans and
$10.7 million for life insurance plans. The corresponding amounts as of
December 31, 1995 were $67.7 million and $10.8 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 $9.6 billion at December
31, 1996 and $9.5 billion at December 31, 1995; total liabilities amounted to
$8.5 billion at December 31, 1996 and $8.3 billion at December 31, 1995; and
total net income was $193.0 million in 1996 and $89.5 million in 1995.
During 1996, the Company sold certain of its affiliates including its ongoing
property and casualty business and its broker-dealer operations to realign its
business objectives.
The Company customarily engages in transactions with its unconsolidated
affiliates, including the cession and assumption of certain insurance business
under the terms of established reinsurance agreements. Various services are
performed by the Company for certain affiliates for which the Company is
reimbursed on the basis of cost. Certain affiliates have entered into various
financial arrangements relating to borrowings and capital maintenance under
which agreements the Company would be obligated in the event of nonperformance
by an affiliate (see Note 15).
The Company received dividends of $9.4 million and $9.7 million in 1996 and
1995, 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 1997 to 2026. 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 and floor contracts to manage
exposure on underlying security values due to a rise in interest rates.
Maturities of current agreements range through 2003.
36
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
The Company also uses financial futures contracts to hedge risks associated
with interest rate fluctuations on sales of guaranteed investment contracts.
The Company is subject to the risks associated with changes in the value of
the underlying securities; however, such changes in value generally are offset
by opposite changes in the value of the hedged items. The contract or notional
amounts of the contracts represent the extent of the Company's involvement but
not the future cash requirements, as the Company intends to close the open
positions prior to settlement. Net deferred losses on future contracts were
$0.5 million and $7.7 million at December 31, 1996 and 1995, respectively.
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
-----------------
1996 1995
-------- --------
(In millions)
<S> <C> <C>
Futures contracts to purchase securities.................... $ 117.6 $ 62.2
======== ========
Futures contracts to sell securities........................ $ 136.4 $ 299.9
======== ========
Notional amount of interest rate swaps, interest rate
swaptions, currency rate swaps, interest rate caps and
interest rate floors to:
Receive variable rates.................................... $3,822.8 $1,735.0
======== ========
Receive fixed rates....................................... $2,912.5 $1,756.3
======== ========
</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, 1996, the Company's interest
rate swaps, interest rate swaptions, currency rate swaps, interest rate caps,
and interest rate floors represented (assets) liabilities to the Company with
fair values of $16.4 million, $0.0 million, $41.1 million, $(0.6) million and
$(0.1) million, respectively. The corresponding amounts as of December 31,
1995 were $37.0 million, $0.0 million, $23.3 million, $(0.3) million and $0.0
million, respectively.
NOTE 12--LEASES
The Company leases office space and furniture and equipment under various
operating leases including furniture and equipment leased under a series of
sales-leaseback agreements with a nonaffiliated organization. Rental expense
for all operating leases totaled $32.1 million in 1996 and $32.2 million in
1995. Future minimum rental commitments under noncancellable operating leases
for office space and furniture and equipment are as follows:
<TABLE>
<CAPTION>
December 31, 1996
-----------------
(In millions)
<S> <C>
1997..................................................... $23.2
1998..................................................... 18.8
1999..................................................... 15.3
2000..................................................... 12.3
2001..................................................... 7.8
Thereafter............................................... 17.0
-----
Total minimum payments................................... $94.4
=====
</TABLE>
37
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
NOTE 13--POLICY RESERVES, POLICYHOLDERS' AND BENEFICIARIES' FUNDS AND
OBLIGATIONS RELATED TO SEPARATE ACCOUNTS
The Company's annuity reserves and deposit fund liabilities that are subject
to discretionary withdrawal (with adjustment), subject to discretionary
withdrawal (without adjustment), and not subject to discretionary withdrawal
provisions are summarized as follows:
<TABLE>
<CAPTION>
December 31, 1996 Percent
----------------- -------
(In millions)
<S> <C> <C>
Subject to discretionary withdrawal (with adjust-
ment):
With market value adjustment....................... $ 1,748.9 4.9%
At book value less surrender charge................ 2,681.4 7.5
--------- -----
Total with adjustment.............................. 4,430.3 12.4
Subject to discretionary withdrawal (without ad-
justment) at book value........................... 815.7 2.3
Subject to discretionary withdrawal--separate ac-
counts............................................ 11,816.8 33.0
Not subject to discretionary withdrawal:
General account.................................... 17,422.1 48.7
Separate accounts.................................. 1,297.3 3.6
--------- -----
Total annuity reserves and deposit liabilities--be-
fore reinsurance.................................... 35,782.2 100.0%
=====
Less reinsurance ceded............................... (0.2)
---------
Net annuity reserves and deposit fund liabilities.... $35,782.0
=========
</TABLE>
Any liquidation costs associated with the $11.8 billion of separate accounts
subject to discretionary withdrawal are sustained by the separate account
contractholders and not by the general account.
NOTE 14--UNPAID CLAIMS
Activity in the liability for accident and health unpaid claims is as follows:
<TABLE>
<CAPTION>
1996 1995
------ ------
(In millions)
<S> <C> <C>
Balance at January 1............................................ $207.7 $216.2
Less reinsurance recoverables................................. 4.0 (7.3)
------ ------
Net balance at January 1........................................ 203.7 208.9
------ ------
Incurred related to:
Current year.................................................. 293.8 301.0
Prior years................................................... (36.1) (25.2)
------ ------
Total incurred.................................................. 257.7 275.8
------ ------
Paid related to:
Current year.................................................. 183.7 192.0
Prior years................................................... 71.7 89.0
------ ------
Total paid...................................................... 255.4 281.0
------ ------
Net balance at December 31...................................... 206.0 203.7
Plus reinsurance recoverable.................................. 3.0 4.0
------ ------
Balance at December 31.......................................... $209.0 $207.7
====== ======
</TABLE>
38
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(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 1996 and
1995.
NOTE 15--COMMITMENTS AND CONTINGENCIES
The Company has extended commitments to purchase long-term bonds, preferred
and common stocks, and real estate and issue real estate mortgages totaling
$619.4 million, $14.7 million, $160.2 million and $275.4 million,
respectively, at December 31, 1996. 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, 1996. The majority of these
commitments expire in 1997.
The Company has contingent liabilities, pursuant to guarantee agreements
issued in connection with real estate joint ventures, in the amount of $43.3
million.
During 1996, the Company entered into a credit support and collateral pledge
agreement with the Federal National Mortgage Association (FNMA). Under the
agreement, the Company sold $532.8 million of commercial mortgage loans and
acquired an equivalent amount of FNMA securities. The Company completed
similar transactions with FNMA in 1991 for $1.042 billion and in 1993 for
$71.9 million. FNMA is guarantying the full face value of the bonds of the
three transactions to the bondholders. However, the Company has agreed to
absorb the first 12.25% of the principal and interest losses (less buy-backs)
for the pools of loans involved in the three transactions, based on the total
outstanding principal balance of $1.036 billion as of July 1, 1996, but is not
required to commit collateral to support this loss contingency. At December
31, 1996, the aggregate outstanding principal balance of all the remaining
pools of loans from 1991, 1993, and 1996 is $907.4 million.
Historically, the Company has experienced losses of less than one percent on
its multi-family mortgage portfolio. Mortgage loan buy-backs required by the
FNMA in 1996 and 1995 amounted to $3.4 million and $0.0 million, respectively.
During 1996, the Company entered into credit support and collateral pledge
agreement with the Federal Home Loan Mortgage Corporation (FHLMC). Under the
agreement, the Company sold $535.3 million of multi-family loans and acquired
and equivalent amount of FHLMC securities. FHLMC is guarantying the full face
value of the bonds to the bondholders. However, the Company has agreed to
absorb the first 10.5% of original principal and interest losses (less buy-
backs) for the pool of loans involved but is not required to commit collateral
to support this loss contingency. Historically, the Company has experienced
total losses of less than one percent on its multi-family loan portfolio. At
December 31, 1996, the aggregate outstanding principal balance of the pools of
loans was $535.3 million. There were no mortgage loans buy-backs in 1996.
The Company has a support agreement with John Hancock under which the Company
agrees to continue directly or indirectly to own all of John Hancock's common
stock and maintain John Hancock'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, 1996 were $278.3
million for short-term borrowings and $145.1 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.
39
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
Various lawsuits arise against the Company in the course of the Company's
business. Purported class actions and individual actions have been or could be
brought against the Company in its normal course of business. While the
Company specifically denies any wrongdoing, such litigation is subject to many
uncertainties, and given the current environment and complexity of various
types of litigation, their outcome can not be predicted. Accordingly, the
Company has established a litigation reserve. As appropriate, the reserve will
be used for legal and other costs related to opposing such litigation or in
the ultimate settlement of suits. The reserve has been charged directly to
policyholders' contingency reserves of the Company. The Company believes that
the ultimate outcome of pending litigation should not have a material adverse
effect on the Company's financial position.
NOTE 16--FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and fair values of the
Company's financial instruments:
<TABLE>
<CAPTION>
Year ended December 31
----------------------------------------
1996 1995
------------------- -------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
--------- --------- --------- ---------
(In millions)
<S> <C> <C> <C> <C>
Assets
Bonds--Note 6...................... $22,467.0 $23,539.0 $21,108.5 $22,995.0
Preferred stocks--Note 6........... 416.2 416.2 338.8 338.8
Common stocks--Note 6.............. 249.8 249.8 130.9 130.9
Mortgage loans on real estate--Note
6................................. 7,964.0 8,400.2 8,801.5 9,381.8
Policy loans--Note 1............... 1,589.3 1,589.3 1,621.3 1,621.3
Cash and cash equivalents--Note 1.. 1,416.7 1,416.7 540.7 540.7
Liabilities
Guaranteed investment contracts--
Note 1............................ 11,921.6 11,943.2 12,014.3 12,325.3
Fixed rate deferred and immediate
annuities--Note 1................. 3,909.3 3,886.1 3,494.5 3,478.6
Supplementary contracts without
life contingencies--Note 1........ 45.6 46.0 39.6 40.7
Derivatives liabilities relating
to:--Note 11
Interest rate swaps.................. -- 16.4 -- 37.0
Currency rate swaps.................. -- 41.1 -- 23.3
Interest rate caps................... -- (0.6) -- (0.3)
Interest rate floors................. -- (0.1) -- 0.0
Commitments--Note 15................. -- 1,095.7 -- 1,070.2
</TABLE>
The carrying amounts in the table are included in the statutory-basis
statements of financial position. The methods and assumptions utilized by the
Company in estimating its fair value disclosures are described in Note 1.
40
<PAGE>
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS
<TABLE>
<C> <S>
1. Statement of Assets and Liabilities, John Hancock Variable Annuity
Account V, at December 31, 1996. (Part B)
2. Statement of Operations, John Hancock Variable Annuity Account V, year
ended December 31, 1996. (Part B)
3. Statement of Changes in Net Assets, John Hancock Variable Annuity
Account V, for each of the two years in the period ended December 31,
1996. (Part B)
4. Notes to Financial Statements, John Hancock Variable Annuity Account V.
(Part B)
5. Statement of Financial Position, John Hancock Mutual Life Insurance
Company, at December 31, 1996 and December 31, 1995. (Part B)
6. Summary of Operations and Changes in Policyholders' Contingency
Reserves, John Hancock Mutual Life Insurance Company, for each of the
two years in the period ended December 31, 1996. (Part B)
7. Statement of Cash Flows, John Hancock Mutual Life Insurance Company,
for each of the two years in the period ended December 31, 1996. (Part
B)
8. Notes to Financial Statements, John Hancock Mutual Life Insurance
Company. (Part B)
(B) EXHIBITS:
1. John Hancock Board Resolution establishing the John Hancock Variable
Annuity Account V, included in Post-Effective Amendment No. 1 to this
File No. 33-82646, filed April 25, 1995.
