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As filed with the Securities and Exchange Commission on March 6, 1996
Registration No. 33-75610
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM S-6
Post-Effective Amendment No. 2 to
Registration Statement Under
THE SECURITIES ACT OF 1933
----------------------
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
(Exact name of trust)
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
(Name of depositor)
JOHN HANCOCK PLACE
BOSTON, MASSACHUSETTS 02117
(Complete address of depositor's principal executive offices)
--------------------
FRANCIS C. CLEARY, JR., ESQ.
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
JOHN HANCOCK PLACE, BOSTON, 02117
(Name and complete address of agent for service)
--------------------
Copy to:
GARY O. COHEN, ESQ.
Freedman, Levy, Kroll & Simonds
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036
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It is proposed that this filing become effective(check appropriate box)
/_/immediately upon filing pursuant to paragraph (b) of Rule 485
/X/on March 11, 1996 pursuant to paragraph (b) of Rule 485
/_/60 days after filing pursuant to paragraph (a)(1) of Rule 485
/ /on (date) pursuant to paragraph (a)(1) of Rule 485
If appropriate check the following box
/_/this post-effective amendment designates a new effective date for a
previously filed amendment
Pursuant to the provisions of Rule 24f-2, Registrant has registered an
indefinite amount of the securities being offered and filed its Notice for
fiscal year 1995 pursuant to Rule 24f-2 on February 22, 1996.
FCC0133.DOC
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CROSS-REFERENCE TABLE
Form N-8B-2 Item Caption in Prospectus
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1, 2 Cover, The Account and The Series
Funds, JHVLICO and John Hancock
3 Inapplicable
4 Cover, Distribution of Policies
5, 6 The Account and The Series Funds,
State Regulation
7, 8, 9 Inapplicable
10(a), (b), (c), (d), (e) Principal Policy Provisions
10(f) Voting Privileges
10(g), (h) Changes that JHVLICO
Can Make
10(i) Appendix--Other Policy
Provisions, The Account and The
Series Funds
11, 12 Summary, The Account and The Series
Funds, Distribution of Policies
13 Charges and expenses,
Appendix--Illustration of Death
Benefits, Account Values,
Surrender Values and
Accumulated Premiums
14, 15 Summary, Distribution of
Policies, Premiums
16 The Account and The Series Funds
17 Summary, Principal Policy
Provisions
18 The Account and The Series Funds,
Tax Considerations
19 Reports
20 Changes that JHVLICO
Can Make
21 Principal Policy Provisions
22 Principal Policy Provisions
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23 Distribution of Policies
24 Not Applicable
25 JHVLICO and John Hancock
26 Not Applicable
27,28,29,30 JHVLICO and John Hancock, Board
of Directors and Executive
Officers of JHVLICO
31,32,33,34 Not Applicable
35 JHVLICO and John Hancock
37 Not Applicable
38,39,40,41(a) Distribution of Policies,
JHVLICO and John Hancock,
Charges and Expenses
42, 43 Not Applicable
44 The Account and The Series Funds,
Principal Policy Provisions,
Appendix--Illustration of Death
Benefits, Account Values,
Surrender Values and
Accumulated Premiums
45 Not Applicable
46 The Account and The Series Funds,
Principal Policy Provisions,
Appendix--Illustration of Death
Benefits, Account Values,
Surrender Values and
Accumulated Premiums
47 Not Applicable
48,49,50 Not Applicable
51 Principal Policy Provisions,
Appendix--Other Policy
Provisions
52 The Account and The Series Funds,
Changes that JHVLICO Can Make
53,54,55 Not Applicable
56,57,58,59 Not Applicable
FCC0131.DOC
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John Hancock Variable Life
LOGO Insurance Company
(JHVLICO)
SCHEDULED PREMIUM VARIABLE LIFE INSURANCE POLICY
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
LIFE AND ANNUITY SERVICES
P.O. BOX 111
BOSTON, MASSACHUSETTS 02117
TELEPHONE 1-800-REAL LIFE (1-800-732-5543)
FAX 617-572-5410
PROSPECTUS MARCH 11, 1996
The scheduled premium variable life policy ("Policy") described in this
Prospectus can be funded, at the discretion of the Owner, by up to ten of the
variable subaccounts of John Hancock Variable Life Account V ("Account"), by a
fixed subaccount (the "Fixed Account"), or by a combination of the Fixed
Account and up to nine of the variable subaccounts (collectively, "the
subaccounts"). The assets of each variable subaccount will be invested in a
corresponding Portfolio of John Hancock Variable Series Trust I, a mutual fund
advised by John Hancock Mutual Life Insurance Company ("John Hancock") or of M
Fund, Inc., a mutual fund advised by M Financial Investment Advisers, Inc.
(collectively, the "Funds"). The assets of the Fixed Account will be invested
in the general account of John Hancock Variable Life Insurance Company
("JHVLICO").
The prospectuses for the Funds, which are attached to this Prospectus,
describe the investment objectives, policies and risks of investing in the
Portfolios of Variable Series Trust I: Stock, Select Stock, Bond, Money Market,
Managed, Real Estate Equity, International, Special Opportunities and Short-
Term U.S. Government and in the Portfolios of M Fund Inc.: Edinburgh Overseas
Equity, Turner Core Growth and Frontier Capital Appreciation.
Replacing existing insurance with a Policy described in this Prospectus may
not be to your advantage.
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
IT IS NOT VALID UNLESS ATTACHED TO A CURRENT PROSPECTUS FOR THE FUND.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
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Page
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SUMMARY................................................................... 1
JHVLICO AND JOHN HANCOCK.................................................. 6
THE ACCOUNT AND THE SERIES FUNDS.......................................... 6
THE FIXED ACCOUNT......................................................... 9
POLICY PROVISIONS AND BENEFITS............................................ 10
Requirements for Issuance of Policy..................................... 10
Premiums................................................................ 10
Account Value and Surrender Value....................................... 14
Death Benefits.......................................................... 15
Death Benefit Options................................................... 15
Definition of Life Insurance............................................ 16
Excess Value............................................................ 16
Partial Withdrawal of Excess Value...................................... 17
Transfers Among Subaccounts............................................. 17
Telephone Transfers and Policy Loans.................................... 18
Loan Provisions and Indebtedness........................................ 19
Default and Options on Lapse............................................ 20
Exchange Privilege...................................................... 21
CHARGES AND EXPENSES...................................................... 21
Charges Deducted from Premiums.......................................... 21
Sales Charges........................................................... 21
Administrative Surrender Charge......................................... 23
Reduced Charges for Eligible Groups..................................... 23
Charges Deducted from Account Value..................................... 23
DISTRIBUTION OF POLICIES.................................................. 26
TAX CONSIDERATIONS........................................................ 26
Policy Proceeds......................................................... 26
Charge for JHVLICO's Taxes.............................................. 27
Corporate and H.R. 10 Plans............................................. 28
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS OF JHVLICO...................... 28
REPORTS................................................................... 29
VOTING PRIVILEGES......................................................... 29
CHANGES THAT JHVLICO CAN MAKE............................................. 30
STATE REGULATION.......................................................... 30
LEGAL MATTERS............................................................. 30
REGISTRATION STATEMENT.................................................... 30
EXPERTS................................................................... 31
FINANCIAL STATEMENTS...................................................... 31
APPENDIX--OTHER POLICY PROVISIONS......................................... 51
APPENDIX--ILLUSTRATION OF DEATH BENEFITS, ACCOUNT VALUES, SURRENDER VALUES
AND ACCUMULATED PREMIUMS................................................. 53
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS.
<PAGE>
INDEX OF DEFINED WORDS AND PHRASES
Below are listed certain words and phrases used in this Prospectus, together
with identification of the page on which each is defined or explained:
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Account Value....................................................... 14
Administrative Surrender Charge..................................... 23
Attained Age........................................................ 15
Base Policy Premium................................................. 10
Basic Account Value................................................. 16
Contingent Deferred Sales Charge.................................... 22
Corridor Factor..................................................... 15
Current Death Benefit............................................... 15
Death Benefit Factor................................................ 15
Excess Value........................................................ 16
Experience Component................................................ 17
Fixed Account....................................................... 9
Grace Period........................................................ 20
Guaranteed Death Benefit............................................ 15
Guaranteed Maximum Recalculation Premium............................ 11
Home Office......................................................... 6
Indebtedness........................................................ 19
Investment Rule..................................................... 12
Loan Account........................................................ 19
Minimum First Premium............................................... 10
Modal............................................................... 10
Premium Component................................................... 17
Premium Recalculation............................................... 10
Required Premium.................................................... 10
Subaccount.......................................................... Cover
Sum Insured......................................................... 14
Surrender Value..................................................... 14
Valuation Date...................................................... 8
</TABLE>
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SUMMARY
WHAT IS THE VARIABLE LIFE POLICY BEING OFFERED?
John Hancock Variable Life Insurance Company ("JHVLICO") issues variable life
insurance policies. The Policies described in this Prospectus are scheduled
annual premium policies that provide for additional premium flexibilities.
JHVLICO also issues in some states an earlier version of these policies. These
other policies are offered by means of other prospectuses, but use the same
Account and underlying Fund.
The Policies differ from ordinary fixed-benefit life insurance in the way
they work. However, the Policies are the same as fixed-benefit life insurance
in providing lifetime protection against economic loss resulting from the death
of the person insured. The Policies are primarily insurance and not
investments.
The Policies work generally as follows: the Owner periodically gives JHVLICO
enough premium to meet the premium schedule selected. JHVLICO takes from each
premium an amount for taxes, and, from certain premiums, a sales charge.
JHVLICO then places the rest of the premium into as many as ten subaccounts as
directed by the Owner. The assets allocated to each variable subaccount are
invested in shares of the corresponding Portfolio of the Funds. The currently
available Portfolios are identified on the cover of this Prospectus. The assets
allocated to the Fixed Account are invested in the general account of JHVLICO.
During the year, JHVLICO takes charges from each subaccount and credits or
charges each subaccount with its respective investment performance. The
insurance charge, which is deducted from the invested assets attributable to
each Policy ("Account Value"), varies monthly with the then attained age of the
insured and with the amount of insurance provided at the start of each month.
The death benefit may be either level or variable as elected by the Owner.
The level death benefit provides a death benefit that generally remains fixed
in amount and an Account Value that varies daily. Two versions of the level
death benefit are available. The variable death benefit provides for a death
benefit and Account Value that may vary daily. JHVLICO guarantees that the
death benefit will never be less than the Sum Insured at issue, absent a
partial surrender ("Guaranteed Death Benefit").
At issue of the Policy, the Current Death Benefit is generally well below the
Guaranteed Death Benefit. Whether or not it exceeds the Guaranteed Death
Benefit depends upon the timing and amount of the premium payments, the
investment experience, the activity under the Policy with respect to Policy
loans, additional benefits and the like, the charges made against the Policy,
and the attained age of the insured. Once the Current Death Benefit exceeds the
Guaranteed Death Benefit, the Owner bears the investment risk for any amount
above the Guaranteed Death Benefit, and JHVLICO bears the investment risk for
the Guaranteed Death Benefit.
The initial Account Value is the sum of the amounts of the premium that
JHVLICO credits to the Policy, after deduction of the initial charges. The
Account Value increases or decreases daily depending on the investment
experience of the subaccounts to which the amounts are allocated at the
direction of the Owner. JHVLICO does not guarantee a minimum amount of Account
Value. Therefore, the Owner bears the investment risk for that portion of the
Account Value allocated to the variable subaccounts. The Owner may surrender a
Policy at any time while the insured is living. The Surrender Value is the
Account Value less the sum of any Administrative Surrender Charge and any
Contingent Deferred Sales Charge and less any Indebtedness. If the Owner
surrenders in the early policy years, the amount of Surrender Value would be low
(as compared with other investments without sales charges) and, consequently,
the insurance protection provided prior to surrender would be costly.
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The minimum Sum Insured at issue is $50,000. All persons insured must be no
more than 75 years of age at issue and meet certain health and other criteria
called "underwriting standards." The smoking status of the insured is generally
reflected in the premiums required and insurance charges made. If the Sum
Insured at issue is at least $100,000, the insured may be eligible for the
"preferred" class, which has the lowest insurance charges for this Policy.
Policies issued in certain jurisdictions or in connection with certain employee
plans will not directly reflect the sex of the insured in either the premium
rates or the charges and values under the Policy.
WHAT IS THE AMOUNT OF THE PREMIUMS?
Base Policy Premiums are determined as follows: A fixed premium is applicable
which does not vary until the Policy anniversary nearest the insured's 70th
birthday or, if later, the tenth Policy anniversary. On this date, in the
absence of an earlier election by the Owner, the "Base Policy Premium" is
automatically shifted to a new premium schedule and a new fixed annual premium
becomes payable on a scheduled basis for the remaining life of the Policy. The
new Base Policy Premium depends upon the Policy's Guaranteed Death Benefit and
Account Value at the time of the premium recalculation. The Owner may request
that the Premium Recalculation take place on any Policy anniversary prior to
that nearest the insured's 70th birthday or, if later, the tenth Policy
anniversary. The Base Policy Premium depends upon the Sum Insured at issue and
the insured's age, smoking status and sex (unless the Policy is sex-neutral).
Base Policy Premiums are payable annually or more frequently over the insured's
lifetime. Additional premiums are charged for Policies in cases involving extra
mortality risks and for additional insurance benefits. These premiums, along
with the Base Policy Premiums, are the Required Premium. There is a 61-day
grace period in which to make Required Premium payments due after the Minimum
First Premium is received.
Within limits, Required Premiums may be paid in advance and more than the
Required Premiums may be paid. If the Account Value under a Policy is
sufficiently high, a Required Premium payment otherwise scheduled need not be
paid.
WHAT IS JOHN HANCOCK VARIABLE LIFE ACCOUNT V?
The Account is a separate investment account of JHVLICO, operated as a unit
investment trust, which supports benefits payable under the Policies. Each
variable subaccount within the Account is invested in a corresponding Portfolio
of John Hancock Variable Series Trust I or of M Fund, Inc., each of which is a
"series" type of mutual fund. The Portfolios of the Funds which are currently
available are Stock, Select Stock, Bond, Money Market, Managed, Real Estate
Equity, International, Special Opportunities, Short-Term U.S. Government,
Edinburgh Overseas Equity, Turner Core Growth and Frontier Capital
Appreciation.
John Hancock receives a fee from John Hancock Variable Series Trust I for
providing investment management services with respect to the Stock, Bond and
Money Market Portfolios at an annual rate of .25% of the average daily net
assets; with respect to the Select Stock and Managed Portfolios, at an annual
rate of .40% of the first $500 million of the average daily net assets and at
lesser percentages for amounts above $500 million; with respect to the Short-
Term U.S. Government Securities Portfolio, at an annual rate of .50% of the
first $250 million of the average daily net assets and at lesser percentages
for amounts above $250 million; with respect to the Real Estate Equity
Portfolio, at an annual rate of .60% of the first $300 million of the average
daily net assets and at lesser percentages for amounts above $300 million, and
with respect to the International Portfolio, at an annual rate of .60% of the
first $250 million of the average daily net assets and at lesser percentages
for amounts above $250 million; with respect to the Special Opportunities
Portfolio, at an annual rate of .75% of the first $250 million of the average
daily net assets and at lesser percentages for amounts above $250 million.
2
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M Financial Investment Advisers, Inc., receives a fee from M Fund, Inc. for
providing investment management services with respect to the Overseas Equity
Portfolio at an annual rate of 1.05% of the first $10 million of the average
daily net assets and at an annual rate of .90% of the next $15 million of the
average daily net assets and at lesser percentages for amounts above $25
million; with respect to the Core Growth Portfolio at an annual rate of .45% of
the average daily net assets; and with respect to the Capital Appreciation
Portfolio at an annual rate of .90% of the average daily net assets.
For a full description of the Funds, see the prospectuses for the Funds
attached to this Prospectus.
WHAT ARE THE CHARGES MADE BY JHVLICO?
State Premium Tax and Federal DAC Tax. Charges deducted from each premium
payment, currently 2.35% for state premium taxes and 1.25% as a Federal
deferred acquisition cost or "DAC Tax" charge.
Sales Charge Deduction from Premium. A charge equal to no more than 5% of all
premiums received in any Policy year up to the Required Premium for that year.
JHVLICO currently intends to waive this deduction from Required Premiums
received after the first 10 Policy years.
Contingent Deferred Sales Charge. A charge deducted from Account Value if the
Policy lapses or is surrendered during the first 13 Policy years. The amount of
the charge depends upon the year in which lapse or surrender occurs. The charge
will never be higher than 15% of Base Policy Premiums paid to date. The total
charges for sales expenses over the lesser of 20 years or the life expectancy
of the insured will not exceed 9% of the premium payments under the Policy,
assuming all Required Premiums are paid, over that period.
Administrative Surrender Charge. A charge deducted from Account Value if the
Policy lapses or is surrendered in the first 9 Policy years. The amount of the
charge depends upon the year in which lapse or surrender occurs and the amount
of the Policy's Guaranteed Death Benefit at that time. The maximum charge is $5
per $1000 of Guaranteed Death Benefit.
Issue Charge. A $20 charge deducted monthly from Account Value in the first
Policy year.
Maintenance Charge. A charge deducted monthly from Account Value in an amount
equal to no more than $8 per Policy (currently $6.00).
Insurance Charge. A charge based upon the amount for which JHVLICO is at
risk, considering the attained age and risk classification of the insured and
JHVLICO's then current monthly insurance rates (never to exceed rates based on
the 1980 CSO Tables) deducted monthly from Account Value. JHVLICO currently
intends to reduce this charge beginning in the tenth Policy year.
Guaranteed Death Benefit Charge. A charge not to exceed 3c per $1000 of
current Sum Insured (currently 1c per $1000) deducted monthly from that portion
of Account Value not attributable to the Fixed Account allocations.
Charge for Mortality and Expense Risks. A charge made daily at an effective
annual rate of .60% of the assets of the Account.
Charges for Extra Mortality Risks. An additional premium, depending upon the
Sum Insured at issue, age of the insured and the degree of additional mortality
risk, is required if the insured does not qualify for
3
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either the preferred or standard underwriting class. This additional premium is
collected in two ways: up to 8.6% of each year's additional premium is deducted
from premiums when paid and the remainder of each year's additional premium is
deducted monthly from Account Value in equal installments.
Charges for Additional Insurance Benefits. An additional premium is required
if the Owner elects to purchase an additional insurance benefit. This
additional premium is collected in two ways: up to 8.6% of each year's
additional premium is deducted from premiums when paid and the remainder of the
additional premium is deducted monthly from Account Value in equal
installments.
Charge for Partial Withdrawal. A charge of $20 is made at the time of any
partial withdrawal of any Excess Value. No Contingent Deferred Sales Charge or
Administrative Surrender Charge is applicable to any such withdrawals.
See "Charges and Expenses" for a full description of the charges under the
Policy.
IS THERE A CHARGE AGAINST THE ACCOUNT FOR FEDERAL INCOME TAX?
Currently no charge is made against any subaccount for Federal income taxes
but if JHVLICO incurs, or expects to incur, income taxes attributable to any
subaccount or this class of Policies in future years, it reserves the right to
make a charge. JHVLICO expects that it will continue to be taxed as a life
insurance company. (See "Charge for JHVLICO's Taxes".)
WHAT IS THE RELATIONSHIP BETWEEN THE PREMIUM AND THE AMOUNT ALLOCATED TO THE
SUBACCOUNTS?
The initial net premium is allocated by JHVLICO from its general account to
one or more of the subaccounts on the date of issue of the Policy. The initial
net premium is the gross premium less the sales charge deducted from certain
premiums and less the charges deducted from all premiums for state premium
taxes and the Federal DAC tax. These charges also apply to subsequent premium
payments. Net premiums derived from payments received after the issue date are
allocated, generally on the date of receipt, to one or more of the subaccounts
as elected by the Owner.
HOW ARE AMOUNTS ALLOCATED TO EACH SUBACCOUNT?
At issue and subsequently thereafter, the Owner will provide us with the rule
("Investment Rule") we will follow to invest net premiums or other amounts in
any one but not more than ten of the subaccounts. The Owner may change the
Investment Rule under which JHVLICO will allocate amounts to subaccounts. (See
"Investment Rule".)
WHAT COMMISSIONS ARE PAID TO AGENTS?
The Policies are sold through agents who are licensed by state authorities to
sell JHVLICO's insurance policies. Commissions payable to agents are described
under "Distribution of Policies". Sales expenses in any year are not equal to
the deduction for sales expenses, including any Contingent Deferred Sales
Charge, in that year. Rather, total sales expenses under the Policies are
intended to be recovered over the lifetimes of the insureds covered by the
Policies.
WHAT IS THE DEATH BENEFIT?
Three death benefit options are available at the time of application for a
Policy.
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Option 1: Level Death Benefit. A level death benefit equal to the greater of
the Guaranteed Death Benefit or the Current Death Benefit.
Option 2: Variable Death Benefit. A variable death benefit equal to the
greater of the Guaranteed Death Benefit plus any Excess Value or the Current
Death Benefit.
Option 3: Level Death Benefit With Greater Funding. A level death benefit
equal to the greater of the Guaranteed Death Benefit or the Current Death
Benefit. It differs from the Level Death Benefit Option described above in that
a greater amount of premium payments can generally be made by the Owner.
The Current Death Benefit is equal to the Account Value multiplied by a
Corridor Factor or a Death Benefit Factor. In all three Options, when the
Current Death Benefit exceeds the Guaranteed Death Benefit, the death benefit
will increase whenever the Policy's Account Value increases, and decrease
whenever the Account Value decreases, but never below the Guaranteed Death
Benefit. These factors increase the death benefit if necessary to ensure that
the Policy will continue to qualify as life insurance under the Federal tax
law. See "Death Benefits"; "Death Benefit Options"; "Definition of Life
Insurance" and "Tax Considerations".
HOW DOES THE ACCOUNT VALUE OF A POLICY VARY IN RELATION TO THE SUBACCOUNTS'
INVESTMENT EXPERIENCE?
In general, the Account Value for any day equals the Account Value for the
previous day, increased by any net premium placed in the subaccounts for the
Policy, decreased by any charges made against the Account Value, and increased
or decreased by the investment experience of the subaccounts. No minimum
Account Value for the Policy is guaranteed.
WHAT IS THE LOAN PROVISION AND HOW DOES A LOAN AFFECT THE DEATH BENEFIT,
ACCOUNT VALUE AND SURRENDER VALUE?
After the first Policy year the Owner may obtain a Policy loan. Assuming no
Indebtedness (see below), the maximum amount of any loan in Policy years two
and three is 75% of that portion of the Surrender Value attributable to
variable subaccount investments, plus 100% of that portion of the Surrender
Value attributable to Fixed Account investments; thereafter the maximum is 90%
of that portion of Surrender Value attributable to variable subaccount
investments, plus 100% of that portion of the Surrender Value attributable to
Fixed Account investments. Interest charged on any loan will accrue daily at an
annual rate determined by JHVLICO at the start of each Policy Year. This
interest rate will not exceed the greater of (1) the "Published Monthly
Average" (see "Loan Provision and Indebtedness") for the calendar month ending
two months before the calendar month of the Policy anniversary or (2) 5%. In
jurisdictions where a fixed loan rate is applicable, JHVLICO will charge
interest at an effective annual rate of 6%, accrued daily. A loan plus accrued
interest ("Indebtedness") may be repaid at the discretion of the Owner in whole
or in part in accordance with the terms of the Policy.
While a loan is outstanding, the rate of interest credited to the Account
Value because of the loan will usually be different than the net investment
experience of the subaccounts. Therefore, the Account Value, the Surrender
Value and any death benefit above the Guaranteed Death Benefit are permanently
affected by any loan.
IS THERE A SHORT-TERM CANCELLATION RIGHT?
The Owner may surrender a Policy by delivering or mailing it within 45 days
after the date of Part A of the application, or within 10 days after receipt of
the Policy by the Owner, or within 10 days after mailing by
5
<PAGE>
JHVLICO of the Notice of Withdrawal Right, whichever is latest, to JHVLICO's
Home Office, or to the agent or agency office through which it was delivered.
Any premium paid on it will be refunded. If required by state law, the refund
will equal the Account Value at the end of the Valuation Period in which the
Policy is received plus all charges or deductions made against premiums plus an
amount reflecting charges against the subaccounts and the investment management
fee of the Funds.
WHAT INVESTMENT TRANSFERS ARE ALLOWED AN OWNER?
The Owner may transfer the Account Value among the variable subaccounts or
into the Fixed Account at any time. Transfers out of the Fixed Account,
however, are subject to restrictions.
ARE THE BENEFITS UNDER A POLICY SUBJECT TO FEDERAL INCOME TAX?
The benefits under Policies described in this Prospectus are expected to
receive the same tax treatment under the Internal Revenue Code of 1986 as
benefits under traditional fixed-benefit life insurance policies. Thus, death
benefits payable under the Policies will not be included in the beneficiary's
gross income. Also, the Owner is not taxed on interest and gains under the
Policy unless and until values are actually received through withdrawal,
surrender, or other distributions.
Under Federal tax law, distributions from Policies on which premiums greater
than a "7-pay" premium limit (as defined in the law) have been paid, will be
subject to special taxation. See "Premiums--7-Pay Premium Limit" and "Policy
Proceeds" for a discussion of how the "7-pay" premium limit may be exceeded
under a Policy. A distribution on such a Policy (called a "modified endowment")
will be taxed to the extent there is any income (gain) to the Owner and an
additional penalty tax may be imposed on the taxable amount.
JHVLICO AND JOHN HANCOCK
JHVLICO, a stock life insurance company chartered in 1979 under Massachusetts
law, is authorized to transact a life insurance and annuity business in
Massachusetts and all states other than New York. JHVLICO began selling
variable life insurance policies in 1980.
JHVLICO is a wholly-owned subsidiary of John Hancock, a company chartered in
Massachusetts in 1862. Its Home Office is at John Hancock Place, Boston,
Massachusetts 02117. John Hancock's assets are over $45 billion and it has
invested over $380 million in JHVLICO in connection with JHVLICO's organization
and operations. It is anticipated that John Hancock will from time to time make
additional capital contributions to JHVLICO to enable it to meet its reserve
requirements and expenses in connection with its business and John Hancock is
committed to make additional capital contributions if necessary to ensure that
JHVLICO maintains a positive net worth.
THE ACCOUNT AND THE SERIES FUNDS
The Account, a separate account established under Massachusetts law in 1986
meets the definition of "separate account" under the Federal securities laws
and is registered as a unit investment trust under the Investment Company Act
of 1940 ("1940 Act").
The Account's assets are the property of JHVLICO. Each Policy provides that
the portion of the Account's assets equal to the reserves and other liabilities
under the Policy shall not be chargeable with liabilities arising out of any
other business JHVLICO may conduct. In addition to the assets attributable to
6
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variable life policies, the Account's assets include assets derived from
charges made by JHVLICO. From time to time these additional assets may be
transferred in cash by JHVLICO to its general account. Before making any such
transfer, JHVLICO will consider any possible adverse impact the transfer might
have on any subaccount. Additional premiums are charged for Policies where the
insured is classified as a substandard risk and a portion of these premiums is
allocated to the Account.
The Account is registered with the Securities and Exchange Commission (the
"Commission") under the 1940 Act. Such registration does not involve the
supervision by the Commission of the management or policies of the Account,
JHVLICO or John Hancock.
The assets in the subaccounts of the Account are invested in corresponding
Portfolios of the Funds, but the assets of one variable subaccount are not
necessarily legally insulated from liabilities associated with another variable
subaccount. New variable subaccounts may be added or existing variable
subaccounts may be deleted as new Portfolios are added to or deleted from the
Funds and made available to Owners.
THE SERIES FUNDS
Each Fund is a "series" type of mutual fund registered with the Commission
under the 1940 Act as an open-end diversified management investment company.
Each Fund serves as the investment medium for the Account and other unit
investment trust separate accounts established for other variable life
insurance policies and variable annuity contracts. (See the attached Fund
prospectuses for a description of a need to monitor for possible conflicts and
other consequences.) A very brief summary of the investment objectives of each
Portfolio is set forth below.
Stock Portfolio
The investment objective of this Portfolio is to achieve intermediate and
long-term growth of capital, with income as a secondary consideration. This
objective will be pursued by investments principally in common stocks (and in
securities convertible into or with rights to purchase common stocks) of
companies believed by management to offer growth potential over both the
intermediate and long-term.
Select Stock Portfolio
The investment objective of this Portfolio is to achieve above-average
capital appreciation through the ownership of common stocks of companies
believed by management to offer above-average capital appreciation
opportunities. Current income is not an objective of the Portfolio.
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 in a diversified portfolio of freely marketable debt
securities. Total rate of return consists of current income, including interest
and discount accruals, and capital appreciation.
Money Market Portfolio
The investment objective of this Portfolio is to provide maximum current
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.
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<PAGE>
Managed Portfolio
The investment objective of this Portfolio is to achieve maximum long-term
total return consistent with prudent investment risk. Investments will be made
in common stocks, convertibles and other fixed income securities and in money
market instruments.
Real Estate Equity Portfolio
The investment objective of this Portfolio is to provide above-average income
and long-term growth of capital by investment principally in equity securities
of companies in the real estate and related industries.
International Portfolio
The investment objective of this Portfolio is to achieve long-term growth of
capital by investing primarily in foreign equity securities.
Special Opportunities Portfolio
The investment objective of this Portfolio is to achieve long-term capital
appreciation by emphasizing investments in equity securities of issuers in
various economic sectors.
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.
John Hancock acts as the investment manager for the Portfolios described
above and John Hancock's indirectly owned subsidiary, Independence Investment
Associates, Inc., with its principal place of business at 53 State Street,
Boston, Massachusetts, provides sub-investment advice with respect to the
Stock, Select Stock, Managed, Real Estate Equity and Short-Term U.S. Government
Portfolio. Another indirectly owned subsidiary, John Hancock Advisers, Inc.,
located at 101 Huntington Avenue, Boston, Massachusetts, and its subsidiary,
John Hancock Advisers International, Limited, located at 34 Dover Street,
London, England, provide sub-investment advice with respect to International
Portfolio, and John Hancock Advisers, Inc. does likewise with respect to the
Bond and Special Opportunities Portfolios.
Edinburgh Overseas Equity Portfolio
Its investment objective is long-term capital appreciation with reasonable
investment risk through active management and investment in common stock and
common stock equivalents of foreign issuers. Current income, if any, is
incidental.
Turner Core Growth Portfolio
The investment objective of this Portfolio is to seek long-term capital
appreciation through a diversified portfolio of common stocks that show strong
earnings potential with reasonable market prices.
Frontier Capital Appreciation Portfolio
This Portfolio seeks maximum capital appreciation through investment in
common stock of companies of all sizes, with emphasis on stocks of small- to
medium-capitalization companies. Importance is placed on growth and price
appreciation, rather than income.
M Financial Investment Advisers, Inc. acts as the investment manager for the
three Portfolios described above. Edinburgh Fund Managers PLC provides sub-
investment advice to the Edinburgh Overseas Equity Portfolio; Turner Investment
Partners, Inc. provides sub-investment advice to the Turner Core Growth
Portfolio; and Frontier Capital Management Company, Inc. provides sub-
investment advice to the Frontier Capital Appreciation Portfolio.
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<PAGE>
JHVLICO will purchase and redeem Fund shares for the Account at their net
asset value without any sales or redemption charges. Shares of the Fund
represent an interest in one of the Portfolios of the Fund which corresponds to
a variable subaccount of the Account. Any dividend or capital gains
distributions received by the Account will be reinvested in Fund shares at
their net asset value as of the dates paid.
On each Valuation Date, shares of each Portfolio are purchased or redeemed by
John Hancock for each variable subaccount based on, among other things, the
amount of net premiums allocated to the variable subaccount, distributions
reinvested, transfers to, from and among variable subaccounts, all to be
effected as of that date. Such purchases and redemptions are effected at the
net asset value per Fund share for each Portfolio determined on that same
Valuation Date. A Valuation Date is any date on which the New York Stock
Exchange is open for trading and on which the Fund values its shares. A
Valuation Period is that period of time from the beginning of the day following
a Valuation Date to the end of the next following Valuation Date.
A full description of each Fund, its investment objectives, policies and
restrictions, its charges, expenses and all other aspects of its operation is
contained in the attached prospectuses and the statement of additional
information referred to therein, which should be read together with this
Prospectus.
THE FIXED ACCOUNT
An Owner may allocate premiums to the Fixed Account or transfer all or a part
of the Account Value under a Policy to the Fixed Account. The amount so
allocated or transferred will become a part of JHVLICO's general account
assets. JHVLICO's general account consists of assets owned by JHVLICO other
than those in the Account and in other separate accounts that have been or may
be established by JHVLICO. Subject to applicable law, JHVLICO has sole
discretion over the investment of assets of the general account and Owners do
not share in the investment experience of those assets. Instead, JHVLICO
guarantees that the Account Value allocated to the Fixed Account will accrue
interest daily at an effective annual rate of at least 4% without regard to the
actual investment experience of the general account. Consequently, if an Owner
pays the Required Premiums, allocates all net premiums only to the Fixed
Account, and makes no transfers, partial withdrawals, or policy loans, the
minimum amount and duration of the death benefit will be determinable and
guaranteed. Transfers from the Fixed Account are subject to certain limitations
(see "Transfers Among Subaccounts"), and charges will vary somewhat for Account
Value allocated to the Fixed Account. See "Charges Deducted From Account
Value".
The Account Value in the Fixed Account is equal to the portion of the net
premiums allocated to it, plus any amounts transferred to it and interest
credited to it, minus any charges deducted from it or partial withdrawals or
amounts transferred from it. JHVLICO guarantees that interest credited to the
Account Value in the Fixed Account will not be less than an effective annual
rate of 4%. JHVLICO may, in its sole discretion, credit higher rates although
it is not obligated to do so. The Owner assumes the risk that interest credited
will not exceed 4% per year. Upon request and in the annual statement, JHVLICO
will inform Owners of the then-applicable rate.
Because of exemptive and exclusionary provisions, interests in JHVLICO's
general account have not been registered under the Securities Act of 1933 and
the general account has not been registered as an investment company under the
1940 Act. Accordingly, neither the general account nor any interests therein
are subject to the provisions of these Acts, and JHVLICO has been advised that
the staff of the Commission has not reviewed the disclosure in this prospectus
relating to the Fixed Account. Disclosure regarding the Fixed Account may,
however, be subject to certain generally-applicable provisions of the Federal
securities laws relating to accuracy and completeness of statements made in
prospectuses.
