<PAGE>
As filed with the Securities and Exchange Commission on May 3, 1999
Registration No. 33-16611
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM S-6
Post-Effective Amendment No. 14 to
Registration Statement Under
THE SECURITIES ACT OF 1933
----------------------
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
(Exact name of trust)
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
(Name of depositor)
JOHN HANCOCK PLACE
BOSTON, MASSACHUSETTS 02117
(Complete address of depositor's principal executive offices)
--------------------
RONALD J. BOCAGE,ESQ.
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
JOHN HANCOCK PLACE, BOSTON, 02117
(Name and complete address of agent for service)
--------------------
Copy to:
THOMAS C. LAUERMAN, ESQ.
Freedman, Levy, Kroll & Simonds
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036
--------------------
It is proposed that this filing become effective(check appropriate box)
[ ]immediately upon filing pursuant to paragraph (b) of Rule 485
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[X]on May 3, 1999 pursuant to paragraph (b) of Rule 485
---
[ ]60 days after filing pursuant to paragraph (a)(1) of Rule 485
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[ ]on (date) pursuant to paragraph (a)(1) of Rule 485
---
If appropriate check the following box
[ ]this post-effective amendment designates a new effective date for a
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previously filed amendment
Pursuant to the provisions of Rule 24f-2, Registrant has registered an
indefinite amount of the securities being offered and filed its Notice for
fiscal year 1998 pursuant to Rule 24f-2 on March 23, 1999.
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
Form N-8B-2 Item Caption in Prospectus
- ---------------- ---------------------
<S> <C>
1, 2 Cover, The Account and The Series
Fund or Funds, JHVLICO and John
Hancock
3 Inapplicable
4 Cover, Distribution of Policies
5,6 The Account and The Series Fund or
Funds, State Regulation
7, 8, 9 Inapplicable
10(a),(b),(c),(d),(e) Policy Provisions and Benefits
10(f) Voting Privileges
10(g),(h) Changes in Applicable Law
-- Funding and Otherwise
10(i) Appendix--Other Policy
Provisions, The Account and
The Series Funds
11, 12 Summary, The Account and Series
Fund or Funds, Distribution of
Policies
13 Charges and expenses,
Appendix--Illustration of Death
Benefits, Surrender Values and
Accumulated Premiums
14, 15 Summary, Distribution of
Policies, Premiums
16 The Account and The Series Fund or
Funds
17 Summary, Policy Provisions and
Benefits
18 The Account and The Series Fund or
Funds, Tax Considerations
19 Reports
20 Changes in Applicable Law
-- Funding and Otherwise
21 Policy Provisions and Benefits
22 Policy Provisions and Benefits
23 Distribution of Policies
24 Not Applicable
25 JHVLICO and John Hancock
26 Not Applicable
27,28,29,30 JHVLICO and John Hancock, Board
of Directors and Executive
Officers of JHVLICO
31,32,33,34 Not Applicable
35 JHVLICO and John Hancock
37 Not Applicable
38,39,40,41(a) Distribution of Policies, JHVLICO
and John Hancock, Charges and
Expenses
42, 43 Not Applicable
44 The Account and The Series Fund or,
Funds, Policy Provisions,
Appendix--Illustration of Death
Benefits, Surrender Values and
Accumulated Premiums
45 Not Applicable
46 The Account and The Series Fund or
Funds, Policy Provisions,
Appendix--Illustration of Death
Benefits, Account Values,
Surrender Values and
Accumulated Premiums
47 Not Applicable
48,49,50 Not Applicable
51 Policy Provisions and Benefits,
Appendix--Other Policy
Provisions
52 The Account and The Series Fund or
Funds,Changes in Applicable
Law -- Funding and Otherwise
53,54,55 Not Applicable
56,57,58,59 Not Applicable
</TABLE>
<PAGE>
PROSPECTUS DATED MAY 3, 1999
FLEX-V1
a scheduled premium variable life insurance policy
issued by
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY ("JHVLICO")
JHVLICO LIFE SERVICING OFFICE
-----------------------------
EXPRESS DELIVERY
----------------
529 Main Street (X-4)
Charlestown, MA 02129
U.S. MAIL
---------
P.O. Box 111
Boston, MA 02117
PHONE: 1-800-732-5543 / FAX: 1-617-886-3048
The policy provides an investment option with fixed rates of return declared
by JHVLICO and the following 23 variable investment options:
<TABLE>
<CAPTION>
VARIABLE INVESTMENT OPTION MANAGED BY
-------------------------- ----------
- ---------------------------------------------------------------------------------------------------------
<S> <C>
Managed . . . . . . . . . . . . . . . . . . . . . . . . Independence Investment Associates, Inc.
Growth & Income . . . . . . . . . . . . . . . . . . . . Independence Investment Associates, Inc.
Equity Index . . . . . . . . . . . . . . . . . . . . . State Street Global Advisors
Large Cap Value . . . . . . . . . . . . . . . . . . . . T. Rowe Price Associates, Inc.
Large Cap Growth . . . . . . . . . . . . . . . . . . . Independence Investment Associates, Inc.
Mid Cap Value . . . . Neuberger Berman, LLC
Mid Cap Growth . . . . Janus Capital Corporation
Real Estate Equity . . Independence Investment Associates, Inc.
Small/Mid Cap Growth. Wellington Management Company, LLP
Small/Mid Cap CORE . . Goldman Sachs Asset Management
Small Cap Value . . . INVESCO Management & Research, Inc.
Small Cap Growth . . . . . . . . . . . . . . . . . . . . John Hancock Advisers, Inc.
Global Equity . . . . . . . . . . . . . . . . . . . . . Scudder Kemper Investments, Inc.
International Balanced . . . . . . . . . . . . . . . . . Brinson Partners, Inc.
International Equity Index . . . . . . . . . . . . . . . Independence International Associates, Inc.
International Opportunities . . . . . . . . . . . . . . Rowe Price-Fleming International, Inc.
Emerging Markets Equity . . . . . . . . . . . . . . . . Montgomery Asset Management, LLC
Short-Term Bond . . . Independence Investment Associates, Inc.
Bond Index . . . . . . Mellon Bond Associates, LLP
Sovereign Bond . . . . . . . . . . . . . . . . . . . . . John Hancock Advisers, Inc.
Global Bond . . . . . . . . . . . . . . . . . . . . . . J.P. Morgan Investment Management, Inc.
High Yield Bond . . . Wellington Management Company, LLP
Money Market . . . . . John Hancock Mutual Life Insurance Company
- ---------------------------------------------------------------------------------------------------------
</TABLE>
We may add or delete variable investment options in the future.
<PAGE>
When you select one or more of these variable investment options, we invest
your money in the corresponding investment option(s) of the John Hancock
Variable Series Trust I (the "Trust"). The Trust is a mutual fund that offers a
number of different investment options (which are called "funds"). The
investment results of each variable investment option you select will depend on
those of the corresponding fund of the Trust. Attached to this prospectus is a
prospectus for the Trust that contains detailed information about each fund
offered under the policy. Be sure to read the prospectus for the Trust before
selecting any of the variable investment options shown on page 1.
GUIDE TO THIS PROSPECTUS
This prospectus contains information that you should know before you buy a
policy or exercise any of your rights under the policy. However, please keep in
mind that this is a prospectus - - it is not the policy. The prospectus
---
simplifies many policy provisions to better communicate the policy's essential
features. Your rights and obligations under the policy will be determined by the
language of the policy itself. When you receive your policy, read it carefully.
This prospectus is arranged in the following way:
. The section which follows is called "Basic Information". It is in a
question and answer format. We suggest you read the Basic Information
section before reading any other section of the prospectus.
. Behind the Basic Information section are illustrations of
hypothetical policy benefits that help clarify how the policy works.
These start on page 17.
. Behind the illustrations is a section called "Additional Information"
that gives more details about the policy. It generally does not
---
repeat information that is in the Basic Information section. A table
of contents for the Additional Information section appears on page
22.
. Behind the Additional Information section are the financial
statements for JHVLICO and Separate Account V. These start on page
40.
. Finally, there is an Alphabetical Index of Key Words and Phrases at
the back of the prospectus on page 79.
After the Alphabetical Index of Key Words and Phrases, this prospectus ends and
the Trust prospectus begins.
**********
Please note that the Securities and Exchange Commission ("SEC") has not
approved or disapproved these securities, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
2
<PAGE>
BASIC INFORMATION
This part of the prospectus provides answers to commonly asked questions about
the policy.
<TABLE>
<CAPTION>
<S> <C>
Question Pages to See
- --------
.What is the policy?....................................................................................................4
.Who owns the policy?...................................................................................................4
.How can I invest money in the policy?..................................................................................4-5
.Is there a minimum amount I must invest?...............................................................................5-6
.How will the value of my investment in the policy change over time?....................................................7
.What is the "Excess Value" of the policy and how is it applied?........................................................
.What charges will JHVLICO deduct from my investment in the policy?....................................................7-9
.What charges will the Trust deduct from my investment in the policy?..................................................9
.What other charges could JHVLICO impose in the future?.................................................................10
.How can I change my policy's investment allocations?...................................................................10-11
.How can I access my investment in the policy?..........................................................................11-12
.How much will JHVLICO pay when the insured person dies?................................................................12-13
.How can I change my policy's insurance coverage?.......................................................................13-14
.Can I cancel my policy after it's issued?..............................................................................14
.Can I choose the form in which JHVLICO pays out policy proceeds?.......................................................14
.To what extent can JHVLICO vary the terms and conditions of its policies in particular cases?..........................15
.How will my policy be treated for income tax purposes?.................................................................15
.How do I communicate with JHVLICO?.....................................................................................15-16
</TABLE>
Here are the page numbers where the questions and answers appear:
3
<PAGE>
WHAT IS THE POLICY?
The policy's primary purpose is to provide lifetime protection against
economic loss due to the death of the insured person. The value of the amount
you have invested under the policy may increase or decrease daily based upon the
investment results of the variable investment options that you choose. The
amount we pay to the policy's beneficiary if the insured person dies (we call
this the "death benefit") may be similarly affected.
While the insured person is alive, you will have a number of options under the
policy. Here are some major ones:
. Determine when and how much you invest in the various investment
options
. Borrow amounts you have in the investment options
. Withdraw any amount we consider to be "Excess Value" in your policy
. Change the beneficiary who will receive the death benefit
. Turn in (i.e., "surrender") the policy for the full amount of its
surrender value
. Reduce the amount of insurance by surrendering part of the policy
. Choose the form in which we will pay out the death benefit or other
proceeds
Most of these options are subject to limits that are explained later in this
prospectus.
WHO OWNS THE POLICY?
That's up to the person who applies for the policy. The owner of the policy is
the person who can exercise most of the rights under the policy, such as the
right to choose the investment options or the right to surrender the policy. In
many cases, the person buying the policy is also the person who will be the
owner. However, the application for a policy can name another person or entity
(such as a trust) as owner. Whenever we've used the term "you" in this
prospectus, we've assumed that the reader is the person who has whatever right
or privilege is being discussed. There may be tax consequences if the owner and
the insured person are different, so you should discuss this issue with your tax
adviser.
HOW CAN I INVEST MONEY IN THE POLICY?
Premium Payments
We call the investments you make in the policy "premiums" or "premium
payments". Premiums are scheduled and payable during the lifetime of the insured
person in accordance with our established rules and rates. Premiums are payable
at our Life Servicing Office on or before the due date specified in the policy.
4
<PAGE>
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 business day in the third, sixth and ninth policy
months. In the second policy year, the scheduled due dates are the last business
day in the sixth and twelfth policy months. In the third and all later policy
years, the scheduled due date is the last business day of the policy year.
You 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. You may also pay
amounts in addition to any billed amount. However, each premium payment must be
at least $25. We reserve 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 you with
considerable payment flexibility in meeting the premium requirements of the
policy. Consider a policy with a $1,000 Required Premium and where you pay
$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" on page
__), 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, you 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.
Maximum premium payments
Federal tax law limits the amount of premium payments you can make relative to
the amount of your policy's insurance coverage. We will not knowingly accept any
amount by which a premium payment exceeds the maximum. If you exceed certain
other limits, the law may impose a penalty on amounts you take out of your
policy. We'll monitor your premium payments and let you know if you're about to
exceed this limit. More discussion of these tax law requirements begins on page
29.
Also, we may refuse to accept any amount of an additional premium if that
amount of premium would increase our insurance risk exposure, and the insured
person doesn't provide us with adequate evidence that he or she continues to
meet our requirements for issuing insurance. In no event, however, will we
refuse to accept any premium necessary to prevent the policy from terminating.
Ways to pay premiums
If you pay premiums by check or money order, they must be drawn on a U.S. bank
in U.S. dollars and made payable to "John Hancock Variable Life Insurance
Company." Premiums after the first must be sent to the JHVLICO Life Servicing
Office at the appropriate address shown on page 1 of this prospectus.
5
<PAGE>
We will also accept premiums:
. by wire or by exchange from another insurance company,
. via an electronic funds transfer program (any owner interested in
making monthly premium payments must use this method), or
-------
. if we agree to it, through a salary deduction plan with your
employer.
You can obtain information on these other methods of premium payment by
contacting your JHVLICO representative or by contacting the JHVLICO Life
Servicing Office.
IS THERE A MINIMUM AMOUNT I MUST INVEST?
Minimum Premium Requirements
An amount of Required Premium (see "Required Premiums" 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 us at
our Life 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 business day in the third policy
month and three-quarters of the Required Premium must be received on or before
the last business day 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 business day 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, we count all premiums received when we determine whether the
premium requirement is met on a scheduled due date. This cumulative amount of
premiums received is reduced for this purpose by amounts withdrawn from the
premium component of Excess Value 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 business day of the second or any
later policy year if any Excess Value is available on the scheduled due date.
See "Value Options" on page __.
Failure to satisfy a premium requirement on a scheduled due date may cause the
policy to terminate. See "Lapse" and "Options on Lapse".
6
<PAGE>
Choice of Premium Schedule
At the time of application, you 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 person 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 person. 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
person's 72nd birthday. At the time of the premium recalculation, we determine a
new Basic Premium which is payable through the remaining lifetime of the insured
person.
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>
Required Premiums
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 for extra mortality risk
or additional insurance benefits that 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 "Premium recalculation" on page __.
If the account value on the business day 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,
we will mail a written notice to you within 10 days after any policy anniversary
stating that no premium payment is required in that policy year.
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 policy continues in full
force during the grace period. If the insured person dies
7
<PAGE>
during the grace period, we will deduct the amount in default from the death
benefit. During the grace period, you cannot make transfers among investment
options or make a partial withdrawal or policy loan.
If your policy enters a grace period, we will notify you of how much you will
need to pay to keep the policy in force. If you don't pay at least the required
amount by the end of the grace period, your policy will terminate (i.e., lapse).
Options on Lapse
If a policy lapses, we apply the surrender value on the date of lapse to one
of three options for continued insurance that does not require further payment
of premium: Variable Paid-Up Insurance, Fixed Paid-Up Insurance or Fixed
Extended Term Insurance on the life of the insured person, 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 response to the
investment experience of the variable investment options. 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 surrender value will purchase.
The Variable Paid-Up Insurance option is not available unless its initial
amount is at least $5,000. If you have elected no option 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 person is a substandard
risk. In either of the latter cases, Fixed Paid-Up Insurance is provided.
You may surrender a policy that is being continued under any of these options
for the option's surrender value while the insured person is living. Loans may
be available under the Variable and Fixed Paid-Up Insurance options.
Reinstatement
You can still reactivate (i.e., "reinstate") a lapsed policy within 3 years
from the beginning of the grace period, unless the surrender value has been paid
out or otherwise exhausted or the period of any Fixed Extended Term Insurance
has expired. You will have to provide evidence that the insured person still
meets our requirements for issuing coverage. You will also have to pay a minimum
amount of premium and be subject to the other terms and conditions applicable to
reinstatements, as specified in the policy.
8
<PAGE>
Premium recalculation
You may elect the premium recalculation applicable to any policy on a Modified
Schedule at any time after the first policy anniversary up to the policy
anniversary nearest the insured person's 72nd birthday. If elected, the premium
recalculation will be effected on the policy anniversary next following receipt
at our Life Servicing Office of satisfactory written notice. If not elected
sooner, we will be effect the premium recalculation on the policy anniversary
nearest the insured person'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 person's sex and age, the Guaranteed Death Benefit under the policy and
the account value on the business day 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 person's age at issue of the policy. The
charge (currently1 1/2%) will not exceed 3% of the amount of account value
applied by us 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
person's age at issue. See "Guaranteed Death Benefit Charges" on page __.
HOW WILL THE VALUE OF MY INVESTMENT IN THE POLICY CHANGE OVER TIME?
From each premium payment you make, we deduct the charges described under
"Deductions from premium payments" below. We invest the rest in the investment
options you've elected.
Over time, the amount you've invested in any variable investment option will
--------
increase or decrease the same as if you had invested the same amount directly in
the corresponding fund of the Trust and had reinvested all fund dividends and
distributions in additional fund shares; except that we will deduct certain
additional charges which will reduce your account value. We describe these
charges under "What charges will JHVLICO deduct from my investment in the
policy?" below.
The amount you've invested in the fixed investment option will earn interest
-----
at a rate we declare from time to time. We guarantee that this rate will be at
least 4%. If you want to know what the current declared rate is, just call or
write to us. The current declared rate will also appear in the annual statement
we will send you. Amounts you invest in the fixed investment option will not be
---
subject to the mortality and expense risk charge or the guaranteed death benefit
charge described on page 8. Otherwise, the charges applicable to the fixed
investment option are the same as those applicable to the variable investment
options.
At any time, the "account value" of your policy is equal to:
. the amount you invested,
9
<PAGE>
. plus or minus the investment experience of the investment options
you've chosen,
. minus all charges we deduct, and
. minus all partial withdrawals of Excess Value you have made.
If you take a loan on the policy, however, your account value will be computed
somewhat differently. This is discussed beginning on page 11.
WHAT IS THE "EXCESS VALUE" OF THE POLICY AND HOW IS IT APPLIED?
Excess Value and its components
As of the last business day in each policy year, we compare the account value
of the policy against the "Benchmark Value" (described below) to determine if
any "Excess Value" exists under the policy. Excess Value is any amount of
account value greater than the Benchmark Value.
The policy statements that we send you (see "Reports that you will receive" on
page __) will specify the amount of any Excess Value at the end of the reporting
period. If you wish this information at any other time, you may contact your
JHVLICO representative or telephone us at 1-800-732-5543.
Benchmark Value can be thought of as what the guaranteed cash value would be
under an otherwise comparable non-variable whole life policy. It is the amount
we deem necessary to support your policy's benefits at any time based on
accepted actuarial methods and assumptions.
The Benchmark Value depends upon the policy's Guaranteed Death Benefit, the
Required Premium, any outstanding loan, the sex and attained age of the insured
person, and any contingent deferred sales charge. The formula describing
precisely how Benchmark Value is calculated on each policy anniversary is set
forth in the policy. 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. If there is a loan outstanding, the Benchmark
Value will not be less than 110% of the outstanding loan amount. The Benchmark
Value generally increases over the life of the policy, as the attained age of
the insured person increases.
Excess Value may arise from two sources. The "premium component" is that
portion of Excess Value up to the amount by which the cumulative premiums paid
(excluding amounts from this component previously withdrawn) exceed the
cumulative amount of Required Premiums due to date. The "experience component"
is that portion of Excess Value above the premium component and arises out of
favorable investment experience or lower than maximum insurance and expense
charges.
Value Options
If Excess Value is available on a policy anniversary, any premium component
and experience component will be applied under Value Options you elect. Either
component may be
10
<PAGE>
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 your election and in
accordance with our then current rules. A change in an election will be
effective as of the policy anniversary next following its date of receipt in
writing at our Life 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 person'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 "What charges will JHVLICO deduct from my investment
in the policy?" on page __) is made against the account value to cover the risk
assumed by us in providing the increased Guaranteed Death Benefit. The Extra
Death Benefit Value Option may not be available if the insured person 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 "What charges will JHVLICO deduct from my investment in the policy?". You
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 you may take as a partial withdrawal. See "Partial
Withdrawal of Excess Value" on page __. Any decrease is effective at the end of
the business day in which we receive 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 is made against the account value to cover the risk assumed
by us 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
11
<PAGE>
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 person. The
Premium Credit Factor decreases from year to year as the attained age of the
insured person increases. For example, the Premium Credit Factor for a female
age 60 is 13.6798, and for a female age 61 is 13.3382.
WHAT CHARGES WILL JHVLICO DEDUCT FROM MY INVESTMENT IN THE POLICY?
Deductions from premium payments
. Premium processing charge - A charge, not to exceed $2, to cover premium
---------------------------
collection and processing costs. The charge is currently $2 but may be
different for payments made under special billing arrangements acceptable
to us.
. Premium tax charge - A charge to cover state premium taxes we currently
--------------------
expect to pay, on average. This charge is currently 2.5% of each premium.
. Premium sales charge - A charge to help defray our sales costs. The
----------------------
charge is 4.5% of the premiums you pay each policy year (after deduction
of the premium processing charge). We currently waive this charge for
policies with a Sum Insured of $250,000 or higher, but continuation of
that waiver is not guaranteed.
Deductions from account value
. Issue charge - A charge to help defray our administrative costs. This
--------------
charge has two parts: (1)_a flat dollar charge of $240, and (2) a charge
of 48c per $1,000 of Sum Insured at issue. The charge is deducted in 48
equal monthly installments. If the policy lapses or is surrendered before
the full amount of the charge has been deducted, the remainder will be
deducted from the surrender value.
. Maintenance charge - A monthly charge to help defray our administrative
--------------------
costs. This charge is also in two parts: (1) a flat dollar charge of up to
$4, and (2) a charge of 2c per $1,000 of the current Sum Insured. This
charge currently cannot exceed $6.75 per month, but this limit is not
guaranteed and may be withdrawn or modified at any time.
