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John Hancock Variable Life
Insurance Company
(JHVLICO)
[LOGO OF JOHN HANCOCK 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 02117
TELEPHONE 1-800-REAL LIFE (1-800-732-5543)
FAX 617-572-5410
PROSPECTUS MAY 1, 1997
AS SUPPLEMENTED JUNE 18, 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 ("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 prospectus for the Fund, which is attached to this Prospectus, describes
the investment objectives, policies and risks of investing in the Portfolios
of the Fund: Growth and Income (formerly Stock), Large Cap Growth (formerly
Select Stock), Sovereign Bond (formerly Bond), Money Market, Managed, Real
Estate Equity, International Equities (formerly International), 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. 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 THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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TABLE OF CONTENTS
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SUMMARY.................................................................... 1
JHVLICO AND JOHN HANCOCK................................................... 6
THE ACCOUNT AND SERIES FUND................................................ 7
THE FIXED ACCOUNT.......................................................... 10
POLICY PROVISIONS AND BENEFITS............................................. 10
Requirements for Issuance of Policy...................................... 11
Premiums................................................................. 11
Account Value and Surrender Value........................................ 14
Death Benefits........................................................... 15
Value Options............................................................ 16
Partial Withdrawal of Excess Value....................................... 17
Transfers Among Subaccounts.............................................. 17
Loan Provisions and Indebtedness......................................... 18
Default and Options on Lapse............................................. 19
Exchange Privilege....................................................... 20
CHARGES AND EXPENSES....................................................... 21
Charges Deducted from Premiums........................................... 21
Sales Charges............................................................ 21
Reduced Charges for Eligible Groups...................................... 22
Charges Deducted from Account Value...................................... 23
DISTRIBUTION OF POLICIES................................................... 25
TAX CONSIDERATIONS......................................................... 26
Policy Proceeds.......................................................... 26
Charge for JHVLICO's Taxes............................................... 27
Corporate and H.R. 10 Plans.............................................. 27
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS OF JHVLICO....................... 28
REPORTS.................................................................... 28
VOTING PRIVILEGES.......................................................... 29
CHANGES IN APPLICABLE LAW--FUNDING AND OTHERWISE........................... 30
STATE REGULATION........................................................... 30
LEGAL MATTERS.............................................................. 30
REGISTRATION STATEMENT..................................................... 30
EXPERTS.................................................................... 30
FINANCIAL STATEMENTS....................................................... 31
APPENDIX--OTHER POLICY PROVISIONS.......................................... 61
APPENDIX--ILLUSTRATION OF DEATH BENEFITS, SURRENDER VALUES AND
ACCUMULATED PREMIUMS...................................................... 63
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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.
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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:
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Account Value....................................................... 14
Attained Age........................................................ 16
Basic Death Benefit................................................. 15
Basic Premium....................................................... 12
Benchmark Value..................................................... 16
Contingent Deferred Sales Charge.................................... 21
Current Death Benefit............................................... 15
Death Benefit Factor................................................ 15
Excess Value........................................................ 16
Experience Component................................................ 16
Extra Death Benefit................................................. 15
Fixed Account....................................................... 10
Grace Period........................................................ 19
Guaranteed Death Benefit............................................ 15
Indebtedness........................................................ 19
Investment Rule..................................................... 13
Issue Charge........................................................ 23
Level Schedule...................................................... 12
Loan Assets......................................................... 19
Minimum First Premium............................................... 11
Modified Schedule................................................... 12
Premium Component................................................... 16
Premium Credit Factor............................................... 16
Premium Processing Charge........................................... 21
Premium Recalculation............................................... 12
Required Premium.................................................... 11
Servicing Office.................................................... 6
Subaccount.......................................................... Cover
Sum Insured at Issue................................................ 15
Surrender Value..................................................... 15
Valuation Date...................................................... 9
Value Option........................................................ 15
Variable Subaccount................................................. 2
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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 policies purchased by the
payment of fixed annual premiums and policies purchased by the payment of a
single premium. These other policies are not funded by the Account and are
offered by means of other prospectuses, but use the same underlying Fund.
As explained below, the death benefit and surrender value under the Policy
may increase or decrease daily. 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 expenses, taxes, and sales load.
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 increase or decrease daily depending on the investment
experience of the Subaccounts to which premiums are allocated. In general, the
Current Death Benefit equals the Account Value times a factor ("Death Benefit
Factor") which depends upon the sex and attained age of the insured. If the
Account Value increases, the Current Death Benefit will increase, and, if the
Account Value decreases, the Current Death Benefit will decrease. However,
JHVLICO guarantees that, regardless of the investment experience, the death
benefit payable will never be less than the amount of insurance originally
purchased in the absence of a subsequent 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 reaches or 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 reaches 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 basically the sum of the amounts of the premium
that JHVLICO, at the direction of the Owner, places in the Account and in the
Fixed Account. The Account Value increases or decreases daily depending on the
investment experience of the Subaccounts to which the amounts are allocated.
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 unpaid Issue Charge and any Contingent Deferred Sales Charge and less any
Indebtedness. If the Owner surrenders in the
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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 initial death benefit that may be bought is $25,000 for insureds
less than 25 years of age at the time of issue of the Policy and $50,000 for
insureds with ages 25 through 75 at issue. All persons insured must meet
certain health and other criteria called "underwriting standards." The smoking
status of the insured is generally reflected in the insurance charges made. If
the minimum death benefit 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?
Premiums are determined under one of two premium schedules selected by the
Owner. Under the Level Schedule, premiums are fixed for the life of the
Policy. Under the Modified Schedule, a lower fixed premium is applicable which
does not vary until the Policy anniversary nearest the insured's 72nd
birthday. On this date, in the absence of an earlier election by the Owner,
the Policy premium is automatically shifted to the Level Schedule and a new
fixed annual premium becomes payable on a scheduled basis. The new 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 72nd birthday. In addition to the premium schedule chosen, the
amount of the premium for a Policy depends upon the Sum Insured at Issue and
the insured's age and sex (unless the Policy is sex-neutral). 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. There is a 61-day grace period in which to
make premium payments due after the Minimum First Premium is received.
Within limits, scheduled premiums may be paid in advance and more than the
scheduled premiums may be paid. If the Account Value under a Policy is
sufficiently high, a 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 Fund. The assets of each variable
Subaccount are invested in the corresponding Portfolio of the Fund. The
Portfolios of the Fund 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, and Equity Index.
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.
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Other Total Fund
Investment Fund Operating Other Fund Expenses
Portfolio Management Fee Expenses Expenses Absent Reimbursement*
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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
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* 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?
Premium Processing Charge. A charge not to exceed $2 deducted from each
premium payment.
State Premium Tax Charge. A charge equal to 2 1/2% of each premium payment
after deduction of the Premium Processing Charge.
Sales Charge Deduction from Premium. A charge equal to 4 1/2% of each
premium payment after deduction of the Premium Processing Charge.
Contingent Deferred Sales Charge. A charge deducted from Account Value if
the Policy lapses or is surrendered during the first 14 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 premiums paid to date. The total
charge 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.
Issue Charges. A charge deducted monthly from Account Value in 48 equal
installments totalling $240 plus 48c per $1000 of Sum Insured at Issue.
Maintenance Charge. A charge deducted monthly from Account Value in an
amount equal to no more than $4 plus 2c per $1000 of current Sum Insured.
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Insurance Charge. A charge based upon the amount at risk, 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.
Guaranteed Death Benefit Charges. 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.
Upon any exercise of the Extra Death Benefit Option or the Basic Premium
Reduction Option, a one-time charge not to exceed 3% (currently 1 1/2%) of the
amount applied to exercise the option.
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 7% of each year's additional premium is deducted from
premiums when paid and 93% 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 7% of each year's
additional premium is deducted from premiums when paid and 93% of the
additional premium is deducted monthly from Account Value in equal
installments.
Charge for Partial Withdrawal. A charge equal to the lesser of $25 or 2% of
the amount withdrawn deducted from Account Value at the time of withdrawal.