9
<PAGE>
POLICY PROVISIONS AND BENEFITS
The discussions which follow under "Death Benefits", "Account Value" and
"Surrender Value" assume that there has been no Policy loan. Benefits and
values are affected if premiums are not paid as scheduled or if a Policy loan
is made.
REQUIREMENTS FOR ISSUANCE OF POLICY
The Policy is generally available with a minimum Sum Insured at issue of
$50,000. All persons insured must be age 75 or under and meet certain health
and other criteria called "underwriting standards". The smoking status of the
insured is reflected in the premiums required and insurance charges made. If
the Sum Insured at issue is at least $100,000, the insured may be eligible for
the "preferred" underwriting class of this Policy, which has the lowest
insurance charges. Policies issued in certain jurisdictions and in connection
with certain employee plans will not directly reflect the sex of the insured in
either the premium rates or the charges or values under the Policy.
Accordingly, the illustrations set forth in this Prospectus may differ for such
Policies.
PREMIUMS
Payment Schedule. Premiums are scheduled and payable during the lifetime of
the insured in accordance with JHVLICO's established rules and rates. Premiums
are payable at JHVLICO's Home Office on or before the due date specified in the
Policy.
Scheduled premiums are payable annually or more frequently, depending upon
the premium schedule mode chosen by the Owner. The scheduled payment date of
any premium is the first day of the applicable Modal period. The "Modal"
periods are the monthly, quarterly, semi-annual or annual intervals at which
the Owner elects to have the scheduled premium payments fall due. The Owner may
change the frequency of scheduled premium payments. No additional charge is
made for premium payments made more frequently than annually.
Minimum Premium Requirements. An amount of Required Premium (see below) is
determined by JHVLICO at the time of issue of the Policy.
A Minimum First Premium must be received by JHVLICO at its Home Office before
the Policy is in full force and effect. The Minimum First Premium is the first
Modal premium. For example, if the Owner has elected a quarterly Modal premium,
one-quarter of the initial Required Premium must be received by JHVLICO at the
time of issue of the Policy.
Premium requirements are met by premium payments on a cumulative basis. For
example, the premium requirement on all scheduled due dates of the first Policy
year would be met if the full Required Premium for the first Policy year were
paid at issue of the Policy, regardless of the mode elected.
Generally, all premiums received, regardless of when received, are counted by
JHVLICO when it determines whether the premium requirement is met on a
scheduled due date. This cumulative amount of premiums received is reduced for
this purpose by amounts withdrawn from the Premium Component of Excess Value.
The premium requirement will also be deemed satisfied on any scheduled due date
if any Excess Value is available on that scheduled due date. See "Excess
Value".
Failure to satisfy a premium requirement on a scheduled due date may cause
the Policy to terminate. See "Default and Options on Lapse".
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<PAGE>
Amount of Required Premium. The Required Premium determined at the start of
each Modal premium period equals an amount for the Sum Insured ("Base Policy
Premium") plus any additional premium because the insured is an extra mortality
risk or because additional insurance benefits have been purchased. The Base
Policy Premium does not change until the Premium Recalculation occurs or the
Policy is partially surrendered.
Premium Recalculation. All Policies are issued on a Modified Schedule as the
basis for the Base Policy Premium. The Base Policy Premium under the Modified
Schedule may increase or decrease upon any Premium Recalculation, whether
automatic or elected earlier by the Owner. A Premium Recalculation must occur
no later than the Policy anniversary nearest the insured's 70th birthday or, if
later, on the tenth Policy anniversary. At the time of the Premium
Recalculation, JHVLICO determines a new Base Policy Premium which is payable
through the remaining lifetime of the insured.
The Premium Recalculation applicable to any Policy may be elected by the
Owner at any time up to the Policy anniversary prior to that nearest the
insured's 70th birthday or, if later, the tenth Policy anniversary. If elected,
the Premium Recalculation will be effected on the Policy anniversary next
following receipt by JHVLICO at its Home Office of satisfactory written notice.
If not elected sooner, the Premium Recalculation will be effected automatically
by JHVLICO as noted above.
The new Base Policy Premium resulting from a Premium Recalculation may be
less than, equal to or greater than the original Base Policy Premium. The new
Base Policy Premium depends on the insured's sex, smoking status, attained age,
the Guaranteed Death Benefit under the Policy and the Account Value on the
Valuation Date immediately preceding the date of the Premium Recalculation.
A table of Guaranteed Maximum Recalculation Premiums for the insured is
determined by JHVLICO and set forth in the Policy. The Guaranteed Maximum
Recalculation Premium increases as the insured's attained age increases. The
new Base Policy Premium will never exceed the Policy's Guaranteed Maximum
Recalculation Premium based on the insured's attained age at the time of the
recalculation.
The Premium Recalculation feature makes it possible for JHVLICO to set a
lower Base Policy Premium (and thus a lower Required Premium) at the time of
Policy issuance than would be possible without this feature. If a purchaser at
any time wishes to "lock in" a Base Policy Premium (and Required Premium) for
the life of the Policy, he or she may request a Premium Recalculation at that
time.
The Guaranteed Maximum Recalculation Premium is lowest for a recalculation at
the time a Policy is issued and increases each year the recalculation is
delayed. Accordingly, by delaying the Premium Recalculation, the Owner assumes
the risk that the Base Policy Premium following the recalculation will be
higher than it would have been had the recalculation been performed at the time
the Policy was issued. The longer the delay and the lower the Policy's Account
Value, the greater this risk. On the other hand, an Owner who defers the
Premium Recalculation has the benefit of a lower Base Policy Premium prior to
the recalculation and a longer period of time to permit the Policy to
accumulate a sufficient amount of Account Value to reduce the possibility or
amount of an increase in the Base Policy Premium at the time of the
recalculation.
If the Policy's Account Value at the time of the Premium Recalculation
exceeds the Policy's Basic Account Value, the Base Policy Premium will be less
following the recalculation than it would have been had the recalculation been
performed at the time of Policy issuance. Otherwise it will be more. As to how
the Basic Account Value is determined, see "Excess Value."
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<PAGE>
As an example, consider the Policy illustrated on page 55, of this Prospectus
(Death Benefit Option 1 in the amount of $100,000, assuming current charge
rates, for a male standard risk non-smoker age 35 at issue). If no Premium
Recalculation is made at Policy issuance, the Base Policy Premium for this
Policy would be $900 until such time as the Premium Recalculation is made.
Assuming such premium is paid annually until the Premium Recalculation, and
assuming constant gross annual investment returns at the rates set forth below,
the following table illustrates what the Base Policy Premium would be following
a recalculation on the dates shown.
<TABLE>
<CAPTION>
Base Policy Premium Following
Policy Anniversary of Recalculation Assuming Hypothetical Gross
Premium Recalculation Annual Rate of Return of:
- --------------------- ------------------------------------------
0% 6% 12%
------------- ------------- --------------
<S> <C> <C> <C>
0(Issue Date)........................ $1,414.00 $1,414.00 $1,414.00
5.................................... $1,607.99 $1,581.92 $1,551.41
10.................................... $1,900.30 $1,791.31 $1,635.15
15.................................... $2,334.72 $2,058.15 $1,566.76
20.................................... $3,008.11 $2,433.77 $1,151.92
25.................................... $4,077.27 $2,998.48 $0.00
30.................................... $5,845.15 $3,914.46 $0.00
35*................................... $8,404.00 $5,561.76 $0.00
</TABLE>
- --------
* Mandatory Premium Recalculation if Owner does not choose earlier date.
A charge will be made if the new Base Policy Premium is below the Guaranteed
Maximum Recalculation Premium for the insured's age at issue of the Policy. The
charge will not exceed 3% (currently 1-1/2%) of the amount by which the
Policy's Account Value exceeds its Basic Account Value at the time of the
Premium Recalculation. See "Guaranteed Minimum Death Benefit Charges." This
charge compensates JHVLICO for the risk inherent in "locking in" the Base
Policy Premium at a lower rate than would have been charged if the Premium
Recalculation had been performed at the time of the Policy issuance.
The amount of any Account Value that is considered Excess Value under a
Policy may increase or decrease as a result of a Premium Recalculation. See
"Excess Value."
Billing, Allocation of Premium Payments (Investment Rule). The Owner may at
any time elect to be billed by JHVLICO for an amount of premium greater than
the Required Premium otherwise payable. The Owner may also elect to be billed
for premiums on an annual, semi-annual or quarterly basis. An automatic check-
writing program may be available to an Owner interested in making monthly
premium payments. All premiums are payable at JHVLICO's Home Office.
Any premium payment will be processed by JHVLICO as of the end of the
Valuation Period in which it is received, unless one of the four exceptions
noted below is applicable. The net premium begins to earn a return in the
Account or Fixed Account, as the case may be, at the close of business on the
date as of which it is processed. Each premium payment will be reduced by the
state premium tax charge, the Federal DAC tax charge and the sales charge
deducted from certain premiums. See "Charges and Expenses". The remainder is
the net premium.
The Owner at the time of application must elect an Investment Rule which will
allocate net premiums and any credits to any one or more of the ten
subaccounts. The Owner must select allocation percentages in whole numbers, the
minimum allocation to a subaccount may not be less than 1 %, and the total
allocated must equal 100%. The Owner may thereafter change the Investment Rule
prospectively at any time. The
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<PAGE>
change will be effective as to any net premiums and credits applied after
receipt at JHVLICO's Home Office of notice satisfactory to JHVLICO. If the
Owner requests a change inconsistent with the transfer provisions, the portion
of the request inconsistent with the transfer provisions will not be effective.
There are four exceptions to the normal practice of processing a premium
payment as of the end of the Valuation Period in which it is received:
(1) A payment received prior to a Policy's date of issue will be
processed as if received on the Valuation Date immediately
preceding the date of issue.
(2) A payment made during a Policy's grace period will be processed as
of the scheduled due date to the extent it represents the amount of
Required Premium in default; any excess will be processed as of the
date of receipt.
(3) If the Minimum First Premium is not received prior to the date of
issue, each payment received thereafter will be processed as if
received on the Valuation Date immediately preceding the issue date
until all of the Minimum First Premium is received.
(4) That portion of any premium that JHVLICO delays accepting as
described under "Other Premium Limitations" or "7-Pay Premium
Limit" below, will be processed as of the end of the Valuation
Period in which that amount is accepted.
Flexibility as to Premium Payments. The Owner may pay more than the Required
Premium during a Policy year and may ask to be billed for an amount greater
than any Required Premium. The Owner may also pay amounts in addition to any
billed amount. JHVLICO reserves the right to limit premium payments above the
amount of the cumulative Required Premiums due on the Policy. At the time of
Policy issuance, JHVLICO will determine whether the planned premium billing
schedule will exceed the 7-pay limit discussed below. If so, JHVLICO will not
issue the Policy unless the Owner signs a form acknowledging that fact.
The ability to pay more than the Required Premium provides the Owner with
considerable payment flexibility in meeting the premium requirements of the
Policy. Consider a Policy with a $1,000 Required Premium and where the Owner
pays $1,250 in each of the first eight Policy years. If none of the additional
premium of $2,000 is withdrawn, the Policy will remain in force for at least
ten years without any further premium payments. During each of these ten years,
the premium received ($1,250 a year for eight years) at least equals the
aggregate Required Premiums ($1,000 a year for 10 years) on the scheduled
payment dates. In other words, the payment of more than the Required Premium in
a year can be relied upon to satisfy the Required Premium requirements in later
years.
7-Pay Premium Limit. Federal tax law modifies the tax treatment of certain
Policy distributions such as loans, surrenders, partial surrenders, and
withdrawals. The application of this modified treatment to any Owner depends
upon whether premiums have been paid at any time during the first 7 Policy
years that exceed a "7-pay" premium as defined in the law. The "7-pay" premium
is greater than the Required Premium but is generally less than the amount an
Owner may choose to pay and JHVLICO will accept. The 7-pay limit is the total
of net level premiums that would have been payable at any time for the Policy
to be fully paid-up after the payment of 7 level annual premiums. If the total
premiums paid exceed the 7-pay limit, the Policy will be treated as a "modified
endowment" which means that the Owner will be subject to tax to the extent of
any income (gain) on any distributions made from the Policy. A material change
in the Policy will result in a new 7-pay limit and test period. A reduction in
the Policy's benefits within the 7-year period following issuance of, or
reinstatement or other material change in, the Policy may also result in the
application of the modified endowment treatment. See "Policy Proceeds" under
"Tax Considerations." If JHVLICO receives
13
<PAGE>
any premium payment that will cause a Policy to become a modified endowment,
the excess portion of that premium payment will not be accepted unless the
Owner signs an acknowledgement of that fact. When it identifies such excess
premium, JHVLICO sends the Owner immediate notice and refunds the excess
premium if it has not received notice of the acknowledgment by the time the
premium payment check has had a reasonable time to clear the banking system,
but in no case longer than two weeks.
Other Premium Limitations. Federal tax law requires a minimum death benefit
in relation to Account Value. See "Definition of Life Insurance". The death
benefit of the Policy will be increased if necessary to ensure that the Policy
will continue to satisfy this requirement. If the payment of a given premium
will cause the Policy Account Value to increase to such an extent that an
increase in death benefit is necessary to satisfy federal tax law requirements,
JHVLICO has the right to not accept the excess portion of that premium payment,
or to require evidence of insurability before that portion is accepted. In no
event, however, will JHVLICO refuse to accept any Required Premium. Also, if an
Owner has elected to use the "guideline premium and cash value corridor" test
for Federal income tax purposes, JHVLICO will not accept the portion of any
premium that exceeds the maximum amount prescribed under that test.
ACCOUNT VALUE AND SURRENDER VALUE
Amount of Account Value. The Account Value increases or decreases depending
upon a number of factors, such as the applicable subaccount's investment
experience, the proportion of the Account Value invested in each subaccount and
the interest credited to any Loan Account established upon the making of a
Policy loan. In general the Account Value for any day equals the Account Value
for the previous day, decreased by charges against the Account Value, increased
or decreased by the investment experience of the subaccounts and increased by
net premiums received. No minimum amount of Account Value is guaranteed.
A Policy loan will not affect the total amount of Account Value at the time
the loan is made but will result in a different rate of return being credited
to the Loan Account portion of the Account Value.
Amount of Surrender Value. The Surrender Value will be the Account Value less
the sum of any Administrative Surrender Charge, any Contingent Deferred Sales
Charge and any Indebtedness.
The Contingent Deferred Sales Charge is deducted from the Account Value upon
surrender of the Policy during the first thirteen Policy years after issue. The
amount of this charge is set forth in a schedule under "Sales Charges". The
total charges for sales expenses, including the Contingent Deferred Sales
Charge, over the lesser of 20 years or the life expectancy of the insured, will
not exceed 9% of the payments under the Policy, assuming that all Required
Premiums are paid, over that period.
When Policy may be Surrendered. A Policy may be surrendered for its Surrender
Value at any time while the insured is living and the Policy is not in a grace
period. Surrender takes effect and the Surrender Value is determined as of the
end of the Valuation Period in which occurs the later of receipt at JHVLICO's
Home Office of a signed request and the surrendered Policy.
When Part of Policy may be Surrendered. A Policy may be partially surrendered
upon submission of a written request satisfactory to JHVLICO in accordance with
its rules. Currently, the Policy after partial surrender must have a Sum
Insured at least as large as the minimum amount for which JHVLICO would issue a
Policy on the life of the insured. The Guaranteed Death Benefit and Required
Premium for the Policy will be adjusted to reflect the new Sum Insured. A pro-
rata portion of the Account Value will be paid to the Owner and a pro-rata
portion of any Contingent Deferred Sales Charge and any Administrative
Surrender
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<PAGE>
Charge will be deducted. A possible alternative to the partial surrender of a
Policy is the withdrawal of Excess Value. See "Excess Value".
A surrender or partial surrender may have significant tax consequences. See
"Tax Considerations".
DEATH BENEFITS
The death benefit proceeds are payable upon the death of the insured while
the Policy is in effect. The proceeds will equal the death benefit of the
Policy, plus any additional rider benefits then due, less any Indebtedness. The
death benefit payable under Death Benefit Options 1 and 3, described below, is
the greater of the Guaranteed Death Benefit or the Current Death Benefit. The
death benefit payable under Death Benefit Option 2 described below is the
greater of the Guaranteed Death Benefit, increased by any Excess Value (see
"Excess Value") or the Current Death Benefit.
Guaranteed Death Benefit. The Guaranteed Death Benefit at issue of the Policy
is the same as the Sum Insured at issue shown in the Policy. Thereafter the
Guaranteed Death Benefit may be reduced by a partial surrender on request of
the Owner. JHVLICO guarantees that, regardless of the investment experience of
the subaccounts, the death benefit will never be less than the Guaranteed Death
Benefit.
Current Death Benefit. The Current Death Benefit on any date is the Account
Value at the end of the Valuation Period containing that date times either the
Death Benefit Factor or Corridor Factor. The Factor used depends upon the Death
Benefit Option selected by the Owner (see below). The Death Benefit Factor
depends upon the sex, smoking status and the then attained age of the insured.
The Death Benefit Factor decreases slightly from year to year as the attained
age of the insured increases. A complete list of Death Benefit Factors is set
forth in the Policy. The Corridor Factor depends upon the then attained age of
the insured. The Corridor Factor decreases slightly (or remains the same at
older and younger ages) from year to year as the attained age of the insured
increases. A complete list of Corridor Factors is set forth in the Policy. See
"Definition of Life Insurance". The Current Death Benefit is variable; it
increases as the Account Value increases and decreases as the Account Value
decreases.
DEATH BENEFIT OPTIONS
At the time of application for a Policy, the Owner must select from among
three death benefit options. After issue of the Policy the Owner may change the
selection from Option 1 to Option 2 or vice versa, subject to such evidence of
insurability as JHVLICO may require. The three options are:
Option 1: Level Death Benefit: Under this option, the death benefit will
equal the Guaranteed Death Benefit, unless the Account Value multiplied by the
Corridor Factor produces a higher death benefit. The Policy will be subject
under this option to the "guideline premium and cash value corridor" test as
defined by Internal Revenue Code ("Code") Section 7702. This option will offer
the best opportunity for the Account Value under a Policy to increase without
increasing the death benefit as quickly as it might under the other options.
When the Current Death Benefit exceeds the Guaranteed Death Benefit, the death
benefit will increase whenever there is an increase in the Policy's Account
Value and will decrease whenever there is a decrease in the Account Value, but
never below the Guaranteed Death Benefit.
Option 2: Variable Death Benefit: Under this option, the death benefit will
equal the Guaranteed Death Benefit, plus any Excess Value, unless the Account
Value multiplied by the Corridor Factor produces a higher death benefit. Under
this option, the Policy will be subject to the "guideline premium and cash
value corridor" test as defined by Code Section 7702. This option will offer
the best opportunity for the Owner who would
15
<PAGE>
like to have an increasing death benefit as early as possible. When the Current
Death Benefit exceeds the Guaranteed Death Benefit plus Excess Value (see
below), the death benefit will increase whenever there is an increase in the
Policy's Account Value and will decrease whenever there is a decrease in the
Account Value, but never below the Guaranteed Death Benefit.
Option 3: Level Death Benefit With Greater Funding: Under this option, the
death benefit will equal the Guaranteed Death Benefit, unless the Account
Value, multiplied by the Death Benefit Factor, gives a higher death benefit.
Under this option, the Policy will be subject to the "cash value accumulation"
test as defined by Code Section 7702. This option will offer the best
opportunity for the Owner who is looking for an increasing death benefit in
later Policy years and/or would like to fund the policy at the "7 pay" limit
for the full 7 years. When the Current Death Benefit exceeds the Guaranteed
Death Benefit, the death benefit will increase whenever there is an increase in
the Policy's Account Value and will decrease whenever there is a decrease in
the Account Value, but never below the Guaranteed Death Benefit.
DEFINITION OF LIFE INSURANCE
Federal tax law requires a minimum death benefit in relation to cash value
for a Policy to qualify as life insurance. The death benefit of a Policy will
be increased if necessary to ensure that the Policy will continue to qualify as
life insurance. One of two tests under current Federal tax law can be used to
determine if a Policy complies with the definition of life insurance in Section
7702 of the Code.
The "guideline premium and cash value corridor" test limits the amount of
premiums payable under a Policy to a certain amount for an insured of a
particular age and sex. The test also applies a prescribed "Corridor Factor" to
determine a minimum ratio of death benefit to Account Value.
The "cash value accumulation test" also limits the amount of premiums payable
under a Policy to a prescribed amount, using a minimum ratio of death benefit
to a Policy's Account Value, but employs as a standard a "net single premium"
computed in compliance with the Code. If the Account Value under a Policy is at
any time greater than the net single premium at the insured's age and sex for
the proposed death benefit, the death benefit will be increased automatically
by multiplying the Account Value by a "Death Benefit Factor" computed in
compliance with the Code.
EXCESS VALUE
As of the last Valuation Date in each Policy month, the Account Value of the
Policy will be compared against an amount (the Basic Account Value described
below) to determine if any "Excess Value" exists under the Policy. Any Excess
Value may be withdrawn (as described below) or, if the Variable Death Benefit
Option has been elected, will be used in computing the amount of variable death
benefit. Excess Value is any amount of Account Value greater than Basic Account
Value.
The annual account statement that JHVLICO sends to each Owner will specify
the amount of any excess value at the end of the reporting period. Owners who
wish this information at any other time may contact their sales representative
or telephone JHVLICO at 1-800-732-5543.
Generally, the Basic Account Value at any time is what the Policy's Account
Value would have been at that time if level annual premiums (and no additional
premiums) had been paid in the amount of the Maximum Guaranteed Recalculation
Premium at issue and earned a constant net return of 4% per annum and if the
cost of insurance charges had been deducted at the maximum rates set forth in
the Policy, and no
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other charges. The Maximum Guaranteed Recalculation Premium at issue is
described under "Premiums--Premium Recalculation" and its amount is specified
in each Policy. Notwithstanding the foregoing, if there is a Policy loan
outstanding, the Basic Account Value will not be less than 110% of Policy
Indebtedness. Also, in all cases where optional rider benefits have been
selected, or the insured person is in a substandard risk category, an
additional amount will be added in computing the Basic Account Value to cover
these items through the end of the then-current Policy year.
The Basic Account Value generally increases as the attained age of the
insured increases. Basic Account Value can also be thought of as what the
guaranteed cash value would be under an otherwise comparable non-variable whole
life policy. It is the amount deemed necessary to support the Policy's benefits
at any time based on accepted actuarial methods.
Excess Value may arise from two sources. The Premium Component is Excess
Value up to the amount by which the cumulative premiums paid (excluding amounts
from this component previously withdrawn) exceed the cumulative sum of Required
Premiums. The Premium Component may be zero. The Experience Component is any
amount of Excess Value above the Premium Component and arises out of favorable
investment experience or lower than maximum insurance and expense charges.
PARTIAL WITHDRAWAL OF EXCESS VALUE
Under JHVLICO's current administrative rules, an Owner may withdraw Excess
Value from the Policy on or after the first Policy anniversary. This privilege,
which reduces the Account Value by the amount of the withdrawal and the
associated charge, may be exercised only once in a Policy year and will be
effective as of the end of the Valuation Period in which JHVLICO receives
written notice satisfactory to it at its Home Office. The minimum amount that
may be withdrawn is $1,000. Unless the Current Death Benefit exceeds the
Guaranteed Death Benefit, a partial withdrawal will not affect the death
benefit payable. A charge of $20 is made against Account Value for each partial
withdrawal. A withdrawal will reduce the death benefit under the Variable Death
Benefit Option by the amount withdrawn and the associated charge. A withdrawal
may have significant tax consequences. See "Tax Considerations".
An amount equal to the Excess Value withdrawn will be removed from each
subaccount in the same proportion as the Account Value is then allocated among
the subaccounts. A partial withdrawal is not a loan and, once made, cannot be
repaid. No Contingent Deferred Sales Charge or Administrative Surrender Charge
is deducted upon a partial withdrawal. Amounts withdrawn may reduce the
cumulative amount of premiums received for purposes of determining whether the
premium requirements of the Policy have been met. Moreover, because the Account
Value is reduced by a partial withdrawal, the premium that results from a
Premium Recalculation will be higher because of the partial withdrawal.
TRANSFERS AMONG SUBACCOUNTS
The Owner may reallocate the amounts held for the Policy in the subaccounts
with no charge. The Owner may either (1) use percentages (in whole numbers) to
be transferred among subaccounts or (2) designate the dollar amount of funds to
be transferred among subaccounts. The reallocation must be such that the total
in the subaccounts after reallocation equals 100% of Account Value. Transfers
out of a variable subaccount will be effective at the end of the Valuation
Period in which JHVLICO receives at its Home Office notice satisfactory to
JHVLICO.
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Transfers out of the Fixed Account to the variable subaccounts are permitted
only once each Policy year and only during the 31-day period beginning on the
Policy anniversary. Transfers out of the Fixed Account may be requested from
60 days before to 30 days after the Policy anniversary. If received on or
before the Policy anniversary, requests for transfer out of the Fixed Account
will be processed on the Policy anniversary (or the next Valuation Date if the
Policy anniversary does not occur on a Valuation Date); if received after the
Policy anniversary, they will be processed at the end of the Valuation Period
in which JHVLICO receives the request at its Home Office. (JHVLICO reserves
the right to defer such Fixed Account transfers for six months.) Transfers
among variable subaccounts and transfers into the Fixed Account may be
requested at any time. A maximum of 20% of Fixed Account assets or, if
greater, $500 may be transferred out of the Fixed Account in any Policy year.
Currently, there is no minimum amount limit on transfers out of the Fixed
Account, but JHVLICO reserves the right to impose such a limit in the future.
If an Owner requests a transfer out of the Fixed Account 61 days or more prior
to the Policy anniversary, that portion of the reallocation will not be
processed and the Owner's confirmation statement will not reflect a transfer
out of the Fixed Account as to such request.
If the Owner requests a reallocation which would result in amounts being
held in more than ten subaccounts, such reallocation will not be effective and
a revised reallocation may be chosen in order that amounts will be reallocated
to no more than ten subaccounts. No transfers may be made while the Policy is
in a grace period.
Dollar Cost Averaging. A scheduled monthly transfer option is available to
Owners seeking to take advantage of "dollar cost averaging". This option
provides for the automatic transfer on a monthly basis of a dollar amount
chosen by the Owner from the Money Market Subaccount to any of the other
variable subaccounts.
Eligibility for this option is limited to an Owner who has $2500 or more in
the Money Market Subaccount on the day the transfer is scheduled to begin.
Scheduled transfers may be made to any one or more but not more than nine of
any other variable subaccounts but the amount to be transferred monthly to any
subaccount must be $100 or more.
Once the election is received in form satisfactory to JHVLICO at its Home
Office, transfers will begin on approximately the start of the second month
following its receipt. To make an election or if you have any questions with
respect to this provision, call 1-800-732-5543.
Once elected, the scheduled monthly transfer option will remain in effect
until the receipt of written notice from the Owner by JHVLICO at its Home
Office of cancellation of the option, the election of a continued insurance
option on lapse or receipt of notice of the death of the insured, whichever
first occurs.
Telephone Transfers and Policy Loans. Once a written authorization is
completed by the Owner, the Owner may request a transfer or policy loan by
telephoning 1-800-732-5543. During periods of heavy telephone usage,
implementing a telephone transfer or policy loan may be difficult. If an Owner
is unable to reach JHVLICO via the above number, the Owner should send a
written request via fax to 1-800-621-0448. (Any requests via fax are
considered telephone requests and are bound by the conditions in the Owner's
signed telephone authorization form.) Any fax request should include the
Owner's name, daytime telephone number, Policy number and, in the case of
transfers, the names of the subaccounts from which and to which money will be
transferred. The right to discontinue telephone transactions at any time
without notice to Owners is specifically reserved.
An Owner who authorizes telephone transactions will be liable for any loss,
expense or cost arising out of any unauthorized or fraudulent telephone
transaction instructions which JHVLICO reasonably believes to be genuine.
JHVLICO employs procedures which include requiring personal identification,
tape recording calls, and providing written confirmation to the Owner. If
JHVLICO does not employ reasonable procedures to confirm
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that instructions communicated by telephone are genuine, it may be liable for
any loss due to unauthorized or fraudulent instructions.
LOAN PROVISIONS AND INDEBTEDNESS
Loan Provision. Loans may be made at any time a Loan Value is available after
the first Policy year. The Owner may borrow money, assigning the Policy as the
only security for the loan, by completion of a form satisfactory to JHVLICO or,
if the telephone transaction authorization form has been completed, by
telephone. Assuming no outstanding Indebtedness in Policy years two and three,
the Loan Value will be 75% of that portion of the Surrender Value attributable
to the variable subaccount investments, plus 100% of that portion of the
Surrender Value attributable to Fixed Account investments and, in later Policy
years, 90% of that portion of the Surrender Value attributable to variable
subaccount investments, plus 100% of that portion of the Surrender Value
attributable to Fixed Account investments. Interest charged on any loan will
accrue daily at an annual rate determined by JHVLICO at the start of each
Policy Year. This interest rate will not exceed the greater of (1) the
"Published Monthly Average" (defined below) for the calendar month ending 2
months before the calendar month of the Policy anniversary or (2) 5%. In
jurisdictions where a fixed loan rate is applicable, JHVLICO will charge
interest at an effective annual rate of 6%, accrued daily. The "Published
Monthly Average" means Moody's Corporate Bond Yield Average--Monthly Average
Corporates, as published by Moody's Investors Service, Inc., or if the average
is no longer published, a substantially similar average established by the
insurance regulator where the Policy is issued.
The amount of any outstanding loan plus accrued interest is called the
"Indebtedness". Except when used to pay premiums, a loan will not be permitted
unless it is at least $300. The Owner may repay all or a portion of any
Indebtedness while the insured is living and the Policy is not in a grace
period. When a loan is made, an amount equal to the loan proceeds will be
transferred out of the Account and the Fixed Account, as applicable. This
amount is allocated to the Loan Account, a portion of JHVLICO's general
account. Each subaccount will be reduced in the same proportion as the Account
Value is then allocated among the subaccounts. Upon each loan repayment, the
same proportionate amount of the entire loan as was borrowed from the Fixed
Account will be repaid to the Fixed Account. The remainder of the loan
repayment will be allocated to the appropriate subaccounts as stipulated in the
current Investment Rule. For example, if the entire loan outstanding is $3000
of which $1000 was borrrowed from the Fixed Account, then upon a repayment of
$1500, $500 would be allocated to the Fixed Account and the remaining $1000
would be allocated to the appropriate subaccounts as stipulated in the current
Investment Rule. If an Owner wishes any payment to constitute a loan repayment
(rather than a premium payment), the Owner must so specify.
Effect of Loan and Indebtedness. A loan does not directly affect the amount
of the Required Premium. While the Indebtedness is outstanding, that portion of
the Account Value that is in the Loan Account is credited interest at a rate
that is 1% less than the loan interest rate for the first 20 Policy years and,
thereafter, .5% less than the loan interest rate. This rate will usually be
different than the net return for the subaccounts. Since the Loan Account and
the remaining portion of the Account Value will generally have different rates
of investment return, any death benefit above the Guaranteed Death Benefit, the
Account Value, and the Surrender Value are permanently affected by any
Indebtedness, whether or not repaid in whole or in part. The amount of any
Indebtedness is subtracted from the amount otherwise payable when the Policy
proceeds become payable.
Whenever the Indebtedness equals or exceeds the Surrender Value, the Policy
terminates 31 days after notice has been mailed by JHVLICO to the Owner and any
assignee of record at their last known addresses, unless a repayment of the
excess Indebtedness is made within that period.
If a Policy is a modified endowment at the time a loan is made, that loan may
have significant tax consequences. See "Tax Considerations".
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DEFAULT AND OPTIONS ON LAPSE
Premium Grace Period, Default and Lapse. Any Required Premium, unless paid in
advance, is in default if not paid on or before its Modal scheduled payment
date, but the Policy provides a 61-day grace period for the payment of each
such amount. (This grace period does not apply to the receipt of the Minimum
First Premium.) The insurance continues in full force during the grace period
but, if the insured dies during the grace period, the amount in default is
deducted from the death benefit otherwise payable. The premium requirement may
also be satisfied and, thus, default may be avoided, if any Excess Value is
available on the scheduled due date.
Written notice will be furnished to the Owner at his or her last known
address, at least 31 days prior to the end of the grace period, specifying the
minimum amount which must be paid to continue the Policy in force on a premium
paying basis after the end of the grace period. If a payment at least equal to
the amount in default is not received by the end of the grace period, the
Policy will lapse. If payment by the Owner of an amount at least equal to the
amount in default is received prior to the end of the grace period, the Policy
will no longer be in default. The portion of the payment equal to the amount in
default will be processed as if it had been received the day it was due; any
excess payment will be processed as of the end of the Valuation Period in which
it is received. See "Premium Payments".
Options on Lapse. If a Policy lapses, the Surrender Value on the date of
lapse is applied under one of the following options for continued insurance not
requiring further payment of premiums. These options provide for Variable or
Fixed Paid-Up Insurance or Fixed Extended Term Insurance on the life of the
insured commencing on the date of lapse.
Both the Variable and Fixed Paid-Up Insurance options provide an amount of
paid-up whole life insurance, determined in accordance with the Policy, which
the Surrender Value will purchase. The amount of Variable Paid-Up Insurance may
then increase or decrease, subject to any guarantee, in accordance with the
investment experience of the subaccounts. The Fixed Paid-Up Insurance option
provides a fixed and level amount of insurance. The Fixed Extended Term
Insurance option provides a fixed amount of insurance determined in accordance
with the Policy, with the insurance coverage continuing for as long a period as
the available Policy values will purchase.
If no option has been elected before the end of the grace period, the Fixed
Extended Term Insurance option automatically applies unless the amount of Fixed
Paid-Up Insurance would equal or exceed the amount of Fixed Extended Term
Insurance or unless the insured is a substandard risk, in either of which cases
Fixed Paid-Up Insurance is provided.
The Variable Paid-Up Insurance option is not available unless the initial
amount of Variable Paid-Up Insurance is at least $5,000.
A Policy continued under any option may be surrendered for its Surrender
Value while the insured is living. Loans may be available under the Variable
and Fixed Paid-Up Insurance options.