2. Not Applicable.
3.(a) Form of Distribution and Servicing Agreement by and among John Hancock
Distributors, Inc., John Hancock Mutual Life Insurance Company, and John
Hancock Variable Life Insurance Company, incorporated by reference from
Pre-Effective Amendment No. 2 to Form S-6 Registration Statement for
John Hancock Variable Life Account S (File No. 333-15075) filed April
23, 1997.
(b) Specimen Variable Contracts Selling between John Hancock Distributors,
Inc., and selling broker-dealers, incorporated by reference from Pre-
Effective Amendment No. 2 to Form S-6 Registration Statement for John
Hancock Variable Life Account S (File No. 333-15075) filed April 23,
1997.
4. Form of periodic payment deferred annuity contract.
5. Form of annuity contract application.
6. Charter and By-Laws of John Hancock Mutual Life Insurance Company,
included in Post-Effective Amendment No. 1 to this File No. 33-82646,
filed April 25, 1995
7. Not Applicable.
8. Not Applicable.
9. Opinion and Consent of Counsel as to legality of interests being
offered, included in the initial Form N-4 Registration Statement to this
File No. 33-82646 filed August 10, 1994.
10.A Consent of Independent Auditors.
10.B Representation of Counsel
11. Not Applicable.
</TABLE>
C-1
<PAGE>
<TABLE>
<C> <S>
12. Not Applicable.
13. Diagram of Subsidiaries of John Hancock Mutual Life Insurance Company
incorporated by reference from Post-Effective Amendment No. 13 to Form N-
1A Registration Statement of John Hancock Variable Series Trust I (File
No. 33-2081) filed April 24, 1996.
14. Power of Attorney of Robert J. Tarr, Jr., incorporated by reference from
Post-Effective Amendment No. 4 to Registration Statement of John Hancock
Mutual Variable Life Account UV (File No. 33-63900) filed April 23, 1997.
Copy of Power of Attorney for Michael C. Hawley, filed on May 1, 1996.
Copies of Powers of Attorney for all other directors, included in Post-
Effective Amendment No. 1 to this File No. 33-82646, filed April 25, 1995.
27. Financial Data Schedule.
</TABLE>
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
DIRECTORS
<TABLE>
<CAPTION>
NAME POSITION WITH DEPOSITOR
---- -----------------------
<S> <C>
Foster L. Aborn......... Vice Chairman of the Board
Samuel W. Bodman........ Director
Nelson S. Gifford....... Director
Richard F. Syron........ 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
Michael C. Hawley ...... Director
I. MacAllister Booth.... Director
C. Vincent Vappi........ Director
Robert J. Tarr, Jr...... Director
Randolph W. Bromery..... Director
David F. D'Alessandro... Senior Executive Vice President and Director
Joan T. Bok............. Director
Robert E. Fast.......... Director
Lawrence K. Fish........ Director
Kathleen F. Feldstein... Director
EXECUTIVE OFFICERS OTHER THAN DIRECTORS
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
Richard S. Scipione..... General Counsel
</TABLE>
All of the above-named officers and directors can be contacted at the
following business address: John Hancock Mutual Life Insurance Company, John
Hancock 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
investment 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. 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
voting of the shares of the Series Fund held by Registrant as to certain
matters. Subject to the voting instructions, John Hancock directly controls
Registrant.
C-2
<PAGE>
A diagram of the subsidiaries of John Hancock is incorporated by reference
from Exhibit 17 to Post-Effective Amendment No. 13 to Form N-1A Registration
Statement of John Hancock Variable Series Trust I (File No. 33-2081) filed
April 24, 1996.
ITEM 27. NUMBER OF CONTRACT OWNERS
Because sales of the Contracts have not yet commenced, there are no Contract
Owners.
ITEM 28. INDEMNIFICATION
Article 9a of the By-Laws of John Hancock provides indemnification to each
present and former trustee, 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
undertaking 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
indemnify or advance any expenses to the trustees, shareholders, officers, or
employees 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
Registrant shall indemnify any trustee made a party to any proceeding by
reason of service 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 officer 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 indemnification 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 indemnified 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 defined 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 ultimately 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 trustees or officer will be
found entitled to indemnification.
Similar types of provisions dealing with the indemnification of the Fund's
officers and trustees are hereby incorporated by reference from documents
previously 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
C-3
<PAGE>
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 Insurance Company (Exhibit 5.a. to the
Fund's Registration Statement (File No. 33-2081) dated December 11, 1985),
Section 14 of the Investment Management Agreement by and between John Hancock
Variable Series Trust and John Hancock Mutual Life Insurance Company (Exhibit
5.g. to Post-Effective Amendment No. 9 to the Fund's Registration Statement
(File No. 33-2081) dated March 2, 1994), 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.k. to Post-Effective Amendment No. 13
to the Fund's Registration Statement (File No. 33-2081) dated April 30, 1996),
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, 1986, 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-
Effective Amendment No. 1 to the Registration Statement of the Fund (File No.
33-2081) dated March 13, 1986), and Section 6 of the Underwriting and Indemnity
Agreement By and Among John Hancock Series Trust, John Hancock Distributors,
Inc., and John Hancock Mutual Life Insurance Company (Exhibit 6.b. to Post-
Effective Amendment No. 14 to Form N-1A Registration Statement of the Fund (File
No. 33-2081) filed February 28, 1997).
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
Registrant 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 indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit, or proceeding) is asserted by such director, officer, or controlling
person in connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled by 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 Distributors, Inc., is also the principal underwriter for
the Fund, John Hancock Variable Annuity Accounts U and I, and John Hancock
Variable Life Accounts U, V, and S, and John Hancock Mutual Variable Life
Insurance Account UV.
(b) Reference is made to the response to Item 25, above.
(c) The information under "Distribution Agreements and Other Services--
Distribution 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
The following entities prepare, maintain, and preserve the records required
by Section 31(a) of the Act for the Registrant and the Fund (as indicated
below) through written agreements between the parties to the effect that such
services will be provided to the Registrant and/or the Fund for such periods
prescribed by the Rules and Regulations of the Commission under the Act and
such records will be surrendered promptly on request:
John Hancock Distributors, Inc., John Hancock Place, Boston, Massachusetts,
02117, serves as Registrant's distributor and principal underwriter, and in such
capacities, keeps records regarding shareholders account records and cancelled
stock certificates. John Hancock (at the same address), in its capacity as
Registrant's depositor, investment adviser, and transfer agent, keeps all other
records required by Section 31(a) of the Act.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
C-4
<PAGE>
ITEM 32. UNDERTAKINGS
(a) Registrant hereby undertakes to file a post-effective amendment to
this Registration Statement as frequently as is necessary to ensure that
the audited 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) Registrant hereby undertakes to deliver any Statement of Additional
Information 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 conditions 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 disclosure 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 representatives 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
employer's Section 403(b) arrangement to which the participant may elect to
transfer his contract value.
(e) John Hancock Mutual Life Insurance Company represents that the fees and
charges deducted under the Policies, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred, and
the risks assumed by the insurance company.
C-5
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, Registrant has caused this Registration Statement to be signed on its
behalf, in the City of Boston and the Commonwealth of Massachusetts on this
12th day of December, 1997. Registrant certifies that it meets the requirements
of the Rule 485(b) of the 1933 Act for effectiveness of this Statement.
John Hancock Variable Annuity Account V
(Registrant)
By John Hancock Mutual Life Insurance
Company
By /s/ Stephen L. Brown
-------------------------------------
Stephen L. Brown
Chairman of the Board and
Chief Executive Officer
John Hancock Mutual Life Insurance
Company (Depositor)
By /s/ Stephen L. Brown
--------------------------------------
Stephen L. Brown
Chairman of the Board and
Chief Executive Officer
C-6
<PAGE>
AS REQUIRED BY THE SECURITIES ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF
1940, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN
THEIR CAPACITIES WITH JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY AND ON THE
DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Thomas E. Moloney Chief Financial
- ------------------------------------- Officer (Principal 12/12/97
THOMAS E. MOLONEY Financial Officer
and Principal
Accounting Officer)
/s/ Stephen L. Brown Chairman of the
- ------------------------------------- Board and Chief 12/12/97
STEPHEN L. BROWN Executive Officer
FOR HIMSELF AND AS (Principal
ATTORNEY-IN-FACT Executive Officer)
FOR: Foster L. Aborn Vice Chairman of the Board
David F. D'Alessandro Senior Executive Vice President and Director
William L. Boyan President of the Board and Chief Operations Officer
<TABLE>
<S> <C> <C> <C>
Nelson S. Gifford Director Joan T. Bok Director
Richard F. Syron Director Michael C. Hawley Director
John F. Magee Director Samuel W. Bodman Director
John M. Connors, Jr. Director Randolph W. Bromery Director
Robert J. Tarr, Jr. Director E. James Morton Director
C. Vincent Vappi Director Lawrence K. Fish Director
Robert E. Fast Director Kathleen F. Feldstein Director
I. MacAllister Booth Director
</TABLE>
C-7
<PAGE>
INDEX TO EXHIBITS
FORM N-4
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT V
<TABLE>
<CAPTION>
EXHIBITS
--------
<C> <S>
4. Form of Contract
5. Form of Application
10.A Consent of Independent Auditors.