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 a processing charge, the charges
deducted for sales expenses and state premium taxes. 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".)
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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 load, 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?
The death benefit payable is the greater of the Guaranteed Death Benefit,
including any Extra Death Benefit Value Option which may have been exercised,
or the Current Death Benefit. Whenever the Current Death Benefit exceeds the
Guaranteed Death Benefit, the death benefit will increase whenever there is an
increase in the Policy's Account Value and it will decrease whenever there is
a decrease in the Policy's Account Value but never below the Guaranteed Death
Benefit. (See "Death Benefits".)
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 effective annual rate determined by JHVLICO at the start
of each Policy Year. This interest rate will not exceed the greater of (1) the
"Published Monthly Average" (see "Loan Provision and Indebtedness") for the
calendar month ending two months before the calendar month of the Policy
anniversary or (2) 5%. In jurisdictions where a fixed loan rate is applicable,
JHVLICO will charge interest at an effective annual rate of 6%, accrued 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
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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 IS THE EXCHANGE PRIVILEGE ALLOWED AN OWNER?
The Owner may transfer the entire Account Value in variable Subaccounts
under a Policy to the Fixed Account at any time. The transfer will take effect
at the end of the Valuation Period in which JHVLICO receives, at its Servicing
Office, notice satisfactory to JHVLICO. (See "Exchange Privilege".)
ARE THE BENEFITS UNDER A POLICY SUBJECT TO FEDERAL INCOME TAX?
There has been a determination by the Internal Revenue Service that death
benefits payable under variable life insurance policies (which appear to be
similar to those described in this Prospectus in all material respects) are
excludable from the beneficiary's gross income for Federal income tax
purposes. It is also believed that an Owner will not be deemed to be in
constructive receipt of the cash values of the Policy until values are
actually received through withdrawal, surrender, or other distributions. 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.
Under recent Federal tax legislation, distributions from Policies entered
into after June 20, 1988 on which premiums greater than a "7-pay" premium
limit (as defined in the law) have been paid, will be subject to taxation. See
"Flexibility as to Premium Payments" for a discussion of how the "7-pay"
premium limit may be exceeded under a Policy. A distribution on such a Policy
(called by the law a "modified endowment contract") will be taxed to the
extent there is any income (gain) to the Owner and an additional tax may be
imposed on the taxable amount (See "Flexibility as to Premium Payments" and
"Policy Proceeds" under "Tax Considerations").
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 commited to make additional capital contributions if necessary
to ensure that JHVLICO maintains a positive net worth.
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THE ACCOUNT AND 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 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.
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.
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
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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 emphazising 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.
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<PAGE>
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 common stocks 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 Fund, 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 Portfolios.
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.
John Hancock will purchase and redeem Fund shares for the Account at their
net asset value without any sales or redemption charges. Shares of the Fund
represent an interest in one of the Portfolios of the Fund which corresponds
to the 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
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<PAGE>
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.
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 scheduled 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 a higher rate 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 Securities and Exchange 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. For the effect of a default in payment of premiums, see "Default and
Options on Lapse", and of a loan, see "Loan Provision and Indebtedness".
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<PAGE>
REQUIREMENTS FOR ISSUANCE OF POLICY
The Policy is generally available with a minimum Sum Insured at Issue of
$25,000 for insureds less than 25 years of age at the time of issue of the
Policy and minimum Sum Insured at Issue of $50,000 for insureds with ages 25
through 75 at issue. All persons insured must meet certain health and other
criteria called "underwriting standards". The smoking status of the insured is
reflected in the 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,
factors and premiums 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.
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.
All Policies operate under the same schedule of due dates.
After the payment of the Minimum First Premium (see "Minimum Premium
Requirements" below) there are three scheduled due dates in the first Policy
year. Due dates are the last Valuation Date in the third, sixth and ninth
Policy months. In the second Policy year, the scheduled due dates are the last
Valuation Date in the sixth and twelfth Policy months. In the third and all
later Policy years, the scheduled due date is the last Valuation Date of the
Policy year.
Minimum Premium Requirements
An amount of Required Premium (see "Amount of Required Premium" below) is
determined at the start of each Policy year. Generally, the full amount of
Required Premium must be paid by the last scheduled due date of the Policy
year. In the first and second Policy years, however, there are additional
requirements.
In the first Policy year, 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 equal to the greater of $150 or one-
fourth of the Required Premium. Also in the first Policy year, one-half of the
Required Premium must be received on or before the last Valuation Date in the
third Policy month and three-quarters of the Required Premium must be received
on or before the last Valuation Date in the sixth Policy month.
In the second Policy year, one-half of the Required Premium for the second
Policy year must be received on or before the last Valuation Date in the sixth
Policy month.
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.
Generally, all premiums 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
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<PAGE>
purpose by amounts withdrawn from the Premium Component of Excess Value and
amounts applied from the Premium Component to any Value Option other than the
Accumulate Option. The premium requirement will also be deemed satisfied on
the last Valuation Date of the second or any later Policy year if any Excess
Value is available on the scheduled due date. See "Value Options".
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 Policy year equals an
amount for the Basic Death Benefit ("Basic Premium") or $300 if the annual
Basic Premium is less than $300, plus any additional premium because the
insured is an extra mortality risk or because additional insurance benefits
have been purchased. The Basic Premium is a level amount that does not change
if the Level Schedule is selected. If the Modified Schedule is selected, the
Basic Premium does not change until the Premium Recalculation occurs. See
"Choice of Premium Schedule" and "Premium Recalculation".
If the Account Value on the Valuation Date immediately preceding the Policy
anniversary, when multiplied by the Death Benefit Factor on that Policy
anniversary , is equal to or greater than the Guaranteed Death Benefit, then
no Required Premium is applicable to the following Policy year. This means
that even if no premium is paid during the Policy year, the premium
requirement will be met on the scheduled due date at the end of the Policy
year. If applicable, Owners will be mailed a written notice by JHVLICO within
10 days after any Policy anniversary stating that no premium payment is
required in that Policy year.
Choice of Premium Schedule
At the time of application, the applicant can select either a Level Schedule
or a Modified Schedule as the basis for the Basic Premium on the Policy. The
Modified Schedule alternative is not available if the insured is over age 70
on the issue date of the Policy. If the Level Schedule is chosen, the Basic
Premium will never increase during the lifetime of the insured. With the Level
Schedule, the Basic Premium is completely insulated from any adverse
investment performance. If the Modified Schedule is chosen, the Basic Premium
is initially lower than under the Level Schedule. However, a Premium
Recalculation (described below) must occur no later than the Policy
anniversary nearest the insured's 72nd birthday. At the time of the Premium
Recalculation, JHVLICO determines a new Basic Premium which is payable through
the remaining lifetime of the insured.
A comparison of the Basic Premiums at issue under the Level and Modified
Schedules for a Sum Insured at issue of $100,000 for a male is shown below:
<TABLE>
<CAPTION>
Issue
Age Level Modified
----- ----- --------
<S> <C> <C>
25 $1,113.00 $ 708.00
40 $1,954.00 $1,305.00
55 $3,869.00 $2,585.00
</TABLE>
Premium Recalculation (Modified Schedule Only)
The Premium Recalculation applicable to any Policy on a Modified Schedule
may be elected by the Owner at any time after the first Policy anniversary up
to the Policy anniversary nearest the insured's 72nd birthday. If elected, the
Premium Recalculation will be effected on the Policy anniversary next
following receipt by
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<PAGE>
JHVLICO at its Servicing Office of satisfactory written notice. If not elected
sooner, the Premium Recalculation will be effected by JHVLICO on the Policy
anniversary nearest the insured's 72nd birthday.
The new Basic Premium resulting from a Premium Recalculation may be less
than, equal to or greater than the original Basic Premium but it will never
exceed the maximum Basic Premium shown in the Policy. The new Basic Premium
depends on the insured's sex and age, the Guaranteed Death Benefit under the
Policy and the Account Value on the Valuation Date immediately preceding the
date of the Premium Recalculation.