. Insurance charge - A monthly charge for the cost of insurance. To
------------------
determine the charge, we multiply the amount of insurance for which we are
at risk by a cost of insurance rate. The rate is derived from an actuarial
table. The table in your policy will show the maximum cost of insurance
-------
rates. The cost of insurance rates that we currently apply are generally
less than the maximum rates. We will review the cost of insurance rates at
least every 5 years and may change them from time to time. However, those
rates will never be more than rates based on the 1980 Commissioners'
Standard Ordinary Mortality Tables. The table of rates we use will depend
on the insurance risk characteristics and gender of the insured person,
the current Sum Insured and the length of time the policy has been in
effect. Regardless of the table used, cost of insurance rates generally
increase each year that you own your policy, as the insured person's
attained age increases. (The insured person's "attained age" on any date
is his or her age on the birthday nearest that date.) We will charge lower
current insurance rates under a policy with a current Sum Insured of
$250,000 or more if the insured person is over age 32 and in the standard
underwriting class or is over age 34 and in the preferred underwriting
class.
12
<PAGE>
. Guaranteed death benefit charge - A monthly charge for our guarantee that
---------------------------------
the death benefit will never be less than the Sum Insured. This charge is
currently 1c per $1,000 of the Sum Insured at the time the charge is
deducted. We guarantee that this charge will never exceed 3c per $1,000 of
the Sum Insured at the time the charge is deducted. When an Extra Death
Benefit Value Option is exercised, we guarantee a higher Guaranteed Death
Benefit. When a Basic Premium Reduction Value Option is exercised, we
provide the same Guaranteed Death Benefit with less premiums. In either
event, we make a one-time deduction from the amount applied as
compensation for making the additional guarantee. The current charge is1
1/2% of the amount applied. We may increase this charge, but it will never
exceed 3% of the amount applied.
. Extra mortality risk charge - An insured person who does not qualify for
---------------------------
either the preferred or standard underwriting class must pay an additional
Required Premium because of the extra mortality risk. We collect this
additional premium in two ways: up to 7% of the additional premium is
deducted from premiums when paid and the remainder of the additional
premium is deducted monthly from your policy's 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.
. M &E charge - A daily charge for mortality and expense risks we assume.
-----------
This charge is deducted from the variable investment options. It does not
apply to the fixed investment option. The current charge is at an
effective annual rate of .60% of the value of the assets in each variable
investment option. We guarantee that this charge will never exceed an
effective annual rate of .90%.
. Additional insurance benefits charges - An additional Required premium
---------------------------------------
must be paid if you elect to purchase any additional insurance benefit
that is added to the policy by means of a rider. We collect this
additional premium in two ways: up to 7% of the additional premium is
deducted from premiums when paid and the remainder of the additional
premium is deducted monthly from your policy's account value in equal
installments.
. Premium recalculation charge - 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 person'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 is1 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 person's age at
issue. We may increase this charge, but it will never exceed 3% of the
amount applied.
. Contingent deferred sales charge ("CDSC") - A charge we deduct if the
-------------------------------------------
policy lapses or is surrendered within the first fourteen policy years. We
deduct this charge to compensate us for sales expenses that we would
otherwise not recover in the event of early lapse or surrender. The CDSC
is a percentage of the lesser of (a) the total amount of premiums you have
actually paid before the date of surrender or lapse and (b) the sum of the
Modified Premiums or portions thereof due (whether or not actually paid)
on or before the date of surrender or lapse.
13
<PAGE>
<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 for the last business
day of policy years 8 through 14.
The amount of the CDSC is calculated on the basis of the premium under the
Modified Schedule for the attained age of the insured person at the time
the policy is issued, regardless of whether the policy uses the Level
Schedule or the Modified Schedule. At issue ages higher than 57, the
maximum CDSC percentage is reached at an earlier policy year and may be
reduced to zero over a shorter number of years.
. Partial withdrawal charge - A charge for each partial withdrawal of
---------------------------
Excess Value to compensate us for the administrative expenses of
processing the withdrawal. The charge is equal to the lesser of $25 or 2%
of the amount withdrawn.
WHAT CHARGES WILL THE TRUST DEDUCT FROM MY INVESTMENT IN THE POLICY?
The Trust must pay investment management fees and other operating expenses.
These fees and expenses are different for each fund of the Trust and reduce the
investment return of each fund. Therefore, they also indirectly reduce the
return you will earn on any variable investment options you select. The figures
in the following chart are expressed as percentages of each fund's average daily
net assets for 1998 (rounded to two decimal places). The percentages reflect the
investment management fees that were payable for1998 and the 1998 other
operating expenses that would have been allocated to the funds under the
allocation rules currently in effect.
<TABLE>
<CAPTION>
Total Fund
Investment Other Operating Other Operating Expenses
Fund Name Management Fee Operating Expenses Expenses Absent Reimbursement*
- --------- -------------- ------------------ ---------- --------------------------
<S> <C> <C> <C> <C>
Managed . . . . . . . . . . 0.32% 0.05% 0.37% 0.05%
Growth & Income . . . . . . 0.25% 0.05% 0.30% 0.05%
Equity Index. . . . . . . . 0.14% 0.08% 0.22% 0.08%
Large Cap Value . . . . . . 0.74% 0.07% 0.81% 0.07%
Large Cap Growth. . . . . . 0.37% 0.05% 0.42% 0.05%
Mid Cap Value . . . . . . . 0.80% 0.05% 0.85% 0.05%
Mid Cap Growth. . . . . . . 0.85% 0.08% 0.93% 0.08%
Real Estate Equity. . . . . 0.60% 0.05% 0.65% 0.05%
Small/Mid Cap Growth**. . . 0.75% 0.05% 0.80% 0.05%
Small/Mid Cap CORE. . . . . 0.80% 0.10% 0.90% 0.23%
Small Cap Value . . . . . . 0.80% 0.07% 0.87% 0.07%
Small Cap Growth. . . . . . 0.75% 0.08% 0.83% 0.08%
Global Equity . . . . . . . 0.90% 0.10% 1.00% 0.50%
International Balanced. . . 0.85% 0.10% 0.95% 0.64%
International Equity Index 0.17% 0.10% 0.27% 0.23%
International Opportunities 0.87% 0.10% 0.97% 0.32%
Emerging Markets Equity . . 1.30% 0.10% 1.40% 0.68%
Short-Term Bond . . . . . . 0.30% 0.05% 0.35% 0.05%
Bond Index. . . . . . . . . 0.15% 0.05% 0.20% 0.05%
Sovereign Bond. . . . . . . 0.25% 0.05% 0.30% 0.05%
Global Bond** . . . . . . . 0.69% 0.06% 0.75% 0.06%
High Yield Bond . . . . . . 0.65% 0.07% 0.72% 0.07%
Money Market. . . . . . . . 0.25% 0.05% 0.30% 0.05%
</TABLE>
14
<PAGE>
* John Hancock reimburses a fund when the fund's other operating expenses exceed
0.10% of the fund's average daily net assets.
** Small/Mid Cap Growth was formerly "Diversified Mid Cap Growth" and Global
Bond was formerly "Strategic Bond."
WHAT OTHER CHARGES COULD JHVLICO IMPOSE IN THE FUTURE?
We currently make no charge against account value for our Federal income
taxes, but if we incur, or expect to incur, income taxes attributable to any
subaccount of the Account or this class of policies in future years, we reserve
the right to make such a charge. Any such charge would reduce what you earn on
any affected investment options. However, we expect that no such charge will be
necessary.
Under current laws, we 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, we may make charges
for such taxes.
We also reserve the right to increase the premium tax charge and the DAC tax
charge in order to correspond, respectively, with changes in the state premium
tax levels and with changes in the Federal income tax treatment of the deferred
acquisition costs for this type of policy.
HOW CAN I CHANGE MY POLICY'S INVESTMENT ALLOCATIONS?
Future premium payments
At any time, you may change the investment options in which future premium
payments will be invested. You make the original allocation in the application
for the policy. The percentages you select must be in whole numbers and must
equal 100% in total.
Transfers of existing account value
You may also transfer your existing account value from one investment option
to another. To do so, you must tell us how much to transfer, either as a whole
number percentage or as a specific dollar amount.
Under our current rules, you can make transfers out of any variable investment
--------
option anytime you wish. However, transfers out of the fixed investment option
-----
are currently subject to the following restrictions:
. You can only make such a transfer once a year and only during the 31 day
period following your policy anniversary.
15
<PAGE>
. We must receive the request for such a transfer during the period
beginning 60 days prior to the policy anniversary and ending 30 days after
it.
. The most you can transfer at any one time is the greater of $500 or 20%
of the assets in your fixed investment option.
We reserve the right to impose a minimum amount limit on transfers out of the
fixed investment option. We also reserve the right to impose a charge of up to
$5 for each transfer among investment options of more than 12 in any policy
year.
Limitation on number of investment options
Whether through the allocation of premium or through the transfer of existing
account value, you can never be invested in more than ten investment options at
any one time.
HOW CAN I ACCESS MY INVESTMENT IN THE POLICY?
Full surrender
You may surrender your policy in full at any time. If you do, we will pay you
the account value, less any unpaid charges and policy loans and less any CDSC
that then applies. This is called your "surrender value." You must return your
policy when you request a full surrender.
Partial withdrawals of Excess Value
Under our current administrative rules, you may make a partial withdrawal of
your policy's Excess Value, if any, at any time after the first policy year (see
"Excess Value and its components" on page __). Each partial withdrawal must be
at least $500. There is a charge for each partial withdrawal. We will
automatically reduce the account value of your policy by the amount of the
withdrawal and the related charge. Each investment option will be reduced in the
same proportion as the account value is then allocated among them. Unless the
Current Death Benefit exceeds the Guaranteed Death Benefit, a partial withdrawal
will not affect the death benefit payable.
Amounts withdrawn from the premium component of Excess Value 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.
Policy loans
You may borrow from your policy at any time after it has been in effect for 1
year by completing a form satisfactory to us or, if the telephone transaction
authorization form has been completed, by telephone. The minimum amount of each
loan is $300, unless the loan is used to pay premiums. The maximum amount you
can borrow is equal to 100% of that portion of your surrender value that is
attributable to the fixed investment option plus one of the following:
16
<PAGE>
. In policy years 2 and 3 - - 75% of that portion of your surrender
value that is attributable to the variable investment options
. In all later policy years - - 90% of that portion of your surrender
value that is attributable to the variable investment options
Interest charged on any loan will accrue daily at an annual rate determined by
John Hancock at the start of each policy year. This interest rate will not
exceed the greater of (1) the "Published Monthly Average" (defined below) for
the calendar month ending 2 months before the calendar month of the policy
anniversary or (2) 5%. In jurisdictions where a fixed loan rate is applicable,
we will charge interest at an effective annual rate of 6%. 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. Accrued interest will be added
to the loan daily and will bear interest at the same rate as the original loan
amount.
The amount of the loan is deducted from the investment options in the same
proportion as the account value is then allocated among them and is placed in a
special loan account. This special loan account will earn interest at a rate
that is 1% less than the loan interest rate for the first 20 Policy years and
.5% less than the loan interest rate thereafter. However, if we determine that a
loan will be treated as a taxable distribution because of the differential
between the loan interest rate and the rate being credited on the special loan
account, we reserve the right to decrease the rate credited on the special loan
account to a rate that would, in our reasonable judgement, result in the
transaction being treated as a loan under Federal tax law.
You can repay all or part of a loan at any time. Each repayment will be
allocated among the investment options as follows:
. The same proportionate part of the loan as was borrowed from the
fixed investment option will be repaid to the fixed investment
option.
. The remainder of the repayment will be allocated among the investment
options in the same way a new premium payment would be allocated.
If you want a payment to be used as a loan repayment, you must include
instructions to that effect. Otherwise, all payments will be assumed to be
premium payments.
HOW MUCH WILL JHVLICO PAY WHEN THE INSURED PERSON DIES?
The death benefit payable upon the death of the insured person 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 your request. We guarantee that, regardless of the
17
<PAGE>
investment experience of the investment options, 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 you exercise 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 and the sex and age of the
insured person on the policy anniversary as of which the Option is exercised.
See "Value Options" on page __. The insured person's age on a policy anniversary
is the age of the insured person on his or her birthday nearest that date.
Current Death Benefit. The Current Death Benefit on any date is the account
value on 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
person. The Death Benefit Factor decreases from year to year as the attained age
of the insured person increases. For example, the Death Benefit Factor for a
male age 75 is 1.3546, and 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 - - that is it increases as the account value increases and decreases
as the account value decreases.
HOW CAN I CHANGE MY POLICY'S INSURANCE COVERAGE?
Change of Sum Insured
At any time, you may request a decrease or increase in your Sum Insured,
subject to our administrative rules in effect at the time. For any increase, we
will require evidence that the insured person still meets our requirements for
issuing coverage. This is because such a change increases our insurance risk
exposure.
Partial surrenders
You may partially surrender your policy upon submission of a written request
satisfactory to us in accordance with our rules. Currently, the policy after
partial surrender must have a Sum Insured at least as large as the minimum
amount for which we would issue a policy on the life of the insured person. The
Guaranteed Death Benefit for the policy will be adjusted to prospectively
reflect the new Sum Insured. A pro-rata portion of the account value will be
paid to you and a pro-rata portion of any contingent deferred sales charge will
be deducted. Possible alternatives to the partial surrender of the policy would
be withdrawal of some or all of your Excess Value or taking a policy loan.
Tax consequences
Please read "Tax considerations" starting on page 29 to learn about possible
tax consequences of changing your insurance coverage under the policy.
CAN I CANCEL MY POLICY AFTER IT'S ISSUED?
You have the right to cancel your policy within the latest of the following
periods:
18
<PAGE>
. 10 days after you receive it (this period may be longer in some
states);
. 10 days after mailing by JHVLICO of the Notice of Withdrawal Right;
or
. 45 days after the date Part A of the application has been completed.
This is often referred to as the "free look" period. To cancel your policy,
simply deliver or mail the policy to us at one of the addresses shown on page 1,
or to the JHVLICO representative who delivered the policy to you.
In most states, you will receive a refund of any premiums you've paid. In some
states, the refund will be your account value on the date of cancellation plus
all charges deducted by JHVLICO or the Trust prior to that date. The date of
cancellation will be the date of such mailing or delivery.
CAN I CHOOSE THE FORM IN WHICH JHVLICO PAYS OUT POLICY PROCEEDS?
Choosing a payment option
You may choose to receive proceeds from the policy as a single sum. This
includes proceeds that become payable because of death or full surrender.
Alternatively, you can elect to have proceeds of $1,000 or more applied to any
of a number of other payment options, including the following:
. Option 1 - Proceeds left with us to accumulate with interest
. Option 2A - Equal monthly payments of a specified amount until all
proceeds are paid out
. Option 2B - Equal monthly payments for a specified period of time
. Option3 - Equal monthly payments for life, but with payments
guaranteed for a specific number of years
. Option 4 - Equal monthly payments for life with no refund
. Option 5 - Equal monthly payments for life with a refund if all of
the proceeds haven't been paid out
You cannot choose an option if the monthly payments under the option would be
less than $50. We will issue a supplementary agreement when the proceeds are
applied to any alternative payment option. That agreement will spell out the
terms of the option in full. We will credit interest on each of the above
options. For Options 1 and 2A, the interest will be at least an effective annual
rate of 3 1/2%.
19
<PAGE>
Changing a payment option
You can change the payment option at any time before the proceeds are payable.
If you haven't made a choice, the payee of the proceeds has a prescribed period
in which he or she can make that choice.
Tax impact
There may be tax consequences to you or your beneficiary depending upon which
payment option is chosen. You should consult with a qualified tax adviser before
making that choice.
TO WHAT EXTENT CAN JHVLICO VARY THE TERMS AND CONDITIONS OF ITS POLICIES IN
PARTICULAR CASES?
Listed below are some variations we can make in the terms of our policies. Any
variation will be made only in accordance with uniform rules that we apply
fairly to all of our customers.
State law insurance requirements
Insurance laws and regulations apply to JHVLICO in every state in which its
policies are sold. As a result, various terms and conditions described in the
prospectus may vary depending upon where you reside. These variations will be
reflected in your policy or in endorsements attached to your policy.
Variations in expenses or risks
We may vary the charges and other terms of our policies where special
circumstances result in sales or administrative expenses, mortality risks or
other risks that are different from those normally associated with the policies.
These include the type of variations discussed under "Reduced charges for
eligible classes" on page 28. No variation in any charge will exceed any maximum
stated in this prospectus with respect to that charge.
HOW WILL MY POLICY BE TREATED FOR INCOME TAX PURPOSES?
Generally, death benefits paid under policies such as yours are not subject to
income tax. Earnings on your account value are not subject to income tax as long
as we don't pay them out to you. If we do pay out any amount of your account
value upon surrender or partial withdrawal, all or part of that distribution
should generally be treated as a return of the premiums you've paid and should
not be subject to income tax. Amounts you borrow are generally not taxable to
you.
However, some of the tax rules change if your policy is found to be a
"modified endowment contract." This can happen if you've paid more than a
certain amount of premiums that is prescribed by the tax laws. Additional taxes
and penalties may be payable for policy distributions of any kind.
For further information about the tax consequences of owning a policy, please
read "Tax considerations" beginning of page 29.
20
<PAGE>
HOW DO I COMMUNICATE WITH JHVLICO?
General Rules
You should mail or express all checks and money orders for premium payments
and loan repayments to the JHVLICO Life Servicing Office at the appropriate
address shown on page 1.
Certain requests must be made in writing and be signed and dated by you,
except as discussed below under "Telephone Transactions.". They include the
following:
. loans, surrenders (including partial surrenders) or partial
withdrawals
. transfers of account value among investment options
. change of allocation among investment options for new premium
payments
. change of death benefit option
. change of beneficiary
. election of payment option for policy proceeds
. tax withholding elections
. election of telephone transaction privilege
You should mail or express these requests to the JHVLICO Life Servicing Office
at the appropriate address shown on page 1. You should also send notice of the
insured person's death and related documentation to the JHVLICO Life Servicing
Office. We don't consider that we've "received" any communication until such
time as it has arrived at the proper place and in the proper and complete form.
We have special forms that should be used for a number of the requests
mentioned above. You can obtain these forms from the JHVLICO Life Servicing
Office or your JHVLICO representative. Each communication to us must include
your name, your policy number and the name of the insured person. We cannot
process any request that doesn't include this required information. Any
communication that arrives after the close of our business day, or on a day that
is not a business day, will be considered "received" by us on the next following
business day. Our business day currently closes at 4:00 p.m. Eastern Standard
Time, but special circumstances (such as suspension of trading on a major
exchange) may dictate an earlier closing time.
Telephone Transactions
If you complete a special authorization form, you can request loans, transfers
among investment options and changes of allocation among investment options
simply by telephoning us at 1-800-732-5543 or by faxing us at 1-617-886-3048.
Any fax request should include your name, daytime telephone number, policy
number and, in the case of transfers and changes of
21
<PAGE>
allocation, the names of the investment options involved. We will honor
telephone instructions from anyone who provides the correct identifying
information, so there is a risk of loss to you if this service is used by an
unauthorized person. However, you will receive written confirmation of all
telephone transactions. There is also a risk that you will be unable to place
your request due to equipment malfunction or heavy phone line usage. If this
occurs, you should submit your request in writing.
The policies are not designed for professional market timing organizations or
other entities that use programmed and frequent transfers among investment
options. For reasons such as that, we reserve the right to change our telephone
transaction policies or procedures at any time. We also reserve the right to
suspend or terminate the privilege altogether.
22
<PAGE>
ILLUSTRATION OF DEATH BENEFITS, ACCOUNT VALUES, SURRENDER VALUES AND
ACCUMULATED PREMIUMS
The following tables illustrate the changes in death benefit, account value
and surrender value of the policy under certain hypothetical circumstances that
we assume solely for this purpose. Each table separately illustrates the
operation of a policy for a specified issue age, premium payment schedule and
Sum Insured. The amounts shown are for the end of each policy year and assume
that all of the account value is invested in funds that achieve investment
returns at constant annual rates of 0%, 6% and 12% before any fees or expenses.
(Investment return reflects investment income and all realized and unrealized
capital gains and losses.) The tables assume annual Required Premiums that are
paid at the beginning of each policy year for an insured person who is a 35 year
old male standard non-smoker underwriting risk when the policy is issued.
Tables are provided for each of the three death benefit options. The tables
headed "Current Charges" assume that the current rates for all charges deducted
by JHVLICO will apply in each year illustrated, including the reduction in the
monthly insurance charge after the ninth policy year and the waiver after the
tenth policy year of the sales charge deducted from premiums. The tables headed
"Maximum Charges" are the same, except that the maximum permitted rates for all
years are used for all charges. The tables do not reflect any charge that we
reserve the right to make but are not currently making.
With respect to fees and expenses deducted from Trust assets, the amounts
shown in all tables reflect (1) investment management fees equivalent to an
effective annual rate of .59%, and (2) an assumed average asset charge for all
other Trust operating expenses equivalent to an effective annual rate of .07%.
These rates are the arithmetic average for all funds of the Trust. In other
words, they are based on the hypothetical assumption that policy account values
are allocated equally among the variable investment options. The actual rates
associated with any policy will vary depending upon the actual allocation of
policy values among the investment options.
The second column of each table shows the amount you would have at the end of
each policy year if an amount equal to the assumed Required Premiums were
invested to earn interest, after taxes, at 5% compounded annually. This is not a
policy value. It is included for comparison purposes only.
Because your circumstances will no doubt differ from those in the
illustrations that follow, values under your policy will differ, in most cases
substantially. Upon request, we will furnish you with a comparable illustration
reflecting your proposed insured person's issue age, sex and underwriting risk
classification, and the Sum Insured and annual Required Premium amount
requested.