10.B Representation of Counsel
27. Financial Data Schedule
</TABLE>
C-8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> LARGE CAP GROWTH
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 40,517,515
<INVESTMENTS-AT-VALUE> 43,071,480
<RECEIVABLES> 0
<ASSETS-OTHER> 72,380
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 41,143,860
<PAYABLE-FOR-SECURITIES> 1,639
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 70,741
<TOTAL-LIABILITIES> 72,380
<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> 43,071,480
<DIVIDEND-INCOME> 6,346,188
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 477,758
<NET-INVESTMENT-INCOME> 5,868,430
<REALIZED-GAINS-CURRENT> 478,115
<APPREC-INCREASE-CURRENT> (830,544)
<NET-CHANGE-FROM-OPS> 5,516,001
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 17,233,864
<NUMBER-OF-SHARES-REDEEMED> 1,305,744
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 15,575,691
<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> 477,758
<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> SOVEREIGN BOND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 62,551,043
<INVESTMENTS-AT-VALUE> 63,635,745
<RECEIVABLES> 0
<ASSETS-OTHER> 34,658
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 63,670,403
<PAYABLE-FOR-SECURITIES> 2,297
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 32,361
<TOTAL-LIABILITIES> 34,658
<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> 63,635,745
<DIVIDEND-INCOME> 4,666,388
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 795,929
<NET-INVESTMENT-INCOME> 3,870,459
<REALIZED-GAINS-CURRENT> 234,092
<APPREC-INCREASE-CURRENT> (2,384,658)
<NET-CHANGE-FROM-OPS> 1,719,893
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,755,044
<NUMBER-OF-SHARES-REDEEMED> 5,214,821
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 3,389,656
<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> 795,929
<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 EQUITIES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 11,301,395
<INVESTMENTS-AT-VALUE> 12,128,068
<RECEIVABLES> 0
<ASSETS-OTHER> 20,997
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 12,149,065
<PAYABLE-FOR-SECURITIES> 451
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 20,546
<TOTAL-LIABILITIES> 20,997
<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> 12,128,068
<DIVIDEND-INCOME> 134,001
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 140,829
<NET-INVESTMENT-INCOME> (6,828)
<REALIZED-GAINS-CURRENT> 147,281
<APPREC-INCREASE-CURRENT> 647,349
<NET-CHANGE-FROM-OPS> 787,802
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,775,436
<NUMBER-OF-SHARES-REDEEMED> 1,341,246
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 3,228,820
<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> 140,829
<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> SMALL CAP GROWTH
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 2,727,262
<INVESTMENTS-AT-VALUE> 2,652,760
<RECEIVABLES> 0
<ASSETS-OTHER> 12,301
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,665,061
<PAYABLE-FOR-SECURITIES> 103
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 12,198
<TOTAL-LIABILITIES> 12,301
<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> 2,652,760
<DIVIDEND-INCOME> 1,258
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 12,428
<NET-INVESTMENT-INCOME> (11,170)
<REALIZED-GAINS-CURRENT> (11,683)
<APPREC-INCREASE-CURRENT> (74,502)
<NET-CHANGE-FROM-OPS> (97,355)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,002,920
<NUMBER-OF-SHARES-REDEEMED> 263,975
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2,652,760
<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> 12,428
<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> 5
<NAME> INTERNATIONAL BALANCED
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 604,300
<INVESTMENTS-AT-VALUE> 621,255
<RECEIVABLES> 0
<ASSETS-OTHER> 2,289
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 623,544
<PAYABLE-FOR-SECURITIES> 25
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,264
<TOTAL-LIABILITIES> 2,289
<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> 621,255
<DIVIDEND-INCOME> 8,357
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 2,394
<NET-INVESTMENT-INCOME> 5,963
<REALIZED-GAINS-CURRENT> 195
<APPREC-INCREASE-CURRENT> 16,955
<NET-CHANGE-FROM-OPS> 23,113
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 618,501
<NUMBER-OF-SHARES-REDEEMED> 14,396
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 621,255
<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> 2,394
<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> MID CAP GROWTH
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 3,295,925
<INVESTMENTS-AT-VALUE> 3,331,665
<RECEIVABLES> 0
<ASSETS-OTHER> 9,982
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,341,647
<PAYABLE-FOR-SECURITIES> 132
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9,850
<TOTAL-LIABILITIES> 9,982
<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> 3,331,665
<DIVIDEND-INCOME> 8,574
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 13,250
<NET-INVESTMENT-INCOME> (4,676)
<REALIZED-GAINS-CURRENT> (24)
<APPREC-INCREASE-CURRENT> 35,740
<NET-CHANGE-FROM-OPS> 31,040
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,413,812
<NUMBER-OF-SHARES-REDEEMED> 117,864
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 3,331,665
<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> 13,250
<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> 7
<NAME> LARGE CAP VALUE
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 3,106,107
<INVESTMENTS-AT-VALUE> 3,223,799
<RECEIVABLES> 0
<ASSETS-OTHER> 28,273
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,252,072
<PAYABLE-FOR-SECURITIES> 129
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 28,144
<TOTAL-LIABILITIES> 28,273
<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> 3,223,799
<DIVIDEND-INCOME> 59,766
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 11,264
<NET-INVESTMENT-INCOME> 48,502
<REALIZED-GAINS-CURRENT> 4,527
<APPREC-INCREASE-CURRENT> 117,692
<NET-CHANGE-FROM-OPS> 170,721
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,216,920
<NUMBER-OF-SHARES-REDEEMED> 115,339
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 3,223,799
<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> 11,264
<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> 8
<NAME> MONEY MARKET
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 26,747,316
<INVESTMENTS-AT-VALUE> 26,747,316
<RECEIVABLES> 0
<ASSETS-OTHER> 337,541
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 27,084,857
<PAYABLE-FOR-SECURITIES> 1,024
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 336,517
<TOTAL-LIABILITIES> 337,541
<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> 26,747,316
<DIVIDEND-INCOME> 1,144,918
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 302,126
<NET-INVESTMENT-INCOME> 842,792
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 842,792
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 22,106,228
<NUMBER-OF-SHARES-REDEEMED> 13,713,388
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 8,392,840
<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> 302,126
<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> 9
<NAME> MID CAP VALUE
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1,328,848
<INVESTMENTS-AT-VALUE> 1,422,615
<RECEIVABLES> 0
<ASSETS-OTHER> 633
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,423,248
<PAYABLE-FOR-SECURITIES> 57
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 576
<TOTAL-LIABILITIES> 633
<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> 1,422,615
<DIVIDEND-INCOME> 29,774
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 5,374
<NET-INVESTMENT-INCOME> 24,420
<REALIZED-GAINS-CURRENT> 1,638
<APPREC-INCREASE-CURRENT> 93,767
<NET-CHANGE-FROM-OPS> 119,825
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,387,328
<NUMBER-OF-SHARES-REDEEMED> 60,188
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,422,615
<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> 5,374
<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> 10
<NAME> SPECIAL OPPORTUNITIES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 28,476,998
<INVESTMENTS-AT-VALUE> 32,202,831
<RECEIVABLES> 0
<ASSETS-OTHER> 303,958
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 32,506,789
<PAYABLE-FOR-SECURITIES> 1,281
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 302,677
<TOTAL-LIABILITIES> 303,958
<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> 32,202,831
<DIVIDEND-INCOME> 1,237,991
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 289,374
<NET-INVESTMENT-INCOME> 948,617
<REALIZED-GAINS-CURRENT> 479,654
<APPREC-INCREASE-CURRENT> 3,216,931
<NET-CHANGE-FROM-OPS> 4,645,202
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 22,330,650
<NUMBER-OF-SHARES-REDEEMED> 1,759,069
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 24,268,166
<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> 289,374
<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> 11
<NAME> REAL ESTATE EQUITY
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 8,909,827
<INVESTMENTS-AT-VALUE> 10,874,885
<RECEIVABLES> 0
<ASSETS-OTHER> 7,209
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 10,882,094
<PAYABLE-FOR-SECURITIES> 391
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6,818
<TOTAL-LIABILITIES> 7,209
<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> 10,874,885
<DIVIDEND-INCOME> 508,891
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 103,737
<NET-INVESTMENT-INCOME> 405,154
<REALIZED-GAINS-CURRENT> 95,726
<APPREC-INCREASE-CURRENT> 1,901,728
<NET-CHANGE-FROM-OPS> 2,402,608
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,441,043
<NUMBER-OF-SHARES-REDEEMED> 1,632,978
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 3,805,519
<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> 103,737
<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> 12
<NAME> GROWTH & INCOME
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 140,006,014
<INVESTMENTS-AT-VALUE> 158,202,995
<RECEIVABLES> 0
<ASSETS-OTHER> 233,267
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 158,436,262
<PAYABLE-FOR-SECURITIES> 5,901
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 227,366
<TOTAL-LIABILITIES> 233,267
<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> 158,202,995
<DIVIDEND-INCOME> 19,586,646
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 1,769,783
<NET-INVESTMENT-INCOME> 17,816,863
<REALIZED-GAINS-CURRENT> 552,624
<APPREC-INCREASE-CURRENT> 4,394,652
<NET-CHANGE-FROM-OPS> 22,764,139
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 48,494,822
<NUMBER-OF-SHARES-REDEEMED> 2,639,518
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 50,802,581
<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> 1,769,783
<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> 13
<NAME> MANAGED
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 339,334,981
<INVESTMENTS-AT-VALUE> 367,126,418
<RECEIVABLES> 0
<ASSETS-OTHER> 331,349
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 367,457,767
<PAYABLE-FOR-SECURITIES> 13,311
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 318,038
<TOTAL-LIABILITIES> 331,349
<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> 367,126,418
<DIVIDEND-INCOME> 45,124,706
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 4,464,180
<NET-INVESTMENT-INCOME> 40,660,526
<REALIZED-GAINS-CURRENT> 2,338,033
<APPREC-INCREASE-CURRENT> (11,935,373)
<NET-CHANGE-FROM-OPS> 31,063,186
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 76,164,584
<NUMBER-OF-SHARES-REDEEMED> 14,610,747
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 51,956,497
<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> 4,464,180
<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> 14
<NAME> SHORT-TERM U.S. GOVERNMENT
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 7,855,146
<INVESTMENTS-AT-VALUE> 7,807,472
<RECEIVABLES> 0
<ASSETS-OTHER> 795
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 7,808,267
<PAYABLE-FOR-SECURITIES> 318
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 477
<TOTAL-LIABILITIES> 795
<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> 7,807,472
<DIVIDEND-INCOME> 336,519
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 90,508
<NET-INVESTMENT-INCOME> 246,011
<REALIZED-GAINS-CURRENT> (7,429)
<APPREC-INCREASE-CURRENT> (66,125)
<NET-CHANGE-FROM-OPS> 172,457
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,948,334
<NUMBER-OF-SHARES-REDEEMED> 1,260,865
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 4,613,915
<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> 90,508
<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> 15
<NAME> SMALL CAP VALUE
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 991,027
<INVESTMENTS-AT-VALUE> 1,037,312
<RECEIVABLES> 0
<ASSETS-OTHER> 510
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,037,822
<PAYABLE-FOR-SECURITIES> 41
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 469
<TOTAL-LIABILITIES> 510
<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> 1,037,312
<DIVIDEND-INCOME> 25,403
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 4,012
<NET-INVESTMENT-INCOME> 21,391
<REALIZED-GAINS-CURRENT> 1,223
<APPREC-INCREASE-CURRENT> 46,285
<NET-CHANGE-FROM-OPS> 68,899
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,048,651
<NUMBER-OF-SHARES-REDEEMED> 58,847
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,037,312
<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> 4,012
<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> 16
<NAME> INTERNATIONAL OPPORTUNITIES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1,606,408
<INVESTMENTS-AT-VALUE> 1,678,594
<RECEIVABLES> 0
<ASSETS-OTHER> 66
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,678,660
<PAYABLE-FOR-SECURITIES> 66
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 66
<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> 1,678,594
<DIVIDEND-INCOME> 4,888
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 7,044
<NET-INVESTMENT-INCOME> (2,156)
<REALIZED-GAINS-CURRENT> 2,121
<APPREC-INCREASE-CURRENT> 72,186
<NET-CHANGE-FROM-OPS> 72,151
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,730,925
<NUMBER-OF-SHARES-REDEEMED> 126,637
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,678,594
<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> 7,044
<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> 17
<NAME> EQUITY INDEX
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1,566,189
<INVESTMENTS-AT-VALUE> 1,656,323
<RECEIVABLES> 0
<ASSETS-OTHER> 9,705
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,666,028
<PAYABLE-FOR-SECURITIES> 67
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9,638
<TOTAL-LIABILITIES> 9,705
<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> 1,656,323
<DIVIDEND-INCOME> 38,372
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 7,202
<NET-INVESTMENT-INCOME> 31,170
<REALIZED-GAINS-CURRENT> 7,516
<APPREC-INCREASE-CURRENT> 90,134
<NET-CHANGE-FROM-OPS> 128,820
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,759,105
<NUMBER-OF-SHARES-REDEEMED> 200,433
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,656,323
<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> 7,202
<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> 18
<NAME> STRATEGIC BOND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1,223,582
<INVESTMENTS-AT-VALUE> 1,228,784
<RECEIVABLES> 0
<ASSETS-OTHER> 8,289
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,237,073
<PAYABLE-FOR-SECURITIES> 49
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 8,240
<TOTAL-LIABILITIES> 8,289
<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> 1,228,784
<DIVIDEND-INCOME> 36,420
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 4,163
<NET-INVESTMENT-INCOME> 32,257
<REALIZED-GAINS-CURRENT> 1,486
<APPREC-INCREASE-CURRENT> (4,798)
<NET-CHANGE-FROM-OPS> 28,945
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,381,255
<NUMBER-OF-SHARES-REDEEMED> 149,159
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,228,784
<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> 4,163
<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>
<PAGE>
Exhibit 4
[LETTERHEAD OF JOHN HANCOCK APPEARS HERE]
OWNER JOHN HANCOCK
ANNUITANT JOHN HANCOCK ANNUITY NUMBER VA 000 000
INDIVIDUAL ANNUITY WITH FIXED AND VARIABLE OPTIONS
The John Hancock Mutual Life Insurance Company agrees to provide the benefits,
rights and privileges as stated in this contract.