Reinstatement. The Policy may be reinstated in accordance with its terms
(including evidence of insurability satisfactory to JHVLICO and payment of the
required premium and charges) within 3 years after the beginning of the grace
period unless the Surrender Value has been paid or otherwise exhausted or the
period of any Fixed Extended Term Insurance has expired.
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EXCHANGE PRIVILEGE
The Owner may transfer the entire Account Value under the Policy to the Fixed
Account at any time, creating a non-variable Policy. The exchange will be
effective at the end of the Valuation Period in which JHVLICO receives at its
Home Office notice of the transfer satisfactory to JHVLICO.
-------------------------
The foregoing description of Policy provisions is qualified by reference to
the specimen Policy which has been filed as an exhibit to the Registration
Statement.
CHARGES AND EXPENSES
CHARGES DEDUCTED FROM PREMIUMS
In addition to part of the sales charge (see "Sales Charges" below), the
following charges are deducted from premiums:
State Premium Tax Charge. A charge equal to 2.35% of each premium payment
will be deducted from each premium payment. Premium taxes vary from state to
state, ranging from zero to 4% currently. A charge of 2.35% is made, regardless
of the premium tax imposed by any state. The 2.35% rate is the average rate
expected to be paid on premiums received in all states over the lifetimes of
the insureds covered by the Policies.
Federal DAC Tax Charge. A charge currently equal to 1.25% of each premium
payment will be deducted from each premium payment to cover the estimated cost
to JHVLICO of the Federal income tax treatment of the Policies' deferred
acquisition costs--commonly referred to as the "DAC Tax". JHVLICO has
determined that this charge is reasonable in relation to JHVLICO's increased
Federal income tax burden under the Internal Revenue Code resulting from the
receipt of premiums. JHVLICO will not increase this charge under outstanding
Policies, but reserves the right, subject to any required regulatory approval,
to change this charge for Policies not yet issued in order to correspond with
changes in the Federal income tax treatment of the Policies' deferred
acquisition costs.
SALES CHARGES
Charges are made to compensate JHVLICO for the cost of selling the Policy.
This cost includes agents' commissions, advertising, and the printing of the
prospectuses and sales literature. The amount of the charge in any Policy year
cannot be specifically related to sales expenses for that year. JHVLICO expects
to recover its total sales expenses over the period the Policies are in effect.
To the extent that sales charges are insufficient to cover total sales
expenses, the sales expenses may be recovered from other sources, including
gains from the charge for mortality and expense risks and other gains with
respect to the Policies, or from JHVLICO's general assets. See "Distribution of
Policies."
From Premiums. Part of the sales charge is deducted from premiums received.
This amount is 5% of the premiums received in any Policy year that do not
exceed that year's total Required Premium. JHVLICO currently intends to make
this deduction only in the first 10 Policy years, but this is not contractually
guaranteed and the right is reserved to continue deductions over a longer
period. Because the Policies were first offered for sale in 1994, no Policies
have yet been outstanding for more than 10 years.
JHVLICO will waive a portion of the sales charge (it is currently waiving a
portion equal to 1-1/2% of the Required Premium) otherwise to be deducted on a
Policy with a current Sum Insured of $250,000 or higher. The continuation of
this waiver is not contractually guaranteed and the waiver may be withdrawn or
modified by JHVLICO in the future.
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No sales charge is deducted from a premium payment received in excess of
Required Premium in any Policy year.
Paying more than one Required Premium in any Policy year could reduce the
Owner's total sales charges. For example, if a Required Premium of $1,000 were
paid in each of the first two Policy years, total sales charges deducted would
be $100. If instead both of these Required Premiums were paid during the first
Policy year, the total sales charge deducted would be only $50. Nevertheless,
attempting to accelerate or decelerate premium payments to reduce the potential
sales charge deducted from premiums is not recommended. Any such acceleration
of premium payments could result in a greater Contingent Deferred Sales Charge
(and, hence, a greater overall sales charge) if the Policy were surrendered and
would increase the likelihood that the Policy would become a modified endowment
(see "Tax Considerations--Policy Proceeds"). On the other hand, to pay less
than the amount of Required Premiums by their due dates is to run the risk that
the Policy will lapse, in which case the Owner will lose insurance coverage and
be subject to additional charges.
Contingent Deferred Sales Charge. The remainder of the sales charge will be
deducted only if the Policy is surrendered or stays in default past its grace
period. This second part is the Contingent Deferred Sales Charge. The
Contingent Deferred Sales Charge, however, will not be deducted for a Policy
that lapses or is surrendered on or after the Policy's thirteenth anniversary,
and it will be reduced for a Policy that lapses or is surrendered between the
end of the seventh Policy year and the end of the thirteenth Policy year.
The Contingent Deferred Sales Charge is a percentage of the lesser of (a) the
total amount of premiums paid before the date of surrender or lapse and (b) the
sum of the Base Policy Premiums due on or before the date of surrender or
lapse. (For this purpose Base Policy Premiums are pro-rated through the end of
the Policy Month in which the surrender or lapse occurs).
<TABLE>
<CAPTION>
Maximum Contingent Deferred Sales
Charge as a Percentage of Base Policy
Premiums Due Through Effective
For Surrenders or Lapses Effective During: Date of Surrender or Lapse
------------------------------------------ -------------------------------------
<S> <C>
Policy Years 1-6....................... 15.00%
Policy Year 7.......................... 12.85%
Policy Year 8.......................... 10.00%
Policy Year 9.......................... 7.77%
Policy Year 10......................... 6.00%
Policy Year 11......................... 4.55%
Policy Year 12......................... 2.92%
Policy Year 13......................... 1.54%
Policy Year 14 and Later............... 0%
</TABLE>
- --------
The amount of the Contingent Deferred Sales Charge is calculated on the basis
of the Base Policy Premium for the age of the insured at the time of issue of
the Policy.
The absence of any need to pay a Required Premium because of the existence of
Excess Value on a scheduled due date does not impact the amount of Base Policy
Premiums deemed to have been due to date for purposes of the Contingent
Deferred Sales Charge. For example, if the size of the Account Value is
sufficiently large that the Required Premium for the fifth Policy year
otherwise payable need not be paid and the Owner surrenders the Policy at the
end of the fifth Policy year, the Contingent Deferred Sales Charge would be
based on the sum of five Base Policy Premiums on the Policy (or, if less, the
total amount of premiums actually paid during all five Policy years).
Similarly, if a Premium Recalculation is required or
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effected, the amount of premiums due to the date of any subsequent surrender or
lapse for purposes of calculating the Contingent Deferred Sales Charge will
continue to be based on the Base Policy Premium in effect prior to such
recalculation.
The Contingent Deferred Sales Charge reaches its maximum at the end of the
sixth Policy year, stays level in the seventh Policy year and is reduced in
each Policy year thereafter until it reaches zero in Policy year 14. At issue
ages higher than age 54, the maximum is reached at an earlier Policy year, and
may be reduced to zero over a shorter number of years.
ADMINISTRATIVE SURRENDER CHARGE
A charge is made if the Policy is surrendered or lapses in the first nine
Policy years to recover administrative expenses relating to the issue of the
Policy which would not otherwise be recouped. The maximum charge in Policy
years 1 through 6 is $5 per $1,000 of Guaranteed Death Benefit, in Policy years
7 and 8 is $4 per $1,000 of Guaranteed Death Benefit and in Policy year 9 is $3
per $1,000 of Guaranteed Death Benefit. For insureds age 24 or less at issue,
this charge will never be more than $200 and will be charged only in the first
four Policy years. Currently a Policy with a Guaranteed Death Benefit at time
of surrender or lapse of $250,000 or more is not charged. A Policy of less than
$250,000 Guaranteed Death Benefit at time of surrender or lapse is not
currently charged if the surrender or lapse is after the fourth Policy year and
is charged no more than $300 if the surrender or lapse is in the first four
Policy years. These lower current charges may be withdrawn or modified by
JHVLICO at some future date.
This charge is made to compensate JHVLICO for expenses incurred in connection
with the underwriting, issuance and maintenance of the Policy which may not be
recovered upon an early surrender or lapse of the Policy.
REDUCED CHARGES FOR ELIGIBLE GROUPS
The sales charges, Administrative Surrender Charge and Issue Charge
(described below) otherwise applicable may be reduced with respect to Policies
issued to a class of associated individuals or to a trustee, employer or
similar entity where JHVLICO anticipates that the sales to the members of the
class will result in lower than normal sales and administrative expenses. These
reductions will be made in accordance with JHVLICO's rules in effect at the
time of the application for a Policy. The factors considered by JHVLICO in
determining the eligibility of a particular group for reduced charges, and the
level of the reduction, are as follows: the nature of the association and its
organizational framework; the method by which sales will be made to the members
of the class; the facility with which premiums will be collected from the
associated individuals and the association's capabilities with respect to
administrative tasks; the anticipated persistency of the Policies; the size of
the class of associated individuals and the number of years it has been in
existence; and any other such circumstances which justify a reduction in sales
or administrative expenses. Any reduction will be reasonable and will apply
uniformly to all prospective Policy purchasers in the class and will not be
unfairly discriminatory to the interests of any Policy Owner.
CHARGES DEDUCTED FROM ACCOUNT VALUE
The following charges are deducted from Account Value:
Issue Charge. JHVLICO will deduct from Account Value an Issue Charge equal to
$20 per month for the first twelve Policy months to compensate JHVLICO for
expenses incurred in connection with the issuance of the Policy, other than
sales expenses. Such expenses include medical examinations, insurance
underwriting costs, and costs incurred in processing applications and
establishing permanent Policy records.
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<PAGE>
Maintenance Charge. JHVLICO will deduct from Account Value a monthly charge
not to exceed $8 per Policy. The current monthly charge is $6 per Policy.
This charge is to compensate JHVLICO for administrative expenses, including
recordkeeping, processing death claims and surrenders, making Policy changes,
reporting and other communications to Owners and other similar expense and
overhead costs.
Insurance Charge. The insurance charge deducted monthly from Account Value is
based on the attained age of the insured and the amount at risk. The amount at
risk is the difference between the death benefit and the Account Value. The
amount of the insurance charge is determined by multiplying JHVLICO's then
current monthly rate for insurance by the amount at risk.
Current monthly rates for insurance are based on the sex, age, smoking
status, underwriting class of the insured and the length of time the Policy has
been in effect. JHVLICO may change these rates from time to time, but they will
never be more than the guaranteed maximum rates based on the 1980
Commissioners' Standard Ordinary Mortality Tables set forth in the Policy.
A reduction in the insurance charge may be made to a Policy beginning on the
first day of the first month in the tenth Policy year. This reduction is not
guaranteed but it is JHVLICO's present intention to effect this reduction in
the tenth and following Policy years as long as the Policy is in force.
The amount of the reduction will depend upon the length of time the Policy
has been in force. In the tenth Policy year the monthly insurance charge will
be reduced by an amount equal to a percentage of the then Account Value. This
percentage will begin at an annual effective rate of .20% in the tenth Policy
year and increase annually by .01% through and including the thirtieth Policy
year. Thereafter the percentage reduction each year the Policy remains in force
will be at an annual effective rate of .40%.
For example, it is expected that the reduction percentage in Policy year 11
would be at an effective annual rate of .21%, in Policy year 20 would be .30%
and in Policy year 30 would be .40%.
JHVLICO reserves the right to modify or discontinue this reduction. Because
the Policies were first offered for sale in 1994, no reductions have yet been
made.
Lower current insurance rates are offered at most ages for insureds who
qualify as non-smokers. To qualify, an insured must meet additional
requirements that relate to smoking habits.
JHVLICO also charges lower current insurance rates under a Policy with a
current Sum Insured of $250,000 or higher, but these lower rates are not
contractually guaranteed and may be withdrawn at some future date.
Guaranteed Death Benefit Charge. JHVLICO deducts a charge from that portion
of the Account Value attributable to the variable subaccounts for the minimum
death benefit that has been guaranteed. JHVLICO guarantees that the death
benefit will never be less than the Sum Insured. In return for making this
guarantee, JHVLICO currently makes a monthly charge of 1c per $1000 of the
current Sum Insured. This charge may be increased by JHVLICO but will never
exceed 3c per $1000 of the current Sum Insured.
When a Premium Recalculation is effected, and the new Base Policy Premium is
less than the Guaranteed Maximum Recalculated Premium for the insured's age at
issue of the Policy, a one-time deduction is made from the amount applied as
compensation for the additional guarantee. The current charge
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<PAGE>
is 1-1/2% of the portion of the Account Value applied to reduce the new Base
Policy Premium to an amount below the Guaranteed Maximum Recalculated Premium
for the insured's age at issue. This charge may be increased by JHVLICO but it
will never exceed 3% of the amount applied.
Charge for Mortality and Expense Risks. A daily charge is made for mortality
and expense risks assumed by JHVLICO at an effective annual rate of .60% of the
value of the Account's assets attributable to the Policies. This charge begins
when amounts under a Policy are first allocated to the Account. The mortality
risk assumed is that insureds may live for a shorter period of time than
estimated and, therefore, a greater amount of death benefit than expected will
be payable in relation to the amount of premiums received. The expense risk
assumed is that expenses incurred in issuing and administering the Policies
will be greater than estimated. JHVLICO will realize a gain from this charge to
the extent it is not needed to provide for benefits and expenses under the
Policies.
Charges for Extra Mortality Risks. An insured who does not qualify for either
the preferred or standard underwriting class must pay an additional Required
Premium because of the extra mortality risk. This additional premium is
collected in two ways: up to 8.6% of the additional premium is deducted from
premiums when paid and the remainder of the additional premium is deducted
monthly from Account Value in equal installments.
Charges for Additional Insurance Benefits. An additional Required Premium
must be paid if the Owner elects to purchase an additional insurance benefit.
This additional premium is collected in two ways: up to 8.6% of the additional
premium is deducted from premiums when paid and the remainder of the additional
premium is deducted monthly from Account Value in equal installments.
Charges for Taxes. Currently no charge is made against Account Value for
JHVLICO's Federal income taxes but if JHVLICO incurs, or expects to incur,
income taxes attributable to the Account or this class of Policies in future
years, it reserves the right to make a charge and any charge would affect what
the subaccounts earn. Charges for other taxes, if any, attributable to the
subaccounts may also be made.
Charge for Partial Withdrawal. On or after the first Policy anniversary, the
Owner may withdraw all or part of any Excess Value in the Policy. The amount to
be withdrawn must be at least $1,000. An administrative charge equal to $20
will be deducted from the Account Value on the date of withdrawal.
Guarantee of Premiums and Certain Charges. The Policy's Base Policy Premium
is guaranteed not to increase, except that a larger Base Policy Premium may
result from the Premium Recalculation. The state premium tax charge, the
Federal DAC tax charge, mortality and expense risk charge, the charge for
partial withdrawals and the Issue Charge are guaranteed not to increase over
the life of the Policy. The maintenance charge, the Guaranteed Death Benefit
Charge, the sales charges, the Administrative Surrender Charge and the
insurance charge are guaranteed not to exceed the maximums set forth in the
Policy.
Fund Investment Management Fee. The Account purchases shares of the Funds at
net asset value, a value which reflects the deduction from the assets of each
Fund of its investment management fee which is described briefly in the summary
of this prospectus and of certain non-advisory operating expenses. For a full
description of these deductions, see the attached prospectuses for the Funds.
The monthly deductions from Account Value described above are deducted on
the date of issue and on the first day of each Policy month thereafter. These
deductions are made from the Subaccounts in proportion to the amount of Account
Value in cash. For each month that JHVLICO is unable to deduct any charge
because there is insufficient Account Value, the uncollected charges will
accumulate and be deducted when and if sufficient Account Value is available.
25
<PAGE>
DISTRIBUTION OF POLICIES
Applications are solicited by agents who are licensed by state insurance
authorities to sell JHVLICO's Policies and who are also registered
representatives of John Hancock or other broker-dealer firms. John Hancock
performs insurance underwriting, determines whether to accept or reject the
application for a Policy and the insured's risk classification and, pursuant to
a sales agreement among John Hancock, JHVLICO, and the Account, acts as the
principal underwriter of the Policies. The sales agreement will remain in
effect until terminated upon sixty days' written notice by any party. JHVLICO
will make the appropriate refund if a Policy ultimately is not issued or is
returned under the short-term cancellation provision. Officers and employees of
John Hancock and JHVLICO are covered by a blanket bond by a commercial carrier
in the amount of $25 million.
John Hancock's representatives are compensated for sales of the Policies on a
commission and service fee basis by John Hancock, and JHVLICO reimburses John
Hancock for such compensation and for other direct and indirect expenses
(including agency expense allowances, general agent, district manager and
supervisor's compensation, agent's training allowances, deferred compensation
and insurance benefits of agents, general agents, district managers and
supervisors, agency office clerical expenses and advertising) actually incurred
in connection with the marketing and sale of the Policies.
The maximum commission payable to an agent for selling a Policy is 50% of the
Base Policy Premiums (prior to any Premium Recalculation) that would be payable
in the first Policy year, 8% of such premiums payable in the second, third and
fourth Policy years and 3% of any such premiums received by JHVLICO in later
years. The maximum commission on any other premium paid in any year is 3%.
Agents with less than four years of service with John Hancock and agents
compensated on salary plus bonus or level commission programs may be paid on a
different basis. Agents who meet certain productivity and persistency standards
with respect to the sale of policies issued by JHVLICO and John Hancock will be
eligible for additional compensation.
John Hancock is registered with the Commission under the Securities Exchange
Act of 1934 as a broker-dealer and is a member of the National Association of
Securities Dealers, Inc. John Hancock is not a member of the Securities
Investor Protection Corporation because it is exempt from membership in that
organization. The Policies may be sold through other registered broker-dealers
whose representatives are authorized by applicable law to sell variable life
insurance policies. The commissions which will be paid out by such broker-
dealers to their registered representatives will be in accordance with their
established rules. The commission rates may be more or less than those set
forth above for John Hancock's agents. In addition, their qualified registered
representatives may be reimbursed by the broker-dealers under expense
reimbursement allowance programs in any year for approved voucherable expenses
incurred.
John Hancock serves as principal underwriter for other separate accounts
registered under the 1940 Act: John Hancock Variable Annuity Accounts U, I and
V, John Hancock Mutual Variable Life Insurance Account UV and John Hancock
Variable Life Accounts U and S. John Hancock is also the investment manager and
principal underwriter for John Hancock Variable Series Trust I.
TAX CONSIDERATIONS
The below description of Federal income tax consequences is only a brief
summary and is not intended as tax advice. For further information consult a
qualified tax advisor. Federal, state and local tax laws can change from time
to time and, as a result, the tax consequences to the Owner and beneficiary may
be altered.
POLICY PROCEEDS
Although the Policy contains provisions not found in fixed benefit life
insurance policies, JHVLICO believes the Policy will receive the same Federal
income and estate tax treatment. Section 7702 of the Internal
26
<PAGE>
Revenue Code ("Code") defines life insurance for Federal tax purposes. If
certain standards are met at issue and over the life of the Policy, the Policy
will come within that definition. JHVLICO will monitor compliance with these
standards. Furthermore, JHVLICO reserves the right to make any changes in the
Policy necessary to ensure the Policy is within the definition of life
insurance.
JHVLICO believes that the death benefit under the Policy will be excludable
from the beneficiary's gross income under Section 101 of the Code. In addition,
increases in Account Value as a result of interest or investment experience
will not be subject to Federal income tax unless and until values are actually
received through withdrawal, surrender or other distributions.
A surrender, partial surrender or withdrawal may have tax consequences. For
example, the Owner will be taxed on a surrender to the extent that the
surrender value exceeds the net premiums paid under the Policy, i.e., ignoring
premiums paid for optional benefits and riders. But under certain circumstances
within the first 15 Policy years the Owner may be taxed on a withdrawal of
Policy values even if total withdrawals do not exceed total premiums paid.
JHVLICO also believes that, except as noted below, loans received under the
Policy will be treated as indebtedness of an Owner and that no part of any loan
will constitute income to the Owner. However, the amount of any loan
outstanding will be taxed to the Owner when a Policy lapses.
Distributions under Policies on which premiums greater than the "7-pay" limit
have been paid will be treated as distributions from a "modified endowment,"
which are subject to taxation based on Federal tax legislation. The Owner of
such a Policy will be taxed on distributions such as loans, surrenders, partial
surrenders and withdrawals to the extent of any income (gain) to the Owner
(income-first basis). The distributions affected will be those made on or
after, and within the two year period prior to the time the Policy becomes a
modified endowment. Additionally, a 10% penalty tax may be imposed on income
distributed before the Owner attains age 59-1/2. Furthermore, any time there is
a "material change" in a Policy (such as an increase in Sum Insured, the
addition of certain other Policy benefits after issue, or reinstatement of a
lapsed policy), the Policy will be subject to a new "7-pay" test, with the
possibility of a tax on distributions if it were subsequently to become a
modified endowment. Moreover, if benefits under a Policy are reduced (such as a
reduction in the Sum Insured or death benefit or the reduction or cancellation
of certain rider benefits, or Policy termination) during the 7 years in which
the 7-pay test is being applied, the 7-pay limit will be recalculated based on
the reduced benefits. If the premiums paid to date are greater than the
recalculated 7-pay limit, the policy will become a modified endowment.
All modified endowment contracts issued by the same insurer (or affiliates)
to the Owner during any calendar year generally will be treated as one contract
for the purpose of applying these rules. Your tax advisor should be consulted
if you have questions regarding the possible impact of the 7-pay limit on your
Policy.
Federal estate and state and local estate, inheritance and other tax
consequences of ownership or receipt of Policy proceeds depend on the
circumstances of each Owner or beneficiary.
CHARGE FOR JHVLICO'S TAXES
Except for the DAC Tax charge, currently JHVLICO makes no charge for Federal
income taxes that may be attributable to this class of Policies. If JHVLICO
incurs, or expects to incur, income taxes attributable to this class of
Policies or any subaccount in the future, it reserves the right to make a
charge for those taxes.
27
<PAGE>
Under current laws, JHVLICO may incur state and local taxes (in addition to
premium taxes) in several states. At present, these taxes are not significant.
If there is a material change in applicable state or local tax laws, charges
for such taxes may be made.
CORPORATE AND H.R. 10 PLANS
The Policy may be acquired in connection with the funding of retirement plans
satisfying the qualification requirements of Section 401 of the Code. If so,
the Code provisions relating to such plans and life insurance benefits
thereunder should be carefully scrutinized.
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS OF JHVLICO
The Directors and Executive Officers of JHVLICO and their principal
occupations during the past five years are as follows:
<TABLE>
<CAPTION>
Directors--Officers Principal Occupations
------------------- ---------------------
<S> <C>
David F. D'Alessandro Chairman of the Board and Chief Execu-
tive Officer of JHVLICO; Senior Execu-
tive Vice President and Director, John
Hancock Mutual Life Insurance Company.
Henry D. Shaw Vice Chairman of the Board and President
of JHVLICO; Senior Vice President, John
Hancock Mutual Life Insurance Company.
Thomas J. Lee Director of JHVLICO; Vice President,
John Hancock Mutual Life Insurance Com-
pany.
Michele G. Van Leer Director of JHVLICO; Vice President,
John Hancock Mutual Life Insurance Com-
pany.
Francis C. Cleary, Jr. Director and Counsel, JHVLICO; Vice
President and Counsel, John Hancock Mu-
tual Life Insurance Company.
Joseph A. Tomlinson Director and Vice President, JHVLICO;
Vice President, John Hancock Mutual Life
Insurance Company.
Robert R. Reitano Director of JHVLICO; Second Vice Presi-
dent, John Hancock Mutual Life Insurance
Company.
Robert S. Paster Director and Actuary of JHVLICO; Second
Vice President, John Hancock Mutual Life
Insurance Company.
Barbara L. Luddy Director, JHVLICO; Second Vice Presi-
dent, John Hancock Mutual Life Insurance
Company.
Daniel L. Ouellette Vice President, Marketing, JHVLICO; Vice
President, John Hancock Mutual Life In-
surance Company.
Patrick F. Smith Controller of JHVLICO; Assistant Con-
troller, John Hancock Mutual Life Insur-
ance Company.
</TABLE>
The business address of all Directors and officers of JHVLICO is John Hancock
Place, Boston, Massachusetts 02117.
28
<PAGE>
REPORTS
In each Policy year (except while the Policy is continued in effect under a
fixed option on lapse) a statement will be sent to the Owner setting forth the
amount of the Current and Guaranteed Death Benefits, the Account Value, the
portion of the Account Value in each subaccount, the Surrender Value, premiums
received and charges deducted from premium since the last report, and any
outstanding indebtedness (and interest charged for the preceding Policy year)
as of the last day of such year. Moreover, confirmations will be furnished to
Owners of transfers among subaccounts, Policy loans, partial withdrawals of
Excess Value and certain other Policy transactions. Premium payments not in
response to a billing notice are "unscheduled" and will be separately
confirmed. Therefore, an Owner who makes a premium payment that differs by more
than $25 from that billed will receive a separate confirmation of that premium
payment.
Owners will be sent semiannually a report containing the financial statements
of the Funds, including a list of securities held in each Portfolio.
VOTING PRIVILEGES
All of the assets in the variable subaccounts of the Account are invested in
shares of the corresponding Portfolios of the Funds. JHVLICO will vote the
shares of each of the Portfolios of the Funds which are deemed attributable to
Policies at regular and special meetings of the Funds' shareholders in
accordance with instructions received from Owners of such policies. Shares of
the Funds held in the Account which are not attributable to policies and shares
for which instructions from Owners are not received will be represented by
JHVLICO at the meeting and will be voted for and against each matter in the
same proportions as the votes based upon the instructions received from the
owners of all policies funded through the Account's corresponding variable
subaccounts.
The number of Fund shares held in each variable subaccount deemed
attributable to each Owner is determined by dividing the amount of a Policy's
Account Value held in the variable subaccount by the net asset value of one
share in the corresponding Fund Portfolio in which the assets of that variable
subaccount are invested. Fractional votes will be counted. The number of shares
as to which the Owner may give instructions will be determined as of the record
date for the Funds' meetings.
Owners of Policies may give instructions regarding the election of the Board
of Trustees of each Fund, ratification of the selection of independent
auditors, approval of Fund investment advisory agreements and other matters
requiring a vote under the 1940 Act. Owners will be furnished information and
forms by JHVLICO in order that voting instructions may be given.
JHVLICO may, when required by state insurance regulatory authorities,
disregard voting instructions if the instructions require that the shares be
voted so as to change the investment objectives of the Portfolios or to approve
or disapprove an investment advisory or underwriting contract for the Funds.
JHVLICO also may disregard voting instructions in favor of changes initiated by
an Owner or a Fund's Board of Trustees in an investment policy, investment
adviser or principal underwriter of the Fund, if JHVLICO (i) reasonably
disapproves of such changes and (ii) in the case of a change of investment
policy or investment adviser, makes a good-faith determination that the
proposed change is contrary to state law or prohibited by state regulatory
authorities or that the change would be inconsistent with a variable
subaccount's investment objectives or would result in the purchase of
securities which vary from the general quality and nature of investments and
29
<PAGE>
investment techniques utilized by other separate accounts of JHVLICO or of an
affiliated life insurance company, which separate accounts have investment
objectives similar to those of the variable subaccount. In the event JHVLICO
does disregard voting instructions, a summary of that action and the reasons
for such action will be included in the next semi-annual report to Owners.
CHANGES THAT JHVLICO CAN MAKE
The voting privileges described in this Prospectus are afforded based on
JHVLICO's understanding of applicable Federal securities law requirements. To
the extent that applicable law, regulations or interpretations change to
eliminate or restrict the need for such voting privileges, JHVLICO reserves
the right to proceed in accordance with any such revised requirements. JHVLICO
also reserves the right, subject to compliance with applicable law, including
approval of Owners if so required, (1) to transfer assets determined by
JHVLICO to be associated with the class of policies to which the Policies
belong from the Account to another separate account or variable subaccount by
withdrawing the same percentage of each investment in the Account with
appropriate adjustments to avoid odd lots and fractions, (2) to operate the
Account as a "management-type investment company" under the 1940 Act, or in
any other form permitted by law, the investment adviser of which would be
JHVLICO, an affiliate or John Hancock, (3) to deregister the Account under the
1940 Act, (4) to substitute for the Portfolio shares held by a subaccount any
other investment permitted by law, and (5) to take any action necessary to
comply with or obtain any exemptions from the 1940 Act. JHVLICO would notify
Owners of any of the foregoing changes and, to the extent legally required,
obtain approval of Owners and any regulatory body prior thereto. Such notice
and approval, however, may not be legally required in all cases.
STATE REGULATION
JHVLICO is subject to regulation and supervision by the Massachusetts
Commissioner of Insurance who periodically examines its affairs. It also is
subject to the applicable insurance laws and regulations of all jurisdictions
in which it is authorized to do business.
JHVLICO is required to submit annual statements of its operations, including
financial statements, to the insurance departments of the various
jurisdictions in which it does business for purposes of determining solvency
and compliance with local insurance laws and regulations.
LEGAL MATTERS
Legal matters in connection with the Policies described in this Prospectus
have been passed on by Francis C. Cleary, Jr., Counsel for JHVLICO. Messrs.
Freedman, Levy, Kroll & Simonds, Washington, D.C., have advised JHVLICO on
certain Federal securities law matters in connection with the Policies.
REGISTRATION STATEMENT
This Prospectus omits certain information contained in the Registration
Statement which has been filed with the Commission. More details may be
obtained from the Securities and Exchange Commission upon payment of the
prescribed fee.
30
<PAGE>
EXPERTS
The financial statements of JHVLICO and the Account included in this
Prospectus have been audited by Ernst & Young LLP, independent auditors, for
the periods indicated in their reports thereon which appear elsewhere herein
and have been included in reliance on their reports given on their authority as
experts in accounting and auditing.
Actuarial matters included in this Prospectus have been examined by Randi M.
Sterrn, F.S.A., an Actuary of JHVLICO.
FINANCIAL STATEMENTS
The financial statements of JHVLICO included herein should be distinguished
from the financial statements of the Account and should be considered only as
bearing upon the ability of JHVLICO to meet its obligations under the Policies.
31
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Short-Term
Select Real Estate Special U.S.
Stock Bond International Money Market Equity Opportunities Stock Government
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
------------ ----------- ------------- ------------ ----------- ------------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Investment in
shares of
portfolios of
John Hancock
Variable Series
Trust I, at
value .......... $113,649,478 $56,377,102 $30,932,790 $19,684,014 $22,246,848 $20,167,152 $217,256,965 $2,466,466
Receivable from
John Hancock
Variable Life
Insurance
Company......... 172,252 67,008 125,749 687,213 12,476 82,622 154,538 15,053
------------ ----------- ----------- ----------- ----------- ----------- ------------ ----------
Total Assets.... 113,821,730 56,444,110 31,058,539 20,371,227 22,259,324 20,249,774 217,411,503 2,481,519
Liabilities
Payable to John
Hancock Variable
Series Trust I . 166,670 64,238 124,279 686,277 11,432 81,681 143,853 14,960
Asset charges
payable ........ 5,582 2,770 1,470 936 1,044 940 10,686 93
------------ ----------- ----------- ----------- ----------- ----------- ------------ ----------
Total
Liabilities.... 172,252 67,008 125,749 687,213 12,476 82,621 154,539 15,053
------------ ----------- ----------- ----------- ----------- ----------- ------------ ----------
Total Net Assets. $113,649,478 $56,377,102 $30,932,790 $19,684,014 $22,246,848 $20,167,153 $217,256,964 $2,466,466
============ =========== =========== =========== =========== =========== ============ ==========
Net Assets
Attributable to
John Hancock
Variable Life
Insurance
Company......... -- -- $ 902,753 -- $ 933,401 $ 683,604 -- $1,907,125
Attributable to
Policyholders... $113,649,478 $56,377,102 30,030,037 $19,684,014 21,313,447 19,483,549 $217,256,964 559,341
------------ ----------- ----------- ----------- ----------- ----------- ------------ ----------
Total Net As-
sets........... $113,649,478 $56,377,102 $30,932,790 $19,684,014 $22,246,848 $20,167,153 $217,256,964 $2,466,466
============ =========== =========== =========== =========== =========== ============ ==========
<CAPTION>
Managed
Subaccount
------------
<S> <C>
Assets
Investment in
shares of
portfolios of
John Hancock
Variable Series
Trust I, at
value .......... $262,405,591
Receivable from
John Hancock
Variable Life
Insurance
Company......... 454,178
------------
Total Assets.... 262,859,769
Liabilities
Payable to John
Hancock Variable
Series Trust I . 441,295
Asset charges
payable ........ 12,883
------------
Total
Liabilities.... 454,178
------------
Total Net Assets. $262,405,591
============
Net Assets
Attributable to
John Hancock
Variable Life
Insurance
Company......... --
Attributable to
Policyholders... $262,405,591
------------
Total Net As-
sets........... $262,405,591
============
</TABLE>
See accompanying notes.