A charge will be made if the new Basic Premium is below the Basic Premium on
the Level Schedule for the insured's age at issue of the Policy. The charge
(currently 1 1/2%) will not exceed 3% of the amount of Account Value applied
by JHVLICO to reduce the new Basic Premium to an amount below the Basic
Premium which would have been payable on the Level Schedule for the insured's
age at issue. See "Guaranteed Death Benefit Charges".
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. A Premium Processing Charge,
not to exceed $2, is deducted from each premium payment. 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 three exceptions
noted below is applicable. Each premium payment will be reduced, first by the
Premium Processing Charge and then by the state premium tax charge and the
sales charge deducted from 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,
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 an 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 three 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 issue date will be processed
as if received on the Valuation Date immediately preceding the
issue date.
(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
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 issue
date, 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.
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<PAGE>
Flexibility as to Premium Payments
The Owner may pay more than the Required Premium during a Policy year and
may ask to be billed for an amount greater than any Required Premium. The
Owner may also pay amounts in addition to any billed amount. However, each
premium payment must be at least $25. JHVLICO reserves the right to limit
premium payments above the amount of the cumulative Required Premiums due on
the Policy.
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 applied under a Value Option (See "Value Options"), 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 due 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. If, however, the Owner were to
apply $500 of the additional premium to a Value Option, then only $1,500 would
remain to meet Required Premiums. The Policy would remain in force for at
least 9 years but a payment of $500 may be necessary by the end of the tenth
Policy year to keep the Policy in force.
7-Pay Premium Limitation
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 that exceed a "7-pay' premium as defined in the law.
The "7-pay' premium is greater than the Required Premium on the Policy but is
generally less than the amount an Owner may choose to pay and JHVLICO will
accept. If the total premium paid exceeds the 7-pay limitation, the Owner will
be subject to the new tax rules on any distributions made from the Policy. A
material change in the Policy will result in a new "7-pay" limitation and test
period. A reduction in death benefit within the seven year period following
issuance of, or a material change in, the Policy may also result in the
application of the modified endowment treatment. See "Policy Proceeds" under
"Tax Considerations." If John Hancock receives any premium payment that will
cause a Policy to become a modified endowment, the excess portion of that
premium will not be accepted unless the Owner signs an acknowledgement of that
fact. When it identifies such excess premium, John Hancock sends the Owner
immediate notice and refunds the excess premium if it has not received the
acknowledgement 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.
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 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.
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<PAGE>
Amount of Surrender Value. The Surrender Value will be the Account Value
less the sum of any unpaid Issue Charge and any Contingent Deferred Sales
Charge and less any Indebtedness.
The Contingent Deferred Sales Charge is deducted from the Account Value upon
surrender of the Policy during the first fourteen Policy years after issue.
The amount of this charge is set forth in a schedule under "Sales Charges".
The total charge 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 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. 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
for the Policy will be adjusted to reflect the new Sum Insured. A pro-rata
portion of any Contingent Deferred Sales Charge will be deducted. A possible
alternative to the partial surrender of a Policy is the withdrawal of Excess
Value. See "Value Options".
DEATH BENEFITS
The death benefit payable is the greater of the Guaranteed Death Benefit,
including any Extra Death Benefit, or the Current Death Benefit.
Guaranteed Death Benefit. The Guaranteed Death Benefit at any time is the
sum of the Basic Death Benefit and any Extra Death Benefit. The Basic Death
Benefit at issue of the Policy is the same as the Sum Insured at Issue shown
in the Policy. Thereafter the Basic 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.
Extra Death Benefit. An Extra Death Benefit may be available from time to
time on Policy anniversaries. If the Owner exercises an Extra Death Benefit
Value Option on a Policy anniversary, the amount of Extra Death Benefit
produced under the Option becomes a Guaranteed Death Benefit. The amount of
any Extra Death Benefit depends upon the Account Value, Benchmark Value (see
"Value Options") and the sex and age of the Insured on the Policy anniversary
as of which the Option is exercised. See "Value Options". The insured's age on
a Policy anniversary is the age of the insured on his or her birthday nearest
that date.
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 the Death
Benefit Factor shown in the Policy. The Death Benefit Factor depends upon the
sex and the then attained age of the insured. The Death Benefit Factor
decreases from year to year as the attained age of the insured increases. For
example, the Death Benefit Factor for a male age 75 is 1.3546, for a male age
76 is 1.3325. (A complete list of Death Benefit Factors is set forth in the
Policy.) The Current Death Benefit is variable: it increases as the Account
Value increases and decreases as the Account Value decreases.
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<PAGE>
VALUE OPTIONS
As of the last Valuation Date in each Policy year, the Account Value of the
Policy will be compared against an amount (the Benchmark Value described
below) to determine if any "Excess Value" exists under the Policy. Any Excess
Value will be applied according to the election made in the application for
the Policy or in a written notice from the Owner after issue of the Policy.
The Benchmark Value depends upon the Policy's Guaranteed Death Benefit, the
Required Premium, any Indebtedness, the sex and attained age of the insured,
and any Surrender Charge. The formula describing precisely how Benchmark Value
is calculated on each Policy anniversary is set forth in the Policy under
"Excess Value". In general, the Benchmark Value increases as more guarantees
are provided in the Policy, either in the form of higher Guaranteed Death
Benefits or lower premiums. The Benchmark Value is also not less than 110% of
any Indebtedness. The Benchmark Value generally increases as the attained age
of the insured increases.
Excess Value is any amount of Account Value greater than Benchmark Value.
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 or applied under certain Value Options)
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.
If Excess Value is available on a Policy anniversary, any Premium Component
and Experience Component will be applied under Value Options elected by the
Owner. Either component may be applied to any available Value Option except
that the Premium Component must be applied to the Accumulate Option until the
second Policy anniversary. The amounts to be applied will be determined in
accordance with the Owner's election and in accordance with the then current
JHVLICO rules. A change in an election will be effective as of the Policy
anniversary next following its date of receipt in writing by JHVLICO at its
Servicing Office or, if subject to underwriting rules, its date of approval.
Any change in election does not affect amounts previously applied under any
Value Option.
The Policy includes three Value Options:
The Accumulate Option leaves any Excess Value in the Account Value and does
not affect the guarantees under the Policy. The Accumulate Option is available
on both Premium Schedules and no limit is placed on the amount that may be
applied from either the Premium Component or the Experience Component.
The Extra Death Benefit Option increases the amount of Guaranteed Death
Benefit. The Extra Death Benefit Option is available on both Premium
Schedules. No limit is placed on the amount that may be applied from the
Experience Component. The amount that may be applied from the Premium
Component is limited to an amount that depends upon the Sum Insured at Issue
and the insured's age at issue of the Policy. Amounts applied from the Premium
Component reduce the cumulative amount of premiums received under the Policy
for purposes of determining whether the Policy will continue to remain in
force. A Guaranteed Death Benefit Charge (see "Charges and Expenses") is made
against the Account Value to cover the risk assumed by JHVLICO in providing
the increased Guaranteed Death Benefit. The Extra Death Benefit Value Option
may not be available if the insured is an extra mortality risk.
The increase in Guaranteed Death Benefit equals the amount applied less the
Guaranteed Death Benefit Charge times the Death Benefit Factor shown in the
Policy. An increase in the Guaranteed Death Benefit may increase the amount at
risk under the Policy which would increase the amount of the Insurance Charge.
See
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<PAGE>
"Charges Deducted from Account Value". The Owner may decrease the amount of
any Extra Death Benefit on the Policy. Depending upon the amount of Account
Value under a Policy, a decrease may result in an amount of Excess Value which
may be taken by the Owner as a partial withdrawal. See "Partial Withdrawal of
Excess Value". Any decrease is effective at the end of the Valuation Period in
which JHVLICO receives written notice of the request.