23
<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 $ 370 $ 421 $ 472
2 2,396 100,000 100,000 100,000 1,024 1,169 1,320
3 3,684 100,000 100,000 100,000 1,673 1,958 2,267
4 5,037 100,000 100,000 100,000 2,315 2,788 3,321
5 6,458 100,000 100,000 100,000 2,949 3,660 4,494
6 7,949 100,000 100,000 100,000 3,572 4,578 5,803
7 9,515 100,000 100,000 100,000 4,182 5,540 7,261
8 11,160 100,000 100,000 100,000 4,816 6,586 8,917
9 12,886 100,000 100,000 100,000 5,435 7,677 10,752
10 14,699 100,000 100,000 100,000 6,109 8,889 12,857
11 16,603 100,000 100,000 100,000 6,885 10,269 15,298
12 18,602 100,000 100,000 100,000 7,716 11,771 18,052
13 20,700 100,000 100,000 100,000 8,527 13,326 21,071
14 22,904 100,000 100,000 100,000 9,315 14,931 24,383
15 25,218 100,000 100,000 100,000 10,079 16,589 28,019
16 27,647 100,000 100,000 103,870 10,628 18,111 31,814
17 30,198 100,000 100,000 113,758 11,147 19,686 35,973
18 32,877 100,000 100,000 124,162 11,638 21,318 40,528
19 35,689 100,000 100,000 135,130 12,099 23,008 45,515
20 38,643 100,000 100,000 146,695 12,527 24,759 50,973
25 55,776 100,000 100,000 215,036 14,137 34,524 86,961
30 77,644 100,000 100,000 305,748 14,578 46,229 142,793
35 105,553 100,000 112,005 427,218 13,120 59,768 227,971
40 141,173 100,000 124,231 590,776 8,655 74,910 356,232
45 186,634 100,000 135,707 810,748 0 91,201 544,857
50 244,655 100,000 146,648 1,107,301 0 108,259 817,438
55 318,706 100,000 157,249 1,507,767 0 125,198 1,200,451
</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.
24
<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 $ 26 $ 54
2 1,524 100,000 100,000 100,000 283 360 441
3 2,344 100,000 100,000 100,000 567 715 875
4 3,204 100,000 100,000 100,000 849 1,089 1,362
5 4,108 100,000 100,000 100,000 1,126 1,484 1,907
6 5,057 100,000 100,000 100,000 1,397 1,902 2,520
7 6,053 100,000 100,000 100,000 1,658 2,339 3,206
8 7,099 100,000 100,000 100,000 1,947 2,834 4,008
9 8,197 100,000 100,000 100,000 2,223 3,348 4,895
10 9,350 100,000 100,000 100,000 2,559 3,953 5,949
11 10,561 100,000 100,000 100,000 3,000 4,697 7,225
12 11,833 100,000 100,000 100,000 3,498 5,531 8,686
13 13,168 100,000 100,000 100,000 3,980 6,383 10,272
14 14,570 100,000 100,000 100,000 4,441 7,251 11,992
15 16,042 100,000 100,000 100,000 4,880 8,133 13,860
16 17,587 100,000 100,000 100,000 5,106 8,838 15,700
17 19,210 100,000 100,000 100,000 5,305 9,553 17,718
18 20,914 100,000 100,000 100,000 5,476 10,279 19,934
19 22,703 100,000 100,000 100,000 5,617 11,014 22,367
20 24,581 100,000 100,000 100,000 5,727 11,757 25,043
25 35,480 100,000 100,000 106,546 5,742 15,552 43,087
30 49,391 100,000 100,000 152,962 4,520 19,213 71,437
35 67,144 100,000 100,000 214,952 1,190 21,990 114,702
40 89,803 100,000 100,000 298,287 0 22,686 179,864
45 118,721 100,000 100,000 410,262 0 18,262 275,714
50 181,558 100,000 100,000 557,785 12,797 27,517 411,771
55 281,273 100,000 100,000 755,072 27,480 52,598 601,172
</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.
25
<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 $ 1,065 $ 1,162 $ 1,260
2 4,206 100,000 100,000 100,000 2,387 2,674 2,973
3 6,468 100,000 100,000 100,000 3,682 4,253 4,871
4 8,843 100,000 100,000 100,000 4,947 5,901 6,973
5 11,337 100,000 100,000 100,000 6,186 7,625 9,308
6 13,955 100,000 100,000 100,000 7,385 9,418 11,892
7 16,705 100,000 100,000 100,000 8,557 11,296 14,765
8 19,592 100,000 100,000 100,000 9,756 13,318 18,014
9 22,623 100,000 100,000 100,000 10,918 15,423 21,608
10 25,806 100,000 100,000 100,000 12,164 17,737 25,709
11 29,148 100,000 100,000 100,000 13,585 20,356 30,451
12 32,657 100,000 100,000 100,000 15,104 23,206 35,804
13 36,342 100,000 100,000 100,000 16,579 26,153 41,684
14 40,211 100,000 100,000 106,753 18,012 29,203 48,130
15 44,273 100,000 100,000 118,105 19,392 32,356 55,158
16 48,538 100,000 100,000 130,139 20,370 35,266 62,474
17 53,017 100,000 100,000 142,898 21,288 38,288 70,480
18 57,719 100,000 100,000 156,438 22,148 41,431 79,241
19 62,657 100,000 100,000 170,801 22,940 44,697 88,820
20 67,841 100,000 100,000 186,076 23,666 48,101 99,293
25 97,922 100,000 111,482 278,802 26,166 67,223 168,115
30 136,313 100,000 132,506 406,329 25,476 89,050 273,071
35 185,310 100,000 154,269 586,069 20,252 113,885 432,651
40 247,845 100,000 177,933 844,636 6,129 141,666 672,481
</TABLE>
- ---------
(1) If premiums are paid more frequently than annually the payments would be
$977.00 semiannually, $488.50 quarterly, or $162.83 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.
26
<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 $ 468 $ 529 $ 591
2 2,809 100,000 100,000 100,000 1,200 1,378 1,563
3 4,320 100,000 100,000 100,000 1,910 2,260 2,640
4 5,906 100,000 100,000 100,000 2,597 3,178 3,833
5 7,571 100,000 100,000 100,000 3,263 4,135 5,158
6 9,320 100,000 100,000 100,000 3,894 5,123 6,622
7 11,157 100,000 100,000 100,000 4,503 6,155 8,252
8 13,085 100,000 100,000 100,000 5,144 7,288 10,121
9 15,109 100,000 100,000 100,000 5,752 8,457 12,182
10 17,235 100,000 100,000 100,000 6,446 9,786 14,577
11 19,467 100,000 100,000 100,000 7,319 11,366 17,421
12 21,810 100,000 100,000 100,000 8,291 13,121 20,662
13 24,271 100,000 100,000 100,000 9,222 14,912 24,189
14 26,855 100,000 100,000 100,000 10,111 16,743 28,037
15 29,568 100,000 100,000 100,000 10,947 18,604 32,234
16 32,417 100,000 100,000 100,000 11,380 20,146 36,473
17 35,408 100,000 100,000 100,000 11,749 21,716 41,146
18 38,548 100,000 100,000 100,000 12,057 23,316 46,308
19 41,846 100,000 100,000 100,023 12,291 24,939 52,014
20 45,309 100,000 100,000 109,205 12,452 26,590 58,273
25 65,398 100,000 100,000 164,866 11,954 35,236 99,413
30 91,038 100,000 100,000 241,306 7,548 43,813 162,168
35 132,907 100,000 100,000 342,672 20,938 60,502 252,969
40 193,229 100,000 110,745 484,930 46,342 88,172 386,091
</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.
27
<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 $ 346 $ 396 $ 446
2 2,396 100,000 100,000 100,000 976 1,119 1,267
3 3,684 100,000 100,000 100,000 1,602 1,880 2,182
4 5,037 100,000 100,000 100,000 2,221 2,682 3,201
5 6,458 100,000 100,000 100,000 2,832 3,524 4,337
6 7,949 100,000 100,000 100,000 3,432 4,411 5,604
7 9,515 100,000 100,000 100,000 4,021 5,341 7,014
8 11,160 100,000 100,000 100,000 4,632 6,352 8,618
9 12,886 100,000 100,000 100,000 5,229 7,407 10,396
10 14,699 100,000 100,000 100,000 5,881 8,581 12,436
11 16,603 100,000 100,000 100,000 6,636 9,921 14,807
12 18,602 100,000 100,000 100,000 7,444 11,381 17,481
13 20,700 100,000 100,000 100,000 8,231 12,888 20,410
14 22,904 100,000 100,000 100,000 8,995 14,445 23,622
15 25,218 100,000 100,000 100,000 9,736 16,051 27,146
16 27,647 100,000 100,000 100,631 10,258 17,515 30,822
17 30,198 100,000 100,000 110,219 10,752 19,031 34,854
18 32,877 100,000 100,000 120,306 11,218 20,601 39,269
19 35,689 100,000 100,000 130,935 11,651 22,224 44,102
20 38,643 100,000 100,000 142,145 12,054 23,906 49,392
25 55,776 100,000 100,000 208,317 13,525 33,250 84,243
30 77,644 100,000 100,000 296,013 13,801 44,381 138,246
35 105,553 100,000 107,533 413,244 12,128 57,381 220,514
40 141,173 100,000 119,240 570,753 7,345 71,900 344,159
45 186,634 100,000 130,317 783,014 0 87,578 526,219
50 244,655 100,000 140,925 1,069,505 0 104,034 789,535
55 318,706 100,000 151,201 1,456,375 0 120,383 1,159,534
</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.
28
<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 $ 29
2 1,524 100,000 100,000 100,000 235 310 387
3 2,344 100,000 100,000 100,000 496 637 791
4 3,204 100,000 100,000 100,000 755 983 1,243
5 4,108 100,000 100,000 100,000 1,009 1,349 1,750
6 5,057 100,000 100,000 100,000 1,257 1,735 2,320
7 6,053 100,000 100,000 100,000 1,497 2,140 2,959
8 7,099 100,000 100,000 100,000 1,763 2,600 3,709
9 8,197 100,000 100,000 100,000 2,018 3,078 4,539
10 9,350 100,000 100,000 100,000 2,332 3,646 5,529
11 10,561 100,000 100,000 100,000 2,751 4,349 6,734
12 11,833 100,000 100,000 100,000 3,227 5,141 8,116
13 13,168 100,000 100,000 100,000 3,684 5,946 9,611
14 14,570 100,000 100,000 100,000 4,121 6,764 11,231
15 16,042 100,000 100,000 100,000 4,536 7,593 12,987
16 17,587 100,000 100,000 100,000 4,736 8,241 14,701
17 19,210 100,000 100,000 100,000 4,908 8,896 16,578
18 20,914 100,000 100,000 100,000 5,054 9,559 18,638
19 22,703 100,000 100,000 100,000 5,168 10,226 20,897
20 24,581 100,000 100,000 100,000 5,252 10,899 23,380
25 35,480 100,000 100,000 100,000 5,124 14,263 40,095
30 49,391 100,000 100,000 142,445 3,731 17,322 66,526
35 67,144 100,000 100,000 200,154 174 19,219 106,806
40 89,803 100,000 100,000 277,549 0 18,543 167,360
45 118,721 100,000 100,000 381,734 0 11,961 256,542
50 184,699 100,000 100,000 518,682 12,720 20,608 382,904
55 290,788 100,000 100,000 701,909 27,226 46,341 558,845
</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.
29
<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 $ 907 $ 1,000 $ 1,092
2 4,206 100,000 100,000 100,000 2,064 2,332 2,610
3 6,468 100,000 100,000 100,000 3,183 3,710 4,280
4 8,843 100,000 100,000 100,000 4,262 5,134 6,117
5 11,337 100,000 100,000 100,000 5,300 6,609 8,143
6 13,955 100,000 100,000 100,000 6,296 8,135 10,382
7 16,705 100,000 100,000 100,000 7,248 9,717 12,857
8 19,592 100,000 100,000 100,000 8,220 11,419 15,658
9 22,623 100,000 100,000 100,000 9,146 13,181 18,752
10 25,806 100,000 100,000 100,000 10,156 15,133 22,299
11 29,148 100,000 100,000 100,000 11,337 17,369 26,430
12 32,657 100,000 100,000 100,000 12,591 19,795 31,091
13 36,342 100,000 100,000 100,000 13,786 22,281 36,198
14 40,211 100,000 100,000 100,000 14,912 24,827 41,803
15 44,273 100,000 100,000 102,669 15,965 27,430 47,949
16 48,538 100,000 100,000 113,040 16,587 29,743 54,265
17 53,017 100,000 100,000 123,957 17,126 32,119 61,138
18 57,719 100,000 100,000 135,460 17,580 34,566 68,615
19 62,657 100,000 100,000 147,583 17,943 37,086 76,746
20 67,841 100,000 100,000 160,385 18,210 39,685 85,584
25 97,922 100,000 100,000 236,083 17,648 54,002 142,356
30 136,313 100,000 105,630 336,605 12,170 70,988 226,213
35 185,310 100,000 121,206 471,100 0 89,478 347,778
40 247,845 100,000 136,135 651,822 0 108,388 518,967
</TABLE>
- ---------
(1) If premiums are paid more frequently than annually the payments would be
$977.00 semiannually, $488.50 quarterly, or $162.83 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.
30
<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 $ 310 $ 366 $ 423
2 2,809 100,000 100,000 100,000 874 1,033 1,198
3 4,320 100,000 100,000 100,000 1,406 1,711 2,043
4 5,906 100,000 100,000 100,000 1,902 2,399 2,963
5 7,571 100,000 100,000 100,000 2,362 3,100 3,970
6 9,320 100,000 100,000 100,000 2,782 3,811 5,075
7 11,157 100,000 100,000 100,000 3,162 4,534 6,288
8 13,085 100,000 100,000 100,000 3,565 5,330 7,684
9 15,109 100,000 100,000 100,000 3,924 6,135 9,211
10 17,235 100,000 100,000 100,000 4,368 7,077 11,011
11 19,467 100,000 100,000 100,000 4,983 8,243 13,190
12 21,810 100,000 100,000 100,000 5,671 9,536 15,669
13 24,271 100,000 100,000 100,000 6,297 10,821 18,333
14 26,855 100,000 100,000 100,000 6,852 12,088 21,199
15 29,568 100,000 100,000 100,000 7,328 13,331 24,286
16 32,417 100,000 100,000 100,000 7,367 14,191 27,268
17 35,408 100,000 100,000 100,000 7,313 15,013 30,525
18 38,548 100,000 100,000 100,000 7,165 15,794 34,096
19 41,846 100,000 100,000 100,000 6,914 16,527 38,019
20 45,309 100,000 100,000 100,000 6,552 17,202 42,342
25 65,398 100,000 100,000 118,632 2,487 19,150 71,534
30 91,038 100,000 100,000 171,520 0 16,386 115,269
35 147,502 100,000 100,000 235,520 12,720 26,512 173,867
40 237,436 100,000 100,000 318,268 27,226 51,468 253,398
</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.
31
<PAGE>
ADDITIONAL INFORMATION
This section of the prospectus provides additional detailed information that
is not contained in the Basic Information section on pages 3 through 16.
<TABLE>
<CAPTION>
CONTENTS OF THIS SECTION PAGES TO SEE
- ------------------------ ------------
<S> <C>
Description of JHVLICO .................... 23
How we support the policy and investment options 23-24
Procedures for issuance of a policy....... 24-25
Commencement of investment performance.... 25
How we process certain policy transactions 25-27
Effects of policy loans................... 27
How we calculate "basic policy value".....
Additional information about how certain policy charges work 27-28
How we market the policies................ 28-29
Tax considerations........................ 29-30
Reports that you will receive............. 31
Voting privileges that you will have...... 31
Changes that JHVLICO can make as to your policy 31-32
Adjustments we make to death benefits..... 32
When we pay policy proceeds............... 32-33
Other details about exercising rights and paying benefits 33
Year 2000 Issues..........................
Legal matters............................. 33
Registration statement filed with the SEC. 33
Accounting and actuarial experts.......... 33
Financial statements of JHVLICO and the Account 33
List of Directors and Executive Officers of JHVLICO 34
</TABLE>
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<PAGE>
DESCRIPTION OF JHVLICO
We are JHVLICO, a stock life insurance company chartered in 1979 under
Massachusetts law. We are authorized to transact a life insurance and annuity
business in all states other than New York and in the District of Columbia. We
began selling variable life insurance policies in 1980.
We are regulated and supervised by the Massachusetts Commissioner of
Insurance, who periodically examines our affairs. We also are subject to the
applicable insurance laws and regulations of all jurisdictions in which we are
authorized to do business. We are required to submit annual statements of our
operations, including financial statements, to the insurance departments of the
various jurisdictions in which we do business for purposes of determining
solvency and compliance with local insurance laws and regulations. The
regulation to which we are subject, however, does not provide a guarantee as to
such matters.
We are a wholly-owned subsidiary of John Hancock Mutual Life Insurance Company
("John Hancock"), a company chartered in Massachusetts in 1862. John Hancock's
home office is at John Hancock Place, Boston, Massachusetts 02117. John
Hancock's assets are approximately $67 billion and it has invested over $380
million in JHVLICO in connection with our organization and operation. It is
anticipated that John Hancock will from time to time make additional capital
contributions to JHVLICO to enable us to meet our reserve requirements and
expenses in connection with our business. John Hancock is committed to make
additional capital contributions if necessary to ensure that we maintain a
positive net worth.
HOW WE SUPPORT THE POLICY AND INVESTMENT OPTIONS
Separate Account V
The variable investment options shown on page 1 are in fact subaccounts of
Separate Account V (the "Account"), a separate account established by us under
Massachusetts law. The Account 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"). Such registration does not
involve supervision by the SEC of the management of the Account or JHVLICO.
The Account's assets are the property of JHVLICO. Each policy provides that
amounts we hold in the Account pursuant to the policies cannot be reached by any
other persons who may have claims against us.
The assets in each subaccount are invested in the corresponding fund of the
Trust, but the assets of one subaccount are not necessarily legally insulated
from liabilities associated with another subaccount. New subaccounts may be
added as new funds are added to the Trust and made available to policy owners.
Existing subaccounts may be deleted if existing funds are deleted from the
Trust.
We will purchase and redeem Trust shares for the Account at their net asset
value without any sales or redemption charges. Shares of the Trust represent an
interest in one of the funds of the Trust which corresponds to a subaccount of
the Account. Any dividend or capital gains distributions received by the Account
will be reinvested in shares of that same fund at their net asset value as of
the dates paid.
On each business day, shares of each fund are purchased or redeemed by us for
each subaccount based on, among other things, the amount of net premiums
allocated to the subaccount, distributions reinvested, and transfers to, from
and among subaccounts, all to be effected as of that date. Such purchases and
redemptions are effected at each fund's net asset value per share determined for
that same date. A "business day" is any date on which the New York Stock
Exchange is open for trading. We compute policy values for each business day as
of the close of that day (usually 4:00 p.m. Eastern Standard Time).
33
<PAGE>
Our general account
Our obligations under the policy's fixed investment option are backed by our
general account assets. Our general account consists of assets owned by us other
than those in the Account and in other separate accounts that we may establish.
Subject to applicable law, we have sole discretion over the investment of assets
of the general account and policy owners do not share in the investment
experience of, or have any preferential claim on, those assets. Instead, we
guarantee that the account value allocated to the fixed investment option will
accrue interest daily at an effective annual rate of at least 4% without regard
to the actual investment experience of the general account.
Because of exemptive and exclusionary provisions, interests in our fixed
investment option have not been registered under the Securities Act of 1933 and
our 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 we have been advised that the staff
of the SEC has not reviewed the disclosure in this prospectus relating to the
fixed investment option. Disclosure regarding the fixed investment option may,
however, be subject to certain generally-applicable provisions of the Federal
securities laws relating to accuracy and completeness of statements made in
prospectuses.
PROCEDURES FOR ISSUANCE OF A POLICY
Generally, the policy is available with a minimum Sum Insured at issue of
$25,000 for insured persons with an attained age of less than 25 at the time of
policy issue, and $50,000 for insured persons with attained ages of 25 through
75 at the time of policy issue. At the time of issue, the insured person must
have an attained age of 75 or less. All insured persons must meet certain health
and other insurance risk criteria called "underwriting standards".
Policies issued in Montana or in connection with certain employee plans will
not directly reflect the sex of the insured person in either the premium rates
or the charges or values under the policy. The illustrations set forth in this
prospectus are sex-distinct and, therefore, may not reflect the rates, charges,
or values that would apply to such policies.
Commencement of insurance coverage
After you apply for a policy, it can sometimes take up to several weeks for us
to gather and evaluate all the information we need to decide whether to issue a
policy to you and, if so, what the insured person's rate class should be. After
we approve an application for a policy and assign an appropriate insurance rate
class, we will prepare the policy for delivery. We will not pay a death benefit
under a policy unless the policy is in effect when the insured person dies
(except for the circumstances described under "Temporary insurance coverage
prior to policy delivery" on page 25).
The policy will take effect only if all of the following conditions are
satisfied:
. The policy is delivered to and received by the applicant.
. At least the first Required Premium is received by us.
. Each insured person is living and still meets our health criteria for
issuing insurance.
If all of the above conditions are satisfied, the policy will take effect on
the date shown in the policy as the "date of issue." That is the date on which
we begin to deduct monthly charges. Policy months, policy years and policy
anniversaries are all measured from the date of issue.
Backdating
In order to preserve a younger age at issue for the insured person, we can
designate a date of issue that is up to 60 days earlier than the date that would
otherwise apply. This is referred to as "backdating"
34
<PAGE>
and is allowed under state insurance laws. Backdating can also be used in
certain corporate-owned life insurance cases involving multiple policies to
retain a common monthly deduction date.
