<PAGE>
As filed with the Securities and Exchange Commission on April 28, 1997
Registration No. 33-75610
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM S-6
Post-Effective Amendment No. 4 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)
--------------------
RONALD J. BOCAGE, ESQ.
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
JOHN HANCOCK PLACE, BOSTON, 02117
(Name and complete address of agent for service)
--------------------
Copy to:
GARY O. COHEN, ESQ.
Freedman, Levy, Kroll & Simonds
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036
--------------------
It is proposed that this filing become effective (check appropriate box)
/ /immediately upon filing pursuant to paragraph (b) of Rule 485
--
/X/on May 1, 1997 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 1996 pursuant to Rule 24f-2 on February 26, 1997.
FCC0015)
<PAGE>
CROSS-REFERENCE TABLE
Form N-8B-2 Item Caption in Prospectus
- ---------------- ---------------------
1, 2 Cover, The Account and The Series
Fund or Funds, JHVLICO and John
Hancock
3 Inapplicable
4 Cover, Distribution of Policies
5,6 The Account and The Series Fund or
Funds, State Regulation
7, 8, 9 Inapplicable
10(a),(b),(c),(d),(e) Policy Provisions and Benefits
10(f) Voting Privileges
10(g),(h) Changes that JHVLICO Can Make
10(i) Appendix--Other Policy Provisions,
The Account and The Series Fund
or Funds
11, 12 Summary, The Account and The Series
Fund or Funds, Distribution of
Policies
13 Charges and expenses, Appendix--
Illustration of Death Benefits,
Account Values, Surrender Values and
Accumulated Premiums
14, 15 Summary, Distribution of
Policies, Premiums
16 The Account and The Series Fund or
Funds
17 Summary, Policy Provisions and
Benefits
18 The Account and The Series Fund or
Funds, Tax Considerations
19 Reports
20 Changes that JHVLICO Can Make
21 Policy Provisions and Benefits
22 Policy Provisions and Benefits
<PAGE>
23 Distribution of Policies
24 Not Applicable
25 JHVLICO and John Hancock
26 Not Applicable
27,28,29,30 JHVLICO and John Hancock, Board
of Directors and Executive
Officers of JHVLICO
31,32,33,34 Not Applicable
35 JHVLICO and John Hancock
37 Not Applicable
38,39,40,41(a) Distribution of Policies,
JHVLICO and John Hancock,
Charges and Expenses
42, 43 Not Applicable
44 The Account and The Series Fund or
Funds, Policy Provisions,
Appendix--Illustration of Death
Benefits, Account Values,
Surrender Values and
Accumulated Premiums
45 Not Applicable
46 The Account and The Series Fund or
Funds, Policy Provisions,
Appendix--Illustration of Death
Benefits, Account Values,
Surrender Values and
Accumulated Premiums
47 Not Applicable
48,49,50 Not Applicable
51 Policy Provisions and Benefits,
Appendix--Other Policy
Provisions
52 The Account and The Series Fund or
Funds, Changes that JHVLICO Can Make
53,54,55 Not Applicable
56,57,58,59 Not Applicable
FCC0131.DOC
<PAGE>
John Hancock Variable
Life
Insurance Company
(JHVLICO)
[LOGO OF JOHN HANCOCK FLEXV2 APPEARS HERE]
SCHEDULED PREMIUM VARIABLE LIFE INSURANCE POLICY
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
John Hancock Place
Boston, Massachusetts 02117
JOHN HANCOCK SERVICING OFFICE:
P.O. Box 111
Boston, Massachusetts 02217
TELEPHONE 1-800-REAL LIFE (1-800-732-5543)
FAX 617-572-5410
PROSPECTUS MAY 1, 1997
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, (the "Fund")
a "series" type mutual fund advised by John Hancock Mutual Life Insurance
Company ("John Hancock"). 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: Growth & Income, Large Cap Growth,
Sovereign Bond, Money Market, Managed, Real Estate Equity, International
Equities, Short-Term U.S. Government, Special Opportunities, Small Cap Growth,
Small Cap Value, Mid Cap Growth, Mid Cap Value, International Balanced,
International Opportunities, Large Cap Value, Strategic Bond and Equity Index.
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
<TABLE>
<CAPTION>
Page
<S> <C>
SUMMARY................................................................... 1
JHVLICO AND JOHN HANCOCK.................................................. 6
THE ACCOUNT AND THE SERIES FUND........................................... 7
THE FIXED ACCOUNT......................................................... 10
POLICY PROVISIONS AND BENEFITS............................................ 10
Requirements for Issuance of Policy..................................... 10
Premiums................................................................ 11
Account Value and Surrender Value....................................... 14
Death Benefits.......................................................... 15
Death Benefit Options................................................... 16
Definition of Life Insurance............................................ 16
Excess Value............................................................ 17
Partial Withdrawal of Excess Value...................................... 17
Transfers Among Subaccounts............................................. 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........................................................... 22
Administrative Surrender Charge......................................... 23
Reduced Charges for Eligible Groups..................................... 24
Charges Deducted from Account Value..................................... 24
DISTRIBUTION OF POLICIES.................................................. 26
TAX CONSIDERATIONS........................................................ 27
Policy Proceeds......................................................... 27
Charge for JHVLICO's Taxes.............................................. 28
Corporate and H.R. 10 Plans............................................. 29
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS OF JHVLICO...................... 29
REPORTS................................................................... 30
VOTING PRIVILEGES......................................................... 30
CHANGES THAT JHVLICO CAN MAKE............................................. 31
STATE REGULATION.......................................................... 31
LEGAL MATTERS............................................................. 31
REGISTRATION STATEMENT.................................................... 31
EXPERTS................................................................... 32
FINANCIAL STATEMENTS...................................................... 32
APPENDIX--OTHER POLICY PROVISIONS......................................... 62
APPENDIX--ILLUSTRATION OF DEATH BENEFITS, ACCOUNT VALUES, SURRENDER VALUES
AND ACCUMULATED PREMIUMS................................................. 64
</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
-----
<S> <C>
Account Value....................................................... 15
Administrative Surrender Charge..................................... 24
Attained Age........................................................ 16
Base Policy Premium................................................. 12
Basic Account Value................................................. 17
Contingent Deferred Sales Charge.................................... 23
Corridor Factor..................................................... 16
Current Death Benefit............................................... 15
Death Benefit Factor................................................ 16
Excess Value........................................................ 17
Experience Component................................................ 17
Fixed Account....................................................... 10
Grace Period........................................................ 20
Guaranteed Death Benefit............................................ 15
Guaranteed Maximum Recalculation Premium............................ 12
Indebtedness........................................................ 20
Investment Rule..................................................... 13
Loan Assets......................................................... 20
Minimum First Premium............................................... 11
Modal............................................................... 11
Premium Component................................................... 17
Premium Recalculation............................................... 12
Required Premium.................................................... 12
Servicing Office.................................................... 6
Subaccount.......................................................... Cover
Sum Insured......................................................... 15
Surrender Value..................................................... 15
Valuation Date...................................................... 9
Variable Subaccounts................................................ 2
</TABLE>
<PAGE>
SUMMARY
WHAT IS THE VARIABLE LIFE POLICY BEING OFFERED?
JHVLICO issues variable life insurance policies. The Policies described in
this Prospectus are scheduled annual premium policies that provide for
additional premium flexibility. JHVLICO also issues in some states an earlier
version of these policies. These other policies are offered by means of other
prospectuses.
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: Premium payments are periodically
made to JHVLICO in amounts sufficient 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 of the policy (the "Owner").
The assets allocated to each variable Subaccount are invested in shares of the
corresponding Portfolio of the Fund. 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 issuance 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. The Owner bears the investment risk for that portion of the Account
Value allocated to the variable Subaccounts. The Owner may surrender a Policy
a t 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.
1
<PAGE>
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 under certain circumstances 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. The
Account is subdivided into a number of variable Subaccounts, each of which
corresponds to one of the Portfolios of the Fund. The assets of each variable
Subaccount are is invested in the corresponding Portfolio of the Fund. The
Portfolios of the Funds which are currently available are Growth & Income,
Large Cap Growth, Sovereign Bond, Money Market, Managed, Real Estate Equity,
International Equities, Short-Term U.S. Government, Special Opportunities,
Small Cap Growth, Small Cap Value, Mid Cap Growth, Mid Cap Value,
International Balanced, International Opportunities, Large Cap Value,
Strategic Bond, Equity Index.
2
<PAGE>
John Hancock Variable Series Trust I pays John Hancock a fee for providing
investment management services to each of its Portfolios. The Fund also pays
for certain non-advisory Fund expenses. The figures in the following chart are
expressed as a percentage of each Portfolio's average daily net assets. The
figures reflect the investment management fees currently payable and the 1996
non-advisory expenses that would have been allocated to the Fund under the
allocation rules currently in effect.
<TABLE>
<CAPTION>
Other Total Fund
Investment Fund Operating Other Fund Expenses
Portfolio Management Fee Expenses Expenses Absent Reimbursement*
--------- -------------- -------- ---------- ---------------------
<S> <C> <C> <C> <C>
Managed................. 0.34% 0.03% 0.37% N/A
Growth & Income......... 0.25% 0.03% 0.28% N/A
Equity Index............ 0.20% 0.25% 0.45% 1.61%
Large Cap Value......... 0.75% 0.25% 1.00% 1.89%
Large Cap Growth........ 0.40% 0.05% 0.45% N/A
Mid Cap Value........... 0.80% 0.25% 1.05% 2.15%
Mid Cap Growth.......... 0.85% 0.25% 1.10% 2.34%
Special Opportunities... 0.75% 0.12% 0.87% N/A
Real Estate Equity...... 0.60% 0.11% 0.71% N/A
Small Cap Value......... 0.80% 0.25% 1.05% 2.06%
Small Cap Growth........ 0.75% 0.25% 1.00% 1.55%
International Balanced.. 0.85% 0.25% 1.10% 1.44%
International Equities.. 0.60% 0.18% 0.78% N/A
International Opportuni-
ties................... 1.00% 0.25% 1.25% 2.76%
Short-Term U.S. Govern-
ment................... 0.30% 0.25% 0.55% 0.79%
Sovereign Bond.......... 0.25% 0.06% 0.31% N/A
Strategic Bond.......... 0.75% 0.25% 1.00% 1.57%
Money Market............ 0.25% 0.07% 0.32% N/A
</TABLE>
- --------
* John Hancock reimburses a Portfolio when the Portfolio's Other Expenses
exceed 0.25% of the Portfolio's average daily net assets.
For a full description of the Fund, see the prospectus for the Fund 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.
3
<PAGE>
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 (currently $6.00) for all Policy years.
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 make a special monthly credit to the Account Value beginning in the
tenth Policy year. Any such credit will be reflected as a reduction to the
insurance charge.
Guaranteed Death Benefit Charge. A charge not to exceed 3c per $1000
(currently 1c per $1000) of current Sum Insured 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 from the
variable Subaccounts at an effective annual rate of .60% of the assets of each
variable Subaccount.
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 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 deducted from Account
Value 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.
4
<PAGE>
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.
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 by any
partial withdrawal, 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
5
<PAGE>
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 and compound daily at an annual
effective 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 and compounded 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 JHVLICO of the
Notice of Withdrawal Right, whichever is latest, to JHVLICO's Servicing
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 Fund.
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.
6
<PAGE>
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 approximately $59 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 FUND
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 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 variable Subaccounts of the Account are invested in the
corresponding Portfolio of the Fund, 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 Fund and made available to Owners.
THE SERIES FUND
The Fund is a "series" type of mutual fund registered with the Commission
under the 1940 Act as an open-end diversified management investment company.
The 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
prospectus 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.
Growth & Income Portfolio: The investment objective of this Portfolio is to
achieve intermediate and long-term growth of capital, with income as a
secondary consideration. This objective will be pursued by investments
principally in common stocks (and securities convertible into or with rights
to purchase common stocks) of companies believed to offer growth potential
over both the intermediate and long-term.
Large Cap Growth Portfolio: The investment objective of this Portfolio is to
achieve above-average capital appreciation through the ownership of common
stocks (and securities convertible into or with rights to purchase common
stocks) of companies believed to offer above-average capital appreciation
opportunities. Current income is not an objective of the Portfolio.
7
<PAGE>
Sovereign Bond Portfolio: The investment objective of this Portfolio is to
provide as high a level of long-term total rate of return as is consistent
with prudent investment risk, through investment primarily in a diversified
portfolio of freely marketable debt securities. Total rate of return consists
of current income, including interest and discount accruals, and capital
appreciation.
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.
Managed Portfolio: The investment objective of this Portfolio is to achieve
maximum long-term total return consistent with prudent investment risk.
Investments will be made in common stocks, convertibles and other equity
investments, in bonds and other fixed income securities and in money market
instruments.
Real Estate Equity Portfolio: The investment objective of this Portfolio is
to provide above-average income and long-term growth of capital by investment
principally in equity securities of companies in the real estate and related
industries.
International Equities 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.
Equity Index Portfolio: The investment objective of this Portfolio is to
provide investment results that correspond to the total return of the U.S.
market as represented by the S&P 500 utilizing common stocks that are publicly
traded in the United States.
Large Cap Value Portfolio: The investment objective of this Portfolio is to
provide substantial dividend income, as well as long-term capital
appreciation, through investment in the common stocks of established companies
believed to offer favorable prospects for increasing dividends and capital
appreciation.
Mid Cap Growth Portfolio: The investment objective of this Portfolio is to
provide long-term growth of capital through a non-diversified portfolio
investing largely in common stocks of medium capitalization companies.
Mid Cap Value Portfolio: The investment objective of this Portfolio is to
provide long-term growth of capital primarily through investment in the common
stocks of medium capitalization companies believed to sell at a discount to
their intrinsic value.
Small Cap Growth Portfolio: The investment objective of this Portfolio is to
provide long-term growth of capital through a diversified portfolio investing
primarily in common stocks of small capitalization emerging growth companies.
Small Cap Value Portfolio: The investment objective of this Portfolio is to
provide long-term growth of capital by investing in a well diversified
portfolio of equity securities of small capitalization companies exhibiting
value characteristics.
8
<PAGE>
Strategic Bond Portfolio: The investment objective of this Portfolio is to
provide a high total return consistent with moderate risk of capital and
maintenance of liquidity, from a portfolio of domestic and international fixed
income securities.
International Opportunities Portfolio: The investment objective of this
Portfolio is to provide capital appreciation through investment in common
stocks of primarily well-established, non-United States companies.
International Balanced Portfolio: The investment objective of this Portfolio
is to maximize total U.S. dollar return, consisting of capital appreciation
and current income, through investment in non-U.S. equity and fixed income
securities.
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, MA 02109, provides sub-investment advice with respect to the Growth &
Income, Large Cap Growth, Managed, Real Estate Equity and Short-Term U.S.
Government Portfolio. Another indirectly owned subsidiary, John Hancock
Advisers, Inc., located at 101 Huntington Avenue, Boston, MA 02199, and its
subsidiary, John Hancock Advisers International, Limited, located at 34 Dover
Street, London, England, provide sub-investment advice with respect to the
International Equities Portfolio, and John Hancock Advisers, Inc., does
likewise with respect to the Sovereign Bond, Small Cap Growth and Special
Opportunities Portfolios.
T. Rowe Price Associates, Inc., located at 100 East Pratt St., Baltimore, MD
21202, provides sub-investment advice with respect to the Large Cap Value
Portfolio and its subsidiary, Rowe Price-Fleming International, Inc., also
located at 100 East Pratt St., Baltimore, MD 21202, provides sub-investment
advice with respect to the International Opportunities Portfolio.
State Street Bank & Trust, N.A., at Two International Place, Boston, MA
02110, is the sub-investment adviser to the Equity Index Portfolio. INVESCO
Management & Research located at 101 Federal Street, Boston, MA 02110, is the
sub-investment adviser to the Small Cap Value Portfolio. Janus Capital
Corporation, with its principal place of business at 100 Filmore Street,
Denver, CO 80206, is the sub-investment adviser to the Mid Cap Growth
Portfolio. Neuberger & Berman, LLC of 605 Third Avenue, New York, NY 10158,
provides sub-investment advice to the Mid Cap Value Portfolio. J.P. Morgan
Investment Management Inc., located at 522 Fifth Avenue, New York, NY 10036,
provides sub-investment advice with respect to the Strategic Bond Portfolio
and Brinson Partners, Inc., of 209 S. LaSalle Street, Chicago, IL 60604, does
likewise with respect to the International Balanced Portfolio.
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 the Fund, its investment objectives, policies and
restrictions, its charges, expenses and all other aspects of its operation is
contained in the attached prospectus and the statement of additional
information referred to therein, which should be read together with this
Prospectus.
9
<PAGE>
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.
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. Amounts of coverage that JHVLICO will accept under the
Policy may be limited by JHVLICO's underwriting and reinsurance procedures as
in effect from time to time.
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. The illustrations set
forth in this Prospectus are sex-distinct and, therefore, do not reflect the
sex-neutral rates, charges or values that would apply to such Policies.
10
<PAGE>
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 Servicing 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 Servicing Office
in order for the Policy to be 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".
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 Servicing Office of satisfactory
written notice. If not elected sooner, the Premium Recalculation will be
effected automatically by JHVLICO as noted above.
11
<PAGE>
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."
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.
12
<PAGE>
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 Servicing 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 as many as ten of the
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 change will be effective as to any net premiums
and credits applied after receipt at JHVLICO's Servicing 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
13
<PAGE>
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 of 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 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 Assets established upon the making of a
Policy loan. In
14
<PAGE>
general the Account Value for any day equals the Account Value for the
previous day, decreased by charges against the Account Value and by any
partial withdrawal of Excess 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 Servicing 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 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
15
<PAGE>
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 issuance 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 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 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 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 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.
16
<PAGE>
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 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 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
17
<PAGE>
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 Servicing Office.
The minimum amount that may be withdrawn is $1,000. A charge of $20 is made
against Account Value for each partial withdrawal. Under Death Benefit Option
2, a partial withdrawal will always result in a reduction of the death benefit
payable. Under Death Benefit Options 1 and 3, a partial withdrawal will reduce
the death benefit payable only when the Current Death Benefit exceeds the
Guaranteed Death Benefit. A withdrawal may have significant tax consequences.
See "Tax Considerations".
An amount equal to the Excess Value withdrawn plus the associated charge
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 Servicing Office notice
satisfactory to JHVLICO.
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 Servicing Office. (JHVLICO
reserves the right to defer such Fixed Account transfers for up to 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 among Subaccounts 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.
18
<PAGE>
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
Servicing 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 Servicing
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 or sending a written request via fax to 1-800-621-
0448. 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. If the fax request option becomes unavailable, another
means of telecommunications will be substituted.
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
unless such loss, expense or cost is the result of JHVLICO's mistake or
negligence. JHVLICO employs procedures which provide safeguards against the
execution of unauthorized transactions, and which are reasonably designed to
confirm that instructions received by telephone are genuine. These procedures
include requiring personal identification, tape recording calls, and providing
written confirmation to the Owner. If JHVLICO does not employ reasonable
procedures to confirm that instructions communicated by telephone are genuine,
it may be liable for any loss due to unauthorized or fraudulent instructions.
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 and compound daily at an effective annual rate of 5% in the first
20 Policy years, and 4.5% thereafter.
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 a portion of JHVLICO's general account called the "Loan
Assets". Each Subaccount will be reduced in the same proportion as the Account
Value is then allocated among the Subaccounts. Upon
19
<PAGE>
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 then current Investment Rule. For example, if
the entire loan outstanding is $3000 of which $1000 was borrowed 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 then 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 Loan Assets is credited interest at a rate
that for the first 20 Policy years is 1% less than the loan interest rate and
thereafter is .5% less than the loan interest rate. The rate credited to Loan
Assets will usually be different than the net return for the Subaccounts.
Since Loan Assets and the remaining portion of the Account Value will
generally have different rates of investment return, the Account Value, the
Surrender Value, and any death benefit above the Guaranteed Death Benefit are
permanently affected by any Indebtedness, whether or not it is 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".
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.
20
<PAGE>
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.
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 Servicing 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. 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
21
<PAGE>
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.
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.
22
<PAGE>
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 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
23
<PAGE>
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 in the event of 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.
Maintenance Charge. JHVLICO will deduct from Account Value a monthly charge
not to exceed $8 for all Policy years. The current monthly charge is $6.
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.
24
<PAGE>
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, JHVLICO may make a
special monthly credit to the Account Value. If such a credit is made, it will
be reflected as a reduction to the insurance charge as described below. This
credit and reduction is not guaranteed but it is JHVLICO's present intention
to effect the credit and 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 would be at an
effective annual rate of .21% in Policy year 11, .30% in Policy year 20 and
.40% in Policy year 30.
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 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 deducted from the
variable Subaccounts for mortality and expense risks assumed by JHVLICO at an
effective annual rate of .60% of the value of the assets of each variable
Subaccount 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
25
<PAGE>
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 Fees and Other Fund Expenses. The Account
purchases shares of the Fund at net asset value, a value which reflects the
deduction from the assets of the Fund of its investment management fees and
certain other non-advisory Fund operating expenses, which are described
briefly in the Summary of this Prospectus. For a full description of these
deductions, see the attached prospectus for the Fund.
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 each. 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.
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 ("representatives") of John Hancock Distributors, Inc.
("Distributors"), an indirect wholly-owned subsidiary of John Hancock located
at 197 Clarendon Street, Boston, MA 02117, or other broker-dealer firms, as
discussed below. John Hancock performs insurance underwriting and determines
whether to accept or reject the application for a Policy and each insured's
risk classification. Pursuant to a sales agreement among John Hancock,
Distributors, JHVLICO, and the Account, Distributors 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.
26
<PAGE>
Distributors' representatives are compensated for sales of the Policies on a
commission and service fee basis by Distributors, and JHVLICO reimburses
Distributors for such compensation and for other direct and indirect expenses
(including agency expense allowances, general agent, district manager and
supervisor's compensation, agent's training allowances, deferred compensation
and insurance benefits of agents, general agents, district managers and
supervisors, agency office clerical expenses and advertising) actually
incurred in connection with the marketing and sale of the Policies.
The maximum commission payable to a Distributors representative for selling
a Policy is 14% of the target premium paid in each of the first 10 Policy
years, and 3% of the target premium paid in each year thereafter. The maximum
commission on any premium paid in any Policy year in excess of the target
premium is 2%.
In addition, Distributors' representatives may earn "credits" toward
qualification for attendance at certain business meetings sponsored by John
Hancock.
Representatives with less than four years of service with Distributors and
those compensated on salary plus bonus or level commission programs may be
paid on a different basis. Representatives who meet certain productivity and
persistency standards with respect to the sale of policies issued by JHVLICO
and John Hancock will be eligible for additional compensation.
Distributors is registered with the Commission under the Securities Exchange
Act of 1934 as a broker-dealer, is a member of the National Association of
Securities Dealers, Inc., and is a member of the Securities Investor
Protection Corporation. The Policies are also sold through other registered
broker-dealers that have entered into selling agreements with Distributors and
whose representatives are authorized by applicable law to sell variable life
insurance policies. The commissions which will be paid by such broker-dealers
to their representatives will be in accordance with their established rules.
The commission rates may be more or less than those set forth above for
Distributors' representatives. In addition, their qualified registered
representatives may be reimbursed by the broker-dealers under expense
reimbursement allowance programs in any year for approved voucherable expenses
incurred. Distributors will compensate the broker-dealers as provided in the
selling agreements, and JHVLICO will reimburse Distributors for such amounts
and for certain other direct expenses in connection with marketing the
Policies through other broker-dealers.
Distributors 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. Distributors is also the 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 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.
27
<PAGE>
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 the 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.
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.
28
<PAGE>
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.
Ronald J. Bocage Director, Vice President and Counsel of
JHVLICO; Vice President and Counsel,
John Hancock Mutual Life Insurance Com-
pany.
Joseph A. Tomlinson Director and Vice President of JHVLICO;
Vice President, John Hancock Mutual Life
Insurance Company.
Robert R. Reitano Director of JHVLICO; Vice President,
John Hancock Mutual Life Insurance Com-
pany.
Robert S. Paster Director of JHVLICO; Second Vice Presi-
dent, John Hancock Mutual Life Insurance
Company.
Barbara L. Luddy Director and Actuary of JHVLICO; Second
Vice President, John Hancock Mutual Life
Insurance Company.
Daniel L. Ouellette Vice President, Marketing, of JHVLICO;
Vice President, John Hancock Mutual Life
Insurance 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.
29
<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 Fund, including a list of securities held in its Portfolio.
VOTING PRIVILEGES
All of the assets in the variable Subaccounts of the Account are invested in
shares of the corresponding Portfolios of the Fund. JHVLICO will vote the
shares of each of the Portfolios of the Fund which are deemed attributable to
qualifying variable life insurance policies and variable annuity contracts at
regular and special meetings of the Fund's shareholders in accordance with
instructions received from owners of such policies or contracts. Shares of the
Fund held in the Account which are not attributable to such policies or
contracts 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 such policies and contracts.
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 Fund's meetings.
Owners of Policies may give instructions regarding the election of the Board
of Trustees of the 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
Fund. 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
30
<PAGE>
result in the purchase of securities which vary from the general quality and
nature of investments and 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 Ronald J. Bocage, Vice President and 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.
31
<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.
32
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Large Cap Sovereign International Small Cap International Mid Cap Large Cap Money Mid Cap
Growth Bond Equities Growth Balanced Growth Value Market Value
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
------------ ----------- ------------- ---------- ------------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Investment in
shares of
portfolios of
John Hancock
Variable Series
Trust I, at
value........... $153,159,843 $64,419,410 $39,447,186 $2,933,413 $743,691 $2,214,471 $1,845,329 $17,375,664 $1,337,926
Investments in
shares of
portfolios of M
Fund Inc., at
value........... -- -- -- -- -- -- -- -- --
Receivable from:
John Hancock
Variable Series
Trust I......... 26,242 31,130 32,210 26,794 310 4,761 9,242 162,096 5,403
M Fund Inc...... -- -- -- -- -- -- -- -- --
------------ ----------- ----------- ---------- -------- ---------- ---------- ----------- ----------
Total Assets.... 153,186,085 64,450,540 39,479,395 2,960,207 744,001 2,219,232 1,854,571 17,537,760 1,343,329
Liabilities
Payable to John
Hancock Variable
Series Trust I.. 23,703 30,069 31,582 26,747 298 4,725 9,212 161,814 5,381
Payable to M Fund
Inc............. -- -- -- -- -- -- -- -- --
Asset charges
payable......... 2,539 1,061 628 47 12 36 30 282 22
------------ ----------- ----------- ---------- -------- ---------- ---------- ----------- ----------
Total
Liabilities.... 26,242 31,130 32,210 26,794 310 4,761 9,242 162,096 5,403
------------ ----------- ----------- ---------- -------- ---------- ---------- ----------- ----------
Net assets....... $153,159,843 $64,419,410 $39,447,186 $2,933,413 $743,691 $2,214,471 $1,845,329 $17,375,664 $1,337,926
============ =========== =========== ========== ======== ========== ========== =========== ==========
Net Assets
Attributable to
John Hancock
Variable Life
Insurance
Company......... -- -- 985,707 -- -- -- -- -- --
Attributable to
policyholders... 153,159,843 64,419,410 38,461,479 2,933,413 743,691 2,214,471 1,845,329 17,375,664 1,337,926
------------ ----------- ----------- ---------- -------- ---------- ---------- ----------- ----------
Total Net
Assets......... $153,159,843 $64,419,410 $39,447,186 $2,933,413 $743,691 $2,214,471 $1,845,329 $17,375,664 $1,337,926
============ =========== =========== ========== ======== ========== ========== =========== ==========
<CAPTION>
Special Real Estate
Opportunities Equity
Subaccount Subaccount
------------- -----------
<S> <C> <C>
Assets
Investment in
shares of
portfolios of
John Hancock
Variable Series
Trust I, at
value........... $46,440,638 $31,786,260
Investments in
shares of
portfolios of M
Fund Inc., at
value........... -- --
Receivable from:
John Hancock
Variable Series
Trust I......... 37,006 18,248
M Fund Inc...... -- --
------------- -----------
Total Assets.... 46,477,644 31,804,508
Liabilities
Payable to John
Hancock Variable
Series Trust I.. 36,261 17,752
Payable to M Fund
Inc............. -- --
Asset charges
payable......... 745 496
------------- -----------
Total
Liabilities.... 37,006 18,248
------------- -----------
Net assets....... $46,440,638 $31,786,260
============= ===========
Net Assets
Attributable to
John Hancock
Variable Life
Insurance
Company......... 890,995 1,242,048
Attributable to
policyholders... 45,549,643 30,544,212
------------- -----------
Total Net
Assets......... $46,440,638 $31,786,260
============= ===========
</TABLE>
- ------
See accompanying notes.