32
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Select Stock Subaccount Bond Subaccount International Subaccount
---------------------------------- ---------------------------------- ----------------------------------
Year Ended December 31 Year Ended December 31 Year Ended December 31
---------------------------------- ---------------------------------- ----------------------------------
1995 1994 1993 1995 1994 1993 1995 1994 1993
----------- ---------- ---------- ---------- ----------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment
Income:
Distributions
received from
the Portfolios
of John Hancock
Variable Series
Trust I........ $ 9,127,019 $2,816,218 $1,554,404 $3,997,055 $2,577,160 $2,170,190 $ 313,290 $ 334,752 $ 190,792
Expenses:
Mortality and
expense risks.. 527,639 251,870 112,906 288,879 210,831 178,618 158,467 92,706 23,714
----------- ---------- ---------- ---------- ----------- ---------- ---------- ----------- ----------
Net Investment
Income......... 8,599,380 2,564,348 1,441,498 3,708,176 2,366,329 1,991,572 154,823 242,046 167,078
Net realized and
Unrealized Gain
(Loss) on
Investments:
Net realized
gain........... 839,997 637,109 599,094 63,373 126,799 603,946 709,715 390,493 100,167
Net unrealized
appreciation
(depreciation)
during the
year........... 13,485,769 (4,019,164) 294,584 4,386,358 (3,555,116) 195,384 1,169,158 (1,861,119) 1,229,760
----------- ---------- ---------- ---------- ----------- ---------- ---------- ----------- ----------
Net Realized and
Unrealized Gain
(Loss) on
Investments..... 14,325,766 (3,382,055) 893,678 4,449,731 (3,428,317) 799,330 1,878,873 (1,470,626) 1,329,927
----------- ---------- ---------- ---------- ----------- ---------- ---------- ----------- ----------
Net Increase
(Decrease) in
Net Assets
Resulting From
Operations...... $22,925,146 $(817,707) $2,335,176 $8,157,907 $(1,061,988) $2,790,902 $2,033,696 $(1,228,580) $1,497,005
=========== ========== ========== ========== =========== ========== ========== =========== ==========
<CAPTION>
Money Market Subaccount
----------------------------
Year Ended December 31
----------------------------
1995 1994 1993
---------- -------- --------
<S> <C> <C> <C>
Investment
Income:
Distributions
received from
the Portfolios
of John Hancock
Variable Series
Trust I........ $1,021,645 $730,311 $179,437
Expenses:
Mortality and
expense risks.. 108,941 108,665 35,572
---------- -------- --------
Net Investment
Income......... 912,704 621,646 143,865
Net realized and
Unrealized Gain
(Loss) on
Investments:
Net realized
gain........... -- -- --
Net unrealized
appreciation
(depreciation)
during the
year........... -- -- --
---------- -------- --------
Net Realized and
Unrealized Gain
(Loss) on
Investments..... -- -- --
---------- -------- --------
Net Increase
(Decrease) in
Net Assets
Resulting From
Operations...... $ 912,704 $621,646 $143,865
========== ======== ========
</TABLE>
- ------
See accompanying notes.
33
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENTS OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
Special
Opportunities
Real Estate Equity Subaccount Subaccount* Stock Subaccount
------------------------------- ----------------------- -----------------------------------
Year Ended December 31 Period Ended Year Ended December 31
------------------------------- December 31 -----------------------------------
1995 1994 1993 1995 1994 1995 1994 1993
---------- --------- -------- ---------- ------------ ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment
Income:
Distributions
received from
the Portfolios
of John Hancock
Variable Series
Trust I......... $1,424,926 $ 993,202 $356,397 $ 483,189 $ 17,225 $20,402,345 $ 8,501,308 $8,517,796
Expenses:
Mortality and
expense risks... 117,861 89,294 38,740 57,525 4,657 1,040,658 679,481 489,537
---------- --------- -------- ---------- -------- ----------- ----------- ----------
Net Investment
Income.......... 1,307,065 903,908 317,657 425,664 12,568 19,361,687 7,821,827 8,028,259
Net Realized and
Unrealized Gain
(Loss) on
Investments:
Net realized
gain (loss)..... (132,712) 302,731 381,959 118,503 (5,379) 1,182,185 913,991 1,623,888
Net unrealized
appreciation
(depreciation)
during the year. 1,164,732 (984,298) (16,951) 2,655,206 (8,734) 28,390,863 (9,911,015) 190,590
---------- --------- -------- ---------- -------- ----------- ----------- ----------
Net Realized and
Unrealized Gain
(Loss) on
Investments...... 1,032,020 (681,567) 365,008 2,773,709 (14,113) 29,573,048 (8,997,024) 1,814,478
---------- --------- -------- ---------- -------- ----------- ----------- ----------
Net Increase
(Decrease) in Net
Assets Resulting
From Operations.. $2,339,085 $ 222,341 $682,665 $3,199,373 $ (1,545) $48,934,735 $(1,175,197) $9,842,737
========== ========= ======== ========== ======== =========== =========== ==========
<CAPTION>
Short-Term
U.S.
Government
Subaccount* Managed Subaccount
--------------------- -------------------------------------
Period Ended Year Ended December 31
December 31 -------------------------------------
1995 1994 1995 1994 1993
-------- ------------ ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Investment
Income:
Distributions
received from
the Portfolios
of John Hancock
Variable Series
Trust I......... $103,070 $ 26,186 $24,582,126 $ 7,481,584 $10,157,641
Expenses:
Mortality and
expense risks... 8,335 729 1,324,428 953,550 725,512
-------- ------------ ----------- ------------- -----------
Net Investment
Income.......... 94,735 25,457 23,257,698 6,528,034 9,432,129
Net Realized and
Unrealized Gain
(Loss) on
Investments:
Net realized
gain (loss)..... 20,630 (1,779) 3,530,479 1,168,573 2,225,422
Net unrealized
appreciation
(depreciation)
during the year. 77,274 (23,668) 24,157,024 (12,012,242) 830,965
-------- ------------ ----------- ------------- -----------
Net Realized and
Unrealized Gain
(Loss) on
Investments...... 97,904 (25,447) 27,687,503 (10,843,669) 3,056,387
-------- ------------ ----------- ------------- -----------
Net Increase
(Decrease) in Net
Assets Resulting
From Operations.. $192,639 $ 10 $50,945,201 $ (4,315,635) $12,488,516
======== ============ =========== ============= ===========
</TABLE>
- ----
* The Short-Term U.S. Government and the Special Opportunities subaccounts
commenced operations on May 1 and May 6, 1994, respectively.
See accompanying notes.
34
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Select Stock Subaccount Bond Subaccount
-------------------------------------- -------------------------------------
Year ended December 31 Year ended December 31
-------------------------------------- -------------------------------------
1995 1994 1993 1995 1994 1993
------------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase
(Decrease) in Net
Assets
From operations:
Net investment
income.......... $ 8,599,380 $ 2,564,348 $ 1,441,498 $ 3,708,176 $ 2,366,329 $ 1,991,572
Net realized
gains........... 839,997 637,109 599,094 63,373 126,799 603,946
Net unrealized
appreciation
(depreciation)
during the year. 13,485,769 (4,019,164) 294,584 4,386,358 (3,555,116) 195,384
------------ ----------- ----------- ----------- ----------- -----------
Net increase
(decrease) in
net assets
resulting from
operations...... 22,925,146 (817,707) 2,335,176 8,157,907 (1,061,988) 2,790,902
From policyholder
transactions:
Net premiums from
policyholders 51,711,591 51,007,044 18,577,185 23,206,469 20,368,275 16,530,998
Net benefits to
policyholders (19,250,850) (18,333,049) (7,776,653) (14,981,037) (11,586,357) (11,672,488)
------------ ----------- ----------- ----------- ----------- -----------
Net increase in
net assets from
policyholder
transactions.... 32,460,741 32,673,995 10,800,532 8,225,432 8,781,918 4,858,510
------------ ----------- ----------- ----------- ----------- -----------
Net increase in
net assets..... 55,385,887 31,856,288 13,135,708 16,383,339 7,719,930 7,649,412
Net Assets:
Beginning of
year............ 58,263,591 26,407,303 13,271,595 39,993,763 32,273,833 24,624,421
------------ ----------- ----------- ----------- ----------- -----------
End of year...... $113,649,478 $58,263,591 $26,407,303 $56,377,102 $39,993,763 $32,273,833
============ =========== =========== =========== =========== ===========
<CAPTION>
International Subaccount Money Market Subaccount
------------------------------------- -------------------------------------
Year ended December 31 Year ended December 31
------------------------------------- -------------------------------------
1995 1994 1993 1995 1994 1993
------------ ------------ ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Increase
(Decrease) in Net
Assets
From operations:
Net investment
income.......... $ 154,823 $ 242,046 $ 167,078 $ 912,704 $ 621,646 $ 143,865
Net realized
gains........... 709,715 390,493 100,167 -- -- --
Net unrealized
appreciation
(depreciation)
during the year. 1,169,158 (1,861,119) 1,229,760 -- -- --
------------ ------------ ----------- ------------ ------------ -----------
Net increase
(decrease) in
net assets
resulting from
operations...... 2,033,696 (1,228,580) 1,497,005 912,704 621,646 143,865
From policyholder
transactions:
Net premiums from
policyholders 17,644,301 21,632,192 5,920,835 21,430,904 58,454,926 8,826,180
Net benefits to
policyholders (12,682,229) (5,717,640) (1,262,467) (19,852,589) (51,398,824) (4,772,045)
------------ ------------ ----------- ------------ ------------ -----------
Net increase in
net assets from
policyholder
transactions.... 4,962,072 15,914,552 4,658,368 1,578,315 7,056,102 4,054,135
------------ ------------ ----------- ------------ ------------ -----------
Net increase in
net assets..... 6,995,768 14,685,972 6,155,373 2,491,019 7,677,748 4,198,000
Net Assets:
Beginning of
year............ 23,937,022 9,251,050 3,095,677 17,192,995 9,515,247 5,317,247
------------ ------------ ----------- ------------ ------------ -----------
End of year...... $30,932,790 $23,937,022 $9,251,050 $19,684,014 $17,192,995 $9,515,247
============ ============ =========== ============ ============ ===========
</TABLE>
- ------
See accompanying notes.
35
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
Special
Real Estate Opportunities
Equity Subaccount Subacount* Stock Subaccount
------------------------------------- ----------------------- ---------------------------------------
Year Ended Period ended Year Ended
December 31 December 31 December 31
------------------------------------- ----------------------- ---------------------------------------
1995 1994 1993 1995 1994 1995 1994 1993
----------- ----------- ----------- ----------- ---------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase
(decrease) in Net
Assets
From operations:
Net investment
income........... $ 1,307,065 $ 903,908 $ 317,657 $ 425,664 $ 12,568 $ 19,361,687 $ 7,821,827 $ 8,028,259
Net realized
gains (losses)... (132,712) 302,731 381,959 118,503 (5,379) 1,182,185 913,991 1,623,888
Net unrealized
appreciation
(depreciation)
during the year.. 1,164,732 (984,298) (16,951) 2,655,206 (8,734) 28,390,863 (9,911,015) 190,590
----------- ----------- ----------- ----------- ---------- ------------ ------------ -----------
Net increase
(decrease) in net
assets resulting
from operations.. 2,339,085 222,341 682,665 3,199,373 (1,545) 48,934,735 (1,175,197) 9,842,737
From policyholder
transactions:
Net premiums from
policyholders 10,547,817 13,824,052 9,937,807 15,268,369 5,297,072 76,729,116 67,541,450 54,985,522
Net benefits to
policyholders (10,156,449) (5,898,220) (2,766,409) (3,375,070) (221,046) (41,442,095) (31,434,994) (29,859,615)
----------- ----------- ----------- ----------- ---------- ------------ ------------ -----------
Net increase in
net assets from
policyholder
transactions..... 391,368 7,925,832 7,171,398 11,893,299 5,076,026 35,287,021 36,106,456 25,125,907
----------- ----------- ----------- ----------- ---------- ------------ ------------ -----------
Net increase in
net assets...... 2,730,453 8,148,173 7,854,063 15,092,672 5,074,481 84,221,756 34,931,259 34,968,644
Net assets:
Beginning of
year............. 19,516,395 11,368,222 3,514,159 5,074,481 -- 133,035,208 98,103,949 63,135,305
----------- ----------- ----------- ----------- ---------- ------------ ------------ -----------
End of year...... $22,246,848 $19,516,395 $11,368,222 $20,167,153 $5,074,481 $217,256,964 $133,035,208 $98,103,949
=========== =========== =========== =========== ========== ============ ============ ===========
<CAPTION>
Short-Term
U.S.
Government
Subaccount* Managed Subaccount
----------------------- -----------------------------------------
Period ended Year Ended
December 31 December 31
----------------------- -----------------------------------------
1995 1994 1995 1994 1993
----------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Increase
(decrease) in Net
Assets
From operations:
Net investment
income........... $ 94,735 $ 25,457 $ 23,257,698 $ 6,528,034 $ 9,432,129
Net realized
gains (losses)... 20,630 (1,779) 3,530,479 1,168,573 2,225,422
Net unrealized
appreciation
(depreciation)
during the year.. 77,274 (23,668) 24,157,024 (12,012,242) 830,965
----------- ----------- ------------- ------------- -------------
Net increase
(decrease) in net
assets resulting
from operations.. 192,639 10 50,945,201 (4,315,635) 12,488,516
From policyholder
transactions:
Net premiums from
policyholders 2,846,775 1,178,590 80,690,820 87,141,271 67,668,655
Net benefits to
policyholders (1,637,415) (114,133) (48,646,275) (43,706,261) (40,199,547)
----------- ----------- ------------- ------------- -------------
Net increase in
net assets from
policyholder
transactions..... 1,209,360 1,064,457 32,044,545 43,435,010 27,469,108
----------- ----------- ------------- ------------- -------------
Net increase in
net assets...... 1,401,999 1,064,457 82,989,746 39,119,375 39,957,624
Net assets:
Beginning of
year............. 1,064,467 -- 179,415,845 140,296,470 100,338,846
----------- ----------- ------------- ------------- -------------
End of year...... $2,466,466 $1,064,467 $262,405,591 $179,415,845 $140,296,470
=========== =========== ============= ============= =============
</TABLE>
- ----
* The Short-Term U.S. Government and the Special Opportunities subaccounts
commenced operations on May 1 and May 6, 1994, respectively.
See accompanying notes.
36
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 1--ORGANIZATION
John Hancock Variable Life Account V (the Account) is a separate investment
account of John Hancock Variable Life Insurance Company (JHVLICO), a wholly-
owned subsidiary of John Hancock Mutual Life Insurance Company (John Hancock).
The Account was formed to fund variable life insurance policies (Policies)
issued by JHVLICO. The Account is operated as a unit investment trust
registered under the Investment Company Act of 1940, as amended, and currently
consists of nine subaccounts. The assets of each subaccount are invested
exclusively in shares of a corresponding portfolio of John Hancock Variable
Series Trust I (the Fund). New subaccounts may be added as new portfolios are
added to the Fund, or as other investment options are developed and made
available to policyholders. The nine portfolios of the Fund which are currently
available are Select Stock, Bond, International, Money Market, Real Estate
Equity, Special Opportunities, Stock, Short-Term U.S. Government and Managed.
Each portfolio has a different investment objective.
The net assets of the Account may not be less than the amount required under
state insurance law to provide for death benefits (without regard to the
minimum death benefit guarantee) and other policy benefits. Additional assets
are held in JHVLICO's general account to cover the contingency that the
guaranteed minimum death benefit might exceed the death benefit which would
have been payable in the absence of such guarantee.
The assets of the Account are the property of JHVLICO. The portion of the
Account's assets applicable to the policies may not be charged with liabilities
arising out of any other business JHVLICO may conduct.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
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 JHVLICO, which is taxed as a life insurance company under
the Internal Revenue Code. JHVLICO has the right to charge the Account any
federal income taxes, or provision for federal income taxes, attributable to
the operations of the Account or to the policies funded in the Account.
Currently, JHVLICO does not make a charge for income or other taxes. Charges
for state and local taxes, if any, attributable to the Account may also be
made.
Expenses: JHVLICO assumes mortality and expense risks of the variable life
insurance policies for which asset charges are deducted at an annual rate of
.60% of net assets (excluding policy loans) of the Account. In addition, a
monthly charge at varying levels for the cost of insurance is deducted from the
net assets of the Account.
JHVLICO makes certain deductions for administrative expenses and state premium
taxes from premium payments before amounts are transferred to the Account.
37
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 3--NET ASSETS
The net assets attributable to JHVLICO represent JHVLICO's funds deposited in
the Account. At its discretion, these amounts may be transferred by JHVLICO to
its general account.
NOTE 4--TRANSACTIONS WITH AFFILIATES
John Hancock acts as the distributor, principal underwriter and investment
advisor for the Fund.
Certain officers of the Account are officers and directors of JHVLICO, the Fund
or John Hancock.
NOTE 5--DETAILS OF INVESTMENT
The details of the shares owned and cost and value of investments in the
portfolios of the Fund at December 31, 1995 were as follows:
<TABLE>
<CAPTION>
Shares
Portfolio Owned Cost Value
--------- ---------- ------------ ------------
<S> <C> <C> <C>
Select Stock.............................. 6,543,480 $103,139,549 $113,649,478
Bond...................................... 5,566,616 54,653,090 56,377,102
International............................. 1,981,646 30,163,057 30,392,791
Money Market.............................. 1,968,401 19,684,014 19,684,014
Real Estate Equity........................ 1,902,059 21,767,182 22,246,849
Special Opportunities..................... 1,529,602 17,520,681 20,167,153
Stock..................................... 15,583,784 197,432,046 217,256,965
Short-Term U.S. Government................ 241,045 2,412,860 2,466,467
Managed................................... 19,116,115 244,207,400 262,405,591
---------- ------------ ------------
54,432,748 $690,979,879 $744,646,410
========== ============ ============
</TABLE>
Purchases, including reinvestment of dividend distributions and proceeds from
sales of shares in the portfolios of the Fund during 1995, were as follows:
<TABLE>
<CAPTION>
Portfolio Purchases Sales
--------- ------------ -----------
<S> <C> <C>
Select Stock.......................................... $ 49,568,131 $ 8,508,010
Bond.................................................. 18,755,232 6,821,624
International......................................... 11,419,611 6,302,715
Money Market.......................................... 30,725,098 28,234,079
Real Estate Equity.................................... 7,174,344 5,475,910
Special Opportunities................................. 13,145,725 826,762
Stock................................................. 66,187,098 11,538,389
Short-Term U.S. Government............................ 2,665,120 1,361,025
Managed............................................... 77,829,013 22,526,769
------------ -----------
$277,469,372 $91,595,283
============ ===========
</TABLE>
38
<PAGE>
REPORTS OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Policyholders
John Hancock Variable Life Account V
of John Hancock Variable Life Insurance Company
We have audited the accompanying statement of assets and liabilities of John
Hancock Variable Life Account V (the "Account") (comprising, respectively,
Select Stock, Bond, International, Money Market, Real Estate Equity, Special
Opportunities, Stock, Short-Term U.S. Government, and Managed Subaccounts) as
of December 31, 1995, and the related statements of operations and statements
of changes in net assets for each of the three years in the period then ended
for the Select Stock, Bond, International, Money Market, Real Estate Equity,
Stock, and Managed Subaccounts; the related statements of operations and
statements of changes in net assets for the year ended December 31, 1995 and
for the period from May 6, 1994 (commencement of operations) to December 31,
1994 for the Special Opportunities Subaccount; and the related statements of
operations and statements of changes in net assets for the year ended December
31, 1995 and for the period from May 1, 1994 (commencement of operations) to
December 31, 1994 for the Short-Term U.S. Government Subaccount. These
financial statements are the responsibility of the Account's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of each of the respective
subaccounts constituting John Hancock Variable Life Account V at December 31,
1995, and the results of their operations and the changes in their net assets
for each of the periods indicated, in conformity with generally accepted
accounting principles.
Ernst & Young LLP
Boston, Massachusetts
February 9, 1996
----------------
Board of Directors
John Hancock Variable Life Insurance Company
We have audited the accompanying statements of financial position of John
Hancock Variable Life Insurance Company as of December 31, 1995 and 1994, and
the related statements of operations and unassigned deficit and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of John Hancock Variable Life
Insurance Company at December 31, 1995 and 1994, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles for a stock life insurance company
wholly-owned by a mutual life insurance company and with reporting practices
prescribed or permitted by the Commonwealth of Massachusetts Division of
Insurance.
Ernst & Young LLP
Boston, Massachusetts
February 7, 1996
39
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
December 31
------------------
1995 1994
---- ----
(In millions)
<S> <C> <C>
Assets
Bonds--Note 7.............................................. $ 552.8 $ 458.3
Preferred stocks........................................... 5.0 5.3
Common stocks.............................................. 1.7 1.9
Investment in affiliates................................... 65.3 59.9
Mortgage loans on real estate--Note 7...................... 146.7 148.5
Real estate................................................ 36.4 27.8
Policy loans............................................... 61.8 47.3
Cash items:
Cash in banks............................................ 11.6 29.3
Temporary cash investments............................... 65.0 46.7
-------- --------
76.6 76.0
Premiums due and deferred.................................. 39.6 43.9
Investment income due and accrued.......................... 18.6 14.7
Other general account assets............................... 20.8 22.3
Assets held in separate accounts........................... 2,421.0 1,721.0
-------- --------
TOTAL ASSETS............................................... $3,446.3 $2,626.9
======== ========
Obligations and Stockholder's Equity
OBLIGATIONS:
Policy reserves.......................................... $ 671.1 $ 638.6
Federal income and other taxes payable--Note 1........... 14.2 17.3
Other accrued expenses................................... 79.9 22.8
Asset valuation reserve--Note 1.......................... 15.4 12.6
Obligations related to separate accounts................. 2,417.0 1,717.7
-------- --------
TOTAL OBLIGATIONS.......................................... 3,197.6 2,409.0
Stockholder's Equity--Notes 2 and 6
Common Stock, $50 par value; authorized 50,000 shares;
issued and outstanding 50,000 shares--1995; 20,000
shares--1994............................................ 2.5 25.0
Paid-in capital.......................................... 377.5 355.0
Unassigned deficit....................................... (131.3) (162.1)
-------- --------
TOTAL STOCKHOLDER'S EQUITY................................. 248.7 217.9
-------- --------
TOTAL OBLIGATIONS AND STOCKHOLDER'S EQUITY................. $3,446.3 $2,626.9
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
40
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND UNASSIGNED DEFICIT
<TABLE>
<CAPTION>
Year Ended December 31
------------------------
1995 1994
---- ----
(In millions)
<S> <C> <C>
Income
Premiums....................................... $ 570.9 $ 430.5
Net investment income--Note 4.................. 62.1 57.6
Other, net..................................... 85.7 95.5
----------- -----------
718.7 583.6
Benefits and Expenses
Payments to policyholders and beneficiaries.... 213.4 187.5
Additions to reserves to provide for future
payments to policyholders and beneficiaries... 282.4 185.3
Expenses of providing service to policyholders
and obtaining new insurance--Note 6........... 150.7 168.9
Cost of restructuring.......................... 0.0 3.0
State and miscellaneous taxes.................. 12.7 11.3
----------- -----------
659.2 556.0
----------- -----------
GAIN FROM OPERATIONS BEFORE FEDERAL INCOME
TAXES AND NET REALIZED CAPITAL GAINS........ 59.5 27.6
Federal income taxes--Note 1..................... 28.4 15.0
----------- -----------
GAIN FROM OPERATIONS BEFORE NET REALIZED
CAPITAL GAINS............................... 31.1 12.6
Net realized capital gains--Note 5............... 0.5 0.4
----------- -----------
NET INCOME................................... 31.6 13.0
Unassigned deficit at beginning of year.......... (162.1) (177.2)
Net unrealized capital losses and other adjust-
ments--Note 5................................... (3.0) (1.5)
Valuation reserve changes--Note 1................ 0.0 2.7
Change in separate account surplus............... 0.7 0.0
Other reserves and adjustments................... 1.5 0.9
----------- -----------
UNASSIGNED DEFICIT AT END OF YEAR............ $(131.3) $(162.1)
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
41
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31
-----------------------
1995 1994
---- ----
(In millions)
<S> <C> <C>
Cash flows from operating activities:
Insurance premiums................................. $ 574.0 $ 436.4
Net investment income.............................. 59.2 57.9
Benefits to policyholders and beneficiaries........ (198.3) (175.3)
Dividends paid to policyholders.................... (13.2) (11.9)
Insurance expenses and taxes....................... (161.5) (180.6)
Net transfers to separate accounts................. (257.4) (146.6)
Other, net......................................... 40.6 72.8
----------- -----------
NET CASH PROVIDED FROM OPERATIONS.............. 43.4 52.7
----------- -----------
Cash flows used in investing activities:
Bond purchases..................................... (172.5) (94.1)
Bond sales......................................... 18.9 23.1
Bond maturities and scheduled redemptions.......... 36.0 22.3
Bond prepayments................................... 20.6 24.7
Stock purchases.................................... (1.7) (1.5)
Proceeds from stock sales.......................... 1.4 1.2
Real estate purchases.............................. (16.2) (18.4)
Real estate sales.................................. 9.3 22.1
Other invested assets purchases.................... (0.4) (0.9)
Proceeds from the sale of other invested assets.... 0.3 1.3
Mortgage loans issued.............................. (19.8) (37.9)
Mortgage loan repayments........................... 21.1 35.2
Other, net......................................... 60.2 22.9
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES.......... (42.8) 0.0
----------- -----------
INCREASE IN CASH AND TEMPORARY CASH INVESTMENTS...... 0.6 52.7
Cash and temporary cash investments at beginning of
year................................................ 76.0 23.3
----------- -----------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF YEAR... $ 76.6 $ 76.0
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
42
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES
John Hancock Variable Life Insurance Company (the Company) is a wholly-owned
subsidiary of John Hancock Mutual Life Insurance Company (John Hancock). The
Company principally writes variable and universal life insurance policies.
Those policies primarily are marketed through John Hancock's sales
organization, which includes a career agency system composed of company owned,
unionized branch offices and independent general agencies. Policies also are
sold through various unaffilated securities broker-dealers and certain other
financial institutions. Currently, the Company writes business in all states
except New York.
The preparation of the financial statements of insurance companies requires
management to make estimates and assumptions that affect amounts reported in
the financial statements and accompanying notes. Such estimates and assumptions
could change in the future as more information becomes known, which could
impact the amounts reported and disclosed herein.
The significant accounting practices of the Company are as follows:
Basis of Presentation: The financial statements have been prepared on the basis
of accounting practices prescribed or permitted by the Commonwealth of
Massachusetts Division of Insurance and in conformity with the practices of the
National Association of Insurance Commissioners which are currently considered
generally accepted accounting principles for a stock life insurance company
wholly-owned by a mutual life insurance company. However, in April 1993, the
Financial Accounting Standard Board (FASB) issued Interpretation 40,
"Applicability of Generally Accepted Accounting Principles to Mutual Life
Insurance and Other Enterprises" (Interpretation). The Interpretation, as
amended, is effective for 1996 annual financial statements and thereafter, and
no longer will allow statutory-basis financial statements to be described as
being prepared in conformity with generally accepted accounting principles
(GAAP). Upon the effective date of the Interpretation, in order for their
financial statements to be described as being prepared in conformity with GAAP,
mutual life insurance companies will be required to adopt all applicable
authoritative GAAP pronouncements in any general-purpose financial statements
that they may issue. The Company has not quantified the effects of the
application of the Interpretation on its financial statements.
The Company has not yet determined whether for general purposes it will
continue to issue statutory-basis financial statements or statements adopting
all applicable authoritative GAAP pronouncements. If the Company decides that
its general-purpose financial statements will be prepared in accordance with
GAAP rather than statutory accounting practices, the financial statements
included herein would have to be restated to reflect all applicable
authoritative GAAP pronouncements, including Statement of Financial Accounting
Standards (SFAS) Nos. 60, 97, and 113.
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.
43
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
Valuation of Assets: General account investments are carried at amounts
determined on the following bases:
Bonds and stock values are carried as prescribed by the National
Association of Insurance Commissioners (NAIC): bonds generally at amortized
amounts or cost, preferred stocks generally at cost and common stocks at
market. The discount or premium on bonds is amortized using the interest
method.
Investments in affiliates are included on the statutory equity method.
Goodwill is amortized on a straight line basis over a ten year period.
Mortgage loans are carried at outstanding principal balance or amortized
cost.
Investment real estate is carried at depreciated cost, less encumbrances.
Depreciation on investment real estate is recorded on a straight line
basis.
Real estate acquired in satisfaction of debt and held for sale is carried
at the lower of cost or market as of the date of foreclosure.
Policy loans are carried at outstanding principal balance, not in excess of
policy cash surrender value.
Asset Valuation and Interest Maintenance Reserves: The Asset Valuation Reserve
(AVR) is computed in accordance with the prescribed NAIC formula and represents
a provision for possible fluctuations in the value of bonds, equity securities,
mortgage loans, real estate and other invested assets. Changes to the AVR are
charged or credited directly to the unassigned deficit.
The Company also records the NAIC prescribed Interest Maintenance Reserve (IMR)
that represents that portion of the after tax net accumulated unamortized
realized capital gains and losses on sales of fixed income securities,
principally bonds and mortgage loans attributable to changes in the general
level of interest rates. Such gains and losses are deferred and amortized into
income over the remaining expected lives of the investments sold. At December
31, 1995, the IMR, net of 1995 amortization of $1.2 million, amounted to $6.9
million, which is included in policy reserves. The corresponding 1994 amounts
were $1.1 million and $7.1 million, respectively.
Separate Accounts: Separate account assets (unit investment trusts valued at
market) and separate account obligations (principally policyholder account
values) are included as separate captions in the statements of financial
position. The change in separate account surplus is recognized through direct
charges or credits to unassigned deficit.
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.
44
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
The methods and assumptions utilized by the Company in estimating its fair
value disclosures for financial instruments are as follows:
The carrying amounts reported in the statement of financial position for
cash and temporary cash investments approximate their fair values.
Fair values for public bonds are obtained from an independent pricing
service. Fair values for private placement securities and publicly traded
bonds not provided by the independent pricing service are estimated by the
Company by discounting expected future cash flows using current market
rates applicable to the yield, credit quality and maturity of the
investments. The fair values for common and preferred stocks, other than
its subsidiary investments, which are carried at equity values, are based
on quoted market prices.
The fair value for mortgage loans is estimated using discounted cash flow
analyses using interest rates adjusted to reflect the credit
characteristics of the loans. Mortgage loans with similar characteristics
and credit risks are aggregated into qualitative categories for purposes of
the fair value calculations.
The carrying amount in the statement of financial position for policy loans
approximates their fair value.
The fair value for outstanding commitments to purchase long-term bonds is
estimated using a discounted cash flow method incorporating adjustments for
the difference in the level of interest rates between the dates the
commitments were made and December 31, 1995. The fair value for commitments
to purchase real estate approximates the amount of the initial commitment.
Capital Gains and Losses: Realized capital gains and losses, net of taxes and
amounts transferred to the IMR, are included in net gain or loss. Unrealized
gains and losses, which consist of market value and book value adjustments, are
shown as adjustments to the unassigned deficit.
Policy Reserves: Reserves for variable life insurance policies are maintained
principally on the modified preliminary term method using the 1958 and 1980
Commissioner's Standard Ordinary (CSO) mortality tables, with an assumed
interest rate of 4% for policies issued prior to May 1, 1983 and 4-1/2% for
policies issued on or thereafter. Reserves for single premium policies are
determined by the net single premium method using the 1958 CSO mortality table,
with an assumed interest rate of 4%. Reserves for universal life policies
issued prior to 1985 are equal to the gross account value which at all times
exceeds minimum statutory requirements. Reserves for universal life policies
issued from 1985 through 1988 are maintained at the greater of the
Commissioner's Reserve Valuation Method (CRVM) using the 1958 CSO mortality
table, with 4-1/2% interest or the cash surrender value. Reserves for universal
life policies issued after 1988 and for flexible variable policies are
maintained using the greater of the cash surrender value or the CRVM method
with the 1980 CSO mortality table and 5-1/2% interest for policies issued from
1988 through 1992; 5% interest for policies issued in 1993 and 1994; and 4-1/2%
interest for policies issued in 1995.
Federal Income Taxes: Federal income taxes are provided in the financial
statements based on amounts determined to be payable as a result of operations
within the current accounting period. The operations of the Company are
consolidated with John Hancock, its Parent, in filing a consolidated federal
income tax return for the affiliated group. The federal income taxes of the
Company are allocated on a separate return basis with certain adjustments. The
Company made payments of $32.2 million in 1995 and received tax benefits of
$7.0 million in 1994.
45
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
Income before taxes differs from taxable income principally due to tax-exempt
investment income, the limitation placed on the tax deductibility of
policyholder dividends, accelerated depreciation, differences in policy
reserves for tax return and financial statement purposes, capitalization of
policy acquisition expenses for tax purposes and other adjustments prescribed
by the Internal Revenue Code.
No provision is generally recognized for timing differences that may exist
between financial reporting and taxable income or loss.
Adjustments to Policy Reserves: From time to time, the Company finds it
appropriate to modify certain required policy reserves because of changes in
actuarial assumptions or increased benefits. Reserve modifications resulting
from such determinations are recorded directly to the unassigned deficit.
During 1994, the Company refined certain actuarial assumptions inherent in the
calculation of preconversion yearly renewable term and gross premium deficiency
reserves, resulting in a $2.7 million decrease in the unassigned deficit at
December 31, 1994.
Reinsurance: Premiums, commissions, expense reimbursements, benefits and
reserves related to reinsured business are accounted for on bases consistent
with those used in accounting for the original policies issued and the terms of
the reinsurance contracts. Premiums ceded to other companies have been reported
as a reduction of premium income. Amounts applicable to reinsurance ceded for
future policy benefits, unearned premium reserves and claim liabilities have
been reported as reductions of these items.
Reclassifications: Certain 1994 amounts have been reclassified to permit
comparison with the corresponding 1995 amounts.
NOTE 2--CAPITALIZATION
In prior years, the Company received capital contributions from John Hancock,
with a portion of the contributed capital being credited to common stock,
although no additional shares were issued. This practice, which is acceptable
to statutory authorities, has the effect of stating the carrying value of
issued shares of common stock at amounts other than $50 per share par value
with the offset reflected in paid-in capital.
At December 31, 1994, the Company had 50,000 shares authorized with 20,000
shares issued and outstanding. On February 16, 1995, the Company issued the
remaining 30,000 shares to John Hancock and transferred $22.5 million from
common stock to paid-in capital. The par value per share is $50.
NOTE 3--ACQUISITION
On June 23, 1993, the Company acquired all of the outstanding shares of stock
of Colonial Penn Annuity and Life Insurance Company (CPAL) from Colonial Penn
Life Insurance Company for an aggregate purchase price of approximately $42.5
million. At the date of acquisition, assets of CPAL were approximately $648.5
million, consisting principally of cash and temporary cash investments and
liabilities were approximately $635.2 million, consisting principally of
reserves related to a block of interest sensitive single-premium whole life
insurance business assumed by CPAL from Charter National Life Insurance Company
46
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 3--ACQUISITION--CONTINUED
(Charter). The purchase price includes contingent payments of up to
approximately $7.3 million payable between 1994 and 1998 based on the actual
lapse experience of the business in force on June 23, 1993. The Company made
contingent payments to CPAL of $1.5 million during 1995 and 1994. Unamortized
goodwill at December 31, 1995 was $17.1 million and is being amortized over ten
years on a straight-line basis.
On June 24, 1993, the Company contributed $24.6 million in additional capital
to CPAL. CPAL was renamed John Hancock Life Insurance Company of America
(JHLICOA) on July 7, 1993. JHLICOA manages the business assumed from Charter
and does not currently issue new business.