The Basic Premium Reduction Option permanently decreases the amount of the
Basic Premium that would otherwise have to be paid in a Policy year to avoid a
lapse at the end of the year. The Basic Premium Reduction Option is available
only on the Level Schedule. No limit is currently placed on the amount that
may be applied from either component except that the Basic Premium may not be
reduced below zero. Amounts applied from the Premium Component reduce the
cumulative amounts of premiums received under the Policy for purposes of
determining whether the Policy will continue to remain in force. A Guaranteed
Death Benefit Charge (see "Charges and Expenses") is made against the Account
Value to cover the risk assumed by JHVLICO that the Guaranteed Death Benefit
will remain in effect notwithstanding the lower future premiums. The reduction
in Basic Premium equals the amount applied, less the Guaranteed Death Benefit
Charge, divided by the Premium Credit Factor shown in the Policy. The Premium
Credit Factor depends upon the sex and the then attained age of the insured.
The Premium Credit Factor decreases from year to year as the attained age of
the insured increases. For example, the Premium Credit Factor for a female age
60 is 13.6798, for a female age 61 is 13.3382.
PARTIAL WITHDRAWAL OF EXCESS VALUE
Under JHVLICO's current administrative rules, an Owner may withdraw Excess
Value from the Policy on or after the first Policy anniversary. This
privilege, which reduces the Account Value by the amount of the withdrawal and
the associated charge, may be exercised only once in a Policy year and will be
effective as of the end of the Valuation Period in which JHVLICO receives
written notice satisfactory to it at its Servicing Office. The minimum amount
that may be withdrawn is $500. Unless the Current Death Benefit exeeds the
Guaranteed Death Benefit, a partial withdrawal will not affect the death
benefit payable. An amount equal to the lesser of $25 or 2% of the amount
withdrawn is charged against Account Value for each partial withdrawal.
An amount equal to the Excess Value withdrawn will be removed from each
Subaccount in the same proportion as the Account Value is then allocated among
the Subaccounts. A partial withdrawal is not a loan and, once made, cannot be
repaid. No Contingent Deferred Sales Charge is deducted upon a partial
withdrawal. Amounts withdrawn from the Premium Component reduce the cumulative
amount of premiums received for purposes of determining whether the premium
requirements of the Policy have been met. On a Modified Schedule, because the
Account Value is reduced by a partial withdrawal, the premium that results
from the 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
up to twelve times in each Policy year with no charge. If any additional
transfers in a Policy year are permitted, JHVLICO may impose a charge of not
more than $5 against Account Value for each additional transfer. 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.
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<PAGE>
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 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. Furthermore, 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.
No transfers among Subaccounts may be made while the Policy is in a grace
period.
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 transfer 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
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
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at an annual rate determined by JHVLICO at the start of each Policy Year. This
interest rate will not exceed the greater of (1) the "Published Monthly
Average" (defined below) for the calendar month ending 2 months before the
calendar month of the Policy anniversary or (2) 5%. In jurisdictions where a
fixed loan rate is applicable, JHVLICO will charge interest at an effective
annual rate of 6%, accrued daily. The "Published Monthly Average" means
Moody's Corporate Bond Yield Average--Monthly Average Corporates, as published
by Moody's Investors Service, Inc., or if the average is no longer published,
a substantially similar average established by the insurance regulator where
the Policy is issued.
The amount of any outstanding loan plus accrued interest is called the
"Indebtedness". Except when used to pay premiums, a loan will not be permitted
unless it is at least $300. The Owner may repay all or a portion of any
Indebtedness while the insured is living and premiums are being duly paid.
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 "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
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 borrrowed from the Fixed Account, then upon a repayment of $1500,
$500 would be allocated to the Fixed Account and the remaining $1000 would be
allocated to the appropriate Subaccounts as stipulated in the then current
Investment Rule.
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 the 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 an 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.
DEFAULT AND OPTIONS ON LAPSE
Premium Grace Period, Default and Lapse. Any amount of premium required to
keep the Policy in force is in default if not paid on or before its scheduled
due 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.
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
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<PAGE>
default. The portion of the payment equal to the amount in default will be
processed as if it had been received the day it was due; any excess payment
will be processed as of the end of the Valuation Period in which it is
received. See "Premium Payments".
Options on Lapse. If a Policy lapses, the Surrender Value on the date of
lapse is applied under one of the following options for continued insurance
not requiring further payment of premiums. These options provide for Variable
or Fixed Paid-Up Insurance or Fixed Extended Term Insurance on the life of the
insured commencing on the date of lapse.
Both the Variable and Fixed Paid-Up Insurance options provide an amount of
paid-up whole life insurance, determined in accordance with the Policy, which
the Surrender Value will purchase. The amount of Variable Paid-Up Insurance
may then increase or decrease, subject to any guarantee, in accordance with
the investment experience of the Subaccounts. The Fixed Paid-Up Insurance
option provides a fixed and level amount of insurance. The Fixed Extended Term
Insurance option provides a fixed amount of insurance determined in accordance
with the Policy, with the insurance coverage continuing for as long a period
as the available Policy values will purchase.
If no option has been elected before the end of the grace period, the Fixed
Extended Term Insurance option automatically applies unless the amount of
Fixed Paid-Up Insurance would equal or exceed the amount of Fixed Extended
Term Insurance or unless the insured is a substandard risk, in either of which
cases Fixed Paid-Up Insurance is provided.
The Variable Paid-Up Insurance option is not available unless the initial
amount of Variable Paid-Up Insurance is at least $5,000.
A Policy continued under any option may be surrendered for its Surrender
Value while the insured is living. Loans may be available under the Variable
and Fixed Paid-Up Insurance options.
Reinstatement. The Policy may be reinstated in accordance with its terms
(including evidence of insurability satisfactory to JHVLICO and payment of the
required premium and charges) within 3 years after the beginning of the grace
period unless the Surrender Value has been paid or otherwise exhausted, or the
period of any Fixed Extended Term Insurance has expired.
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.
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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:
Premium Processing Charge. A charge, not to exceed $2, will be deducted from
each premium payment for collection and processing costs. Policyholders who
pay premiums annually will incur lower aggregate processing charges than those
who pay premiums more frequently. The processing charge is currently $2 but
may be different for payments made under special billing arrangements
acceptable to JHVLICO.
State Premium Tax Charge. A charge equal to 2 1/2% of each premium payment,
after the deduction of the Premium Processing Charge, will be deducted from
each premium payment except in any state where a lower charge is required. The
2 1/2% 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.
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 load 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."
Part of the sales charge is deducted from each premium payment received.
This amount is 4 1/2% of the premium, after deduction of the Premium
Processing Charge. JHVLICO will waive the portion of the sales charge
otherwise to be deducted from each premium paid 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 at some future date.
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 fourteenth anniversary, and it will be reduced for a Policy
that lapses or is surrendered between the end of the tenth Policy year and the
end of the fourteenth Policy year.
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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 Modified Premiums or portions thereof due on or before the
date of surrender or lapse.
<TABLE>
<CAPTION>
Maximum Contingent Deferred Sales
Charge as a Percentage of Modified
Premiums Due Through Effective
For Surrenders or Lapses Effective During: Date of Surrender or Lapse*
------------------------------------------ ----------------------------------
<S> <C>
Policy Years 1-8......................... 15.00%
Policy Year 9............................ 14.38%
Policy Year 10........................... 13.89%
Policy Year 11........................... 10.80%
Policy Year 12........................... 7.35%
Policy Year 13........................... 4.50%
Policy Year 14........................... 2.08%
Policy Year 15 and Later................. 0%
</TABLE>
- --------
* A slightly lower percentage than that shown applies in the last Valuation
Period of Policy years 8 through 14.
The amount of the Contingent Deferred Sales Charge is calculated on the
basis of the premium under the Modified Schedule for the age of the insured at
the time of issue of the Policy, regardless of whether the Policy uses the
Level Schedule or the Modified Schedule. At issue ages above 70, however,
where only the Level Schedule is available, the Contingent Deferred Sales
Charge depends on the premium under that schedule. Also, lower percentages
apply at higher issue ages.