33
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Short-Term Turner Edinburgh
Growth & U.S. Small Cap International Equity Strategic Core International
Income Managed Government Value Opportunities Index Bond Growth Equity
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
------------ ------------ ---------- ---------- ------------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Investment in
shares of
portfolios of
John Hancock
Variable Series
Trust I, at
value........... $299,997,131 $304,230,791 $3,015,184 $1,329,794 $2,260,539 $1,199,192 $418,113 $ -- $ --
Investments in
shares of
portfolios of M
Fund Inc., at
value........... -- -- -- -- -- -- -- 2,740 63,191
Receivable from:
John Hancock
Variable Series
Trust I......... 117,763 25,104 547 4,324 7,832 9,736 152 -- --
M Fund Inc...... -- -- -- -- -- -- -- -- 1
------------ ------------ ---------- ---------- ---------- ---------- -------- ------ -------
Total Assets.... 300,114,894 304,255,895 3,015,731 1,334,118 2,268,371 1,208,928 418,265 2,740 63,192
Liabilities
Payable to John
Hancock Variable
Series Trust I.. 112,767 20,063 507 4,303 7,795 9,716 145 -- --
Payable to M Fund
Inc............. -- -- -- -- -- -- -- -- --
Asset charges
payable......... 4,997 5,041 40 21 37 20 7 -- 1
------------ ------------ ---------- ---------- ---------- ---------- -------- ------ -------
Total
Liabilities.... 117,763 25,104 547 4,324 7,832 9,736 152 -- 1
------------ ------------ ---------- ---------- ---------- ---------- -------- ------ -------
Net assets....... $299,997,131 $304,230,791 $3,015,184 $1,329,794 $2,260,539 $1,199,192 $418,113 $2,740 $63,191
============ ============ ========== ========== ========== ========== ======== ====== =======
Net Assets
Attributable to
John Hancock
Variable Life
Insurance
Company......... -- -- 579,518 -- -- -- -- -- --
Attributable to
policyholders... 299,997,131 304,230,791 2,435,667 1,329,794 2,260,539 1,199,192 418,113 2,740 63,191
------------ ------------ ---------- ---------- ---------- ---------- -------- ------ -------
Total Net
Assets......... $299,997,131 $304,230,791 $3,015,184 $1,329,794 $2,260,539 $1,199,192 $418,113 $2,740 $63,191
============ ============ ========== ========== ========== ========== ======== ====== =======
<CAPTION>
Frontier
Capital
Appreciation
Subaccount
------------
<S> <C>
Assets
Investment in
shares of
portfolios of
John Hancock
Variable Series
Trust I, at
value........... $ --
Investments in
shares of
portfolios of M
Fund Inc., at
value........... 62,124
Receivable from:
John Hancock
Variable Series
Trust I......... --
M Fund Inc...... 1
------------
Total Assets.... 62,125
Liabilities
Payable to John
Hancock Variable
Series Trust I.. --
Payable to M Fund
Inc............. --
Asset charges
payable......... 1
------------
Total
Liabilities.... 1
------------
Net assets....... $62,124
============
Net Assets
Attributable to
John Hancock
Variable Life
Insurance
Company......... --
Attributable to
policyholders... 62,124
------------
Total Net
Assets......... $62,124
============
</TABLE>
- ------
See accompanying notes.
34
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENTS OF OPERATIONS
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
International
Equities
Large Cap Growth Subaccount Sovereign Bond Subaccount Subaccount
----------------------------------- ---------------------------------- ---------------------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
----------- ----------- ---------- ---------- ---------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment
income:
Distributions
received from:
John Hancock
Variable Series
Trust I........ $22,706,338 $ 9,127,019 $2,816,218 $4,518,056 $3,997,055 $ 2,577,160 $ 460,651 $ 313,290 $ 334,752
M Fund Inc...... -- -- -- -- -- -- -- -- --
----------- ----------- ---------- ---------- ---------- ----------- ---------- ---------- -----------
Total investment
income......... 22,706,338 9,127,019 2,816,218 4,518,056 3,997,055 2,577,160 460,651 313,290 334,752
Expenses:
Mortality and
expense risks.. 789,368 527,639 251,870 352,330 288,879 210,831 209,866 158,467 92,706
----------- ----------- ---------- ---------- ---------- ----------- ---------- ---------- -----------
Net investment
income (loss).. 21,916,970 8,599,380 2,564,348 4,165,726 3,708,176 2,366,329 250,785 154,823 242,046
Net realized and
unrealized gain
(loss) on
investments:
Net realized
gain (loss).... 2,555,654 839,997 637,109 (136,401) 63,373 126,799 156,348 709,715 (210,939)
Net unrealized
appreciation
(depreciation)
during the
year........... (2,922,417) 13,485,769 (4,019,164) (1,537,488) 4,386,358 (3,555,116) 2,539,023 1,169,158 (1,861,119)
----------- ----------- ---------- ---------- ---------- ----------- ---------- ---------- -----------
Net realized and
unrealized gain
(loss) on
investments..... (366,763) 14,325,766 (3,382,055) (1,673,889) 4,449,731 (3,428,317) 2,695,371 1,878,873 (1,470,626)
----------- ----------- ---------- ---------- ---------- ----------- ---------- ---------- -----------
Net increase
(decrease) in
net assets
resulting from
operations...... $21,550,207 $22,925,146 $ (817,707) $2,491,837 $8,157,907 $(1,061,988) $2,946,156 $2,033,696 $(1,228,580)
=========== =========== ========== ========== ========== =========== ========== ========== ===========
<CAPTION>
Small Cap International
Growth Balanced
Subaccount Subaccount
----------- -------------
1996* 1996*
----------- -------------
<S> <C> <C>
Investment
income:
Distributions
received from:
John Hancock
Variable Series
Trust I........ $ 1,404 $11,409
M Fund Inc...... -- --
----------- -------------
Total investment
income......... 1,404 11,409
Expenses:
Mortality and
expense risks.. 6,704 1,311
----------- -------------
Net investment
income (loss).. (5,300) 10,098
Net realized and
unrealized gain
(loss) on
investments:
Net realized
gain (loss).... (210,399) 1,642
Net unrealized
appreciation
(depreciation)
during the
year........... (86,846) 18,955
----------- -------------
Net realized and
unrealized gain
(loss) on
investments..... (297,785) 20,597
----------- -------------
Net increase
(decrease) in
net assets
resulting from
operations...... $(303,085) $30,694
=========== =============
</TABLE>
- ------
* From May 1, 1996 (commencement of operations).
See accompanying notes.
35
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
Mid Cap Growth Large Cap Value Mid Cap Value
Subaccount Subaccount Money Market Subaccount Subaccount Special Opportunities Subaccount
-------------- --------------- ---------------------------- ------------- ------------------------------------
1996* 1996* 1996 1995 1994 1996* 1996 1995 1994**
-------------- --------------- -------- ---------- -------- ------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment
Income:
Distributions
received from:
John Hancock
Variable Series
Trust I........ $ 7,102 $ 36,343 $918,057 $1,021,645 $730,311 $ 28,018 $ 1,789,171 $ 483,189 $ 17,225
M Fund Inc...... -- -- -- -- -- -- -- -- --
------- -------- -------- ---------- -------- -------- ----------- ----------- --------
Total investment
income......... 7,102 36,343 918,057 1,021,645 730,311 28,018 1,789,171 483,189 17,225
Expenses:
Mortality and
expense risks.. 4,054 3,073 105,919 108,941 108,665 2,232 188,016 57,525 4,657
------- -------- -------- ---------- -------- -------- ----------- ----------- --------
Net investment
income......... 3,048 33,270 812,137 912,704 621,646 25,786 1,601,155 425,664 12,568
Net Realized and
Unrealized Gain
(Loss) on
Investments:
Net realized
gain (loss).... 168 3,072 -- -- -- 2,034 1,418,069 118,503 (5,379)
Net unrealized
appreciation
(depreciation)
during the
year........... 38,250 87,225 -- -- -- 102,527 4,977,778 2,655,206 (8,734)
------- -------- -------- ---------- -------- -------- ----------- ----------- --------
Net Realized and
Unrealized Gain
(Loss) on
Investments..... 38,418 90,297 -- -- -- 104,561 6,395,847 2,773,709 (14,113)
------- -------- -------- ---------- -------- -------- ----------- ----------- --------
Net Increase
(Decrease) in
Net Assets
Resulting From
Operations...... $41,466 $123,568 $812,137 $ 912,704 $621,646 $130,347 $ 7,997,002 $ 3,199,373 $ (1,545)
======= ======== ======== ========== ======== ======== =========== =========== ========
</TABLE>
- ------
* From May 1, 1996 (commencement of operations).
** From May 6, 1994 (commencement of operations).
See accompanying notes.
36
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
Real Estate Equity Subaccount Growth & Income Subaccount Managed Subaccount
-------------------------------- ----------------------------------- -------------------------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
---------- ---------- --------- ----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment
income:
Distributions
received from:
John Hancock
Variable
Series Trust I. $1,610,938 $1,424,926 $ 993,202 $37,254,741 $20,402,345 $ 8,501,308 $37,205,797 $24,582,126 $ 7,481,584
M Fund Inc...... -- -- -- -- -- -- -- -- --
---------- ---------- --------- ----------- ----------- ----------- ----------- ----------- ------------
Total investment
income......... 1,610,938 1,424,926 993,202 37,254,741 20,402,345 8,501,308 37,205,797 24,582,126 7,481,584
Expenses:
Mortality and
expense risks.. 145,276 117,861 89,294 1,542,729 1,040,658 679,481 1,678,618 1,324,428 953,550
---------- ---------- --------- ----------- ----------- ----------- ----------- ----------- ------------
Net investment
income......... 1,465,662 1,307,065 903,908 35,712,012 19,361,687 7,821,827 35,527,179 23,257,698 6,528,034
Net realized and
unrealized gain
(loss):
Net realized
gain (loss).... 184,058 (132,712) 302,731 3,938,033 1,182,185 913,991 3,555,551 3,530,479 1,168,573
Net unrealized
appreciation
(depreciation)
during
the year....... 5,976,712 1,164,732 (984,298) 6,429,196 28,390,863 (9,911,015) (11,690,944) 24,157,024 (12,012,242)
---------- ---------- --------- ----------- ----------- ----------- ----------- ----------- ------------
Net realized and
unrealized gain
(loss)
on investments.. 6,160,770 1,032,020 (681,567) 10,367,229 29,573,048 (8,997,024) (8,135,393) 27,687,503 (10,843,669)
---------- ---------- --------- ----------- ----------- ----------- ----------- ----------- ------------
Net increase
(decrease)
in net assets
resulting from
operations...... $7,626,432 $2,339,085 $ 222,341 $46,079,242 $48,934,735 $(1,175,197) $27,391,786 $50,945,201 $ (4,315,635)
========== ========== ========= =========== =========== =========== =========== =========== ============
<CAPTION>
Small Cap
Short-Term U.S. Value
Government Subaccount Subaccount
---------------------------- ----------
1996 1995 1994** 1996*
--------- -------- --------- ----------
<S> <C> <C> <C> <C>
Investment
income:
Distributions
received from:
John Hancock
Variable
Series Trust I. $140,926 $103,070 $ 26,186 $32,693
M Fund Inc...... -- -- -- --
--------- -------- --------- ----------
Total investment
income......... 140,926 103,070 26,186 32,693
Expenses:
Mortality and
expense risks.. 12,366 8,335 729 2,395
--------- -------- --------- ----------
Net investment
income......... 128,560 94,735 25,457 30,298
Net realized and
unrealized gain
(loss):
Net realized
gain (loss).... 20,920 20,630 (1,779) (1,418)
Net unrealized
appreciation
(depreciation)
during
the year....... (69,770) 77,274 (23,668) 66,350
--------- -------- --------- ----------
Net realized and
unrealized gain
(loss)
on investments.. (48,850) 97,904 (25,447) 64,932
--------- -------- --------- ----------
Net increase
(decrease)
in net assets
resulting from
operations...... $ 79,709 $192,639 $ 10 $95,230
========= ======== ========= ==========
</TABLE>
- ------
*From May 1, 1996 (commencement of operations).
**From May 1, 1994 (commencement of operations).
See accompanying notes.
37
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
Edinburgh
International Turner International Frontier
Opportunities Equity Index Strategic Bond Core Growth Equity Capital Appreciation
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
------------- ------------ -------------- ----------- ------------- --------------------
1996* 1996* 1996* 1996* 1996* 1996*
------------- ------------ -------------- ----------- ------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I........ $ 5,631 $27,780 $13,269 $ -- $-- $ --
M Fund Inc............. -- -- -- 91 362 --
-------- ------- ------- -------- ---- ---------
Total investment
income................ 5,631 27,780 13,269 91 362 --
Expenses:
Mortality and expense
risks................. 3,818 2,193 675 1,556 74 1,628
-------- ------- ------- -------- ---- ---------
Net investment income
(loss)................ 1,813 25,586 12,594 (1,465) 289 (1,628)
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss)................ 2,596 4,690 1,272 (75,788) (30) (130,154)
Net unrealized
appreciation
(depreciation) during
the year.............. 98,849 58,797 (2,250) 220 1,432
-------- ------- ------- -------- ---- ---------
Net realized and
unrealized gain (loss)
on investments......... 101,445 63,487 (978) (75,788) 189 (128,722)
-------- ------- ------- -------- ---- ---------
Net increase (decrease)
in net assets resulting
from operations........ $103,258 $89,073 $11,616 $(77,254) $478 $(130,350)
======== ======= ======= ======== ==== =========
</TABLE>
- ------
* From May 1, 1996 (commencement of operations).
See accompanying notes.
38
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
Large Cap Growth Subaccount Sovereign Bond Subaccount
---------------------------------------- ----------------------------------------
1996 1995 1994 1996 1995 1994
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net
assets
From operations:
Net investment
income (loss).... $ 21,916,970 $ 8,599,380 $ 2,564,348 $ 4,165,726 $ 3,708,176 $ 2,366,329
Net realized
gains (losses)... 2,555,654 839,997 637,109 (136,401) 63,373 126,799
Net unrealized
appreciation
(depreciation)
during the year.. (2,922,417) 13,485,769 (4,019,164) (1,537,488) 4,386,358 (3,555,116)
------------ ------------ ------------ ------------ ------------ ------------
Net increase
(decrease) in net
assets resulting
from operations.. 21,550,207 22,925,146 (817,707) 2,491,837 8,157,907 (1,061,988)
From policyholder transactions:
Net premiums from
policyholders.... 51,040,008 51,711,591 51,007,044 20,848,505 23,206,470 20,368,275
Net benefits to
policyholders.... (33,079,850) (19,250,850) (18,333,049) (14,924,987) (14,981,037) (11,586,357)
------------ ------------ ------------ ------------ ------------ ------------
Net increase in
net assets from
policyholder
transactions..... 17,960,159 32,460,741 32,673,995 5,923,519 8,225,433 8,781,918
------------ ------------ ------------ ------------ ------------ ------------
Net increase in
net assets...... 39,510,366 55,385,887 31,856,288 8,415,356 16,383,340 7,719,930
Net assets:
Beginning of
year............. 113,649,478 58,263,591 26,407,303 56,377,103 39,993,763 32,273,833
------------ ------------ ------------ ------------ ------------ ------------
End of year...... $153,159,843 $113,649,478 $ 58,263,591 $ 64,419,410 $ 56,377,103 $ 39,993,763
============ ============ ============ ============ ============ ============
<CAPTION>
Small Cap International
Growth Balanced
International Equities Subaccount Subaccount Subaccount
---------------------------------------- ------------ -------------
1996 1995 1994 1996* 1996*
------------- ------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net
assets
From operations:
Net investment
income (loss).... $ 250,785 $ 154,823 $ 242,046 $ (5,300) $ 10,098
Net realized
gains (losses)... 156,348 709,715 390,493 (210,939) 1,642
Net unrealized
appreciation
(depreciation)
during the year.. 2,539,023 1,169,158 (1,861,119) (86,846) 18,955
------------- ------------- ------------ ------------ -------------
Net increase
(decrease) in net
assets resulting
from operations.. 2,946,156 2,033,696 (1,228,580) (303,085) 30,694
From policyholder transactions:
Net premiums from
policyholders.... 17,279,404 17,644,301 21,632,192 5,020,648 777,316
Net benefits to
policyholders.... (11,711,164) (12,682,229) (5,717,640) (1,784,151) (64,319)
------------- ------------- ------------ ------------ -------------
Net increase in
net assets from
policyholder
transactions..... 5,568,239 4,962,072 15,914,552 3,236,497 712,997
------------- ------------- ------------ ------------ -------------
Net increase in
net assets...... 8,514,395 6,995,768 14,685,972 2,933,413 743,691
Net assets:
Beginning of
year............. 30,932,790 23,937,022 9,251,050 -- --
------------- ------------- ------------ ------------ -------------
End of year...... $ 39,447,186 $ 30,932,790 $23,937,022 $ 2,933,413 $743,691
============= ============= ============ ============ =============
</TABLE>
- ------
*From May 1, 1996 (commencement of operations).
See accompanying notes.
39
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
Mid Cap Growth Large Cap Value Mid Cap Value
Subaccount Subaccount Money Market Subaccount Subaccount
-------------- --------------- ------------------------------------- -------------
1996* 1996* 1996 1995 1994 1996*
-------------- --------------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (de-
crease) in net as-
sets
From operations:
Net investment
income.......... $ 3,048 $ 33,271 $ 812,137 $ 912,704 $ 621,646 $ 25,786
Net realized
gains (losses).. 168 3,072 -- -- -- 2,034
Net unrealized
appreciation
(depreciation)
during the year. 38,250 87,225 -- -- -- 102,527
---------- ---------- ----------- ----------- ----------- ----------
Net increase
(decrease) in
net assets
resulting from
operations...... 41,466 123,568 812,137 912,704 621,646 130,347
From policyholder
transactions:
Net premiums from
policyholders... 2,413,439 1,814,755 24,680,961 21,430,904 58,454,926 1,258,509
Net benefits to
policyholders... (240,434) (92,994) (27,801,448) (19,852,589) (51,398,824) (50,930)
---------- ---------- ----------- ----------- ----------- ----------
Net increase
(decrease) in
net assets from
policyholder
transactions.... 2,173,005 1,721,761 (3,120,487) 1,578,315 7,056,102 1,207,579
---------- ---------- ----------- ----------- ----------- ----------
Net increase
(decrease) in
net assets..... 2,214,471 1,845,329 (2,308,350) 2,491,019 7,677,748 1,337,926
Net assets:
Beginning of
year............. -- -- 19,684,014 17,192,995 9,515,247 --
---------- ---------- ----------- ----------- ----------- ----------
End of year...... $2,214,471 $1,845,329 $17,375,664 $19,684,014 $17,192,995 $1,337,926
========== ========== =========== =========== =========== ==========
<CAPTION>
Special Opportunities Subaccount
-------------------------------------
1996 1995 1994**
------------ ------------ -----------
<S> <C> <C> <C>
Increase (de-
crease) in net as-
sets
From operations:
Net investment
income.......... $ 1,601,155 $ 425,664 $ 12,568
Net realized
gains (losses).. 1,418,069 118,503 (5,379)
Net unrealized
appreciation
(depreciation)
during the year. 4,977,778 2,655,206 (8,734)
------------ ------------ -----------
Net increase
(decrease) in
net assets
resulting from
operations...... 7,997,002 3,199,373 (1,545)
From policyholder
transactions:
Net premiums from
policyholders... 30,839,359 15,268,369 5,297,072
Net benefits to
policyholders... (12,562,876) (3,375,070) (221,046)
------------ ------------ -----------
Net increase
(decrease) in
net assets from
policyholder
transactions.... 18,276,484 11,893,299 5,076,026
------------ ------------ -----------
Net increase
(decrease) in
net assets..... 26,273,485 15,092,672 5,074,481
Net assets:
Beginning of
year............. 20,167,153 5,074,481 --
------------ ------------ -----------
End of year...... $46,440,638 $20,167,153 $5,074,481
============ ============ ===========
</TABLE>
- ------
* From May 1, 1996 (commencement of operations).
** From May 6, 1994 (commencement of operations).
See accompanying notes.
40
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
Real Estate Equity Subaccount Growth & Income Subaccount
------------------------------------- ----------------------------------------
1996 1995 1994 1996 1995 1994
----------- ----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Increase
(decrease) in Net
Assets
From operations:
Net investment
income.......... $ 1,465,662 $ 1,307,065 $ 903,908 $ 35,712,012 $ 19,361,687 $ 7,821,827
Net realized
gains (losses).. 184,058 (132,712) 302,731 3,938,033 1,182,185 913,991
Net unrealized
appreciation
(depreciation)
during the year. 5,976,712 1,164,732 (984,298) 6,429,196 28,390,863 (9,911,015)
----------- ----------- ----------- ------------ ------------ ------------
Net increase
(decrease) in
net assets
resulting from
operations...... 7,626,432 2,339,085 222,341 46,079,242 48,934,735 (1,175,197)
From policyholder
transactions:
Net premiums from
policyholders... 10,025,704 10,547,817 13,824,052 93,961,136 76,729,116 67,541,450
Net benefits to
policyholders... (8,112,734) (10,156,449) (5,898,220) (57,300,211) (41,442,095) (31,434,994)
----------- ----------- ----------- ------------ ------------ ------------
Net increase in
net assets from
policyholder
transactions.... 1,912,970 391,368 7,925,832 36,660,925 35,287,021 36,103,456
----------- ----------- ----------- ------------ ------------ ------------
Net increase in
net assets..... 9,539,402 2,730,453 8,148,173 82,740,167 84,221,756 34,931,259
Net assets
Beginning of
year............ 22,246,848 19,516,395 11,368,222 217,256,964 133,035,208 98,103,949
----------- ----------- ----------- ------------ ------------ ------------
End of year...... $31,786,260 $22,246,848 $19,516,395 $299,997,131 $217,256,964 $133,035,208
=========== =========== =========== ============ ============ ============
<CAPTION>
Small Cap
Short-Term U.S. Government Value
Managed Subaccount Subaccount Subaccount
----------------------------------------- ----------------------------------- -----------
1996 1995 1994 1996 1995 1994** 1996*
------------- ------------- ------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase
(decrease) in Net
Assets
From operations:
Net investment
income.......... $ 35,527,179 $ 23,257,698 $ 6,528,044 $ 128,560 $ 94,735 $ 25,457 $ 30,298
Net realized
gains (losses).. 3,555,551 3,530,479 1,168,573 20,920 20,630 (1,779) (1,418)
Net unrealized
appreciation
(depreciation)
during the year. (11,690,944) 24,157,024 (12,012,242) (69,770) 77,274 (23,668) 66,350
------------- ------------- ------------- ----------- ----------- ----------- -----------
Net increase
(decrease) in
net assets
resulting from
operations...... 27,391,786 50,945,201 (4,315,635) 79,709 192,639 10 95,230
From policyholder
transactions:
Net premiums from
policyholders... 71,167,774 80,690,820 87,141,271 2,675,105 2,846,775 1,178,590 1,344,453
Net benefits to
policyholders... (56,734,361) (48,646,275) (43,706,261) (2,206,096) (1,637,415) (114,133) (109,889)
------------- ------------- ------------- ----------- ----------- ----------- -----------
Net increase in
net assets from
policyholder
transactions.... 14,433,414 32,044,545 43,435,010 469,009 1,209,360 1,064,457 1,234,564
------------- ------------- ------------- ----------- ----------- ----------- -----------
Net increase in
net assets..... 41,825,200 82,989,746 39,119,375 548,718 1,401,999 1,064,467 1,329,794
Net assets
Beginning of
year............ 262,405,591 179,415,845 140,296,470 2,466,466 1,064,467 -- --
------------- ------------- ------------- ----------- ----------- ----------- -----------
End of year...... $304,230,791 $262,405,591 $179,415,845 $3,015,184 $2,466,466 $1,064,467 $1,329,794
============= ============= ============= =========== =========== =========== ===========
</TABLE>
- ------
* From May 1, 1996 (commencement of operations).
** From May 1, 1994 (commencement of operations).
See accompanying notes.
41
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
Frontier
International Turner Core Edinburgh Capital
Opportunities Equity Index Strategic Bond Growth International Equity Appreciation
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
------------- ------------ -------------- ----------- -------------------- ------------
1996* 1996* 1996* 1996* 1996* 1996*
------------- ------------ -------------- ----------- -------------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income
(loss)................ $ 1,813 $ 25,586 $ 12,594 $ (1,465) $ 289 $ (1,628)
Net realized gains
(losses).............. 2,596 4,690 1,272 (75,788) (30) (130,154)
Net unrealized appreci-
ation (depreciation)
during the year....... 98,849 58,797 (2,250) -- 220 1,432
---------- ---------- -------- ----------- ------- -----------
Net increase (decrease)
in net assets
resulting from
operations............ 103,258 89,073 11,616 (77,254) 478 (130,350)
From policyholder
transactions:
Net premiums from poli-
cyholders............. 2,395,587 1,242,668 495,203 1,525,222 64,120 1,568,562
Net benefits to policy-
holders............... (238,306) (132,549) (88,706) (1,445,228) (1,406) (1,376,088)
---------- ---------- -------- ----------- ------- -----------
Net increase in net as-
sets from policyholder
transactions.......... 2,157,281 1,110,119 406,497 79,993 62,713 192,474
---------- ---------- -------- ----------- ------- -----------
Net increase in net
assets............... 2,260,539 1,199,192 418,113 2,740 63,191 62,124
Net assets
Beginning of year...... -- -- -- -- -- --
---------- ---------- -------- ----------- ------- -----------
End of year............ $2,260,539 $1,199,192 $418,113 $ 2,740 $63,191 $ 62,124
========== ========== ======== =========== ======= ===========
</TABLE>
- ------
* From May 1, 1996 (commencement of operations).
See accompanying notes.
42
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
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 twenty-one subaccounts. The assets of each subaccount are invested
exclusively in shares of a corresponding Portfolio of John Hancock Variable
Series Trust I (the Fund) or of M Fund Inc. (M Fund). New subaccounts may be
added as new portfolios are added to the Fund or to M Fund, or as other
investment options are developed and made available to policyholders. The
twenty-one Portfolios of the Fund and of M Fund which are currently available
are Large Cap Growth, Sovereign Bond, International Equities, Small Cap
Growth, International Balanced, Mid Cap Growth, Large Cap Value, Money Market,
Mid Cap Value, Special Opportunities, Real Estate Equity, Growth & Income,
Managed, Short-Term U.S. Government, Small Cap Value, International
Opportunities, Equity Index, Strategic Bond, Turner Core Growth, Edinburgh
International Equity and Frontier Capital Appreciation. 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
Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Valuation of Investments: Investment in shares of the Fund and of M Fund are
valued at the reported net asset values of the respective Portfolios.
Investment transactions are recorded on the trade date. Dividend income is
recognized on the ex-dividend date. Realized gains and losses on sales of 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.
43
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
Expenses: JHVLICO assumes mortality and expense risks of the variable life
insurance policies for which asset charges are deducted at an annual rate of
.6% of net assets 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.