NOTE 4--NET INVESTMENT INCOME
Investment income has been reduced by the following amounts:
<TABLE>
<CAPTION>
1995 1994
------ ------
(In millions)
<S> <C> <C>
Investment expenses............................................ $ 5.1 $ 3.4
Interest expense............................................... 0.0 0.2
Depreciation expense........................................... 1.0 0.6
Investment taxes............................................... 0.5 0.2
------ ------
$ 6.6 $ 4.4
====== ======
NOTE 5--NET CAPITAL GAINS (LOSSES) AND OTHER ADJUSTMENTS
Net realized capital gains consist of the following items:
<CAPTION>
1995 1994
------ ------
(In millions)
<S> <C> <C>
Gains (losses) from asset sales................................ $ 4.0 $ (1.6)
Capital gains (tax) credit..................................... (2.5) 2.5
Net capital gains transferred to IMR........................... (1.0) (0.5)
------ ------
Net Realized Capital Gains................................... $ 0.5 $ 0.4
====== ======
Net unrealized capital losses and other adjustments consist of the following
items:
<CAPTION>
1995 1994
------ ------
(In millions)
<S> <C> <C>
Gains (losses) from changes in security values and book value
adjustments................................................... $ (0.2) $ 0.7
Increase in asset valuation reserve............................ (2.8) (2.2)
------ ------
Net Unrealized Capital Losses and Other Adjustments.......... $ (3.0) $ (1.5)
====== ======
</TABLE>
47
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 6--TRANSACTIONS WITH PARENT
The Company's Parent provides the Company with personnel, property and
facilities in carrying out certain of its corporate functions. The Parent
annually determines a fee for these services and facilities based on a number
of criteria which were revised in 1995 and 1994 to reflect continuing changes
in the Company's operations. The amount of the service fee charged to the
Company was $97.9 million and $117.0 million in 1995 and 1994, respectively,
which has been included in insurance and investment expenses. The Parent has
guaranteed that, if necessary, it will make additional capital contributions to
prevent the Company's stockholder's equity from declining below $1.0 million.
The service fee charged to the Company by the Parent includes $1.8 million and
$6.0 million in 1995 and 1994, respectively, representing the portion of the
provision for retiree benefit plans determined under the accrual method,
including a provision for the 1993 transition liability which is being
amortized over twenty years, that was allocated to the Company.
Effective January 1, 1994, the Company entered into a modified coinsurance
agreement with John Hancock to reinsure 50% of 1994 issues of flexible premium
variable life insurance and scheduled premium variable life insurance policies.
In connection with this agreement, John Hancock transferred $32.7 million and
$29.5 million of cash for tax, commission, and expense allowances to the
Company, which increased the Company's net gain from operations by $20.3
million and $26.9 million in 1995 and 1994, respectively.
NOTE 7--INVESTMENTS
The statement value and fair value of bonds are shown below:
<TABLE>
<CAPTION>
Gross Gross
Statement Unrealized Unrealized Fair
Year Ended December 31, 1995 Value Gains Losses Value
---------------------------- --------- ---------- ---------- ------
(In millions)
<S> <C> <C> <C> <C>
U.S. treasury securities and obligations
of U.S. government corporations and
agencies................................. $ 89.0 $ 0.5 $ 0.0 $ 89.5
Obligations of states and political
subdivisions............................. 11.4 1.1 0.0 12.5
Debt securities issued by foreign
governments.............................. 1.3 0.2 0.0 1.5
Corporate securities...................... 445.6 44.1 1.6 488.1
Mortgage-backed securities................ 5.5 0.3 0.1 5.7
------ ----- ----- ------
Totals.................................. $552.8 $46.2 $ 1.7 $597.3
====== ===== ===== ======
<CAPTION>
Gross Gross
Statement Unrealized Unrealized Fair
Year Ended December 31, 1994 Value Gains Losses Value
---------------------------- --------- ---------- ---------- ------
(In millions)
<S> <C> <C> <C> <C>
U.S. treasury securities and obligations
of U.S. government corporations and
agencies................................. $ 10.4 $ 0.0 $ 0.5 $ 9.9
Obligations of states and political
subdivisions............................. 11.6 0.2 0.1 11.7
Debt securities issued by foreign
governments.............................. 1.3 0.0 0.0 1.3
Corporate securities...................... 431.9 10.5 9.9 432.5
Mortgage-backed securities................ 3.1 0.1 0.1 3.1
------ ----- ----- ------
Totals.................................. $458.3 $10.8 $10.6 $458.5
====== ===== ===== ======
</TABLE>
48
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 7--INVESTMENTS--CONTINUED
The statement value and fair value of bonds at December 31, 1995, by
contractual maturity, are shown below. Maturities will differ from contractual
maturities because eligible borrowers may exercise their right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Statement Fair
Value Value
--------- ------
(In millions)
<S> <C> <C>
Due in one year or less....................................... $ 18.7 $ 19.8
Due after one year through five years......................... 266.8 278.6
Due after five years through ten years........................ 153.1 167.4
Due after ten years........................................... 108.7 125.8
------ ------
547.3 591.6
Mortgage-backed securities.................................... 5.5 5.7
------ ------
$552.8 $597.3
====== ======
</TABLE>
Proceeds from sales of bonds during 1995 and 1994 were $18.9 million and $23.1
million, respectively. Gross gains of $0.2 million in 1995 and $0.0 million in
1994 and gross losses of $0.1 million in 1995 and $0.1 million in 1994 were
realized on these transactions.
The cost of common stocks was $0.1 million and $1.4 million at December 31,
1995 and 1994, respectively. Gross unrealized appreciation on common stocks
totaled $1.7 million, and gross unrealized depreciation totaled $0.1 million at
December 31, 1995. The fair value of preferred stock totaled $5.2 million at
December 31, 1995 and $5.0 million at December 31, 1994.
Mortgage loans with outstanding principal balances of $1.1 million and bonds
with amortized cost of $4.0 million were nonincome producing for the twelve
months ended December 31, 1995.
At December 31, 1995, the mortgage loan portfolio was diversified by geographic
region and specific collateral property type as displayed below. The Company
controls credit risk through credit approvals, limits and monitoring
procedures.
<TABLE>
<CAPTION>
Statement
Property Type Value
------------- -------------
(In millions)
<S> <C>
Apartments.............. $ 52.1
Hotels.................. 4.5
Industrial.............. 25.4
Office buildings........ 12.6
Retail.................. 20.3
Agricultural............ 19.8
Other................... 12.0
------
$146.7
======
</TABLE>
<TABLE>
<CAPTION>
Geographic Statement
Concentration Value
------------- -------------
(In millions)
<S> <C>
East North Central...... $ 30.1
East South Central...... 1.9
Middle Atlantic......... 10.5
Mountain................ 11.8
New England............. 19.8
Pacific................. 41.6
South Atlantic.......... 31.0
------
$146.7
======
</TABLE>
49
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 7--INVESTMENTS--CONTINUED
At December 31, 1995, the fair values of the commercial and agricultural
mortgage loans portfolios were $132.1 million and $22.2 million, respectively.
The corresponding amounts as of December 31, 1994 were approximately $118.8
million and $27.3 million, respectively.
NOTE 8--REINSURANCE
The Company cedes business to reinsurers to share risks under variable life,
universal life and flexible variable life insurance policies for the purpose of
reducing exposure to large losses. Premiums, benefits and reserves ceded to
reinsurers in 1995 were $72.4 million, $8.7 million, and $12.1 million,
respectively. The corresponding amounts in 1994 were $67.5 million, $12.3
million, and $16.3 million, respectively.
To the extent that an assuming reinsurance company is unable to meet its
obligations under a reinsurance agreement, the Company remains liable as the
direct insurer on all risks reinsured.
NOTE 9--POLICYHOLDERS' RESERVES AND BENEFICIARIES' FUND
The Company's annuity reserves and deposit fund liabilities that are subject to
discretionary withdrawal (with adjustment), subject to discretionary withdrawal
(without adjustment), and not subject to discretionary withdrawal provisions
are summarized as follows:
<TABLE>
<CAPTION>
December 31, 1995 Percent
----------------- -------
(In millions)
<S> <C> <C>
Subject to discretionary withdrawal (with
adjustment):
With market value adjustment....................... $ 0.0 0.0%
At book value less surrender charge................ 115.4 99.1
------ -----
Total with adjustment.............................. 115.4 99.1
Subject to discretionary withdrawal (without
adjustment) at book value......................... 1.0 0.9
Not subject to discretionary withdrawal.............. 0.0 0.0
------ -----
Total annuity reserves and deposit liabilities....... $116.4 100.0%
====== =====
</TABLE>
NOTE 10--COMMITMENTS AND CONTINGENCIES
The Company has extended commitments to purchase long-term bonds and issue real
estate mortgages totaling $16.6 million and $5.4 million, respectively, at
December 31, 1995. The Company monitors the creditworthiness of borrowers under
long-term bond commitments and requires collateral as deemed necessary. If
funded, loans related to real estate mortgages would be fully collateralized by
the related properties. The fair value of the commitments described above is
$23.8 million at December 31, 1995. The majority of these commitments expire in
1996.
In the normal course of its business operations, the Company is involved in
litigation from time to time with claimants, beneficiaries and others, and a
number of litigation matters were pending as of December 31, 1995. It is the
opinion of management, after consultation with counsel, that the ultimate
liability with respect to these claims, if any, will not materially affect the
financial position of the Company.
50
<PAGE>
APPENDIX--OTHER POLICY PROVISIONS
SETTLEMENT PROVISIONS
In place of a single payment, an amount of $1,000 or more payable under the
Policy as a benefit or as the Surrender Value, if any, may be left with JHVLICO
under the terms of a supplementary agreement. The agreement will be issued when
the proceeds are applied through the election of any one of the options below.
The following options are subject to the restrictions and limitations stated
in the Policy.
Option 1--Interest Income at the declared rate but not less than 3-1/2% a
year on proceeds held on deposit.
Option 2A--Income of a Specified Amount, with payments each year totaling
at least 1/12th of the proceeds, until the proceeds, with interest credited
at the declared rate but not less than 3-1/2% a year on unpaid balances,
are fully paid.
Option 2B--Income for a Fixed Period, with each payment as declared.
Option 3--Life Income with Payments for a Guaranteed Period.
Option 4--Life Income without Refund at the death of the Payee of any
part of the proceeds applied. Only one payment is made if the Payee dies
before the second payment is due.
Option 5--Life Income with Cash Refund at the death of the Payee of the
amount, if any, equal to the proceeds applied less the sum of all income
payments made.
No election of an option may provide for income payments of less than $50.
Other options may be arranged with JHVLICO's approval including optional
methods of settlement available from John Hancock.
ADDITIONAL INSURANCE BENEFITS
On payment of an additional premium and subject to certain age and insurance
underwriting requirements, certain additional provisions, such as an Accidental
Death Benefit, which are subject to the restrictions and limitations set forth
therein, may be included in a Policy.
GENERAL PROVISIONS
BENEFICIARY. The Beneficiary will be as shown in the application for the
Policy, unless thereafter changed by the Owner in accordance with the terms of
the Policy. If the insured dies and there is no surviving Beneficiary, the
Owner will be the Beneficiary, but if the insured was the Owner, the Owner's
estate will be the Beneficiary.
ASSIGNMENT. The Owner's interest in the Policy may be assigned without the
consent of any revocable Beneficiary. JHVLICO will not be on notice of any
assignment unless it is in writing and until a duplicate of the original
assignment has been filed at JHVLICO's Home Office. JHVLICO assumes no
responsibility for the validity or sufficiency of any assignment.
MISSTATEMENT OF AGE OR SEX. If the age or sex of the insured has been
misstated, JHVLICO will adjust the benefits payable to reflect the correct age
or sex.
51
<PAGE>
SUICIDE. If the insured commits suicide, while sane or insane, within 2 years
(except where state law requires a shorter period) from the issue date shown in
the Policy, JHVLICO will pay in place of all other benefits an amount equal to
the premium paid less any Indebtedness on the date of death and any
withdrawals. If the suicide is more than 2 years from the issue date but within
2 years of any increase in death benefit due to payment of any premium in
excess of the Required Premium or change in Death Benefit Option the benefits
payable will not include the increased benefit but will include the excess
premium.
AVIATION ACTIVITY EXCLUSION. If the insured dies in an aviation accident
while a crew member on other than a commercial aircraft and the Policy provides
at the request of the Owner for a limited benefit in such situation, JHVLICO
will pay in place of all other benefits an amount equal to the greater of the
premium paid or the Surrender Value, less any Indebtedness.
INCONTESTABILITY. The Policy, except for any provision for a disability
benefit or additional benefits provisions added after issue, shall be
incontestable other than for nonpayment of premiums after it has been in force
during the lifetime of the insured for 2 years from its issue date. If,
however, evidence of insurability is required with respect to any increase in
death benefit, it shall be incontestable after the increase has been in force
for 2 years from the increase date.
DEFERRAL OF DETERMINATION AND PAYMENTS. If the Policy is not on a fixed non-
forfeiture option, payment of any death, surrender, withdrawal or loan proceeds
will ordinarily be made within seven days after receipt at JHVLICO's Home
Office of all documents required for any such payment. Approximately two-thirds
of the claims for death proceeds which are made within two years after the date
of issue of the Policy will be investigated to determine whether the claim
should be contested and payment of these claims will therefore be delayed.
JHVLICO may defer any transaction requiring a determination of Account Value
for any period during which: (1) the disposal or valuation of the Account's
assets is not reasonably practicable because the New York Stock Exchange is
closed or conditions are such that, under the Commission's rules and
regulations, trading is restricted or an emergency is deemed to exist or (2)
the Commission by order permits postponement of such actions for the protection
of JHVLICO Owners.
Under a Policy being continued under a fixed non-forfeiture option, payment
of the cash value or loan proceeds may be deferred by JHVLICO for up to six
months after receipt of a request therefor. Interest will be accrued at an
annual rate of 3-1/2% if such a deferment extends beyond 29 days.
The foregoing description of Policy provisions is qualified by reference to
the specimen Policy which has been filed as an exhibit to the Registration
Statement.
52
<PAGE>
APPENDIX--ILLUSTRATION OF DEATH BENEFITS, ACCOUNT VALUES,
SURRENDER VALUES AND ACCUMULATED PREMIUMS
The following tables illustrate the changes in death benefit, Account Value
and Surrender Value of the Policy, disregarding any Policy loans. Each table
separately illustrates the operation of a Policy for an identified issue age,
premium schedule and Sum Insured and shows how the death benefit, Account Value
and Surrender Value (reflecting the deduction of surrender charges, if any) may
vary over an extended period of time assuming hypothetical rates of investment
return (i.e., investment income and capital gains and losses, realized or
unrealized) equivalent to constant gross annual rates of 0%, 6% and 12%. The
tables are based on given annual premiums paid at the beginning of each Policy
year and will assist in a comparison of the values set forth in the tables with
those under other variable life insurance policies which may be issued by
JHVLICO or other companies. Tables are provided for each of the three available
death benefit options. The values for a Policy would be different from those
shown if premiums are paid in different amounts or at different times or if the
actual gross rates of investment return average 0%, 6% or 12% over a period of
years, but nevertheless fluctuated above or below the average for individual
Policy years.
The amounts shown for the death benefit, Account Value and Surrender Value
are as of the end of each Policy year. The tables headed "Using Current
Charges" assume that current monthly rates for insurance and current charges
for expenses (including JHVLICO's intended waiver after ten Policy years of the
sales charge deducted from certain premiums and its intended reduction in the
tenth Policy year in the insurance charge deducted monthly from Account Value)
will be made in each year illustrated. The tables headed "Using Maximum
Charges" assumes that the maximum (guaranteed) charge will be made for the
monthly rates for insurance and for expense charges in each year illustrated
without waivers or reductions. The amounts shown in all tables reflect an
average asset charge for the daily investment advisory expense charges to the
Portfolios of the Fund (equivalent to an effective annual rate of .53%) and an
assumed average asset charge for the annual nonadvisory operating expenses of
each Portfolio of the Fund (equivalent to an effective annual rate of .15%).
For a description of expenses charged to the Portfolios, including the
reimbursement of any Portfolio for annual non-advisory operating expenses in
excess of an effective annual rate of .25%, a continuing obligation of the
Fund's investment adviser, see the attached prospectus for the Fund. The
charges for the daily investment management fee and the annual non-advisory
operating expenses are based on the hypothetical assumption that Policy values
are allocated equally among the variable subaccounts. The actual charges and
expenses associated with any Policy will vary depending upon the actual
allocation of Policy values among subaccounts.
The tables reflect that no charge is currently made to the Account for
Federal income taxes. However, JHVLICO reserves the right to make such a charge
in the future and any charge would require higher rates of investment return in
order to produce the same Policy values.
The second column of each table shows the amount to which the total premiums
paid to the end of a Policy year during the premium paying period would
accumulate if an amount equal to those premiums were invested to earn interest,
after taxes, at 5% compounded annually.
JHVLICO will furnish upon request a comparable illustration reflecting the
proposed insured's age, sex, underwriting risk classification and the Sum
Insured at issue or premium amount requested, and assuming annual premiums and
that the proposed insured is not in a substandard underwriting risk
classification.
53
<PAGE>
DEATH BENEFIT OPTION 1: --LEVEL DEATH BENEFIT
ILLUSTRATION ASSUMES CURRENT CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK
SUM INSURED AT ISSUE (GUARANTEED DEATH BENEFIT): $100,000
$900 BASE POLICY PREMIUM (1)
<TABLE>
<CAPTION>
Death Benefit(3) Account Value(3) Surrender Value(3)
-------------------------------- -------------------------------- --------------------------------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of: Annual Investment Return of: Annual Investment Return of:
Policy At 5% Interest -------------------------------- -------------------------------- --------------------------------
Year Per Year(2) 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
- ------ -------------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 945 100,000 100,000 100,000 324 357 390 0 0 0
2 1,937 100,000 100,000 100,000 874 969 1,067 304 399 497
3 2,979 100,000 100,000 100,000 1,408 1,599 1,806 703 894 1,101
4 4,073 100,000 100,000 100,000 1,925 2,248 2,612 1,085 1,408 1,772
5 5,222 100,000 100,000 100,000 2,422 2,915 3,491 1,747 2,240 2,816
6 6,428 100,000 100,000 100,000 2,900 3,599 4,450 2,090 2,789 3,640
7 7,694 100,000 100,000 100,000 3,356 4,300 5,495 2,546 3,490 4,685
8 9,024 100,000 100,000 100,000 3,790 5,018 6,635 3,070 4,298 5,915
9 10,420 100,000 100,000 100,000 4,199 5,750 7,879 3,569 5,120 7,249
10 11,886 100,000 100,000 100,000 4,595 6,512 9,257 4,055 5,972 8,717
11 13,425 100,000 100,000 100,000 5,011 7,340 10,817 4,561 6,890 10,367
12 15,042 100,000 100,000 100,000 5,402 8,189 12,532 5,087 7,874 12,217
13 16,739 100,000 100,000 100,000 5,768 9,061 14,416 5,588 8,881 14,236
14 18,521 100,000 100,000 100,000 6,107 9,955 16,491 6,107 9,955 16,491
15 20,392 100,000 100,000 100,000 6,417 10,871 18,777 6,417 10,871 18,777
16 22,356 100,000 100,000 100,000 6,697 11,809 21,296 6,697 11,809 21,296
17 24,419 100,000 100,000 100,000 6,937 12,761 24,071 6,937 12,761 24,071
18 26,585 100,000 100,000 100,000 7,132 13,724 27,128 7,132 13,724 27,128
19 28,859 100,000 100,000 100,000 7,276 14,692 30,497 7,276 14,692 30,497
20 31,247 100,000 100,000 100,000 7,363 15,663 34,216 7,363 15,663 34,216
25 45,102 100,000 100,000 100,000 6,718 20,378 59,759 6,718 20,378 59,759
30 62,785 100,000 100,000 113,336 3,349 24,174 103,587 3,349 24,174 103,587
35 85,353 100,000 100,000 184,056 0 25,039 176,162 0 25,039 176,162
40 141,828 100,000 100,000 280,378 0 41,908 289,812 0 41,908 289,812
45 213,905 100,000 100,000 455,864 0 38,476 479,883 0 38,476 479,883
</TABLE>
- --------
(1) Assumes annual premium payments of $900 per year until the premium
recalculation at age 70 and annual recalculated premium amounts thereafter.
If premiums are paid more frequently than annually, the above values shown
would be affected.
(2) Assumes payment of recalculated annual premium amounts of $5,669 after age
70. As indicated in note (3) below, the actual recalculated premium may be
lower or higher than this amount.
(3) Assumes payment of recalculated premiums after age 70 in annual amounts of
$8,404 at 0%, $5,669 at 6% and $0 at 12%, subject to any maximums required
to maintain the Policy's status for federal income tax purposes.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT
RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY
THE OWNER. THE DEATH BENEFIT, ACCOUNT VALUE AND SURRENDER VALUE FOR A POLICY
WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT
RETURN AVERAGE 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE
OR BELOW THE AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE
MADE THAT THESE HYPOTHETICAL INVESTMENT RESULTS CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
54
<PAGE>
DEATH BENEFIT OPTION 1: LEVEL DEATH BENEFIT ILLUSTRATION ASSUMES GUARANTEED
CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK
SUM INSURED AT ISSUE (GUARANTEED DEATH BENEFIT): $100,000
$900 BASE POLICY PREMIUM (1)
<TABLE>
<CAPTION>
Death Benefit(3) Account Value(3) Surrender Value(3)
-------------------------------- -------------------------------- --------------------------------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of: Annual Investment Return of: Annual Investment Return of:
Policy At 5% Interest -------------------------------- -------------------------------- --------------------------------
Year Per Year(2) 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
- ------ -------------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 945 100,000 100,000 100,000 276 308 339 0 0 0
2 1,937 100,000 100,000 100,000 780 868 960 10 98 190
3 2,979 100,000 100,000 100,000 1,267 1,444 1,637 362 539 732
4 4,073 100,000 100,000 100,000 1,737 2,037 2,374 697 997 1,334
5 5,222 100,000 100,000 100,000 2,189 2,643 3,176 1,014 1,468 2,001
6 6,428 100,000 100,000 100,000 2,621 3,266 4,050 1,311 1,956 2,740
7 7,694 100,000 100,000 100,000 3,032 3,901 5,001 1,822 2,691 3,791
8 9,024 100,000 100,000 100,000 3,422 4,549 6,037 2,302 3,429 4,917
9 10,420 100,000 100,000 100,000 3,787 5,209 7,165 2,857 4,279 6,235
10 11,886 100,000 100,000 100,000 4,129 5,881 8,395 3,589 5,341 7,855
11 13,425 100,000 100,000 100,000 4,444 6,563 9,735 3,994 6,113 9,285
12 15,042 100,000 100,000 100,000 4,730 7,253 11,196 4,415 6,938 10,881
13 16,739 100,000 100,000 100,000 4,987 7,950 12,791 4,807 7,770 12,611
14 18,521 100,000 100,000 100,000 5,212 8,654 14,533 5,212 8,654 14,533
15 20,392 100,000 100,000 100,000 5,402 9,361 16,437 5,402 9,361 16,437
16 22,356 100,000 100,000 100,000 5,556 10,070 18,518 5,556 10,070 18,518
17 24,419 100,000 100,000 100,000 5,668 10,775 20,794 5,668 10,775 20,794
18 26,585 100,000 100,000 100,000 5,730 11,470 23,281 5,730 11,470 23,281
19 28,859 100,000 100,000 100,000 5,740 12,151 26,003 5,740 12,151 26,003
20 31,247 100,000 100,000 100,000 5,687 12,808 28,981 5,687 12,808 28,981
25 45,102 100,000 100,000 100,000 4,260 15,502 48,878 4,260 15,502 48,878
30 62,785 100,000 100,000 100,000 0 16,137 81,951 0 16,137 81,951
35 85,353 100,000 100,000 143,628 0 11,746 136,975 0 11,746 136,975
40 150,250 100,000 100,000 213,502 0 17,618 219,650 0 17,618 219,650
45 233,078 100,000 100,000 339,199 0 0 355,463 0 0 355,463
</TABLE>
- --------
(1) Assumes annual premium payments of $900 per year until the premium
recalculation at age 70 and annual recalculated premium amounts thereafter.
If premiums are paid more frequently than annually, the above values shown
would be affected.
(2) Assumes payment of recalculated annual premium amounts of $7,121 after age
70. As indicated in note (3) below, the actual recalculated premium may be
lower or higher than this amount.
(3) Assumes payment of recalculated premiums after age 70 in annual amounts of
$8,404 at 0%, $7,121 at 6% and $0 at 12%, subject to any maximums required
to maintain the Policy's status for federal income tax purposes.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT
RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY
THE OWNER. THE DEATH BENEFIT, ACCOUNT VALUE AND SURRENDER VALUE FOR A POLICY
WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT
RETURN AVERAGE 0%, 5% OR 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE
OR BELOW THE AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE
MADE THAT THESE HYPOTHETICAL INVESTMENT RESULTS CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
55
<PAGE>
DEATH BENEFIT OPTION 2: VARIABLE DEATH BENEFIT
ILLUSTRATION ASSUMES CURRENT CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK
SUM INSURED AT ISSUE (GUARANTEED DEATH BENEFIT): $100,000
$900 BASE POLICY PREMIUM (1)
<TABLE>
<CAPTION>
Death Benefit(3) Account Value(3) Surrender Value(3)
-------------------------------- -------------------------------- --------------------------------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of: Annual Investment Return of: Annual Investment Return of:
Policy At 5% Interest -------------------------------- -------------------------------- --------------------------------
Year Per Year(2) 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
- ------ -------------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 945 100,000 100,000 100,000 324 357 390 0 0 0
2 1,937 100,000 100,000 100,000 874 969 1,067 304 399 497
3 2,979 100,000 100,000 100,000 1,408 1,599 1,806 703 894 1,101
4 4,073 100,000 100,000 100,000 1,925 2,248 2,612 1,085 1,408 1,772
5 5,222 100,000 100,000 100,000 2,422 2,915 3,491 1,747 2,240 2,816
6 6,428 100,000 100,000 100,000 2,900 3,599 4,450 2,090 2,789 3,640
7 7,694 100,000 100,000 100,000 3,356 4,300 5,495 2,546 3,490 4,685
8 9,024 100,000 100,000 100,000 3,790 5,018 6,635 3,070 4,298 5,915
9 10,420 100,000 100,000 100,000 4,199 5,750 7,879 3,569 5,120 7,249
10 11,886 100,000 100,000 100,000 4,595 6,512 9,257 4,055 5,972 8,717
11 13,425 100,000 100,000 100,000 5,011 7,340 10,817 4,561 6,890 10,367
12 15,042 100,000 100,000 100,000 5,402 8,189 12,532 5,087 7,874 12,217
13 16,739 100,000 100,000 100,000 5,768 9,061 14,416 5,588 8,881 14,236
14 18,521 100,000 100,000 100,000 6,107 9,955 16,491 6,107 9,955 16,491
15 20,392 100,000 100,000 100,000 6,417 10,871 18,777 6,417 10,871 18,777
16 22,356 100,000 100,000 100,000 6,697 11,809 21,296 6,697 11,809 21,296
17 24,419 100,000 100,000 100,429 6,937 12,761 24,067 6,937 12,761 24,067
18 26,585 100,000 100,000 101,583 7,132 13,724 27,110 7,132 13,724 27,110
19 28,859 100,000 100,000 102,974 7,276 14,692 30,455 7,276 14,692 30,455
20 31,247 100,000 100,000 104,634 7,363 15,663 34,130 7,363 15,663 34,130
25 45,102 100,000 100,000 118,228 6,718 20,378 58,815 6,718 20,378 58,815
30 62,785 100,000 100,000 145,213 3,349 24,174 98,913 3,349 24,174 98,913
35 85,353 100,000 100,000 195,019 0 25,039 164,363 0 25,039 164,363
40 141,828 100,000 108,742 271,051 0 40,240 268,004 0 40,240 268,004
45 213,905 100,000 100,000 420,999 0 35,231 441,005 0 35,231 441,005
</TABLE>
- --------
(1) Assumes annual premium payments of $900 per year until the premium
recalculation at age 70 and annual recalculated premium amounts thereafter.
If premiums are paid more frequently than annually, the above values shown
would be affected.
(2) Assumes payment of recalculated annual premium amounts of $5,669 after age
70. As indicated in note (3) below, the actual recalculated premium may be
lower or higher than this amount.
(3) Assumes payment of recalculated premiums after age 70 in annual amounts of
$8,404 at 0%, $5,669 at 6% and $0 at 12%, subject to any maximum required
to maintain the Policy's status for federal income tax purposes.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT
RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY
THE OWNER. THE DEATH BENEFIT, ACCOUNT VALUE AND SURRENDER VALUE FOR A POLICY
WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT
RETURN AVERAGE 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE
OR BELOW THE AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE
MADE THAT THESE HYPOTHETICAL INVESTMENT RESULTS CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
56
<PAGE>
DEATH BENEFIT OPTION 2: VARIABLE DEATH BENEFIT ILLUSTRATION ASSUMES GUARANTEED
CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK SUM INSURED AT ISSUE
(GUARANTEED DEATH BENEFIT): $100,000 $900 BASE POLICY PREMIUM (1)
<TABLE>
<CAPTION>
Death Benefit(3) Account Value(3) Surrender Value(3)
-------------------------------- -------------------------------- --------------------------------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of: Annual Investment Return of: Annual Investment Return of:
Policy At 5% Interest -------------------------------- -------------------------------- --------------------------------
Year Per Year(2) 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
- ------ -------------- --------- -------- --------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 945 100,000 100,000 100,000 276 308 339 0 0 0
2 1,937 100,000 100,000 100,000 780 868 960 10 98 190
3 2,979 100,000 100,000 100,000 1,267 1,444 1,637 362 539 732
4 4,073 100,000 100,000 100,000 1,737 2,037 2,374 697 997 1,334
5 5,222 100,000 100,000 100,000 2,189 2,643 3,176 1,014 1,468 2,001
6 6,428 100,000 100,000 100,000 2,621 3,266 4,050 1,311 1,956 2,740
7 7,694 100,000 100,000 100,000 3,032 3,901 5,001 1,822 2,691 3,791
8 9,024 100,000 100,000 100,000 3,422 4,549 6,037 2,302 3,429 4,917
9 10,420 100,000 100,000 100,000 3,787 5,209 7,165 2,857 4,279 6,235
10 11,886 100,000 100,000 100,000 4,129 5,881 8,395 3,589 5,341 7,855
11 13,425 100,000 100,000 100,000 4,444 6,563 9,735 3,994 6,113 9,285
12 15,042 100,000 100,000 100,000 4,730 7,253 11,196 4,415 6,938 10,881
13 16,739 100,000 100,000 100,000 4,987 7,950 12,791 4,807 7,770 12,611
14 18,521 100,000 100,000 100,000 5,212 8,654 14,533 5,212 8,654 14,533
15 20,392 100,000 100,000 100,000 5,402 9,361 16,437 5,402 9,361 16,437
16 22,356 100,000 100,000 100,000 5,556 10,070 18,518 5,556 10,070 18,518
17 24,419 100,000 100,000 100,000 5,668 10,775 20,794 5,668 10,775 20,794
18 26,585 100,000 100,000 100,000 5,730 11,470 23,281 5,730 11,470 23,281
19 28,859 100,000 100,000 100,000 5,740 12,151 26,003 5,740 12,151 26,003
20 31,247 100,000 100,000 100,182 5,687 12,808 28,977 5,687 12,808 28,977
25 45,102 100,000 100,000 109,219 4,260 15,502 48,508 4,260 15,502 48,508
30 62,785 100,000 100,000 127,782 0 16,137 79,087 0 16,137 79,087
35 85,353 100,000 100,000 162,226 0 11,746 127,267 0 11,746 127,267
40 150,250 100,000 100,000 210,665 0 17,029 199,949 0 17,029 199,949
45 233,078 100,000 100,000 311,776 0 0 318,296 0 0 318,296
</TABLE>
- --------
(1) Assumes annual premium payments of $900 per year until the premium
recalculation at age 70 and annual recalculated premium amounts thereafter.
If premiums are paid more frequently than annually, the above values shown
would be affected.
(2) Assumes payment of recalculated annual premium amounts of $7,121 after age
70. As indicated in note (3) below, the actual recalculated premium may be
lower or higher than this amount.
(3) Assumes payment of recalculated premiums after age 70 in annual amounts of
$8,404 at 0%, $7,121 at 6% and $0 at 12%, subject to any maximums required
to maintain the Policy's status for federal income tax purposes.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT
RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY
THE OWNER. THE DEATH BENEFIT, ACCOUNT VALUE AND SURRENDER VALUE FOR A POLICY
WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT
RETURN AVERAGE 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE
OR BELOW THE AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE
MADE THAT THESE HYPOTHETICAL INVESTMENT RESULTS CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
57
<PAGE>
DEATH BENEFIT OPTION 3: LEVEL DEATH BENEFIT WITH GREATER FUNDING ILLUSTRATION
ASSUMES CURRENT CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK SUM INSURED AT ISSUE
(GUARANTEED DEATH BENEFIT): $100,000 $900 BASE POLICY PREMIUM (1)
<TABLE>
<CAPTION>
Death Benefit(3) Account Value(3) Surrender Value(3)
-------------------------------- -------------------------------- --------------------------------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of: Annual Investment Return of: Annual Investment Return of:
Policy At 5% Interest -------------------------------- -------------------------------- --------------------------------
Year Per Year(2) 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
- ------ -------------- --------- -------- --------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 945 100,000 100,000 100,000 324 357 390 0 0 0
2 1,937 100,000 100,000 100,000 874 969 1,067 304 399 497
3 2,979 100,000 100,000 100,000 1,408 1,599 1,806 703 894 1,101
4 4,073 100,000 100,000 100,000 1,925 2,248 2,612 1,085 1,408 1,772
5 5,222 100,000 100,000 100,000 2,422 2,915 3,491 1,747 2,240 2,816
6 6,428 100,000 100,000 100,000 2,900 3,599 4,450 2,090 2,789 3,640
7 7,694 100,000 100,000 100,000 3,356 4,300 5,495 2,546 3,490 4,685
8 9,024 100,000 100,000 100,000 3,790 5,018 6,635 3,070 4,298 5,915
9 10,420 100,000 100,000 100,000 4,199 5,750 7,879 3,569 5,120 7,249
10 11,886 100,000 100,000 100,000 4,595 6,512 9,257 4,055 5,972 8,717
11 13,425 100,000 100,000 100,000 5,011 7,340 10,817 4,561 6,890 10,367
12 15,042 100,000 100,000 100,000 5,402 8,189 12,532 5,087 7,874 12,217
13 16,739 100,000 100,000 100,000 5,768 9,061 14,416 5,588 8,881 14,236
14 18,521 100,000 100,000 100,000 6,107 9,955 16,491 6,107 9,955 16,491
15 20,392 100,000 100,000 100,000 6,417 10,871 18,777 6,417 10,871 18,777
16 22,356 100,000 100,000 100,000 6,697 11,809 21,296 6,697 11,809 21,296
17 24,419 100,000 100,000 100,000 6,937 12,761 24,071 6,937 12,761 24,071
18 26,585 100,000 100,000 100,000 7,132 13,724 27,128 7,132 13,724 27,128
19 28,859 100,000 100,000 100,000 7,276 14,692 30,497 7,276 14,692 30,497
20 31,247 100,000 100,000 100,000 7,363 15,663 34,216 7,363 15,663 34,216
25 45,102 100,000 100,000 106,844 6,718 20,378 59,544 6,718 20,378 59,544
30 62,785 100,000 100,000 157,187 3,349 24,174 99,472 3,349 24,174 99,472
35 85,353 100,000 100,000 226,216 0 25,039 160,455 0 25,039 160,455
40 141,828 100,000 100,000 315,462 16,458 49,738 246,300 16,458 49,738 246,300
45 213,905 100,000 100,000 440,024 31,466 82,761 372,299 31,466 82,761 372,299
</TABLE>
- --------
(1) Assumes annual premium payments of $900 per year until the premium
recalculation at age 70 and annual recalculated premium amounts thereafter.