The conditions for coverage described above under "Commencement of insurance
coverage" must still be satisfied, but in a backdating situation the policy
takes effect retroactively. Backdating results in a lower insurance charge
(because of the insured person's younger age at issue), but monthly charges
begin earlier than would otherwise be the case. Those monthly charges will be
deducted as soon as we receive premiums sufficient to pay them.
Temporary coverage prior to policy delivery
If a specified amount of premium is paid with the application for a policy and
other conditions are met, we will provide temporary term life insurance coverage
on the insured person for a period prior to the time coverage under the policy
takes effect. Such temporary term coverage will be subject to the terms and
conditions described in the application for the policy, including limits on
amount and duration of coverage.
Monthly deduction dates
Each charge that we deduct monthly is assessed against your account value or
the subaccounts at the close of business on the date of issue and at the close
of the first business day in each subsequent policy month.
COMMENCEMENT OF INVESTMENT PERFORMANCE
All premium payments will be allocated among the investment options on the
date as of which they are processed (as discussed below).
HOW WE PROCESS CERTAIN POLICY TRANSACTIONS
Premium payments
We will process any premium payment as of the day we receive it, unless one of
the following exceptions applies:
(1) We will process a payment received prior to a policy's date of issue as if
received on the business day that first precedes the date of issue.
(2) If you pay a sufficient premium to take your policy out of a grace period,
the portion of such premium that equals the overdue Required Premium will be
processed as of that Required Premium's due date.
(3) If the Minimum First Premium is not received prior to the date of issue,
we will process each premium payment received thereafter as if received on the
business day immediately preceding the date of issue until all of the Minimum
First Premium is received.
(4) We will process the portion of any premium payment for which we require
evidence of the insured person's continued insurability only after we have
received such evidence and found it satisfactory to us.
(5) If we receive any premium payment that will cause a policy to become a
modified endowment or will cause a policy to lose its status as life insurance
under the tax laws, we will not accept the excess portion of that premium
payment and will immediately notify the owner. We will refund the excess premium
when the premium payment check has had time to clear the banking system (but in
no case more than two weeks after receipt), except in the following
circumstances:
. The tax problem resolves itself prior to the date the refund is to be
made; or
. The tax problem relates to modified endowment status and we receive a
signed acknowledgment from the owner prior to the refund date instructing
us to process the
35
<PAGE>
premium notwithstanding the tax issues involved.
In the above cases, we will treat the excess premium as having been received on
the date the tax problem resolves itself or the date we receive the signed
acknowledgment. We will then process it accordingly.
(6) If a premium payment is received or is otherwise scheduled to be processed
(as specified above) on a date that is not a business day, the premium payment
will be processed on the business day next following that date.
Transfers among investment options
Any reallocation among investment options must be such that the total in all
investment options after reallocation equals 100% of account value. Transfers
out of a variable investment option will be effective at the end of the business
day in which we receive at our Life Servicing Office notice satisfactory to us.
If received on or before the policy anniversary, requests for transfer out of
the fixed investment option will be processed on the policy anniversary (or the
next business day if the policy anniversary does not occur on a business day).
If received after the policy anniversary, such a request will be processed at
the end of the business day in which we receive the request at our Life
Servicing Office. If you request a transfer out of the fixed investment option
61 days or more prior to the policy anniversary, we will not process that
portion of the reallocation, and your confirmation statement will not reflect a
transfer out of the fixed investment option as to such request. Currently, there
is no minimum amount limit on transfers into the fixed investment option, but we
reserve the right to impose such a limit in the future. We have the right to
defer transfers of amounts out of the fixed investment option for up to six
months.
Telephone transfers and policy loans
Once you have completed a written authorization, you may request a transfer or
policy loan by telephone or by fax. If the fax request option becomes
unavailable, another means of telecommunication will be substituted.
If you authorize telephone transactions, you will be liable for any loss,
expense or cost arising out of any unauthorized or fraudulent telephone
instructions which we reasonably believe to be genuine, unless such loss,
expense or cost is the result of our mistake or negligence. We employ 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 we do not
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine, we may be liable for any loss due to unauthorized or
fraudulent instructions.
Effective date of other policy transactions
Reinstatements of lapsed policies take effect on the monthly deduction date on
or next following the date we approve your request.
We process loans, surrenders, partial withdrawals, partial surrenders and loan
repayments as of the day we receive such request or repayment.
EFFECTS OF POLICY LOANS
The account value, the surrender value, and any death benefit above the
Guaranteed Death Benefit are permanently affected by any loan, whether or not it
is repaid in whole or in part. This is because the amount of the loan is
deducted from the investment options and placed in a special loan account. The
investment options and the special loan account will generally have different
rates of investment return.
The amount of the outstanding loan (which includes accrued and unpaid
interest) is subtracted from the amount otherwise payable when the policy
proceeds become payable.
36
<PAGE>
Whenever the outstanding loan exceeds the surrender value of the policy, the
policy will terminate 31 days after we have mailed notice of termination to you
(and to any assignee of record at such assignee's last known address), unless a
repayment of such excess is made within that period.
ADDITIONAL INFORMATION ABOUT HOW CERTAIN POLICY CHARGES WORK
Sales expenses and related charges
The sales charges (i.e., the premium sales charge and the CDSC) help to
compensate us for the cost of selling our policies. (See "What charges will
JHVLICO deduct from my investment in the policy?" in the Basic Information
section of this prospectus.) The amount of the charges in any policy year does
not specifically correspond to sales expenses for that year. We expect to
recover our total sales expenses over the life of the policies. To the extent
that the sales charges do not 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 our
general assets. (See "How we market the policies" on page 28.)
Effect of premium payment pattern
You may structure the timing and amount of premium payments to minimize the
sales charges, although doing so involves certain risks. Paying more than one
Required Premium in any policy year could reduce your total sales charges.
Accelerating the payment of Required Premiums to earlier policy years could
result in a larger CDSC and/or cause aggregate premiums paid to exceed the
policy's 7-pay premium limit and, as a result, cause the policy to become a
modified endowment, with adverse tax consequences to you upon receipt of policy
distributions. (See "Tax consequences" beginning on page 29.) On the other hand,
to pay less than the amount of Required Premiums by their due dates runs the
risk that the policy will lapse, resulting in loss of coverage and additional
charges.
Monthly charges
We deduct the monthly charges described in the Basic Information section from
your policy's investment options in proportion to the amount of account value
you have in each. For each month that we cannot deduct any charge because of
insufficient account value, the uncollected charges will accumulate and be
deducted when and if sufficient account value becomes available.
The insurance under the policy continues in full force during any grace period
but, if the insured person dies during the policy grace period, the amount of
unpaid monthly charges is deducted from the death benefit otherwise payable.
Reduced charges for eligible classes
The charges 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 we anticipate that the sales to the members of the class will
result in lower than normal sales or administrative expenses, lower taxes or
lower risks to us. We will make these reductions in accordance with our rules in
effect at the time of the application for a policy. The factors we consider 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 lapse and surrender rates 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 result in a reduction
in sales or administrative expenses, lower taxes or lower risks. Any reduction
in charges will be reasonable and will apply uniformly to all prospective policy
purchasers in the class and will not unfairly discriminate against any owner.
37
<PAGE>
HOW WE MARKET THE POLICIES
Signator Investors, Inc. ("Signator"), an indirect wholly-owned subsidiary of
John Hancock located at 197 Clarendon Street, Boston, MA 02117, is registered as
a broker-dealer under the Securities Exchange Act of 1934 and is a member of the
National Association of Securities Dealers, Inc. and the Securities Investor
Protection Corporation. Signator acts as principal underwriter and principal
distributor of the policies pursuant to a sales agreement among John Hancock,
Signator, JHVLICO, and the Account. Signator also serves as principal
underwriter for John Hancock Variable Annuity Accounts U, I and V, John Hancock
Mutual Variable Life Insurance Account UV and John Hancock Variable Life
Accounts V and S, all of which are registered under the 1940 Act. Signator is
also the principal underwriter for John Hancock Variable Series Trust I.
Applications for policies are solicited by agents who are licensed by state
insurance authorities to sell JHVLICO's policies and who are also registered
representatives ("representatives") of Signator 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
person's risk classification. JHVLICO will make the appropriate refund if a
policy ultimately is not issued or is returned under the "free look" 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.
Signator's representatives are compensated for sales of the policies on a
commission and service fee basis by Signator, and JHVLICO reimburses Signator
for such compensation and for other direct and indirect expenses (including
agency expense allowances, general agent, district manager and supervisor's
compensation, agent's training allowances, deferred compensation and insurance
benefits of agents, general agents, district managers and supervisors, agency
office clerical expenses and advertising) actually incurred in connection with
the marketing and sale of the policies.
The maximum commission payable to a Signator representative for selling a
policy is 50% of the premium that would be payable under a Modified Schedule in
the first policy year, 10% of the such premiums payable in the second through
fourth policy years, and 3% of any other premiums received by us in each policy
year thereafter.
Representatives with less than four years of service with Signator 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.
The policies are also sold through other registered broker-dealers that have
entered into selling agreements with Signator 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 Signator's 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. Signator will compensate the
broker-dealers as provided in the selling agreements, and JHVLICO will reimburse
Signator for such amounts and for certain other direct expenses in connection
with marketing the policies through other broker-dealers.
Representatives of Signator and the other broker-dealers mentioned above may
also earn "credits" toward qualification for attendance at certain business
meetings sponsored by John Hancock.
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<PAGE>
The offering of the policies is intended to be continuous, but neither JHVLICO
nor Signator is obligated to sell any particular amount of policies.
TAX CONSIDERATIONS
This description of federal income tax consequences is only a brief summary
and is not intended as tax advice. Tax consequences will vary based on your own
particular circumstances, and for further information you should consult a
qualified tax advisor. Federal, state and local tax laws, regulations and
interpretations can change from time to time. As a result, the tax consequences
to you and the beneficiary may be altered, in some cases retroactively.
Policy proceeds
We believe the policy will receive the same federal income and estate tax
treatment as fixed benefit life insurance policies. Section 7702 of the Internal
Revenue Code (the "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 satisfy that definition. We will monitor compliance with these standards.
If the policy complies with the definition of life insurance, we believe the
death benefit under the policy will be excludable from the beneficiary's gross
income under the Code. In addition, increases in account value as a result of
interest or investment experience will not be subject to federal income tax
unless and until values are actually received through distributions.
Distributions for tax purposes can include amounts received upon full or partial
surrender or partial withdrawals. You may also be deemed to have received a
distribution for tax purposes if you assign all or part of your policy rights or
change your policy's ownership.
In general, the owner will be taxed on the amount of distributions that exceed
the premiums paid under the policy. But under certain circumstances within the
first 15 policy years, the owner may be taxed on a distribution even if total
withdrawals do not exceed total premiums paid. Any taxable distribution will be
ordinary income to the owner (rather than capital gains).
We also believe 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 outstanding loan that
was not previously considered income (as discussed below) will be treated as if
it had been distributed to the owner if the policy terminates for any reason.
It is possible that, despite our monitoring, a policy might fail to qualify as
life insurance under Section 7702 of the Code. This could happen, for example,
if we inadvertently failed to return to you any premium payments that were in
excess of permitted amounts, or if the Trust failed to meet certain investment
diversification or other requirements of the Code. If this were to occur, you
would be subject to income tax on the income and gains under the policy for the
period of the disqualification and for subsequent periods and the death benefit
proceeds would lose their non-taxable status.
In the past, the United States Treasury Department has stated that it
anticipated issuing guidelines prescribing circumstances in which the ability of
a policy owner to direct his or her investment to particular funds may cause the
policy owner, rather than the insurance company, to be treated as the owner of
the shares of those funds. In that case, any income and gains attributable to
those shares would be included in your current gross income for federal income
tax purposes. Under current law, however, we believe that we, and not the owner
of a policy, would be considered the owner of the fund's shares for tax
purposes.
Tax consequences of ownership or receipt of policy proceeds under federal,
state and local estate, inheritance, gift and other tax laws depend on the
circumstances of each owner or beneficiary.
39
<PAGE>
Because there may be unfavorable tax consequences (including recognition of
taxable income and the loss of income tax-free treatment for any death benefit
payable to the beneficiary), you should consult a qualified tax adviser prior to
changing the policy's ownership or making any assignment of ownership interests.
7-pay premium limit
At the time of policy issuance, we will determine whether the premium payments
for which we will bill you will exceed the 7-pay limit discussed below. If so,
our standard procedures prohibit issuance of the policy unless you sign a form
acknowledging that fact.
The 7-pay limit is the total of net level premiums that would have been
payable at any time for a comparable fixed policy to be fully "paid-up" after
the payment of 7 equal annual premiums. "Paid-up" means that no further premiums
would be required to continue the coverage in force indefinitely, based on
certain prescribed assumptions. If the total premiums paid at any time during
the first 7 policy years exceed the 7-pay limit, the policy will be treated as a
"modified endowment", which can have adverse tax consequences.
The owner will be taxed on distributions and loans from a "modified endowment"
to the extent of any income (gain) to the owner (on an income-first basis). The
distributions and loans affected will be those made on or after, and within the
two year period prior to, the time the policy becomes a modified endowment.
Additionally, a 10% penalty tax may be imposed on taxable portions of such
distributions or loans that are made before the owner attains age 591/2.
Furthermore, any time there is a "material change" in a policy (such as a Sum
Insured increase, the addition of certain other policy benefits after issue, a
change in death benefit option, or reinstatement of a lapsed policy), the policy
will have a new 7-pay limit as if it were a newly-issued policy. This is true
even for policies entered into prior to June 21, 1988. If a prescribed portion
of the policy's then account value, plus all other premiums paid within 7 years
after the material change, at any time exceed the new 7-pay limit, the policy
will become a modified endowment.
Moreover, if benefits under a policy are reduced (such as a partial surrender,
a reduction in the Sum Insured, or the reduction or cancellation of certain
rider benefits) during the 7 years in which a 7-pay test is being applied, the
7-pay limit will be recalculated based on the reduced benefits. If the premiums
paid to date are greater than the recalculated 7-pay limit, the policy will
become a modified endowment.
All modified endowments issued by the same insurer (or its affiliates) to the
owner during any calendar year generally will be treated as one contract for the
purpose of applying the modified endowment rules. A policy received in exchange
for a modified endowment will itself also be a modified endowment. You should
consult your tax advisor if you have questions regarding the possible impact of
the 7-pay limit on your policy.
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. We are not responsible for compliance with the
terms of any such plan or with the requirements of applicable provisions of the
Code.
REPORTS THAT YOU WILL RECEIVE
At least annually, we will send you a statement setting forth at least the
following information as of the end of the most recent reporting period: the Sum
Insured, the account value, the portion of the account value in each investment
option, the surrender value, premiums received and charges deducted from
premiums since the last report, and any outstanding
40
<PAGE>
policy loan (and interest charged for the preceding policy year). Moreover, you
also will receive confirmations of transfers among investment options, policy
loans, partial withdrawals and certain other policy transactions. Premium
payments not in response to a billing notice are "unscheduled" and will be
separately confirmed. Therefore, if you make a premium payment that differs by
more than $25 from that billed, you will receive a separate confirmation of that
premium payment.
Semiannually we will send you a report containing the financial statements of
the Trust, including a list of securities held in each fund.
VOTING PRIVILEGES THAT YOU WILL HAVE
All of the assets in the subaccounts of the Account are invested in shares of
the corresponding funds of the Trust. We will vote the shares of each of the
funds of the Trust which are deemed attributable to variable life insurance
policies at regular and special meetings of the Trust's shareholders in
accordance with instructions received from owners of such policies. Shares of
the Trust held in the Account which are not attributable to such policies, as
well as shares for which instructions from owners are not received, will be
represented by us at the meeting. We will vote such shares for and against each
matter in the same proportions as the votes based upon the instructions received
from the owners of such policies.
We determine the number of a fund's shares held in a subaccount attributable
to each owner by dividing the amount of a policy's account value held in the
subaccount by the net asset value of one share in the fund. Fractional votes
will be counted. We determine the number of shares as to which the owner may
give instructions as of the record date for the Trust's meeting. Owners of
policies may give instructions regarding the election of the Board of Trustees
of the Trust, ratification of the selection of independent auditors, approval of
Trust investment advisory agreements and other matters requiring a shareholder
vote. We will furnish owners with information and forms to enable owners to give
voting instructions.
However, we may, in certain limited circumstances permitted by the SEC's
rules, disregard voting instructions. If we do disregard voting instructions,
you will receive a summary of that action and the reasons for it in the next
semi-annual report to owners.
CHANGES THAT JHVLICO CAN MAKE AS TO YOUR POLICY
Changes relating to the Trust or the Account
The voting privileges described in this prospectus reflect our 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, we reserve the right to proceed in accordance with any
such revised requirements. We also reserve 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 your policy belongs from the Account to another separate account or
subaccount, (2) to operate the Account as a "management-type investment company"
under the 1940 Act, or in any other form permitted by law, the investment
adviser of which would be JHVLICO, an affiliate or John Hancock, (3) to
deregister the Account under the 1940 Act, (4) to substitute for the fund shares
held by a subaccount any other investment permitted by law, and (5) to take any
action necessary to comply with or obtain any exemptions from the 1940 Act. We
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.
41
<PAGE>
Other permissible changes
We reserve the right to make any changes in the policy necessary to ensure the
policy is within the definition of life insurance under the Federal tax laws and
is in compliance with any changes in Federal or state tax laws.
In our policies, we reserve the right to make certain changes if they would
serve the best interests of policy owners or would be appropriate in carrying
out the purposes of the policies. Such changes include the following:
. Changes necessary to comply with or obtain or continue exemptions under
the federal securities laws
. Combining or removing investment options
. Changes in the form of organization of any separate account
Any such changes will be made only to the extent permitted by applicable laws
and only in the manner permitted by such laws. When required by law, we will
obtain your approval of the changes and the approval of any appropriate
regulatory authority.
ADJUSTMENTS WE MAKE TO DEATH BENEFITS
If the insured person commits suicide within certain time periods, the amount
of death benefit we pay will be limited as described in the policy. Also, if an
application misstated the age or gender of the insured person, we will adjust
the amount of any death benefit as described in the policy.
WHEN WE PAY POLICY PROCEEDS
General
We will pay any death benefit, withdrawal, surrender value or loan within 7
days after we receive the last required form or request (and, with respect to
the death benefit, any other documentation that may be required). If we don't
have information about the desired manner of payment within 7 days after the
date we receive notification of the insured person's death, we will pay the
proceeds as a single sum, normally within 7 days thereafter.
Delay to challenge coverage
We may challenge the validity of your insurance policy based on any material
misstatements made to us in the application for the policy. We cannot make such
a challenge, however, beyond certain time limits that are specified in the
policy.
Delay for check clearance
We reserve the right to defer payment of that portion of your account value
that is attributable to a premium payment made by check for a reasonable period
of time (not to exceed 15 days) to allow the check to clear the banking system.
Delay of separate account proceeds
We reserve the right to defer payment of any death benefit, loan or other
distribution that is derived from a variable investment option if (a) the New
York Stock Exchange is closed (other than customary weekend and holiday
closings) or trading on the New York Stock Exchange is restricted; (b) an
emergency exists, as a result of which disposal of securities is not reasonably
practicable or it is not reasonably practicable to fairly determine the account
value; or (c) the SEC by order permits the delay for the protection of owners.
Transfers and allocations of account value among the investment options may also
be postponed under these circumstances. If we need to defer calculation of
separate account values for any of the foregoing reasons, all delayed
transactions will be processed at the next values that we do compute.
OTHER DETAILS ABOUT EXERCISING RIGHTS AND PAYING BENEFITS
Joint ownership
If more than one person owns a policy, all owners must join in most requests
to exercise rights under the policy.
42
<PAGE>
Assigning your policy
You may assign your rights in the policy to someone else as collateral for a
loan or for some other reason. Assignments do not require the consent of any
revocable beneficiary. A copy of the assignment must be forwarded to us. We are
not responsible for any payment we make or any action we take before we receive
notice of the assignment in good order. Nor are we responsible for the validity
of the assignment. An absolute assignment is a change of ownership. All
collateral assignees of record must consent to any full surrender, partial
withdrawal or loan from the policy.
Your beneficiary
You name your beneficiary when you apply for the policy. The beneficiary is
entitled to the proceeds we pay following the insured person's death. You may
change the beneficiary during the insured person's lifetime. Such a change
requires the consent of any irrevocable named beneficiary. A new beneficiary
designation is effective as of the date you sign it, but will not affect any
payments we make before we receive it. If no beneficiary is living when the
insured person dies, we will pay the insurance proceeds to the owner or the
owner's estate.
YEAR 2000 ISSUES
The advent of the Year 2000 presents a technological challenge to JHVLICO. In
close cooperation with John Hancock Mutual Life Insurance Company, its parent,
JHVLICO has developed and is executing a plan to modify or replace significant
portions of JHVLICO's computer information and automated technologies so that
its systems will function properly with respect to dates in the year 2000 and
thereafter. The plan also involves coordination and testing with business
partners to ensure that external factors do not adversely impact JHVLICO's
systems. JHVLICO presently believes that with modifications to existing systems
and conversions to new technologies, the year 2000 will not pose significant
operational problems for its computer systems. However, if certain modifications
and conversions are not made, or are not completed on time, the year 2000 issue
could have an adverse impact on the operations of JHVLICO.
JHVLICO has substantially completed the process of remediating its systems and
expects the compliance testing component of the project to be substantially
complete by June, 1999. This completion target was derived utilizing numerous
assumptions of future events, including availability of certain resources and
other factors. However, there can be no guarantee that this estimate will be
achieved, that these steps will be sufficient or that actual results may not
differ materially from those anticipated. For more information about the impact
of year 2000, please refer to Note 12 of the Notes to Statutory-Basis Financial
Statements of John Hancock Variable Life Insurance Company included in this
prospectus.