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 and of M Fund at December 31, 1996 were as follows:
<TABLE>
<CAPTION>
Shares
Portfolio Owned Cost Value
--------- ---------- ------------ ------------
<S> <C> <C> <C>
Large Cap Growth.......................... 8,756,127 $145,572,331 $153,159,843
Sovereign Bond............................ 6,593,119 64,605,934 64,419,410
International Equities.................... 2,343,721 36,138,429 39,447,186
Small Cap Growth.......................... 295,281 3,020,254 2,933,413
International Balanced.................... 71,556 724,736 743,691
Mid Cap Growth............................ 216,631 2,176,221 2,214,471
Large Cap Value........................... 166,404 1,758,104 1,845,329
Money Market.............................. 1,737,566 17,375,664 17,375,664
Mid Cap Value............................. 117,894 1,235,400 1,337,926
Special Opportunities..................... 2,810,852 38,816,388 46,440,638
Real Estate Equity........................ 2,171,886 25,329,878 31,786,260
Growth & Income........................... 20,471,470 273,743,016 299,997,131
Managed................................... 22,784,884 297,723,544 304,230,791
Short-Term U.S. Government................ 300,108 3,031,349 3,015,184
Small Cap Value........................... 123,931 1,263,444 1,329,794
International Opportunities............... 213,316 2,161,690 2,260,539
Equity Index.............................. 108,064 1,140,395 1,199,192
Strategic Bond............................ 41,159 420,364 418,113
Turner Core Growth........................ 236 2,740 2,740
Edinburgh International Equity............ 6,396 62,972 63,191
Frontier Capital Appreciation............. 4,962 60,692 62,124
</TABLE>
44
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 5--DETAILS OF INVESTMENT--CONTINUED
Purchases, including reinvestment of dividend distributions and proceeds from
sales of shares in the Portfolios of the Fund and of M Fund during 1996, were
as follows:
<TABLE>
<CAPTION>
Portfolio Purchases Sales
--------- ----------- -----------
<S> <C> <C>
Large Cap Growth....................................... $57,084,851 $17,207,723
Sovereign Bond......................................... 17,069,620 6,980,376
International Equities................................. 10,889,232 5,070,208
Small Cap Growth....................................... 4,808,912 1,577,714
International Balanced................................. 782,342 59,248
Mid Cap Growth......................................... 2,244,678 68,625
Large Cap Value........................................ 1,802,792 47,761
Money Market........................................... 22,341,290 24,649,640
Mid Cap Value.......................................... 1,294,623 61,257
Special Opportunities.................................. 24,232,199 4,354,560
Real Estate Equity..................................... 7,479,651 4,101,012
Growth & Income........................................ 91,820,483 19,447,546
Managed................................................ 76,126,209 26,165,616
Short-Term U.S. Government............................. 2,512,362 1,915,792
Small Cap Value........................................ 1,365,414 100,552
International Opportunities............................ 2,337,466 178,372
Equity Index........................................... 1,223,909 88,204
Strategic Bond......................................... 500,399 81,308
Turner Core Growth..................................... 1,757,166 1,678,638
Edinburgh International Equity......................... 63,897 895
Frontier Capital Appreciation.......................... 1,798,979 1,605,600
</TABLE>
45
<PAGE>
REPORT 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, the
Large Cap Growth, Sovereign Bond, International Equities, Small Cap Growth,
International Balanced, Mid Cap Growth, Large Cap Value, Money Market, Mid Cap
Value, Special Opportunities, Real Estate Equity, Growth & Income, Managed,
Short-Term U.S. Government, Small Cap Value, International Opportunities,
Equity Index, Strategic Bond, Turner Core Growth, Edinburgh International
Equity and Frontier Capital Appreciation Subaccounts) as of December 31, 1996,
and the related statements of operations and statements of changes in net
assets for each of the periods indicated therein. These financial statements
are the responsibility of the Account's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of each of the respective
subaccounts constituting John Hancock Variable Life Account V at December 31,
1996, 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 7, 1997
46
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors
John Hancock Variable Life Insurance Company
We have audited the accompanying statutory-basis statements of financial
position of John Hancock Variable Life Insurance Company as of December 31,
1996 and 1995, and the related statutory-basis statements of operations and
unassigned deficit and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
As described in Note 1 to the financial statements, the Company presents its
financial statements in conformity with accounting practices prescribed or
permitted by the Commonwealth of Massachusetts Division of Insurance, which
practices differ from generally accepted accounting principles. The variances
between such practices and generally accepted accounting principles also are
described in Note 1. The effects on the financial statements of these
variances are not reasonably determinable but are presumed to be material.
In our report dated February 7, 1996, we expressed an opinion that the 1995
financial statements of the Company fairly present, in all material respects,
the Company's financial position, results of operations, and cash flows in
conformity with generally accepted accounting principles for 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. As described in Note 1, the accompanying
statutory-basis financial statements are no longer considered to be prepared
in conformity with generally accepted accounting principles. Accordingly, our
present opinion on the 1995 financial statements, as presented in the
following paragraph, is different from that expressed in our previous report.
In our opinion, because of the effects of the matter described in the second
preceding paragraph, the financial statements referred to above do not present
fairly, in conformity with generally accepted accounting principles, the
financial position of John Hancock Variable Life Insurance Company at December
31, 1996 and 1995, or the results of its operations or its cash flows for the
years then ended.
Also, in our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of John Hancock
Variable Life Insurance Company at December 31, 1996 and 1995, and the results
of its operations and its cash flows for the years then ended in conformity
with accounting practices prescribed or permitted by the Commonwealth of
Massachusetts Division of Insurance.
Ernst & Young LLP
Boston, Massachusetts
February 14, 1997
47
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
December 31
------------------
1996 1995
---- ----
(In millions)
<S> <C> <C>
Assets
Bonds--Note 7.............................................. $ 753.5 $ 552.8
Preferred stocks........................................... 9.6 5.0
Common stocks.............................................. 1.4 1.7
Investment in affiliates................................... 72.0 65.3
Mortgage loans on real estate--Note 7...................... 212.1 146.7
Real estate................................................ 38.8 36.4
Policy loans............................................... 80.8 61.8
Cash items:
Cash in banks............................................ 26.7 11.6
Temporary cash investments............................... 5.2 65.0
-------- --------
31.9 76.6
Premiums due and deferred.................................. 36.8 39.6
Investment income due and accrued.......................... 22.6 18.6
Other general account assets............................... 17.8 20.8
Assets held in separate accounts........................... 3,290.5 2,421.0
-------- --------
TOTAL ASSETS............................................... $4,567.8 $3,446.3
======== ========
Obligations and Stockholder's Equity
OBLIGATIONS
Policy reserves.......................................... $ 877.8 $ 612.3
Federal income and other taxes payable--Note 1........... 29.4 14.2
Other accrued expenses................................... 75.1 138.7
Asset valuation reserve--Note 1.......................... 16.6 15.4
Obligations related to separate accounts................. 3,285.8 2,417.0
-------- --------
TOTAL OBLIGATIONS.......................................... 4,284.7 3,197.6
Stockholder's Equity--Notes 2 and 6
Common Stock, $50 par value; authorized 50,000 shares;
issued and
outstanding 50,000 shares............................... 2.5 2.5
Paid-in capital.......................................... 377.5 377.5
Unassigned deficit......................................... (96.9) (131.3)
-------- --------
TOTAL STOCKHOLDER'S EQUITY................................. 283.1 248.7
-------- --------
TOTAL OBLIGATIONS AND STOCKHOLDER'S EQUITY................. $4,567.8 $3,446.3
======== ========
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
48
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF OPERATIONS AND UNASSIGNED DEFICIT
<TABLE>
<CAPTION>
Year ended December 31
------------------------
1996 1995
---- ----
(In millions)
<S> <C> <C>
Income
Premiums............................................ $ 820.6 $ 570.9
Net investment income--Note 4....................... 76.1 62.1
Other, net.......................................... 406.0 85.7
----------- ----------
1,302.7 718.7
Benefits and Expenses
Payments to policyholders and beneficiaries......... 236.1 213.4
Additions to reserves to provide for future payments
to policyholders and beneficiaries................. 790.1 282.4
Expenses of providing service to policyholders and
obtaining new insurance--Note 6.................... 183.8 150.7
State and miscellaneous taxes....................... 17.3 12.7
----------- ----------
1,227.3 659.2
----------- ----------
GAIN FROM OPERATIONS BEFORE FEDERAL INCOME TAXES
AND NET REALIZED CAPITAL GAINS (LOSSES).......... 75.4 59.5
Federal income taxes--Note 1.......................... 38.6 28.4
----------- ----------
GAIN FROM OPERATIONS BEFORE NET REALIZED CAPITAL
GAINS (LOSSES)................................... 36.8 31.1
Net realized capital gains (losses)--Note 5........... (1.5) 0.5
----------- ----------
NET INCOME........................................ 35.3 31.6
Unassigned deficit at beginning of year............... (131.3) (162.1)
Net unrealized capital gains (losses) and other ad-
justments--Note 5.................................... 2.5 (3.0)
Other reserves and adjustments........................ (3.4) 2.2
----------- ----------
UNASSIGNED DEFICIT AT END OF YEAR................. $ (96.9) $ (131.3)
=========== ==========
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
49
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31
----------------------
1996 1995
---- ----
(In millions)
<S> <C> <C>
Cash flows from operating activities:
Insurance premiums................................. $ 824.2 $ 574.0
Net investment income.............................. 73.4 59.2
Benefits to policyholders and beneficiaries........ (212.7) (198.3)
Dividends paid to policyholders.................... (15.7) (13.2)
Insurance expenses and taxes....................... (196.6) (161.5)
Net transfers to separate accounts................. (524.2) (257.4)
Other, net......................................... 386.7 55.1
----------- -----------
NET CASH PROVIDED FROM OPERATIONS.............. 335.1 57.9
----------- -----------
Cash flows used in investing activities:
Bond purchases..................................... (489.9) (172.5)
Bond sales......................................... 228.3 18.9
Bond maturities and scheduled redemptions.......... 27.8 36.0
Bond prepayments................................... 31.9 20.6
Stock purchases.................................... (6.5) (1.7)
Proceeds from stock sales.......................... 0.4 1.4
Real estate purchases.............................. (10.5) (16.2)
Real estate sales.................................. 8.5 9.3
Other invested assets purchases.................... 0.0 (0.4)
Proceeds from the sale of other invested assets.... 1.5 0.3
Mortgage loans issued.............................. (84.4) (19.8)
Mortgage loan repayments........................... 17.7 21.1
Other, net......................................... (104.6) 45.7
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES.......... (379.8) (57.3)
----------- -----------
INCREASE (DECREASE) IN CASH AND TEMPORARY CASH IN-
VESTMENTS........................................... (44.7) 0.6
Cash and temporary cash investments at beginning of
year................................................ 76.6 76.0
----------- -----------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF YEAR... $ 31.9 $ 76.6
=========== ===========
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
50
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS 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, domiciled in the Commonwealth of Massachusetts, principally writes
variable and universal life insurance policies. Those policies primarily are
marketed through John Hancock's sales organization, which includes a career
agency system composed of company-owned, unionized branch offices and
independent general agencies. Policies also are sold through various
unaffiliated securities broker-dealers and certain other financial
institutions. Currently, the Company writes business in all states except New
York.
The preparation of the financial statements requires management to make
estimates and assumptions that affect amounts reported in the financial
statements and accompanying notes. Such estimates and assumptions could change
in the future as more information becomes known, which could impact the
amounts reported and disclosed herein.
Basis of Presentation: The financial statements have been prepared using
accounting practices prescribed or permitted by the Commonwealth of
Massachusetts Division of Insurance and in conformity with the practices of
the National Association of Insurance Commissioners (NAIC), which practices
differ from generally accepted accounting principles (GAAP). The 1995
financial statements presented for comparative purposes were previously
described as being prepared in accordance with GAAP for stock life insurance
companies wholly-owned by a mutual life insurance company. Pursuant to
Financial Accounting Standards Board Interpretation 40, "Applicability of
Generally Accepted Accounting Principles to Mutual Life Insurance and Other
Enterprises" (FIN 40), as amended, which is effective for 1996 financial
statements, financial statements based on statutory accounting practices can
no longer be described as prepared in conformity with GAAP. Furthermore,
financial statements prepared in conformity with statutory accounting
practices for periods prior to the effective date of FIN 40 are not considered
GAAP presentations when presented in comparative form with financial
statements for periods subsequent to the effective date. Accordingly, the 1995
financial statements are no longer considered to be presented in conformity
with GAAP.
The significant differences from GAAP include: (1) policy acquisition costs
are charged to expense as incurred rather than deferred and amortized over the
related premium-paying period; (2) policy reserves are based on statutory
mortality, morbidity, and interest requirements without consideration of
withdrawals and Company experience; (3) certain assets designated as
"nonadmitted assets" are excluded from the balance sheet by direct charges to
surplus; (4) reinsurance recoverables are netted against reserves and claim
liabilities rather than reflected as an asset; (5) bonds held as available for
sale are recorded at amortized cost or market value as determined by the NAIC
rather than at fair value; (6) an Asset Valuation Reserve and Interest
Maintenance Reserve as prescribed by the NAIC are not calculated under GAAP.
Under GAAP, realized capital gains and losses are reported in the income
statement on a pretax basis as incurred and investment valuation allowances
are provided when there has been a decline in value deemed other than
temporary; (7) investments in affiliates are carried at their net equity value
with changes in value being recorded directly to unassigned deficit rather
than consolidated in the financial statements; and (8) no provision is made
for the deferred income tax effects of temporary differences between book and
tax basis reporting. The effects of the foregoing variances from GAAP have not
been determined but are presumed to be material.
51
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
The significant accounting practices of the Company are as follows:
Pending Statutory Standards: The NAIC currently is in the process of
recodifying statutory accounting practices, the result of which is expected to
constitute the only source of prescribed statutory accounting practices.
Accordingly, that project, which is expected to be completed in 1999 will
likely change, to some extent, prescribed statutory accounting practices, and
may result in changes to the accounting practices that the Company uses to
prepare its statutory-basis financial statements. The impact of any such
changes on the Company's unassigned deficit cannot be determined at this time
and could be material.
Revenues and Expenses: Premium revenues are recognized over the premium-paying
period of the policies whereas expenses, including the acquisition costs of
new business, are charged to operations as incurred and policyholder dividends
are provided as paid or accrued.
Cash and Temporary Cash Investments: Cash includes currency on hand and demand
deposits with financial institutions. Temporary cash investments are short-
term, highly-liquid investments both readily convertible to known amounts of
cash and so near maturity that there is insignificant risk of changes in value
because of changes in interest rates.
Valuation of Assets: General account investments are carried at amounts
determined on the following bases:
Bond and stock values are carried as prescribed by the NAIC; bonds
generally at amortized amounts or cost, preferred stocks generally at cost
and common stocks at market. The discount or premium on bonds is amortized
using the interest method.
Investments in affiliates are included on the statutory equity method.
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. Accumulated depreciation amounted to $1.2 million in 1996 and $0.5
million in 1995.
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,
52
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
principally bonds and mortgage loans, attributable to changes in the general
level of interest rates. Such gains and losses are deferred and amortized into
income over the remaining expected lives of the investments sold. At December
31, 1996, the IMR, net of 1996 amortization of $1.2 million, amounted to $5.9
million, which is included in policy reserves. The corresponding 1995 amounts
were $1.2 million and $6.9 million, respectively.
Separate Accounts: Separate account assets and liabilities reported in the
accompanying statements of financial position represent funds that are
separately administered and for which the contractholder, rather than the
Company, generally bears the investment risk. Separate account contractholders
have no claim against the assets of the general account of the Company.
Separate account assets are reported at market value. The operations of the
separate accounts are not included in the summary of operations; however,
income earned on amounts initially invested by the Company in the formation of
new separate accounts is included in other income.
Fair Values of Financial Instruments: Statement of Financial Accounting
Standards (SFAS) No. 107, "Disclosure about Fair Value of Financial
Instruments," requires disclosure of fair value information about financial
instruments, whether or not recognized in the statement of financial position,
for which it is practicable to estimate the value. In situations where quoted
market prices are not available, fair values are based on estimates using
present value or other valuation techniques. SFAS No. 107 excludes certain
financial instruments and all nonfinancial instruments from its disclosure
requirements. Therefore, the aggregate fair value amounts presented do not
represent the underlying value of the Company.
The methods and assumptions utilized by the Company in estimating its fair
value disclosures for financial instruments are as follows:
The carrying amounts reported in the statement of financial position for
cash and temporary cash investments approximate their fair values.
Fair values for public bonds are obtained from an independent pricing
service. Fair values for private placement securities and publicly traded
bonds not provided by the independent pricing service are estimated by the
Company by discounting expected future cash flows using current market
rates applicable to the yield, credit quality and maturity of the
investments. The fair values for common and preferred stocks, other than
its subsidiary investments, which are carried at equity values, are based
on quoted market prices.
The fair value of interest rate swaps and currency rate swaps is estimated
using a discounted cash flow method adjusted for the difference between the
rate of the existing swap and the current swap market rate. Discounted cash
flows in foreign currencies are converted to U.S. dollars using current
exchange rates.
The fair value for mortgage loans is estimated using discounted cash flow
analyses using interest rates adjusted to reflect the credit
characteristics of the underlying loans. Mortgage loans with similar
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 and
issue real estate mortgages is estimated using a discounted cash flow
method incorporating adjustments for the difference in the level of
interest rates between the dates the commitments were made and December 31,
1996. The fair value for commitments to purchase real estate approximates
the amount of the initial commitment.
53
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
Capital Gains and Losses: Realized capital gains and losses are determined
using the specific identification basis. Realized capital gains and losses,
net of taxes and amounts transferred to the IMR, are included in net gain or
loss. Unrealized gains and losses, which consist of market value and book
value adjustments, are shown as adjustments to the unassigned deficit.
Policy Reserves: Life reserves are developed by actuarial methods and are
determined based on published tables using statutorily specified interest
rates and valuation methods that will provide, in the aggregate, reserves that
are greater than or equal to the minimum or guaranteed policy cash values or
the amounts required by the Commonwealth of Massachusetts Division of
Insurance. Reserves for variable life insurance policies are maintained
principally on the modified preliminary term method using the 1958 and 1980
Commissioner's Standard Ordinary (CSO) mortality tables, with an assumed
interest rate of 4% for policies issued prior to May 1, 1983 and 4 1/2% for
policies issued on or thereafter. Reserves for single premium policies are
determined by the net single premium method using the 1958 CSO mortality
table, with an assumed interest rate of 4%. Reserves for universal life
policies issued prior to 1985 are equal to the gross account value which at
all times exceeds minimum statutory requirements. Reserves for universal life
policies issued from 1985 through 1988 are maintained at the greater of the
Commissioner's Reserve Valuation Method (CRVM) using the 1958 CSO mortality
table, with 4 1/2% interest or the cash surrender value. Reserves for
universal life policies issued after 1988 and for flexible variable policies
are maintained using the greater of the cash surrender value or the CRVM
method with the 1980 CSO mortality table and 5 1/2% interest for policies
issued from 1988 through 1992; 5% interest for policies issued in 1993 and
1994; and 4 1/2% interest for policies issued in 1995 and 1996.
Federal Income Taxes: Federal income taxes are reported in the financial
statements based on amounts determined to be payable as a result of operations
within the current accounting period. The operations of the Company are
consolidated with John Hancock in filing a consolidated federal income tax
return 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 $33.5 million in 1996 and $32.2 million in 1995.
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 temporary differences that may exist
between financial reporting and taxable income or loss.
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 1995 amounts have been reclassified to permit
comparison with the corresponding 1996 amounts.
54
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
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 (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 each of 1996 and 1995.
Unamortized goodwill at December 31, 1996 was $15.2 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>
1996 1995
---- ----
(In millions)
<S> <C> <C>
Investment expenses............................................... $ 7.0 $ 5.1
Depreciation expense.............................................. 0.9 1.0
Investment taxes.................................................. 0.5 0.5
------ ------
$ 8.4 $ 6.6
====== ======
</TABLE>
55
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 5--NET CAPITAL GAINS (LOSSES) AND OTHER ADJUSTMENTS
Net realized capital gains (losses) consist of the following items:
<TABLE>
<CAPTION>
1996 1995
---- ----
(In millions)
<S> <C> <C>
Net gains (losses) from asset sales............................. $ (0.2) $ 4.0
Capital gains tax............................................... (1.0) (2.5)
Net capital gains transferred to IMR............................ (0.3) (1.0)
------ ------
Realized Capital Gains (Losses)............................... $ (1.5) $ 0.5
====== ======
</TABLE>
Net unrealized capital gains (losses) and other adjustments consist of the
following items:
<TABLE>
<CAPTION>
1996 1995
---- ----
(In millions)
<S> <C> <C>
Net gains (losses) from changes in security values and book
value adjustments.............................................. $ 3.7 $ (0.2)
Increase in asset valuation reserve............................. (1.2) (2.8)
------ ------
Net Unrealized Capital Gains (Losses) and Other Adjustments... $ 2.5 $ (3.0)
====== ======
</TABLE>
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 1996 and 1995 to reflect continuing changes
in the Company's operations. The amount of the service fee charged to the
Company was $111.7 million and $97.9 million in 1996 and 1995, 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 $1.6 million and
$1.8 million in 1996 and 1995, 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 1996, 1995 and 1994 issues of
flexible premium variable life insurance and scheduled premium variable life
insurance policies. In connection with this agreement, John Hancock
transferred $24.5 million and $32.7 million of cash for tax, commission, and
expense allowances to the Company, which increased the Company's net gain from
operations by $15.7 million and $20.3 million in 1996 and 1995, respectively.
Effective January 1, 1996, the Company entered into a modified coinsurance
agreement with John Hancock to reinsure 50% of 1995 and 1996 issues of retail
annuity contracts (Independence Preferred and Declaration). In connection with
this agreement, John Hancock transferred $23.2 million of cash for surrender
benefits, tax, reserve increase, commission, expense allowances and premium to
the Company, which increased the Company's net gain from operations by $15.1
million in 1996.
56
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
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, 1996 Value Gains Losses Value
---------------------------- --------- ---------- ---------- -----
(In millions)
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations
of U.S. government corporations and
agencies............................... $ 44.4 $ 0.2 $0.2 $ 44.4
Obligations of states and political sub-
divisions.............................. 12.6 0.4 0.0 13.0
Debt securities issued by foreign gov-
ernments............................... 0.8 0.1 0.0 0.9
Corporate securities.................... 623.2 29.8 3.4 649.6
Mortgage-backed securities.............. 72.5 10.2 0.1 82.6
------ ----- ---- ------
Total bonds........................... $753.5 $40.7 $3.7 $790.5
====== ===== ==== ======
<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 sub-
divisions.............................. 11.4 1.1 0.0 12.5
Debt securities issued by foreign gov-
ernments............................... 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
------ ----- ---- ------
Total bonds............................. $552.8 $46.2 $1.7 $597.3
====== ===== ==== ======
</TABLE>
The statement value and fair value of bonds at December 31, 1996, by
contractual maturity, are shown below. Maturities will differ from contractual
maturities because eligible borrowers may exercise their right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Statement Fair
Value Value
--------- -----
(In millions)
<S> <C> <C>
Due in one year or less....................................... $ 51.6 $ 52.9
Due after one year through five years......................... 260.8 267.7
Due after five years through ten years........................ 244.3 253.7
Due after ten years........................................... 124.3 133.6
------ ------
681.0 707.9
Mortgage-backed securities.................................... 72.5 82.6
------ ------
$753.5 $790.5
====== ======
</TABLE>
57
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 7--INVESTMENTS--CONTINUED
Proceeds from sales of bonds during 1996 and 1995 were $228.3 million and
$18.9 million, respectively. Gross gains of $1.3 million in 1996 and $0.2
million in 1995 and gross losses of $2.1 million in 1996 and $0.1 million in
1995 were realized on these transactions.
The cost of common stocks was $0.0 million and $0.1 million at December 31,
1996 and 1995, respectively. Gross unrealized appreciation on common stocks
totaled $1.4 million, and gross unrealized depreciation totaled $0.0 million
at December 31, 1996. The fair value of preferred stock totaled $9.6 million
at December 31, 1996 and $5.2 million at December 31, 1995.
Bonds with amortized cost of $11.3 million were nonincome producing for the
twelve months ended December 31, 1996.
At December 31, 1996, the mortgage loan portfolio was diversified by
geographic region and specific collateral property type as displayed below.
The Company controls credit risk through credit approvals, limits and
monitoring procedures.
<TABLE>
<CAPTION>
Statement
Property Type Value
------------- ---------
(In millions)
<S> <C>
Apartments.............. $ 96.0
Industrial.............. 35.0
Office buildings........ 11.3
Retail.................. 29.0
Agricultural............ 28.9
Other................... 11.9
------
$212.1
======
</TABLE>
<TABLE>
<CAPTION>
Geographic Statement
Concentration Value
------------- ---------
(In millions)
<S> <C>
East North Central...... $ 31.1
Middle Atlantic......... 11.5
Mountain................ 7.6
New England............. 27.6
Pacific................. 49.9
South Atlantic.......... 58.8
West South Central...... 25.6
------
$212.1
======
</TABLE>
At December 31, 1996, the fair values of the commercial and agricultural
mortgage loans portfolios were $189.0 million and $30.4 million, respectively.
The corresponding amounts as of December 31, 1995 were approximately $132.1
million and $22.2 million, respectively.
The maximum and minimum lending rates for mortgage loans during 1996 were
8.69% and 7.04% for agricultural loans and 8.5% and 7.2% for other properties.
Generally, the maximum percentage of any loan to the value of security at the
time of the loan, exclusive of insured or guaranteed or purchase money
mortgages, is 75%. For city mortgages, fire insurance is carried on all
commercial and residential properties at least equal to the excess of the loan
over the maximum loan which would be permitted by law on the land without the
building, except as permitted by regulations of the Federal Housing Commission
on loans fully insured under the provisions of the National Housing Act. For
agricultural mortgage loans, fire insurance is not normally required on land
based loans except in those instances where a building is critical to the
farming operation. Fire insurance is required on all agri-business facilities
in an aggregate amount equal to the loan balance.
58
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
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 1996 were $384.3 million, $9.9 million, and $12.1 million,
respectively. The corresponding amounts in 1995 were $72.4 million, $8.7
million, and $12.1 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--FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Company enters into interest rate swap contracts for the purpose of
converting the interest rate characteristics (fixed or variable) of certain
investments to match those of related insurance liabilities. Maturities of
current agreements range through 2011. These swaps involve, to varying
degrees, interest rate risk in excess of amounts recognized in the statement
of financial position.
The Company enters into currency rate swap agreements to manage exposure to
foreign exchange rate fluctuations. Maturities of current agreements range
through 2006. Should the counterparty fail to meet the terms of the contract,
the Company's market risk is limited to the currency rate differential.
The Company enters into interest rate cap contracts to manage exposure on
underlying security values due to a rise in interest rates. Maturities of
current agreements range through 2006.
The Company also uses financial futures contracts to hedge public bonds
intended for future sale in order to lock in the market value at the date of
contract. The Company is subject to the risks associated with changes in the
value of the underlying securities; however, such changes in value generally
are offset by changes in the value of the hedged items. The contract or
notional amounts of the contracts represent the extent of the Company's
involvement but not in the future cash requirements, as the Company intends to
close the open positions prior to settlement.
The contract or notional amount of the foregoing financial instruments, which
indicates the Company's involvement and in certain instances, maximum credit
risk related to those instruments, is as follows:
<TABLE>
<CAPTION>
December 31
-------------
1996 1995
---- ----
(In millions)
<S> <C> <C>
Futures contracts to sell securities............................ $ 73.0 $ 0.0
======= =====
Notional amount of interest rate swaps, currency rate swaps, and
interest rate caps to:
Receive variable rates........................................ $ 215.9 $ 0.0
======= =====
Receive fixed rates........................................... $ 26.6 $ 5.0
======= =====
</TABLE>
59
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 9--FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK--CONTINUED
The Company continually monitors its positions and the credit ratings of the
counterparties to these financial instruments. The Company believes the risk
of incurring losses due to the nonperformance by its counterparties is remote
and that any such losses would be immaterial.
Based on the market rates in effect at December 31, 1996, the Company's
interest rate swaps, currency rate swaps and interest rate caps represented
(assets) liabilities to the Company with fair values of $2.3 million, $(8.2)
million and $(2.0) million, respectively. The corresponding amounts as of
December 31, 1995 were $0.0 million.
NOTE 10--POLICYHOLDERS' RESERVES AND BENEFICIARIES' FUND
The Company's annuity reserves and deposit fund liabilities that are subject
to discretionary withdrawal and subject to discretionary withdrawal (without
adjustment) are summarized as follows:
<TABLE>
<CAPTION>
December 31, 1996 Percent
----------------- -------
(In millions)
<S> <C> <C>
Subject to discretionary withdrawal at book value
less surrender charge............................... $441.9 89.3%
Subject to discretionary withdrawal at book value
(without adjustment)................................ 53.0 10.7
------ -----
Total annuity reserves and deposit liabilities....... $494.9 100.0%
====== =====
</TABLE>
NOTE 11--COMMITMENTS AND CONTINGENCIES
The Company has extended commitments to purchase long-term bonds and real
estate and issue real estate mortgages totalling $42.1 million, $0.1 million,
and $33.5 million, respectively, at December 31, 1996. 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 $76.2 million at December 31,
1996. The majority of these commitments expire in 1997.
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, 1996. 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.
60
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 12--FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and fair values of the
Company's financial instruments:
<TABLE>
<CAPTION>
Year ended December 31
--------------------------------
1996 1995
--------------- ---------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ------ -------- ------
(In millions)
<S> <C> <C> <C> <C>
Assets
Bonds--Note 7............................... $753.5 $790.5 $552.8 $597.3
Preferred stocks--Note 7.................... 9.6 9.6 5.0 5.2
Common stocks--Note 7....................... 1.4 1.4 1.7 1.7
Mortgage loans on real estate--Note 7....... 212.1 219.4 146.7 154.3
Policy loans--Note 1........................ 80.8 80.8 61.8 61.8
Cash and cash equivalents--Note 1........... 31.9 31.9 76.6 76.6
Derivatives liabilities relating to:--Note 9
Interest rate swaps......................... -- 2.3 -- 0.0
Currency rate swaps......................... -- (8.2) -- 0.0
Interest rate caps.......................... -- (2.0) -- 0.0
Liabilities
Commitments--Note 11........................ -- 76.2 -- 23.8
</TABLE>
The carrying amounts in the table are included in the statutory-basis
statements of financial position. The method and assumptions utilized by the
Company in estimating its fair value disclosures are described in Note 1.