If the contract is in force on the Date of Maturity, we will pay an Annuity to
the Annuitant, until otherwise directed by the Owner. The variable and fixed
portions of each Annuity payment will be determined in accordance with the
"Conversion" provision of this contract. The variable portion may increase or
decrease depending upon the investment experience of the Subaccounts in which
the Net Premiums are invested. Unless otherwise elected, annuity payments will
be payable at monthly intervals for a period of 10 years and as long thereafter
as the Annuitant lives. The variable portion of annuity payments will not
decrease if the annual rate of investment return earned on assets of the
Subaccounts is approximately 4.90% before deductions made directly to such
Subaccounts of approximately 1.40% per annum.
By written notice, the Owner may elect the Date of Maturity at any time,
provided the Date elected is: (i) not later than the Annuitant's 90th birthday;
(ii) at least 31 days after the written notice; and (iii) at least six months
after the date the first premium is applied to the contract. If no other
election is made, the Date of Maturity will be the Annuitant's 90th birthday.
A Death Benefit will be payable if the Annuitant's death occurs before the Date
of Maturity and before the Surrender Date, as stated in the "Death Benefit" and
other contract provisions.
We are issuing this contract in consideration of the application and the payment
of premiums.
The Contract Specifications on Page 3 and the conditions and provisions on this
and the following pages are part of the contract.
10 Day Right to Cancel - This contract may be returned by delivering or mailing
it within 10 days after its receipt to the Company at Boston, Massachusetts, or
to the agent or agency office through which it was delivered, with a written
request for cancellation. Immediately on such delivery or mailing and such
written request, the contract shall be deemed void from the beginning and a
refund will be made within 10 days. The amount refunded will be the sum of (i)
the Accumulated Value at the end of the Valuation Period form the date the
contract is mailed or delivered to the agency or agent through whom it was
purchased or the date the contract is mailed or delivered to the Home Office,
and (ii) the sum of all charges made with respect to the contract.
[SIGNATURE APPEARS HERE] [SIGNATURE APPEARS HERE]
President Secretary
Combination Fixed/Variable Annuity - monthly annuity payable to Annuitant
beginning on the Date of Maturity for a guaranteed period of 10 years and
thereafter for life, unless otherwise elected.
Nonparticipating
Initial premium is shown on Page 3.
All benefits, payments and values under this contract which are based on the
Investment experience of a Separate account are variable and not guaranteed as
to fixed dollar amount.
<PAGE>
CONTRACT PROVISIONS
<TABLE>
<CAPTION>
Numerical Guide Alphabetical Guide
Section Section
<S> <C>
1. Contract Specifications 7. Accumulations
2. Definitions 23. Annual Statement
3. Owner, Beneficiary 15. Annuity Payments
4. The Contract 20. Assignment
5. Payment of Premiums 3. Beneficiary
6. Investment and Account Transfer Options 21. Claims of Creditors
7. Accumulations in Variable and Fixed Accounts 4. Contract
8. Accumulations Shares and Annuity Unit Valuation 10. Contract Fee and Premium Taxes
9. Death Benefit 1. Contract Specifications
10. Contract Fee and Premium Taxes 15. Conversion
11. Partial Withdrawals 9. Death Benefit
12. Withdrawal Charge 2. Definitions
13. Surrender Provision 19. Incontestability
14. Reinstatement 6. Investment Option
15. Conversion 24. Miscellaneous
16. Settlement Options 18. Misstatement of Age or Sex
17. Proof Required for Payment 16. Optional Methods of Settlement
18. Misstatement of Age or Sex 3. Owner
19. Incontestability 11. Partial Withdrawals
20. Assignment 1.,5. Premiums
21. Claims of Creditors 17. Proof Required for Payment
22. Right to Make Changes 14. Reinstatement
23. Annual Statement 22. Right to Make Changes
24. Miscellaneous 13. Surrender Provision
6. Transfer Option
8. Valuation Procedures
12. Withdrawal Charge
</TABLE>
2
<PAGE>
- --------------------------------------------------------------------------------
1. CONTRACT SPECIFICATIONS
- --------------------------------------------------------------------------------
OWNER John Hancock
ANNUITANT John Hancock
ANNUITY NUMBER VA 000 000
ISSUE AGE 35
DATE OF ISSUE December 1, 1997
DATE OF MATURITY December 1, 2052
INITIAL PREMIUM $11,000.00
SUBSEQUENT PREMIUMS MAY BE PAID IN ACCORDANCE WITH SECTION 5.
AN ANNUAL MAINTENANCE CHARGE MAY BE DEDUCTED AS DESCRIBED IN SECTION 11,
THIS CHARGE IS CURRENTLY $30.
AMOUNT WITHDRAWN MAY BE SUBJECT TO WITHDRAWAL CHARGES WHICH ARE DESCRIBED
IN SECTION 13.
3
<PAGE>
- --------------------------------------------------------------------------------
2. DEFINITIONS
- --------------------------------------------------------------------------------
"Account", unmodified, means a Subaccount or a Fixed Account.
"Accumulated Value", unmodified, means the value of this contract on any
date prior to the commencement of life annuity payments. This value equals
the sum of (i) the accumulated values for all Subaccounts and (ii) the
accumulated value of the contract in the Fixed Account. The accumulated
value for each Subaccount as of any date will equal the number of
Accumulation Shares for that Subaccount then credited to this contract
multiplied by the Accumulation Share Value for that Subaccount on that
date.
"Accumulation Share" means a unit of measurement used in determining the
value of this contract prior to the commencement of life annuity payments.
The Accumulation Share Value for each Subaccount will reflect the
investment experience of that Subaccount. It will vary in dollar amount.
"Annuity Unit" means a unit of measurement used in determining the amount
of the variable portion of each Annuity payment. The value of an Annuity
Unit for each Subaccount will depend on the assumed investment rate and the
investment experience of that Subaccount. It will vary in dollar amount.
"Fifth Interval Contract Anniversary" means each contract anniversary that
is a multiple of five measured from the Date of Issue.
"Fixed Account" means an Account established by us which accumulates at
rates, not less than 3%, which we will determine and declare from time to
time.
"Fund" means a series type mutual fund registered under the Investment
Company Act of 1940 (the Act) as an open-end diversified management
investment company.
"In force" means that the Annuitant is living. Surrender Value of the
contract has not become payable, and the contract has not been terminated
in accordance with the "Payment of Premiums" provision in Section 5.
"Measuring Person" means the person on whose life Annuity payments will be
based.
"Net Premium" means the premium paid less any applicable taxes based on the
amount of premium payment.
"Payment" means, unless otherwise stated, payment at our Home Office in
Boston, Massachusetts.
"Portfolio" means each division of a Fund which has a specific investment
objective.
"Separate Account", unmodified, means a separate investment account
established by us pursuant to applicable law in which you ar eligible to
invest under this contract.
"Subaccount" means each division of a Separate Account. The assets of each
Subaccount are invested solely in shares of the corresponding Portfolio of
a Fund.
"Surrender Date" means the date of receipt of written notice of surrender
under Section 13.
"Valuation Date" means any date on which the New York Stock Exchange is
open for trading and on which the Fund values its shares.
"Valuation Period" means that period of time from the beginning of the day
following a Valuation Date to the end of the next following Valuation Date.
"We", "us", "our" refer only to the John Hancock Mutual Life Insurance
Company.
"Written notice" means, unless otherwise stated, a written notice received
at our Home Office in Boston, Massachusetts.
"You" and "your" refer only to the Owner of this contract.
4
<PAGE>
- --------------------------------------------------------------------------------
3. OWNER, BENEFICIARY
- --------------------------------------------------------------------------------
The Owner and the Beneficiary will be as shown in the application unless
you change them or they are changed by the terms of this provision.
If the Annuitant dies and there is no surviving Beneficiary, you will be
the Beneficiary, but if you were the Annuitant, your estate will be the
Beneficiary.
You shall have the sole and absolute power to exercise all rights and
privileges without the consent of any other person except as otherwise
provided by this contract or unless you provide otherwise by written
notice.
While the Annuitant is alive, you may change the Owner by written notice.
You may change the Beneficiary by written notice no later than receipt of
the required due proof of the Annuitant's death. A change will take effect
when the notice is received and filed at our Home Office. The change
will take effect whether or not you or the Annuitant is then alive. A
change shall be subject to the rights of any assignee of record with us and
subject to any payment made or other action taken by us before we received
and filed the notice.
JOINT OWNERS
If joint Owners are named in the application, each joint Owner will be
considered the primary Beneficiary of the other joint Owners. Should
another person or entity be designated as Beneficiary in the application,
such Beneficiary will be deemed a contingent Beneficiary for all Owners
with rights subordinate to the rights of each joint Owner, Signatures of
all joint Owners are required for any exercise of ownership rights
requiring written notification.
- --------------------------------------------------------------------------------
4. THE CONTRACT
- --------------------------------------------------------------------------------
The entire contract between the Applicant and us consists of this
contract and the application, a copy of which is attached.
Contract years, contract months and contract anniversaries are measured
from the Date of Issue.
Only the President, a Vice President, the Secretary, or an Assistant
Secretary of the Company has authority to waive or agree to change in any
respect any of the conditions or provisions of the contract.
- --------------------------------------------------------------------------------
5. PAYMENT OF PREMIUMS
- --------------------------------------------------------------------------------
All premium payments shall be made to us at our Home Office. Premium
payments are subject to the following conditions:
(a) Each premium payment must be at least $50
(b) The maximum premium that may be allocated to the contract in any
contract year is $1,000,000.
(c) The maximum premium that may be allocated to any Subaccount in any
contract year is $1,000,000 less any amount previously transferred
to such Subaccount in such year.
(d) The maximum premium that may be allocated to the Fixed Account in
any contract year, exclusive of the initial premium payment, is
$100,000, less any amount previously transferred to the Fixed
Account in such year.
(e) No premium payments may be made to the Fixed Account after the end
of the tenth contract year.
(f) No premium payments may be made to the contract after the
Annuitant's 85th birthday.
5
<PAGE>
- --------------------------------------------------------------------------------
6. INVESTMENT AND ACCOUNT TRANSFER OPTIONS
- --------------------------------------------------------------------------------
INVESTMENT OPTION
The Net Premium will be allocated to the accounts according to the
Investment Option then in effect. The Initial Investment Option is that
elected by you in the application. You may elect to change the Investment
Option. The change will be effective as to the application of any Net
Premium made on or after the date of receipt at our Home Office of notice
satisfactory to us. The minimum percentage that may be allocated to any
Account will not be greater than 25%, and the maximum number of Accounts in
which reserves may be held will not be less than two. All percentages you
elect must be whole numbers.
ACCOUNT TRANSFER OPTION
Subject to the limitations below, you may elect to reallocate amounts among
the Accounts up to twelve times in each contract year without incurring a
transfer charge. We reserve the right to impose a charge for each transfer
that exceeds 12 in any contract year in an amount not to exceed $25 per
transfer. Transfers between the Subaccounts or from a Subaccount to the
Fixed Account will be effective on the date of receipt at our Home Office
of notice satisfactory to us. No transfer will be permitted on or within 30
days of the Maturity Date. The number of Accumulation Shares or Annuity
Units and the amount of accumulated value of the Fixed Account transferred
to or from each Account will reflect the respective values in each Account.