If premiums are paid more frequently than annually, the above values shown
would be affected.
(2) Assumes payment of recalculated annual premium amounts of $5,669 after age
70. As indicated in note (3) below, the actual recalculated premium may be
lower or higher than this amount.
(3) Assumes payment of recalculated premiums after age 70 in annual amounts of
$8,404 at 0%, $5,669 at 6% and $0 at 12%.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT
RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY
THE OWNER. THE DEATH BENEFIT, ACCOUNT VALUE AND SURRENDER VALUE FOR A POLICY
WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT
RETURN AVERAGE 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE
OR BELOW THE AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE
MADE THAT THESE HYPOTHETICAL INVESTMENT RESULTS CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
58
<PAGE>
DEATH BENEFIT OPTION 3: LEVEL DEATH BENEFIT WITH GREATER FUNDING ILLUSTRATION
ASSUMES GUARANTEED CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK SUM INSURED AT ISSUE
(GUARANTEED DEATH BENEFIT): $100,000 $900 BASE POLICY PREMIUM (1)
<TABLE>
<CAPTION>
Death Benefit(3) Account Value(3) Surrender Value(3)
-------------------------------- -------------------------------- --------------------------------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of: Annual Investment Return of: Annual Investment Return of:
Policy At 5% Interest -------------------------------- -------------------------------- --------------------------------
Year Per Year(2) 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
- ------ -------------- -------- -------- --------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 945 100,000 100,000 100,000 276 308 339 0 0 0
2 1,937 100,000 100,000 100,000 780 868 960 10 98 190
3 2,979 100,000 100,000 100,000 1,267 1,444 1,637 362 539 732
4 4,073 100,000 100,000 100,000 1,737 2,037 2,374 697 997 1,334
5 5,222 100,000 100,000 100,000 2,189 2,643 3,176 1,014 1,468 2,001
6 6,428 100,000 100,000 100,000 2,621 3,266 4,050 1,311 1,956 2,740
7 7,694 100,000 100,000 100,000 3,032 3,901 5,001 1,822 2,691 3,791
8 9,024 100,000 100,000 100,000 3,422 4,549 6,037 2,302 3,429 4,917
9 10,420 100,000 100,000 100,000 3,787 5,209 7,165 2,857 4,279 6,235
10 11,886 100,000 100,000 100,000 4,129 5,881 8,395 3,589 5,341 7,855
11 13,425 100,000 100,000 100,000 4,444 6,563 9,735 3,994 6,113 9,285
12 15,042 100,000 100,000 100,000 4,730 7,253 11,196 4,415 6,938 10,881
13 16,739 100,000 100,000 100,000 4,987 7,950 12,791 4,807 7,770 12,611
14 18,521 100,000 100,000 100,000 5,212 8,654 14,533 5,212 8,654 14,533
15 20,392 100,000 100,000 100,000 5,402 9,361 16,437 5,402 9,361 16,437
16 22,356 100,000 100,000 100,000 5,556 10,070 18,518 5,556 10,070 18,518
17 24,419 100,000 100,000 100,000 5,668 10,775 20,794 5,668 10,775 20,794
18 26,585 100,000 100,000 100,000 5,730 11,470 23,281 5,730 11,470 23,281
19 28,859 100,000 100,000 100,000 5,740 12,151 26,003 5,740 12,151 26,003
20 31,247 100,000 100,000 100,000 5,687 12,808 28,981 5,687 12,808 28,981
25 45,102 100,000 100,000 100,000 4,260 15,502 48,878 4,260 15,502 48,878
30 62,785 100,000 100,000 127,227 0 16,137 80,198 0 16,137 80,198
35 85,353 100,000 100,000 179,420 0 11,746 126,722 0 11,746 126,722
40 150,250 100,000 100,000 242,854 6,580 33,247 188,376 6,580 33,247 188,376
45 233,078 100,000 100,000 327,728 11,538 57,014 275,621 11,538 57,014 275,621
</TABLE>
- --------
(1) Assumes annual premium payments of $900 per year until the premium
recalculation at age 70 and annual recalculated premium amounts thereafter.
If premiums are paid more frequently that annually, the above values shown
would be affected.
(2) Assumes payment of recalculated annual premium amounts of $7,121 after age
70. As indicated in note (3) below, the actual recalculated premium may be
lower or higher than this amount.
(3) Assumes payment of recalculated premiums after age 70 in annual amounts of
$8,404 at 0%, $7,121 at 6% and $0 at 12%.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT
RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY
THE OWNER. THE DEATH BENEFIT, ACCOUNT VALUE AND SURRENDER VALUE FOR A POLICY
WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT
RETURN AVERAGE 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE
OR BELOW THE AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE
MADE THAT THESE HYPOTHETICAL INVESTMENT RESULTS CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
59
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
LOGO
POLICIES ISSUED BY JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
JOHN HANCOCK PLACE, BOSTON, MASSACHUSETTS 02117
S8144 5/95
(94-85)
<PAGE>
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that Section.
UNDERTAKING REGARDING INDEMNIFICATION
Pursuant to Section X of JHVLICO's Bylaws and Section 67 of the
Massachusetts Business Corporation Law, JHVLICO indemnifies each director,
former director, officer, and former officer, and his heirs and legal
representatives from liability incurred or imposed in connection with any legal
action in which he may be involved by reason of any alleged act or omission as
an officer or a director of JHVLICO.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following Papers and Documents:
The facing sheet.
Cross-Reference Table.
The prospectus consisting of 59 pages.
The undertaking to file reports.
The undertaking regarding indemnification.
The signatures.
The following exhibits:
<PAGE>
1.A. (1) JHVLICO Board Resolution establishing the separate account.
(2) Not Applicable
(3) (a) Distribution Agreement including Amendment.
(b) Specimen Variable Contracts Selling Agreement between John
Hancock Mutual Life Insurance Company and selling broker-
dealers.
(c) Schedule of sales commissions included in Exhibit I. A. (3) (a)
above.
(4) Not Applicable
(5) Form of scheduled premium variable life insurance policy, included
in the initial registration statement of this Account for scheduled
premium policies, filed February 22, 1994.
(6) (a) JHVLICO Certificate of Incorporation.
(b) JHVLICO By-laws.
(7) Not Applicable.
(8) Not Applicable.
(9) Not Applicable.
(10) Form of application for Policy, included in the initial Registration
statement of this Account for scheduled premium policies, filed
February 22, 1994.
<PAGE>
2. Included as exhibit 1.A(5) above
3. Opinion and consent of counsel as to securities being registered, included
in Pre-Effective Amendment No. 1 to this Registration Statement, filed July
14, 1994.
4. Not Applicable
5. Not Applicable
6. Opinion and consent of actuary.
7. Consent of independent auditors.
8. Memorandum describing JHVLICO's issuance, transfer and redemption procedures
for the policy pursuant to Rule 6e-2(b)(l2)(ii).
9. Powers of attorney for Cleary, Tomlinson, D'Alessandro, Shaw, Luddy, Lee,
Reitano, Van Leer, and Paster.
10. Opinion of Counsel as to eligibility of this Post-Effective Amendment
for filing pursuant to Rule 485(b).
11. Exemptive Relief Relied Upon.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the John
Hancock Variable Life Insurance Company has duly caused this amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunder
duly authorized, and its seal to be hereunto fixed and attested, all in the City
of Boston and Commonwealth of Massachusetts on the 29th day of February, 1996.
JOHN HANCOCK VARIABLE LIFE
INSURANCE COMPANY
(SEAL)
By HENRY D. SHAW
----------------------------------
Henry D. Shaw
President
Attest: FRANCIS C. CLEARY, JR.
---------------------------------
Francis C. Cleary, Jr.
Counsel
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment to the Registration Statement has been signed below by the
following persons in the capacities with John Hancock Variable Life Insurance
Company and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
- ------------------------- ------------------------------- ----------------
<S> <C> <C>
- -------------------------
David F. D'Alessandro Chairman of the Board February ,1996
HENRY D. SHAW Vice Chairman of the Board
- -------------------------
Henry D. Shaw and President(Acting Principal
Executive Officer) February 29,1996
ROBERT S. PASTER
- -------------------------
Robert S. Paster Director February 29,1996
ROBERT R. REITANO Director(Principal
- -------------------------
Robert R. Reitano Financial Officer) February 29,1996
FRANCIS C. CLEARY, JR.
- -------------------------
Francis C. Cleary, Jr Director February 29,1996
- -------------------------
Thomas J. Lee Director February , 1996
MICHELE VAN LEER
- -------------------------
Michele Van Leer Director February 29,1996
JOSEPH A. TOMLINSON
- -------------------------
Joseph A. Tomlinson Director February 29,1996
BARBARA L. LUDDY
- -------------------------
Barbara L. Luddy Director February 29,1996
PATRICK F. SMITH Controller (Principal
- -------------------------
Patrick F. Smith Accounting Officer) February 29,1996
</TABLE>
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, John Hancock Variable Life Account V, certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this amended
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, and its seal to be hereunto fixed and attested, all in the City
of Boston and Commonwealth of Massachusetts on the 29th day of February, 1996.
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
(Registrant)
By John Hancock Mutual Life Insurance Company
(Depositor)
(SEAL)
By HENRY D. SHAW
-------------------------------
Henry D. Shaw
President
Attest: FRANCIS C. CLEARY, JR.
--------------------------------
Francis C. Cleary, Jr.
Counsel
FCC0201.DOC
<PAGE>
EXHIBIT I. A. (1)
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
Boston, Massachusetts
VOTE OF BOARD OF DIRECTORS
Meeting of December 11, 1986
VOTED, with respect to separate investment accounts:
(a) To establish a separate investment account, to be designated John Hancock
Variable Life Account V (the "Account"), pursuant to Section 132 G of Chapter
175 of the Massachusetts General Laws, as amended, for the funds attributable to
individual life policies on a variable basis to be issued by the Company. The
Officers of the Company may from time to time change the designation of the
Account from John Hancock Variable Life Account V to such other designation as
they may deem necessary and appropriate.
(b) To allocate to the Account amounts to provide for life insurance
(including benefits incidental thereto) payable in fixed or variable amounts or
both and the income, gains and losses, realized or unrealized, attributable to
the Account shall be credited to or charged against the Account without regard
to the other income, gains or losses of the Company.
(c) To authorize the registration of the Account as an investment company
under the Investment Company Act of 1940 and the registration of the variable
life insurance policies issued in connection with the Account as securities
under the Securities Act of 1933, and to authorize and empower the Chairman of
the Board, the President, any Vice President or the Secretary of the Company
("Officers of the Company") to take all action necessary to comply with the
Acts, including but not limited to the execution and filing of registration
statements and amendments thereto, applications for exemptions from the
provisions of the Act as may be necessary or desirable and amendments thereto,
and agreements for the administration of the Account and for the distribution of
variable life insurance policies carrying an interest in the Account assets and
any other actions necessary under all other applicable federal and state laws
and regulations.
(d) To authorize the Officers of the Company to take all actions necessary to
register the Account as a unit investment trust under the Investment Company Act
of 1940, and to take such related actions as they deem necessary and appropriate
to carry out the foregoing, including, without limitation, the following:
determining that the fundamental investment policy of the Account shall be to
invest or reinvest the assets in securities issued by such investment companies
registered under the Investment Company Act of 1940 as the Officers may
designate pursuant to the provisions of the variable life insurance products
issued by the Company; establishing one or more subaccounts within the Account
to which net premiums under the variable life policies will be allocated in
accordance with instructions received from policyowners, reserving to the
Officers the authority to increase or decrease the number of subaccounts in the
Account as they deem necessary or appropriate; and investing each subaccount
only in the shares of a single mutual fund or a single portfolio of an
investment company organized as a series fund pursuant to the Investment Company
Act of 1940.
<PAGE>
-2-
(e) To authorize the Officers of the Company to deposit such amount in the
Account or in each subaccount thereof as may be necessary or appropriate to
facilitate the Account's operations; to transfer funds from time to time between
the Company's general account and the Account as deemed appropriate and
consistent with the terms of the variable life insurance policies and applicable
laws; and to establish criteria by which the Company shall institute procedures
to provide for a pass-through of voting rights to the owners of variable life
insurance policies issued by the Company, as required by applicable laws, with
respect to the shares of any investment companies which are held in the Account.
(f) To appoint Francis C. Cleary, Jr., Counsel, as agent for service of
process or the like for the Company to receive notices and communications from
the Securities and Exchange Commission with respect to such Registration
Statements or exemptive applications and amendments thereto as may be filed on
behalf of the Company concerning the Account or the variable life insurance
policies, and to exercise the powers give to such agent in the rules and
regulations of the Securities and Exchange Commission under the Securities Act
of 1933, the Investment Company Act of 1940, or the Securities Exchange Act of
1934.
(g) To authorize the Officers of the Company to do or cause to be done all
things necessary or desirable, as may be advised by counsel, to comply with, or
obtain exemptions from, federal, state or local statutes or regulations that may
be applicable to the issuance and sale of variable life insurance products by
the Company.
(h) To authorize the Company to act as the depositor for the Account and
provide all administrative services in connection with the establishment and
maintenance of the Account and in connection with the issuance and sale of
variable life insurance policies, all on such terms and subject to such
modifications as the Officers deem necessary or appropriate to effectuate the
foregoing.
(i) To authorize the Company of the Company to organize a suitable investment
company under the Investment Company Act of 1940, if in their discretion the
organization of such a company is necessary, the shares of which shall be
purchased by the Company in order to serve as an investment vehicle for the
Account and, further, that the Officers are authorized to do all things as they
deem necessary and appropriate to carry out the foregoing, including, without
limitation, the following: selecting an appropriate custodian to hold the assets
of such investment company: selecting an appropriate principal underwriter in
connection with the sale of securities to or by the Account; selecting an
appropriate investment advisor for such investment company; and entering into
agreements with such entities.
(j) To empower the Executive Committee to authorize the execution and
delivery of such instruments and such other action as it may deem necessary or
desirable in order to carry out the purpose and intent of this vote and to
comply with applicable federal or state laws and regulations.
<PAGE>
Exhibit 1.A.(3)(a)
DISTRIBUTION AGREEMENT
AGREEMENT, made as of the 26th day of August, 1993, by and between
John Hancock Mutual Life Insurance Company ("John Hancock") and, on its own
behalf and on behalf of its several existing and future separate accounts
registered under the Investment Company Act of 1940 (the "Investment Company
Act"), including without limitation John Hancock Variable Life Accounts U, V and
S, John Hancock Variable Life Insurance Company ("JHVLICO").
WHEREAS, John Hancock is the principal underwriter of John Hancock
Variable Series Trust I ("the Fund"), a series mutual fund whose shareholders
are separate accounts of insurance companies, including JHVLICO, pursuant to an
Underwriting and Administrative Services Agreement dated as of January 15, 1986
("Underwriting Agreement");
WHEREAS, insurance companies issue variable life insurance and annuity
products under which net premiums or considerations are allocated to such
separate accounts for investment in the Fund;
WHEREAS, the Fund is registered as an open-end investment company under
the Investment Company Act;
WHEREAS, John Hancock is registered as a broker-dealer under the
Securities Exchange Act of 1934 ("1934 Act") and is a member of the National
Association of Securities Dealers, Inc.;
WHEREAS, JHVLICO will issue variable life insurance policies ("Policies")
whose net premiums are or will be allocated to JHVLICO's registered separate
accounts; and
WHEREAS, John Hancock and JHVLICO wish to enter into this Agreement
defining the conditions under which John Hancock will distribute the Contracts;
NOW THEREFORE, John Hancock and JHVLICO hereby agree as follows:
1. John Hancock shall offer for sale and sell Policies on behalf of
JHVLICO in each state and other jurisdictions in which such policies may be
lawfully sold. Such offering or sale shall be on such terms and conditions and
shall provide for such lawful compensation to John Hancock as John Hancock and
JHVLICO shall determine, provided that such terms, conditions and compensation
shall be as set forth in or not inconsistent with a prospectus meeting the
requirements of Section 10(a) of the Securities Act of 1933, as amended, and
containing the required information for or forming a part of a registration
statement effective under said Act.
Applications for Policies shall be solicited by insurance agents of
JHVLICO who are duly and appropriately licensed for the sale of such Policies in
each such state or other jurisdiction. John Hancock shall have responsibility
for arranging for such licensing. John Hancock shall review completed
applications for Policies in terms of suitability (except to the extent that
responsibility for suitability determinations is assumed by other broker-dealers
pursuant to the selling agreements referred to in paragraph 10 below) and
insurance underwriting and shall determine whether to accept or reject any
application in accordance with underwriting rules established by JHVLICO. John
Hancock will determine an insured's risk classification pursuant to its own
underwriting rules. Initial and subsequent premium payments under Policies shall
be made by check payable to JHVLICO. JHVLICO will refund any premiums paid if a
Policy is not issued or is surrendered under the short-term cancellation
provision.
<PAGE>
2. John Hancock shall pay its registered representatives acting as
JHVLICO's agents commissions and service fees in accordance with its then
applicable compensation rules and procedures. The maximum commission payable to
an agent for selling a policy shall be as set forth in Exhibit A appended
hereto. JHVLICO will reimburse John Hancock for commissions, any service fees
and for other direct and indirect expenses (including agency expense allowances,
general agent, district manager and supervisor compensation, agent training
allowances, deferred compensation and insurance benefits of agents, general
agents, district managers and supervisors, agency office clerical expenses and
advertising) actually incurred in connection with the marketing and sale of
Policies.
3. The books, accounts and records of John Hancock and JHVLICO as to all
transactions hereunder shall be maintained so as to disclose clearly and
accurately the nature and details of the transactions, including particularly
such accounting information as is necessary to support the reasonableness of the
amounts to be paid by JHVLICO hereunder and to ensure compliance with applicable
regulatory and reporting requirements. To the extent that either of John Hancock
or JHVLICO maintains on behalf of the other any records required to be
maintained by the other pursuant to 1940 Act Rules 30a- or 30a-2 under the
Investment Company Act or pursuant to 1934 Act Rules 17a-3 and 17a-4, such
records are the property of the party so required to maintain them and will be
surrendered promptly to that party upon its request.
4. This Agreement shall terminate automatically if it shall be assigned or
if the Underwriting Agreement is terminated. This Agreement may be terminated at
any time on 60 days' written notice to the other party hereto, without the
payment of any penalty, by John Hancock or JHVLICO.
5. John Hancock will pay the expenses of preparing and printing
registration statements, prospectuses and sales literature, all fees and
expenses in connection with John Hancock's qualification as a broker-dealer and
all other expenses relating to the offering, sale or delivery of Policies.
JHVLICO will reimburse John Hancock for registration fees under the Securities
Act of 1933, the costs associated with the preparation and printing of
registration statements, prospectuses and sales literature and for like expenses
actually incurred in connection with the offering, sale and delivery of
Policies.
6. In offering, selling and delivering Policies, John Hancock will duly
conform in all respects with the laws of the United States and of each state in
which Policies may be offered for sale by it pursuant to this Agreement.
Applications will be solicited by registered representatives of John Hancock or
any other broker-dealer who have been duly licensed. In connection with the
offering, sale or delivery of Policies, John Hancock will not give any
information or make any representation other than information and
representations contained in or not inconsistent with a prospectus meeting the
requirement of Section 10(a) of the Securities Act of 1933 and containing the
required information for or forming a part of a registration statement which is
effective under said Act.
7. John Hancock agrees that, in the absence of a fixed account or if no
suitable fixed-dollar policy is available from JHVLICO, it will issue a policy
of fixed benefit insurance without evidence of insurability in exchange for any
Policy whenever the Owner of a Policy elects to exchange the Policy in
accordance with its provisions.
8. JHVLICO undertakes to guarantee the performance of all of John
Hancock's obligations, imposed by Section 27(f) of the Investment Company Act of
1940, as amended, and Rules 6e-2(b)(l4)(vi), 6e-3(T)(b)(l3)(vi) and 27d-2(b)
adopted by the Securities and Exchange Commission, to make refunds of charges
required of the principal underwriter of Policies issued in connection with the
registered separate account.
<PAGE>
9. No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought.
10. John Hancock and JHVLICO may agree with one or more broker-dealers
registered under the Securities Exchange Act of 1934 for the sale of the
Policies funded by the registered separate account. Any broker-dealer offering,
selling or delivering Policies will agree with John Hancock and JHVLICO to
conform duly in all respects with the laws of the United States and of each
state in which Contracts may be offered for sale by it. No agent or
representative of any such broker-dealer shall solicit applications for Policies
until duly licensed and appointed by JHVLICO as a life insurance agent of
JHVLICO in the appropriate jurisdiction. John Hancock will compensate other
broker-dealers as provided in the selling agreements with such other broker-
dealers, and JHVLICO will reimburse John Hancock for such amounts.
11. This Agreement shall be subject to the applicable provisions of the
Federal securities laws and the rules, regulations, and rulings thereunder,
including such exemptions as the Securities and Exchange Commission may grant,
and the terms hereof shall be interpreted and construed in accordance therewith.
12. John Hancock shall, in connection with its obligations hereunder,
comply with all laws and regulations, whether Federal or state, and whether
relating to insurance or securities, including but not limited to the
recordkeeping and sales supervision requirements of such laws and regulations
and rules of the National Association of Securities Dealers, Inc.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year above written.
Date: August 26, l993
John Hancock Mutual Life Insurance Company
By: WILLIAM L. BOYAN
----------------
William L. Boyan
President
Date: August 26, 1993
John Hancock Variable Life Insurance Company
By: HENRY D. SHAW/
--------------
Henry D., Shaw
President
<PAGE>
AMENDMENT TO DISTRIBUTION AGREEMENT
BY AND BETWEEN
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
AND
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
AGREEMENT made this 1st day of August, 1994, by and between John Hancock
Mutual Life Insurance Company ("John Hancock") and John Hancock Variable Life
Insurance Company ("JHVLICO"), on its own behalf and on behalf of its several
existing and future separate accounts registered under the Investment Company
Act of 1940 (the "Investment Company Act"), including without limitation John
Hancock Variable Life Accounts U, V and S and John Hancock Variable Annuity
Account I.
WHEREAS, John Hancock and JHVLICO are parties to a distribution agreement
dated August 26, 1993 (the "Distribution Agreement") governing the terms and
conditions under which John Hancock has undertaken to offer for sale and sell on
behalf of JHVLICO, in each state and other jurisdiction where lawfully
permitted, certain variable life insurance policies, issued by JHVLICO, whose
net premiums are or will be allocated to JHVLICO's registered separate accounts;
WHEREAS, JHVLICO will continue to issue such variable life insurance
policies and will begin to issue variable annuity contracts whose net premiums
are or will be allocated to certain JHVLICO registered separate accounts;
WHEREAS, John Hancock and JHVLICO wish to enter into this Amendment
redefining the conditions and terms of the Distribution Agreement and Exhibit A
thereto;
NOW THEREFORE, in consideration of the premises and covenants contained
herein, John Hancock and JHVLICO hereby amend the Distribution Agreement and
Exhibit A thereto and agree to the following terms:
1. Any reference to "variable life insurance policies" in the Distribution
Agreement shall be read "variable life insurance policies and variable annuity
contracts"; and
2. Except as otherwise specified in this Amendment, any reference to
"Policies" or "policies" in the Distribution Agreement shall include variable
life insurance policies, issued by JHVLICO, whose net premiums are or will be
allocated to certain JHVLICO registered separate accounts and variable annuity
contracts, issued by JHVLICO, whose net premiums are or will be allocated to
certain JHVLICO registered separate accounts; and
3. The phrase "With respect to life insurance policies only" should be added
to the beginning of provision seven in the Distribution Agreement; and
4. The commission schedule for John Hancock Variable Annuity Account I should
be included in
<PAGE>
Exhibit A, as shown in the attachment to this Amendment.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and on its behalf by its duly authorized representative as
of the day and year indicated.
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
BY: STEPHEN L. BROWN AUGUST 2, 1994
----------------- --------------
Stephen L. Brown (date)
Chairman and Chief Executive Officer
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
on its own behalf and on behalf of its
several existing and future registered
separate accounts
BY: HENRY D. SHAW AUGUST 5, 1994
-------------- --------------
Henry D. Shaw (date)
President
EXHIBIT A
Scheduled Premium Policy (Flex V)
Maximum commission of 50% of premium paid under Modified Schedule of
premiums in Policy year 1, 10% of such premiums in Policy years 2-4, and 3% of
any other premiums.
Annual Premium Policy (VLI)
Maximum commission of 55% of premium paid in Policy year 1, 15% of
premium paid in Policy year 2, 10% of premium paid in Policy years 3-5, 5% of
premium paid in Policy years 6-10, and 3% of any other premiums.
Single Premium Policy
Maximum commission of 3%.
Flexible Premium Variable Survivorship Policy (VEP)
Maximum commission of 45% of Target Premium paid in Policy year 1, 5%
of Target Premium paid in Policy years 2-5, 3% of Target Premium paid in any
subsequent years, and 3% of any excess premium in any year.
Individual Deferred Combination Fixed/Variable Annuity Contract (Independence
Preferred)
Maximum commission of 3% of premium on contracts issued to Annuitants
issue age 0-70, maximum commission of 2% of premium on contracts issued to
Annuitants issue ages 71 and above.
<PAGE>
Revised Flexible Premium Policy (New Flex V)
Maximum Commission of 50% of premium paid up to Required Premium in
Policy year 1, 8% of such premiums in Policy years 2-4, and 3% of any other
premiums.
Universal Variable Policy (MVL)
Maximum commission of 50% of premium paid up to Required Premium paid
in Policy year 1, 6% of the Target Premium for Policy years 2-4; 3% of the
Target Premium in each year thereafter, and 3% of excess premium in any year.
Variable COLI Policy (VCOLI)
Maximum commission of 14% of Target Premium in Policy years 1-10; 3% of
Target Premium in Policy years 11 and thereafter; and 2% of any excess premium
paid.
Universal Variable Policy (MVL II)
Maximum commission of 20% of Target Premium in Policy year 1, plus 6%
of the Target Premium for the first Policy year which will be payable in each of
Policy years 2-4; 6% of the Target Premium for Policy years 2-4; 3% of the
Target Premium paid in each year thereafter; and 3% of excess premium in any
year.
(Exhibit A, as amended, December 6, 1995)
<PAGE>
EXHIBIT 1.A.(3)(b)
VARIABLE CONTRACTS
SELLING AGREEMENT
John Hancock Mutual Life Insurance Company ("JHMLICO"), as the distributor and
principal underwriter, and
("the Broker/Dealer"), enter into this agreement effective with its execution by
the Broker/Dealer for the purpose of authorizing the Broker/Dealer to solicit
applications for variable life insurance and annuity contracts ("Contracts")
distributed by JHMLICO on its own behalf and on behalf of John Hancock Variable
Life Insurance Company ("JHVLICO"), a subsidiary of JHMLICO. The parties
represent as follows:
1. JHMLICO is engaged in the issuance of variable annuity contracts and
JHVLICO is engaged in the issuance of variable life insurance contracts,
both in accordance with Federal securities laws and the applicable laws of
those states in which the Contracts have been qualified for sale. The
Contracts are considered securities under the Securities Act of 1933;
therefore, distribution of the Contracts is made through JHMLICO as a
registered broker/dealer under the Securities Act of 1934 and as a member
of the National Association of Securities Dealers, Inc. ("NASD").
2. The Broker/Dealer certifies that it is a registered Broker/Dealer under the
Securities Exchange Act of 1934 and a member of the NASD. The
Broker/Dealer agrees to abide by all rules and regulations of the NASD,
including its Rules of Fair Practice, and to comply with all applicable
state and Federal laws and the rules and regulations of authorized
regulatory agencies affecting the sale of the Contracts.
3. The Broker/Dealer will select persons to be registered and supervised by it
who will be trained and qualified to solicit applications for the Contracts
in conformance with applicable state and Federal laws and regulations.
Persons so trained and qualified will be registered representatives of the
Broker/Dealer in accordance with the rules of the NASD and they will be
properly licensed to represent JHMLICO or JHVLICO or both in accordance
with the state insurance laws of those jurisdictions in which the Contracts
may lawfully be distributed and in which they solicit applications for such
Contracts.
4. The Broker/Dealer will take reasonable steps to ensure that its registered
representatives shall not make recommendations to applicants to purchase
Contracts in the absence of reasonable grounds to believe the purchase of
each Contract is suitable for the applicant. The procedure will include
review of all proposals and applications for Contracts for suitability and
completeness and correctness as to form as well as review and endorsement
on an internal record of the Broker/Dealer of
<PAGE>
-2-
the transactions. The Broker/Dealer will promptly forward to JHMLICO all
applications found suitable, together with any payments received with the
applications, without deduction or reduction. JHMLICO reserves the right
to reject any Contract application and return any payment made in
connection with an application which is rejected. Contracts issued on
applications accepted by JHMLICO or JHVLICO will be forwarded to the
registered representative of the Broker/Dealer for delivery to the Contract
owner.
5. The Broker/Dealer will perform the selling functions required by this
agreement only in accordance with the terms and conditions of the then
current prospectus applicable to the Contracts and will make no
representations not included in the prospectus or in any authorized
supplemental material. Any material prepared or used by the Broker/Dealer
or its registered representatives, which describes or must describe the
Contracts, or uses the name of JHVLICO, JHMLICO or the logos or Service
Marks of either must be approved by JHMLICO in writing prior to any such
use.
6. JHMLICO will provide Broker/Dealer with prospectuses, and any supplements
or amendments thereto, describing the Contracts subject to this Agreement.
JHMLICO is responsible for maintaining in effect in accordance with the
requirements of the Securities and Exchange Commission each Registration
Statement of which the prospectus is part. JHMLICO will immediately notify
Broker/Dealer of the issuance of any stop order or any Federal or state
regulatory proceeding which would prevent the sale of Contracts in any
state or jurisdiction.
7. Compensation payable on sales of the Contracts solicited by the
Broker/Dealer will be paid to the Broker/Dealer by JHMLICO in accordance
with the compensation schedules defined under the John Hancock Mutual Life
Insurance Company/M Financial Group Master Agreement dated December 5, 1991
and the Producer Agreements related thereto, as in effect at the time the
contract premiums or considerations are received by JHMLICO or JHVLICO.
Compensation to the registered representative for contracts solicited by
the registered representative will be governed by an agreement between the
Broker/Dealer and its registered representative. To the extent requested by
Broker/Dealer, registered representative compensation may be paid directly
to such registered representative by JHMLICO or JHVLICO. A portion of the
compensation otherwise payable to Broker/Dealer pursuant to the
compensation schedules applicable to the Contracts shall be payable to
Mutual Service Corporation (MSC) in accordance with the agreement in effect
between M Financial Group and MSC (currently 2% of first year commissions,
1% of renewal commissions). To the extent requested by Broker/Dealer and
its registered representative, registered representative compensation shall
be paid to JH Networking Insurance Agency ("NIA") for allocation to The
John Hancock/M Financial Group Deferred Commission Plan, as in effect at
the time the compensation becomes payable.
8. In the event of any surrender of a Contract within the 10 day "free look"
period or, in the case of a variable life insurance policy, within 10 days
after the mailing of the Notice of Withdrawal Right, any compensation
payable to Broker/Dealer or its registered representatives will not be
payable or will be refunded if priorly paid, in accordance with the terms
of the M Producer's Contract appended as Exhibit A to the Master Agreement.
<PAGE>
-3-
9. This agreement may not be assigned except by mutual consent and will
continue for an indefinite term, subject to the termination by either party
by ten days advance written notice to the other party, except that in the
event JHMLICO or the Broker/Dealer ceases to be a registered broker/dealer
or a member of the NASD, this agreement will immediately terminate. Upon
its termination, all authorizations, rights and obligations shall cease,
except the agreement in Section 11, the indemnifications in Section 12 and
the payment of any accrued but unpaid compensation to the Broker/Dealer.
10. For the purpose of compliance with any applicable Federal or state
securities laws or regulations, the Broker/Dealer acknowledges and agrees
that in performing the services covered by this agreement, it is acting in
the capacity of an independent "broker" or "dealer" as defined by the By-
Laws of the NASD and not as an agent or employee of either JHMLICO or
JHVLICO or any registered investment company. In furtherance of its
responsibilities as a broker or dealer, the Broker/Dealer acknowledges that
it is responsible for statutory and regulatory compliance in securities
transactions involving any business produced by its registered
representatives concerning the Contracts.
For the purpose of compliance with any applicable state insurance laws or
regulations, the Broker/Dealer acknowledges and agrees that only while
performing the insurance selling functions reflected by this agreement are
the Broker/Dealer's registered representatives acting as the licensed
insurance agents of JHMLICO or JHVLICO or both and in that capacity are
authorized only to solicit applications for the Contracts which will not
become effective until acceptance by JHMLICO or JHVLICO.