61
<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 Servicing 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 those which would have
been purchased at the correct age or sex by the most recent insurance charge
deducted from Account Value.
62
<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, the Policy will terminate and 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 less 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
during the lifetime of the insured 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
Servicing 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.
63
<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 .58%) 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 .18%).
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.
64
<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 Account Value Surrender Value
-------------------------------- -------------------------------- --------------------------------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of: Annual Investment Return of: Annual Investment Return of:
Policy At 5% Interest -------------------------------- -------------------------------- --------------------------------
Year Per Year (2) 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
- ------ -------------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 945 100,000 100,000 100,000 323 356 390 0 0 0
2 1,937 100,000 100,000 100,000 873 967 1,066 303 397 496
3 2,979 100,000 100,000 100,000 1,406 1,596 1,803 701 891 1,098
4 4,073 100,000 100,000 100,000 1,921 2,243 2,607 1,081 1,403 1,767
5 5,222 100,000 100,000 100,000 2,416 2,907 3,482 1,741 2,232 2,807
6 6,428 100,000 100,000 100,000 2,892 3,588 4,436 2,082 2,778 3,626
7 7,694 100,000 100,000 100,000 3,345 4,284 5,475 2,535 3,474 4,665
8 9,024 100,000 100,000 100,000 3,776 4,996 6,607 3,056 4,276 5,887
9 10,420 100,000 100,000 100,000 4,182 5,722 7,841 3,552 5,092 7,211
10 11,886 100,000 100,000 100,000 4,573 6,477 9,207 4,033 5,937 8,667
11 13,425 100,000 100,000 100,000 4,986 7,297 10,754 4,536 6,847 10,304
12 15,042 100,000 100,000 100,000 5,372 8,137 12,450 5,057 7,822 12,135
13 16,739 100,000 100,000 100,000 5,733 8,998 14,314 5,553 8,818 14,134
14 18,521 100,000 100,000 100,000 6,068 9,880 16,364 6,068 9,880 16,364
15 20,392 100,000 100,000 100,000 6,372 10,782 18,619 6,372 10,782 18,619
16 22,356 100,000 100,000 100,000 6,647 11,705 21,104 6,647 11,705 21,104
17 24,419 100,000 100,000 100,000 6,882 12,641 23,837 6,882 12,641 23,837
18 26,585 100,000 100,000 100,000 7,071 13,584 26,844 7,071 13,584 26,844
19 28,859 100,000 100,000 100,000 7,209 14,533 30,156 7,209 14,533 30,156
20 31,247 100,000 100,000 100,000 7,290 15,480 33,807 7,290 15,480 33,807
25 45,102 100,000 100,000 100,000 6,615 20,044 58,797 6,615 20,044 58,797
30 62,785 100,000 100,000 121,816 3,220 23,601 101,513 3,220 23,601 101,513
35 85,353 100,000 100,000 197,857 0 24,078 172,050 0 24,078 172,050
40 142,434 100,000 100,000 295,968 0 40,276 281,875 0 40,276 281,875
45 215,287 100,000 100,000 488,068 0 35,308 464,827 0 35,308 464,827
</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 $5,809 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%, $5,809 6% and $0 at 12%, subject to any maximums required to
maintain the Policy's status for federal income tax purposes.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT
RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY
THE OWNER. THE DEATH BENEFIT, ACCOUNT VALUE AND SURRENDER VALUE FOR A POLICY
WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT
RETURN AVERAGE 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE
OR BELOW THE AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE
MADE THAT THESE HYPOTHETICAL INVESTMENT RESULTS CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
65
<PAGE>
DEATH BENEFIT OPTION 1: LEVEL DEATH BENEFIT ILLUSTRATION ASSUMES MAXIMUM
CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK
SUM INSURED AT ISSUE (GUARANTEED DEATH BENEFIT): $100,000
$900 BASE POLICY PREMIUM (1)
<TABLE>
<CAPTION>
Death Benefit Account Value Surrender Value
-------------------------------- -------------------------------- --------------------------------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of: Annual Investment Return of: Annual Investment Return of:
Policy At 5% Interest -------------------------------- -------------------------------- --------------------------------
Year Per Year (2) 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
- ------ -------------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 945 100,000 100,000 100,000 276 307 339 0 0 0
2 1,937 100,000 100,000 100,000 778 866 959 8 96 189
3 2,979 100,000 100,000 100,000 1,265 1,441 1,634 360 536 729
4 4,073 100,000 100,000 100,000 1,733 2,032 2,369 693 992 1,329
5 5,222 100,000 100,000 100,000 2,183 2,636 3,167 1,008 1,461 1,992
6 6,428 100,000 100,000 100,000 2,614 3,255 4,037 1,304 1,945 2,727
7 7,694 100,000 100,000 100,000 3,022 3,886 4,982 1,812 2,676 3,772
8 9,024 100,000 100,000 100,000 3,409 4,529 6,011 2,289 3,409 4,891
9 10,420 100,000 100,000 100,000 3,771 5,183 7,130 2,841 4,253 6,200
10 11,886 100,000 100,000 100,000 4,110 5,849 8,349 3,570 5,309 7,809
11 13,425 100,000 100,000 100,000 4,421 6,524 9,677 3,971 6,074 9,227
12 15,042 100,000 100,000 100,000 4,704 7,205 11,122 4,389 6,890 10,807
13 16,739 100,000 100,000 100,000 4,956 7,893 12,698 4,776 7,713 12,518
14 18,521 100,000 100,000 100,000 5,177 8,586 14,418 5,177 8,586 14,418
15 20,392 100,000 100,000 100,000 5,363 9,282 16,295 5,363 9,282 16,295
16 22,356 100,000 100,000 100,000 5,513 9,978 18,346 5,513 9,978 18,346
17 24,419 100,000 100,000 100,000 5,620 10,669 20,585 5,620 10,669 20,585
18 26,585 100,000 100,000 100,000 5,678 11,348 23,030 5,678 11,348 23,030
19 28,859 100,000 100,000 100,000 5,683 12,012 25,703 5,683 12,012 25,703
20 31,247 100,000 100,000 100,000 5,625 12,650 28,623 5,625 12,650 28,623
25 45,102 100,000 100,000 100,000 4,178 15,223 48,054 4,178 15,223 48,054
30 62,785 100,000 100,000 100,000 0 15,677 80,138 0 15,677 80,138
35 85,353 100,000 100,000 153,520 0 11,013 133,496 0 11,013 133,496
40 150,714 100,000 100,000 223,819 0 16,389 213,161 0 16,389 213,161
45 234,133 100,000 100,000 360,710 0 0 343,533 0 0 343,533
</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 $7,228 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%, $7,228 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.
66
<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 Account Value Surrender Value
-------------------------------- -------------------------------- --------------------------------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of: Annual Investment Return of: Annual Investment Return of:
Policy At 5% Interest -------------------------------- -------------------------------- --------------------------------
Year Per Year (2) 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
- ------ -------------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 945 100,000 100,000 100,000 323 356 390 0 0 0
2 1,937 100,000 100,000 100,000 873 967 1,066 303 397 496
3 2,979 100,000 100,000 100,000 1,406 1,596 1,803 701 891 1,098
4 4,073 100,000 100,000 100,000 1,921 2,243 2,607 1,081 1,403 1,767
5 5,222 100,000 100,000 100,000 2,416 2,907 3,482 1,741 2,232 2,807
6 6,428 100,000 100,000 100,000 2,892 3,588 4,436 2,082 2,778 3,626
7 7,694 100,000 100,000 100,000 3,345 4,284 5,475 2,535 3,474 4,665
8 9,024 100,000 100,000 100,000 3,776 4,996 6,607 3,056 4,276 5,887
9 10,420 100,000 100,000 100,000 4,182 5,722 7,841 3,552 5,092 7,211
10 11,886 100,000 100,000 100,000 4,573 6,477 9,207 4,033 5,937 8,667
11 13,425 100,000 100,000 100,000 4,986 7,297 10,754 4,536 6,847 10,304
12 15,042 100,000 100,000 100,000 5,372 8,137 12,450 5,057 7,822 12,135
13 16,739 100,000 100,000 100,000 5,733 8,998 14,314 5,553 8,818 14,134
14 18,521 100,000 100,000 100,000 6,068 9,880 16,364 6,068 9,880 16,364
15 20,392 100,000 100,000 100,000 6,372 10,782 18,619 6,372 10,782 18,619
16 22,356 100,000 100,000 100,237 6,647 11,705 21,104 6,647 11,705 21,104
17 24,419 100,000 100,000 101,350 6,882 12,641 23,834 6,882 12,641 23,834
18 26,585 100,000 100,000 102,694 7,071 13,584 26,830 7,071 13,584 26,830
19 28,859 100,000 100,000 104,299 7,209 14,533 30,119 7,209 14,533 30,119
20 31,247 100,000 100,000 106,197 7,290 15,480 33,730 7,290 15,480 33,730
25 45,102 100,000 100,000 121,408 6,615 20,044 57,907 6,615 20,044 57,907
30 62,785 100,000 100,000 151,037 3,220 23,601 96,986 3,220 23,601 96,986
35 85,353 100,000 100,000 205,022 0 24,078 160,451 0 24,078 160,451
40 142,434 100,000 104,849 287,273 0 38,697 260,330 0 38,697 260,330
45 215,287 100,000 100,000 447,640 0 32,333 426,324 0 32,333 426,324
</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 $5,809 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%, $5,809 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.
67
<PAGE>
DEATH BENEFIT OPTION 2: VARIABLE DEATH BENEFIT ILLUSTRATION ASSUMES MAXIMUM
CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK SUM INSURED AT ISSUE
(GUARANTEED DEATH BENEFIT): $100,000 $900 BASE POLICY PREMIUM (1)
<TABLE>
<CAPTION>
Death Benefit Account Value Surrender Value
-------------------------------- -------------------------------- ---------------------------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of: Annual Investment Return of: Annual Investment Return of
Policy At 5% Interest -------------------------------- -------------------------------- ---------------------------
Year Per Year (2) 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
- ------ -------------- --------- -------- --------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 945 100,000 100,000 100,000 276 307 339 0 0 0
2 1,937 100,000 100,000 100,000 778 866 959 8 96 189
3 2,979 100,000 100,000 100,000 1,265 1,441 1,634 360 536 729
4 4,073 100,000 100,000 100,000 1,733 2,032 2,369 693 992 1,329
5 5,222 100,000 100,000 100,000 2,183 2,636 3,167 1,008 1,461 1,992
6 6,428 100,000 100,000 100,000 2,614 3,255 4,037 1,304 1,945 2,727
7 7,694 100,000 100,000 100,000 3,022 3,886 4,982 1,812 2,676 3,772
8 9,024 100,000 100,000 100,000 3,409 4,529 6,011 2,289 3,409 4,891
9 10,420 100,000 100,000 100,000 3,771 5,183 7,130 2,841 4,253 6,200
10 11,886 100,000 100,000 100,000 4,110 5,849 8,349 3,570 5,309 7,809
11 13,425 100,000 100,000 100,000 4,421 6,524 9,677 3,971 6,074 9,227
12 15,042 100,000 100,000 100,000 4,704 7,205 11,122 4,389 6,890 10,807
13 16,739 100,000 100,000 100,000 4,956 7,893 12,698 4,776 7,713 12,518
14 18,521 100,000 100,000 100,000 5,177 8,586 14,418 5,177 8,586 14,418
15 20,392 100,000 100,000 100,000 5,363 9,282 16,295 5,363 9,282 16,295
16 22,356 100,000 100,000 100,000 5,513 9,978 18,346 5,513 9,978 18,346
17 24,419 100,000 100,000 100,000 5,620 10,669 20,585 5,620 10,669 20,585
18 26,585 100,000 100,000 100,000 5,678 11,348 23,030 5,678 11,348 23,030
19 28,859 100,000 100,000 100,000 5,683 12,012 25,703 5,683 12,012 25,703
20 31,247 100,000 100,000 101,087 5,625 12,650 28,620 5,625 12,650 28,620
25 45,102 100,000 100,000 111,223 4,178 15,223 47,723 4,178 15,223 47,723
30 62,785 100,000 100,000 131,519 0 15,677 77,468 0 15,677 77,468
35 85,353 100,000 100,000 168,648 0 11,013 124,077 0 11,013 124,077
40 150,714 100,000 100,000 220,810 0 15,827 193,867 0 15,827 193,867
45 234,133 100,000 100,000 327,768 0 0 306,970 0 0 306,970
</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 $7,228 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%, $7,228 at 6% and $0 at 12%, subject to any maximums required
to maintain the Policy's status for federal income tax purposes.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT
RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY
THE OWNER. THE DEATH BENEFIT, ACCOUNT VALUE AND SURRENDER VALUE FOR A POLICY
WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT
RETURN AVERAGE 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE
OR BELOW THE AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE
MADE THAT THESE HYPOTHETICAL INVESTMENT RESULTS CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
68
<PAGE>
DEATH BENEFIT OPTION 3: LEVEL DEATH BENEFIT WITH GREATER FUNDING ILLUSTRATION
ASSUMES CURRENT CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK SUM INSURED AT ISSUE
(GUARANTEED DEATH BENEFIT): $100,000 $900 BASE POLICY PREMIUM (1)
<TABLE>
<CAPTION>
Death Benefit Account Value Surrender Value
-------------------------------- -------------------------------- ---------------------------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of: Annual Investment Return of: Annual Investment Return of
Policy At 5% Interest -------------------------------- -------------------------------- ---------------------------
Year Per Year (2) 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
- ------ -------------- --------- -------- --------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 945 100,000 100,000 100,000 323 356 390 0 0 0
2 1,937 100,000 100,000 100,000 873 967 1,066 303 397 496
3 2,979 100,000 100,000 100,000 1,406 1,596 1,803 701 891 1,098
4 4,073 100,000 100,000 100,000 1,921 2,243 2,607 1,081 1,403 1,767
5 5,222 100,000 100,000 100,000 2,416 2,907 3,482 1,741 2,232 2,807
6 6,428 100,000 100,000 100,000 2,892 3,588 4,436 2,082 2,778 3,626
7 7,694 100,000 100,000 100,000 3,345 4,284 5,475 2,535 3,474 4,665
8 9,024 100,000 100,000 100,000 3,776 4,996 6,607 3,056 4,276 5,887
9 10,420 100,000 100,000 100,000 4,182 5,722 7,841 3,552 5,092 7,211
10 11,886 100,000 100,000 100,000 4,573 6,477 9,207 4,033 5,937 8,667
11 13,425 100,000 100,000 100,000 4,986 7,297 10,754 4,536 6,847 10,304
12 15,042 100,000 100,000 100,000 5,372 8,137 12,450 5,057 7,822 12,135
13 16,739 100,000 100,000 100,000 5,733 8,998 14,314 5,553 8,818 14,134
14 18,521 100,000 100,000 100,000 6,068 9,880 16,364 6,068 9,880 16,364
15 20,392 100,000 100,000 100,000 6,372 10,782 18,619 6,372 10,782 18,619
16 22,356 100,000 100,000 100,000 6,647 11,705 21,104 6,647 11,705 21,104
17 24,419 100,000 100,000 100,000 6,882 12,641 23,837 6,882 12,641 23,837
18 26,585 100,000 100,000 100,000 7,071 13,584 26,844 7,071 13,584 26,844
19 28,859 100,000 100,000 100,000 7,209 14,533 30,156 7,209 14,533 30,156
20 31,247 100,000 100,000 100,000 7,290 15,480 33,807 7,290 15,480 33,807
25 45,102 100,000 100,000 113,905 6,615 20,044 58,620 6,615 20,044 58,620
30 62,785 100,000 100,000 166,147 3,220 23,601 97,619 3,220 23,601 97,619
35 85,353 100,000 100,000 237,528 0 24,078 156,929 0 24,078 156,929
40 142,434 100,000 100,000 328,361 16,252 48,697 239,890 16,252 48,697 239,890
45 215,287 100,000 102,767 455,952 31,056 81,393 361,122 31,056 81,393 361,122
</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 $5,809 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%, $5,809 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.
69
<PAGE>
DEATH BENEFIT OPTION 3: LEVEL DEATH BENEFIT WITH GREATER FUNDING ILLUSTRATION
ASSUMES MAXIMUM CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK SUM INSURED AT ISSUE
(GUARANTEED DEATH BENEFIT): $100,000 $900 BASE POLICY PREMIUM (1)
<TABLE>
<CAPTION>
Death Benefit Account Value Surrender Value
-------------------------------- -------------------------------- ---------------------------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of: Annual Investment Return of: Annual Investment Return of
Policy At 5% Interest -------------------------------- -------------------------------- ---------------------------
Year Per Year (2) 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
- ------ -------------- -------- -------- --------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 945 100,000 100,000 100,000 276 307 339 0 0 0
2 1,937 100,000 100,000 100,000 778 866 959 8 96 189
3 2,979 100,000 100,000 100,000 1,265 1,441 1,634 360 536 729
4 4,073 100,000 100,000 100,000 1,733 2,032 2,369 693 992 1,329
5 5,222 100,000 100,000 100,000 2,183 2,636 3,167 1,008 1,461 1,992
6 6,428 100,000 100,000 100,000 2,614 3,255 4,037 1,304 1,945 2,727
7 7,694 100,000 100,000 100,000 3,022 3,886 4,982 1,812 2,676 3,772
8 9,024 100,000 100,000 100,000 3,409 4,529 6,011 2,289 3,409 4,891
9 10,420 100,000 100,000 100,000 3,771 5,183 7,130 2,841 4,253 6,200
10 11,886 100,000 100,000 100,000 4,110 5,849 8,349 3,570 5,309 7,809
11 13,425 100,000 100,000 100,000 4,421 6,524 9,677 3,971 6,074 9,227
12 15,042 100,000 100,000 100,000 4,704 7,205 11,122 4,389 6,890 10,807
13 16,739 100,000 100,000 100,000 4,956 7,893 12,698 4,776 7,713 12,518
14 18,521 100,000 100,000 100,000 5,177 8,586 14,418 5,177 8,586 14,418
15 20,392 100,000 100,000 100,000 5,363 9,282 16,295 5,363 9,282 16,295
16 22,356 100,000 100,000 100,000 5,513 9,978 18,346 5,513 9,978 18,346
17 24,419 100,000 100,000 100,000 5,620 10,669 20,585 5,620 10,669 20,585
18 26,585 100,000 100,000 100,000 5,678 11,348 23,030 5,678 11,348 23,030
19 28,859 100,000 100,000 100,000 5,683 12,012 25,703 5,683 12,012 25,703
20 31,247 100,000 100,000 100,000 5,625 12,650 28,623 5,625 12,650 28,623
25 45,102 100,000 100,000 100,000 4,178 15,223 48,054 4,178 15,223 48,054
30 62,785 100,000 100,000 133,765 0 15,677 78,593 0 15,677 78,593
35 85,353 100,000 100,000 187,349 0 11,013 123,777 0 11,013 123,777
40 150,714 100,000 100,000 250,787 6,457 32,454 183,216 6,457 32,454 183,216
45 234,133 100,000 100,000 337,063 11,305 55,834 266,959 11,305 55,834 266,959
</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 $7,228 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%, $7,228 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.
70
<PAGE>
[LOGO OF JOHN HANCOCK WORLDWIDE SPONSOR APPEARS HERE]
POLICIES ISSUED BY JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
JOHN HANCOCK PLACE, BOSTON, MASSACHUSETTS 02117
S8144 5/97
<PAGE>
John Hancock Variable Life
Insurance Company
(JHVLICO)
LOGO
SCHEDULED PREMIUM VARIABLE LIFE INSURANCE POLICY
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
John Hancock Place
Boston, Massachusetts 02117
JOHN HANCOCK SERVICING OFFICE:
P.O. Box 111
Boston, Massachusetts 02117
TELEPHONE 1-800-REAL LIFE (1-800-732-5543)
FAX 617-572-5410
PROSPECTUS MAY 1, 1997
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 "series"
type mutual fund advised by John Hancock Mutual Life Insurance Company ("John
Hancock") or of M Fund, Inc., a "Series" type 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: Growth & Income, Large Cap Growth
(formerly Select Stock), Sovereign Bond, Money Market, Managed, Real Estate
Equity, International Equities, Short-Term U.S. Government, Special
Opportunities, Small Cap Growth, Small Cap Value, Mid Cap Growth, Mid Cap
Value, International Balanced, International Opportunities, Large Cap Value,
Strategic Bond and Equity Index and in the Portfolios of M Fund Inc.:
Edinburgh Overseas Equity, Turner Core Growth, Frontier Capital Appreciation,
and Enhanced U.S. Equity. (The Enhanced U.S. Equity Portfolio is not currently
available to Owners, but is expected to be made available some time in the
future.) Other variable Subaccounts and Portfolios may be added in the future.
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
<TABLE>
<CAPTION>
Page
<S> <C>
SUMMARY................................................................... 1
JHVLICO AND JOHN HANCOCK.................................................. 7
THE ACCOUNT AND THE SERIES FUNDS.......................................... 7
THE FIXED ACCOUNT......................................................... 11
POLICY PROVISIONS AND BENEFITS............................................ 11
Requirements for Issuance of Policy..................................... 11
Premiums................................................................ 12
Account Value and Surrender Value....................................... 15
Death Benefits.......................................................... 16
Death Benefit Options................................................... 17
Definition of Life Insurance............................................ 17
Excess Value............................................................ 18
Partial Withdrawal of Excess Value...................................... 18
Transfers Among Subaccounts............................................. 19
Loan Provisions and Indebtedness........................................ 20
Default and Options on Lapse............................................ 21
Exchange Privilege...................................................... 22
CHARGES AND EXPENSES...................................................... 22
Charges Deducted from Premiums.......................................... 22
Sales Charges........................................................... 23
Administrative Surrender Charge......................................... 24
Reduced Charges for Eligible Groups..................................... 25
Charges Deducted from Account Value..................................... 25
DISTRIBUTION OF POLICIES.................................................. 27
TAX CONSIDERATIONS........................................................ 28
Policy Proceeds......................................................... 28
Charge for JHVLICO's Taxes.............................................. 29
Corporate and H.R. 10 Plans............................................. 29
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS OF JHVLICO...................... 30
REPORTS................................................................... 31
VOTING PRIVILEGES......................................................... 31
CHANGES THAT JHVLICO CAN MAKE............................................. 32
STATE REGULATION.......................................................... 32
LEGAL MATTERS............................................................. 32
REGISTRATION STATEMENT.................................................... 32
EXPERTS................................................................... 33
FINANCIAL STATEMENTS...................................................... 33
APPENDIX--OTHER POLICY PROVISIONS......................................... 63
APPENDIX--ILLUSTRATION OF DEATH BENEFITS, ACCOUNT VALUES, SURRENDER VALUES
AND ACCUMULATED PREMIUMS................................................. 65
</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
-----
<S> <C>
Account Value....................................................... 15
Administrative Surrender Charge..................................... 24
Attained Age........................................................ 17
Base Policy Premium................................................. 12
Basic Account Value................................................. 18
Contingent Deferred Sales Charge.................................... 23
Corridor Factor..................................................... 16
Current Death Benefit............................................... 16
Death Benefit Factor................................................ 16
Excess Value........................................................ 18
Experience Component................................................ 18
Fixed Account....................................................... 11
Grace Period........................................................ 21
Guaranteed Death Benefit............................................ 16
Guaranteed Maximum Recalculation Premium............................ 13
Indebtedness........................................................ 21
Investment Rule..................................................... 14
Loan Assets......................................................... 20
Minimum First Premium............................................... 12
Modal............................................................... 12
Premium Component................................................... 18
Premium Recalculation............................................... 12
Required Premium.................................................... 12
Servicing Office.................................................... 6
Subaccount.......................................................... Cover
Sum Insured......................................................... 16
Surrender Value..................................................... 16
Valuation Date...................................................... 10
Variable Subaccounts................................................ 2
</TABLE>
<PAGE>
SUMMARY
WHAT IS THE VARIABLE LIFE POLICY BEING OFFERED?
JHVLICO issues variable life insurance policies. The Policies described in
this Prospectus are scheduled annual premium policies that provide for
additional premium flexibility. JHVLICO also issues in some states an earlier
version of these policies. These other policies are offered by means of other
prospectuses.
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: Premium payments are periodically
made to JHVLICO in amounts sufficient 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 of the Policy (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 issuance 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. 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.
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
1
<PAGE>
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. The
Account is divided into a number of variable Subaccounts, each of which
corresponds to one of the Portfolios of the Funds. The assets of each variable
Subaccount are invested in the corresponding Portfolio of the Funds. The
Portfolios of the Funds which are currently available are Growth & Income,
Large Cap Growth, Sovereign Bond, Money Market, Managed, Real Estate Equity,
International Equities, Short-Term U.S. Government, Special Opportunities,
Small Cap Growth, Small Cap Value, Mid Cap Growth, Mid Cap Value,
International Balanced, International Opportunities, Large Cap Value,
Strategic Bond, Equity Index, Edinburgh Overseas Equity, Turner Core Growth
and Frontier Capital Appreciation. The Enhanced U.S. Equity Portfolio is
expected to be made available sometime in the future.
2
<PAGE>
John Hancock Variable Series Trust I pays John Hancock a fee for providing
investment management services to each of its Portfolios. The Fund also pays
for certain non-advisory Fund expenses. The figures in the following chart are
expressed as a percentage of each Portfolio's average daily net assets. The
figures reflect the investment management fees currently payable and the 1996
non-advisory expenses that would have been allocated to the Fund under the
allocation rules currently in effect.
<TABLE>
<CAPTION>
Other Total Fund
Investment Fund Operating Other Fund Expenses
Portfolio Management Fee Expenses Expenses Absent Reimbursement*
--------- -------------- -------- ---------- ---------------------
<S> <C> <C> <C> <C>
Managed................. 0.34% 0.03% 0.37% N/A
Growth & Income......... 0.25% 0.03% 0.28% N/A
Equity Index............ 0.20% 0.25% 0.45% 1.61%
Large Cap Value......... 0.75% 0.25% 1.00% 1.89%
Large Cap Growth........ 0.40% 0.05% 0.45% N/A
Mid Cap Value........... 0.80% 0.25% 1.05% 2.15%
Mid Cap Growth.......... 0.85% 0.25% 1.10% 2.34%
Special Opportunities... 0.75% 0.12% 0.87% N/A
Real Estate Equity...... 0.60% 0.11% 0.71% N/A
Small Cap Value......... 0.80% 0.25% 1.05% 2.06%
Small Cap Growth........ 0.75% 0.25% 1.00% 1.55%
International Balanced.. 0.85% 0.25% 1.10% 1.44%
International Equities.. 0.60% 0.18% 0.78% N/A
International Opportuni-
ties................... 1.00% 0.25% 1.25% 2.76%
Short-Term U.S. Govern-
ment................... 0.30% 0.25% 0.55% 0.79%
Sovereign Bond.......... 0.25% 0.06% 0.31% N/A
Strategic Bond.......... 0.75% 0.25% 1.00% 1.57%
Money Market............ 0.25% 0.07% 0.32% N/A
</TABLE>
- --------
* John Hancock reimburses a Portfolio when the Portfolio's Other Expenses
exceed 0.25% of the Portfolio's average daily net assets.
M Fund, Inc., pays M Financial Investment Advisers, Inc., ("M Financial") a
fee for providing investment management services to each of its Portfolios. M
Fund, Inc., also pays for certain non-advisory Fund expenses. The figures in
the following chart are expressed as a percentage of each Portfolio's average
daily net assets. The figures reflect the investment management fees currently
payable and the 1996 non-advisory expenses that would have been allocated to
the Fund under the allocation rules currently in effect.
<TABLE>
<CAPTION>
Other Total Fund
Investment Fund Operating Other Fund Expenses
Portfolio Management Fee Expenses Expenses Absent Reimbursement*
--------- -------------- -------- ---------- ---------------------
<S> <C> <C> <C> <C>
Edinburgh Overseas Equi-
ty..................... 1.05% 0.25% 1.30% 6.29%
Turner Core Growth**.... 0.45% 0.25% 0.70% 8.06%
Frontier Capital Appre-
ciation**.............. 0.90% 0.25% 1.15% 7.29%
Enhanced U.S. Equity.... 0.55% 0.25% 0.80% 11.90%
</TABLE>
- --------
* M Financial reimburses a Portfolio when the Portfolio's Other Expenses
exceed 0.25% of the Portfolio's average daily net assets.
** Figures do not reflect interest expense, which is 0.08% for the Turner Core
Growth Portfolio and 0.05% for the Frontier Capital Appreciation Portfolio.
For a full description of the Funds, see the prospectuses for the Funds
attached to this Prospectus.
3
<PAGE>
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 (currently $6.00) for all Policy years.