Transfers to or form the Fixed Account are prohibited after commencement of
Annuity payments. The maximum number of Accounts in which Accumulated Value
may be held will be subject to our rules in effect at the time of election.
The maximum amount which may be transferred to a Subaccount in any contract
year is $1,000,000 less net premiums previously allocated to such
Subaccount in such contract year.
During the first contract year,only one transfer is permitted out of the
Fixed Account, and may be made at any time. In each subsequent contract
year, only one transfer is permitted out of the Fixed Account, and may be
made provided such transfer is at least 180 days subsequent to any prior
transfer. If the accumulated value of the Fixed Account is $2,500 or less,
then a transfer made out of the Fixed Account may not exceed $500. If the
accumulated value of the Fixed Account exceeds $2,500, then no more than
20% of that value may be transferred from the Fixed Account. The maximum
amount that may be transferred to the Fixed Account in any contract year is
$100,000, less net premiums previously allocated to the Fixed Account in
such year. A transfer to the Fixed Account may not be made within 6 months
of a transfer out of the Fixed Account.
If the Accumulated Value is invested in more than four Accounts on the Date
of Maturity or other date elected for commencement of Annuity payments and
before conversion in accordance with Section 15, we will allocate the
Accumulated Value to the four Accounts then having the largest portions of
the Accumulated Value. The Accumulated Value in Accounts other than such
four Accounts will be allocated to the four Accounts in proportion to the
amounts in the four Accounts. Such allocation will be made not withstanding
any transfer restrictions specified in this subsection. The rules that will
be applied as of any date will be those in effect on that date.
6
<PAGE>
- --------------------------------------------------------------------------------
7. ACCUMULATIONS IN VARIABLE AND FIXED ACCOUNTS
- --------------------------------------------------------------------------------
PURCHASE OF ACCUMULATION SHARES
The portion of the Net Premium not allocated to the Fixed Account will be
allocated to each elected Subaccount for investment with other funds in
each such Subaccount and applied to the purchase of Accumulation Shares to
the credit of this contract. The number of Accumulation Shares in each
Subaccount purchased by each premium payment will be determined by dividing
the applicable portion of the Net Premium by the applicable Accumulation
Share Value of the Subaccount of the first Valuation Date which is the same
as or next follows the receipt of the premium payment at our Home Office.
ACCUMULATED VALUE IN THE FIXED ACCOUNT
We will accumulate (i) the portion of any Net Premium allocated to the
Fixed Account and (ii) any amount transferred form a Subaccount, from the
date the premium is received or the transfer is made. The accumulated value
of the contract's share of the Fixed Account on any date prior to the date
annuity payments commence is the sum of such Net Premiums and transfers
accumulated with interest to that date less the sum of (a), (b) and (c)
accumulated with interest to that date, where:
(a) is any withdrawal made from the Fixed Account;
(b) is any transfer made from the Fixed Account; and
(c) is any charge deducted from the Fixed Account.
Interest will be credited daily and will then earn interest from that date.
The interest rates used will be the applicable rates that we declare. All
such declared rates will be expressed on an annual effective basis and will
never be less than the guaranteed minimum rate of 3% on an annual effective
basis. The interest credited on any given day will be at a rate which, if
compounded daily for one year, would equal the applicable declared rate.
- --------------------------------------------------------------------------------
8. ACCUMULATION SHARES AND ANNUITY UNIT VALUATION
- --------------------------------------------------------------------------------
ACCUMULATION SHARE VALUE
The Accumulation Share Value is calculated separately for each Subaccount.
The value of one Accumulation Share was set at $10.00 on the date assets
were first allocated to each Subaccount. The value of one Accumulation
Share on any Valuation Date thereafter will be determined for each
Subaccount by multiplying the immediately preceding Accumulation Share
Value by the applicable Net Investment Factor for the Valuation Period
ending on that Valuation Date. On any date other than a Valuation Date, the
Accumulation Share Value will be the same as that on the next following
Valuation Date.
ANNUITY UNIT VALUE
The Annuity Unit Value is calculated separately for each Subaccount. The
value of one Annuity Unit was set at $1.00 on the date assets were first
allocated to each Subaccount. The value of one Annuity Unit on any
Valuation Date thereafter will be determined for each Subaccount by
multiplying (1) the immediately preceding Annuity Unit Value by (2) the
applicable Net Investment Factor for the Valuation Period ending on the
Valuation Date reduced by .00009425 (assuming annual effective interest at
the rate of 3 1/2%) times the applicable Net Investment Factor for each
calendar day in the Valuation Period. On any date other than a Valuation
Date, the Annuity Unit Value will by the same as that on the next
following Valuation Date.
NET INVESTMENT FACTOR
The Net Investment Factor for each Subaccount for any Valuation Period is
equal to one plus the applicable net investment rate for such period. A Net
Investment Factor may be fore or less than one. The net investment rate for
each Subaccount for any Valuation Period will be determined by: (1) taking
the sum of the accrued investment income and capital gains and losses,
realized or unrealized, of the Subaccount for the Valuation Period; (2)
subtracting the sum of (i) an amount for any applicable income taxes and
(ii) an amount for mortality and expense risks and administrative expenses
computed by multiplying .00003836 times the value of the Subaccount at the
beginning of the Valuation Period times the number of calendar days in the
Valuation Period; and (3) dividing the result by the value of the
Subaccount at the beginning of the Valuation Period.
VALUATION OF ASSETS
The values of the assets in the Subaccounts shall be determined at a fair
value in accordance with applicable law. Liabilities attributable to the
Subaccount will be deducted to determine the value of the Subaccount.
7
<PAGE>
ADJUSTMENT OF UNITS AND VALUES
We reserve the right to change the number and value of the Accumulation Shares
or Annuity Units or both without your consent or the consent of any other
person, provided strict equity is preserved and the change does not affect the
benefits, provisions or investment return of this contract.
- --------------------------------------------------------------------------------
9. DEATH BENEFIT
- --------------------------------------------------------------------------------
If the Annuitant dies before the Date of Maturity, we will pay the Death Benefit
to the Beneficiary. The Death Benefit will equal the greatest of: (i) the
Accumulated Value as of the date of receipt of due proof of the Annuitant's
death; (ii) the amount of the premiums paid less the amount of all partial
withdrawals made, if any; or (iii) the Accumulated Value as of any Fifth
Interval Contract Anniversary preceding the date of receipt of due proof of the
Annuitant's death and preceding the contract anniversary nearest the Annuitant's
81st birthday plus any premiums paid less any partial withdrawals made since
such Fifth Interval Contract Anniversary.
Notwithstanding any of the above, the following will apply upon the death of the
Owner, if the Contract Value has not already been converted into an annuity:
(i) If the Beneficiary is the spouse of the Owner, the Beneficiary may
continue the contract in force as Owner.
(ii) If the Beneficiary is not the spouse of the Owner, or if the
Beneficiary is the spouse of the Owner but does not choose to continue
the contract, we will pay the death benefit (or the Surrender Value if
the Owner is not the Annuitant) in full to the Beneficiary within 5
years of the Owner's death or apply the Accumulated Value in full
towards the purchase of a life annuity on the Beneficiary with
payments beginning within 1 year of the Owner's death.
- --------------------------------------------------------------------------------
10. CONTRACT FEE AND PREMIUM TAXES
- --------------------------------------------------------------------------------
We will deduct a contract fee of $30 on each contract anniversary prior to the
Date of Maturity and on the date of surrender of the contract if the Accumulated
Value is then less than $10,000. No contract fee will be deducted if the
Accumulated Value is $10,000 or more. We reserve the right to increase the
contract fee up to $50, subject to applicable state regulations.
The contract fee will be deducted from the accumulated value for each Accountant
in the same proportion as such value bears to the Accumulated Value. However, no
deduction will be made from the accumulated value in the Fixed Account which
results in an accumulation at less than the 3% guaranteed rate.
A deduction for a premium tax or a similar tax will be made either from premiums
or from the Accumulated Value if and when such a tax is incurred by us. However,
if premium taxes or similar taxes are incurred by us at the time premiums are
paid and we decide to defer the deduction for such taxes by waiving the
deduction in accordance with the immediately preceding sentence then a deduction
will be made upon any withdrawal under Section 11 and either on the Surrender
Date, the Date of Maturity, or the date of payment of the Death Benefit. Such
deduction will be equal to the tax percentage multiplied by (i) in the case of
withdrawals, the withdrawal amount requested, (ii) in the case of surrender or
annuitization, the Accumulated Value as of the Surrender Date or the Date of
Maturity as the case may be, or (iii) in the case of death, the Death Benefit as
of the date of receipt of due proof of the Annuitant's death. The "tax
percentage" is equal to the percentage of premium which the premium tax or
similar tax in question constitutes.
- --------------------------------------------------------------------------------
11. PARTIAL WITHDRAWALS
- --------------------------------------------------------------------------------
Subject to the limits described in this section, you may request a withdrawal of
less than the Surrender Value. The total of the requested amount and any
withdrawal charge made is called a partial withdrawal. We will pay the requested
amount on receipt of written notice before the Annuitant's death and before the
commencement of Annuity payments. The amount of the partial withdrawal will then
be deducted from the Accumulated Value. Without our prior approval, we will not
permit a partial withdrawal of less than $100 nor will we permit a partial
withdrawal if the Accumulated Value after such requested partial withdrawal
would be less than $1000.
We may defer the payment of any partial withdrawal in the same manner as we may
defer the payment of the Surrender Value.
8
<PAGE>
- --------------------------------------------------------------------------------
12. WITHDRAWAL CHARGE
- --------------------------------------------------------------------------------
A withdrawal charge will be computed upon surrender of the policy and upon each
partial withdrawal. To determine the withdrawal charge, we will first deduct the
following amounts from the premium payments made to date in order that such
payments were received:
(a) The sum of all contract fees deducted to date.
(b) The sum of all prior partial withdrawals.
If the surrender or partial withdrawal occurs after the first contract year, we
will then withdraw, without charge, 10% of the Accumulated Value of the contract
on the first day of the current contract year less the sum of all prior partial
withdrawals made during the current contract year. This amount will be withdrawn
from the remaining premium payments in the order they were received.
We will then continue to withdraw the remaining premium payments in the order
that they were received and will apply the following table of withdrawal charges
to these premiums until the total amount withdrawn (including the withdrawal
charges) reaches (i) the Accumulated value in the case of a full surrender; (ii)
the amount of the partial withdrawal; or (iii) all remaining premium payments
have been withdrawn:
<TABLE>
<CAPTION>
Time from premium payment
to date of surrender or withdrawal Charge
---------------------------------- ------
<S> <C>
7 years or more No Charge
At least 6 years, but less than 7 years 1%
At least 5 years, but less than 6 years 2%
At least 4 years, but less than 5 years 3%
At least 3 years, but less than 4 years 4%
At least 2 years, but less than 3 years 5%
At least 1 year, but less than 2 years 6%
Less than 1 year 7%
</TABLE>
Unless otherwise specified by you, the withdrawal charge will be deducted from
the accumulated value for each Account in the same proportion as such value
bears to the Accumulated Value.