LEGAL MATTERS
The legal validity of the policies described in this prospectus has been
passed on by Ronald J. Bocage, Vice President and Counsel for JHVLICO. Messrs.
Freedman, Levy, Kroll & Simonds, Washington, D.C., have advised us on certain
Federal securities law matters in connection with the policies.
REGISTRATION STATEMENT FILED WITH THE SEC
This prospectus omits certain information contained in the Registration
Statement which has been filed with the SEC. More details may be obtained from
the SEC upon payment of the prescribed fee.
ACCOUNTING AND ACTUARIAL 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 has
been included in reliance on their reports given on their authority as experts
in accounting and auditing.
43
<PAGE>
Actuarial matters included in this prospectus have been examined by Malcolm
Cheung, F.S.A.,an Actuary of JHVLICO and Second Vice President of John Hancock.
FINANCIAL STATEMENTS OF JHVLICO AND THE ACCOUNT
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.
44
<PAGE>
LIST 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 Principal Occupations
- --------- ---------------------
<S> <C>
David F. D'Alessandro Chairman of the Board and Chief Executive Officer of
JHVLICO; President and Chief Operating Officer, John
Hancock Mutual Life Insurance Company.
Michele G. Van Leer Vice Chairman of the Board and President of JHVLICO;
Senior Vice President, John Hancock Mutual Life
Insurance Company.
Joseph A. Tomlinson Director and Vice President of JHVLICO; Vice President,
John Hancock Mutual Life Insurance Company.
Ronald J. Bocage Director, Vice President and Counsel of JHVLICO; Vice
President and Counsel, John Hancock Mutual Life
Insurance Company.
Thomas J. Lee Director of JHVLICO; Vice President, John Hancock
Mutual Life Insurance Company.
Robert R. Reitano Director of JHVLICO; Vice President, John Hancock
Mutual Life Insurance Company.
Malcolm Cheung Director of JHVLICO; Second Vice President, John
Hancock Mutual Life Insurance Company
Robert S. Paster Director of JHVLICO; Second Vice President, 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 Controller, John
Hancock Mutual Life Insurance Company.
</TABLE>
The business address of all Directors and officers of JHVLICO is John Hancock
Place, Boston, Massachusetts 02117.
45
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Directors and Policyholders 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, 1998
and 1997, 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 opinion, because of the effects of the matter described in the
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, 1998 and 1997, 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, 1998 and 1997, 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 19, 1999
46
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
December 31
--------------------
1998 1997
--------- -----------
(In millions)
<S> <C> <C>
ASSETS
Bonds--Note 6 . . . . . . . . . . . . . . . . . . . . $1,185.8 $1,092.7
Preferred stocks . . . . . . . . . . . . . . . . . . . 36.5 17.2
Common stocks . . . . . . . . . . . . . . . . . . . . 3.1 2.3
Investment in affiliates . . . . . . . . . . . . . . . 81.7 79.1
Mortgage loans on real estate--Note 6 . . . . . . . . 388.1 273.9
Real estate . . . . . . . . . . . . . . . . . . . . . 41.0 39.9
Policy loans . . . . . . . . . . . . . . . . . . . . . 137.7 106.8
Cash items:
Cash in banks . . . . . . . . . . . . . . . . . . . 11.4 83.1
Temporary cash investments . . . . . . . . . . . . . 8.5 60.1
-------- --------
19.9 143.2
Premiums due and deferred . . . . . . . . . . . . . . 32.7 33.8
Investment income due and accrued . . . . . . . . . . 29.8 24.7
Other general account assets . . . . . . . . . . . . . 47.5 16.8
Assets held in separate accounts . . . . . . . . . . . 6,595.2 4,691.1
-------- --------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . $8,599.0 $6,521.5
======== ========
OBLIGATIONS AND STOCKHOLDER'S EQUITY
OBLIGATIONS
Policy reserves . . . . . . . . . . . . . . . . . . $1,652.0 $1,124.3
Federal income and other taxes payable--Note 1 . . . 44.3 36.1
Other general account obligations . . . . . . . . . 150.9 481.9
Transfers from separate accounts, net . . . . . . . (190.3) (146.8)
Asset valuation reserve--Note 1 . . . . . . . . . . 21.9 18.6
Obligations related to separate accounts . . . . . . 6,589.4 4,685.7
-------- --------
TOTAL OBLIGATIONS . . . . . . . . . . . . . . . . . . 8,268.2 6,199.8
STOCKHOLDER'S EQUITY
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 . . . . . . . . . . . . . . . . . (49.2) (58.3)
-------- --------
TOTAL STOCKHOLDER'S EQUITY . . . . . . . . . . . . . . 330.8 321.7
-------- --------
TOTAL OBLIGATIONS AND STOCKHOLDER'S EQUITY . . . . . . $8,599.0 $6,521.5
======== ========
</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
-----------------------
1998 1997
----------- -------------
(In millions)
<S> <C> <C>
INCOME
Premiums . . . . . . . . . . . . . . . . . . . . $1,272.3 $ 872.7
Net investment income--Note 3 . . . . . . . . . 122.8 89.7
Other, net . . . . . . . . . . . . . . . . . . . 618.1 449.1
-------- --------
2,013.2 1,411.5
BENEFITS AND EXPENSES
Payments to policyholders and beneficiaries . . 301.4 264.0
Additions to reserves to provide for future
payments to policyholders and beneficiaries . 1,360.2 826.2
Expenses of providing service to policyholders
and obtaining new insurance
--Note 5 . . . . . . . . . . . . . . . . . . . 274.2 233.2
State and miscellaneous taxes . . . . . . . . . 28.1 19.1
-------- --------
1,963.9 1,342.5
-------- --------
GAIN FROM OPERATIONS BEFORE FEDERAL INCOME
TAXES AND NET REALIZED CAPITAL LOSSES . . . 49.3 69.0
Federal income taxes--Note 1 . . . . . . . . . . . 33.1 38.5
-------- --------
GAIN FROM OPERATIONS BEFORE NET REALIZED
CAPITAL
LOSSES . . . . . . . . . . . . . . . . . . . 16.2 30.5
Net realized capital losses--Note 4 . . . . . . . (0.6) (3.0)
-------- --------
NET INCOME . . . . . . . . . . . . . . . . . 15.6 27.5
Unassigned deficit at beginning of year . . . . . (58.3) (96.9)
Net unrealized capital (losses) gains and other
adjustments--Note 4 . . . . . . . . . . . . . . . (6.0) 5.0
Other reserves and adjustments . . . . . . . . . . (0.5) 6.1
-------- --------
UNASSIGNED DEFICIT AT END OF YEAR . . . . . . . . $ (49.2) $ (58.3)
======== ========
</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
-----------------------
1998 1997
----------- ------------
(In millions)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Insurance premiums . . . . . . . . . . . . . . . $1,275.3 $ 877.0
Net investment income . . . . . . . . . . . . . . 118.2 89.9
Benefits to policyholders and beneficiaries . . . (275.5) (245.2)
Dividends paid to policyholders . . . . . . . . . (22.3) (18.7)
Insurance expenses and taxes . . . . . . . . . . (296.9) (267.2)
Net transfers to separate accounts . . . . . . . (874.4) (715.2)
Other, net . . . . . . . . . . . . . . . . . . . 551.3 408.9
-------- -------
NET CASH PROVIDED FROM OPERATIONS . . . . . . 475.7 129.5
-------- -------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Bond purchases . . . . . . . . . . . . . . . . . (618.8) (621.6)
Bond sales . . . . . . . . . . . . . . . . . . . 340.7 197.3
Bond maturities and scheduled redemptions . . . . 111.8 34.1
Bond prepayments . . . . . . . . . . . . . . . . 76.5 51.6
Stock purchases . . . . . . . . . . . . . . . . . (23.4) (15.7)
Proceeds from stock sales . . . . . . . . . . . . 1.9 6.7
Real estate purchases . . . . . . . . . . . . . . (4.2) (1.3)
Real estate sales . . . . . . . . . . . . . . . . 2.1 0.4
Other invested assets purchases . . . . . . . . . 0.0 (1.0)
Proceeds from the sale of other invested assets . 0.0 0.3
Mortgage loans issued . . . . . . . . . . . . . . (145.5) (94.5)
Mortgage loan repayments . . . . . . . . . . . . 33.2 32.4
Other, net . . . . . . . . . . . . . . . . . . . (435.2) 393.1
-------- -------
NET CASH USED IN INVESTING ACTIVITIES . . . . (660.9) (18.2)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in short-term note payable . . . . . 61.9 0.0
-------- -------
NET CASH PROVIDED FROM FINANCING ACTIVITIES . 61.9 0.0
-------- -------
(DECREASE) INCREASE IN CASH AND TEMPORARY CASH
INVESTMENTS. . . . . . . . . . . . . . . . . . . . (123.3) 111.3
Cash and temporary cash investments at beginning of
year . . . . . . . . . . . . . . . . . . . . . . . 143.2 31.9
-------- -------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF YEAR $ 19.9 $ 143.2
======== =======
</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 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 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; (8) no provision is made for the deferred income tax
effects of temporary differences between book and tax basis reporting; and (9)
certain items, including modifications to required policy reserves resulting
from changes in actuarial assumptions, are recorded directly to unassigned
deficit rather than being reflected in income. The effects of the foregoing
variances from GAAP have not been determined but are presumed to be material.
The significant accounting practices of the Company are as follows:
Pending Statutory Standards: During March 1998, the NAIC adopted the
codification of statutory accounting practices, which is effective in 2001.
Codification 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. Codification will
require adoption by the various states before it becomes the prescribed
statutory basis of accounting for insurance companies domesticated within those
states. Accordingly, before codification becomes effective for the Company, the
Massachusetts Division of Insurance must adopt codification as the prescribed
basis of accounting on which domestic insurers must report their statutory-basis
results to the Division of Insurance. The impact of any such changes on the
Company's unassigned deficit is not expected to 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.
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
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 fair value. The discount or premium on bonds is amortized using the
interest method.
Investments in affiliates are included on the statutory equity method.
Loan-backed bonds and structured securities are valued at amortized cost using
the interest method including anticipated prepayments. Prepayment assumptions
are obtained from broker dealer surveys or internal estimates and are based on
the current interest rate and economic environment. The retrospective
adjustment method is used to value all such securities except for
interest-only securities, which are valued using the prospective method.
The net interest effect of interest rate and currency rate swap transactions
is recorded as an adjustment of interest income as incurred. The initial cost
of interest rate cap agreements is amortized to net investment income over the
life of the related agreement. Gains and losses on financial futures contracts
used as hedges against interest rate fluctuations are deferred and recognized
in income over the period being hedged.
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 $3.0 million in 1998 and $2.1 million in
1997.
Real estate acquired in satisfaction of debt and real estate held for sale are
carried at the lower of cost or fair value.
Policy loans are carried at outstanding principal balance, not in excess of
policy cash surrender value.
Asset Valuation and Interest Maintenance Reserves: The Asset Valuation Reserve
(AVR) is computed in accordance with the prescribed NAIC formula and represents
a provision for possible fluctuations in the value of bonds, equity securities,
mortgage loans, real estate and other invested assets. Changes to the AVR are
charged or credited directly to the unassigned deficit.
The Company also records the NAIC prescribed Interest Maintenance Reserve (IMR)
that represents that portion of the after tax net accumulated unamortized
realized capital gains and losses on sales of fixed income securities,
principally bonds and mortgage loans, attributable to changes in the general
level of interest rates. Such gains and losses are deferred and amortized into
income over the remaining expected lives of the investments sold. At December
31, 1998, the IMR, net of 1998 amortization of $2.4 million, amounted to $10.7
million, which is included in policy reserves. The corresponding 1997 amounts
were $1.2 million and $7.8 million, respectively.
Goodwill: The excess of cost over the statutory book value of the net assets of
life insurance business acquired was $11.4 million and $13.1 million at December
31, 1998 and 1997, respectively, and generally is amortized over a ten-year
period using a straight-line method.
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
Separate Accounts: Separate account assets and liabilities reported in the
accompanying statements of financial position represent funds that are
separately administered, principally for variable life insurance policies, and
for which the contractholder, rather than the Company, generally bears the
investment risk. Separate account obligations are intended to be satisfied from
separate account assets and not from assets of the general account. Separate
accounts generally are reported at fair value. The operations of the separate
accounts are not included in the statement 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 Value Disclosure 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 certain
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. See Note 11.
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.
Fair values for futures contracts are based on quoted market prices. Fair
values for interest rate swap, cap agreements, and currency swap agreements
are based on current settlement values. The current settlement values are
based on brokerage quotes that utilize pricing models or formulas using
current assumptions.
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, 1998.
Capital Gains and Losses: Realized capital gains and losses are determined using
the specific identification method. 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.
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
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 and4 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 and5
1/2% interest for policies issued from 1988 through 1992; 5% interest for
policies issued in 1993 and 1994; and4 1/2% interest for policies issued in 1995
through 1998.
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 basis 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 $38.2 million in 1998 and $29.6 million in 1997.
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.
Amounts for disputed tax issues relating to the prior years are charged or
credited directly to policyholders' contingency reserve.
Adjustments to Policy Reserves: From time to time, the Company finds it
appropriate to modify certain required policy reserves because of changes in
actuarial assumptions. Reserve modifications resulting from such determinations
are recorded directly to stockholder's equity. During 1997, the Company refined
certain actuarial assumptions inherent in the calculation of reserves related to
AIDS claims under individual life insurance policies resulting in a $6.4 million
increase in stockholder's equity at December 31, 1997. No additional refinements
were made during 1998.
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.
Reclassification: Certain 1997 amounts have been reclassified to conform to the
1998 presentation.
53
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 2--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 1998 and 1997.
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 was subsequently renamed Investors Partner Life Company
(IPL) on March 5, 1998. IPL manages the business assumed from Charter and does
not currently issue new business.
NOTE 3--NET INVESTMENT INCOME
Investment income has been reduced by the following amounts:
<TABLE>
<CAPTION>
1998 1997
------- --------
(In millions)
<S> <C> <C>
Investment expenses . . . . . . . . . . . . . . . . . . . . $ 8.3 $5.0
Interest expense . . . . . . . . . . . . . . . . . . . . . 2.4 0.7
Depreciation expense . . . . . . . . . . . . . . . . . . . 0.8 1.1
Investment taxes . . . . . . . . . . . . . . . . . . . . . 0.7 0.4
----- ----
$12.2 $7.2
===== ====
</TABLE>
NOTE 4--NET CAPITAL GAINS (LOSSES) AND OTHER ADJUSTMENTS
Net realized capital gains (losses) consist of the following items:
<TABLE>
<CAPTION>
1998 1997
------ --------
(In millions)
<S> <C> <C>
Net gains from asset sales . . . . . . . . . . . . . . . . . $ 7.6 $ 0.8
Capital gains tax . . . . . . . . . . . . . . . . . . . . . (2.9) (0.7)
Net capital gains transferred to IMR . . . . . . . . . . . . (5.3) (3.1)
----- -----
Net Realized Capital Losses . . . . . . . . . . . . . . . $(0.6) $(3.0)
===== =====
</TABLE>
Net unrealized capital (losses) gains and other adjustments consist of the
following items:
<TABLE>
<CAPTION>
1998 1997
--------------- --------
(In millions)
<S> <C> <C>
Net (losses) gains from changes in security values
and book value adjustments . . . . . . . . . . . . $ (2.7) $ 7.0
Increase in asset valuation reserve . . . . . . . . (3.3) (2.0)
-------------- -----
$ (6.0) $ 5.0
============== =====
</TABLE>
54
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 5--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 1998 and 1997 to reflect continuing changes in
the Company's operations. The amount of the service fee charged to the Company
was $157.5 million and $123.6 million in 1998 and 1997, 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 $0.7 million and
$0.9 million in 1998 and 1997, 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.
The Company has a modified coinsurance agreement with John Hancock to reinsure
50% of 1994 through 1998 issues of flexible premium variable life insurance and
scheduled premium variable life insurance policies. In connection with this
agreement, John Hancock transferred $4.9 million and $22.0 million of cash for
tax, commission, and expense allowances to the Company, which increased the
Company's net gain from operations by $22.2 million and $10.1 million in 1998
and 1997, respectively.
The Company also has a modified coinsurance agreement with John Hancock to
reinsure 50% of 1995 through 1998 issues of certain retail annuity contracts
(Independence Preferred and Declaration). In connection with this agreement, the
Company received a net cash payment of $12.7 million in 1998 and made a net cash
payment of $1.1 million in 1997 for surrender benefits, tax, reserve increase,
commission, expense allowances and premium. This agreement increased the
Company's net gain from operations by $8.4 million and $9.8 million in 1998 and
1997, respectively.
Effective January 1, 1997, the Company entered into a stop-loss agreement with
John Hancock to reinsure mortality claims in excess of 110% of expected
mortality claims in 1998 and 1997 for all policies that are not reinsured under
any other indemnity agreement. In connection with the agreement, John Hancock
received $1.0 million in 1998 and transferred $2.4 million in 1997 of cash for
mortality claims to the Company, which decreased by $0.5 million and increased
by $1.3 million the Company's net gain from operations in 1998 and 1997,
respectively.
At December 31, 1998, the Company had outstanding a short-term note of $61.9
million payable to an affiliate at a variable rate of interest. The note is part
of a revolving line of credit. Interest paid in 1998 was $2.9 million. The note
is included in other general account obligations.
55
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 6--INVESTMENTS
The statement value and fair value of bonds are shown below:
<TABLE>
<CAPTION>
Gross Gross
Statement Unrealized Unrealized Fair
December 31, 1998 Value Gains Losses Value
----------------- --------- ---------- ---------- ----------
(In millions)
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies . . $ 5.1 $ 0.1 $ 0.0 $ 5.2
Obligations of states and
political subdivisions . . . . 3.2 0.3 0.0 3.5
Corporate securities . . . . . 925.2 50.4 15.0 960.6
Mortgage-backed securities . . 252.3 10.0 0.1 262.2
-------- ----- ----- --------
Total bonds . . . . . . . . . $1,185.8 $60.8 $15.1 $1,231.5
======== ===== ===== ========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1997
-----------------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. government corporations and agencies $ 254.5 $ 0.2 $0.1 $ 254.6
Obligations of states and political
subdivisions. . . . . . . . . . . . . . . 12.1 1.0 0.0 13.1
Debt securities issued by foreign
governments . . . . . . . . . . . . . . . 0.2 0.0 0.0 0.2
Corporate securities . . . . . . . . . . . 712.7 43.9 2.7 753.9
Mortgage-backed securities . . . . . . . . 113.2 3.5 0.0 116.7
-------- ----- ---- --------
Total bonds . . . . . . . . . . . . . . $1,092.7 $48.6 $2.8 $1,138.5
======== ===== ==== ========
</TABLE>
The statement value and fair value of bonds at December 31, 1998, 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 . . . . . . . . . . . . . . . . $ 57.3 $ 59.1
Due after one year through five years . . . . . . . . . 283.4 294.1
Due after five years through ten years . . . . . . . . 374.9 388.7
Due after ten years . . . . . . . . . . . . . . . . . . 217.9 227.4
-------- --------
933.5 969.3
Mortgage-backed securities . . . . . . . . . . . . . . 252.3 262.2
-------- --------
$1,185.8 $1,231.5
======== ========
</TABLE>
Gross gains of $3.4 million in 1998 and $1.1 million in 1997 and gross losses of
$0.7 million in 1998 and $4.5 million in 1997 were realized from the sale of
bonds.
At December 31, 1998, bonds with an admitted asset value of $8.6 million were on
deposit with state insurance departments to satisfy regulatory requirements.
The cost of common stocks was $2.1 million and $0.0 million at December 31, 1998
and 1997, respectively. At December 31, 1998, gross unrealized appreciation on
common stocks totaled $1.3 million, and gross unrealized
56
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 6--INVESTMENTS--CONTINUED
depreciation totaled $0.3 million. The fair value of preferred stock totaled
$36.5 million at December 31, 1998 and $17.2 million at December 31, 1997.
Bonds with amortized cost of $0.9 million were non-income producing for the
twelve months ended December 31, 1998.
At December 31, 1998, 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 Geographic Statement
Property Type Value Concentration Value
------------- --------- ------------- ---------
(In millions) (In millions)
<S> <C> <C> <C>
Apartments . . . . . $106.4 East North Central . $ 56.4
Hotels . . . . . . . 9.6 East South Central . 0.9
Industrial . . . . . 71.9 Middle Atlantic . . . 26.2
Office buildings . . 78.2 Mountain . . . . . . 27.5
Retail . . . . . . . 29.6 New England . . . . . 36.9
Agricultural . . . . 71.5 Pacific . . . . . . . 96.4
Other . . . . . . . . 20.9 South Atlantic . . . 83.8
West North Central . 13.1
West South Central . 43.3
Other . . . . . . . . 3.6
------ ------
$388.1 $388.1
====== ======
</TABLE>
At December 31, 1998, the fair values of the commercial and agricultural
mortgage loans portfolios were $331.3 million and $70.0 million, respectively.
The corresponding amounts as of December 31, 1997 were approximately $243.8
million and $42.0 million, respectively.
The maximum and minimum lending rates for mortgage loans during 1998 were 9.19%
and 6.82% for agricultural loans and 8.88% and 6.56% for other properties.
Generally, the maximum percentage of any loan to the value of security at the
time of the loan, exclusive of insured, 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.
NOTE 7--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 1998 were $590.2 million, $21.5 million, and $8.2 million,
respectively. The corresponding amounts in 1997 were $427.4 million, $18.3
million, and $10.1 million, respectively.