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 make a special monthly credit to the Account Value beginning in the
tenth Policy year. Any such credit will be reflected as a reduction to the
insurance charge.
Guaranteed Death Benefit Charge. A charge not to exceed 3c per $1000
(currently 1c per $1000) of current Sum Insured 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 from the
variable Subaccounts at an effective annual rate of .60% of the assets of each
variable Subaccount.
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 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.
4
<PAGE>
Charge for Partial Withdrawal. A charge of $20 is deducted from Account
Value 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.
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.
5
<PAGE>
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 by any
partial withdrawal of Excess 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 and
compound daily at an annual effective 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 and
compounded 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 JHVLICO of the
Notice of Withdrawal Right, whichever is latest, to JHVLICO's Servicing
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.
6
<PAGE>
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 approximately $59 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 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.
7
<PAGE>
The assets in the variable Subaccounts of the Account are invested in the
corresponding Portfolio 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.
Growth & Income Portfolio: The investment objective of this Portfolio is to
achieve intermediate and long-term growth of capital, with income as a
secondary consideration. This objective will be pursued by investments
principally in common stocks (and securities convertible into or with rights
to purchase common stocks) of companies believed to offer growth potential
over both the intermediate and long-term.
Large Cap Growth Portfolio: The investment objective of this Portfolio is to
achieve above-average capital appreciation through the ownership of common
stocks (and securities convertible into or with rights to purchase common
stocks) of companies believed by management to offer above-average capital
appreciation opportunities. Current income is not an objective of the
Portfolio.
Sovereign Bond Portfolio: The investment objective of this Portfolio is to
provide as high a level of long-term total rate of return as is consistent
with prudent investment risk, through investment primarily in a diversified
portfolio of freely marketable debt securities. Total rate of return consists
of current income, including interest and discount accruals, and capital
appreciation.
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.
Managed Portfolio: The investment objective of this Portfolio is to achieve
maximum long-term total return consistent with prudent investment risk.
Investments will be made in common stocks, convertibles and other equity
investments, in bonds and other fixed income securities and in money market
instruments.
Real Estate Equity Portfolio: The investment objective of this Portfolio is
to provide above-average income and long-term growth of capital by investment
principally in equity securities of companies in the real estate and related
industries.
International Equities 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.
8
<PAGE>
Equity Index Portfolio: The investment objective of this Portfolio is to
provide investment results that correspond to the total return of the U.S.
market as represented by the S&P 500 utilizing common stocks that are publicly
traded in the United States.
Large Cap Value Portfolio: The investment objective of this Portfolio is to
provide substantial dividend income, as well as long-term capital
appreciation, through investment in the common stocks of established companies
believed to offer favorable prospects for increasing dividends and capital
appreciation.
Mid Cap Growth Portfolio: The investment objective of this Portfolio is to
provide long-term growth of capital through a non-diversified portfolio
investing largely in common stocks of medium capitalization companies.
Mid Cap Value Portfolio: The investment objective of this Portfolio is to
provide long-term growth of capital primarily through investment in the common
stocks of medium capitalization companies believed to sell at a discount to
their intrinsic value.
Small Cap Growth Portfolio: The investment objective of this Portfolio is to
provide long-term growth of capital through a diversified portfolio investing
primarily in common stocks of small capitalization emerging growth companies.
Small Cap Value Portfolio: The investment objective of this Portfolio is to
provide long-term growth of capital by investing in a well diversified
portfolio of equity securities of small capitalization companies exhibiting
value characteristics.
Strategic Bond Portfolio: The investment objective of this Portfolio is to
provide a high total return consistent with moderate risk of capital and
maintenance of liquidity, from a portfolio of domestic and international fixed
income securities.
International Opportunities Portfolio: The investment objective of this
Portfolio is to provide capital appreciation through investment in common
stocks of primarily well-established, non-United States companies.
International Balanced Portfolio: The investment objective of this Portfolio
is to maximize total U.S. dollar return, consisting of capital appreciation
and current income, through investment in non-U.S. equity and fixed income
securities.
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, MA 02109, provides sub-investment advice with respect to the Growth &
Income, Large Cap Growth, Managed, Real Estate Equity and Short-Term U.S.
Government Portfolio. Another indirectly owned subsidiary, John Hancock
Advisers, Inc., located at 101 Huntington Avenue, Boston, MA 02199, and its
subsidiary, John Hancock Advisers International, Limited, located at 34 Dover
Street, London, England, provide sub-investment advice with respect to the
International Equities Portfolio, and John Hancock Advisers, Inc., does
likewise with respect to the Sovereign Bond, Small Cap Growth and Special
Opportunities Portfolios.
T. Rowe Price Associates, Inc., located at 100 East Pratt St., Baltimore, MD
21202, provides sub-investment advice with respect to the Large Cap Value
Portfolio and its subsidiary, Rowe Price-Fleming International, Inc., also
located at 100 East Pratt St., Baltimore, MD 21202, provides sub-investment
advice with respect to the International Opportunities Portfolio.
9
<PAGE>
State Street Bank & Trust, N.A., at Two International Place, Boston, MA
02110, is the sub-investment adviser to the Equity Index Portfolio. INVESCO
Management & Research located at 101 Federal Street, Boston, MA 02110, is the
sub-investment adviser to the Small Cap Value Portfolio. Janus Capital
Corporation, with its principal place of business at 100 Filmore Street,
Denver, CO 80206, is the sub-investment adviser to the Mid Cap Growth
Portfolio. Neuberger & Berman, LLC of 605 Third Avenue, New York, NY 10158,
provides sub-investment advice to the Mid Cap Value Portfolio. J.P. Morgan
Investment Management Inc., located at 522 Fifth Avenue, New York, NY 10036,
provides sub-investment advice with respect to the Strategic Bond Portfolio
and Brinson Partners, Inc., of 209 S. LaSalle Street, Chicago, IL 60604, does
likewise with respect to the International Balanced Portfolio.
Edinburgh Overseas Equity Portfolio: The investment objective of this
Portfolio is to provide 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: The investment objective of this
Portfolio is to seek 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.
Enhanced U.S. Equity Portfolio. The investment objective of this Portfolio
is to provide above market total return through investment in common stock of
companies perceived to provide a return higher than that of the S&P 500 at
approximately the same level of investment risk as the S&P 500.
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; Frontier Capital Management Company, Inc. provides sub-
investment advice to the Frontier Capital Appreciation Portfolio; and Franklin
Portfolio Associates Trust provides sub-investment advice to the Enhanced U.S.
Equity Portfolio.
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.
10
<PAGE>
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.
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. Amounts of coverage that JHVLICO will accept under the
Policy may be limited by JHVLICO's underwriting and reinsurance procedures as
in effect from time to time.
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. The illustrations set
forth in this Prospectus are sex-distinct and, therefore, do not reflect the
sex-neutral rates, charges or values that would apply to such Policies.
11
<PAGE>
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 Servicing 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 Servicing Office
in order for the Policy to be 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".
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 Servicing Office of satisfactory
written notice. If not elected sooner, the Premium Recalculation will be
effected automatically by JHVLICO as noted above.
12
<PAGE>
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."
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.
13
<PAGE>
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 Servicing 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 as many as ten of the
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 change will be effective as to any net premiums
and credits applied after receipt at JHVLICO's Servicing 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
14
<PAGE>
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 of 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 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 Assets 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
15
<PAGE>
Account Value and by any partial withdrawal of Excess 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 Servicing 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 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
16
<PAGE>
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 issuance 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 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 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 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 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.
17
<PAGE>
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 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 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
18
<PAGE>
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. A charge of $20 is made
against Account Value for each partial withdrawal. Under Death Benefit Option
2, a partial withdrawal will always result in a reduction of the death benefit
payable. Under Death Benefit Options 1 and 3, a partial withdrawal will reduce
the death benefit payable only when the Current Death Benefit exceeds the
Guaranteed Death Benefit. A withdrawal may have significant tax consequences.
See "Tax Considerations".
An amount equal to the Excess Value withdrawn plus the associated charge
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 Servicing Office notice
satisfactory to JHVLICO.
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 up to 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 among Subaccounts 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.
19
<PAGE>
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
Servicing 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 Servicing
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 or sending a written request via fax to 1-800-621-
0448. 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. If the fax request option becomes unavailable, another
means of telecommunications will be substituted.
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,
unless such loss, experience or cost is the result of JHVLICO's mistake or
negligence. JHVLICO employs procedures which provide safeguards against the
execution of unauthorized transactions, and which are reasonably designed to
confirm that instructions received by telephone are genuine. These procedures
include requiring personal identification, tape recording calls, and providing
written confirmation to the Owner. If JHVLICO does not employ reasonable
procedures to confirm that instructions communicated by telephone are genuine,
it may be liable for any loss due to unauthorized or fraudulent instructions.
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 and compound daily at an effective annual rate of 5% in the first
20 Policy years, and 4.5% thereafter.
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 a portion of JHVLICO's general account called the "Loan
Assets". 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
20
<PAGE>
will be repaid to the Fixed Account. The remainder of the loan repayment will
be allocated to the appropriate Subaccounts as stipulated in the then current
Investment Rule. For example, if the entire loan outstanding is $3000 of which
$1000 was borrowed 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 then 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 Loan Assets is credited interest at a rate
that for the first 20 Policy years is 1% less than the loan interest rate and
thereafter is .5% less than the loan interest rate. The rate credited to Loan
Assets will usually be different than the net return for the Subaccounts.
Since Loan Assets and the remaining portion of the Account Value will
generally have different rates of investment return, the Account Value, the
Surrender Value, and any death benefit above the Guaranteed Death Benefit are
permanently affected by any Indebtedness, whether or not it is 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".
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
21
<PAGE>
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.
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 Servicing 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. 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
22
<PAGE>
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.
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
23
<PAGE>
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 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.
24
<PAGE>
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 in the event of 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.
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.
Beginning on the first day of the first month in the tenth Policy year,
JHVLICO may make a special monthly credit to the Account Value. If such a
credit is made, it will be reflected as a reduction to the insurance charge as
described below. This credit and reduction is not guaranteed but it is
JHVLICO's present intention to effect the credit and reduction in the tenth
and following Policy years as long as the Policy is in force.
25
<PAGE>
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 would be at an
effective annual rate of .21% in Policy year 11, .30% in Policy year 20 and
.40% in Policy year 30.
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 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 deducted from the
variable Subaccounts for mortality and expense risks assumed by JHVLICO at an
effective annual rate of .60% of the value of the assets of each variable
Subaccount 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.
26
<PAGE>
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 Fees and Other Fund Expenses. 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 fees and
certain other non-advisory Fund operating expenses, which are described
briefly in the Summary of this Prospectus. 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 each. 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.
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 ("representatives") of John Hancock Distributors, Inc.
("Distributors"), an indirect wholly-owned subsidiary of John Hancock located
at 197 Clarendon Street, Boston, MA 02117, or other broker-dealer firms, as
discussed below. John Hancock performs insurance underwriting and determines
whether to accept or reject the application for a Policy and each insured's
risk classification. Pursuant to a sales agreement among John Hancock,
Distributors, JHVLICO, and the Account, Distributors 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.
Distributors' representatives are compensated for sales of the Policies on a
commission and service fee basis by Distributors, and JHVLICO reimburses
Distributors 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.
27
<PAGE>
The maximum commission payable to a Distributors representative for selling
a Policy is 14% of the target premium paid in each of the first 10 Policy
years, and 3% of the target premium paid in each year thereafter. The maximum
commission on any premium paid in any Policy year in excess of the target
premium is 2%.
In addition, Distributors' representatives may earn "credits" toward
qualification for attendance at certain business meetings sponsored by John
Hancock.
Representatives with less than four years of service with Distributors and
those compensated on salary plus bonus or level commission programs may be
paid on a different basis. Representatives who meet certain productivity and
persistency standards with respect to the sale of policies issued by JHVLICO
and John Hancock will be eligible for additional compensation.
Distributors is registered with the Commission under the Securities Exchange
Act of 1934 as a broker-dealer, is a member of the National Association of
Securities Dealers, Inc., and is a member of the Securities Investor
Protection Corporation. The Policies are also sold through other registered
broker-dealers that have entered into selling agreements with Distributors and
whose representatives are authorized by applicable law to sell variable life
insurance policies. The commissions which will be paid by such broker-dealers
to their representatives will be in accordance with their established rules.
The commission rates may be more or less than those set forth above for
Distributors' representatives. In addition, their qualified registered
representatives may be reimbursed by the broker-dealers under expense
reimbursement allowance programs in any year for approved voucherable expenses
incurred. Distributors will compensate the broker-dealers as provided in the
selling agreements, and JHVLICO will reimburse Distributors for such amounts
and for certain other direct expenses in connection with marketing the
Policies through other broker-dealers.
Distributors 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. Distributors is also the 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 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.
28
<PAGE>
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 the 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.
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.
29
<PAGE>
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.
Ronald J. Bocage Director, Vice President and Counsel of
JHVLICO; Vice President and Counsel,
John Hancock Mutual Life Insurance Com-
pany.
Joseph A. Tomlinson Director and Vice President of JHVLICO;
Vice President, John Hancock Mutual Life
Insurance Company.
Robert R. Reitano Director of JHVLICO; Vice President,
John Hancock Mutual Life Insurance Com-
pany.
Robert S. Paster Director of JHVLICO; Second Vice Presi-
dent, John Hancock Mutual Life Insurance
Company.
Barbara L. Luddy Director and Actuary of JHVLICO; Second
Vice President, John Hancock Mutual Life
Insurance Company.
Daniel L. Ouellette Vice President, Marketing, of JHVLICO;
Vice President, John Hancock Mutual Life
Insurance 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.
30
<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
qualifying variable life insurance policies and variable annuity contracts at
regular and special meetings of the Funds' shareholders in accordance with
instructions received from owners of such policies or contracts. Shares of the
Funds held in the Account which are not attributable to such policies or
contracts 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 such policies and contracts.
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 a
Fund. 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
investment techniques utilized by other separate accounts of JHVLICO or of an
affiliated life insurance company, which separate
31
<PAGE>
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 Ronald J. Bocage, Vice President and 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.
32
<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.
33
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Large Cap Sovereign International Small Cap International Mid Cap Large Cap Money Mid Cap
Growth Bond Equities Growth Balanced Growth Value Market Value
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
------------ ----------- ------------- ---------- ------------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Investment in
shares of
portfolios of
John Hancock
Variable Series
Trust I, at
value........... $153,159,843 $64,419,410 $39,447,186 $2,933,413 $743,691 $2,214,471 $1,845,329 $17,375,664 $1,337,926
Investments in
shares of
portfolios of M
Fund Inc., at
value........... -- -- -- -- -- -- -- -- --
Receivable from:
John Hancock
Variable Series
Trust I........ 26,242 31,130 32,210 26,794 310 4,761 9,242 162,096 5,403
M Fund Inc...... -- -- -- -- -- -- -- -- --
------------ ----------- ----------- ---------- -------- ---------- ---------- ----------- ----------
Total assets.... 153,186,085 64,450,540 39,479,395 2,960,207 744,001 2,219,232 1,854,571 17,537,760 1,343,329
Liabilities
Payable to John
Hancock Variable
Series Trust I.. 23,703 30,069 31,582 26,747 298 4,725 9,212 161,814 5,381
Payable to M Fund
Inc............. -- -- -- -- -- -- -- -- --
Asset charges
payable......... 2,539 1,061 628 47 12 36 30 282 22
------------ ----------- ----------- ---------- -------- ---------- ---------- ----------- ----------
Total
liabilities.... 26,242 31,130 32,210 26,794 310 4,761 9,242 162,096 5,403
------------ ----------- ----------- ---------- -------- ---------- ---------- ----------- ----------
Net assets....... $153,159,843 $64,419,410 $39,447,186 $2,933,413 $743,691 $2,214,471 $1,845,329 $17,375,664 $1,337,926
============ =========== =========== ========== ======== ========== ========== =========== ==========
Net Assets
Attributable to
John Hancock
Variable Life
Insurance
Company......... -- -- 985,707 -- -- -- -- -- --
Attributable to
policyholders... 153,159,843 64,419,410 38,461,479 2,933,413 743,691 2,214,471 1,845,329 17,375,664 1,337,926
------------ ----------- ----------- ---------- -------- ---------- ---------- ----------- ----------
Total net
assets......... $153,159,843 $64,419,410 $39,447,186 $2,933,413 $743,691 $2,214,471 $1,845,329 $17,375,664 $1,337,926
============ =========== =========== ========== ======== ========== ========== =========== ==========
<CAPTION>
Special Real Estate
Opportunities Equity
Subaccount Subaccount
------------- -----------
<S> <C> <C>
Assets
Investment in
shares of
portfolios of
John Hancock
Variable Series
Trust I, at
value........... $46,440,638 $31,786,260
Investments in
shares of
portfolios of M
Fund Inc., at
value........... -- --
Receivable from:
John Hancock
Variable Series
Trust I........ 37,006 18,248
M Fund Inc...... -- --
------------- -----------
Total assets.... 46,477,644 31,804,508
Liabilities
Payable to John
Hancock Variable
Series Trust I.. 36,261 17,752
Payable to M Fund
Inc............. -- --
Asset charges
payable......... 745 496
------------- -----------
Total
liabilities.... 37,006 18,248
------------- -----------
Net assets....... $46,440,638 $31,786,260
============= ===========
Net Assets
Attributable to
John Hancock
Variable Life
Insurance
Company......... 890,995 1,242,048
Attributable to
policyholders... 45,549,643 30,544,212
------------- -----------
Total net
assets......... $46,440,638 $31,786,260
============= ===========
</TABLE>
See accompanying notes.
34
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Short-Term Turner Edinburgh
Growth & U.S. Small Cap International Equity Strategic Core International
Income Managed Government Value Opportunities Index Bond Growth Equity
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
------------ ------------ ---------- ---------- ------------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Investment in
shares of
portfolios of
John Hancock
Variable Series
Trust I, at
value........... $299,997,131 $304,230,791 $3,015,184 $1,329,794 $2,260,539 $1,199,192 $418,113 $ -- $ --
Investments in
shares of
portfolios of M
Fund Inc. at
value........... -- -- -- -- -- -- -- 2,740 63,191
Receivable from:
John Hancock
Variable Series
Trust I........ 117,763 25,104 547 4,324 7,832 9,736 152 -- --
M Fund Inc...... -- -- -- -- -- -- -- -- 1
------------ ------------ ---------- ---------- ---------- ---------- -------- ------ -------
Total assets.... 300,114,894 304,255,895 3,015,731 1,334,118 2,268,371 1,208,928 418,265 2,740 63,192
Liabilities
Payable to John
Hancock Variable
Series Trust I.. 112,767 20,063 507 4,303 7,795 9,716 145 -- --
Payable to M Fund
Inc............. -- -- -- -- -- -- -- -- --
Asset charges
payable......... 4,997 5,041 40 21 37 20 7 -- 1
------------ ------------ ---------- ---------- ---------- ---------- -------- ------ -------
Total
liabilities.... 117,763 25,104 547 4,324 7,832 9,736 152 -- 1
------------ ------------ ---------- ---------- ---------- ---------- -------- ------ -------
Net assets....... $299,997,131 $304,230,791 $3,015,184 $1,329,794 $2,260,539 $1,199,192 $418,113 $2,740 $63,191
============ ============ ========== ========== ========== ========== ======== ====== =======
Net Assets
Attributable to
John Hancock
Variable Life
Insurance
Company......... -- -- 579,518 -- -- -- -- -- --
Attributable to
policyholders... 299,997,131 304,230,791 2,435,667 1,329,794 2,260,539 1,199,192 418,113 2,740 63,191
------------ ------------ ---------- ---------- ---------- ---------- -------- ------ -------
Total net
assets......... $299,997,131 $304,230,791 $3,015,184 $1,329,794 $2,260,539 $1,199,192 $418,113 $2,740 $63,191
============ ============ ========== ========== ========== ========== ======== ====== =======
<CAPTION>
Frontier
Capital
Appreciation
Subaccount
------------
<S> <C>
Assets
Investment in
shares of
portfolios of
John Hancock
Variable Series
Trust I, at
value........... $ --
Investments in
shares of
portfolios of M
Fund Inc. at
value........... 62,124
Receivable from:
John Hancock
Variable Series
Trust I........ --
M Fund Inc...... 1
------------
Total assets.... 62,125
Liabilities
Payable to John
Hancock Variable
Series Trust I.. --
Payable to M Fund
Inc............. --
Asset charges
payable......... 1
------------
Total
liabilities.... 1
------------
Net assets....... $62,124
============
Net Assets
Attributable to
John Hancock
Variable Life
Insurance
Company......... --
Attributable to
policyholders... 62,124
------------
Total net
assets......... $62,124
============
</TABLE>
- ------
See accompanying notes.
35
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENTS OF OPERATIONS
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
International
Equities
Large Cap Growth Subaccount Sovereign Bond Subaccount Subaccount
----------------------------------- ---------------------------------- ---------------------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
----------- ----------- ---------- ---------- ---------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment
income:
Distributions
received from:
John Hancock
Variable Series
Trust I........ $22,706,338 $ 9,127,019 $2,816,218 $4,518,056 $3,997,055 $ 2,577,160 $ 460,651 $ 313,290 $ 334,752
M Fund Inc...... -- -- -- -- -- -- -- -- --
----------- ----------- ---------- ---------- ---------- ----------- ---------- ---------- -----------
Total investment
income......... 22,706,338 9,127,019 2,816,218 4,518,056 3,997,055 2,577,160 460,651 313,290 334,752
Expenses:
Mortality and
expense risks.. 789,368 527,639 251,870 352,330 288,879 210,831 209,866 158,467 92,706
----------- ----------- ---------- ---------- ---------- ----------- ---------- ---------- -----------
Net investment
income (loss).. 21,916,970 8,599,380 2,564,348 4,165,726 3,708,176 2,366,329 250,785 154,823 242,046
Net realized and
unrealized gain
(loss) on
investments:
Net realized
gain (loss).... 2,555,654 839,997 637,109 (136,401) 63,373 126,799 156,348 709,715 (210,939)
Net unrealized
appreciation
(depreciation)
during the
year........... (2,922,417) 13,485,769 (4,019,164) (1,537,488) 4,386,358 (3,555,116) 2,539,023 1,169,158 (1,861,119)
----------- ----------- ---------- ---------- ---------- ----------- ---------- ---------- -----------
Net realized and
unrealized gain
(loss) on
investments..... (366,763) 14,325,766 (3,382,055) (1,673,889) 4,449,731 (3,428,317) 2,695,371 1,878,873 (1,470,626)
----------- ----------- ---------- ---------- ---------- ----------- ---------- ---------- -----------
Net increase
(decrease) in
net assets
resulting from
operations...... $21,550,207 $22,925,146 $ (817,707) $2,491,837 $8,157,907 $(1,061,988) $2,946,156 $2,033,696 $(1,228,580)
=========== =========== ========== ========== ========== =========== ========== ========== ===========
<CAPTION>
Small Cap International
Growth Balanced
Subaccount Subaccount
----------- -------------
1996* 1996*
----------- -------------
<S> <C> <C>
Investment
income:
Distributions
received from:
John Hancock
Variable Series
Trust I........ $ 1,404 $11,409
M Fund Inc...... -- --
----------- -------------
Total investment
income......... 1,404 11,409
Expenses:
Mortality and
expense risks.. 6,704 1,311
----------- -------------
Net investment
income (loss).. (5,300) 10,098
Net realized and
unrealized gain
(loss) on
investments:
Net realized
gain (loss).... (210,399) 1,642
Net unrealized
appreciation
(depreciation)
during the
year........... (86,846) 18,955
----------- -------------
Net realized and
unrealized gain
(loss) on
investments..... (297,785) 20,597
----------- -------------
Net increase
(decrease) in
net assets
resulting from
operations...... $(303,085) $30,694
=========== =============
</TABLE>
- ------
* From May 1, 1996 (commencement of operations).
See accompanying notes.
36
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
Mid Cap Growth Large Cap Value Mid Cap Value
Subaccount Subaccount Money Market Subaccount Subaccount Special Opportunities Subaccount
-------------- --------------- ---------------------------- ------------- ------------------------------------
1996* 1996* 1996 1995 1994 1996* 1996 1995 1994**
-------------- --------------- -------- ---------- -------- ------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment
income:
Distributions
received from:
John Hancock
Variable Series
Trust I........ $ 7,102 $ 36,343 $918,057 $1,021,645 $730,311 $ 28,018 $ 1,789,171 $ 483,189 $ 17,225
M Fund Inc...... -- -- -- -- -- -- -- -- --
------- -------- -------- ---------- -------- -------- ----------- ----------- ---------
Total investment
income......... 7,102 36,343 918,057 1,021,645 730,311 28,018 1,789,171 483,189 17,225
Expenses:
Mortality and
expense risks.. 4,054 3,073 105,919 108,941 108,665 2,232 188,016 57,525 4,657
------- -------- -------- ---------- -------- -------- ----------- ----------- ---------
Net investment
income......... 3,048 33,270 812,137 912,704 621,646 25,786 1,601,155 425,664 12,568
Net realized and
unrealized gain
(loss) on
investments:
Net realized
gain (loss).... 168 3,072 -- -- -- 2,034 1,418,069 118,503 (5,379)
Net unrealized
appreciation
(depreciation)
during the
year........... 38,250 87,225 -- -- -- 102,527 4,977,778 2,655,206 (8,734)
------- -------- -------- ---------- -------- -------- ----------- ----------- ---------
Net realized and
unrealized gain
(loss) on
investments..... 38,418 90,297 -- -- -- 104,561 6,395,847 2,773,709 (14,113)
------- -------- -------- ---------- -------- -------- ----------- ----------- ---------
Net increase
(decrease) in
net assets
resulting from
operations...... $41,466 $123,568 $812,137 $ 912,704 $621,646 $130,347 $ 7,997,002 $ 3,199,373 $ (1,545)
======= ======== ======== ========== ======== ======== =========== =========== =========
</TABLE>
- ------
* From May 1, 1996 (commencement of operations).
** From May 6, 1994 (commencement of operations).
See accompanying notes.
37
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
Real Estate Equity Subaccount Growth & Income Subaccount Managed Subaccount
-------------------------------- ----------------------------------- -------------------------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
---------- ---------- --------- ----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment
income:
Distributions
received from:
John Hancock
Variable
Series Trust I. $1,610,938 $1,424,926 $ 993,202 $37,254,741 $20,402,345 $ 8,501,308 $37,205,797 $24,582,126 $ 7,481,584
M Fund Inc...... -- -- -- -- -- -- -- -- --
---------- ---------- --------- ----------- ----------- ----------- ----------- ----------- ------------
Total investment
income......... 1,610,938 1,424,926 993,202 37,254,741 20,402,345 8,501,308 37,205,797 24,582,126 7,481,584
Expenses:
Mortality and
expense risks.. 145,276 117,861 89,294 1,542,729 1,040,658 679,481 1,678,618 1,324,428 953,550
---------- ---------- --------- ----------- ----------- ----------- ----------- ----------- ------------
Net investment
income......... 1,465,662 1,307,065 903,908 35,712,012 19,361,687 7,821,827 35,527,179 23,257,698 6,528,034
Net realized and
unrealized gain
(loss):
Net realized
gain (loss).... 184,058 (132,712) 302,731 3,938,033 1,182,185 913,991 3,555,551 3,530,479 1,168,573
Net unrealized
appreciation
(depreciation)
during
the year....... 5,976,712 1,164,732 (984,298) 6,429,196 28,390,863 (9,911,015) (11,690,944) 24,157,024 (12,012,242)
---------- ---------- --------- ----------- ----------- ----------- ----------- ----------- ------------
Net realized and
unrealized gain
(loss)
on investments.. 6,160,770 1,032,020 (681,567) 10,367,229 29,573,048 (8,997,024) (8,135,393) 27,687,503 (10,843,669)
---------- ---------- --------- ----------- ----------- ----------- ----------- ----------- ------------
Net increase
(decrease)
in net assets
resulting from
operations...... $7,626,432 $2,339,085 $ 222,341 $46,079,242 $48,934,735 $(1,175,197) $27,391,786 $50,945,201 $ (4,315,635)
========== ========== ========= =========== =========== =========== =========== =========== ============
<CAPTION>
Small Cap
Short-Term U.S. Value
Government Subaccount Subaccount
---------------------------- ----------
1996 1995 1994** 1996*
--------- -------- --------- ----------
<S> <C> <C> <C> <C>
Investment
income:
Distributions
received from:
John Hancock
Variable
Series Trust I. $140,926 $103,070 $ 26,186 $32,693
M Fund Inc...... -- -- -- --
--------- -------- --------- ----------
Total investment
income......... 140,926 103,070 26,186 32,693
Expenses:
Mortality and
expense risks.. 12,366 8,335 729 2,395
--------- -------- --------- ----------
Net investment
income......... 128,560 94,735 25,457 30,298
Net realized and
unrealized gain
(loss):
Net realized
gain (loss).... 20,920 20,630 (1,779) (1,418)
Net unrealized
appreciation
(depreciation)
during
the year....... (69,770) 77,274 (23,668) 66,350
--------- -------- --------- ----------
Net realized and
unrealized gain
(loss)
on investments.. (48,850) 97,904 (25,447) 64,932
--------- -------- --------- ----------
Net increase
(decrease)
in net assets
resulting from
operations...... $ 79,709 $192,639 $ 10 $95,230
========= ======== ========= ==========
</TABLE>
- ------
*From May 1, 1996 (commencement of operations).