- --------------------------------------------------------------------------------
13. SURRENDER PROVISION
- --------------------------------------------------------------------------------
SURRENDER VALUE
We will determine and pay the Accumulated Value of this contract, less any
withdrawal charge described in Section 12, as a Surrender Value on receipt at
our Home Office before the Annuitant's death and before the commencement of
Annuity payments of written notice requesting payment of the Surrender Value. We
reserve the right to defer the payment of the Surrender Value from the Fixed
Account for a period of six months. We will pay the Surrender Value from the
Subaccounts within 7 days (plus any period of extension under the applicable
laws, rules and regulations governing the redemption of variable Annuities)
after the date of receipt of the written notice unless a different method of
settlement is mutually agreed on, in writing, between you and us.
9
<PAGE>
- --------------------------------------------------------------------------------
14. REINSTATEMENT
- --------------------------------------------------------------------------------
The contract may be reinstated by the payment of at least one premium while the
Annuitant is living unless the Surrender Value has been paid, applied or
otherwise exhausted, or annuity payments have begun. The Net premium will be
applied as provided in Section 6 and Section 7.
- --------------------------------------------------------------------------------
15. CONVERSION
- --------------------------------------------------------------------------------
CONVERSION OF ACCUMULATION SHARES TO ANNUITY UNITS
On the Date of Maturity or other date elected under Section 16 for commencement
of Annuity payments, the Accumulation Shares credited to the contract will be
converted into Annuity Units. Annuity payments will then commence subject to
the limitations specified in Section 16 and all other applicable provisions.
The number of Annuity Units credited to each Subaccount will be determined by:
(1) multiplying the number of Accumulation Shares credited to that Subaccount on
the date of conversion by the Accumulation Share Value for the Subaccount as of
10 days prior to the date the first Annuity payment is due; (2) deducting any
applicable premium tax; (3) dividing the resulting value by 1000; (4)
multiplying the value from (3) by the applicable factor from the Table of First
Variable Annuity Payment Factors on page 13 for the option elected, or if no
option is elected the applicable factor for Option A (Variable) with a
guaranteed period of ten years, to determine that Subaccount's portion of the
variable portion of the first monthly Annuity payment, and (5) dividing the
value from (4) by the Annuity Unit Value for the Subaccount as of 10 days prior
to the date the first Annuity payment is due.
VARIABLE ANNUITY PAYMENTS
The amount of the variable portion of the monthly Annuity payment due on the
first payment date is equal to the sum of the portions for each Subaccount
determined as described in the preceding paragraph. The amount of the variable
portion of any monthly Annuity payment subsequent to the first will be
determined by adding together for each Subaccount the product of the number of
Annuity Units credited to the Subaccount and the Annuity Unit Value for the
Subaccount 10 days prior to the date the payment is due. We guarantee that the
Annuity Unit Values used in determining Annuity payments will not be affected by
variations in our mortality experience or our actual expenses from those
assumed.
CONVERSION OF ACCUMULATED VALUE IN FIXED ACCOUNT
On the Date of Maturity or other date elected under Section 16 for commencement
of Annuity payments, we will convert the Accumulated Value in the Fixed Account
into a fixed monthly Annuity. Annuity payments will then commence subject to
the limitations specified in Section 16 and all other applicable provisions. We
will determine the fixed monthly Annuity by (1) subtracting any applicable
premium tax from the Accumulated Value in the Fixed Account on the date the
first Annuity payment is due, (2) dividing the result by 1000, and (3)
multiplying such resulting amount by the greatest of the following; (i) the
applicable Fixed Monthly Annuity Option Rate then in effect for the option
elected, or if no option is elected, the applicable rate for Option A (Fixed)
with a guaranteed period of ten years; (ii) the applicable rate from the Table
of Fixed Annuity Payment Factors on Page 14 or (iii) the current rate for a
single consideration immediate annuity.
10
<PAGE>
- --------------------------------------------------------------------------------
16. SETTLEMENT PROVISIONS
- --------------------------------------------------------------------------------
ANNUITY ON DATE OF MATURITY
We shall make the Annuity payments provided on the first page of this contract
automatically as a Life Annuity with Payments for a Guaranteed Period of 10
Years in accordance with the provisions of Option A unless another option is
elected. We shall determine the amounts of the Annuity payments in accordance
with the provisions of this section and of the "Conversion" provision in Section
15. Amounts in the Subaccounts will be used to provide variable benefits.
Amounts in the Fixed Account will be used to provide fixed benefits.
If the amount of the first monthly Annuity payment would be less than $20, we
will make a single payment equal to the Accumulated Value on the Date of
Maturity. This single payment shall be in place of all other benefits provided
by this contract. If the amount of the first monthly Annuity payment would be at
least $20 but less than $50, we may make payments at quarterly, semi-annual or
annual intervals.
OPTIONAL METHODS OF SETTLEMENT
In place of (i) the Annuity on the Date of Maturity provided in the first page
of this contract or (ii) a single payment in case of death prior to the date
Annuity payments commence or (iii) a single payment in case of surrender which
occurs at least 6 months after the date the first premium is applied to the
contract, proceeds payable under this contract may be left with us in accordance
with one of the options set forth below and terms of a supplementary agreement
to be issued when the option becomes effective, but only if (i) such proceeds
are in an amount of $5000 or more and (ii) the amount of the first monthly
Annuity payment would be $50 or more.
Option A
A (Variable) - Life Annuity on a Variable Basis with Payments for a Guaranteed
Period of 5, 10, or 20 Years. If the Measuring Person's death occurs within the
guaranteed period, payments will be made for the remainder of the guaranteed
period in accordance with the terms of the supplementary agreement.
A (Fixed) - Life Annuity with Payments for a Guaranteed Period of 5, 10, or 20
years. If the Measuring Person's death occurs within the guaranteed period,
payments will be made for the remainder of the guaranteed period in accordance
with the terms of the supplementary agreement.
Option B
B (Variable) - Life Annuity on a Variable Basis Without Further Payment on Death
of the Measuring Person.
B (Fixed) - Life Annuity Without Further Payment on Death of the Measuring
Person.
You may elect an option by written notice before the death of the Annuitant and
before the commencement of Annuity payments. If you have made no election before
the death of the Annuitant, the Beneficiary may make an election by the written
notice before the proceeds become payable.
11
<PAGE>
ANNUITY PAYMENT AND OPTION LIMITATIONS
While the Annuitant is living (i) the Measuring Person will be the Annuitant;
(ii) the Payee will be the Annuitant unless otherwise directed by you; and (iii)
the Contingent Payee will be the Beneficiary unless otherwise provided by the
written notice.
If the Annuitant dies and Death Benefit proceeds are left with us in accordance
with a settlement option election (i) the Measuring Person will be the
Beneficiary; (ii) the Payee will be the Beneficiary unless otherwise designated
in the election; and (iii) the Contingent Payee will be the person or persons so
designated in the election and in accordance with the terms of the supplementary
agreement.
Optional methods of settlement are not available without our consent if the
proceeds are payable to an executor, administrator, trustee, corporation,
partnership or association.
If the Owner of this contract dies on or after annuity payments have begun, any
remaining benefit under such annuity on the date of the Owner's death must be
paid out at least as rapidly as under the method of making annuity payments then
in effect.
FIRST VARIABLE ANNUITY PAYMENT FACTORS
The Table of First Variable Annuity Payment Factors on page 13 shows the amount
of the variable portion of the first monthly Annuity payment provided on the
first page of the contract and under Option A (Variable) and Option B
(Variable) for each $1,000 applied. The factors in this table are based on the
1983a Individual Annuity Mortality Table with mortality and age adjustments and
interest at the rate of 3 1/2% a year. The amount of the variable portion of
the first payment will depend on the sex and adjusted age of the Measuring
Person. The adjusted age is determined from the actual age on the Measuring
Person's birthday nearest the date the first Annuity payment is due, by
subtracting one year for each complete 10 year period elapsed since the Date of
Issue.
FIXED ANNUITY PAYMENTS
The Table of Fixed Annuity Payment Factors on page 14 shows the guaranteed
amount of the fixed portion of the monthly Annuity payments for each $1,000
applied. The guaranteed amount of the fixed portion of the Annuity payments
will depend on the adjusted age of the Measuring Person. The adjusted age is
determined for the actual age on the Measuring Person's birthday nearest the
date the first Annuity payment is due, by subtracting one year for each complete
10 year period elapsed since the Date of Issue.
12
<PAGE>
TABLE OF FIRST VARIABLE ANNUITY PAYMENT FACTORS
Monthly life annuity with payments on a variable basis for each $1,000
applied.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Option A (Variable)
Adjusted Option B (Variable)
Age of Measuring Life Annuity with Payments Life Annuity Without
Person on Birthday for a Guaranteed Period Further Payment on
Nearest Date ----------------------- Death
of First Payment 5 Years 10 Years 20 Years of Measuring Person
---------------- ------- -------- -------- -------------------
Male Female Male Female Male Female Male Female
---- ------ ---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
55 4.50 4.13 4.46 4.11 4.32 4.05 4.51 4.13
56 4.58 4.19 4.54 4.18 4.38 4.10 4.59 4.20
57 4.67 4.26 4.62 4.24 4.44 4.16 4.68 4.27
58 4.76 4.33 4.71 4.31 4.50 4.22 4.78 4.34
59 4.86 4.41 4.80 4.39 4.57 4.28 4.88 4.42
60 4.96 4.49 4.90 4.46 4.63 4.35 4.98 4/50
61 5.08 4.58 5.00 4.55 4.70 4.41 5.10 4.59
62 5.20 4.67 5.11 4.64 4.77 4.48 5.22 4.69
63 5.32 4.77 5.23 4.73 4.84 4.55 5.36 4.79
64 5.46 4.88 5.35 4.83 4.91 4.62 5.50 4.89
65 5.61 4.99 5.47 4.94 4.97 4.69 5.65 5.01
66 5.76 5.11 5.61 5.05 5.04 4.77 5.81 5.14
67 5.93 5.24 5.74 5.17 5.11 4.84 5.99 5.27
68 6.10 5.38 5.89 5.29 5.17 4.92 6.17 5.41
69 6.29 5.53 6.04 5.43 5.24 5.00 6.37 5.56
70 6.49 5.69 6.20 5.57 5.30 5.07 6.59 5.73
71 6.69 5.86 6.36 5.72 5.35 5.15 6.81 5.91
72 6.91 6.05 6.52 5.88 5.41 5.22 7.05 6.10
73 7.14 6.25 6.69 6.04 5.46 5.29 7.31 6.32
74 7.39 6.46 6.87 6.22 5.50 5.35 7.58 6.55
75 7.65 6.70 7.05 6.40 5.54 5.41 7.88 6,79
76 7.92 6.94 7.23 6.59 5.58 5.47 8.19 7.06
77 8.21 7.20 7.41 6.78 5.61 5.52 8.53 7.35
78 8.52 7.48 7.59 6.98 5.64 5.56 8.90 7.66
79 8.84 7.78 7.78 7.19 5.67 5.61 9.29 8.00
80 9.17 8.10 7.96 7.40 5.69 5.64 9.71 8.36
81 9.52 8.44 8.14 7.61 5.71 5.67 10.16 8.76
82 9.88 8.81 8.31 7.82 5.73 5.70 10.64 9.30
83 10.26 9.19 8.48 8.03 5.74 5.72 11.16 9.67
84 10.65 9.59 8.64 8.23 5.74 5.73 11.71 10.18
85 and over 11.05 10.02 8.79 8.42 5.75 5.74 12.30 10.74
</TABLE>
13
<PAGE>
TABLE OF FIXED ANNUITY PAYMENT FACTORS
Monthly life annuity with payments on a fixed basis for each $1,000
applied.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Option A (Fixed)
Adjusted Option B (Fixed)
Age of Measuring Life Annuity with Payments Life Annuity Without
Person on Birthday for a Guaranteed Period Further Payment on
Nearest Date ----------------------- Death
of First Payment 5 Years 10 Years 20 Years of Measuring Person
---------------- ---------------------------------------------- -------------------
Male Female Male Female Male Female Male Female
---- ------ ---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
55 3.92 3.55 3.89 3.54 3.76 3.48 3.93 3.55
56 4.00 3.62 3.97 3.60 3.82 3.54 4.01 3.62
57 4.09 3.69 4.05 3.67 3.89 3.60 4.10 3.69
58 4.18 3.76 4.14 3.74 3.96 3.66 4.19 3.77
59 4.28 3.82 4.23 3.82 4.02 3.73 4.30 3.85
60 4.39 3.92 4.33 3.90 4.09 3.79 4.40 3.93
61 4.50 4.01 4.44 3.99 4.16 3.86 4.52 4.02
62 4.62 4.11 4.55 4.08 4.24 3.94 4.64 4.12
63 4.75 4.21 4.67 4.17 4.31 4.01 4.78 4.22
64 4.89 4.32 4.79 4.28 4.38 4.08 4.92 4.33
65 5.04 4.43 4.92 4.38 4.45 4.16 5.07 4.45
66 5.19 4.55 5.05 4.50 4.52 4.24 5.23 4.57
67 5.36 4.68 5.20 4.62 4.59 4.32 5.41 4.70
68 5.53 4.82 5.34 4.75 4.66 4.40 5.59 4.85
69 5.72 4.97 5.50 4.88 4.73 4.48 5.79 5.00
70 5.92 5.14 5.66 5.03 4.79 4.56 6.00 5.17
71 6.12 5.31 5.82 5.18 4.85 4.64 6.23 5.35
72 6.34 5.50 5.99 5.34 4.91 4.71 6.46 5.54
73 6.57 5.70 6.16 5.51 4.96 4.78 6.72 5.75
74 6.82 5.91 6.34 5.69 5.01 4.85 6.99 5.98
75 7.08 6.14 6.53 5.87 5.05 4.92 7.29 6.23
76 7.36 6.39 6.71 6.07 5.09 4.97 7.60 6.49
77 7.65 6.65 6.90 6.27 5.13 5.03 7.94 6.78
78 7.96 6.93 7.09 6.47 5.16 5.08 8.30 7.09
79 8.28 7.23 7.28 6.58 5.19 5.12 8.69 7.42
80 8.61 7.55 7.46 6.90 5.21 5.16 9.11 7.79
81 8.97 7.90 7.65 7.11 5.23 5.19 9.55 8.18
82 9.33 8.26 7.83 7.33 5.24 5.22 10.03 8.62
83 9.71 8.65 8.00 7.54 5.25 5.23 10.55 9.08
84 10.11 9.05 8.16 7.74 5.26 5.25 11.10 9.59
85 and over 10.51 9.48 8.32 7.94 5.27 5.26 11.68 10.15
</TABLE>
14
<PAGE>
- --------------------------------------------------------------------------------
17. PROOF REQUIRED FOR COMMENCEMENT AND FOR CONTINUATION OF ANNUITY PAYMENTS
- --------------------------------------------------------------------------------
Before making the first Annuity payment, we shall have the right to require
proof of the correct age of the Measuring Person. We shall also have the right
to require proof that the Measuring Person is living on the date each Annuity
payment is due.