11. The Broker/Dealer and JHMLICO jointly agree to cooperate fully in any
insurance or securities regulatory investigation or proceeding or judicial
proceeding arising in connection with any Contract. Without limiting the
foregoing:
a. Broker/Dealer will be notified promptly of any customer complaint or
notice of any regulatory authority investigation or proceeding or
judicial proceeding received by JHMLICO with respect to any
Contract.
b. Broker/Dealer will promptly notify JHMLICO of any customer complaint
or notice of any regulatory authority investigation or proceeding or
judicial proceeding received by Broker/Dealer with respect to any
Contract.
12. (1) JHMLICO agrees to indemnify and hold harmless Broker/Dealer and each
person who controls or is associated with Broker/Dealer against any
losses, claims, damages or liabilities, joint or several, to which
Broker/Dealer or such controlling or associated person may become
subject under the 1933 Act or otherwise insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of a
material fact required to be stated therein or necessary to make the
statements therein not misleading contained (i) in any Registration
Statement, any Prospectus or any document executed by JHMLICO or JHVLICO
specifically for the purpose of qualifying a Contract for sale under the
laws of any jurisdiction or (ii) in any written information or sales
material authorized for and supplied or furnished to Broker/Dealer and
its agents or representatives by
<PAGE>
-4-
JHMLICO, its employees or agents, in connection with the sale of the
Contract and JHMLICO will reimburse Broker/Dealer and each such
controlling person for legal or other expenses reasonably incurred by
Broker/Dealer or such controlling person in connection with
investigating or defending any such loss, claim, damage, liability or
action.
(2) Broker/Dealer agrees to indemnify and hold harmless such director or
officer may become subject under the 1933 Act and state JHMLICO and each
of its directors and officers against any insurance losses, claims,
damages or liabilities to which JHMLICO and any laws or otherwise
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon:
(a)any unauthorized use of sales materials or any verbal or written
misrepresentations or any unlawful sales practices concerning a
Contract by Broker/Dealer or
(b)claims by agents or representatives or employees of Broker/Dealer
for commissions or other compensation or remuneration of any type
or
(c)failure by agents, representatives or employees of Broker/Dealer
to comply with all applicable state insurance laws and regulations
including but not limited to state licensing requirements, rebate
statutes and replacement regulations, and the provisions of this
Agreement; and Broker will reimburse JHMLICO and any director or
officer for any legal or other expenses reasonably incurred by
JHMLICO or such director or officer in connection with
investigating or defending any such loss, claim, damage, liability
or action.
(3) After receipt by a party entitled to indemnification of notice of the
commencement of any action, if a claim in respect thereof is to be made
against any person obligated to provide indemnification, such indemnified
party will notify the indemnifying party in writing of the commencement
thereof as soon as practicable thereafter, and the omission so to notify
the indemnifying party will not relieve it from any liability except to
the extent that the omission results in a failure of actual notice to the
indemnifying party, and such indemnifying party is damaged solely as a
result of the failure to give such notice.
13. All notices to JHMLICO should be mailed to:
Mr. Henry D. Shaw, Senior Vice President
John Hancock Mutual Life Insurance Company
John Hancock Place
P. O. Box 111
Boston, MA 02117
<PAGE>
-5-
All notices to the Broker/Dealer will be duly given if mailed to the
address shown below.
14. This agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts.
In reliance on the representations set forth and in consideration of the
undertakings described, the parties represented below do hereby contract
and agree.
John Hancock Mutual Life Broker-Dealer
Insurance Company
By:_______________________ By:____________________________
Title:____________________ Title: ________________________
Date of Execution Date of Execution______________
<PAGE>
EXHIBIT 1. A. (6) (a)
NO. D-30612
THE COMMONWEALTH OF MASSACHUSETTS
DEPARTMENT OF BANKING AND INSURANCE
Division of Insurance
CERTIFICATE OF AUTHORITY DATE: March 5, 1979
- ------------------------
THIS IS TO CERTIFY THAT THE
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
BOSTON MASSACHUSETTS
is duly organized under the laws of this Commonwealth, has fully complied with
the requirements of said laws applicable to it and that it is authorized to
issue policies and transact the kinds of business authorized under the Sections
of Chapter 175 of the General Laws of Massachusetts and amendments thereto
described by the following designations: (See Reverse Side for Legend)
6B 16A
This Certificate shall remain in effect for an indefinite term unless said
authority is amended or revoked in accordance with Law.
SEAL
IN WITNESS WHEREOF, I have
hereunto set my hand and
affixed the official seal of
this Division, at the City
of Boston, the date appearing
above.
MICHAEL J. SABBAGH
------------------
Michael J. Sabbagh
Commissioner of Insurance
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
DIVISION OF INSURANCE
100 Cambridge Street, Boston 02202
MICHAEL J. SABBAGH
COMMISSIONER OF INSURANCE
F 2975
TO WHOM IT MAY CONCERN:
I, Michael J. Sabbagh, Commissioner of Insurance for the Commonwealth
of Massachusetts, hereby certify that the
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
of Boston, in the Commonwealth of Massachusetts, having no liabilities, except
reasonable organization expenses and having complied with the requirements of
the Laws of this Commonwealth relating to insurance companies, adopted a
proper system of accounting, employed a competent accountant, a competent
claim manager, a competent and experienced underwriter, and a competent and
experienced actuary, and that its officers and directors are of good repute
and competent to manage said company, is fully authorized to insure upon the
stock plan the business of health and life insurance now or hereafter
described or permitted by Clauses Sixth and Sixteenth of Section Forty-Seven,
Chapter One Hundred and Seventy-Five of the General Laws of the Commonwealth
of Massachusetts and the acts in amendment thereof and in addition thereto.
IN WITNESS WHEREOF, I have here-unto set my hand and affixed the
official seal of this Division at the City of Boston, this Fifth Day of
March, A.D. 1979.
MICHAEL J. SABBAGH
------------------
Michael J. Sabbagh
Commissioner of Insurance
SEAL
FCC0105.DOC
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<PAGE>
EXHIBIT 1.A.(6)(b)
BY-LAWS
OF
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
ARTICLE I
OFFICES
The principal office and principal place of business of the Company in the
Commonwealth of Massachusetts shall be located in the City of Boston, Suffolk
County.
ARTICLE II
SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the shareholders shall be
held on the 2nd Wednesday following the 2nd Monday in April in each year at the
hour of 2:00 P.M., for the purpose of electing directors and for the transaction
of such other business as may come before the meeting. If the day fixed for the
annual meeting shall be a legal holiday, such meeting shall be held on the next
succeeding business day. If the election of directors shall not be held on the
day designated herein for any annual meeting, or at any adjournment thereof, the
board of directors shall cause the election to be held at a meeting of the
shareholders as soon thereafter as conveniently may be.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders may be
called by the chairman of the board, the vice chairman of the board, the
president, a majority of the board of directors or by the holders of not less
than one-fifth of all the outstanding shares of the corporation.
SECTION 3. PLACE OF MEETING. The board of directors may designate any
place, either within or without the Commonwealth of Massachusetts as the place
of meeting for any annual meeting or for any special meeting. A waiver of notice
signed by all shareholders may designate any place, either within or without the
Commonwealth of Massachusetts, as the place for the holding of such meeting. If
no designation is made, or if a special meeting be otherwise called, the place
of meeting shall be the principal office of the corporation in the Commonwealth
of Massachusetts.
SECTION 4. NOTICE OF MEETINGS. Written or printed notice stating the
place, day and hour of the meeting, and in the case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not less
than ten nor more than forty days before the date of the meeting, or in the case
of a merger or consolidation not less than twenty nor more than forty days
before the meeting, either personally or by mail, to each shareholder of record
entitled to vote at such meeting. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail, addressed to the shareholder
at his address as it appears on the records of the corporation, with postage
thereon prepaid.
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SECTION 5. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders, or shareholders entitled to receive payment of any
dividend, or in order to make determination of shareholders for any other proper
purpose, the board of directors of the corporation may provide that the stock
transfer books shall be closed for a stated period but not to exceed, in any
case, forty days. If the stock transfer books shall be closed for the purpose of
determining shareholders entitled to notice of or to vote at a meeting of
shareholders, such books shall be closed for at least ten days, or in the case
of a merger or consolidation, at least twenty days, immediately preceding such
meeting. In lieu of closing the stock transfer books, the board of directors may
fix in advance a date as the record date for any such determination of
shareholders, such date in any case to be not more than forty days and, for a
meeting of shareholders, not less than ten days, or in the case of a merger or
consolidation, not less than twenty days, immediately preceding such meeting. If
the stock transfer books are not closed and no record date is fixed for the
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders, or shareholders entitled to receive payment of a dividend, the
date on which notice of the meeting is mailed or the date on which the
resolution of the board of directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of shareholders.
SECTION 6. VOTING LISTS. The agent having charge of the transfer books
for shares of the corporation shall make, at least ten days before each meeting
of shareholders, a complete list of the shareholders entitled to vote at such
meeting, arranged in alphabetical order, with the address of and the number of
shares held by each, which list, for a period of ten days prior to such meeting,
shall be kept on file at the principal office of the corporation and shall be
subject to inspection by any shareholder at any time during usual business
hours. Such list shall also be produced and kept open at the time and place of
the meeting and shall be subject to the inspection of any shareholder during the
whole time of the meeting. The original share ledger or transfer book, or a
duplicate thereof kept in this Commonwealth, shall be prima facie evidence as to
who are the shareholders entitled to examine such list or share ledger or
transfer book or to vote at any meeting of shareholders.
SECTION 7. QUORUM. A majority of the outstanding shares of the
corporation, represented in person or by proxy, shall constitute a quorum at any
meeting of shareholders; provided, that if less than a majority of the
outstanding shares are represented at said meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice. If
a quorum is present, the affirmative vote of the majority of the shares
represented at the meeting shall be the act of the shareholders.
SECTION 8. PROXIES. At all meetings of shareholders, a shareholder may
vote by proxy executed in writing by the shareholder or by his duly authorized
attorney-in-fact. Such proxy shall be filed with the corporation before or at
the time of the meeting. No proxy shall be valid after eleven months from the
date of its execution, unless otherwise provided in the proxy.
SECTION 9. VOTING OF SHARES. Each outstanding share shall be entitled to
one vote upon each matter submitted to vote at a meeting of shareholders.
SECTION 10. VOTING OF SHARES BY CERTAIN HOLDERS. Shares standing in the
name of another corporation, domestic or foreign, may be voted by such officer,
agent, or proxy as the by-laws of such corporation may prescribe, or, in the
absence of such provision, as the board of directors of such corporation may
determine.
Shares standing in the name of a deceased person, a minor ward or an
incompetent person, may be voted by his administrator, executor, court appointed
guardian or conservator,
2
<PAGE>
either in person or by proxy without a transfer of such shares into the name of
such administrator, executor, court appointed guardian or conservator. Shares
standing in the name of a trustee may be voted by him, either in person or by
proxy.
Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into his name if authority so to do
be contained in an appropriate order of the court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Shares of its own stock belonging to this corporation shall not be
voted, directly or indirectly, at any meeting and shall not be counted in
determining the total number of outstanding shares at any given time, but shares
of its own stock held by it in a fiduciary capacity may be voted and shall be
counted in determining the total number of outstanding shares at any given time.
SECTION 11. INSPECTORS. At any meeting of shareholders, the chairman of
the meeting may, or upon the request of any shareholder shall, appoint one or
more persons as inspectors for such meeting.
Such inspectors shall ascertain and report the number of shares
represented at the meeting, based upon their determination of the validity and
effect of proxies; count all votes and report the results; and do such other
acts as are proper to conduct the election and voting with impartiality and
fairness to all the shareholders.
Each report of an inspector shall be in writing and signed by him or by
a majority of them if there be more than one inspector acting at such meeting.
If there is more than one inspector, the report of a majority shall be the
report of the inspectors. The report of the inspector or inspectors on the
number of shares represented at the meeting and the results of the voting shall
be prima facie evidence thereof.
SECTION 12. VOTING BY BALLOT. Voting on any question or in any election
may be viva voce unless the presiding officer shall order or any shareholder
shall demand that voting be by ballot.
ARTICLE III
DIRECTORS
SECTION 1. GENERAL POWERS. The business and affairs of the corporation
shall be managed by its board of directors. The board of directors shall
annually elect a chairman of the board, a vice chairman of the board, a
president, a secretary, a treasurer and such other officers as these by-laws may
provide. The board of directors shall at each annual meeting of the corporation
submit a full statement of the transactions of the corporation during the
previous year and of its financial condition.
SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The number of directors
of the corporation shall be not less than five nor more than nine. Each director
shall hold office until the next annual meeting of shareholders or until his
successor shall have been elected and qualified.
3
<PAGE>
SECTION 3. REGULAR MEETINGS. A regular meeting of the board of directors
shall be held without other notice than this by-law, immediately after, and at
the same place as, the annual meeting of shareholders. The board of directors
may provide, by resolution, the time and place, either within or without the
Commonwealth of Massachusetts, for the holding of additional regular meetings
without other notice than such resolution.
SECTION 4. SPECIAL MEETINGS. Special meetings of the board of directors
may be called by or at the request of the chairman of the board, the vice
chairman of the board, the president or any two directors. The person or persons
authorized to call special meetings of the board of directors may fix any place,
either within or without the Commonwealth of Massachusetts, as the place for
holding any special meeting of the board of directors called by them.
SECTION 5. NOTICE. Notice of any special meeting shall be given at
least five days previous thereto by written notice delivered personally or
mailed to each director at his business address, or by telegram. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail
so addressed, with postage thereon prepaid. If notice be given by telegram, such
notice shall be deemed to be delivered when the telegram is delivered to the
telegram company. Any director may waive notice of any meeting. The attendance
of a director at any meeting shall constitute a waiver of notice of such
meeting, except where a director attends a meeting for the express purpose of
objecting to the transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the board of directors need be specified
in the notice or waiver of notice of such meeting.
SECTION 6. QUORUM. A majority of the number of directors then in
office, but no less than four in number, shall constitute a quorum for
transaction of business at any meeting of the board of directors, provided, that
if less than majority of such number of directors is present at said meeting, a
majority of the directors present may adjourn the meeting from time to time
without further notice.
SECTION 7. MANNER OF ACTING. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors.
SECTION 8. ACTION WITHOUT A MEETING. Any action required or permitted
to be taken at any meeting of the board of directors may be taken without a
meeting if written consents thereto are signed by all members of the board of
directors and such written consents are filed with the minutes of proceedings of
the board.
SECTION 9 VACANCIES. Any vacancy occurring in the board of directors
and any directorship to be filled by reason of an increase in the number of
directors, may be filled by the directors or by the shareholders at an annual
meeting or at a special meeting of shareholders called for that purpose.
SECTION 10. COMPENSATION. The board of directors, by the affirmative
vote of a majority of directors then in office, and irrespective of any personal
interest of any of its members, shall have authority to establish reasonable
compensation of all directors for service to the corporation as directors,
officers or otherwise. By resolution of the board of directors the directors may
be paid their expenses, if any, of attendance at each meeting of the board.
4
<PAGE>
ARTICLE IV
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
SECTION 1. HOW CONSTITUTED. By resolution adopted by the board of
directors, the board may designate one or more committees, including an
executive committee, each consisting of at least three directors. Each member of
a committee shall be a director and shall hold office during the pleasure of the
board. The chairman of the board, the vice chairman of the board and the
president shall be members of the executive committee.
SECTION 2. POWERS OF THE EXECUTIVE COMMITTEE. Unless otherwise provided by
resolution of the board of directors, the executive committee shall, during the
intervals between meetings of the board of directors, have and may exercise all
of the powers of the board of directors in the management of the business and
affairs of the corporation except the power to declare a dividend, to authorize
the issuance of stock, or to recommend to shareholders any action requiring
shareholders' approval.
SECTION 3. OTHER COMMITTEES OF THE BOARD OF DIRECTORS. To the extent
provided by resolution of the board, other committees shall have and may
exercise any of the powers that may lawfully be granted to the executive
committee.
SECTION 4. PROCEEDINGS, QUORUM AND MANNER OF ACTING. In the absence of
appropriate resolution of the board of directors, each committee may adopt such
rules and regulations governing its proceedings, quorum and manner of acting as
it shall deem proper and desirable, provided that the quorum shall not be less
than two directors. In the absence of any member of any such committee, the
members thereof present at any meeting, whether or not they constitute a quorum,
may appoint a member of the board of directors to act in the place of such
absent member.
SECTION 5. OTHER COMMITTEES. The board of directors may appoint other
committees, each consisting of one or more persons, who need not be directors.
Each such committee shall have such powers and perform such duties as may be
assigned to it from time to time by the board of directors, but shall not
exercise any power which may lawfully be exercised only by the board of
directors or a committee thereof.
ARTICLE V
OFFICERS
SECTION 1. NUMBER. The officers of the corporation shall be a chairman of
the board, a vice chairman of the board, a president, one or more vice
presidents (the number thereof to be determined by the board of directors), a
controller, a treasurer, and a secretary, and such assistant controllers,
treasurers, secretaries or other officers as may be elected or appointed by the
board of directors. Any two or more offices may be held by the same person
except that the chairman, vice chairman and president cannot also serve
simultaneously as secretary of the corporation, but no person shall execute,
acknowledge or verify any instrument in more than one capacity if such
instrument is required by law, the Articles of Organization or these by-laws to
be executed, acknowledged or verified by two or more officers. The chairman of
the board, vice chairman and the president shall be selected from among the
directors and may hold such offices only so long as they continue to be
directors. No other officer need be a director.
5
<PAGE>
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the corporation
shall be elected annually by the board of directors at the first meeting of the
board of directors held after each annual meeting of shareholders. If the
election of officers shall not be held at such meeting, such election shall be
held as soon thereafter as conveniently may be. Vacancies may be filled or new
offices filled at any meeting of the board of directors. Each officer shall hold
office until his successor shall have been duly elected and shall have qualified
or until his death or until he shall resign or shall have been removed in the
manner hereinafter provided. Election or appointment of an officer or agent
shall not of itself create contract rights.
SECTION 3. REMOVAL. Any officer or agent elected or appointed by the board
of directors may be removed by the board of directors whenever in its judgment
the best interest of the corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, or the person so
removed.
SECTION 4. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the board
of directors for the unexpired portion of the term.
SECTION 5. CHAIRMAN OF THE BOARD. The chairman of the board shall be the
chief executive officer of the corporation, shall preside at all shareholders'
meetings and at all meetings of the board of directors and shall be ex officio a
-- -------
member of all committees of the board of directors, except the audit committee,
if any. Subject to the supervision of the board of directors, he shall have
general charge of the business, affairs and property of the corporation and its
officers, employees and agents. He shall sign (unless the vice chairman of the
board, the president or a vice president shall have signed) certificates
representing the stock of the corporation authorized for issuance by the board
of directors and shall have such other powers and perform such other duties as
may be assigned to him from time to time by the board of directors.
SECTION 6. VICE CHAIRMAN OF THE BOARD. The vice chairman of the board shall
assist the chief executive officer of the corporation in his duties and, at the
request of or in the absence or disability of the chairman of the board, he
shall preside at all shareholders' meetings and at all meetings of the board of
directors and shall in general exercise the powers and perform the duties of the
chairman of the board. He shall sign (unless the chairman of the board, the
president or a vice president shall have signed) certificates representing the
stock of the corporation authorized for issuance by the board of directors and
shall have such other powers and perform such other duties as may be assigned to
him from time to time by the chairman of the board or the board of directors.
SECTION 7. PRESIDENT. The president shall be the chief operating officer of
the corporation. In the event of the absence or disability of both the chairman
of the board and the vice chairman of the board, he shall preside at all
shareholders' meetings and at all meetings of the board of directors and shall
in general exercise the powers and perform the duties of both. Subject to the
supervision of the board of directors and such direction and control as the
chairman of the board and the vice chairman of the board may exercise, he shall
have general charge of the operations of the corporation and its officers,
employees and agents. He shall sign (unless the chairman or the vice chairman of
the board or a vice president shall have signed) certificates representing the
stock of the corporation authorized the board of directors may for issuance by
the board of directors. Except as otherwise order, he may sign in the name and
on behalf of the corporation all deeds, mortgages, bonds, contracts, instruments
or agreements. He shall exercise such other powers and perform such other duties
as from time to time may be assigned to him by the board of directors.
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<PAGE>
SECTION 8. VICE PRESIDENT. The board of directors shall, from time to time,
designate and elect one or more vice presidents who shall have such powers and
perform such duties as from time to time may be assigned to them by the board of
directors or the president. At the request or in the absence or disability of
the president, the vice president (or, if there are two or more vice presidents,
then the senior of the vice presidents present and able to act) may perform all
the duties of the president and, when so acting, shall have all the powers of
and be subject to all the restrictions upon the president. Any vice president
may sign (unless the president or another vice president shall have signed)
certificates representing stock of the corporation authorized for issuance by
the board of directors.
SECTION 9. CONTROLLER AND ASSISTANT CONTROLLERS. The controller shall be
the principal accounting officer of the corporation and shall have general
charge of the books of account of the corporation. He shall cause to be prepared
annually a full and correct statement of the affairs of the corporation,
including a balance sheet and a financial statement of operations for the
preceding fiscal year. He shall perform all the duties incident to the office of
controller and such other duties as from time to time may be assigned to him by
the chairman or by the board of directors.
Any assistant controller may perform such duties of the controller as the
controller or the board of directors may assign and, in the absence of the
controller, he may perform all of the duties of the controller.
SECTION 10. TREASURER AND ASSISTANT TREASURER. The treasurer shall be the
principal financial officer of the corporation and shall have general charge of
the finances of the corporation. Except as otherwise provided by the board of
directors, he shall have general supervision of the funds and property of the
corporation. He shall sign (unless an assistant treasurer or secretary or
assistant secretary shall have signed) all certificates of stock of the
corporation authorized for issuance by the board of directors. He shall render
to the board of directors, whenever directed by the board, a report relating to
his custody of the funds and property of the corporation and of all his
transactions as treasurer; and as soon as possible after the close of each
fiscal year he shall make and submit to the board of directors a like report for
such fiscal year. He shall perform all the duties incident to the office of
treasurer and such other duties as from time to time may be assigned to him by
the chairman or the board of directors.
Any assistant treasurer may perform such duties of the treasurer as the
treasurer or the board of directors may assign, and, in the absence of the
treasurer, he may perform all the duties of the treasurer.
SECTION 11. SECRETARY AND ASSISTANT SECRETARY. The secretary shall (a) keep
the minutes of the shareholders' and of the board of directors' meetings in one
or more books provided for that purpose; (b) see that all notices are duly given
in accordance with the provisions of these by-laws or as required by law; (c) be
custodian of the corporate records and of the seal of the corporation and see
the seal of the corporation is affixed to all certificates for shares prior to
the issue thereof and to all documents, the execution of which on behalf of the
corporation under its seal is duly authorized in accordance with the provisions
of these by-laws;(d) keep a register of the post-office address of each
shareholder which shall be furnished to the secretary by such shareholder; (e)
sign with the chairman, vice chairman, president, or a vice president,
certificates for shares of the corporation, the issue of which shall have been
authorized by resolution of the board of directors; (f) have general charge of
the stock transfer books of the corporation; (g) in general perform all duties
incident to the office of secretary and such other duties as from time to time
may be assigned to him by the chairman or by the board of directors.
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<PAGE>
Any assistant secretary may perform such duties of the secretary as the
secretary or the board of directors may assign, and, in the absence of the
secretary, he may perform all the duties of the secretary.
SECTION 12. SUBORDINATE OFFICERS. The board of directors from time to time
may appoint such other officers or agents as it may deem advisable, each of whom
shall have such title, hold office for such period, have such authority and
perform such duties as the board of directors may determine. The board of
directors from time to time may delegate to one or more officers or agents the
power to appoint any such subordinate officers or agents and to prescribe their
respective rights, terms of office, authorities and duties.
SECTION 13. REMUNERATION. The salaries or other compensation of the
officers of the corporation shall be fixed from time to time by resolution of
the board of directors, except that the board of directors may by resolution
delegate to any person or group of persons the power to fix the salaries or
other compensation of any subordinate officers or agents appointed in accordance
with the provisions of Section 12 hereof. No officer shall be prevented from
receiving a salary by reason of the fact that he is also a director of the
corporation.
SECTION 14. The board of directors may require any officer or agent of the
corporation to execute a bond to the corporation in such sum and with such
surety or sureties as the board of directors may determine, conditioned upon the
faithful performance of his duties to the corporation, Any secretary, treasurer,
assistant secretary and assistant treasurer of the corporation shall, in
accordance with the applicable provisions of the Massachusetts General Laws,
give a bond, with surety, payable to the corporation conditioned upon the
faithful performance of his or her duties and that such bond be executed by such
officer before performing any duties of his or her office.
SECTION 15. COMMISSIONS. No person shall be eligible as an elective or
appointed officer who has any interest in commissions or other compensation
based on premiums or considerations paid to the corporation on any policy or
contract, or on any extension of conversion thereof, unless such policy,
contract, extension or conversion was written and effective prior to his
election or appointment.
ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. CONTRACTS. The board of directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and deliver and
instrument in the name of and on behalf of the corporation, and such authority
may be general or confined to specific instances.
SECTION 2. LOANS. No loans shall be contracted on behalf of the corporation
and no evidences of indebtedness shall be issued in its name unless authorized
by a resolution of the board of directors. Such authority may be general or
confined to specific instances.
SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the corporation, shall be signed by such officer or officers, agent or agents of
the corporation and in such manner as shall from time to time be determined by
resolution of the board of directors.
8
<PAGE>
SECTION 4. DEPOSITS. All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the corporation in such
banks, trust companies or other depositories as the board of directors may
select.
ARTICLE VII
CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. CERTIFICATES FOR SHARES. Certificates representing shares of the
corporation shall be in such form as may be determined by the board of
directors. Such certificates shall be signed by the chairman of the board, the
vice chairman of the board, the president or a vice president and by the
secretary or an assistant secretary and shall be sealed with the seal of the
corporation. All certificates for shares shall be consecutively numbered or
otherwise identified. The name of the person to whom the shares represented
thereby are issued, with the number of shares and date of issue, shall be
entered on the books of the corporation. All certificates surrendered to the
corporation for transfer shall be cancelled and no new certificate shall be
issued until the former certificate for a like number of shares shall have been
surrendered and cancelled, except that in case of a lost, destroyed or mutilated
certificate, a new one may be issued therefor upon such terms and indemnity to
the corporation as the board of directors may prescribe.
SECTION 2. TRANSFERS OF SHARES. Transfers of shares of the corporation
shall be made only on the books of the corporation by the holder of record
thereof or by his legal representative, who shall furnish proper evidence of
authority to transfer, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the secretary of the corporation, and on
surrender for cancellation of the certificate for such shares. The person in
whose name shares stand on the books of the corporation shall be deemed the
owner thereof for all purposes as regards the corporation.
ARTICLE VIII
FISCAL YEAR
The fiscal year of the corporation shall begin on the first day of
January in each year and end on the last day of December in each year.
ARTICLE IX
WAIVER OF NOTICE
Whenever any notice whatever is required to be given under the
provisions of these by-laws or under the provisions of the Articles of
Incorporation, a waiver thereof in writing, signed by the person or persons
entitled to such notice, whether before or after the time stated therein, shall
be deemed equivalent to the giving of such notice.
ARTICLE X
INDEMNIFICATION
The corporation shall, except as hereinafter provided and subject to
limitations of law, indemnify each director, former director, officer and former
officer, and his heirs and legal representatives, for and against all loss,
liability and expense, whether heretofore or hereafter imposed upon or incurred
by him in connection with any pending or future action, suit, proceeding
9
<PAGE>
or claim in which he may be involved, or with which he may be threatened, by
reason of any alleged act or omission as a director or officer of the
corporation. Such loss, liability and expense shall include, but not be limited
to, judgments, fines, court costs, reasonable attorneys' fees and the cost of
reasonable settlements. Such indemnification shall not cover (a) loss, liability
or expense imposed or incurred in connection with any item or matter as to which
such director or officer shall be finally adjudicated not to have acted in good
faith in the reasonable belief that his action was in the best interest of the
corporation or (h) loss, liability or expense imposed or incurred in connection
with any item or matter which shall be settled without final adjudication unless
such settlement shall have been approved as in the best interests of the
corporation by vote of the board of directors at a meeting in which no director
participates against whom any suit, proceeding or claim on the same or similar
grounds is then pending or threatened, or in the event no such vote can be
taken, unless, in the opinion of independent counsel selected by or in a manner
determined by the board of directors, there is no reasonable ground not to
approve such settlement as being in the best interests of the corporation. As
part of such indemnification, the corporation may pay expenses incurred in
defending any such action, suit, proceeding or claim in advance of the final
disposition thereof upon receipt of an undertaking by the person indemnified to
repay such payment if he should be determined not to be entitled to
indemnification hereunder. The foregoing rights of indemnification shall be in
addition to any rights to which any director, former director, officer, or
former officer, heirs or legal representatives may otherwise be lawfully
entitled.
ARTICLE XI
AMENDMENTS
These by-laws may not be altered, amended or repealed prior to the
issuance of a certificate of authority to the company, except by written consent
of subscribers representing at least two-thirds of the shares subscribed, and
the approval of the Commissioner of Insurance of Massachusetts. After a
certificate of authority is issued, the power to make, amend or repeal these by-
laws shall be vested in the board of directors.
Adopted this 25th day of February, 1979.
Certified to be a true copy of the By-Laws of John Hancock Variable Life
Insurance Company as adopted at the Initial Meeting of Incorporators and as
amended from time to time, up to and including the date set forth below.
10
<PAGE>
EXHIBIT 6
February 22, 1996
Board of Directors
John Hancock Variable Life Insurance Company
Members of the Board:
This opinion is furnished in connection with the filing of this Post-Effective
Amendment to the Registration Statement on Form S-6 by John Hancock Variable
Life Insurance Company (JHVLICO) under the Securities Act of 1933, as amended,
with respect to the scheduled premium variable life insurance policy under which
amounts will be allocated by JHVLICO to one or more of the subaccounts of John
Hancock Variable Life Account V ("Account"). The scheduled premium policy is
described in the prospectus included in the amended Registration Statement.
The policy form was prepared under my direction, and I am familiar with the
amended Registration Statement and exhibits thereto. In my opinion:
1. Except to the extent that exemptive relief has been obtained, the "sales
load", as defined in paragraph (c) (4) of Rule 6(e)-2 under the Investment
Company Act of 1940, will not exceed 9 per centum of the payments to be
made thereon during the period equal to the lesser of 20 years or the
anticipated life expectancy of the insured named in the policy based on
the 1980 Commissioners Standard Ordinary Mortality Tables. Such sales load
during the first two policy years will not exceed 30 per centum of
payments made for the first policy year plus 10 per centum of payments
made for the second policy year.
2. Except to the extent that exemptive relief has been obtained, the
proportionate amount of sales load deducted from any payment during the
policy period will not exceed the proportionate amount deducted from any
prior payment during the policy period.
<PAGE>
-2-
3. The illustrations of death benefit, account value, surrender value, and
accumulated premiums shown in the appendix of the scheduled premium
prospectus included in the amended Registration Statement, based on the
assumptions stated in the illustrations, are consistent with the
provisions of the policy. The policies have not been designed so as to
make the relationship between premiums and benefits, as shown in the
illustrations, appear disproportionately more favorable to a prospective
purchaser of a policy for a standard risk nonsmoker male age 35, than to
prospective purchasers of policies for a male at other ages or in another
risk classification or for a female nor have the particular examples set
forth in the illustrations been selected for the purpose of making this
relationship more favorable.
4. The charge for federal taxes that is imposed under the policy is
reasonable in relation to JHVLICO's increased tax burden under Section 848
of the Internal Revenue Code of 1986, resulting from JHVLICO's receipt of
such premiums. The cost to JHVLICO of capital used to satisfy its
increased tax burden under Section 848 is, in essence, JHVLICO's targeted
rate of return. The targeted rate of return is reasonable and the factors
taken into account by JHVLICO in determining such targeted rate of return
are appropriate factors to consider.
I hereby consent to the filing of this opinion as an exhibit to the amended
Registration Statement and to the use of my name relating to actuarial matters
under the heading "Experts" in the prospectus.
/s/ Randi M. Sterrn
-------------------
Randi M. Sterrn FSA
Senior Associate Actuary
<PAGE>
EXHIBIT 7
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Prospectus and to the use of our report dated February 9, 1996, with respect to
the financial statements of John Hancock Variable Life Account V and February 7,
1996 with respect to the financial statements of John Hancock Variable Life
Insurance Company, included in this Post-Effective Amendment No. 2 to the
Registration Statement (Form S-6, No. 33-75610).
/s/Ernst & Young LLP
ERNST & YOUNG LLP
Boston, Massachusetts
March 4, 1996
FCC0151.DOC
<PAGE>
EXHIBIT 8
June, 1993 (as amended January, 1994)
Description of JHMLICO's and JHVLICO's Issuance,
Transfer and Redemption Procedures for Policies
Pursuant to Rule 6e-2(b) (12) (ii)
and
Method of Effecting Conversion to Fixed Benefit Policies
Pursuant to Rule 6e-2(b) (13) (v) (B).
--------------------------------------
Set forth below is the information called for under Rule 6e-2(b) (12)
(ii) and Rule 6e-2(b) (13) (v) (B) under the Investment Company Act
1940 ("1940 Act") regarding certain procedures under John Hancock
Mutual Life Insurance Company's ("JHMLICO") and John Hancock Variable
Life Insurance Company's ("JHVLICO") Scheduled Premium Variable Life
Insurance Policies (hereinafter referred to individually as the
"Policy" and collectively as the "Policies") newly issued in 1994.
Rule 6e-2(b) (12) (ii) provides an exemption for a variable life
insurance separate account, its sponsoring insurance company, its
investment adviser and its principal underwriter from Sections 22(d),
22(e) and 27(c) (1) of the 1940 Act and Rule 22c-1 thereunder for
issuance, transfer and redemption procedures under a variable life
insurance Policy to the extent necessary to assure compliance with
Rule 6e-2, state insurance law or established administrative
procedures of the life insurance company. The Rule requires, as a
condition for exemption, that such procedures be reasonable, fair and
nondiscriminatory, and be disclosed in the registration statement
filed with respect to such variable life insurance policies.