57
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 7--REINSURANCE--CONTINUED
Reinsurance ceded contracts do not relieve the Company from its obligations to
policyholders. The Company remains liable to its policyholders for the portion
reinsured to the extent that any reinsurer does not meet its obligations for
reinsurance ceded to it under the reinsurance agreements. Failure of the
reinsurers to honor their obligations could result in losses to the Company;
consequently, estimates are established for amounts deemed or estimated to be
uncollectible. To minimize its exposure to significant losses from reinsurance
insolvencies, the Company evaluates the financial condition of its reinsurers
and monitors concentration of credit risk arising from similar characteristics
of the reinsurer.
Neither the Company, nor any of its related parties, control, either directly or
indirectly, any external reinsurers with which the Company conducts business. No
policies issued by the Company have been reinsured with a foreign company which
is controlled, either directly or indirectly, by a party not primarily engaged
in the business of insurance.
The Company has not entered into any reinsurance agreements in which the
reinsurer may unilaterally cancel any reinsurance for reasons other than
nonpayment of premiums or other similar credits. The Company does not have any
reinsurance agreements in effect in which the amount of losses paid or accrued
through December 31, 1998 would result in a payment to the reinsurer of amounts
which, in the aggregate and allowing for offset of mutual credits from other
reinsurance agreements with the same reinsurer, exceed the total direct premiums
collected under the reinsured policies.
NOTE 8--FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The notional amounts, carrying values and estimated fair values of the Company's
derivative instruments were as follows at December 31:
<TABLE>
<CAPTION>
Assets (Liabilities)
Number of Contracts/ ---------------------------------------
Notional Amounts 1998 1997
--------------------- --------------------- ----------------
Carrying Fair Carrying Fair
1998 1997 Value Value Value Value
---------- ---------- ---------- --------- -------- --------
($ In millions)
<S> <C> <C> <C> <C> <C> <C>
Futures contracts to
sell securities . . 947 367 $(0.5) $ (0.5) $(0.4) $(0.4)
Interest rate swap
agreements . . . . . $365.0 $245.0 -- (17.7) -- (7.8)
Interest rate cap
agreements . . . . . 89.4 89.4 3.1 3.1 1.4 1.4
Currency rate swap
agreements . . . . . 15.8 14.3 -- (3.3) -- (2.1)
</TABLE>
The Company uses futures contracts, interest rate swap, cap agreements, and
currency rate swap agreements for other than trading purposes to hedge and
manage its exposure to changes in interest rate levels, foreign exchange rate
fluctuations and to manage duration mismatch of assets and liabilities.
The futures contracts expire in 1999. The interest rate swap agreements expire
in 1999 to 2009. The interest rate cap agreements expire in 2006 to 2007. The
currency rate swap agreements expire in 2006 to 2009.
The Company's exposure to credit risk is the risk of loss from a counterparty
failing to perform to the terms of the contract. The Company continually
monitors its position and the credit ratings of the counterparties to these
derivative instruments. To limit exposure associated with counterparty
nonperformance on interest rate and currency swap agreements, the Company enters
into master netting agreements with its counterparties. The Company believes the
risk of incurring losses due to nonperformance by its counterparties is remote
and that such losses, if any, would be immaterial. Futures contracts trade on
organized exchanges and, therefore, have minimal credit risk.
58
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 9--POLICY RESERVES, POLICYHOLDERS' AND BENEFICIARIES' FUNDS AND OBLIGATIONS
RELATED TO SEPARATE ACCOUNTS
The Company's annuity reserves and deposit fund liabilities that are subject to
discretionary withdrawal, with and without adjustment, are summarized as
follows:
<TABLE>
<CAPTION>
December 31, 1998 Percent
----------------- ---------
(In millions)
<S> <C> <C>
Subject to discretionary withdrawal (with
adjustment)
With market value adjustment . . . . . . . . . $ 0.9 0.1%
At book value less surrender charge . . . . . 1,677.9 88.8
-------- -----
Total with adjustment . . . . . . . . . . . 1,678.8 88.9
Subject to discretionary withdrawal at book value
(without adjustment) . . . . . . . . . . . . . 203.6 10.8
Not subject to discretionary withdrawal--general
account . . . . . . . . . . . . . . . . . . . . 6.5 0.3
-------- -----
Total annuity reserves and deposit
liabilities. . . . . . . . . . . . . . . . $1,888.9 100.0%
======== =====
</TABLE>
NOTE 10--COMMITMENTS AND CONTINGENCIES
The Company has extended commitments to purchase long-term bonds and issue real
estate mortgages totaling $5.9 million and $24.8 million, respectively, at
December 31, 1998. 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 estimated fair value of the commitments described
above is $32.1 million at December 31, 1998. The majority of these commitments
expire in 1999.
In the normal course of its business operations, the Company is involved with
litigation from time to time with claimants, beneficiaries and others, and a
number of litigation matters were pending as of December 31, 1998. 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 or results of operations of the Company.
59
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 11--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
---------------------------------------------
1998 1997
----------------------- -------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
----------- ----------- --------- -----------
(In millions)
<S> <C> <C> <C> <C>
Assets
Bonds--Note 6 . . . . . . $1,185.8 $1,231.5 $1,092.7 $1,138.5
Preferred stocks--Note 6 . 36.5 36.5 17.2 17.2
Common stocks--Note 6 . . 3.1 3.1 2.3 2.3
Mortgage loans on real
estate--Note 6 . . . . . 388.1 401.3 273.9 285.8
Policy loans--Note 1 . . . 137.7 137.7 106.8 106.8
Cash and cash
equivalents--Note 1 . . 19.9 19.9 143.2 143.2
Derivatives assets
(liabilities) relating
to:--Note 8
Futures contracts . . . . (0.5) (0.5) (0.4) (0.4)
Interest rate swaps . . . -- (17.7) -- (7.8)
Currency rate swaps . . . -- (3.3) -- (2.1)
Interest rate caps . . . . 3.1 3.1 1.4 1.4
Liabilities
Commitments--Note 10 . . . -- 32.1 -- 194.5
</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.
NOTE 12--IMPACT OF YEAR 2000 (UNAUDITED)
The Company relies on John Hancock, its parent company, for information
processing services. John Hancock is executing its plan to address the impact of
the Year 2000 issues that result from computer programs being written using two
digits to reflect the year rather than four to define the applicable year and
century. Historically, the first two digits were hardcoded to save memory. Many
of John Hancock's computer programs that have date-sensitive software, including
those relied upon by the Company, may recognize a date using "00" as the year
1900 rather than the year 2000. This could result in an information technology
(IT) system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices or engage in similar normal business activities. In addition,
non-IT systems including, but not limited to, security alarms, elevators and
telephones are subject to malfunction due to their dependence on embedded
technology such as microcontrollers for proper operation. As described, the Year
2000 project presents a number of challenges for financial institutions since
the correction of Year 2000 issues in IT and non-IT systems will be complex and
costly for the entire industry.
John Hancock began to address the Year 2000 project as early as 1994. John
Hancock's plan to address the Year 2000 Project includes an awareness campaign,
an assessment period, a renovation stage, validation work and an implementation
of Company solutions.
The continuous awareness campaign serves several purposes: defining the problem,
gaining executive level support and sponsorship, establishing a team and overall
strategy, and assessing existing information system management resources.
Additionally, the awareness campaign establishes an education process to ensure
that all employees are aware of the Year 2000 issue and knowledgeable of their
role in securing solutions.
60
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 12--IMPACT OF YEAR 2000 (UNAUDITED)--CONTINUED
The assessment phase, which was completed for both IT and non-IT systems as of
April 1998, included the identification, inventory, analysis, and prioritization
of IT and non-IT systems and processes to determine their conversion or
replacement.
The renovation stage reflects the conversion, validation, replacement, or
elimination of selected platforms, applications, databases and utilities,
including the modification of applicable interfaces. Additionally, the
renovation stage includes performance, functionality, and regression testing and
implementation. As of December 31, 1998, the renovation phase was substantially
complete for computer applications, systems and desktops. For all remaining
components, the renovation phase is underway and will be complete before the end
of the second quarter of 1999.
The validation phase consists of the compliance testing of renovated systems.
The validation phase is expected to be complete by mid 1999, after renovation is
accomplished. Testing facilities will be used through the remainder of 1999 to
perform special functional testing. Special functional testing includes testing,
as required, with material third parties and industry groups and performing
reviews of "dry runs" of year-end activities. Scheduled testing of material
relationships with third parties, including those impacting the Company, is
underway. It is anticipated that testing with material business partners will
continue through much of 1999.
Finally, the implementation phase involves the actual implementation of
converted or replaced platforms, applications, databases, utilities, interfaces,
and contingency planning. Implementation is being performed concurrently during
the renovation phase and is expected to be completed before the end of the
second quarter of 1999.
The costs of the Year 2000 project consist of internal IT personnel and external
costs such as consultants, programmers, replacement software, and hardware. The
costs of the Year 2000 project are expensed as incurred. The project is funded
partially through a reallocation of resources from discretionary projects.
Through December 31, 1998, John Hancock has incurred and expensed approximately
$9.8 million in related payroll costs for its internal IT personnel on the
project. The estimated range of remaining internal IT personnel costs of the
project is approximately $8 to $9 million. Through December 31, 1998, John
Hancock has incurred and expensed approximately $36.4 million in external costs
for the project. The estimated range of remaining external costs of the project
is approximately $35 to $36 million. The total costs of the Year 2000 project to
John Hancock, based on management's best estimates, include approximately $18
million in internal IT personnel, $7.4 million in the external modification of
software, $34.2 million for external solution providers, $19.4 million in
replacement costs of non-compliant IT systems and $12.6 million in oversight,
test facilities and other expenses. Accordingly, the estimated range of total
costs of the Year 2000 project to John Hancock, internal and external, is
approximately $90 to $95 million. However, there can be no guarantee that these
estimates will be achieved and actual results could materially differ from those
plans. Specific factors that might cause such material differences include, but
are not limited to, the availability and cost of personnel trained in this area,
the ability to locate and correct all relevant computer codes, and similar
uncertainties.
61
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 12--IMPACT OF YEAR 2000 (UNAUDITED)--CONTINUED
John Hancock's total Year 2000 project costs include the estimated impact of
external solution providers and are based on presently available information.
However, there is no guarantee that the systems of other companies that John
Hancock's systems rely on will be timely converted, or that a failure to convert
by another company, or a conversion that is incompatible with John Hancock's
systems, including those upon which the Company relies, would not have material
adverse effect on John Hancock or the Company. It is documented in trade
publications that companies in foreign countries are not acting as intensively
as domestic companies to remediate Year 2000 issues. Accordingly, it is expected
that Company facilities based outside the United States face higher degrees of
risks from data exchanges with material business partners. In addition, the
Company has numerous customers that hold products of the Company. Nearly all
products sold by the Company contain date sensitive data, examples of which are
policy expiration dates, birth dates and premium payment dates. Finally, the
regulated nature of the Company's industry exposes it to potential supervisory
or enforcement actions relating to Year 2000 issues.
John Hancock's contingency planning initiative related to the Year 2000 project
is underway. The plan is addressing John Hancock's readiness as well as that of
material business partners on whom John Hancock and the Company depend. John
Hancock's contingency plans are being designed to keep each subsidiary's
operations functioning in the event of a failure or delay due to the Year 2000
record format and date calculation changes. Contingency plans are being
constructed based on the foundation of extensive business resumption plans that
John Hancock has maintained and updated periodically, which outline responses to
situations that may affect critical business functions. These plans also provide
emergency operations guidance, which defines a documented order of actions to
respond to problems. These extensive business resumption plans are being
enhanced to cover Year 2000 situations.
62
<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, Emerging Markets Equity, International Equity
Index (formerly, International Equities), Global Equity, Small Cap Growth,
International Balanced, Mid Cap Growth, Large Cap Value, Money Market, Mid Cap
Value, Diversified Mid Cap Growth (formerly, Special Opportunities), Bond Index,
Small/Mid Cap CORE, Real Estate Equity, Growth & Income, Managed, Short-Term
Bond (formerly, Short-Term U.S. Government), Small Cap Value, International
Opportunities, Equity Index, High Yield Bond, Strategic Bond, Turner Core
Growth, Brandes International Equity (formerly, Edinburgh International Equity),
and Frontier Capital Appreciation Subaccounts) as of December 31, 1998, the
related statements of operations and 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,
1998, 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 10, 1999
63
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
LARGE CAP SOVEREIGN EMERGING INTERNATIONAL
GROWTH BOND MARKETS EQUITY EQUITY INDEX
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------ ----------- -------------- ---------------
<S> <C> <C> <C> <C>
ASSETS
Investment in shares
of portfolios of John
Hancock Variable
Series Trust I,
at value . . . . . . $318,056,515 $85,780,562 $ 1,689 $44,324,924
Investments in shares
of portfolios of M
Fund Inc., at value -- -- -- --
Receivable from:
John Hancock Variable
Series Trust I . . 18,077 4,200 -- 7,865
M Fund Inc. . . . .
------------ ----------- ---------- -----------
Total assets . . . . 318,074,592 85,784,762 1,689 44,332,789
LIABILITIES
Payable to:
John Hancock Variable
Life Insurance
Company . . . . . . 12,873 2,791 -- 7,160
M Fund Inc. . . . . -- -- -- --
Asset charges payable 5,204 1,410 -- 705
------------ ----------- ---------- -----------
Total liabilities . . 18,077 4,201 -- 7,865
------------ ----------- ---------- -----------
Net assets . . . . . $318,056,515 $85,780,561 $ 1,689 $44,324,924
============ =========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
GLOBAL SMALL CAP INTERNATIONAL MID CAP
EQUITY GROWTH BALANCED GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Investment in shares of
portfolios of John
Hancock Variable Series
Trust I,
at value . . . . . . . $1,885 $13,486,064 $1,731,100 $11,219,643
Investments in shares of
portfolios of M Fund
Inc., at value . . . . -- -- -- --
Receivable from:
John Hancock Variable
Series Trust I . . . -- 4,459 2,752 3,110
M Fund Inc. . . . . .
------ ----------- ---------- -----------
Total assets . . . . . 1,885 13,490,523 1,733,852 11,222,753
LIABILITIES
Payable to:
John Hancock Variable
Life Insurance Company
. . . . . . . . . . -- 4,242 2,723 2,932
M Fund Inc. . . . . . -- -- -- --
Asset charges payable . -- 216 28 178
------ ----------- ---------- -----------
Total liabilities . . . -- 4,458 2,751 3,110
------ ----------- ---------- -----------
Net assets . . . . . . $1,885 $13,486,065 $1,731,101 $11,219,643
====== =========== ========== ===========
</TABLE>
See accompanying notes.
64
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
DIVERSIFIED MID
LARGE CAP MONEY CAP BOND SMALL/
VALUE MARKET MID CAP VALUE GROWTH INDEX MID CAP CORE
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ------------ ------------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investment in shares of portfolios of
John Hancock Variable Series Trust I, at
value . . . . . . . . . . . . . . . . . $10,716,976 $ 21,026,260 $ 16,254,342 $45,483,238 $ 4,190 $ 56,040
Investments in shares of portfolios of M
Fund Inc., at value . . . . . . . . . . -- -- -- -- -- --
Receivable from:
John Hancock Variable Series Trust I . 6,475 80,158 22,469 5,483 -- 1
M Fund Inc. . . . . . . . . . . . . . . -- -- -- -- -- --
----------- ------------ ------------ ----------- ------------ -------------
Total assets . . . . . . . . . . . . . . 10,723,451 21,106,418 16,276,811 45,488,721 4,190 56,041
LIABILITIES
Payable to:
John Hancock Variable Life Insurance
Company . . . . . . . . . . . . . . . 6,300 79,813 22,206 4,773 -- --
M Fund Inc. . . . . . . . . . . . . . . -- -- -- -- -- --
Asset charges payable . . . . . . . . . 176 344 263 711 -- 1
----------- ------------ ------------ ----------- ------------ -------------
Total liabilities . . . . . . . . . . . 6,476 80,157 22,469 5,484 -- 1
----------- ------------ ------------ ----------- ------------ -------------
Net assets . . . . . . . . . . . . . . . $10,716,975 $ 21,026,261 $ 16,254,342 $45,483,237 $ 4,190 $ 56,040
=========== ============ ============ =========== ============ =============
</TABLE>
<TABLE>
<CAPTION>
REAL ESTATE GROWTH & SHORT-TERM SMALL CAP INTERNATIONAL
EQUITY INCOME MANAGED BOND VALUE OPPORTUNITIES
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ------------ ------------ ---------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investment in shares of portfolios of John
Hancock Variable Series Trust I, at value $34,249,612 $552,313,331 $450,747,024 $6,046,092 $9,873,799 $17,088,499
Investments in shares of portfolios of M Fund
Inc., at value . . . . -- -- -- -- -- --
Receivable from:
John Hancock Variable Series Trust I 16,722 87,919 418,038 1,234 5,346 5,154
M Fund Inc. . . . . . -- -- -- -- -- --
----------- ------------ ------------ ---------- ---------- -----------
Total assets . . . . . 34,266,334 552,401,250 451,165,062 6,047,326 9,879,245 17,093,653
LIABILITIES
Payable to:
John Hancock Variable Life Insurance Company 16,186 78,844 410,639 1,145 5,188 4,874
M Fund Inc. . . . . . -- -- -- -- -- --
Asset charges payable . 536 9,075 7,398 89 158 280
----------- ------------ ------------ ---------- ---------- -----------
Total liabilities . . . 16,722 87,919 418,037 1,234 5,346 5,154
----------- ------------ ------------ ---------- ---------- -----------
Net assets . . . . . . $34,249,612 $552,313,331 $450,747,025 $6,046,092 $9,873,799 $17,088,499
=========== ============ ============ ========== ========== ===========
</TABLE>
See accompanying notes.
65
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
TURNER BRANDES FRONTIER
EQUITY HIGH YIELD CORE INTERNATIONAL CAPITAL
INDEX BOND STRATEGIC BOND GROWTH EQUITY APPRECIATION
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ---------- -------------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investment in shares of portfolios of John
Hancock Variable Series Trust I, at value . $26,799,569 $1,765 $4,608,410 $2,774,457 $1,355,068 $7,229,794
Investments in shares of portfolios of M Fund
Inc., at value . . . . . . . . . . . . . . . -- -- -- -- -- --
Receivable from:
John Hancock Variable Series Trust I . . . . 76,155 -- 3,774 235 22 272
M Fund Inc. . . . . . . . . . . . . . . . . -- -- -- -- -- --
----------- ------ ---------- ---------- ---------- ----------
Total assets . . . . . . . . . . . . . . . . 26,875,724 1,765 4,612,184 2,774,692 1,355,090 7,230,066
LIABILITIES
Payable to:
John Hancock Variable Life Insurance
Company . . . . . . . . . . . . . . . . . . 75,715 -- 3,698 190 -- 156
M Fund Inc. . . . . . . . . . . . . . . . . -- -- -- -- -- --
Asset charges payable . . . . . . . . . . . . 440 -- 76 45 22 116
----------- ------ ---------- ---------- ---------- ----------
Total liabilities . . . . . . . . . . . . . . 76,155 -- 3,774 235 22 272
----------- ------ ---------- ---------- ---------- ----------
Net assets . . . . . . . . . . . . . . . . . $26,799,569 $1,765 $4,608,410 $2,774,457 $1,355,068 $7,229,794
=========== ====== ========== ========== ========== ==========
</TABLE>
See accompanying notes.
66
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENTS OF OPERATIONS
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
LARGE CAP GROWTH SUBACCOUNT SOVEREIGN BOND SUBACCOUNT
------------------------------------- -------------------------------------
1998 1997 1996 1998 1997 1996
----------- ----------- ------------ ----------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I . . . . . $31,074,914 $19,906,569 $22,706,338 $6,701,784 $5,517,405 $ 4,518,056
M Fund Inc. . . . . . . . . . . . . . . . . . . -- -- -- -- -- --
----------- ----------- ----------- ---------- ---------- -----------
Total investment income . . . . . . . . . . . . 31,074,914 19,906,569 22,706,338 6,701,784 5,517,405 4,518,056
Expenses:
Mortality and expense risks . . . . . . . . . . 1,577,321 1,152,388 789,368 486,757 417,812 352,330
----------- ----------- ----------- ---------- ---------- -----------
Net investment income . . . . . . . . . . . . . 29,497,593 18,754,181 21,916,970 6,215,027 5,099,593 4,165,726
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss) . . . . . . . . . . . 7,477,359 5,377,678 2,555,654 125,377 (316,608) (136,401)
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . . . 50,180,004 24,886,516 (2,922,417) (432,666) 1,592,275 (1,537,488)
----------- ----------- ----------- ---------- ---------- -----------
Net realized and unrealized gain (loss) on
investments . . . . . . . . . . . . . . . . . . 57,657,363 30,264,194 (366,763) (307,289) 1,275,667 (1,673,889)
----------- ----------- ----------- ---------- ---------- -----------
Net increase in net assets resulting from
operations . . . . . . . . . . . . . . . . . . $87,154,956 $49,018,375 $21,550,207 $5,907,738 $6,375,260 $ 2,491,837
=========== =========== =========== ========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
EMERGING GLOBAL
MARKETS EQUITY EQUITY
SUBACCOUNT INTERNATIONAL EQUITY INDEX SUBACCOUNT SUBACCOUNT
-------------- -------------------------------------- ------------
1998** 1998 1997 1996 1998**
-------------- ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I . . $ 1 $6,864,977 $ 2,032,258 $ 460,651 $ 2
M Fund Inc. . . . . -- -- -- -- --
--- ---------- ----------- ---------- ---
Total investment
income . . . . . . . 1 6,864,977 2,032,258 460,651 2
Expenses:
Mortality and expense
risks . . . . . . . 258,595 249,823 209,866 1
--- ---------- ----------- ---------- ---
Net investment income 1 6,606,382 1,782,435 250,785 1
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss) . . . . . . (1) 1,270,070 958,182 156,348 --
Net unrealized
appreciation
(depreciation)
during the period . (4) 23,662 (4,981,747) 2,539,023 69
--- ---------- ----------- ---------- ---
Net realized and
unrealized gain
(loss) on investments
. . . . . . . . . . (5) 1,293,732 (4,023,565) 2,695,371 69
--- ---------- ----------- ---------- ---
Net increase
(decrease) in net
assets resulting from
operations . . . . . $(4) $7,900,114 $(2,241,130) $2,946,156 $70
=== ========== =========== ========== ===
</TABLE>
- ---------
** From May 1, 1998 (commencement of operations).
See accompanying notes.