- --------------------------------------------------------------------------------
18. MISSTATEMENT OF AGE OR SEX
- --------------------------------------------------------------------------------
If the age or sex of the Measuring Person has been misstated, we will adjust the
amount of each Annuity payment and every other benefit to that which the premium
paid would have purchased at the correct age and sex. We will charge any
overpayments and credit any underpayments against future payments we make under
the contract. Interest on any overpayment or underpayment will be paid at the
rate of 6% a year to the date of payment, charge, or credit.
- --------------------------------------------------------------------------------
19. INCONTESTABILITY
- --------------------------------------------------------------------------------
This contract shall be incontestable after it has been in force for 1 year from
its Date of Issue, except for nonpayment of premium.
- --------------------------------------------------------------------------------
20. ASSIGNMENT
- --------------------------------------------------------------------------------
You may assign your interest in this contract, except as otherwise provided,
without the consent of any revocable Beneficiary. Your interest, any interest of
the Annuitant and of any revocable Beneficiary shall be subject to the terms of
the assignment.
We will not be on notice of any assignment unless it is in writing; nor will we
be on notice until a duplicate of the original assignment has been filed at our
Home Office. We assume no responsibility for the validity or sufficiency of any
assignment.
If the application indicates that this contract is issued in a TSA or HR-10
plan, this contract is subject to assignment restrictions for Federal Income Tax
purposes. In such event, this contract shall 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 us.
- --------------------------------------------------------------------------------
21. CLAIMS OF CREDITORS
- --------------------------------------------------------------------------------
The proceeds and all other payments under the contract will be exempt from the
claims of creditors to the extent permitted by law. The proceeds and payments
may not be assigned or withdrawn before becoming payable without our agreement.
<PAGE>
- --------------------------------------------------------------------------------
22. RIGHT TO MAKE CHANGES
- --------------------------------------------------------------------------------
We reserve the right to make certain changes if, in our judgment, they would
best serve the interest of the owners of contracts such as this or would be
appropriate in carrying out the purposes of such contracts. Any changes will be
made only to the extent and in the manner permitted by applicable laws. Also,
when required by law, we will obtain your approval of the changes and approval
from any appropriate regulatory authority.
If any changes result in a material change in the underlying investment of
Subaccounts to which the reserves for this contract are allocated, we will
notify you of such change. You may then make a new election under the
Investment Option and the Account Transfer Option provisions.
- --------------------------------------------------------------------------------
23. ANNUAL STATEMENT
- --------------------------------------------------------------------------------
We will furnish you with reports annually, or more frequently, as required by
applicable law. They will include: (i) a statement of the investments held in
each Portfolio; and (ii) a statement of the condition and value of this contract
which will show the number of Accumulation Shares, if any, credited to each
Subaccount, the value of each Accumulation Share, and the Accumulated Value of
this contract.
- --------------------------------------------------------------------------------
24. MISCELLANEOUS
- --------------------------------------------------------------------------------
If the Accumulated Value of the contract becomes zero, we reserve the right to
terminate this contract.
Under New York law, all income, gains and losses, realized or unrealized, of the
Separate accounts shall be credited to or charged against the amounts placed in
the Separate Accounts without regard to our other income, gains and losses. The
assets of the Separate Accounts are owned solely by us. We are not a trustee
with respect to any part or the whole of those assets. The portion of the assets
in the Separate Accounts equal to the reserves and other liabilities under this
contract with respect to the Separate Accounts shall not be chargeable with
liabilities arising out of any other business we may conduce.
In place of operating each Separate Account as a unit investment trust, we
reserve the right to make investments directly, operating the Separate Account
as a "management-type investment company" under the 1940 Act, or in any other
form permitted by law, the investment adviser of which would be us or an
affiliate. The Separate Account assets would be invested as provided with
respect to the investment objectives of the Separate Account.
The values and benefits are not less than the minimum requirements of state law.
16
<PAGE>
The ANNUITANT, by virtue of this contract, is a member of the John Hancock
Mutual Life Insurance Company, and is entitled to vote either in person or by
proxy at any and all meetings of the Company. The annual meetings are held at
the Company's Home Office on the second Monday of April in each year, at twelve
o'clock noon.
Communications about this contract should be sent to the Company at John Hancock
Place, Boston, Massachusetts 027117.
Combination Fixed/Variable Annuity -- monthly annuity payable to Annuitant
beginning on Date of Maturity for a guaranteed period of 10 years and thereafter
for life.
Nonparticipating
Initial premium is shown on page 3
All benefits, payments and values under this contract which are based on the
Investment experience of a Separate Account are variable and not guaranteed as
to fixed dollar amount.
<PAGE>
Exhibit 5
INDIVIDUAL ANNUITY APPLICATION
See reverse for instructions.
[LOGO OF JOHN HANCOCK
ANNUITIES APPEARS HERE]
If you have any questions regarding your annuity please call: 1-800-732-5543
Please print. Make checks payable to
John Hancock Mutual Life Insurance Company, Boston, MA 02117
This application for use in the state of New York Only
<TABLE>
<CAPTION>
This application is to the John Hancock Mutual Life Insurance Company
====================================================================================================================================
<S> <C>
1 CONTRACT TYPE
Deferred: [_] Variable Immediate: [_] Variable: Benchmark: [_] 3.5% [_] 5.0%
[_] Fixed - 1 Year Initial Interest Guarantee Period [_] Fixed
[_] Fixed - 3 Year Initial Interest Guarantee Period
====================================================================================================================================
2 INITIAL PREMIUM $
------------------
Request for Premium Notices: Amount $ [_] Ann. [_] Semiannual [_] Qtly [_] Other
------------- --------------------------
Direct Premium Payment (ADD Program)
-----------------
Please staple I authorize John Hancock to begin making automatic monthly withdrawals from my account at the financial
your voided institution indicated. I understand that this authorization does not affect the terms of my annuity contract.
check here.
-----------------
(Special tax rules apply to IRA contributions.)
$
------------------------------------- --------------------------------------- --------------------------------------
Monthly Amount Financial Institution Account Number
====================================================================================================================================
3 ANNUITANT
Name: Residence: Street
----------------------------------------------------- ----------------------------------------------
Date of Birth [_] Male [_] Female City State Zip
-------------------- -------------------------------------------------
Social Security No Telephone No.
---------------------------------------- --------------------------------------------------
====================================================================================================================================
4 OWNER (if other than Annuitant) (If Joint Owners, see instructions for Box 4)
Name: Residence: Street
----------------------------------------------------- ----------------------------------------------
Date of Birth [_] Male [_] Female City State Zip
-------------------- -------------------------------------------------
Social Security No or Tax I.D. No. Telephone No.
------------- ---------------------------- ----------------------------------
====================================================================================================================================
5 BENEFICIARY AND RELATIONSHIP TO ANNUITANT:
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
6 THIS ANNUITY IS BEING APPLIED FOR AS: (Check one)
[_] Non-Qualified [_] IRA Rollover [_] SEP [_] 403(b) [_] Profit Sharing Plan [_] Pension Plan
[_] IRA [_] IRA Transfer [_] SARSEP [_] 401(k) [_] Deferred Comp. Public Employees [_] Other
-------
====================================================================================================================================
7 PROVISIONAL DATE OF MATURITY (For Deferred Annuities)
The Provisional Date of Maturity is the contract anniversary nearest the Annuitant's:
[_] 85th birthday (Non-Qualified) [_] 70th birthday (Qualified) [_] Other age
--------------
====================================================================================================================================
8 WILL THE ANNUITY APPLIED FOR REPLACE OR CHANGE ANY EXISTING ANNUITY OR LIFE INSURANCE?
[_] Yes If yes, indicate: [_] No If no indicate source of money
----------------------------------
Issuer Contract Type Contract No.
----------------------------------------- ----------------------- ------------------------
[_] 1035 exchange (Please submit cost basis information.)
====================================================================================================================================
9 PLEASE SEND STATEMENTS AND NOTICES TO:
[_] Annuitant [_] Owner [_] Other* *If other, please indicate name and address:
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Original-Home Office Yellow-Customer Pink-Agent
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
10 INVESTMENT OPTIONS (for Variable Annuities)
Please use whole percentages. Total = 100% No more than 10 accounts (portfolios) may be selected at one time.