The absence of any need to pay a Required Premium because of the adequacy of
the Account Value on a Policy anniversary does not impact the amount of
Modified 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 Modified 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 (i.e., from
Modified to Level Schedule) or a premium reduction is implemented, 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 premium schedule in effect prior to such recalculation or reduction.
The Contingent Deferred Sales Charge reaches its maximum at the end of the
ninth Policy year and equals this amount for the entire tenth Policy year. The
Contingent Deferred Sales Charge is reduced in each Policy year after the
tenth. At issue ages higher than age 57, the maximum is reached at an earlier
Policy year, e.g., the end of the fifth Policy year at issue age 70, and may
be reduced to zero over a shorter number of years.
REDUCED CHARGES FOR ELIGIBLE GROUPS
The sales charges 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
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<PAGE>
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 Policyowner.
CHARGES DEDUCTED FROM ACCOUNT VALUE
In addition to the possible transfer charge discussed above under "Transfers
Among Subaccounts", the following charges are deducted from Account Value:
Issue Charge. JHVLICO will deduct from Account Value a charge ($240 per
Policy and 48c per $1,000 of the Sum Insured at Issue) 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. For a Policy with a $50,000 Sum Insured
at Issue, the total Issue Charge would be $264.
This charge is fully assessed upon the issuance of the Policy, but will be
deducted from the Account Value in 48 equal monthly installments. On the Date
of Issue and on the first day of each subsequent Policy month, JHVLICO will
deduct $5 plus 1c per $1,000 of the Sum Insured at Issue. For each month that
JHVLICO is unable to deduct the charge because there is insufficient Account
Value, the period over which JHVLICO will make this deduction will be extended
by one month.
If a Policy lapses or is surrendered before the Issue Charge has been fully
recovered, the unpaid balance is part of the Surrender Charge. If a Policy
terminates by reason of the death of the insured, the unpaid balance will not
reduce the death benefit. The unpaid Issue Charge also reduces the amount that
may be borrowed through a Policy loan.
Maintenance Charge. JHVLICO will deduct from the Account Value a monthly
charge equal to $4 plus 2c per $1,000 of the current Sum Insured. For a Policy
with a Sum Insured at Issue of $50,000 the maintenance charge deducted during
a Policy year would be $60.
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.
The maximum monthly maintenance charge currently is $6.75 no matter how
large a Policy's current Sum Insured. Based on the current monthly charge,
this maximum will benefit all Policies which have a current Sum Insured above
$137,500. Policies with a Sum Insured below this amount are not affected by
the maximum. This current maximum is not contractually guaranteed and may be
withdrawn or modified by JHVLICO at some future date.
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.
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<PAGE>
Current monthly rates for insurance are based on the sex, age, and
underwriting class of the insured. 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.
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 and be age 20 or over. Insureds who
are under 20 years of age may ask us to review their current smoking habits
after they reach their 20th birthday.
JHVLICO will also charge lower current insurance rates under a Policy with a
current Sum Insured of $250,000 or higher if the insured is over age 32 in the
standard underwriting class or the insured is over age 34 in the preferred
underwriting class. These lower current insurance rates are not contractually
guaranteed and may be withdrawn or modified by JHVLICO at some future date.
Guaranteed Death Benefit Charges. 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 an Extra Death Benefit Value Option is exercised, JHVLICO guarantees a
higher Guaranteed Death Benefit. When a Basic Premium Reduction Value Option
is exercised, JHVLICO provides the same Guaranteed Death Benefit with less
premiums. In either event, JHVLICO makes a one-time deduction from the amount
applied as compensation for making the additional guarantee. The current
charge is 1 1/2% of the amount applied. This charge may be increased by
JHVLICO but it will never exceed 3% of the amount applied.
When a Premium Recalculation is effected on Policy on a Modified Schedule,
and the new Basic Premium is less than the Basic Premium on the Level Schedule
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 amount applied to reduce the new Basic Premium
to an amount below the Basic Premium on the Level Schedule 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 7% of the additional premium is deducted from
premiums when paid and 93% of the additional premium is deducted monthly from
Account Value in equal installments.
An insured who is charged an additional Required Premium because of the
extra mortality risk may not be eligible to exercise the Extra Death Benefit
Value Option.
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<PAGE>
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 7% of the additional
premium is deducted from premiums when paid and 93% 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 effect 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 fifth 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 $500. An administrative charge equal to the
lesser of $25 or 2% of the amount withdrawn will be deducted from the Account
Value on the date of withdrawal.
Guarantee of Premiums and Certain Charges. The Policy's Basic Premium is
guaranteed not to increase, except that a larger Basic Premium may result from
the Premium Recalculation for a Modified Schedule Policy. The state premium
tax charge, sales charges, 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. Any charge for transfers among Subaccounts, the
Premium Processing Charge, the maintenance charge, the Guaranteed Death
Benefit Charges 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.
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.
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<PAGE>
The maximum commission payable to an agent for selling a Policy is 50% of
the premium that would be payable under a Modified Schedule in the first
Policy year, 10% of such premiums payable in the second, third and fourth
Policy years and 3% of any other premiums received by JHVLICO.
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
POLICY PROCEEDS
Although the Policy contains provisions not found in fixed benefit life
insurance policies, JHVLICO believes the Policy will nevertheless 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.
JHVLICO believes that the death benefit under the Policy will be excludable
from the beneficiary's gross income under Section 101 of the Code. The Owner
of a Policy is not deemed to be in constructive receipt of the cash values
until a withdrawal or surrender. 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 the Owner may be taxed on a withdrawal of Policy
values even if total withdrawals do not exceed total premiums paid.
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<PAGE>
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 entered into after June 20, 1988, on which
premiums greater than the "7-pay' limit have been paid will be subject to
taxation based on Federal tax law. 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).
Additionally, a 10% penalty tax may be imposed on income distributed before
the Owner attains age 59 1/2. Policies entered into prior to June 21, 1988,
may also be subject to a tax on distributions if there is a material change in
the benefits or other terms of the Policy. 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 recent tax law 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.
The above description of Federal tax consequences is only a brief summary
and is not intended as tax advice. For further information consult a qualified
tax advisor.
Federal and state tax laws can change from time to time and, as a result,
the tax consequences to the Owner and beneficiary may be altered.
CHARGE FOR JHVLICO'S TAXES
Currently JHVLICO makes no charge against the Account 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.
27
<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.
Robert R. Reitano 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
Company.
Joseph A. Tomlinson Director and Vice President of JHVLICO;
Vice President, John Hancock Mutual Life
Insurance Company.
Michele G. Van Leer 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.
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
28
<PAGE>
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 each Portfolio.
VOTING PRIVILEGES
All of the assets in the variable Subaccounts of the Account, apart from
assets attributable to Policy loans, 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 and 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 meeting.
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 the Fund's investment management agreement 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 of the Fund
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 the Fund's Board of Trustees in the
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 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.
29
<PAGE>
CHANGES IN APPLICABLE LAW--FUNDING AND OTHERWISE
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, and (3) to deregister the Account under
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.
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.
30
<PAGE>
Actuarial matters included in this Prospectus have been examined by Randi M.
Sterrn, F.S.A., an Actuary of JHVLICO.
FINANCIAL STATEMENTS
The financial statements of JHVLICO included herein should be distinguished
from the financial statements of the Account and should be considered only as
bearing upon the ability of JHVLICO to meet its obligations under the Policies.
31
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 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.
32
<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.
33
<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.
34
<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.
35
<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.
36
<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.
37
<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.
38
<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.
39
<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.
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>
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.
41
<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.
42
<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>
43
<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>
44
<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
45
<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
46
<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.
47
<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.
48
<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.
49
<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.
50
<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,
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
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.
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
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.
53
<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>
54
<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.
55
<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>
56
<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.
57
<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>
58
<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.
59
<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.
60
<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.
61
<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,
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 premium in
excess of the Required Premium, any increase in death benefit due to payment
of excess premium 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.