67
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
SMALL CAP GROWTH SUBACCOUNT INTERNATIONAL BALANCED SUBACCOUNT
--------------------------------- -------------------------------------------
1998 1997 1996* 1998 1997 1996*
----------- --------- ---------- --------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I . . . . . $ -- $ 3,380 $ 1,404 $ 111,976 $ 62,258 $ 11,409
M Fund Inc. . . . . . . . . . . . . . . . . . -- -- -- -- -- --
---------- -------- --------- --------- -------------- ---------------
Total investment income . . . . . . . . . . . . -- 3,380 1,404 111,976 62,258 11,409
Expenses:
Mortality and expense risks . . . . . . . . . 57,076 33,986 6,704 8,831 6,972 1,311
---------- -------- --------- --------- -------------- ---------------
Net investment income (loss) . . . . . . . . . (57,076) (30,606) (5,300) 103,145 55,286 10,098
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss) . . . . . . . . . . . 157,975 116,210 (210,939) 20,527 29,092 1,642
Net unrealized appreciation (depreciation)
during the
period . . . . . . . . . . . . . . . . . . . 1,605,647 732,330 (86,846) 108,042 (68,785) 18,954
---------- -------- --------- --------- -------------- ---------------
Net realized and unrealized gain (loss) on
investments. . . . . . . . . . . . . . . . . . 1,763,622 848,540 (297,785) 128,569 (39,693) 20,596
---------- -------- --------- --------- -------------- ---------------
Net increase (decrease) in net assets resulting
from operations . . . . . . . . . . . . . . . $1,706,546 $817,934 $(303,085) $ 231,714 $ 15,593 $ 30,694
========== ======== ========= ========= ============== ===============
</TABLE>
<TABLE>
<CAPTION>
MID CAP GROWTH SUBACCOUNT LARGE CAP VALUE SUBACCOUNT
------------------------------ ------------------------------
1998 1997 1996* 1998 1997 1996*
---------- --------- ------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I . . $ 993,504 $ -- $ 7,102 $ 560,242 $259,192 $ 36,343
M Fund Inc. . . . . -- -- -- -- -- --
---------- -------- ------- --------- -------- --------
Total investment
income . . . . . . . 993,504 7,102 560,242 259,192 36,343
Expenses:
Mortality and expense
risks . . . . . . . 42,815 20,278 4,054 54,311 23,604 3,072
---------- -------- ------- --------- -------- --------
Net investment income
(loss) . . . . . . . 950,689 (20,278) 3,048 505,931 235,588 33,271
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain . 338,131 64,078 168 364,328 147,209 3,072
Net unrealized
appreciation
(depreciation)
during the
period . . . . . . 1,477,149 567,677 38,250 (186,805) 547,716 87,225
---------- -------- ------- --------- -------- --------
Net realized and
unrealized gain on
investments. . . . . 1,815,280 631,755 38,418 177,523 694,925 90,297
---------- -------- ------- --------- -------- --------
Net increase in net
assets resulting from
operations . . . . . $2,765,969 $611,477 $41,466 $ 683,454 $930,513 $123,568
========== ======== ======= ========= ======== ========
</TABLE>
- ---------
* From May 1, 1996 (commencement of operations).
See accompanying notes.
68
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
MONEY MARKET SUBACCOUNT MID CAP VALUE SUBACCOUNT
------------------------------ ----------------------------------
1998 1997 1996 1998 1997 1996*
---------- -------- -------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I . . $1,110,309 $895,867 $918,057 $ 142,246 $ 972,249 $ 28,018
M Fund Inc. . . . . -- -- -- -- --
---------- -------- -------- ----------- ---------- --------
Total investment
income . . . . . . . 1,110,309 895,867 918,057 142,246 972,249 28,018
Expenses:
Mortality and expense
risks . . . . . . . 125,891 101,168 105,920 95,456 36,967 2,232
---------- -------- -------- ----------- ---------- --------
Net investment income 984,418 794,699 812,137 46,790 935,282 25,786
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain. . -- -- -- 470,277 148,954 2,034
Net unrealized
appreciation
(depreciation)
during the
period . . . . . . -- -- -- (2,496,498) 58,693 102,527
---------- -------- -------- ----------- ---------- --------
Net realized and
unrealized gain
(loss) on investments -- -- -- (2,026,221) 207,647 104,561
---------- -------- -------- ----------- ---------- --------
Net increase
(decrease) in net
assets resulting from
operations . . . . . $ 984,418 $794,699 $812,137 $(1,979,431) $1,142,929 $130,347
========== ======== ======== =========== ========== ========
</TABLE>
<TABLE>
<CAPTION>
SMALL/MID CAP
DIVERSIFIED MID CAP BOND INDEX CORE
GROWTH SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------------------------ ---------- ---------------
1998 1997 1996 1998** 1998**
---------- ------------ ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I . . $ 863,342 $ 5,058,010 $1,789,171 $ 62 $ --
M Fund Inc. . . . . -- -- -- -- --
---------- ----------- ---------- ---- ------
Total investment
income . . . . . . . 863,342 5,058,010 1,789,171 62
Expenses:
Mortality and expense
risks . . . . . . . 281,235 296,759 188,016 1 14
---------- ----------- ---------- ---- ------
Net investment income
(loss) . . . . . . . 582,107 4,761,251 1,601,155 61 (14)
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain . 1,879,057 4,458,015 1,418,069 -- --
Net unrealized
appreciation
(depreciation)
during the period . 3,090 (7,254,086) 4,977,778 (88) 4,448
---------- ----------- ---------- ---- ------
Net realized and
unrealized gain
(loss) on investments 1,882,147 (2,796,071) 6,395,847 (88) 4,448
---------- ----------- ---------- ---- ------
Net increase
(decrease) in net
assets resulting from
operations . . . . . $2,464,254 $ 1,965,180 $7,997,002 $(27) $4,434
========== =========== ========== ==== ======
</TABLE>
- ---------
* From May 1, 1996 (commencement of operations).
** From May 1, 1998 (commencement of operations).
See accompanying notes.
69
<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
----------------------------------------
1998 1997 1996
------------- ----------- ------------
<S> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I . . . . . $ 2,281,310 $ 2,934,672 $ 1,610,938
M Fund Inc. . . . . . . . . . . . . . . . . . -- -- --
------------ ----------- ------------
Total investment income . . . . . . . . . . . . 2,281,310 2,934,672 1,610,938
Expenses:
Mortality and expense risks . . . . . . . . . 219,763 212,177 145,276
------------ ----------- ------------
Net investment income . . . . . . . . . . . . . 2,061,547 2,722,495 1,465,662
Net realized and unrealized gain (loss) on
investments:
Net realized gain . . . . . . . . . . . . . . 903,492 751,985 184,058
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . . . (10,193,226) 2,343,294 5,976,712
------------ ----------- ------------
Net realized and unrealized gain (loss) on
investments. . . . . . . . . . . . . . . . . . (9,289,734) 3,095,279 6,160,770
------------ ----------- ------------
Net increase (decrease) in net assets resulting
from operations . . . . . . . . . . . . . . . $ (7,228,187) $ 5,817,774 $ 7,626,432
============ =========== ============
<CAPTION>
GROWTH & INCOME
SUBACCOUNT
--------------------------------------
1998 1997 1996
------------ ----------- -------------
<S> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I . . . . . $ 54,199,315 $52,442,930 $37,254,741
M Fund Inc. . . . . . . . . . . . . . . . . . -- -- --
------------ ----------- -----------
Total investment income . . . . . . . . . . . . 54,199,315 52,442,930 37,254,741
Expenses:
Mortality and expense risks . . . . . . . . . 2,856,645 2,178,739 1,542,729
------------ ----------- -----------
Net investment income . . . . . . . . . . . . . 51,342,670 50,264,191 35,712,012
Net realized and unrealized gain (loss) on
investments:
Net realized gain . . . . . . . . . . . . . . 12,465,262 7,351,086 3,938,033
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . . . 60,549,503 32,872,184 6,429,197
------------ ----------- -----------
Net realized and unrealized gain (loss) on
investments. . . . . . . . . . . . . . . . . . 73,014,765 40,223,270 10,367,230
------------ ----------- -----------
Net increase (decrease) in net assets resulting
from operations . . . . . . . . . . . . . . . $124,357,435 $90,487,461 $46,079,242
============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
MANAGED SHORT-TERM BOND
SUBACCOUNT SUBACCOUNT
-------------------------------------- --------------------------------
1998 1997 1996 1998 1997 1996
----------- ----------- ------------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I . . $42,558,328 $34,981,042 $ 37,205,797 $ 318,055 $ 216,077 $140,926
M Fund Inc. . . . . -- -- -- -- -- --
----------- ----------- ------------ --------- --------- --------
Total investment
income . . . . . . . 42,558,328 34,981,042 37,205,797 318,055 216,077 140,926
Expenses:
Mortality and expense
risks . . . . . . . 2,438,618 2,035,959 1,678,618 27,623 17,975 12,366
----------- ----------- ------------ --------- --------- --------
Net investment income 40,119,710 32,945,083 35,527,179 290,432 198,102 128,560
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . 5,216,094 3,754,808 3,555,551 13,933 (12,481) 20,920
Net unrealized
appreciation
(depreciation)
during the period . 28,230,322 19,460,056 (11,690,944) (45,745) 24,408 (69,771)
----------- ----------- ------------ --------- --------- --------
Net realized and
unrealized gain
(loss) on investments 33,446,416 23,214,864 (8,135,393) (31,8120) 11,927 (48,851)
----------- ----------- ------------ --------- --------- --------
Net increase in net
assets resulting from
operations . . . . . $73,566,126 $56,159,947 $ 27,391,786 $ 258,620 $ 210,029 $ 79,709
=========== =========== ============ ========= ========= ========
</TABLE>
See accompanying notes.
70
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
SMALL CAP VALUE INTERNATIONAL OPPORTUNITIES
SUBACCOUNT SUBACCOUNT
------------------------------ -----------------------------------
1998 1997 1996* 1998 1997 1996*
---------- --------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I . . $ 54,320 $537,451 $32,693 $ 85,655 $ 85,488 $ 5,631
M Fund Inc. . . . . -- -- -- -- -- --
--------- -------- ------- ---------- --------- --------
Total investment
income . . . . . . . 54,320 537,451 32,693 85,655 85,488 5,631
Expenses:
Mortality and expense
risks . . . . . . . 51,961 21,374 2,395 64,058 27,161 3,818
--------- -------- ------- ---------- --------- --------
Net investment income 2,359 516,077 30,298 21,597 58,327 1,813
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . 254,157 179,065 (1,418) 196,024 104,001 2,596
Net unrealized
appreciation
(depreciation)
during the period . (813,644) (60,841) 66,350 1,366,734 (279,934) 98,849
--------- -------- ------- ---------- --------- --------
Net realized and
unrealized gain
(loss) on investments (559,487) 118,224 64,932 1,562,758 (175,933) 101,445
--------- -------- ------- ---------- --------- --------
Net increase
(decrease) in net
assets resulting from
operations . . . . . $(557,128) $634,301 $95,230 $1,584,355 $(117,606) $103,258
========= ======== ======= ========== ========= ========
</TABLE>
<TABLE>
<CAPTION>
EQUITY INDEX HIGH YIELD BOND STRATEGIC BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------------------- --------------- -------------------------------
1998 1997 1996* 1998** 1998 1997 1996*
---------- ---------- ------- --------------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I . . . $ 700,367 $ 289,092 $27,780 $12 $217,011 $155,751 $13,269
M Fund Inc. . . . . . . . . . . . . . . . -- -- -- -- -- -- --
---------- ---------- ------- --- -------- -------- -------
Total investment income . . . . . . . . . . 700,367 289,092 27,780 12 217,011 155,751 13,269
Expenses:
Mortality and expense risks . . . . . . . 108,231 33,761 2,194 1 23,315 10,483 675
---------- ---------- ------- --- -------- -------- -------
Net investment income . . . . . . . . . . . 592,136 255,331 25,586 11 193,696 145,268 12,594
Net realized and unrealized gain (loss) on
investments:
Net realized gain . . . . . . . . . . . . 997,526 72,875 4,690 -- 25,425 4,242 1,272
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . 2,882,597 973,872 58,797 (9) 91,397 7,679 (2,250)
---------- ---------- ------- --- -------- -------- -------
Net realized and unrealized gain (loss) on
investments. . . . . . . . . . . . . . . . 3,880,123 1,046,747 63,487 (9) 116,822 11,921 (978)
---------- ---------- ------- --- -------- -------- -------
Net increase in net assets resulting from
operations . . . . . . . . . . . . . . . . $4,472,259 $1,302,078 $89,073 $ 2 $310,518 $157,189 $11,616
========== ========== ======= === ======== ======== =======
</TABLE>
- ---------
* From May 1, 1996 (commencement of operations).
** From May 1, 1998 (commencement of operations).
See accompanying notes.
71
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
BRANDES FRONTIER
TURNER CORE GROWTH INTERNATIONAL EQUITY CAPITAL APPRECIATION
SUBACCOUNT SUBACCOUNT SUBACCOUNT
--------------------------- -------------------------- -----------------------------
1998 1997 1996* 1998 1997 1996* 1998 1997 1996*
-------- ------- --------- -------- --------- ----- --------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series
Trust I . . . . . . . . . . . . . . $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
M Fund Inc. . . . . . . . . . . . . 48,858 22,593 91 76,526 11,174 362 14,932 59,777 --
-------- ------- -------- -------- -------- ---- -------- ------- ---------
Total investment income . . . . . . . 48,858 22,593 91 76,526 11,174 362 14,932 59,777 --
Expenses:
Mortality and expense risks . . . . 4,430 828 1,556 6,543 2,688 74 24,050 7,104 1,628
-------- ------- -------- -------- -------- ---- -------- ------- ---------
Net investment income (loss) . . . . 44,428 21,765 (1,465) 69,983 8,486 288 (9,118) 52,673 (1,628)
Net realized and unrealized gain
(loss) on investments:
Net realized gain (loss) . . . . . . 38,125 1,020 (75,788) 8,487 371 (30) 89,974 10,828 (130,154)
Net unrealized appreciation
(depreciation) during the period . 318,448 17,720 -- 101,256 (32,110) 220 524,011 28,386 1,432
-------- ------- -------- -------- -------- ---- -------- ------- ---------
Net realized and unrealized gain
(loss) on investments . . . . . . . 356,573 18,740 (75,788) 109,743 (31,739) 190 613,985 39,214 (128,722)
-------- ------- -------- -------- -------- ---- -------- ------- ---------
Net increase (decrease) in net assets
resulting from operations . . . . . $401,001 $40,505 $(77,253) $179,726 $(23,253) $478 $604,867 $91,887 $(130,350)
======== ======= ======== ======== ======== ==== ======== ======= =========
</TABLE>
- ---------
* From May 1, 1996 (commencement of operations).
See accompanying notes.
72
<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 SOVEREIGN BOND
SUBACCOUNT SUBACCOUNT
------------------------------------------ ------------------------------------------
1998 1997 1996 1998 1997 1996
------------- ------------- ------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . . $ 29,497,593 $ 18,754,181 $ 21,916,970 $ 6,215,027 $ 5,099,593 $ 4,165,726
Net realized gains (losses) . . . . . 7,477,359 5,377,678 2,555,654 125,377 (316,608) (136,401)
Net unrealized appreciation
(depreciation) during the period . . 50,180,004 24,886,516 (2,922,417) (432,666) 1,592,275 (1,537,488)
------------ ------------ ------------ ------------ ------------ ------------
Net increase in net assets resulting
from operations . . . . . . . . . . . 87,154,956 49,018,375 21,550,207 5,907,738 6,375,260 2,491,837
From policyholder transactions:
Net premiums from policyholders . . . 50,518,731 50,870,640 51,040,008 17,861,340 21,348,125 20,848,505
Net benefits to policyholders . . . . (40,022,049) (32,643,981) (33,079,850) (15,352,996) (14,778,316) (15,298,035)
------------ ------------ ------------ ------------ ------------ ------------
Net increase in net assets resulting
from policyholder transactions . . . 10,496,682 18,226,659 17,960,158 2,508,344 6,569,809 5,550,470
------------ ------------ ------------ ------------ ------------ ------------
Net increase in net assets . . . . . . 97,651,638 67,245,034 39,510,365 8,416,082 12,945,069 8,042,307
Net assets at beginning of period . . 220,404,877 153,159,843 113,649,478 77,364,479 64,419,410 56,377,103
------------ ------------ ------------ ------------ ------------ ------------
Net assets at end of period . . . . . $318,056,515 $220,404,877 $153,159,843 $ 85,780,561 $ 77,364,479 $ 64,419,410
============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
EMERGING
MARKETS GLOBAL
EQUITY INTERNATIONAL EQUITY EQUITY
SUBACCOUNT INDEX SUBACCOUNT SUBACCOUNT
---------- ------------------------------------------ ------------
1998** 1998 1997 1996 1998**
---------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets from
operations:
Net investment income $ 1 $ 6,606,382 $ 1,782,435 $ 250,785 $ 1
Net realized gains
(losses). . . . . . (1) 1,270,070 958,182 156,348 --
Net unrealized
appreciation
(depreciation)
during the period . (4) 23,662 (4,981,747) 2,539,023 69
------ ------------ ------------ ------------ ------
Net increase
(decrease) in net
assets resulting from
operations . . . . . (4) 7,900,114 (2,241,130) 2,946,156 70
From policyholder
transactions:
Net premiums from
policyholders . . . 1,730 11,092,106 17,654,531 17,279,404 1,850
Net benefits to
policyholders . . . (37) (16,638,267) (12,889,618) (11,711,164) (35)
------ ------------ ------------ ------------ ------
Net increase
(decrease) in net
assets resulting from
policyholder
transactions . . . . 1,691 (5,546,159) 4,764,913 5,568,240 1,815
------ ------------ ------------ ------------ ------
Net increase in net
assets . . . . . . . 1,689 2,353,955 2,523,783 8,514,396 1,885
Net assets at
beginning of period 0 41,970,969 39,447,186 30,932,790 0
------ ------------ ------------ ------------ ------
Net assets at end of
period . . . . . . . $1,689 $ 44,324,924 $ 41,970,969 $ 39,447,186 $1,885
====== ============ ============ ============ ======
</TABLE>
- ---------
** From May 1, 1998 (commencement of operations).
See accompanying notes.
73
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
SMALL CAP INTERNATIONAL BALANCED
GROWTH SUBACCOUNT SUBACCOUNT
--------------------------------------- ----------------------------------------
1998 1997 1996 1998 1997 1996
------------ ------------ ------------ ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) . . . . . . . $ (57,076) $ (30,606) $ (5,300) $ 103,145 $ 55,286 $ 10,098
Net realized gains (losses) . . . . . . . 157,975 116,210 (210,939) 20,527 29,092 1,642
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . 1,605,647 732,330 (86,846) 108,042 (68,785) 18,954
----------- ----------- ----------- ----------- ----------- ------------
Net increase (decrease) in net assets
resulting from operations . . . . . . . . 1,706,546 817,934 (303,085) 231,714 15,593 30,694
From policyholder transactions:
Net premiums from policyholders . . . . . 6,942,071 7,111,430 5,020,648 775,469 1,210,054 777,316
Net benefits to policyholders . . . . . . (3,551,395) (2,474,024) (1,784,150) (433,887) (811,533) (64,319)
----------- ----------- ----------- ----------- ----------- ------------
Net increase in net assets resulting from
policyholder transactions . . . . . . . . 3,390,766 4,637,406 3,236,498 341,582 398,521 712,997
----------- ----------- ----------- ----------- ----------- ------------
Net increase in net assets . . . . . . . . 5,097,312 5,455,340 2,933,413 573,296 414,114 743,691
Net assets at beginning of period . . . . . 8,388,753 2,933,413 0 1,157,805 743,691 0
----------- ----------- ----------- ----------- ----------- ------------
Net assets at end of period . . . . . . . . $13,486,065 $ 8,388,753 $ 2,933,413 $ 1,731,101 $ 1,157,805 $ 743,691
=========== =========== =========== =========== =========== ============
</TABLE>
<TABLE>
<CAPTION>
MID CAP GROWTH LARGE CAP VALUE
SUBACCOUNT SUBACCOUNT
-------------------------------------- --------------------------------------
1998 1997 1996* 1998 1997 1996*
------------ ------------ ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) . . . . . . . . $ 950,689 $ (20,278) $ 3,048 $ 505,931 $ 235,588 $ 33,271
Net realized gains . . . . . . . . . . . . . 338,131 64,078 168 364,328 147,209 3,072
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . . 1,477,149 567,677 38,250 (186,805) 547,716 87,225
----------- ----------- ---------- ----------- ----------- ----------
Net increase in net assets resulting from
operations . . . . . . . . . . . . . . . . . 2,765,969 611,477 41,466 683,454 930,513 123,568
From policyholder transactions:
Net premiums from policyholders . . . . . . . 6,310,992 3,564,986 2,413,439 6,344,623 5,175,373 1,814,755
Net benefits to policyholders . . . . . . . . (2,644,280) (1,603,972) (240,434) (2,846,246) (1,416,071) (92,994)
----------- ----------- ---------- ----------- ----------- ----------
Net increase in net assets resulting from
policyholder transactions . . . . . . . . . . 3,666,712 1,961,014 2,173,005 3,498,377 3,759,302 1,721,761
----------- ----------- ---------- ----------- ----------- ----------
Net increase in net assets . . . . . . . . . . 6,432,681 2,572,491 2,214,471 4,181,831 4,689,815 1,845,329
Net assets at beginning of period . . . . . . 4,786,962 2,214,471 0 6,535,144 1,845,329 0
----------- ----------- ---------- ----------- ----------- ----------
Net assets at end of period . . . . . . . . . $11,219,643 $ 4,786,962 $2,214,471 $10,716,975 $ 6,535,144 $1,845,329
=========== =========== ========== =========== =========== ==========
</TABLE>
- ---------
* From May 1, 1996 (commencement of operations).