<S> <C>
Mid Cap/Small Cap Stocks: Bonds:
_____% Real Estate Equity _____% Short Term US Government Bond
_____% Mid Cap Value _____% Sovereign Bond
_____% Mid Cap Growth _____% Strategic Bond
_____% Special Opportunities
_____% Small Cap Value Cash Equivalents:
_____% Small Cap Growth _____% Money Market
International Equities: Other:
_____% International Balanced _____% ______________________
_____% International Equities _____% ______________________
_____% International Opportunities _____% ______________________
Large Cap Stocks: Fixed Account:
_____% Managed _____% Fixed Account
_____% Growth & Income
_____% Large Cap Value
_____% Equity Index
_____% Large Cap Growth
====================================================================================================================================
11 SUITABILITY (FOR ALL ANNUITY CONTRACTS)
Estimated Household Annual Income Age Federal Tax Bracket % No. of Dependents
-------------- ----------- ------- -----------
Estimated Household Net Worth (excluding Home, Auto, Furnishings)
-------------------------------------------------------------
Occupation/Employer Employer Address
-------------------------------------- ----------------------------------------------------
Are you associated with another NASD Member Firm ? [_] Yes [_] No Firm
----------------------------------------------------
Investment experience: Do you own Mutual Funds [_] Yes [_] No Individual Stocks/Bonds [_] Yes [_] No
Annuities [_] Yes [_] No
CD's/Money Market Accounts [_] Yes [_] No Other [_] Yes [_] No Specify
--------------------------------------
Do you understand that the Variable Annuity accumulated values and annuity payments may increase or decrease depending on
market conditions? [_] Yes [_] No
Investment Objective: [_] Safety of Principal [_] Growth and Income [_] Growth [_] Aggressive Growth
[_] Other (specify)
----------------------------------------
====================================================================================================================================
12 PAYMENT OPTION (FOR IMMEDIATE ANNUITIES)
Option: Payment Interval: [_] Annual [_] Semiannual [_] Quarterly [_] Monthly
-----------------------------
First payment date is one interval from the Date of Issue unless otherwise indicated:
-----------------------------------------
If a joint and survivor option is requested, please provide Joint Annuitant information below:
Name: Date of Birth [_] Male [_] Female Social Security No.
------------------- ------------------ -----------------
Residence: Street City State Zip
------------------------------------- ---------------- --------------- --------------------
====================================================================================================================================
13 SPECIAL REQUEST
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
The following applies to each of the undersigned: To the best of my knowledge and belief, the statements in this application are
true and complete. The annuity contract will take effect as of its date of issue if each annuitant is living on that date and the
required minimum premium has been made. Any check tendered is received subject to collection only. I (we) have discussed the
material information in the prospectus, including charges and expenses, with my representative and I (we) agree with the
recommendation to purchase this product. [_] Check if you wish a statement of additional information.
Signature
------------------------------- ---------------------------------- -------------------------------------------------
Applicant(s) Annuitant, if other than applicant Joint Annuitant, if any (Immediate Annuities only)
Signed at
------------------------------- ---------------------------------- -------------------------------------------------
City and State Date Agent (Reg. Rep.) Signature
- -----------------------------------------------------------------------------------------------------------------------------------
Agent: Is the annuity applied for intended to replace or change any existing annuity or life insurance? [_] Yes [_] No
Agency ORD CODE
-------------------------------------------------------------- ------------------------------
Agent Payroll No. Name GA Contract Code Agent SS#
-------------- -------------------------------- ------------ -----------------
Agent Payroll No. Name GA Contract Code Agent SS#
-------------- -------------------------------- ------------ -----------------
- -----------------------------------------------------------------------------------------------------------------------------------
NASD Principal Approval Date
---------------------------------------------------------- -----------------------------------------
</TABLE>
<PAGE>
INSTRUCTIONS
IMPORTANT INFORMATION TO READ BEFORE MAKING ANNUITANT, OWNER AND BENEFICIARY
DESIGNATIONS IN SECTIONS 3, 4 & 5 OF THE APPLICATION. THESE DESIGNATIONS AFFECT
THE PAYMENT OF ANY APPLICABLE DEATH BENEFIT.
DEFINITIONS
Annuitant--The person on whose life annuity payments will be based. Payments
are determined by the age and sex of the Annuitant, except in certain employee
benefit cases, where payments are determined solely by the age of the
Annuitant.
Owner(s)--The person(s) who has total control of the contract and directs who
will receive the annuity payments.
Beneficiary--The person to whom a distribution is made, as described below, if
the Annuitant or any Owner dies.
DEATH OF ANNUITANT
If the Annuitant (whether or not also the Owner) dies before the contract
annuitizes, the death benefit of the contract is paid to the Beneficiary.***
DEATH OF OWNER WHO IS NOT THE ANNUITANT
In most cases, the designated Owner and Annuitant is the same individual.
However, if you choose to have the Owner and Annuitant not be the same
individual and the Owner dies before the Annuitant and before the contract
annuitizes, the surrender value of the annuity (contract value less surrender
charge) is paid to the beneficiary. This is true even if there are two or more
such Owners and only one of them dies.***
***SPECIAL RULE FOR SPOUSE OF OWNER (Applies to Non-qualified and IRA
Contracts only)
If the surviving spouse of a deceased Owner or Owner/Annuitant is the named
Beneficiary, such surviving spouse will have the option of continuing the
contract in force as the new Owner. If the spouse chooses this option, the
distributions to the Beneficiary that are described above will not be made.
HOW TO DEAL WITH HUSBAND AND WIFE AS JOINT OWNERS
In the case where a husband and wife are joint Owners and the intent is to
have a surviving spouse continue the contact, the designation of Primary
Beneficiary should read: "Survivor of [name], husband, or [name], wife.
Example: OWNERS Husband and Wife
ANNUITANT Husband or Wife
BENEFICIARY Primary-Survivor of Husband or Wife, Contingent--
Any other party (e.g., children)
In the above example, the surviving spouse would have the option of either
continuing the contract in force as sole Owner or receiving a distribution,
regardless of which spouse dies first. If the spouse who dies first is the
-------------------------------------
Annuitant, the distribution would be the death benefit of the annuity. If the
spouse who dies first is not the Annuitant, the distribution would be the
---
surrender value of the annuity. If the husband and wife die simultaneously,
the Contingent Beneficiary would receive the death benefit.
================================================================================
2 DIRECT PREMIUM PAYMENT
Direct premium payment is a service which allows you to automatically add
monthly payments to your John Hancock Annuity. The minimum monthly payment for
the ADD Program is $50, with the exception of the Allegiance Preferred Annuity
which is $200. The withdrawal from your checking account will occur on the
fourth Thursday of every month. If this day is a bank holiday, the withdrawal
will occur on the prior business day. You have the right to change your
monthly payment amount or discontinue the service at any time.
John Hancock will provide you with confirmation of the date the first
withdrawal will occur. You can change your Annuity Direct Premium Payment
amount by calling Customer Access toll free at 1-800-732-5543.
================================================================================
4 OWNER
Joint Owners (Non-Qualified only)
. Name one individual as the owner in box 4.
. Enter the joint owner's name and Social Security Number, in box 13.
. Please have both owners sign as applicants.
Note: Read Death of Owner who is not Annuitant information if Joint Owners.
Contract owned by a minor
. In Box 4, insert "[name of custodian of minor], as custodian for [name of
minor]." Also provide the minor's Social Security Number in box 4.
. Provide the custodian's Social Security Number in box 13.
. Please have the custodian sign as applicant.
================================================================================
5 BENEFICIARY DESIGNATIONS
Wording for common beneficiary designations.
. One beneficiary: John Smith, husband.
. One primary and one secondary beneficiary: John Smith, husband, if
living; otherwise Anne Smith, daughter.
. One primary and unnamed children as secondary beneficiaries: John Smith,
husband, if living; otherwise the children born of the marriage of or
legally adopted by John Smith and Mary Smith.
. Trustee: The ABC Trust effective (date), John Smith as Trustee (if more
than 1 trustee, list all)
<PAGE>
================================================================================
6 FORMS FOR QUALIFIED PLANS
Individual Retirement Annuity (IRA)
12505-Statement of Eligibility
QRP1052-Direct Transfer/Rollover Form
Simplified Employee Pension (SEP) or Salary Reduction (SARSEP)
Without JH Prototype: With JH Prototype (QRP1015):
5305-SEP Copy of Plan Registration Form
5305A-SEP (SARSEP) 12505 (complete section V)
12505 (complete section V)
403(b) Annuity
QRP100 (one per case)
RP1411
QRP1402
QRP1053-403(b) Transfer Form
RP1011 (if employer contributes, new cases only)
Pension, Profit Sharing, 401(k)
Non-JH Prototype: JH Prototype:
QRP1060 Copy of Plan Registration Form
RP1011 RP1011
Deferred Compensation
RP1600 (new cases only)
================================================================================
12 PAYMENT OPTION
Fixed Annuities
Life Income/No Refund*
Payment for life of the annuitant.
Life Income/Cash Refund*
Payments for life of the annuitant. At death, if the deposit exceeds the
total annuity payments made, the difference is refunded to the beneficiary in
lump sum.
Life Income/Installment Refund*
Payment for life of the annuitant. At death, payments are continued to the
beneficiary until total payments equal the amount applied.
Life Income with 5, 10, or 20 Years Guaranteed*
Payments for life with 5, 10, or 20 years guaranteed.
Joint and Last Survivor*
Payments while either annuitant is living.
Joint and 1/2 Survivor*
Payments for the lives of both annuitants. Upon the death of either, 1/2 of
the payment amount continues to the survivor.
Joint and Last Survivor with 5, 10, or 20 Years Guaranteed*
Payments for the lives of both annuitants with 5, 10, or 20 years guaranteed.
Qualified Joint and Survivor*
Payments for the life of participant; at participant's death, 1/2 of the
payment amount continues to the survivor.
Term Certain (10 to 30 Years)**
Payments guaranteed over a fixed period, not to exceed annuitant's age 96.
Amount Certain
Payments of a fixed amount until the amount applied and interest have been
fully paid, not to exceed annuitant's age 96.
Variable Annuities
Life Income/No Refund*
Life Income with 5, 10, or 20 Years Guaranteed*
Joint and Last Survivor*
*Proof of Age (Immediate Annuities only)
Please submit a copy of one of the following:
. Valid Driver's License
. Birth Certificate
. Marriage Certificate
. Valid Passport
. Policy number and date of birth from application in a John Hancock
Insurance Policy
**Shorter periods available with approval
<PAGE>
EXHIBIT 10(B)
[JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY LETTERHEAD]
December 12, 1997
SECURITIES & EXCHANGE COMMISSION
450 FIFTH STREET, NW
WASHINGTON, DC 20549
RE: John Hancock Variable Annuity Account V
File Nos. 33-82646 and 811-5140
Dear Commissioners:
This opinion is being furnished with respect to the filing of Post-Effective
Amendment No. 4 under the Securities Act of 1933 and Post-Effective Amendment
No. 16 under the Investment Company Act of 1940 of the Form N-4 Registration
Statement of John Hancock Variable Annuity Account V 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
ineligible to become effective pursuant to paragraph (b).
I 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
Commission.
Very truly yours,
/s/ SANDRA M. DADALT
Sandra M. DaDalt
Counsel
<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 Information
in Post-Effective Amendment No. 4 to the Registration Statement (Form N-4, No.
33-82646) of John Hancock Variable Annuity Account V.
We also consent to the incorporation of our reports dated February 7, 1997,
with respect to the financial statements included in the Annual Report of the
John Hancock Variable Annuity Account V, and February 14, 1997, with respect to
the financial statements included in the Annual Report of the John Hancock
Mutual Life Insurance Company for the year ended December 31, 1996.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
Boston, Massachusetts
December 12, 1997