62
<PAGE>
APPENDIX--ILLUSTRATION OF DEATH BENEFITS,
SURRENDER VALUES AND ACCUMULATED PREMIUMS
The following tables illustrate the changes in death benefit 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 at Issue and shows how the death benefit and
surrender value (reflecting the deduction of the surrender charge, 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 death benefit and surrender value
figures set forth in the tables with those under other variable life insurance
policies which may be issued by JHVLICO or other companies. The death benefit
and surrender value 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 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 will be
made in each year illustrated. The tables headed "Using Maximum Charges"
assume that the maximum (guaranteed) charge will be made for insurance and for
expense charges in each year illustrated. 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 nine variable Subaccounts. The
actual charges and expenses associated with any Policy will vary depending
upon the actual allocation of Policy values among Subaccounts. During the
first 14 Policy years, the surrender values for the base Policy are the
Account Values less the Contingent Deferred Sales Charge (and, during the
first four years, less any unpaid Issue Charge). Thereafter the Account Value
will be equal to the surrender value.
The tables reflect that no charge is currently made to the Accounts 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.
The amounts shown for the death benefit and surrender value reflect Excess
Value, if any, applied under the Accumulate Option.
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.
63
<PAGE>
PLAN: SCHEDULED PREMIUM VARIABLE WHOLE LIFE
MALE, ISSUE AGE 25, STANDARD NON-SMOKER UNDERWRITING RISK
SUM INSURED AT ISSUE (GUARANTEED DEATH BENEFIT) $100,000
PREMIUM SCHEDULE--LEVEL
$1,113 BASIC PREMIUM (1)
USING CURRENT CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
------------------------------ --------------------------------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated 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
------ -------------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 1,169 100,000 100,000 100,000 369 420 471
2 2,396 100,000 100,000 100,000 1,022 1,166 1,318
3 3,684 100,000 100,000 100,000 1,669 1,952 2,261
4 5,037 100,000 100,000 100,000 2,308 2,778 3,310
5 6,458 100,000 100,000 100,000 2,939 3,646 4,477
6 7,949 100,000 100,000 100,000 3,558 4,557 5,778
7 9,515 100,000 100,000 100,000 4,164 5,512 7,225
8 11,160 100,000 100,000 100,000 4,793 6,548 8,868
9 12,886 100,000 100,000 100,000 5,406 7,629 10,686
10 14,699 100,000 100,000 100,000 6,074 8,828 12,769
11 16,603 100,000 100,000 100,000 6,844 10,193 15,185
12 18,602 100,000 100,000 100,000 7,667 11,679 17,908
13 20,700 100,000 100,000 100,000 8,470 13,214 20,891
14 22,904 100,000 100,000 100,000 9,250 14,798 24,159
15 25,218 100,000 100,000 100,000 10,006 16,432 27,742
16 27,647 100,000 100,000 102,772 10,545 17,926 31,478
17 30,198 100,000 100,000 112,478 11,056 19,472 35,568
18 32,877 100,000 100,000 122,678 11,537 21,071 40,044
19 35,689 100,000 100,000 133,419 11,987 22,724 44,939
20 38,643 100,000 100,000 144,732 12,404 24,435 50,291
25 55,776 100,000 100,000 211,340 13,958 33,930 85,466
30 77,644 100,000 100,000 299,255 14,336 45,218 139,761
35 105,553 100,000 109,212 416,337 12,813 58,277 222,165
40 141,173 100,000 120,729 573,147 8,285 72,798 345,602
45 186,634 100,000 131,420 782,935 0 88,320 526,166
50 244,655 100,000 141,313 1,064,076 0 104,321 785,528
55 318,706 100,000 150,976 1,442,017 0 120,204 1,148,103
</TABLE>
- --------
(1) If premiums are paid more frequently than annually the payments would be
$556.50 semiannually, $278.25 quarterly, or $92.75 on a special monthly
basis. The death benefits and surrender values shown would be affected by
the more frequent premium payments.
(2) The premiums accumulated at 5% interest in Column 2 are those payable if
the gross investment return is 6%.
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 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.
64
<PAGE>
PLAN: SCHEDULED PREMIUM VARIABLE WHOLE LIFE
MALE, ISSUE AGE 25, STANDARD NON-SMOKER UNDERWRITING RISK
SUM INSURED AT ISSUE (GUARANTEED DEATH BENEFIT) $100,000
PREMIUM SCHEDULE AT ISSUE--MODIFIED
$708 INITIAL BASIC PREMIUM AT ISSUE (1)
USING CURRENT CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
-------------------------------- --------------------------------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated 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
------ -------------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 743 100,000 100,000 100,000 0 25 54
2 1,524 100,000 100,000 100,000 282 359 439
3 2,344 100,000 100,000 100,000 565 712 872
4 3,204 100,000 100,000 100,000 846 1,085 1,356
5 4,108 100,000 100,000 100,000 1,121 1,477 1,899
6 5,057 100,000 100,000 100,000 1,390 1,891 2,507
7 6,053 100,000 100,000 100,000 1,649 2,325 3,188
8 7,099 100,000 100,000 100,000 1,935 2,815 3,983
9 8,197 100,000 100,000 100,000 2,209 3,324 4,862
10 9,350 100,000 100,000 100,000 2,542 3,923 5,905
11 10,561 100,000 100,000 100,000 2,979 4,659 7,168
12 11,833 100,000 100,000 100,000 3,474 5,485 8,614
13 13,168 100,000 100,000 100,000 3,951 6,327 10,181
14 14,570 100,000 100,000 100,000 4,409 7,184 11,880
15 16,042 100,000 100,000 100,000 4,844 8,054 13,722
16 17,587 100,000 100,000 100,000 5,065 8,746 15,531
17 19,210 100,000 100,000 100,000 5,259 9,446 17,512
18 20,914 100,000 100,000 100,000 5,426 10,156 19,685
19 22,703 100,000 100,000 100,000 5,562 10,873 22,069
20 24,581 100,000 100,000 100,000 5,667 11,597 24,687
25 35,480 100,000 100,000 104,557 5,657 15,263 42,283
30 49,391 100,000 100,000 149,527 4,413 18,731 69,833
35 67,144 100,000 100,000 209,251 1,068 21,221 111,660
40 89,803 100,000 100,000 289,109 0 21,487 174,330
45 118,721 100,000 100,000 395,842 0 16,375 266,023
50 181,296 100,000 100,000 535,562 12,766 25,377 395,365
55 280,481 100,000 100,000 721,360 27,299 50,360 574,331
</TABLE>
- --------
(1) If premiums are paid more frequently than annually the payments would be
$354.00 semiannually, $177.00 quarterly, or $59.00 on a special monthly
basis. The death benefits and surrender values shown would be affected by
the more frequent premium payments. The basic premium (annual) after a
recalculation at age 72 will be as follows: $9,973 for a hypothetical
gross investment return of 0%, $8,541 for a gross return of 6%, and $0 for
a gross return of 12%.
(2) The premiums accumulated at 5% interest in Column 2 are those payable if
the gross investment return is 6%.