**From May 1, 1994 (commencement of operations).
See accompanying notes.
38
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
Edinburgh
International Turner International Frontier
Opportunities Equity Index Strategic Bond Core Growth Equity Capital Appreciation
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
------------- ------------ -------------- ----------- ------------- --------------------
1996* 1996* 1996* 1996* 1996* 1996*
------------- ------------ -------------- ----------- ------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I........ $ 5,631 $27,780 $13,269 $ -- $-- $ --
M Fund Inc............. -- -- -- 91 362 --
-------- ------- ------- -------- ---- ---------
Total investment
income................ 5,631 27,780 13,269 91 362 --
Expenses:
Mortality and expense
risks................. 3,818 2,193 675 1,556 74 1,628
-------- ------- ------- -------- ---- ---------
Net investment income
(loss)................ 1,813 25,586 12,594 (1,465) 289 (1,628)
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss)................ 2,596 4,690 1,272 (75,788) (30) (130,154)
Net unrealized
appreciation
(depreciation) during
the year.............. 98,849 58,797 (2,250) 220 1,432
-------- ------- ------- -------- ---- ---------
Net realized and
unrealized gain (loss)
on investments......... 101,445 63,487 (978) (75,788) 189 (128,722)
-------- ------- ------- -------- ---- ---------
Net increase (decrease)
in net assets resulting
from operations........ $103,258 $89,073 $11,616 $(77,254) $478 $(130,350)
======== ======= ======= ======== ==== =========
</TABLE>
- ------
* From May 1, 1996 (commencement of operations).
See accompanying notes.
39
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
Large Cap Growth Subaccount Sovereign Bond Subaccount
---------------------------------------- ----------------------------------------
1996 1995 1994 1996 1995 1994
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net
assets
From operations:
Net investment
income (loss).... $ 21,916,970 $ 8,599,380 $ 2,564,348 $ 4,165,726 $ 3,708,176 $ 2,366,329
Net realized
gains (losses)... 2,555,654 839,997 637,109 (136,401) 63,373 126,799
Net unrealized
appreciation
(depreciation)
during the year.. (2,922,417) 13,485,769 (4,019,164) (1,537,488) 4,386,358 (3,555,116)
------------ ------------ ------------ ------------ ------------ ------------
Net increase
(decrease) in net
assets resulting
from operations.. 21,550,207 22,925,146 (817,707) 2,491,837 8,157,907 (1,061,988)
From policyholder transactions:
Net premiums from
policyholders.... 51,040,008 51,711,591 51,007,044 20,848,505 23,206,470 20,368,275
Net benefits to
policyholders.... (33,079,850) (19,250,850) (18,333,049) (14,924,987) (14,981,037) (11,586,357)
------------ ------------ ------------ ------------ ------------ ------------
Net increase in
net assets from
policyholder
transactions..... 17,960,159 32,460,741 32,673,995 5,923,519 8,225,433 8,781,918
------------ ------------ ------------ ------------ ------------ ------------
Net increase in
net assets...... 39,510,366 55,385,887 31,856,288 8,415,356 16,383,340 7,719,930
Net assets:
Beginning of
year............. 113,649,478 58,263,591 26,407,303 56,377,103 39,993,763 32,273,833
------------ ------------ ------------ ------------ ------------ ------------
End of year...... $153,159,843 $113,649,478 $ 58,263,591 $ 64,419,410 $ 56,377,103 $ 39,993,763
============ ============ ============ ============ ============ ============
<CAPTION>
Small Cap International
Growth Balanced
International Equities Subaccount Subaccount Subaccount
---------------------------------------- ------------ -------------
1996 1995 1994 1996* 1996*
------------- ------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net
assets
From operations:
Net investment
income (loss).... $ 250,785 $ 154,823 $ 242,046 $ (5,300) $ 10,098
Net realized
gains (losses)... 156,348 709,715 390,493 (210,939) 1,642
Net unrealized
appreciation
(depreciation)
during the year.. 2,539,023 1,169,158 (1,861,119) (86,846) 18,955
------------- ------------- ------------ ------------ -------------
Net increase
(decrease) in net
assets resulting
from operations.. 2,946,156 2,033,696 (1,228,580) (303,085) 30,694
From policyholder transactions:
Net premiums from
policyholders.... 17,279,404 17,644,301 21,632,192 5,020,648 777,316
Net benefits to
policyholders.... (11,711,164) (12,682,229) (5,717,640) (1,784,151) (64,319)
------------- ------------- ------------ ------------ -------------
Net increase in
net assets from
policyholder
transactions..... 5,568,239 4,962,072 15,914,552 3,236,497 712,997
------------- ------------- ------------ ------------ -------------
Net increase in
net assets...... 8,514,395 6,995,768 14,685,972 2,933,413 743,691
Net assets:
Beginning of
year............. 30,932,790 23,937,022 9,251,050 -- --
------------- ------------- ------------ ------------ -------------
End of year...... $ 39,447,186 $ 30,932,790 $23,937,022 $ 2,933,413 $743,691
============= ============= ============ ============ =============
</TABLE>
- ------
*From May 1, 1996 (commencement of operations).
See accompanying notes.
40
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
Mid Cap Growth Large Cap Value Mid Cap Value
Subaccount Subaccount Money Market Subaccount Subaccount
-------------- --------------- ------------------------------------- -------------
1996* 1996* 1996 1995 1994 1996*
-------------- --------------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (de-
crease) in net as-
sets from opera-
tions:
Net investment
income.......... $ 3,048 $ 33,271 $ 812,137 $ 912,704 $ 621,646 $ 25,786
Net realized
gains (losses).. 168 3,072 -- -- -- 2,034
Net unrealized
appreciation
(depreciation)
during the year. 38,250 87,225 -- -- -- 102,527
---------- ---------- ----------- ----------- ----------- ----------
Net increase
(decrease) in
net assets
resulting from
operations...... 41,466 123,568 812,137 912,704 621,646 130,347
From policyholder
transactions:
Net premiums from
policyholders... 2,413,439 1,814,755 24,680,961 21,430,904 58,454,926 1,258,509
Net benefits to
policyholders... (240,434) (92,994) (27,801,448) (19,852,589) (51,398,824) (50,930)
---------- ---------- ----------- ----------- ----------- ----------
Net increase
(decrease) in
net assets from
policyholder
transactions.... 2,173,005 1,721,761 (3,120,487) 1,578,315 7,056,102 1,207,579
---------- ---------- ----------- ----------- ----------- ----------
Net increase
(decrease) in
net assets..... 2,214,471 1,845,329 (2,308,350) 2,491,019 7,677,748 1,337,926
Net assets:
Beginning of
year............. -- -- 19,684,014 17,192,995 9,515,247 --
---------- ---------- ----------- ----------- ----------- ----------
End of year...... $2,214,471 $1,845,329 $17,375,664 $19,684,014 $17,192,995 $1,337,926
========== ========== =========== =========== =========== ==========
<CAPTION>
Special Opportunities Subaccount
-------------------------------------
1996 1995 1994**
------------ ------------ -----------
<S> <C> <C> <C>
Increase (de-
crease) in net as-
sets from opera-
tions:
Net investment
income.......... $ 1,601,155 $ 425,664 $ 12,568
Net realized
gains (losses).. 1,418,069 118,503 (5,379)
Net unrealized
appreciation
(depreciation)
during the year. 4,977,778 2,655,206 (8,734)
------------ ------------ -----------
Net increase
(decrease) in
net assets
resulting from
operations...... 7,997,002 3,199,373 (1,545)
From policyholder
transactions:
Net premiums from
policyholders... 30,839,359 15,268,369 5,297,072
Net benefits to
policyholders... (12,562,876) (3,375,070) (221,046)
------------ ------------ -----------
Net increase
(decrease) in
net assets from
policyholder
transactions.... 18,276,484 11,893,299 5,076,026
------------ ------------ -----------
Net increase
(decrease) in
net assets..... 26,273,485 15,092,672 5,074,481
Net assets:
Beginning of
year............. 20,167,153 5,074,481 --
------------ ------------ -----------
End of year...... $46,440,638 $20,167,153 $5,074,481
============ ============ ===========
</TABLE>
- ------
*From May 1, 1996 (commencement of operations).
**From May 6, 1994 (commencement of operations).
See accompanying notes.
41
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
Real Estate Equity Subaccount Growth & Income Subaccount
------------------------------------- ----------------------------------------
1996 1995 1994 1996 1995 1994
----------- ----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Increase
(decrease) in net
assets
From operations:
Net investment
income.......... $ 1,465,662 $ 1,307,065 $ 903,908 $ 35,712,012 $ 19,361,687 $ 7,821,827
Net realized
gains (losses).. 184,058 (132,712) 302,731 3,938,033 1,182,185 913,991
Net unrealized
appreciation
(depreciation)
during the year. 5,976,712 1,164,732 (984,298) 6,429,196 28,390,863 (9,911,015)
----------- ----------- ----------- ------------ ------------ ------------
Net increase
(decrease) in
net assets
resulting from
operations...... 7,626,432 2,339,085 222,341 46,079,242 48,934,735 (1,175,197)
From policyholder
transactions:
Net premiums from
policyholders... 10,025,704 10,547,817 13,824,052 93,961,136 76,729,116 67,541,450
Net benefits to
policyholders... (8,112,734) (10,156,449) (5,898,220) (57,300,211) (41,442,095) (31,434,994)
----------- ----------- ----------- ------------ ------------ ------------
Net increase in
net assets from
policyholder
transactions.... 1,912,970 391,368 7,925,832 36,660,925 35,287,021 36,103,456
----------- ----------- ----------- ------------ ------------ ------------
Net increase in
net assets..... 9,539,402 2,730,453 8,148,173 82,740,167 84,221,756 34,931,259
Net assets
Beginning of
year............ 22,246,848 19,516,395 11,368,222 217,256,964 133,035,208 98,103,949
----------- ----------- ----------- ------------ ------------ ------------
End of year...... $31,786,260 $22,246,848 $19,516,395 $299,997,131 $217,256,964 $133,035,208
=========== =========== =========== ============ ============ ============
<CAPTION>
Small Cap
Short-Term U.S. Government Value
Managed Subaccount Subaccount Subaccount
----------------------------------------- ----------------------------------- -----------
1996 1995 1994 1996 1995 1994** 1996*
------------- ------------- ------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase
(decrease) in net
assets
From operations:
Net investment
income.......... $ 35,527,179 $ 23,257,698 $ 6,528,044 $ 128,560 $ 94,735 $ 25,457 $ 30,298
Net realized
gains (losses).. 3,555,551 3,530,479 1,168,573 20,920 20,630 (1,779) (1,418)
Net unrealized
appreciation
(depreciation)
during the year. (11,690,944) 24,157,024 (12,012,242) (69,770) 77,274 (23,668) 66,350
------------- ------------- ------------- ----------- ----------- ----------- -----------
Net increase
(decrease) in
net assets
resulting from
operations...... 27,391,786 50,945,201 (4,315,635) 79,709 192,639 10 95,230
From policyholder
transactions:
Net premiums from
policyholders... 71,167,774 80,690,820 87,141,271 2,675,105 2,846,775 1,178,590 1,344,453
Net benefits to
policyholders... (56,734,361) (48,646,275) (43,706,261) (2,206,096) (1,637,415) (114,133) (109,889)
------------- ------------- ------------- ----------- ----------- ----------- -----------
Net increase in
net assets from
policyholder
transactions.... 14,433,414 32,044,545 43,435,010 469,009 1,209,360 1,064,457 1,234,564
------------- ------------- ------------- ----------- ----------- ----------- -----------
Net increase in
net assets..... 41,825,200 82,989,746 39,119,375 548,718 1,401,999 1,064,467 1,329,794
Net assets
Beginning of
year............ 262,405,591 179,415,845 140,296,470 2,466,466 1,064,467 -- --
------------- ------------- ------------- ----------- ----------- ----------- -----------
End of year...... $304,230,791 $262,405,591 $179,415,845 $3,015,184 $2,466,466 $1,064,467 $1,329,794
============= ============= ============= =========== =========== =========== ===========
</TABLE>
- ------
* From May 1, 1996 (commencement of operations).
** From May 1, 1994 (commencement of operations).
See accompanying notes.
42
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
Frontier
International Turner Core Edinburgh Capital
Opportunities Equity Index Strategic Bond Growth International Equity Appreciation
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
------------- ------------ -------------- ----------- -------------------- ------------
1996* 1996* 1996* 1996* 1996* 1996*
------------- ------------ -------------- ----------- -------------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income
(loss)................ $ 1,813 $ 25,586 $ 12,594 $ (1,465) $ 289 $ (1,628)
Net realized gains
(losses).............. 2,596 4,690 1,272 (75,788) (30) (130,154)
Net unrealized appreci-
ation (depreciation)
during the year....... 98,849 58,797 (2,250) -- 220 1,432
---------- ---------- -------- ----------- ------- -----------
Net increase (decrease)
in net assets
resulting from
operations............ 103,258 89,073 11,616 (77,254) 478 (130,350)
From policyholder
transactions:
Net premiums from poli-
cyholders............. 2,395,587 1,242,668 495,203 1,525,222 64,120 1,568,562
Net benefits to policy-
holders............... (238,306) (132,549) (88,706) (1,445,228) (1,406) (1,376,088)
---------- ---------- -------- ----------- ------- -----------
Net increase in net as-
sets from policyholder
transactions.......... 2,157,281 1,110,119 406,497 79,993 62,713 192,474
---------- ---------- -------- ----------- ------- -----------
Net increase in net
assets............... 2,260,539 1,199,192 418,113 2,740 63,191 62,124
Net assets
Beginning of year...... -- -- -- -- -- --
---------- ---------- -------- ----------- ------- -----------
End of year............ $2,260,539 $1,199,192 $418,113 $ 2,740 $63,191 $ 62,124
========== ========== ======== =========== ======= ===========
</TABLE>
- ------
* From May 1, 1996 (commencement of operations).
See accompanying notes.
43
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
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 twenty-one subaccounts. The assets of each subaccount are invested
exclusively in shares of a corresponding Portfolio of John Hancock Variable
Series Trust I (the Fund) or of M Fund Inc. (M Fund). New subaccounts may be
added as new portfolios are added to the Fund or to M Fund, or as other
investment options are developed and made available to policyholders. The
twenty-one Portfolios of the Fund and of M Fund which are currently available
are Large Cap Growth, Sovereign Bond, International Equities, Small Cap
Growth, International Balanced, Mid Cap Growth, Large Cap Value, Money Market,
Mid Cap Value, Special Opportunities, Real Estate Equity, Growth & Income,
Managed, Short-Term U.S. Government, Small Cap Value, International
Opportunities, Equity Index, Strategic Bond, Turner Core Growth, Edinburgh
International Equity and Frontier Capital Appreciation. 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
Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Valuation of Investments: Investment in shares of the Fund and of M Fund are
valued at the reported net asset values of the respective Portfolios.
Investment transactions are recorded on the trade date. Dividend income is
recognized on the ex-dividend date. Realized gains and losses on sales of 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.
44
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
Expenses: JHVLICO assumes mortality and expense risks of the variable life
insurance policies for which asset charges are deducted at an annual rate of
.6% of net assets 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.
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 and of M Fund at December 31, 1996 were as follows:
<TABLE>
<CAPTION>
Shares
Portfolio Owned Cost Value
--------- ---------- ------------ ------------
<S> <C> <C> <C>
Large Cap Growth.......................... 8,756,127 $145,572,331 $153,159,843
Sovereign Bond............................ 6,593,119 64,605,934 64,419,410
International Equities.................... 2,343,721 36,138,429 39,447,186
Small Cap Growth.......................... 295,281 3,020,254 2,933,413
International Balanced.................... 71,556 724,736 743,691
Mid Cap Growth............................ 216,631 2,176,221 2,214,471
Large Cap Value........................... 166,404 1,758,104 1,845,329
Money Market.............................. 1,737,566 17,375,664 17,375,664
Mid Cap Value............................. 117,894 1,235,400 1,337,926
Special Opportunities..................... 2,810,852 38,816,388 46,440,638
Real Estate Equity........................ 2,171,886 25,329,878 31,786,260
Growth & Income........................... 20,471,470 273,743,016 299,997,131
Managed................................... 22,784,884 297,723,544 304,230,791
Short-Term U.S. Government................ 300,108 3,031,349 3,015,184
Small Cap Value........................... 123,931 1,263,444 1,329,794
International Opportunities............... 213,316 2,161,690 2,260,539
Equity Index.............................. 108,064 1,140,395 1,199,192
Strategic Bond............................ 41,159 420,364 418,113
Turner Core Growth........................ 236 2,740 2,740
Edinburgh International Equity............ 6,396 62,972 63,191
Frontier Capital Appreciation............. 4,962 60,692 62,124
</TABLE>
45
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 5--DETAILS OF INVESTMENT--CONTINUED
Purchases, including reinvestment of dividend distributions and proceeds from
sales of shares in the Portfolios of the Fund and of M Fund during 1996, were
as follows:
<TABLE>
<CAPTION>
Portfolio Purchases Sales
--------- ----------- -----------
<S> <C> <C>
Large Cap Growth....................................... $57,084,851 $17,207,723
Sovereign Bond......................................... 17,069,620 6,980,376
International Equities................................. 10,889,232 5,070,208
Small Cap Growth....................................... 4,808,912 1,577,714
International Balanced................................. 782,342 59,248
Mid Cap Growth......................................... 2,244,678 68,625
Large Cap Value........................................ 1,802,792 47,761
Money Market........................................... 22,341,290 24,649,640
Mid Cap Value.......................................... 1,294,623 61,257
Special Opportunities.................................. 24,232,199 4,354,560
Real Estate Equity..................................... 7,479,651 4,101,012
Growth & Income........................................ 91,820,483 19,447,546
Managed................................................ 76,126,209 26,165,616
Short-Term U.S. Government............................. 2,512,362 1,915,792
Small Cap Value........................................ 1,365,414 100,552
International Opportunities............................ 2,337,466 178,372
Equity Index........................................... 1,223,909 88,204
Strategic Bond......................................... 500,399 81,308
Turner Core Growth..................................... 1,757,166 1,678,638
Edinburgh International Equity......................... 63,897 895
Frontier Capital Appreciation.......................... 1,798,979 1,605,600
</TABLE>
46
<PAGE>
REPORT 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, the
Large Cap Growth, Sovereign Bond, International Equities, Small Cap Growth,
International Balanced, Mid Cap Growth, Large Cap Value, Money Market, Mid Cap
Value, Special Opportunities, Real Estate Equity, Growth & Income, Managed,
Short-Term U.S. Government, Small Cap Value, International Opportunities,
Equity Index, Strategic Bond, Turner Core Growth, Edinburgh International
Equity and Frontier Capital Appreciation Subaccounts) as of December 31, 1996,
and the related statements of operations and statements of changes in net
assets for each of the periods indicated therein. These financial statements
are the responsibility of the Account's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of each of the respective
subaccounts constituting John Hancock Variable Life Account V at December 31,
1996, 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 7, 1997
47
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors
John Hancock Variable Life Insurance Company
We have audited the accompanying statutory-basis statements of financial
position of John Hancock Variable Life Insurance Company as of December 31,
1996 and 1995, and the related statutory-basis statements of operations and
unassigned deficit and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
As described in Note 1 to the financial statements, the Company presents its
financial statements in conformity with accounting practices prescribed or
permitted by the Commonwealth of Massachusetts Division of Insurance, which
practices differ from generally accepted accounting principles. The variances
between such practices and generally accepted accounting principles also are
described in Note 1. The effects on the financial statements of these
variances are not reasonably determinable but are presumed to be material.
In our report dated February 7, 1996, we expressed an opinion that the 1995
financial statements of the Company fairly present, in all material respects,
the Company's financial position, results of operations, and cash flows in
conformity with generally accepted accounting principles for 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. As described in Note 1, the accompanying
statutory-basis financial statements are no longer considered to be prepared
in conformity with generally accepted accounting principles. Accordingly, our
present opinion on the 1995 financial statements, as presented in the
following paragraph, is different from that expressed in our previous report.
In our opinion, because of the effects of the matter described in the second
preceding paragraph, the financial statements referred to above do not present
fairly, in conformity with generally accepted accounting principles, the
financial position of John Hancock Variable Life Insurance Company at December
31, 1996 and 1995, or the results of its operations or its cash flows for the
years then ended.
Also, in our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of John Hancock
Variable Life Insurance Company at December 31, 1996 and 1995, and the results
of its operations and its cash flows for the years then ended in conformity
with accounting practices prescribed or permitted by the Commonwealth of
Massachusetts Division of Insurance.
Ernst & Young LLP
Boston, Massachusetts
February 14, 1997
48
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
December 31
------------------
1996 1995
---- ----
(In millions)
<S> <C> <C>
Assets
Bonds--Note 7.............................................. $ 753.5 $ 552.8
Preferred stocks........................................... 9.6 5.0
Common stocks.............................................. 1.4 1.7
Investment in affiliates................................... 72.0 65.3
Mortgage loans on real estate--Note 7...................... 212.1 146.7
Real estate................................................ 38.8 36.4
Policy loans............................................... 80.8 61.8
Cash items:
Cash in banks............................................ 26.7 11.6
Temporary cash investments............................... 5.2 65.0
-------- --------
31.9 76.6
Premiums due and deferred.................................. 36.8 39.6
Investment income due and accrued.......................... 22.6 18.6
Other general account assets............................... 17.8 20.8
Assets held in separate accounts........................... 3,290.5 2,421.0
-------- --------
TOTAL ASSETS............................................... $4,567.8 $3,446.3
======== ========
Obligations and Stockholder's Equity
OBLIGATIONS
Policy reserves.......................................... $ 877.8 $ 612.3
Federal income and other taxes payable--Note 1........... 29.4 14.2
Other accrued expenses................................... 75.1 138.7
Asset valuation reserve--Note 1.......................... 16.6 15.4
Obligations related to separate accounts................. 3,285.8 2,417.0
-------- --------
TOTAL OBLIGATIONS.......................................... 4,284.7 3,197.6
Stockholder's Equity--Notes 2 and 6
Common Stock, $50 par value; authorized 50,000 shares;
issued and
outstanding 50,000 shares............................... 2.5 2.5
Paid-in capital.......................................... 377.5 377.5
Unassigned deficit......................................... (96.9) (131.3)
-------- --------
TOTAL STOCKHOLDER'S EQUITY................................. 283.1 248.7
-------- --------
TOTAL OBLIGATIONS AND STOCKHOLDER'S EQUITY................. $4,567.8 $3,446.3
======== ========
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
49
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF OPERATIONS AND UNASSIGNED DEFICIT
<TABLE>
<CAPTION>
Year ended December 31
------------------------
1996 1995
---- ----
(In millions)
<S> <C> <C>
Income
Premiums............................................ $ 820.6 $ 570.9
Net investment income--Note 4....................... 76.1 62.1
Other, net.......................................... 406.0 85.7
----------- ----------
1,302.7 718.7
Benefits and Expenses
Payments to policyholders and beneficiaries......... 236.1 213.4
Additions to reserves to provide for future payments
to policyholders and beneficiaries................. 790.1 282.4
Expenses of providing service to policyholders and
obtaining new insurance--Note 6.................... 183.8 150.7
State and miscellaneous taxes....................... 17.3 12.7
----------- ----------
1,227.3 659.2
----------- ----------
GAIN FROM OPERATIONS BEFORE FEDERAL INCOME TAXES
AND NET REALIZED CAPITAL GAINS (LOSSES).......... 75.4 59.5
Federal income taxes--Note 1.......................... 38.6 28.4
----------- ----------
GAIN FROM OPERATIONS BEFORE NET REALIZED CAPITAL
GAINS (LOSSES)................................... 36.8 31.1
Net realized capital gains (losses)--Note 5........... (1.5) 0.5
----------- ----------
NET INCOME........................................ 35.3 31.6
Unassigned deficit at beginning of year............... (131.3) (162.1)
Net unrealized capital gains (losses) and other ad-
justments--Note 5.................................... 2.5 (3.0)
Other reserves and adjustments........................ (3.4) 2.2
----------- ----------
UNASSIGNED DEFICIT AT END OF YEAR................. $ (96.9) $ (131.3)
=========== ==========
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
50
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31
----------------------
1996 1995
---- ----
(In millions)
<S> <C> <C>
Cash flows from operating activities:
Insurance premiums................................. $ 824.2 $ 574.0
Net investment income.............................. 73.4 59.2
Benefits to policyholders and beneficiaries........ (212.7) (198.3)
Dividends paid to policyholders.................... (15.7) (13.2)
Insurance expenses and taxes....................... (196.6) (161.5)
Net transfers to separate accounts................. (524.2) (257.4)
Other, net......................................... 386.7 55.1
----------- -----------
NET CASH PROVIDED FROM OPERATIONS.............. 335.1 57.9
----------- -----------
Cash flows used in investing activities:
Bond purchases..................................... (489.9) (172.5)
Bond sales......................................... 228.3 18.9
Bond maturities and scheduled redemptions.......... 27.8 36.0
Bond prepayments................................... 31.9 20.6
Stock purchases.................................... (6.5) (1.7)
Proceeds from stock sales.......................... 0.4 1.4
Real estate purchases.............................. (10.5) (16.2)
Real estate sales.................................. 8.5 9.3
Other invested assets purchases.................... 0.0 (0.4)
Proceeds from the sale of other invested assets.... 1.5 0.3
Mortgage loans issued.............................. (84.4) (19.8)
Mortgage loan repayments........................... 17.7 21.1
Other, net......................................... (104.6) 45.7
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES.......... (379.8) (57.3)
----------- -----------
INCREASE (DECREASE) IN CASH AND TEMPORARY CASH IN-
VESTMENTS........................................... (44.7) 0.6
Cash and temporary cash investments at beginning of
year................................................ 76.6 76.0
----------- -----------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF YEAR... $ 31.9 $ 76.6
=========== ===========
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
51
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS 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, domiciled in the Commonwealth of Massachusetts, principally writes
variable and universal life insurance policies. Those policies primarily are
marketed through John Hancock's sales organization, which includes a career
agency system composed of company-owned, unionized branch offices and
independent general agencies. Policies also are sold through various
unaffiliated securities broker-dealers and certain other financial
institutions. Currently, the Company writes business in all states except New
York.
The preparation of the financial statements requires management to make
estimates and assumptions that affect amounts reported in the financial
statements and accompanying notes. Such estimates and assumptions could change
in the future as more information becomes known, which could impact the
amounts reported and disclosed herein.
Basis of Presentation: The financial statements have been prepared using
accounting practices prescribed or permitted by the Commonwealth of
Massachusetts Division of Insurance and in conformity with the practices of
the National Association of Insurance Commissioners (NAIC), which practices
differ from generally accepted accounting principles (GAAP). The 1995
financial statements presented for comparative purposes were previously
described as being prepared in accordance with GAAP for stock life insurance
companies wholly-owned by a mutual life insurance company. Pursuant to
Financial Accounting Standards Board Interpretation 40, "Applicability of
Generally Accepted Accounting Principles to Mutual Life Insurance and Other
Enterprises" (FIN 40), as amended, which is effective for 1996 financial
statements, financial statements based on statutory accounting practices can
no longer be described as prepared in conformity with GAAP. Furthermore,
financial statements prepared in conformity with statutory accounting
practices for periods prior to the effective date of FIN 40 are not considered
GAAP presentations when presented in comparative form with financial
statements for periods subsequent to the effective date. Accordingly, the 1995
financial statements are no longer considered to be presented in conformity
with GAAP.
The significant differences from GAAP include: (1) policy acquisition costs
are charged to expense as incurred rather than deferred and amortized over the
related premium-paying period; (2) policy reserves are based on statutory
mortality, morbidity, and interest requirements without consideration of
withdrawals and Company experience; (3) certain assets designated as
"nonadmitted assets" are excluded from the balance sheet by direct charges to
surplus; (4) reinsurance recoverables are netted against reserves and claim
liabilities rather than reflected as an asset; (5) bonds held as available for
sale are recorded at amortized cost or market value as determined by the NAIC
rather than at fair value; (6) an Asset Valuation Reserve and Interest
Maintenance Reserve as prescribed by the NAIC are not calculated under GAAP.