JHMLICO and JHVLICO represent that their procedures meet the foregoing
standards of Rule 6e-2(b) (12) (ii), based on the following facts and
circumstances:
1. Because of the insurance nature of the Policies and, in certain
instances, as a result of the requirements of the state insurance
laws, the procedures necessarily differ in significant respects from
the procedures for mutual funds and contractual plans for which the
1940 Act was designed.
<PAGE>
2. Many of the procedures have been adapted from those established and
utilized in connection with the administration of JHMLICO's fixed
benefit life insurance policies and earlier versions of variable life
insurance policies issued by its subsidiary, JHVLICO.
3. Certain procedures, including the 24-month conversion right to
fixed benefit policies, are required by Rule 6e-2.
4. JHMLICO and JHVLICO, in structuring their procedures to comply with
Rule 6e-2, state insurance laws, and their established administrative
procedures, have attempted to meet the intent of the 1940 Act to the
extent deemed feasible.
5. Generally speaking, the state insurance laws to which both JHMLICO
and JHVLICO are subject reflect the fundamental principle that the
procedures shall not be unfair, unreasonable or unjustly
discriminatory to any policyholder.
6. Because of the intricate insurance methodology underlying the
procedures, it is often difficult to determine, with certainty,
whether and to what extent a particular procedure, or a given step to
that procedure, deviates from a specific requirement of Section 22(d),
22(e) or 27(c) (1) of the 1940 Act or Rule 22c-1 thereunder.
Accordingly, the summary below includes the principal Policy
provisions and procedures that might be deemed to constitute, either
directly or indirectly, accommodation of the 1940 Act requirements and
insurance practices. Given the complexities of the Policies'
operations, the summary, although comprehensive, does not attempt to
treat each and every mechanical variation or permutation that might
occur and does not repeat every provision or procedure that is already
set forth in the registration statement or exhibits thereto. At the
same time, the summary, in order to provide a comprehensive view of
the procedures, includes certain procedural steps that do not
constitute a deviation from the Sections and Rule cited above.
<PAGE>
Rule 6e-2(b) (13) (v) (B) grants an exemption for a variable life
insurance separate account, its sponsoring insurance company, its
investment adviser and its principal underwriter from Section 27(d) of
the 1940 Act for variable life insurance policies which allow the
policyholder to convert a variable life insurance policy into a fixed
benefit life insurance policy at any time during the first 24 months
after issuance. The Rule requires, as a condition for exemption, that
the method of computing any adjustments made in payments or cash
values to reflect variances between the payments and cash values under
the original policy and new policy be set out in an exhibit to the
registration statement filed with respect to the variable life
insurance Policy. JHMLICO's and JHVLICO's Policies provide for such a
conversion privilege. No adjustments in payments and cash values are
made upon exercise of that privilege, as described below.
This memorandum divides the information called for by Rules 6e-2(b)
(12) (ii) and 6e-2(b) (13) (v) (B) into three parts. The first part
summarizes procedures under the policies which might be deemed to
involve, either directly or indirectly, a "redemption" within the
meaning of the 1940 Act. The second part summarizes procedures which
might be deemed to involve, either directly or indirectly, a
"purchase" transaction. The third part summarizes the procedures for
converting a Policy to a fixed benefit Policy.*/
-
_____________________
*/ If an Owner requests a "purchase" or "redemption" transaction which
-
is impossible (for example, allocation of a loan or partial surrender
to subaccounts which have insufficient assets to support said
allocation) or impermissible (such as a reduction in the Basic Death
Benefit below the minimum required amount), JHMLICO will notify the
Policy Owner to determine what action, if any, the Policy Owner wishes
to take instead.
This exhibit refers to procedures as they affect the respective
variable accounts of JHMLICO and JHVLICO ("the Account") used in
funding the Policies. Except as otherwise stated herein, these
procedures do not necessarily reflect the Fixed Account under the
Policies which is held in the General Account of each insurer.
Whenever reference is made herein to JHMLICO it should also be read as
JHVLICO, insofar as JHVLICO and its Account are concerned, each
insurer having adopted identical procedures.
<PAGE>
Except as otherwise defined herein, capitalized terms used in this
memorandum have the same meaning as are defined in the prospectus
contained in the applicable registration statement.
I. "Redemption" Procedures:
Surrender and Related Transactions
----------------------------------
JHMLICO's Policies provide for the payment of monies to a policyholder
("Owner") or beneficiary upon presentation to JHMLICO of a Policy.
Such presentation might be deemed to constitute, either directly or
indirectly, a "redemption" of the Owner's interest within the meaning
of the 1940 Act. Set forth below is a summary of the principal policy
provisions and procedures which might be viewed as involving such a
"redemption". The principal difference between such "redemptions" and
redemptions it the mutual fund or contractual plan context is that
under the Policies, the payee may be deemed not to receive a pro rata
or proportionate share of the assets in JHMLICO's account within the
meaning of the 1940 Act. The amount received by the payee will depend
upon the particular benefit for which the Policy is presented,
including, for example the Surrender Value or Death Benefit.
There are also certain Policy provisions -- such as options on
lapse -- under which the Policy will not be presented to JHMLICO but
which will affect the Owner's benefits and involve a transfer of the
assets supporting the Policy reserve out of the Account. Finally,
state insurance law may require that certain requirements be met
before JHMLICO is permitted to make payments to the payee.
A. SURRENDER VALUES
----------------
If the insured party under a Policy ("Insured") is alive, JHMLICO will
pay, within seven days, the Surrender Value next computed after
receipt, at its Home Office, of the Policy and a signed request for
surrender. Computations with respect to the investment experience of
the subaccounts will be made as of 4:00 p.m., New York City time, on
each day during which the New York Stock Exchange is open for trading
and on which the fund values its shares. This will enable JHMLICO to
pay the Surrender Value based on the next computed value after a
request is received.
While no premium is in default, the Surrender Value is equal to the
Account Value less any indebtedness, less any Contingent Deferred
Sales Charges and less any Administrative Surrender Charge. In
general, the Account Value for any day equals the Policy Account Value
for the previous day, increased by any net premium and decreased by
any charges against the Account Value, accumulated at the subaccount's
rate of return after charges against the Account. The
<PAGE>
Contingent Deferred Sales Charge is deducted from the Policy Account
Value upon surrender of the Policy during the first thirteen Policy
years after issue. (It is deducted for fewer than thirteen years at
certain issue ages).
The amount of this charge is calculated on the basis of the premium
under the Modified Schedule for the issue age of the Policy. Lower
percentages apply at higher issue ages. The total charge for sales
load, including the Contingent Deferred Sales Charge, over the lesser
of 20 years or the life expectancy of the insured, will not exceed 9%
of the Basic Premium at issue over that period. No minimum amount of
Policy Account Value is guaranteed. JHMLICO will make the payment of
the Surrender Value out of its General Account and transfer assets
from the Account to the General Account for the amounts held for the
Policy in the Account.
The Administrative Surrender Charge is deducted from a Policy's
Account Value upon its surrender or lapse in the first nine Policy
years after issue. The amount of this charge is determined as an
amount per thousand of Guaranteed Death Benefit. Currently the charge
is waived for a Policy with more than $250,000 of Guaranteed Death
Benefit at the time of surrender or lapse and is reduced for all other
Policies.
In lieu of payment of the Surrender Value upon surrender of a Policy
in a single sum, an election may be made to apply all or a portion of
the proceeds under one of the benefit settlement options described in
the Policy or, with the approval of JHMLICO, under other optional
methods of settlement available from JHMLICO. The election may be
made by the Owner during the Insured's lifetime, or, if no election is
in effect at death, by the beneficiary. The benefit settlement
options are subject to the restrictions and limitations set forth in
the Policy.
B. PARTIAL SURRENDER
-----------------
A Policy may be partially surrendered in accordance with Rule 6e-2(b)
(12) (ii). The Policy after the Partial Surrender must have an
initial Sum Insured at least as great as the minimum issue size for
that type or Policy.
When a Policy is partially surrendered, there is a proportionate
reduction in Death Benefit, Account Value, Surrender Value, Contingent
Deferred Sales Charge, Administrative Surrender Charge, Required
Premium Target, Loans, Rider/Rating Premium, and Basic Premium.
If there is an outstanding Policy loan on the Policy, the outstanding
indebtedness after the Partial Surrender can not exceed the then
current available Loan Value.
<PAGE>
Partial Surrenders will be effected as of the end of the Valuation
Period in which all materials necessary to complete the Partial
Surrender (including a written request in proper form and the Policy)
are received at JHMLICO's Home Office. Similar to the surrender
transaction, JHMLICO will pay, within seven days, the resulting
Surrender Value computed.
C. DEATH CLAIMS
------------
JHMLICO will pay a death benefit to the beneficiary within seven days
after receipt at its Home Office of due proof of death of the Insured,
and all other requirements necessary 1/ to make payment. Provided the
-
Policy is in full force, 2/ the Death Benefit will be the greater of
-
(1) the Guaranteed Death Benefit (and Excess Value, if any, under the
variable death benefit option) plus all premiums received after the
last processing date prior to the Insured's date of death less any
indebtedness on the date of death, and (2) the Account Value at the
end of the Valuation Period in which death occurs multiplied by the
applicable Death Benefit Factor or Corridor Factor, as applicable,
less any indebtedness on the date of death. The Death Benefit is also
less any premium in default if death occurs during the 61 day grace
period. The Guaranteed Death Benefit is equal to the Basic Death
Benefit.
The proceeds payable on death also reflect interest from the date of
death to the date of payment.
JHMLICO will make payment of the Death Benefit out of its General
Account, and will transfer assets from the Account to the General
Account in an amount equal to the amount held in the Account for the
Policy terminated by death. The excess of the Guaranteed Death
Benefit over the Current Death Benefit, if any, will be paid out of a
General Account reserve maintained for that purpose.
In lieu of payment of the Death Benefit in a single sum, a settlement
option may be selected as described in Section I.A, above.
---------------
1/State insurance laws impose various requirements, such as receipt of
-
a tax waiver before payment of the Death Benefit may be made. In
addition, payment of the Death Benefit is subject to the provisions of
the Policy regarding suicide and incontestability.
2/"In full force", means that the insurance under the Policy is being
-
continued for the greater of the Guaranteed Death Benefit and the
Current Death Benefit, and that no unpaid premium is more than 61 days
overdue.
<PAGE>
D. DEFAULT AND OPTIONS ON LAPSE
----------------------------
On each applicable processing date, JHMLICO compares the Cumulative
Premium Balance under a Policy on the immediately preceding Valuation
Date with the Required Premium Target on such Valuation Date. If the
Cumulative Premium Balance is then less than the Required Premium
Target for the Policy, the Policy can be in default on that Processing
Date. The premium requirement will also be deemed satisfied on the
last Valuation Date of any Policy month if adequate Excess Value
(defined below) is available on the scheduled due date. If both of
the tests fail, the Policy is in default. The difference between the
Cumulative Premium Balance and the Required Premium Target is the
amount in default.
The Policy provides that any amount in default may be paid within a
61-day grace period after the date of default. Written notice will be
furnished to the Owner at his or her last known address, at least 61
days prior to the end of the grace period, specifying the minimum
amount which must be paid to continue the Policy in force on a premium
paying basis after the end of the grace period. If a payment at least
equal to the amount in default is not received by the end of the grace
period the Policy will lapse. If payment by the Owner of an amount in
default is received prior to the end of the grace period, the Policy
will no longer be in default. The portion of the payment equal to the
amount in default will be processed as if it had been received on the
processing date of the Cumulative Premium Test; any excess payment
will be processed as of the date of receipt.
The insurance continues in full force during the grace period but, if
the insured dies during the grace period, the amount in default will
be deducted from the amount of Death Benefit otherwise payable.
If a Policy lapses, the Surrender Value under the Policy on the date
of lapse is applied under one of the following options for continued
insurance not requiring further payment of premiums. These options
provide for Variable or Fixed paid-Up Insurance or Fixed Extended Term
Insurance on the life of the insured commencing on the date of lapse.
Both the Variable and Fixed Paid-Up Insurance options provide an
amount of paid-up whole life insurance determined in accordance with
the Policy which the Surrender Value will purchase. The amount of
Variable Paid-Up Insurance may then increase or decrease, subject to
any guarantee, in accordance
<PAGE>
with the investment experience of the subaccount. The Fixed Extended
Term Insurance option provides a fixed amount of insurance determined
in accordance with the Policy, with the insurance coverage continuing
for as long a period as the available Policy values will purchase.
If no option has been elected before the end of the grace period, the
Fixed Extended Term insurance option automatically applies unless the
amount of Fixed Paid-Up Insurance would equal or exceed the amount of
Fixed Extended Term Insurance or unless the insured is a substandard
risk, in either of which cases Fixed Paid-Up Insurance is provided.
The Variable Paid-Up Insurance option is not available unless the
initial amount of Variable Paid-Up Insurance is at least $5000.
A Policy continued under any option may be surrendered for its
Surrender Value while the insured is living. Loans may be available
under the Variable and Fixed Paid-Up Insurance options.
E. POLICY LOAN
-----------
Loans may be made at any time a Loan Value is available after the
first Policy year. The Owner may borrow money on completion of a form
satisfactory to JHMLICO assigning the Policy as the only security for
the loan. Payment of the loan will be made from JHMLICO's Home
Office. The Loan Value will be 75% of the Surrender Value in Policy
years two and three and 90% of the Surrender Value in later Policy
years. Interest accrues and is compounded daily at an effective
annual rate determined by John Hancock at the start of each Policy
year. This interest rate will not exceed the greater of (1) the
"Published Monthly Average" (defined below) for the calendar month
ending 2 months before the calendar month of the Policy anniversary or
(2)5%. The "Published Monthly Average" means Moody's Corporate Bond
Yield Average-Monthly Average Corporate, as published by Moody's
Investors Service, Inc., or if the average is no longer published, a
substantially similar average established by the insurance regulator
where the Policy is issued.
-9-
The amount of any outstanding loan plus accrued interest is called the
"indebtedness". Except when used to pay premiums, a loan will not be
permitted unless its is at least $300. The Owner may repay all or a
portion of any indebtedness while the insured is living and premiums
are being duly paid. When a loan is made, shares are redeemed in an
aggregate
<PAGE>
equal to the amount of the loan and this aggregate value is
allocated to the Loan Account. The shares redeemed will be redeemed
in each subaccount in the same proportion as the Account Value is then
allocated among the subaccounts. Upon each loan repayment, the same
proportionate amount of the entire loan as was borrowed from the Fixed
Account will be repaid to the Fixed Account. The remainder of the
loan repayment will be allocated to the appropriate subaccounts as
stipulated in the current Investment Rule.
Loan interest which is not paid by a Policy anniversary will be added
to the loan principal by automatically effecting an additional Policy
loan. Amounts transferred to the Policy loan account are credited
with interest at 1% less than the loan interest rate per annum for the
first 20 Policy years and .50% less than the loan interest rate per
annum in years 21 and beyond, which interest is transferred to the
subaccount when the loan is repaid, according to the Investment Rule
then in affect.
A loan does not directly affect the amount of the Required Premium.
While the indebtedness is outstanding, that portion of the Account
Value that is in the Loan Account is credited with interest at a rate
of 1% less than the loan rate for the first 20 Policy years and .50%
less than the loan rate in years 21 and later, a rate which will
usually be different than the net return for the subaccounts. Since
the Loan Account and the remaining portion of the Account Value will
generally have different rates of investment return, any Death Benefit
above the Guaranteed Death Benefit, the Account Value, and the
Surrender Value are permanently affected by any indebtedness, whether
or not repaid in whole or in part. The amount of any outstanding
indebtedness is subtracted from the amount otherwise payable when the
Policy proceeds become payable.
Whenever the indebtedness equals or exceeds the Surrender Value, the
Policy terminates 31 days after notice has been mailed by JHMLICO to
the Owner and any assignee of record at their last known addresses,
unless a repayment of the excess indebtedness is made within that
period.
-10-
F. TRANSFERS AMONG VARIABLE SUBACCOUNTS
------------------------------------
The Owner may reallocate the amounts held for the Policy in the
variable subaccounts in each Policy year without charge. The Owner may
use either percentages (in whole numbers) or designate the dollar
amount of funds to be transferred
<PAGE>
between subaccounts. The reallocation must be such that the total in
the subaccounts after reallocation equals 100%. The change will be
effective at the end of the Valuation Period in which JHMLICO receives
at its Home Office notice satisfactory to JHMLICO.
G. CONVERSION PRIVILEGE
--------------------
The conversion privilege provided in a accordance with Rule 6e-2(b)
(13) (v) (B) under the 1940 Act is discussed under III. below.
H. PARTIAL WITHDRAWAL OF EXCESS VALUE
----------------------------------
An Owner may withdraw Excess Value from the Policy on or after the
first Policy anniversary. This privilege, which reduces the Account
Value by the amount of the withdrawal and the associated charge, may
be exercised only once in a Policy year and will be effective as of
the end of the Valuation Period in which JHMLICO receives written
notice satisfactory to it at its Home Office. The minimum amount that
may be withdrawn is $500. Unless the Current Death Benefit exceeds
the Guaranteed Death Benefit, a partial withdrawal will not affect the
Death Benefit Payable. An amount equal to $25 is charged against
Account Value for each partial withdrawal. When a withdrawal of
Excess Value is made, the Premium Component, if any, is treated as
having been withdrawn first. Amounts withdrawn from the Premium
Component reduce the cumulative premium balance.
-11-
II. PURCHASE AND RELATED TRANSACTIONS
--------------------------------------
Set out below is a summary of the principal provisions of the Policies
and administrative procedures thereunder that might be deemed to
constitute, either directly or indirectly, a "purchase" transaction
within the meaning of the 1940 Act. The summary shows that, because
of the insurance nature of the Policies, the procedures involved
necessarily differ in certain significant respects form the purchase
procedures for mutual funds and contractual plans. The chief
differences revolve around the premium rate structure and the
insurance underwriting (i.e., evaluation of risk) process. There are
also certain Policy provisions -- such as reinstatement -- which do
not result in the issuance of a Policy but which required certain
payments by the Owner and involve a transfer of assets supporting the
Policy reserve into the Account.
A. PREMIUM SCHEDULES AND UNDERWRITING STANDARDS
--------------------------------------------
Premiums for JHMLICO's Policies will not be the same for all Owners.
The chief reason is that the principle of pooling and distribution of
mortality risks is based upon the
<PAGE>
assumption that each Owner pays a premium commensurate with the
Insured's mortality risk which is actuarially determined based upon
factors such as age, sex, smoking status, health and occupation. In
the context of life insurance as contrasted with mutual funds, a
uniform premium (or "public offering price") for all Insured's would
discriminate unfairly in favor of those Insured's representing greater
mortality risks to the disadvantage of those representing lesser
risks. Accordingly, although there will be no uniform "Public offering
price" for all Insured's, there will be a single "price" for all
Insured's in a given actuarial category.
The Policies will be offered and sold pursuant to established premium
schedules 3/ and underwriting standards and in accordance with state
-
insurance laws. Such laws prohibit unfair discrimination among
Policyholders, but recognize that premiums may be based upon factors
such as age, sex, smoking status, health, and occupation. In a few
states, the premiums and values under the Policies will not directly
reflect the sex of the insured.
----------------
3/In accordance with industry practice, JHMLICO will establish
-
procedures to handle errors in initial and subsequent premium payments
to collect underpayments, except for de minimis amounts.
<PAGE>
B. APPLICATION AND INITIAL PREMIUM PROCESSING
------------------------------------------
Upon receipt of a completed application from a proposed Owner, JHMLICO
will follow certain insurance underwriting (i.e., evaluation of risk)
procedures designed to determine whether the proposed Insured is
insurable. This process may involve such verification procedures as
medical examinations and may require that further information be
provided by the proposed Insured before a determination can be made.
A Policy cannot be issued, i.e., physically issued through JHMLICO's
computerized issue system until this underwriting procedure has been
completed.
The date on which a Policy is issued is referred to as the "date of
Issue". The date of issue coincides with the beginning of a Valuation
Period. It represents the commencement of the suicide and contestable
periods for purposes of the Policies. It is also the date as of which
the insurance age of the proposed Insured is determined. It
represents the first day of the Policy year and therefore determines
the Policy anniversary. It also marks the commencement of the
variability of benefits.
These processing procedures are designed to provide immediate benefits
to the proposed Owner in connection with payment of the initial
premium and will not dilute any benefit payable to an existing Owner.
Although a Policy cannot be issued until after the underwriting
process has been completed, the proposed Insured will receive
immediate insurance coverage, if he has paid his minimum first
premium, subject to the other terms and conditions of JHMLICO's
Receipt and Conditional Temporary Insurance Agreement. If the minimum
first premium is paid with the application and the Policy is issued as
applied for, the date of issue in general will be the last of the Part
A date or the Part B date of the application or the date of most
recent evidence of insurability, so that variability of benefits will
commence as of that date. If the minimum first premium is not paid
with the application, the date of issue will be the actual date the
application is processed for issue or the next valid issue date
provided the Owner pays the necessary premium. Except as referred to
above, no coverage will take effect with respect to a Policy until the
minimum first premium has been paid and the Policy is delivered to the
Owner while the insured is living and has not consulted, been
examined, or treated by a doctor since the latest Part B of the
application was completed. If coverage under a Policy never goes into
effect, any premium paid will be returned without interest.
<PAGE>
JHMLICO will require that the Policy be delivered and the minimum
initial premium paid within a specific period to protect itself
against anti-selection by the proposed Owner resulting from
deterioration in the Insured's health. Generally, the period will not
exceed 60 days from the date of completion of the latest of Parts A
and B of the application and any required medical examination.
JHMLICO will transfer the appropriate amount from its general account
to the Account on the date the Policy is approved. The appropriate
amount will be calculated as though the net premium had in fact been
transferred from the General Account to the Account commencing on the
date the Policy is issued.
C. PREMIUM RECALCULATION
---------------------
The premium Recalculation applicable to any Policy on a Modified
Schedule may be elected by the Owner at any time up to the Policy
anniversary nearest the Insured's 70th birthday, or, if later, the
tenth Policy Anniversary. If elected, the Premium Recalculation will
be effected on the Policy anniversary next following receipt by
JHMLICO at its Home office of satisfactory written notice. If not
elected sooner, the Premium Recalculation will be effected by JHMLICO
on the Policy anniversary nearest the Insured's 70th birthday, or, if
later, the tenth Policy Anniversary.
The new Basic Premium resulting from a Premium Recalculation may be
less than, equal to or greater than the original Basic Premium but it
will never exceed the Guaranteed Maximum Recalculation Premium for the
attained age shown in the Policy. The new Basic Premium depends on
the Insured's sex, smoking status and age, the Guaranteed Death
Benefit under the Policy and the Account Value on the Valuation Date
immediately preceding the date of the premium Recalculation.
D. REINSTATEMENT PROVISION
-----------------------
The Policy may be reinstated within 3 years after the beginning of the
grace period unless the Surrender Value has been paid or otherwise
exhausted, or the period of any extended term insurance has expired.
A Policy will be reinstated upon receipt by JHMLICO of a written
application for reinstatement and production of evidence of
insurability satisfactory to JHMLICO and payment of an amount equal to
the
<PAGE>
sum of (a) and (b), each accumulated at an effective annual rate
of 6% to the date of reinstatement, where:
(a) is the difference between the Required Premium Target and the
Cumulative Premium Balance at the date of lapse, and
(b) is all Required Annual Premiums for the period between the date of
lapse and the date of reinstatement.
On the date of reinstatement the Policy will have (i) a Sum Insured as
if no lapse had occurred and (ii) indebtedness equal to any
indebtedness at the end of the day immediately preceding the date of
reinstatement.
The Account Value on the date of reinstatement will be the sum of (a)
through (c) less (d) through (f) where:
(a) is the Surrender Value of the nonforfeiture option in effect on
the date of reinstatement plus any indebtedness on the date of
reinstatement;
(b) is the amount in Premium Payment above;
(c) is the deferred sales charge and administrative surrender charge
adjustment (as defined below);
(d) is the aggregate premium expense charges, i.e. sales charge,
premium tax charge and Federal DAC tax charge; and
(e) is the sum of all Maintenance Charges and charges for Riders and
ratings, if any, that would have been made from the date of lapse to
the date of reinstatement if the Policy had not lapsed, with interest
an effective annual rate of 6% to the date of reinstatement.
The deferred sales charge adjustment is the smaller of (a) and (b)
where:
(a) is the deferred sales charge and administrative surrender charge
applicable if the Policy were surrendered immediately after
reinstatement; and
(b) is the deferred sales charge and administrative surrender charge
made on the date of lapse.
In order to assist a lapsed Owner in making a considered judgment as
to whether to reinstate, JHMLICO may calculate the amount payable upon
reinstatement and "freeze" the amount for up to ten days.
F. REPAYMENT OF LOAN
-----------------
<PAGE>
The Owner may repay all or a portion of any indebtedness while the
insured is living and premiums are duly paid. When a loan is made,
shares are redeemed in an aggregate value equal to the amount of the
loan and this aggregate value is transferred to the general account
and carried as a Loan Account. The shares redeemed will be redeemed
in each subaccount in the same proportion as the Account Value is then
allocated among the subaccounts. Upon each loan repayment, the same
proportionate amount of the entire loan as was borrowed from the Fixed
Account will be repaid to the Fixed Account. The remainder of the
loan repayment will be allocated to the appropriate subaccounts as
stipulated in the current Investment Rule.
While the indebtedness is outstanding, that portion of the Account
Value that is in the Loan Account is credited with interest at a rate
of at 1% less than the loan rate in the first 20 Policy years and .50%
less than the loan rate in years 21 and beyond, a rate which will
usually be different than the net return for the subaccounts. Since
the Loan Account and the remaining portion of the Account Value will
generally have different rates of investment return, any Death Benefit
above the Guaranteed Death Benefit, the Account Value, and the
Surrender Value are permanently affected by any indebtedness, whether
or not repaid in whole or in part. The amount of any outstanding
indebtedness is subtracted from the amount otherwise payable when the
Policy proceeds become payable.
G. CORRECTION OF MISSTATEMENT OF AGE OR SEX
----------------------------------------
If JHMLICO discovers that the age or sex of the Insured has been
misstated, JHMLICO will reconstruct the Policy by determining what
benefits the premium paid would have purchased at the correct age or
sex. Special adjustments may have to be made if the resultant face
amount is below JHMLICO's minimum size Policy.
Once the benefits are redetermined, JHMLICO will make the necessary
adjustment in the reserve assets in the Account to reflect the
redetermined benefits and the correct age and sex of the Insured.
III. CONVERSION OF POLICY
--------------------
JHMLICO's Policies, in accordance with Rule 6e-2(b) (v) (b) under the
1940 Act, provide that the Owner within 24 months of issue, or any
time after thereafter, may transfer the entire Account Value under the
Policy to the Fixed Account
<PAGE>
thus creating a non-variable or fixed benefit life insurance Policy.
This conversion privilege is designed to permit an Owner to change his
or her mind and to obtain a fixed benefit Policy.
<PAGE>
EXHIBIT 9
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
John Hancock Variable Annuity and Variable Life Insurance Accounts
------------------------------------------------------------------
POWER OF ATTORNEY
The undersigned member of the Board of Directors of John Hancock Variable
Life Insurance Company does hereby constitute and appoint Henry D. Shaw, Francis
C. Cleary, Thomas J. Lee, Sandra M. DaDalt and Laura M. Mangan, and each of them
individually, with full power of substitution, his or her true and lawful
attorneys and agents to execute, in the name of, and on behalf of, the
undersigned as a member of said Board of Directors, the Registration Statements
under the Securities Act of 1933 and the Investment Company Act of 1940, and
each amendment to the Registration Statements, to be filed for John Hancock
Variable Life Account V, John Hancock Variable Annuity Account I and any other
variable annuity or variable life insurance account of John Hancock Variable
Life Insurance Company with the Securities and Exchange Commission and to take
any and all action and to execute in the name of, and on behalf of, the
undersigned as a member of said Board of Directors or otherwise any and all
instruments, including applications for exemptions from such Acts, which said
attorneys and agents deem necessary or advisable to enable any variable annuity
or variable life insurance account of John Hancock Variable Life Insurance
Company to comply with the Securities Act of 1933, as amended, the Investment
Company Act of 1940, as amended, and the rules, regulations and requirements of
the Securities and Exchange Commission in respect thereof; and the undersigned
hereby ratifies and confirms as his or her own act and deed all that each of
said attorneys and agents shall do or cause to have done by virtue hereof. Each
of said attorneys and agents shall have, and may exercise, all of the powers
hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand on
the date shown.
DATE DIRECTOR
---- --------
9-15-94 /s/ HENRY D. SHAW
9-15-94 /s/ JOSEPH A. TOMLINSON
9-15-94 /s/ ROBERT R. REITANO
9-15-94 /s/ THOMAS J. LEE
9-15-94 /s/ FRANCIS C. CLEARY, JR.
10-12-94 /s/ BARBARA L. LUDDY
10-13-94 /s/ MICHELE G. VAN LEER
3-9-95 /s/ ROBERT S. PASTER
4-5-95 /s/ DAVID F. D'ALESSANDRO
<PAGE>
EXHIBIT 10
February 29, 1996
United States Securities
and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Gentlemen:
This opinion is being furnished with respect to the filing of this post-
effective amendment of the Registrant's Registration Statement with the
Securities and Exchange Commission as required by Rule 485 under the Securities
Act of 1933.
We 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 our opinion this post-
effective amendment does not contain disclosures which would render it
ineligible to become effective pursuant to paragraph (b).
We hereby consent to the filing of this opinion with and as a part of this
post-effective amendment to Registrant's Registration Statement with the
Commission.
Very truly yours,
/s/ Francis C. Cleary Jr.
Francis C. Cleary, Jr.
Vice President and Counsel
FCC0110.DOC
<PAGE>
Exhibit 11
Exemptive Relief Relied Upon
With respect to the variable life insurance policies ("Policies") that are
the subject of this registration statement, the Registrant, Depositor and the
Principal Underwriter rely on exemptive relief granted in SEC File No. 812-8446,
Rel. No. IC-19817 (Oct 27, 1993) (Notice), Rel. No. IC-19898 (Nov.24, 1993)
(Order) (among other things, the Commission in that proceeding granted class
exemptive relief with respect to the deduction of charges associated with the
Depositor's treatment of deferred acquisition costs for federal income tax
purposes) and exemptive relief granted in SEC File No. 812-8858, Rel. No.
IC-20266 (May 2, 1994) (Notice), Rel. No. IC-20332 (June 1, 1994) (Order) (the
Commission in that proceeding granted Registrant, inter alia, several exemptions
----- ----
from the Investment Company Act of 1940 and Rule 6e-2 (b), thereunder.
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<NET-ASSETS> 22,246,848
<DIVIDEND-INCOME> 1,424,926
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 117,861
<NET-INVESTMENT-INCOME> 1,307,065
<REALIZED-GAINS-CURRENT> (132,712)
<APPREC-INCREASE-CURRENT> 1,164,732
<NET-CHANGE-FROM-OPS> 2,339,085
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7,174,344
<NUMBER-OF-SHARES-REDEEMED> 5,475,910
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2,730,453
<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> 117,861
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> SPECIAL OPPORTUNITIES SUBACCOUNT
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 17,520,681
<INVESTMENTS-AT-VALUE> 20,167,152
<RECEIVABLES> 82,621
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 20,249,774
<PAYABLE-FOR-SECURITIES> 81,681
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 940
<TOTAL-LIABILITIES> 82,621
<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> 20,167,153
<DIVIDEND-INCOME> 483,189
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 57,525
<NET-INVESTMENT-INCOME> 425,664
<REALIZED-GAINS-CURRENT> 118,503
<APPREC-INCREASE-CURRENT> 2,655,706
<NET-CHANGE-FROM-OPS> 3,199,373
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 13,145,725
<NUMBER-OF-SHARES-REDEEMED> 826,762
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 15,092,672
<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> 57,525
<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> STOCK SUBACCOUNT
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 197,432,046
<INVESTMENTS-AT-VALUE> 217,256,965
<RECEIVABLES> 154,538
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 217,411,503
<PAYABLE-FOR-SECURITIES> 143,853
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 10,686
<TOTAL-LIABILITIES> 154,539
<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> 217,256,964
<DIVIDEND-INCOME> 20,402,345
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 1,040,658
<NET-INVESTMENT-INCOME> 19,361,687
<REALIZED-GAINS-CURRENT> 1,182,185
<APPREC-INCREASE-CURRENT> 28,390,863
<NET-CHANGE-FROM-OPS> 48,934,735
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 66,187,098
<NUMBER-OF-SHARES-REDEEMED> 11,538,389
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 84,221,758
<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> 1,040,658
<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> MANAGED SUBACCOUNT
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 244,207,400
<INVESTMENTS-AT-VALUE> 262,405,591
<RECEIVABLES> 454,178
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 262,859,769
<PAYABLE-FOR-SECURITIES> 441,295
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 12,883
<TOTAL-LIABILITIES> 454,178
<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> 262,405,591
<DIVIDEND-INCOME> 24,582,126
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 1,324,428
<NET-INVESTMENT-INCOME> 23,257,698
<REALIZED-GAINS-CURRENT> 3,530,479
<APPREC-INCREASE-CURRENT> 24,157,024
<NET-CHANGE-FROM-OPS> 50,945,201
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 77,829,013
<NUMBER-OF-SHARES-REDEEMED> 22,526,769
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 82,989,746
<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> 1,324,428
<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> 9
<NAME> SHORT-TERM U.S. GOVERNMENT SUBACCOUNT
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 2,412,860
<INVESTMENTS-AT-VALUE> 2,466,466
<RECEIVABLES> 15,053
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,481,519
<PAYABLE-FOR-SECURITIES> 14,960
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 93
<TOTAL-LIABILITIES> 15,053
<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> 2,466,466
<DIVIDEND-INCOME> 103,070
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 8,335
<NET-INVESTMENT-INCOME> 94,736
<REALIZED-GAINS-CURRENT> 20,636
<APPREC-INCREASE-CURRENT> 77,274
<NET-CHANGE-FROM-OPS> 192,639
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,665,120
<NUMBER-OF-SHARES-REDEEMED> 1,361,025
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,401,999
<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> 8,335
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
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<PER-SHARE-DIVIDEND> 0
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<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