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 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>
PLAN: SCHEDULED PREMIUM VARIABLE WHOLE LIFE
MALE, ISSUE AGE 40, PREFERRED UNDERWRITING RISK
SUM INSURED AT ISSUE (GUARANTEED DEATH BENEFIT) $100,000
PREMIUM SCHEDULE--LEVEL
$1,954 BASIC PREMIUM (1)
USING CURRENT CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
-------------------------------- -------------------------------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated 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
------ -------------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 2,052 100,000 100,000 100,000 1,063 1,160 1,258
2 4,206 100,000 100,000 100,000 2,383 2,669 2,967
3 6,468 100,000 100,000 100,000 3,673 4,242 4,859
4 8,843 100,000 100,000 100,000 4,934 5,882 6,952
5 11,337 100,000 100,000 100,000 6,166 7,596 9,275
6 13,955 100,000 100,000 100,000 7,357 9,376 11,842
7 16,705 100,000 100,000 100,000 8,520 11,239 14,693
8 19,592 100,000 100,000 100,000 9,709 13,242 17,914
9 22,623 100,000 100,000 100,000 10,860 15,326 21,474
10 25,806 100,000 100,000 100,000 12,094 17,614 25,533
11 29,148 100,000 100,000 100,000 13,502 20,204 30,224
12 32,657 100,000 100,000 100,000 15,006 23,020 35,515
13 36,342 100,000 100,000 100,000 16,467 25,930 41,322
14 40,211 100,000 100,000 105,769 17,883 28,937 47,683
15 44,273 100,000 100,000 116,938 19,247 32,042 54,613
16 48,538 100,000 100,000 128,764 20,207 34,898 61,813
17 53,017 100,000 100,000 141,287 21,106 37,860 69,686
18 57,719 100,000 100,000 154,564 21,946 40,936 78,292
19 62,657 100,000 100,000 168,630 22,718 44,128 87,691
20 67,841 100,000 100,000 183,573 23,424 47,449 97,958
25 97,922 100,000 109,590 273,975 25,807 66,082 165,204
30 136,313 100,000 129,842 397,633 24,977 87,260 267,226
35 185,310 100,000 150,320 570,631 19,587 110,970 421,254
40 247,845 100,000 172,796 818,697 5,250 137,576 651,829
</TABLE>
- --------
(1) If premiums are paid more frequently than annually the payments would be
$977.00 semiannually, $488.50 quarterly, or $162.84 on a special monthly
basis. The death benefits and surrender values shown would be affected by
the more frequent premium payments.
(2) The premiums accumulated at 5% interest in Column 2 are those payable if
the gross investment return is 6%.
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 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>
PLAN: SCHEDULED PREMIUM VARIABLE WHOLE LIFE
MALE, ISSUE AGE 40, PREFERRED UNDERWRITING RISK
SUM INSURED AT ISSUE (GUARANTEED DEATH BENEFIT) $100,000
PREMIUM SCHEDULE AT ISSUE--MODIFIED
$1,305 INITIAL BASIC PREMIUM AT ISSUE (1)
USING CURRENT CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
-------------------------------- --------------------------------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated 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
------ -------------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 1,370 100,000 100,000 100,000 467 528 590
2 2,809 100,000 100,000 100,000 1,197 1,374 1,560
3 4,320 100,000 100,000 100,000 1,904 2,254 2,633
4 5,906 100,000 100,000 100,000 2,589 3,166 3,820
5 7,571 100,000 100,000 100,000 3,251 4,118 5,138
6 9,320 100,000 100,000 100,000 3,877 5,098 6,592
7 11,157 100,000 100,000 100,000 4,481 6,121 8,209
8 13,085 100,000 100,000 100,000 5,116 7,242 10,061
9 15,109 100,000 100,000 100,000 5,717 8,399 12,101
10 17,235 100,000 100,000 100,000 6,405 9,712 14,471
11 19,467 100,000 100,000 100,000 7,269 11,275 17,285
12 21,810 100,000 100,000 100,000 8,233 13,010 20,489
13 24,271 100,000 100,000 100,000 9,155 14,779 23,972
14 26,855 100,000 100,000 100,000 10,035 16,585 27,767
15 29,568 100,000 100,000 100,000 10,862 18,418 31,903
16 32,417 100,000 100,000 100,000 11,284 19,929 36,067
17 35,408 100,000 100,000 100,000 11,644 21,464 40,653
18 38,548 100,000 100,000 100,000 11,940 23,026 45,713
19 41,846 100,000 100,000 100,000 12,163 24,607 51,301
20 45,309 100,000 100,000 107,633 12,313 26,211 57,435
25 65,398 100,000 100,000 161,887 11,758 34,542 97,616
30 91,038 100,000 100,000 235,987 7,294 42,599 158,593
35 132,732 100,000 100,000 333,535 20,702 59,033 246,224
40 192,698 100,000 108,978 469,636 46,055 86,766 373,914
</TABLE>
- --------
(1) If premiums are paid more frequently than annually the payments would be
$652.50 semiannually, $326.25 quarterly, or $108.75 on a special monthly
basis. The death benefits and surrender values shown would be affected by
the more frequent premium payments. The basic premium (annual) after a
recalculation at age 72 will be as follows: $9,461 for a hypothetical
gross investment return of 0%, $4,068 for a gross return of 6%, and $0 for
a gross return of 12%.
(2) The premiums accumulated at 5% interest in Column 2 are those payable if
the gross investment return is 6%.
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 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>
PLAN: SCHEDULED PREMIUM VARIABLE WHOLE LIFE
MALE, ISSUE AGE 25, STANDARD NON-SMOKER UNDERWRITING RISK
SUM INSURED AT ISSUE (GUARANTEED DEATH BENEFIT) $100,000
PREMIUM SCHEDULE--LEVEL
$1,113 BASIC PREMIUM (1)
USING MAXIMUM CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
------------------------------ --------------------------------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated 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
------ -------------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 1,169 100,000 100,000 100,000 345 395 445
2 2,396 100,000 100,000 100,000 974 1,116 1,264
3 3,684 100,000 100,000 100,000 1,598 1,875 2,177
4 5,037 100,000 100,000 100,000 2,215 2,673 3,191
5 6,458 100,000 100,000 100,000 2,822 3,511 4,321
6 7,949 100,000 100,000 100,000 3,419 4,391 5,579
7 9,515 100,000 100,000 100,000 4,003 5,313 6,979
8 11,160 100,000 100,000 100,000 4,610 6,315 8,570
9 12,886 100,000 100,000 100,000 5,201 7,360 10,332
10 14,699 100,000 100,000 100,000 5,848 8,522 12,351
11 16,603 100,000 100,000 100,000 6,596 9,848 14,697
12 18,602 100,000 100,000 100,000 7,397 11,291 17,342
13 20,700 100,000 100,000 100,000 8,176 12,780 20,235
14 22,904 100,000 100,000 100,000 8,933 14,315 23,404
15 25,218 100,000 100,000 100,000 9,665 15,898 26,878
16 27,647 100,000 100,000 100,000 10,178 17,337 30,495
17 30,198 100,000 100,000 108,974 10,663 18,824 34,460
18 32,877 100,000 100,000 118,864 11,119 20,361 38,799
19 35,689 100,000 100,000 129,273 11,543 21,949 43,542
20 38,643 100,000 100,000 140,238 11,936 23,592 48,729
25 55,776 100,000 100,000 204,732 13,352 32,675 82,794
30 77,644 100,000 100,000 289,722 13,568 43,398 135,308
35 105,553 100,000 104,755 402,714 11,835 55,899 214,895
40 141,173 100,000 115,783 553,718 6,993 69,816 333,887
45 186,634 100,000 126,106 756,151 0 84,749 508,166
50 244,655 100,000 135,504 1,027,518 0 100,032 758,540
55 318,706 100,000 144,871 1,392,550 0 115,343 1,108,718
</TABLE>
- --------
(1) If premiums are paid more frequently than annually the payments would be
$556.50 semiannually, $278.25 quarterly, or $92.75 on a special monthly
basis. The death benefits and surrender values shown would be affected by
the more frequent premium payments.
(2) The premiums accumulated at 5% interest in Column 2 are those payable if
the gross investment return is 6%.