Under GAAP, realized capital gains and losses are reported in the income
statement on a pretax basis as incurred and investment valuation allowances
are provided when there has been a decline in value deemed other than
temporary; (7) investments in affiliates are carried at their net equity value
with changes in value being recorded directly to unassigned deficit rather
than consolidated in the financial statements; and (8) no provision is made
for the deferred income tax effects of temporary differences between book and
tax basis reporting. The effects of the foregoing variances from GAAP have not
been determined but are presumed to be material.
52
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
The significant accounting practices of the Company are as follows:
Pending Statutory Standards: The NAIC currently is in the process of
recodifying statutory accounting practices, the result of which is expected to
constitute the only source of prescribed statutory accounting practices.
Accordingly, that project, which is expected to be completed in 1999 will
likely change, to some extent, prescribed statutory accounting practices, and
may result in changes to the accounting practices that the Company uses to
prepare its statutory-basis financial statements. The impact of any such
changes on the Company's unassigned deficit cannot be determined at this time
and could be material.
Revenues and Expenses: Premium revenues are recognized over the premium-paying
period of the policies whereas expenses, including the acquisition costs of
new business, are charged to operations as incurred and policyholder dividends
are provided as paid or accrued.
Cash and Temporary Cash Investments: Cash includes currency on hand and demand
deposits with financial institutions. Temporary cash investments are short-
term, highly-liquid investments both readily convertible to known amounts of
cash and so near maturity that there is insignificant risk of changes in value
because of changes in interest rates.
Valuation of Assets: General account investments are carried at amounts
determined on the following bases:
Bond and stock values are carried as prescribed by the NAIC; bonds
generally at amortized amounts or cost, preferred stocks generally at cost
and common stocks at market. The discount or premium on bonds is amortized
using the interest method.
Investments in affiliates are included on the statutory equity method.
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. Accumulated depreciation amounted to $1.2 million in 1996 and $0.5
million in 1995.
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,
53
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
principally bonds and mortgage loans, attributable to changes in the general
level of interest rates. Such gains and losses are deferred and amortized into
income over the remaining expected lives of the investments sold. At December
31, 1996, the IMR, net of 1996 amortization of $1.2 million, amounted to $5.9
million, which is included in policy reserves. The corresponding 1995 amounts
were $1.2 million and $6.9 million, respectively.
Separate Accounts: Separate account assets and liabilities reported in the
accompanying statements of financial position represent funds that are
separately administered and for which the contractholder, rather than the
Company, generally bears the investment risk. Separate account contractholders
have no claim against the assets of the general account of the Company.
Separate account assets are reported at market value. The operations of the
separate accounts are not included in the summary of operations; however,
income earned on amounts initially invested by the Company in the formation of
new separate accounts is included in other income.
Fair Values of Financial Instruments: Statement of Financial Accounting
Standards (SFAS) No. 107, "Disclosure about Fair Value of Financial
Instruments," requires disclosure of fair value information about financial
instruments, whether or not recognized in the statement of financial position,
for which it is practicable to estimate the value. In situations where quoted
market prices are not available, fair values are based on estimates using
present value or other valuation techniques. SFAS No. 107 excludes certain
financial instruments and all nonfinancial instruments from its disclosure
requirements. Therefore, the aggregate fair value amounts presented do not
represent the underlying value of the Company.
The methods and assumptions utilized by the Company in estimating its fair
value disclosures for financial instruments are as follows:
The carrying amounts reported in the statement of financial position for
cash and temporary cash investments approximate their fair values.
Fair values for public bonds are obtained from an independent pricing
service. Fair values for private placement securities and publicly traded
bonds not provided by the independent pricing service are estimated by the
Company by discounting expected future cash flows using current market
rates applicable to the yield, credit quality and maturity of the
investments. The fair values for common and preferred stocks, other than
its subsidiary investments, which are carried at equity values, are based
on quoted market prices.
The fair value of interest rate swaps and currency rate swaps is estimated
using a discounted cash flow method adjusted for the difference between the
rate of the existing swap and the current swap market rate. Discounted cash
flows in foreign currencies are converted to U.S. dollars using current
exchange rates.
The fair value for mortgage loans is estimated using discounted cash flow
analyses using interest rates adjusted to reflect the credit
characteristics of the underlying loans. Mortgage loans with similar
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 and
issue real estate mortgages is estimated using a discounted cash flow
method incorporating adjustments for the difference in the level of
interest rates between the dates the commitments were made and December 31,
1996. The fair value for commitments to purchase real estate approximates
the amount of the initial commitment.
54
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
Capital Gains and Losses: Realized capital gains and losses are determined
using the specific identification basis. Realized capital gains and losses,
net of taxes and amounts transferred to the IMR, are included in net gain or
loss. Unrealized gains and losses, which consist of market value and book
value adjustments, are shown as adjustments to the unassigned deficit.
Policy Reserves: Life reserves are developed by actuarial methods and are
determined based on published tables using statutorily specified interest
rates and valuation methods that will provide, in the aggregate, reserves that
are greater than or equal to the minimum or guaranteed policy cash values or
the amounts required by the Commonwealth of Massachusetts Division of
Insurance. Reserves for variable life insurance policies are maintained
principally on the modified preliminary term method using the 1958 and 1980
Commissioner's Standard Ordinary (CSO) mortality tables, with an assumed
interest rate of 4% for policies issued prior to May 1, 1983 and 4 1/2% for
policies issued on or thereafter. Reserves for single premium policies are
determined by the net single premium method using the 1958 CSO mortality
table, with an assumed interest rate of 4%. Reserves for universal life
policies issued prior to 1985 are equal to the gross account value which at
all times exceeds minimum statutory requirements. Reserves for universal life
policies issued from 1985 through 1988 are maintained at the greater of the
Commissioner's Reserve Valuation Method (CRVM) using the 1958 CSO mortality
table, with 4 1/2% interest or the cash surrender value. Reserves for
universal life policies issued after 1988 and for flexible variable policies
are maintained using the greater of the cash surrender value or the CRVM
method with the 1980 CSO mortality table and 5 1/2% interest for policies
issued from 1988 through 1992; 5% interest for policies issued in 1993 and
1994; and 4 1/2% interest for policies issued in 1995 and 1996.
Federal Income Taxes: Federal income taxes are reported in the financial
statements based on amounts determined to be payable as a result of operations
within the current accounting period. The operations of the Company are
consolidated with John Hancock in filing a consolidated federal income tax
return 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 $33.5 million in 1996 and $32.2 million in 1995.
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 temporary differences that may exist
between financial reporting and taxable income or loss.
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 1995 amounts have been reclassified to permit
comparison with the corresponding 1996 amounts.
55
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
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 (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 each of 1996 and 1995.
Unamortized goodwill at December 31, 1996 was $15.2 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>
1996 1995
---- ----
(In millions)
<S> <C> <C>
Investment expenses............................................... $ 7.0 $ 5.1
Depreciation expense.............................................. 0.9 1.0
Investment taxes.................................................. 0.5 0.5
------ ------
$ 8.4 $ 6.6
====== ======
</TABLE>
56
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 5--NET CAPITAL GAINS (LOSSES) AND OTHER ADJUSTMENTS
Net realized capital gains (losses) consist of the following items:
<TABLE>
<CAPTION>
1996 1995
---- ----
(In millions)
<S> <C> <C>
Net gains (losses) from asset sales............................. $ (0.2) $ 4.0
Capital gains tax............................................... (1.0) (2.5)
Net capital gains transferred to IMR............................ (0.3) (1.0)
------ ------
Realized Capital Gains (Losses)............................... $ (1.5) $ 0.5
====== ======
</TABLE>
Net unrealized capital gains (losses) and other adjustments consist of the
following items:
<TABLE>
<CAPTION>
1996 1995
---- ----
(In millions)
<S> <C> <C>
Net gains (losses) from changes in security values and book
value adjustments.............................................. $ 3.7 $ (0.2)
Increase in asset valuation reserve............................. (1.2) (2.8)
------ ------
Net Unrealized Capital Gains (Losses) and Other Adjustments... $ 2.5 $ (3.0)
====== ======
</TABLE>
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 1996 and 1995 to reflect continuing changes
in the Company's operations. The amount of the service fee charged to the
Company was $111.7 million and $97.9 million in 1996 and 1995, 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 $1.6 million and
$1.8 million in 1996 and 1995, 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 1996, 1995 and 1994 issues of
flexible premium variable life insurance and scheduled premium variable life
insurance policies. In connection with this agreement, John Hancock
transferred $24.5 million and $32.7 million of cash for tax, commission, and
expense allowances to the Company, which increased the Company's net gain from
operations by $15.7 million and $20.3 million in 1996 and 1995, respectively.
Effective January 1, 1996, the Company entered into a modified coinsurance
agreement with John Hancock to reinsure 50% of 1995 and 1996 issues of retail
annuity contracts (Independence Preferred and Declaration). In connection with
this agreement, John Hancock transferred $23.2 million of cash for surrender
benefits, tax, reserve increase, commission, expense allowances and premium to
the Company, which increased the Company's net gain from operations by $15.1
million in 1996.
57
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
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, 1996 Value Gains Losses Value
---------------------------- --------- ---------- ---------- -----
(In millions)
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations
of U.S. government corporations and
agencies............................... $ 44.4 $ 0.2 $0.2 $ 44.4
Obligations of states and political sub-
divisions.............................. 12.6 0.4 0.0 13.0
Debt securities issued by foreign gov-
ernments............................... 0.8 0.1 0.0 0.9
Corporate securities.................... 623.2 29.8 3.4 649.6
Mortgage-backed securities.............. 72.5 10.2 0.1 82.6
------ ----- ---- ------
Total bonds........................... $753.5 $40.7 $3.7 $790.5
====== ===== ==== ======
<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 sub-
divisions.............................. 11.4 1.1 0.0 12.5
Debt securities issued by foreign gov-
ernments............................... 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
------ ----- ---- ------
Total bonds............................. $552.8 $46.2 $1.7 $597.3
====== ===== ==== ======
</TABLE>
The statement value and fair value of bonds at December 31, 1996, by
contractual maturity, are shown below. Maturities will differ from contractual
maturities because eligible borrowers may exercise their right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Statement Fair
Value Value
--------- -----
(In millions)
<S> <C> <C>
Due in one year or less....................................... $ 51.6 $ 52.9
Due after one year through five years......................... 260.8 267.7
Due after five years through ten years........................ 244.3 253.7
Due after ten years........................................... 124.3 133.6
------ ------
681.0 707.9
Mortgage-backed securities.................................... 72.5 82.6
------ ------
$753.5 $790.5
====== ======
</TABLE>
58
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 7--INVESTMENTS--CONTINUED
Proceeds from sales of bonds during 1996 and 1995 were $228.3 million and
$18.9 million, respectively. Gross gains of $1.3 million in 1996 and $0.2
million in 1995 and gross losses of $2.1 million in 1996 and $0.1 million in
1995 were realized on these transactions.
The cost of common stocks was $0.0 million and $0.1 million at December 31,
1996 and 1995, respectively. Gross unrealized appreciation on common stocks
totaled $1.4 million, and gross unrealized depreciation totaled $0.0 million
at December 31, 1996. The fair value of preferred stock totaled $9.6 million
at December 31, 1996 and $5.2 million at December 31, 1995.
Bonds with amortized cost of $11.3 million were nonincome producing for the
twelve months ended December 31, 1996.
At December 31, 1996, the mortgage loan portfolio was diversified by
geographic region and specific collateral property type as displayed below.
The Company controls credit risk through credit approvals, limits and
monitoring procedures.
<TABLE>
<CAPTION>
Statement
Property Type Value
------------- ---------
(In millions)
<S> <C>
Apartments.............. $ 96.0
Industrial.............. 35.0
Office buildings........ 11.3
Retail.................. 29.0
Agricultural............ 28.9
Other................... 11.9
------
$212.1
======
</TABLE>
<TABLE>
<CAPTION>
Geographic Statement
Concentration Value
------------- ---------
(In millions)
<S> <C>
East North Central...... $ 31.1
Middle Atlantic......... 11.5
Mountain................ 7.6
New England............. 27.6
Pacific................. 49.9
South Atlantic.......... 58.8
West South Central...... 25.6
------
$212.1
======
</TABLE>
At December 31, 1996, the fair values of the commercial and agricultural
mortgage loans portfolios were $189.0 million and $30.4 million, respectively.
The corresponding amounts as of December 31, 1995 were approximately $132.1
million and $22.2 million, respectively.
The maximum and minimum lending rates for mortgage loans during 1996 were
8.69% and 7.04% for agricultural loans and 8.5% and 7.2% for other properties.
Generally, the maximum percentage of any loan to the value of security at the
time of the loan, exclusive of insured or guaranteed or purchase money
mortgages, is 75%. For city mortgages, fire insurance is carried on all
commercial and residential properties at least equal to the excess of the loan
over the maximum loan which would be permitted by law on the land without the
building, except as permitted by regulations of the Federal Housing Commission
on loans fully insured under the provisions of the National Housing Act. For
agricultural mortgage loans, fire insurance is not normally required on land
based loans except in those instances where a building is critical to the
farming operation. Fire insurance is required on all agri-business facilities
in an aggregate amount equal to the loan balance.
59
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
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 1996 were $384.3 million, $9.9 million, and $12.1 million,
respectively. The corresponding amounts in 1995 were $72.4 million, $8.7
million, and $12.1 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--FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Company enters into interest rate swap contracts for the purpose of
converting the interest rate characteristics (fixed or variable) of certain
investments to match those of related insurance liabilities. Maturities of
current agreements range through 2011. These swaps involve, to varying
degrees, interest rate risk in excess of amounts recognized in the statement
of financial position.
The Company enters into currency rate swap agreements to manage exposure to
foreign exchange rate fluctuations. Maturities of current agreements range
through 2006. Should the counterparty fail to meet the terms of the contract,
the Company's market risk is limited to the currency rate differential.
The Company enters into interest rate cap contracts to manage exposure on
underlying security values due to a rise in interest rates. Maturities of
current agreements range through 2006.
The Company also uses financial futures contracts to hedge public bonds
intended for future sale in order to lock in the market value at the date of
contract. The Company is subject to the risks associated with changes in the
value of the underlying securities; however, such changes in value generally
are offset by changes in the value of the hedged items. The contract or
notional amounts of the contracts represent the extent of the Company's
involvement but not in the future cash requirements, as the Company intends to
close the open positions prior to settlement.
The contract or notional amount of the foregoing financial instruments, which
indicates the Company's involvement and in certain instances, maximum credit
risk related to those instruments, is as follows:
<TABLE>
<CAPTION>
December 31
-------------
1996 1995
---- ----
(In millions)
<S> <C> <C>
Futures contracts to sell securities............................ $ 73.0 $ 0.0
======= =====
Notional amount of interest rate swaps, currency rate swaps, and
interest rate caps to:
Receive variable rates........................................ $ 215.9 $ 0.0
======= =====
Receive fixed rates........................................... $ 26.6 $ 5.0
======= =====
</TABLE>
60
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 9--FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK--CONTINUED
The Company continually monitors its positions and the credit ratings of the
counterparties to these financial instruments. The Company believes the risk
of incurring losses due to the nonperformance by its counterparties is remote
and that any such losses would be immaterial.
Based on the market rates in effect at December 31, 1996, the Company's
interest rate swaps, currency rate swaps and interest rate caps represented
(assets) liabilities to the Company with fair values of $2.3 million, $(8.2)
million and $(2.0) million, respectively. The corresponding amounts as of
December 31, 1995 were $0.0 million.
NOTE 10--POLICYHOLDERS' RESERVES AND BENEFICIARIES' FUND
The Company's annuity reserves and deposit fund liabilities that are subject
to discretionary withdrawal and subject to discretionary withdrawal (without
adjustment) are summarized as follows:
<TABLE>
<CAPTION>
December 31, 1996 Percent
----------------- -------
(In millions)
<S> <C> <C>
Subject to discretionary withdrawal at book value
less surrender charge............................... $441.9 89.3%
Subject to discretionary withdrawal at book value
(without adjustment)................................ 53.0 10.7
------ -----
Total annuity reserves and deposit liabilities....... $494.9 100.0%
====== =====
</TABLE>
NOTE 11--COMMITMENTS AND CONTINGENCIES
The Company has extended commitments to purchase long-term bonds and real
estate and issue real estate mortgages totalling $42.1 million, $0.1 million,
and $33.5 million, respectively, at December 31, 1996. 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 $76.2 million at December 31,
1996. The majority of these commitments expire in 1997.
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, 1996. 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.
61
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 12--FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and fair values of the
Company's financial instruments:
<TABLE>
<CAPTION>
Year ended December 31
--------------------------------
1996 1995
--------------- ---------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ------ -------- ------
(In millions)
<S> <C> <C> <C> <C>
Assets
Bonds--Note 7............................... $753.5 $790.5 $552.8 $597.3
Preferred stocks--Note 7.................... 9.6 9.6 5.0 5.2
Common stocks--Note 7....................... 1.4 1.4 1.7 1.7
Mortgage loans on real estate--Note 7....... 212.1 219.4 146.7 154.3
Policy loans--Note 1........................ 80.8 80.8 61.8 61.8
Cash and cash equivalents--Note 1........... 31.9 31.9 76.6 76.6
Derivatives liabilities relating to:--Note 9
Interest rate swaps......................... -- 2.3 -- 0.0
Currency rate swaps......................... -- (8.2) -- 0.0
Interest rate caps.......................... -- (2.0) -- 0.0
Liabilities
Commitments--Note 11........................ -- 76.2 -- 23.8
</TABLE>
The carrying amounts in the table are included in the statutory-basis
statements of financial position. The method and assumptions utilized by the
Company in estimating its fair value disclosures are described in Note 1.
62
<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 those which would have
been purchased at the correct age or sex by the most recent insurance charge
deducted from Account Value.
63
<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, the Policy will terminate and 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 less 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
during the lifetime of the insured 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
Servicing 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.
64
<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 Funds (equivalent to an effective annual rate of .61%) and
an assumed average asset charge for the annual nonadvisory operating expenses
of each Portfolio of the Funds (equivalent to an effective annual rate of
.19%). 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
Funds' investment adviser, see the attached prospectuses for the Funds. 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.
65
<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 Account Value Surrender Value
-------------------------------- -------------------------------- --------------------------------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of: Annual Investment Return of: Annual Investment Return of:
Policy At 5% Interest -------------------------------- -------------------------------- --------------------------------
Year Per Year (2) 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
- ------ -------------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 945 100,000 100,000 100,000 323 356 389 0 0 0
2 1,937 100,000 100,000 100,000 873 967 1,065 303 397 495
3 2,979 100,000 100,000 100,000 1,405 1,595 1,802 700 890 1,097
4 4,073 100,000 100,000 100,000 1,919 2,241 2,604 1,079 1,401 1,764
5 5,222 100,000 100,000 100,000 2,413 2,903 3,478 1,738 2,228 2,803
6 6,428 100,000 100,000 100,000 2,887 3,583 4,430 2,077 2,773 3,620
7 7,694 100,000 100,000 100,000 3,339 4,277 5,466 2,529 3,467 4,656
8 9,024 100,000 100,000 100,000 3,769 4,987 6,595 3,049 4,267 5,875
9 10,420 100,000 100,000 100,000 4,173 5,710 7,824 3,543 5,080 7,194
10 11,886 100,000 100,000 100,000 4,563 6,462 9,185 4,023 5,922 8,645
11 13,425 100,000 100,000 100,000 4,973 7,278 10,725 4,523 6,828 10,275
12 15,042 100,000 100,000 100,000 5,358 8,114 12,414 5,043 7,799 12,099
13 16,739 100,000 100,000 100,000 5,716 8,970 14,269 5,536 8,790 14,089
14 18,521 100,000 100,000 100,000 6,048 9,847 16,308 6,048 9,847 16,308
15 20,392 100,000 100,000 100,000 6,350 10,744 18,550 6,350 10,744 18,550
16 22,356 100,000 100,000 100,000 6,622 11,660 21,019 6,622 11,660 21,019
17 24,419 100,000 100,000 100,000 6,855 12,588 23,734 6,855 12,588 23,734
18 26,585 100,000 100,000 100,000 7,041 13,523 26,720 7,041 13,523 26,720
19 28,859 100,000 100,000 100,000 7,176 14,462 30,006 7,176 14,462 30,006
20 31,247 100,000 100,000 100,000 7,254 15,400 33,628 7,254 15,400 33,628
25 45,102 100,000 100,000 100,000 6,563 19,898 58,375 6,563 19,898 58,375
30 62,785 100,000 100,000 120,725 3,156 23,350 100,604 3,156 23,350 100,604
35 85,353 100,000 100,000 195,789 0 23,659 170,251 0 23,659 170,251
40 142,701 100,000 100,000 292,335 0 39,567 278,414 0 39,567 278,414
45 215,894 100,000 100,000 481,197 0 33,937 458,282 0 33,937 458,282
</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 $5,854 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%, $5,854 6% and $0 at 12%, subject to any maximums required to
maintain the Policy's status for federal income tax purposes.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT
RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY
THE OWNER. THE DEATH BENEFIT, ACCOUNT VALUE AND SURRENDER VALUE FOR A POLICY
WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT
RETURN AVERAGE 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE
OR BELOW THE AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE
MADE THAT THESE HYPOTHETICAL INVESTMENT RESULTS CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
66
<PAGE>
DEATH BENEFIT OPTION 1: LEVEL DEATH BENEFIT ILLUSTRATION ASSUMES MAXIMUM
CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK
SUM INSURED AT ISSUE (GUARANTEED DEATH BENEFIT): $100,000
$900 BASE POLICY PREMIUM (1)
<TABLE>
<CAPTION>
Death Benefit Account Value Surrender Value
-------------------------------- -------------------------------- --------------------------------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of: Annual Investment Return of: Annual Investment Return of:
Policy At 5% Interest -------------------------------- -------------------------------- --------------------------------
Year Per Year (2) 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
- ------ -------------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 945 100,000 100,000 100,000 275 307 339 0 0 0
2 1,937 100,000 100,000 100,000 778 866 958 8 96 188
3 2,979 100,000 100,000 100,000 1,263 1,440 1,633 358 535 728
4 4,073 100,000 100,000 100,000 1,732 2,030 2,366 692 990 1,326
5 5,222 100,000 100,000 100,000 2,180 2,633 3,164 1,005 1,458 1,989
6 6,428 100,000 100,000 100,000 2,610 3,250 4,032 1,300 1,940 2,722
7 7,694 100,000 100,000 100,000 3,017 3,879 4,974 1,807 2,669 3,764
8 9,024 100,000 100,000 100,000 3,402 4,521 6,000 2,282 3,401 4,880
9 10,420 100,000 100,000 100,000 3,763 5,172 7,115 2,833 4,242 6,185
10 11,886 100,000 100,000 100,000 4,100 5,835 8,329 3,560 5,295 7,789
11 13,425 100,000 100,000 100,000 4,410 6,507 9,651 3,960 6,057 9,201
12 15,042 100,000 100,000 100,000 4,690 7,184 11,090 4,375 6,869 10,775
13 16,739 100,000 100,000 100,000 4,940 7,868 12,658 4,760 7,688 12,478
14 18,521 100,000 100,000 100,000 5,159 8,557 14,368 5,159 8,557 14,368
15 20,392 100,000 100,000 100,000 5,343 9,247 16,233 5,343 9,247 16,233
16 22,356 100,000 100,000 100,000 5,491 9,937 18,270 5,491 9,937 18,270
17 24,419 100,000 100,000 100,000 5,595 10,622 20,494 5,595 10,622 20,494
18 26,585 100,000 100,000 100,000 5,651 11,294 22,920 5,651 11,294 22,920
19 28,859 100,000 100,000 100,000 5,654 11,951 25,571 5,654 11,951 25,571
20 31,247 100,000 100,000 100,000 5,594 12,581 28,465 5,594 12,581 28,465
25 45,102 100,000 100,000 100,000 4,137 15,101 47,694 4,137 15,101 47,694
30 62,785 100,000 100,000 100,000 0 15,476 79,346 0 15,476 79,346
35 85,353 100,000 100,000 151,770 0 10,693 131,974 0 10,693 131,974
40 150,917 100,000 100,000 220,849 0 15,856 210,333 0 15,856 210,333
45 234,595 100,000 100,000 355,267 0 0 338,350 0 0 338,350
</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 $7,262 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%, $7,262 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.
67
<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 Account Value Surrender Value
-------------------------------- -------------------------------- --------------------------------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of: Annual Investment Return of: Annual Investment Return of:
Policy At 5% Interest -------------------------------- -------------------------------- --------------------------------
Year Per Year (2) 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
- ------ -------------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 945 100,000 100,000 100,000 323 356 389 0 0 0
2 1,937 100,000 100,000 100,000 873 967 1,065 303 397 495
3 2,979 100,000 100,000 100,000 1,405 1,595 1,802 700 890 1,097
4 4,073 100,000 100,000 100,000 1,919 2,241 2,604 1,079 1,401 1,764
5 5,222 100,000 100,000 100,000 2,413 2,903 3,478 1,738 2,228 2,803
6 6,428 100,000 100,000 100,000 2,887 3,583 4,430 2,077 2,773 3,620
7 7,694 100,000 100,000 100,000 3,339 4,277 5,466 2,529 3,467 4,656
8 9,024 100,000 100,000 100,000 3,769 4,987 6,595 3,049 4,267 5,875
9 10,420 100,000 100,000 100,000 4,173 5,710 7,824 3,543 5,080 7,194
10 11,886 100,000 100,000 100,000 4,563 6,462 9,185 4,023 5,922 8,645
11 13,425 100,000 100,000 100,000 4,973 7,278 10,725 4,523 6,828 10,275
12 15,042 100,000 100,000 100,000 5,358 8,114 12,414 5,043 7,799 12,099
13 16,739 100,000 100,000 100,000 5,716 8,970 14,269 5,536 8,790 14,089
14 18,521 100,000 100,000 100,000 6,048 9,847 16,308 6,048 9,847 16,308
15 20,392 100,000 100,000 100,000 6,350 10,744 18,550 6,350 10,744 18,550
16 22,356 100,000 100,000 100,152 6,622 11,660 21,019 6,622 11,660 21,019
17 24,419 100,000 100,000 101,247 6,855 12,588 23,731 6,855 12,588 23,731
18 26,585 100,000 100,000 102,570 7,041 13,523 26,707 7,041 13,523 26,707
19 28,859 100,000 100,000 104,151 7,176 14,462 29,972 7,176 14,462 29,972
20 31,247 100,000 100,000 106,021 7,254 15,400 33,555 7,254 15,400 33,555
25 45,102 100,000 100,000 121,010 6,563 19,898 57,509 6,563 19,898 57,509
30 62,785 100,000 100,000 150,193 3,156 23,350 96,142 3,156 23,350 96,142
35 85,353 100,000 100,000 203,315 0 23,659 158,743 0 23,659 158,743
40 142,701 100,000 104,489 283,933 0 38,027 256,989 0 38,027 256,989
45 215,894 100,000 100,000 440,946 0 31,079 419,948 0 31,079 419,948
</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 $5,854 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%, $5,854 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.
68
<PAGE>
DEATH BENEFIT OPTION 2: VARIABLE DEATH BENEFIT ILLUSTRATION ASSUMES MAXIMUM
CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK SUM INSURED AT ISSUE
(GUARANTEED DEATH BENEFIT): $100,000 $900 BASE POLICY PREMIUM (1)
<TABLE>
<CAPTION>
Death Benefit Account Value Surrender Value
-------------------------------- -------------------------------- --------------------------------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of: Annual Investment Return of: Annual Investment Return of:
Policy At 5% Interest -------------------------------- -------------------------------- --------------------------------
Year Per Year (2) 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
- ------ -------------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 945 100,000 100,000 100,000 275 307 339 0 0 0
2 1,937 100,000 100,000 100,000 778 866 958 8 96 188
3 2,979 100,000 100,000 100,000 1,263 1,440 1,633 358 535 728
4 4,073 100,000 100,000 100,000 1,732 2,030 2,366 692 990 1,326
5 5,222 100,000 100,000 100,000 2,180 2,633 3,164 1,005 1,458 1,989
6 6,428 100,000 100,000 100,000 2,610 3,250 4,032 1,300 1,940 2,722
7 7,694 100,000 100,000 100,000 3,017 3,879 4,974 1,807 2,669 3,764
8 9,024 100,000 100,000 100,000 3,402 4,521 6,000 2,282 3,401 4,880
9 10,420 100,000 100,000 100,000 3,763 5,172 7,115 2,833 4,242 6,185
10 11,886 100,000 100,000 100,000 4,100 5,835 8,329 3,560 5,295 7,789
11 13,425 100,000 100,000 100,000 4,410 6,507 9,651 3,960 6,057 9,201
12 15,042 100,000 100,000 100,000 4,690 7,184 11,090 4,375 6,869 10,775
13 16,739 100,000 100,000 100,000 4,940 7,868 12,658 4,760 7,688 12,478
14 18,521 100,000 100,000 100,000 5,159 8,557 14,368 5,159 8,557 14,368
15 20,392 100,000 100,000 100,000 5,343 9,247 16,233 5,343 9,247 16,233
16 22,356 100,000 100,000 100,000 5,491 9,937 18,270 5,491 9,937 18,270
17 24,419 100,000 100,000 100,000 5,595 10,622 20,494 5,595 10,622 20,494
18 26,585 100,000 100,000 100,000 5,651 11,294 22,920 5,651 11,294 22,920
19 28,859 100,000 100,000 100,000 5,654 11,951 25,571 5,654 11,951 25,571
20 31,247 100,000 100,000 100,930 5,594 12,581 28,464 5,594 12,581 28,464
25 45,102 100,000 100,000 110,879 4,137 15,101 47,379 4,137 15,101 47,379
30 62,785 100,000 100,000 130,812 0 15,476 76,761 0 15,476 76,761
35 85,353 100,000 100,000 167,257 0 10,693 122,686 0 10,693 122,686
40 150,917 100,000 100,000 218,167 0 15,306 191,223 0 15,306 191,223
45 234,595 100,000 100,000 322,859 0 0 302,061 0 0 302,061
</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 $7,262 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%, $7,262 at 6% and $0 at 12%, subject to any maximums required
to maintain the Policy's status for federal income tax purposes.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT
RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY
THE OWNER. THE DEATH BENEFIT, ACCOUNT VALUE AND SURRENDER VALUE FOR A POLICY
WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT
RETURN AVERAGE 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE
OR BELOW THE AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE
MADE THAT THESE HYPOTHETICAL INVESTMENT RESULTS CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
69
<PAGE>
DEATH BENEFIT OPTION 3: LEVEL DEATH BENEFIT WITH GREATER FUNDING ILLUSTRATION
ASSUMES CURRENT CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK SUM INSURED AT ISSUE
(GUARANTEED DEATH BENEFIT): $100,000 $900 BASE POLICY PREMIUM (1)
<TABLE>
<CAPTION>
Death Benefit Account Value Surrender Value
-------------------------------- -------------------------------- --------------------------------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of: Annual Investment Return of: Annual Investment Return of:
Policy At 5% Interest -------------------------------- -------------------------------- --------------------------------
Year Per Year (2) 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
- ------ -------------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 945 100,000 100,000 100,000 323 356 389 0 0 0
2 1,937 100,000 100,000 100,000 873 967 1,065 303 397 495
3 2,979 100,000 100,000 100,000 1,405 1,595 1,802 700 890 1,097
4 4,073 100,000 100,000 100,000 1,919 2,241 2,604 1,079 1,401 1,764
5 5,222 100,000 100,000 100,000 2,413 2,903 3,478 1,738 2,228 2,803
6 6,428 100,000 100,000 100,000 2,887 3,583 4,430 2,077 2,773 3,620
7 7,694 100,000 100,000 100,000 3,339 4,277 5,466 2,529 3,467 4,656
8 9,024 100,000 100,000 100,000 3,769 4,987 6,595 3,049 4,267 5,875
9 10,420 100,000 100,000 100,000 4,173 5,710 7,824 3,543 5,080 7,194
10 11,886 100,000 100,000 100,000 4,563 6,462 9,185 4,023 5,922 8,645
11 13,425 100,000 100,000 100,000 4,973 7,278 10,725 4,523 6,828 10,275
12 15,042 100,000 100,000 100,000 5,358 8,114 12,414 5,043 7,799 12,099
13 16,739 100,000 100,000 100,000 5,716 8,970 14,269 5,536 8,790 14,089
14 18,521 100,000 100,000 100,000 6,048 9,847 16,308 6,048 9,847 16,308
15 20,392 100,000 100,000 100,000 6,350 10,744 18,550 6,350 10,744 18,550
16 22,356 100,000 100,000 100,000 6,622 11,660 21,019 6,622 11,660 21,019
17 24,419 100,000 100,000 100,000 6,855 12,588 23,734 6,855 12,588 23,734
18 26,585 100,000 100,000 100,000 7,041 13,523 26,720 7,041 13,523 26,720
19 28,859 100,000 100,000 100,000 7,176 14,462 30,006 7,176 14,462 30,006
20 31,247 100,000 100,000 100,000 7,254 15,400 33,628 7,254 15,400 33,628
25 45,102 100,000 100,000 113,115 6,563 19,898 58,214 6,563 19,898 58,214
30 62,785 100,000 100,000 164,764 3,156 23,350 96,806 3,156 23,350 96,806
35 85,353 100,000 100,000 235,194 0 23,659 155,387 0 23,659 155,387
40 142,701 100,000 100,000 324,535 16,151 48,245 237,094 16,151 48,245 237,094
45 215,894 100,000 102,018 449,815 30,855 80,800 356,261 30,855 80,800 356,261
</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 $5,854 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%, $5,854 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.
70
<PAGE>
DEATH BENEFIT OPTION 3: LEVEL DEATH BENEFIT WITH GREATER FUNDING ILLUSTRATION
ASSUMES MAXIMUM CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK SUM INSURED AT ISSUE
(GUARANTEED DEATH BENEFIT): $100,000 $900 BASE POLICY PREMIUM (1)
<TABLE>
<CAPTION>
Death Benefit Account Value Surrender Value
-------------------------------- -------------------------------- --------------------------------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of: Annual Investment Return of: Annual Investment Return of:
Policy At 5% Interest -------------------------------- -------------------------------- --------------------------------
Year Per Year (2) 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
- ------ -------------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 945 100,000 100,000 100,000 275 307 339 0 0 0
2 1,937 100,000 100,000 100,000 778 866 958 8 96 188
3 2,979 100,000 100,000 100,000 1,263 1,440 1,633 358 535 728
4 4,073 100,000 100,000 100,000 1,732 2,030 2,366 692 990 1,326
5 5,222 100,000 100,000 100,000 2,180 2,633 3,164 1,005 1,458 1,989
6 6,428 100,000 100,000 100,000 2,610 3,250 4,032 1,300 1,940 2,722
7 7,694 100,000 100,000 100,000 3,017 3,879 4,974 1,807 2,669 3,764
8 9,024 100,000 100,000 100,000 3,402 4,521 6,000 2,282 3,401 4,880
9 10,420 100,000 100,000 100,000 3,763 5,172 7,115 2,833 4,242 6,185
10 11,886 100,000 100,000 100,000 4,100 5,835 8,329 3,560 5,295 7,789
11 13,425 100,000 100,000 100,000 4,410 6,507 9,651 3,960 6,057 9,201
12 15,042 100,000 100,000 100,000 4,690 7,184 11,090 4,375 6,869 10,775
13 16,739 100,000 100,000 100,000 4,940 7,868 12,658 4,760 7,688 12,478
14 18,521 100,000 100,000 100,000 5,159 8,557 14,368 5,159 8,557 14,368
15 20,392 100,000 100,000 100,000 5,343 9,247 16,233 5,343 9,247 16,233
16 22,356 100,000 100,000 100,000 5,491 9,937 18,270 5,491 9,937 18,270
17 24,419 100,000 100,000 100,000 5,595 10,622 20,494 5,595 10,622 20,494
18 26,585 100,000 100,000 100,000 5,651 11,294 22,920 5,651 11,294 22,920
19 28,859 100,000 100,000 100,000 5,654 11,951 25,571 5,654 11,951 25,571
20 31,247 100,000 100,000 100,000 5,594 12,581 28,465 5,594 12,581 28,465
25 45,102 100,000 100,000 100,000 4,137 15,101 47,694 4,137 15,101 47,694
30 62,785 100,000 100,000 132,567 0 15,476 77,889 0 15,476 77,889
35 85,353 100,000 100,000 185,401 0 10,693 122,490 0 10,693 122,490
40 150,917 100,000 100,000 247,709 6,396 32,109 180,968 6,396 32,109 180,968
45 234,595 100,000 100,000 332,311 11,191 55,323 263,196 11,191 55,323 263,196
</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 $7,262 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%, $7,262 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.
71
<PAGE>
LOGO
POLICIES ISSUED BY JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
JOHN HANCOCK PLACE, BOSTON, MASSACHUSETTS 02117
S8144-M 5/97
<PAGE>
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that Section.
REPRESENTATION OF REASONABLENESS
John Hancock Variable Life Insurance Company represents that the fees and
charges deducted under the Policies, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred, and the
risks assumed by the insurance company.
UNDERTAKING REGARDING INDEMNIFICATION
Pursuant to Section X of JHVLICO's Bylaws and Section 67 of the
Massachusetts Business Corporation Law, JHVLICO indemnifies each director,
former director, officer, and former officer, and his heirs and legal
representatives from liability incurred or imposed in connection with any legal
action in which he may be involved by reason of any alleged act or omission as
an officer or a director of JHVLICO.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following Papers and Documents:
The facing sheet.
Cross-Reference Table.
The prospectus including eighteen subaccounts consists of 73 pages and the
prospectus including twenty-one subaccounts consists of 74 pages.
The undertaking to file reports.
The undertaking regarding indemnification.
<PAGE>
The signatures.
The following exhibits:
I.A. (1) JHVLICO Board Resolution establishing the separate account included in
Post-Effective Amendment No. 2 to this Form S-6 Registration
Statement, filed March 5, 1996.
(2) Not Applicable
(3) (a) Form of Distribution Agreement by and among John Hancock
Distributors, Inc., John Hancock Mutual Life Insurance Company,
and John Hancock Variable Life Insurance Company, incorporated by
reference from Pre-Effective Amendments No. 2 to Form S-6
Registration Statement of John Hancock Variable Life Account S
(File No. 333-15075) filed April 18, 1997.
(b) Specimen Variable Contracts Selling Agreement between John Hancock
Distributors, Inc., and selling broker-dealers, incorporated by
reference from Pre-Effective Amendment No. 2 to Form S-6
Registration Statement of John Hancock Variable Life Account S
(File No. 333-15075) filed April 18, 1997.
(c) Schedule of sales commissions included in Exhibit I. A. (3) (a)
above.
(4) Not Applicable
(5) Form of scheduled premium variable life insurance policy, included in
the initial filing of this registration statement, filed February 22,
1994.
(6) (a) JHVLICO Certificate of Incorporation included in Post-Effective
Amendment No. 2 to this Form S-6 Registration Statement, filed March
5, 1996.
(b) JHVLICO By-laws included in Post-Effective Amendment No. 2 to this
Form S-6 Registration Statement, filed March 5, 1996.
(7) Not Applicable.
(8) Not Applicable.
(9) Not Applicable.
(10) Form of application for Policy, included in the initial
filing of this registration statement, 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), previously filed
electronically on April 23, 1996.
9. Power of attorney of Ronald J. Bocage, incorporated by reference from Form
10-K annual reported for John Hancock Variable Life Insurance Company (File
No. 33- ) filed March 28, 1997. Powers of attorney for Tomlinson,
D'Alessandro, Shaw, Luddy, Lee, Reitano, Van Leer, and Paster included in
Post-Effective Amendment No. 2 to this Form S-6 Registration Statement,
filed March 5, 1996.
10. Opinion of Counsel as to eligibility of this Post-Effective Amendment
for filing pursuant to Rule 485(b).
11. Exemptive Relief Relied Upon included in Post-Effective Amendment No. 2 to
this Form S-6 Registration Statement, filed March 5, 1996.
<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 17th day of April, 1997.
JOHN HANCOCK VARIABLE LIFE
INSURANCE COMPANY
(SEAL)
By HENRY D. SHAW
-------------
Henry D. Shaw
President
Attest: Ronald J. Bocage
---------------------------
Ronald J. Bocage
Vice President and 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.
Signatures Title Date
- ---------- ----- ----
ROBERT R. REITANO
- ----------------------
Robert R. Reitano Director(Principal Financial Officer)
April 16, 1997
PATRICK F. SMITH
- ----------------------
Patrick F. Smith Controller (Principal
Accounting Officer) April 16, 1997
HENRY D. SHAW
- ----------------------
Henry D. Shaw Vice Chairman of the Board
for himself and as and President(Acting Principal
Attorney-in-Fact Executive Officer) April 17, 1997
For: David F. D'Alessandro Chairman of the Board
Robert S. Paster Director
Thomas J. Lee Director
Michele G. Van Leer Director
Joseph A. Tomlinson Director
Barbara L. Luddy Director
Ronald J. Bocage Director
<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 Post-
Effective Amendment to the Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, and its seal to be hereunto fixed
and attested, all in the City of Boston and Commonwealth of Massachusetts on the
17th day of April, 1997.
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 Ronald J. Bocage
--------------------------
Ronald J. Bocage
Vice President and Counsel
W001402.DOC
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> LARGE CAP GROWTH
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 145,572,331
<INVESTMENTS-AT-VALUE> 153,159,843
<RECEIVABLES> 0
<ASSETS-OTHER> 26,242
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 153,186,085
<PAYABLE-FOR-SECURITIES> 23,703
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,539
<TOTAL-LIABILITIES> 26,242
<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> 153,159,843
<DIVIDEND-INCOME> 22,706,338
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 789,368
<NET-INVESTMENT-INCOME> 21,916,970
<REALIZED-GAINS-CURRENT> 2,555,654
<APPREC-INCREASE-CURRENT> (2,922,417)
<NET-CHANGE-FROM-OPS> 21,550,207
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 57,084,851
<NUMBER-OF-SHARES-REDEEMED> 17,207,723
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 39,510,366
<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> 789,368
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> SOVEREIGN BOND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 64,605,934
<INVESTMENTS-AT-VALUE> 64,419,410
<RECEIVABLES> 0
<ASSETS-OTHER> 31,130
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 64,450,540
<PAYABLE-FOR-SECURITIES> 30,069
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,061
<TOTAL-LIABILITIES> 31,130
<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> 64,419,410
<DIVIDEND-INCOME> 4,518,056
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 352,330
<NET-INVESTMENT-INCOME> 4,165,726
<REALIZED-GAINS-CURRENT> (136,401)
<APPREC-INCREASE-CURRENT> (1,537,488)
<NET-CHANGE-FROM-OPS> 2,491,837
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 17,069,620
<NUMBER-OF-SHARES-REDEEMED> 6,980,376
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 8,415,356
<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> 352,330
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> INTERNATIONAL EQUITIES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 36,138,429
<INVESTMENTS-AT-VALUE> 39,447,186
<RECEIVABLES> 0
<ASSETS-OTHER> 32,210
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 39,479,395
<PAYABLE-FOR-SECURITIES> 31,582
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 628
<TOTAL-LIABILITIES> 32,210
<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> 39,447,186
<DIVIDEND-INCOME> 460,651
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 209,866
<NET-INVESTMENT-INCOME> 250,785
<REALIZED-GAINS-CURRENT> 156,348
<APPREC-INCREASE-CURRENT> 2,539,023
<NET-CHANGE-FROM-OPS> 2,946,156
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,889,232
<NUMBER-OF-SHARES-REDEEMED> 5,070,208
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 8,514,395
<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> 209,866
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> SMALL CAP GROWTH
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 3,020,254
<INVESTMENTS-AT-VALUE> 2,933,413
<RECEIVABLES> 0
<ASSETS-OTHER> 26,794
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,960,207
<PAYABLE-FOR-SECURITIES> 26,747
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 47
<TOTAL-LIABILITIES> 26,794
<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> 2,933,413
<DIVIDEND-INCOME> 1,404
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 6,704
<NET-INVESTMENT-INCOME> (5,300)
<REALIZED-GAINS-CURRENT> (210,399)
<APPREC-INCREASE-CURRENT> (86,846)
<NET-CHANGE-FROM-OPS> (303,085)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,808,912
<NUMBER-OF-SHARES-REDEEMED> 1,577,714
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2,933,413
<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> 6,704
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> INTERNATIONAL BALANCED
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 724,736
<INVESTMENTS-AT-VALUE> 743,691
<RECEIVABLES> 0
<ASSETS-OTHER> 310
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 744,001
<PAYABLE-FOR-SECURITIES> 298
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 12
<TOTAL-LIABILITIES> 310
<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> 743,691
<DIVIDEND-INCOME> 11,409
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 1,311
<NET-INVESTMENT-INCOME> 10,098
<REALIZED-GAINS-CURRENT> 1,642
<APPREC-INCREASE-CURRENT> 18,955
<NET-CHANGE-FROM-OPS> 30,694
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 782,342
<NUMBER-OF-SHARES-REDEEMED> 59,248
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 743,691
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,311
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> MID CAP GROWTH
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 2,176,221
<INVESTMENTS-AT-VALUE> 2,214,471
<RECEIVABLES> 0
<ASSETS-OTHER> 4,761
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,219,232
<PAYABLE-FOR-SECURITIES> 4,725
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 36
<TOTAL-LIABILITIES> 4,761
<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> 2,214,471
<DIVIDEND-INCOME> 7,102
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 4,054
<NET-INVESTMENT-INCOME> 3,048
<REALIZED-GAINS-CURRENT> 168
<APPREC-INCREASE-CURRENT> 38,250
<NET-CHANGE-FROM-OPS> 41,466
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,244,678
<NUMBER-OF-SHARES-REDEEMED> 68,625
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2,214,471
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,054
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> LARGE CAP VALUE
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1,758,104
<INVESTMENTS-AT-VALUE> 1,845,329
<RECEIVABLES> 0
<ASSETS-OTHER> 9,242
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,854,571
<PAYABLE-FOR-SECURITIES> 9,212
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 30
<TOTAL-LIABILITIES> 9,242
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,845,329
<DIVIDEND-INCOME> 36,343
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 3,073
<NET-INVESTMENT-INCOME> 33,270
<REALIZED-GAINS-CURRENT> 3,072
<APPREC-INCREASE-CURRENT> 87,225
<NET-CHANGE-FROM-OPS> 123,568
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,802,792
<NUMBER-OF-SHARES-REDEEMED> 47,761
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,845,329
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,073
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 8
<NAME> MONEY MARKET
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 17,375,664
<INVESTMENTS-AT-VALUE> 17,375,664
<RECEIVABLES> 0
<ASSETS-OTHER> 162,096
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 17,537,760
<PAYABLE-FOR-SECURITIES> 161,814
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 282
<TOTAL-LIABILITIES> 162,096
<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> 17,375,664
<DIVIDEND-INCOME> 918,057
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 105,919
<NET-INVESTMENT-INCOME> 812,137
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 812,137
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 22,341,290
<NUMBER-OF-SHARES-REDEEMED> 24,649,640
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (2,308,350)
<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> 105,919
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 9
<NAME> MID CAP VALUE
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1,235,400
<INVESTMENTS-AT-VALUE> 1,337,926
<RECEIVABLES> 0
<ASSETS-OTHER> 5,403
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,343,329
<PAYABLE-FOR-SECURITIES> 5,381
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 22
<TOTAL-LIABILITIES> 5,403
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,337,926
<DIVIDEND-INCOME> 28,018
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 2,232
<NET-INVESTMENT-INCOME> 25,786
<REALIZED-GAINS-CURRENT> 2,034
<APPREC-INCREASE-CURRENT> 102,527
<NET-CHANGE-FROM-OPS> 130,347
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,294,623
<NUMBER-OF-SHARES-REDEEMED> 61,257
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,337,926
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,232
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 10
<NAME> SPECIAL OPPORTUNITIES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 38,816,388
<INVESTMENTS-AT-VALUE> 46,440,638
<RECEIVABLES> 0
<ASSETS-OTHER> 37,006
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 46,477,644
<PAYABLE-FOR-SECURITIES> 36,261
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 745
<TOTAL-LIABILITIES> 37,006
<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> 46,440,638
<DIVIDEND-INCOME> 1,789,171
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 188,016
<NET-INVESTMENT-INCOME> 1,601,155
<REALIZED-GAINS-CURRENT> 1,418,069
<APPREC-INCREASE-CURRENT> 4,977,778
<NET-CHANGE-FROM-OPS> 7,997,002
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 24,232,199
<NUMBER-OF-SHARES-REDEEMED> 4,354,560
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 26,273,485
<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> 188,016
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> REAL ESTATE EQUITY
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 25,329,878
<INVESTMENTS-AT-VALUE> 31,786,260
<RECEIVABLES> 0
<ASSETS-OTHER> 18,248
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 31,804,508
<PAYABLE-FOR-SECURITIES> 17,752
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 496
<TOTAL-LIABILITIES> 18,248
<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> 31,786,260
<DIVIDEND-INCOME> 1,610,938
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 145,276
<NET-INVESTMENT-INCOME> 1,465,662
<REALIZED-GAINS-CURRENT> 184,058
<APPREC-INCREASE-CURRENT> 5,976,712
<NET-CHANGE-FROM-OPS> 7,626,432
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7,479,651
<NUMBER-OF-SHARES-REDEEMED> 4,101,012
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 9,539,402
<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> 145,276
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 12
<NAME> GROWTH & INCOME
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 273,743,016
<INVESTMENTS-AT-VALUE> 299,997,131
<RECEIVABLES> 0
<ASSETS-OTHER> 177,763
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 300,114,894
<PAYABLE-FOR-SECURITIES> 112,767
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,997
<TOTAL-LIABILITIES> 117,763
<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> 299,997,131
<DIVIDEND-INCOME> 37,254,741
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 1,542,729
<NET-INVESTMENT-INCOME> 35,712,012
<REALIZED-GAINS-CURRENT> 3,938,033
<APPREC-INCREASE-CURRENT> 6,429,196
<NET-CHANGE-FROM-OPS> 46,079,242
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 91,820,483
<NUMBER-OF-SHARES-REDEEMED> 19,447,546
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 82,740,167
<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> 1,542,729
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 13
<NAME> MANAGED
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 297,723,544
<INVESTMENTS-AT-VALUE> 304,230,791
<RECEIVABLES> 0
<ASSETS-OTHER> 25,104
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 304,255,895
<PAYABLE-FOR-SECURITIES> 20,063
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,041
<TOTAL-LIABILITIES> 25,104
<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> 304,230,791
<DIVIDEND-INCOME> 37,205,797
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 1,678,618
<NET-INVESTMENT-INCOME> 35,527,179
<REALIZED-GAINS-CURRENT> 3,555,551
<APPREC-INCREASE-CURRENT> (11,690,944)
<NET-CHANGE-FROM-OPS> 27,391,786
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 76,126,209
<NUMBER-OF-SHARES-REDEEMED> 26,165,616
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 41,825,200
<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> 1,678,618
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 14
<NAME> SHORT-TERM U.S. GOVERNMENT
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 3,031,349
<INVESTMENTS-AT-VALUE> 3,015,184
<RECEIVABLES> 0
<ASSETS-OTHER> 547
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,015,731
<PAYABLE-FOR-SECURITIES> 507
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 40
<TOTAL-LIABILITIES> 547
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 3,015,184
<DIVIDEND-INCOME> 140,926
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 12,366
<NET-INVESTMENT-INCOME> 128,560
<REALIZED-GAINS-CURRENT> 20,920
<APPREC-INCREASE-CURRENT> (69,770)
<NET-CHANGE-FROM-OPS> 79,709
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,512,362
<NUMBER-OF-SHARES-REDEEMED> 1,915,792
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 548,718
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 12,366
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 15
<NAME> SMALL CAP VALUE
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 1,329,794
<RECEIVABLES> 0
<ASSETS-OTHER> 4,324
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,334,118
<PAYABLE-FOR-SECURITIES> 4,303
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 21
<TOTAL-LIABILITIES> 4,324
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,329,794
<DIVIDEND-INCOME> 32,693
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 2,395
<NET-INVESTMENT-INCOME> 30,298
<REALIZED-GAINS-CURRENT> (1,418)
<APPREC-INCREASE-CURRENT> 66,350
<NET-CHANGE-FROM-OPS> 95,230
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,365,414
<NUMBER-OF-SHARES-REDEEMED> 100,552
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,329,794
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,395
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 16
<NAME> INTERNATIONAL OPPORTUNITIES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 2,161,690
<INVESTMENTS-AT-VALUE> 2,260,539
<RECEIVABLES> 0
<ASSETS-OTHER> 7,832
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,268,371
<PAYABLE-FOR-SECURITIES> 7,795
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 37
<TOTAL-LIABILITIES> 7,832
<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> 2,260,539
<DIVIDEND-INCOME> 5,631
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 3,818
<NET-INVESTMENT-INCOME> 1,813
<REALIZED-GAINS-CURRENT> 2,596
<APPREC-INCREASE-CURRENT> 98,849
<NET-CHANGE-FROM-OPS> 103,258
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,337,466
<NUMBER-OF-SHARES-REDEEMED> 178,372
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2,260,539
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,818
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 17
<NAME> EQUITY INDEX
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1,140,395
<INVESTMENTS-AT-VALUE> 1,199,192
<RECEIVABLES> 0
<ASSETS-OTHER> 9,736
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,208,928
<PAYABLE-FOR-SECURITIES> 9,716
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 20
<TOTAL-LIABILITIES> 9,736
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,199,192
<DIVIDEND-INCOME> 27,780
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 2,193
<NET-INVESTMENT-INCOME> 25,586
<REALIZED-GAINS-CURRENT> 4,690
<APPREC-INCREASE-CURRENT> 58,797
<NET-CHANGE-FROM-OPS> 89,073
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,223,909
<NUMBER-OF-SHARES-REDEEMED> 88,204
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,199,192
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,193
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 18
<NAME> STRATEGIC BOND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 420,364
<INVESTMENTS-AT-VALUE> 418,113
<RECEIVABLES> 0
<ASSETS-OTHER> 152
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 418,265
<PAYABLE-FOR-SECURITIES> 145
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7
<TOTAL-LIABILITIES> 152
<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> 418,113
<DIVIDEND-INCOME> 13,269
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 675
<NET-INVESTMENT-INCOME> 12,594
<REALIZED-GAINS-CURRENT> 1,272
<APPREC-INCREASE-CURRENT> (2,250)
<NET-CHANGE-FROM-OPS> 11,616
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 500,399
<NUMBER-OF-SHARES-REDEEMED> 81,308
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 418,113
<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> 675
<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> 19
<NAME> TURNER CORE GROWTH
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 2,740
<INVESTMENTS-AT-VALUE> 2,740
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,740
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<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> 2,740
<DIVIDEND-INCOME> 91
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 1,556
<NET-INVESTMENT-INCOME> (1,465)
<REALIZED-GAINS-CURRENT> (75,788)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> (77,254)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,757,166
<NUMBER-OF-SHARES-REDEEMED> 1,678,638
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2,740
<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> 1,556
<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> 20
<NAME> EDINBURGH INT'L EQUITY
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 62,972
<INVESTMENTS-AT-VALUE> 63,191
<RECEIVABLES> 0
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 63,192
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1
<TOTAL-LIABILITIES> 1
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 63,191
<DIVIDEND-INCOME> 362
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 74
<NET-INVESTMENT-INCOME> 289
<REALIZED-GAINS-CURRENT> (30)
<APPREC-INCREASE-CURRENT> 220
<NET-CHANGE-FROM-OPS> 478
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 63,897
<NUMBER-OF-SHARES-REDEEMED> 895
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 63,191
<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> 74
<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> 21
<NAME> FRONTIER CAPITAL APPRECIATION
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 60,692
<INVESTMENTS-AT-VALUE> 62,124
<RECEIVABLES> 0
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 62,125
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1
<TOTAL-LIABILITIES> 1
<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> 62,124
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 1,628
<NET-INVESTMENT-INCOME> (1,628)
<REALIZED-GAINS-CURRENT> (130,154)
<APPREC-INCREASE-CURRENT> 1,432
<NET-CHANGE-FROM-OPS> (130,350)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,798,979
<NUMBER-OF-SHARES-REDEEMED> 1,605,600
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 62,124
<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> 1,628
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
EXHIBIT 6
[LETTERHEAD OF JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY APPEARS HERE]
April 21, 1997
Board of Directors
John Hancock Variable Life Insurance Company
Re: File Nos. 33-75610 and 811-5290
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, 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.
I hereby consent to the filing of this opinion as an exhibit to the amended
Registration Statement and to the use of my name 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 7, 1997, with respect to
the financial statements of John Hancock Variable Life Account V and February
14, 1997, with respect to the financial statements of John Hancock Variable Life
Insurance Company, included in this Post-Effective Amendment No. 4 to the
Registration Statement (Form S-6, No. 33-75610).
/s/Ernst & Young LLP
ERNST & YOUNG LLP
Boston, Massachusetts
April 28, 1997
<PAGE>
EXHIBIT 10
[LETTERHEAD OF JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY APPEARS HERE]
April 28, 1997
United States Securities
and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
John Hancock Variable Life Account V
File Nos. 33-75610 and 811-5290
Commissioners:
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/Sandra M. DaDalt
-------------------
Sandra M. DaDalt
Counsel