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 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>
PLAN: SCHEDULED PREMIUM VARIABLE WHOLE LIFE
MALE, ISSUE AGE 25, STANDARD NON-SMOKER UNDERWRITING RISK
SUM INSURED AT ISSUE (GUARANTEED DEATH BENEFIT) $100,000
PREMIUM SCHEDULE AT ISSUE--MODIFIED
$708 INITIAL BASIC PREMIUM AT ISSUE (1)
USING MAXIMUM CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
-------------------------------- --------------------------------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated 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
------ -------------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 743 100,000 100,000 100,000 0 1 28
2 1,524 100,000 100,000 100,000 234 308 386
3 2,344 100,000 100,000 100,000 494 634 788
4 3,204 100,000 100,000 100,000 752 979 1,238
5 4,108 100,000 100,000 100,000 1,005 1,342 1,742
6 5,057 100,000 100,000 100,000 1,251 1,725 2,308
7 6,053 100,000 100,000 100,000 1,488 2,126 2,942
8 7,099 100,000 100,000 100,000 1,752 2,582 3,685
9 8,197 100,000 100,000 100,000 2,004 3,055 4,507
10 9,350 100,000 100,000 100,000 2,315 3,617 5,487
11 10,561 100,000 100,000 100,000 2,732 4,314 6,680
12 11,833 100,000 100,000 100,000 3,204 5,097 8,048
13 13,168 100,000 100,000 100,000 3,657 5,893 9,525
14 14,570 100,000 100,000 100,000 4,091 6,701 11,124
15 16,042 100,000 100,000 100,000 4,502 7,520 12,856
16 17,587 100,000 100,000 100,000 4,697 8,155 14,541
17 19,210 100,000 100,000 100,000 4,866 8,796 16,384
18 20,914 100,000 100,000 100,000 5,006 9,443 18,404
19 22,703 100,000 100,000 100,000 5,117 10,094 20,617
20 24,581 100,000 100,000 100,000 5,196 10,749 23,045
25 35,480 100,000 100,000 100,000 5,045 13,993 39,330
30 49,391 100,000 100,000 139,193 3,632 16,874 65,007
35 67,144 100,000 100,000 194,778 65 18,509 103,937
40 89,803 100,000 100,000 268,923 0 17,443 162,158
45 118,721 100,000 100,000 368,205 0 10,250 247,450
50 184,464 100,000 100,000 497,854 12,689 18,695 367,528
55 290,076 100,000 100,000 670,342 27,047 44,369 533,712
</TABLE>
- --------
(1) If premiums are paid more frequently than annually the payments would be
$354.00 semiannually, $177.00 quarterly, or $59.00 on a special monthly
basis. The death benefits and surrender values shown would be affected by
the more frequent premium payments. The basic premium (annual) after a
recalculation at age 72 will be as follows: $9,973 for a hypothetical
gross investment return of 0%, $9,490 for a gross return of 6%, and $0 for
a gross return of 12%.
(2) The premiums accumulated at 5% interest in Column 2 are those payable if
the gross investment return is 6%.
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 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>
PLAN: SCHEDULED PREMIUM VARIABLE WHOLE LIFE
MALE, ISSUE AGE 40, PREFERRED UNDERWRITING RISK
SUM INSURED AT ISSUE (GUARANTEED DEATH BENEFIT) $100,000
PREMIUM SCHEDULE--LEVEL
$1,954 BASIC PREMIUM (1)
USING MAXIMUM CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
-------------------------------- -------------------------------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated 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
------ -------------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 2,052 100,000 100,000 100,000 906 998 1,091
2 4,206 100,000 100,000 100,000 2,060 2,327 2,605
3 6,468 100,000 100,000 100,000 3,176 3,700 4,269
4 8,843 100,000 100,000 100,000 4,249 5,116 6,097
5 11,337 100,000 100,000 100,000 5,282 6,582 8,113
6 13,955 100,000 100,000 100,000 6,270 8,098 10,336
7 16,705 100,000 100,000 100,000 7,215 9,665 12,791
8 19,592 100,000 100,000 100,000 8,178 11,351 15,568
9 22,623 100,000 100,000 100,000 9,095 13,094 18,631
10 25,806 100,000 100,000 100,000 10,093 15,023 22,141
11 29,148 100,000 100,000 100,000 11,263 17,233 26,226
12 32,657 100,000 100,000 100,000 12,505 19,629 30,831
13 36,342 100,000 100,000 100,000 13,686 22,082 35,871
14 40,211 100,000 100,000 100,000 14,799 24,590 41,396
15 44,273 100,000 100,000 101,607 15,837 27,151 47,453
16 48,538 100,000 100,000 111,800 16,444 29,416 53,670
17 53,017 100,000 100,000 122,516 16,967 31,739 60,427
18 57,719 100,000 100,000 133,795 17,405 34,126 67,772
19 62,657 100,000 100,000 145,667 17,751 36,580 75,750
20 67,841 100,000 100,000 158,191 18,001 39,105 84,414
25 97,922 100,000 100,000 231,981 17,343 52,910 139,882
30 136,313 100,000 102,969 329,427 11,759 69,200 221,389
35 185,310 100,000 117,227 458,311 0 86,540 338,337
40 247,845 100,000 131,370 631,367 0 104,594 502,681
</TABLE>
- --------
(1) If premiums are paid more frequently than annually the payments would be
$977.00 semiannually, $488.50 quarterly, or $162.84 on a special monthly
basis. The death benefits and surrender values shown would be affected by
the more frequent premium payments.
(2) The premium accumulated at 5% interest in Column 2 are those payable if
the gross investment return is 6%.
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 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>
PLAN: SCHEDULED PREMIUM VARIABLE WHOLE LIFE
MALE, ISSUE AGE 40, PREFERRED UNDERWRITING RISK
SUM INSURED AT ISSUE (GUARANTEED DEATH BENEFIT) $100,000
PREMIUM SCHEDULE AT ISSUE--MODIFIED
$1,305 INITIAL BASIC PREMIUM AT ISSUE (1)
USING MAXIMUM CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
-------------------------------- --------------------------------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated 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
------ -------------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 1,370 100,000 100,000 100,000 309 365 422
2 2,809 100,000 100,000 100,000 872 1,030 1,195
3 4,320 100,000 100,000 100,000 1,402 1,705 2,036
4 5,906 100,000 100,000 100,000 1,895 2,389 2,951
5 7,571 100,000 100,000 100,000 2,351 3,085 3,953
6 9,320 100,000 100,000 100,000 2,768 3,790 5,049
7 11,157 100,000 100,000 100,000 3,144 4,505 6,252
8 13,085 100,000 100,000 100,000 3,542 5,293 7,634
9 15,109 100,000 100,000 100,000 3,896 6,087 9,144
10 17,235 100,000 100,000 100,000 4,334 7,017 10,924
11 19,467 100,000 100,000 100,000 4,944 8,170 13,079
12 21,810 100,000 100,000 100,000 5,626 9,447 15,528
13 24,271 100,000 100,000 100,000 6,245 10,714 18,156
14 26,855 100,000 100,000 100,000 6,793 11,962 20,980
15 29,568 100,000 100,000 100,000 7,262 13,183 24,017
16 32,417 100,000 100,000 100,000 7,294 14,020 26,940
17 35,408 100,000 100,000 100,000 7,233 14,815 30,128
18 38,548 100,000 100,000 100,000 7,078 15,568 33,616
19 41,846 100,000 100,000 100,000 6,820 16,269 37,444
20 45,309 100,000 100,000 100,000 6,451 16,909 41,654
25 65,398 100,000 100,000 116,151 2,358 18,629 70,038
30 91,038 100,000 100,000 167,339 0 15,503 112,459
35 147,376 100,000 100,000 228,709 12,689 25,452 168,839
40 237,055 100,000 100,000 307,502 27,047 50,169 244,827
</TABLE>
- --------
(1) If premiums are paid more frequently than annually the payments would be
$652.50 semiannually, $326.25 quarterly, or $108.75 on a special monthly
basis. The death benefits and surrender values shown would be affected by
the more frequent premium payments. The basic premium (annual) after a
recalculation at age 72 will be as follows: $9,973 for a hypothetical
gross investment return of 0%, $8,477 for a gross return of 6%, and $0 for
a gross return of 12%.
(2) The premiums accumulated at 5% interest in Column 2 are those payable if
the gross investment return is 6%.
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 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 OF JOHN HANCOCK APPEARS HERE]
POLICIES ISSUED BY JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
JOHN HANCOCK PLACE, BOSTON, MASSACHUSETTS 02117
S8138 6/97