See accompanying notes.
74
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
MONEY MARKET MID CAP VALUE
SUBACCOUNT SUBACCOUNT
------------------------------------------ --------------------------------------
1998 1997 1996 1998 1997 1996*
------------- ------------- ------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . . . . $ 984,418 $ 794,699 $ 812,137 $ 46,790 $ 935,282 $ 25,786
Net realized gains . . . . . . . . . . . -- -- -- 470,277 148,954 2,034
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . -- -- -- (2,496,498) 58,693 102,527
------------ ------------ ------------ ----------- ----------- ----------
Net increase in net assets resulting from
operations. . . . . . . . . . . . . . . . 984,418 794,699 812,137 (1,979,431) 1,142,929 130,347
From policyholder transactions:
Net premiums from policyholders . . . . . 29,578,379 19,719,031 24,680,961 12,176,727 12,224,626 1,258,509
Net benefits to policyholders . . . . . . (26,039,389) (21,386,542) (27,801,448) (7,125,389) (1,523,046) (50,930)
------------ ------------ ------------ ----------- ----------- ----------
Net increase (decrease) in net assets
resulting from policyholder transactions 3,538,991 (1,667,511) (3,120,487) 5,051,338 10,701,580 1,207,579
------------ ------------ ------------ ----------- ----------- ----------
Net increase (decrease) in net assets . . 4,523,409 (872,812) (2,308,350) 3,071,907 11,844,509 1,337,926
Net assets at beginning of period . . . . 16,502,852 17,375,664 19,684,014 13,182,435 1,337,926 0
------------ ------------ ------------ ----------- ----------- ----------
Net assets at end of period . . . . . . . $ 21,026,261 $ 16,502,852 $ 17,375,664 $16,254,342 $13,182,435 $1,337,926
============ ============ ============ =========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
SMALL/MID CAP
DIVERSIFIED MID CAP GROWTH BOND INDEX CORE
SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------------------------------ ---------- ---------------
1998 1997 1996 1998** 1998**
------------- ------------- ------------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets from
operations:
Net investment income
(loss). . . . . . . $ 582,107 $ 4,761,251 $ 1,601,155 $ 61 $ (14)
Net realized gains . 1,879,057 4,458,015 1,418,069 -- --
Net unrealized
appreciation
(depreciation)
during the
period . . . . . . 3,090 (7,254,086) 4,977,778 (88) 4,448
------------ ------------ ------------ ------ -------
Net increase
(decrease) in net
assets resulting from
operations . . . . . 2,464,254 1,965,180 7,997,002 (27) 4,434
From policyholder
transactions:
Net premiums from
policyholders . . . 15,336,392 26,820,224 30,839,359 4,217 51,606
Net benefits to
policyholders . . . (24,152,376) (23,391,073) (12,562,876) -- --
------------ ------------ ------------ ------ -------
Net increase
(decrease) in net
assets resulting from
policyholder
transactions . . . . (8,815,986) 3,429,151 18,276,483 4,217 51,606
------------ ------------ ------------ ------ -------
Net increase
(decrease) in net
assets . . . . . . . (6,351,732) 5,394,331 26,273,485 4,190 56,040
Net assets at
beginning of period 51,834,969 46,440,638 20,167,153 0 0
------------ ------------ ------------ ------ -------
Net assets at end of
period . . . . . . . $ 45,483,237 $ 51,834,969 $ 46,440,638 $4,190 $56,040
============ ============ ============ ====== =======
</TABLE>
- ---------
* From May 1, 1996 (commencement of operations).
** From May 1, 1998 (commencement of operations).
See accompanying notes.
75
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
REAL ESTATE EQUITY GROWTH & INCOME
SUBACCOUNT SUBACCOUNT
------------------------------------------ ------------------------------------------
1998 1997 1996 1998 1997 1996
------------- ------------- ------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . . $ 2,061,547 $ 2,722,495 $ 1,465,662 $ 51,342,670 $ 50,264,191 $ 35,712,012
Net realized gains . . . . . . . . . 903,492 751,985 184,058 12,465,262 7,351,086 3,938,033
Net unrealized appreciation
(depreciation) during the period . . (10,193,226) 2,343,294 5,976,712 60,549,503 32,872,184 6,429,197
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations . . . . . . (7,228,187) 5,817,774 7,626,432 124,357,435 90,487,461 46,079,242
From policyholder transactions:
Net premiums from policyholders . . . 9,200,146 13,842,210 10,025,714 92,202,780 94,961,660 93,961,136
Net benefits to policyholders . . . . (10,281,699) (8,886,892) (8,112,734) (79,305,839) (70,387,297) (57,300,211)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from policyholder
transactions. . . . . . . . . . . . . (1,081,553) 4,955,318 1,912,980 12,896,941 24,574,363 36,660,925
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets (8,309,740) 10,773,092 9,539,412 137,254,376 115,061,824 82,740,167
Net assets at beginning of period . . 42,559,352 31,786,260 22,246,848 415,058,955 299,997,131 217,256,964
------------ ------------ ------------ ------------ ------------ ------------
Net assets at end of period . . . . . $ 34,249,612 $ 42,559,352 $ 31,786,260 $552,313,331 $415,058,955 $299,997,131
============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
MANAGED SHORT-TERM BOND
SUBACCOUNT SUBACCOUNT
------------------------------------------ ---------------------------------------
1998 1997 1996 1998 1997 1996
------------- ------------- ------------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . . . $ 40,119,710 $ 32,945,083 $ 35,527,179 $ 290,432 $ 198,102 $ 128,560
Net realized gains (losses) . . . . . . 5,216,094 3,754,808 3,555,551 13,933 (12,481) 20,920
Net unrealized appreciation
(depreciation) during the period . . . 28,230,322 19,460,056 (11,690,944) (45,745) 24,408 (69,771)
------------ ------------ ------------ ----------- ----------- -----------
Net increase in net assets resulting from
operations . . . . . . . . . . . . . . . 73,566,126 56,159,947 27,391,786 258,620 210,029 79,709
From policyholder transactions:
Net premiums from policyholders . . . . 67,707,213 71,811,719 71,167,775 3,006,341 3,042,915 2,675,105
Net benefits to policyholders . . . . . (60,791,416) (61,937,355) (56,734,361) (1,696,858) (1,790,137) (2,206,096)
------------ ------------ ------------ ----------- ----------- -----------
Net increase in net assets resulting from
policyholder transactions . . . . . . . 6,915,797 9,874,364 14,433,414 1,309,481 1,252,778 469,009
------------ ------------ ------------ ----------- ----------- -----------
Net increase in net assets . . . . . . . 80,481,923 66,034,311 41,825,200 1,568,101 1,462,806 548,718
Net assets at beginning of period . . . . 370,265,102 304,230,791 262,405,591 4,477,991 3,015,184 2,466,466
------------ ------------ ------------ ----------- ----------- -----------
Net assets at end of period . . . . . . . $450,747,025 $370,265,102 $304,230,791 $ 6,046,092 $ 4,477,991 $ 3,015,184
============ ============ ============ =========== =========== ===========
</TABLE>
See accompanying notes.
76
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
SMALL CAP VALUE INTERNATIONAL OPPORTUNITIES
SUBACCOUNT SUBACCOUNT
-------------------------------------- --------------------------------------
1998 1997 1996* 1998 1997 1996*
------------ ------------ ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . . . . . . $ 2,359 $ 516,077 $ 30,298 $ 21,597 $ 58,327 $ 1,813
Net realized gains (losses) . . . . . . . . . 254,157 179,065 (1,418) 196,024 104,001 2,596
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . . (813,644) (60,841) 66,350 1,366,734 (279,934) 98,849
----------- ----------- ---------- ----------- ----------- ----------
Net increase (decrease) in net assets resulting
from operations . . . . . . . . . . . . . . . (557,128) 634,301 95,230 1,584,355 (117,606) 103,258
From policyholder transactions:
Net premiums from policyholders . . . . . . . 7,056,456 6,430,967 1,344,453 11,422,860 6,249,522 2,395,587
Net benefits to policyholders . . . . . . . . (3,706,669) (1,313,921) (109,889) (2,428,740) (1,882,431) (238,306)
----------- ----------- ---------- ----------- ----------- ----------
Net increase in net assets resulting from
policyholder transactions . . . . . . . . . . 3,349,786 5,117,046 1,234,564 8,994,120 4,367,091 2,157,281
----------- ----------- ---------- ----------- ----------- ----------
Net increase in net assets . . . . . . . . . . 2,792,658 5,751,347 1,329,794 10,578,475 4,249,485 2,260,539
Net assets at beginning of period . . . . . . 7,081,141 1,329,794 0 6,510,024 2,260,539 0
----------- ----------- ---------- ----------- ----------- ----------
Net assets at end of period . . . . . . . . . $ 9,873,799 $ 7,081,141 $1,329,794 $17,088,499 $ 6,510,024 $2,260,539
=========== =========== ========== =========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
HIGH YIELD
EQUITY INDEX BOND
SUBACCOUNT SUBACCOUNT
-------------------------------------- ------------
1998 1997 1996* 1998**
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Increase (decrease) in
net assets from
operations:
Net investment income $ 592,136 $ 255,331 $ 25,586 $ 11
Net realized gains . . 997,526 72,875 4,690 --
Net unrealized
appreciation
(depreciation) during
the period . . . . . 2,882,597 973,872 58,797 (9)
----------- ----------- ---------- ------
Net increase in net
assets resulting from
operations . . . . . . 4,472,259 1,302,078 89,073 2
From policyholder
transactions:
Net premiums from
policyholders . . . . 18,349,859 9,373,895 1,242,668 1,791
Net benefits to
policyholders . . . . (6,452,625) (1,445,089) (132,549) (28)
----------- ----------- ---------- ------
Net increase in net
assets resulting from
policyholder
transactions . . . . . 11,897,234 7,928,806 1,110,119 1,763
----------- ----------- ---------- ------
Net increase in net
assets . . . . . . . . 16,369,493 9,230,884 1,199,192 1,765
Net assets at beginning
of period . . . . . . 10,430,076 1,199,192 0 0
----------- ----------- ---------- ------
Net assets at end of
period . . . . . . . . $26,799,569 $10,430,076 $1,199,192 $1,765
=========== =========== ========== ======
</TABLE>
- ---------
* From May 1, 1996 (commencement of operations).
** From May 1, 1998 (commencement of operations).
See accompanying notes.
77
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
STRATEGIC BOND TURNER CORE
SUBACCOUNT GROWTH SUBACCOUNT
---------------------------------- ---------------------------------------
1998 1997 1996* 1998 1997 1996*
----------- ----------- --------- ----------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets from
operations:
Net investment income
(loss). . . . . . . $ 193,696 $ 145,268 $ 12,594 $ 44,428 $ 21,765 $ (1,465)
Net realized gains
(losses). . . . . . 25,425 4,242 1,272 38,125 1,020 (75,788)
Net unrealized
appreciation
(depreciation)
during the period . 91,397 7,679 (2,250) 318,448 17,720 --
---------- ---------- -------- ---------- ------------ -----------
Net increase
(decrease) in net
assets resulting from
operations . . . . . 310,518 157,189 11,616 401,001 40,505 (77,253)
From policyholder
transactions:
Net premiums from
policyholders . . . 2,562,718 2,575,091 495,203 2,940,093 209,202 1,525,222
Net benefits to
policyholders . . . (892,634) (522,585) (88,706) (811,472) (7,612) (1,445,229)
---------- ---------- -------- ---------- ------------ -----------
Net increase in net
assets resulting from
policyholder
transactions . . . . 1,670,084 2,052,506 406,497 2,128,621 201,590 79,993
---------- ---------- -------- ---------- ------------ -----------
Net increase in net
assets . . . . . . . 1,980,602 2,209,695 418,113 2,529,622 242,095 2,740
Net assets at
beginning of period 2,627,808 418,113 0 244,835 2,740 0
---------- ---------- -------- ---------- ------------ -----------
Net assets at end of
period . . . . . . . $4,608,410 $2,627,808 $418,113 $2,774,457 $ 244,835 $ 2,740
========== ========== ======== ========== ============ ===========
</TABLE>
<TABLE>
<CAPTION>
BRANDES FRONTIER CAPITAL
INTERNATIONAL EQUITY APPRECIATION
SUBACCOUNT SUBACCOUNT
------------------------------- --------------------------------------
1998 1997 1996* 1998 1997 1996*
----------- --------- -------- ------------ ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets from
operations:
Net investment income
(loss). . . . . . . $ 69,983 $ 8,486 $ 288 $ (9,118) $ 52,673 $ (1,628)
Net realized gains
(losses). . . . . . 8,487 371 (30) 89,974 10,828 (130,154)
Net unrealized
appreciation
(depreciation)
during the period . 101,256 (32,110) 220 524,011 28,386 1,432
---------- -------- ------- ----------- ---------- -----------
Net increase
(decrease) in net
assets resulting from
operations . . . . . 179,726 (23,253) 478 604,867 91,887 (130,350)
From policyholder
transactions:
Net premiums from
policyholders . . . 457,393 764,978 64,120 5,165,104 2,429,648 1,568,562
Net benefits to
policyholders . . . (76,919) (10,047) (1,407) (1,076,779) (47,057) (1,376,088)
---------- -------- ------- ----------- ---------- -----------
Net increase in net
assets resulting from
policyholder
transactions . . . . 380,473 754,931 62,713 4,088,325 2,382,591 192,474
---------- -------- ------- ----------- ---------- -----------
Net increase in net
assets . . . . . . . 560,199 731,678 63,191 4,693,192 2,474,478 62,124
Net assets at
beginning of period 794,869 63,191 0 2,536,602 62,124 0
---------- -------- ------- ----------- ---------- -----------
Net assets at end of
period . . . . . . . $1,355,068 $794,869 $63,191 $ 7,229,794 $2,536,602 $ 62,124
========== ======== ======= =========== ========== ===========
</TABLE>
- ---------
* From May 1, 1996 (commencement of operations).
See accompanying notes.
78
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
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-six 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-six Portfolios of the Fund and M Fund which are currently available are
the Large Cap Growth, Sovereign Bond, Emerging Markets Equity, International
Equity Index (formerly, International Equities), Global Equity, Small Cap
Growth, International Balanced, Mid Cap Growth, Large Cap Value, Money Market,
Mid Cap Value, Diversified Mid Cap Growth (formerly, Special Opportunities),
Bond Index, Small/Mid Cap CORE, Real Estate Equity, Growth & Income, Managed,
Short-Term Bond (formerly, Short-Term U.S. Government), Small Cap Value,
International Opportunities, Equity Index, High Yield Bond, Strategic Bond,
Turner Core Growth, Brandes International Equity (formerly, Edinburgh
International Equity) and Frontier Capital Appreciation Portfolios. 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.
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 underlying Portfolio 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.
79
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
NOTES TO FINANCIAL STATEMENTS--(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 .60% 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.
3. 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.
4. DETAILS OF INVESTMENTS
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, 1998 were as follows:
<TABLE>
<CAPTION>
SUBACCOUNT SHARES OWNED COST VALUE
---------- ------------ ------------ --------------
<S> <C> <C> <C>
Large Cap Growth . . . . . . 12,142,245 $235,402,483 $318,056,515
Sovereign Bond . . . . . . . 8,645,835 84,807,507 85,780,562
Emerging Markets Equity . . . 238 1,694 1,689
International Equity Index . 2,848,543 45,974,251 44,324,924
Global Equity . . . . . . . . 191 1,816 1,885
Small Cap Growth . . . . . . 1,038,384 11,234,932 13,486,064
International Balanced . . . 155,612 1,672,887 1,731,100
Mid Cap Growth . . . . . . . 742,261 9,136,569 11,219,643
Large Cap Value . . . . . . . 764,391 10,268,840 10,716,976
Money Market . . . . . . . . 2,102,626 21,026,261 21,026,260
Mid Cap Value . . . . . . . . 1,334,115 18,589,620 16,254,342
Diversified Mid Cap Growth . 2,853,472 45,109,983 45,483,238
Bond Index . . . . . . . . . 411 4,278 4,190
Small/Mid Cap CORE . . . . . 6,214 51,592 56,040
Real Estate Equity . . . . . 2,748,812 35,643,163 34,249,612
Growth & Income . . . . . . . 28,334,899 432,637,528 552,313,331
Managed . . . . . . . . . . . 28,827,116 396,549,399 450,747,024
Short-Term Bond . . . . . . . 601,695 6,083,594 6,046,092
Small Cap Value . . . . . . . 852,010 10,681,936 9,873,899
International Opportunities . 1,399,021 15,902,850 17,088,499
Equity Index . . . . . . . . 1,513,867 22,884,303 26,799,569
High Yield Bond . . . . . . . 191 1,774 1,765
Strategic Bond . . . . . . . 434,780 4,511,586 4,608,410
Turner Core Growth . . . . . 155,520 2,438,293 2,774,457
Brandes International Equity 125,006 1,285,922 1,355,068
Frontier Capital Appreciation 479,112 6,677,398 7,229,794
</TABLE>
80
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Purchases, including reinvestment of dividend distributions and proceeds from
sales of shares in the Portfolios of the Fund and of M Fund during 1998, were as
follows:
<TABLE>
<CAPTION>
SUBACCOUNT PURCHASES SALES
---------- ------------ -------------
<S> <C> <C>
Large Cap Growth . . . . . . . . . . $ 60,056,615 $20,062,340
Sovereign Bond . . . . . . . . . . . 17,193,357 8,469,956
Emerging Markets Equity . . . . . . 1,738 45
International Equity Index . . . . . 13,298,411 12,238,188
Global Equity . . . . . . . . . . . 1,830 14
Small Cap Growth . . . . . . . . . . 5,212,634 1,878,945
International Balanced . . . . . . . 891,556 446,831
Mid Cap Growth . . . . . . . . . . . 6,196,277 1,578,875
Large Cap Value . . . . . . . . . . 5,544,671 1,540,362
Money Market . . . . . . . . . . . . 24,150,417 19,627,008
Mid Cap Value . . . . . . . . . . . 10,174,189 5,076,062
Diversified Mid Cap Growth . . . . . 8,870,815 17,104,694
Bond Index . . . . . . . . . . . . . 4,279 1
Small/Mid Cap CORE . . . . . . . . . 51,605 13
Real Estate Equity . . . . . . . . . 6,973,005 5,993,011
Growth & Income . . . . . . . . . . 101,104,853 36,865,243
Managed . . . . . . . . . . . . . . 76,770,686 29,735,180
Short-Term Bond . . . . . . . . . . 3,072,537 1,472,622
Small Cap Value . . . . . . . . . . 5,794,840 2,442,693
International Opportunities . . . . 10,647,007 1,631,290
Equity Index . . . . . . . . . . . . 16,107,138 3,617,768
High Yield Bond . . . . . . . . . . 1,802 28
Strategic Bond . . . . . . . . . . . 2,667,370 803,590
Turner Core Growth . . . . . . . . . 3,052,385 879,335
Brandes International Equity . . . . 530,820 80,364
Frontier Capital Appreciation . . . 5,113,856 1,034,648
</TABLE>
5. IMPACT OF YEAR 2000 (UNAUDITED)
The John Hancock Variable Life Account V, along with John Hancock Mutual Life
Insurance Company, its ultimate parent (together, John Hancock), is executing
its plan to address the impact of the Year 2000 issues that result from computer
programs being written using two digits to reflect the year rather than four to
define the applicable year and century. Historically, the first two digits were
hardcoded to save memory. Many of the John Hancock's computer programs that have
date-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in an information technology (IT) system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices or
engage in similar normal business activities. In addition, non-IT systems
including, but not limited to, security alarms, elevators and telephones are
subject to malfunction due to their dependence on embedded technology such as
microcontrollers for proper operation. As described, the Year 2000 project
presents a number of challenges for financial institutions since the correction
of Year 2000 issues in IT and non-IT systems will be complex and costly for the
entire industry.
81
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
John Hancock began to address the Year 2000 project as early as 1994. John
Hancock's plan to address the Year 2000 Project includes an awareness campaign,
an assessment period, a renovation stage, validation work and an implementation
of Company solutions.
The continuous awareness campaign serves several purposes: defining the
problem, gaining executive level support and sponsorship, establishing a team
and overall strategy, and assessing existing information system management
resources. Additionally, the awareness campaign establishes an education process
to ensure that all employees are aware of the Year 2000 issue and knowledgeable
of their role in securing solutions.
The assessment phase, which was completed for both IT and non-IT systems as of
April 1998, included the identification, inventory, analysis, and prioritization
of IT and non-IT systems and processes to determine their conversion or
replacement.
The renovation stage reflects the conversion, validation, replacement, or
elimination of selected platforms, applications, databases and utilities,
including the modification of applicable interfaces. Additionally, the
renovation stage includes performance, functionality, and regression testing and
implementation. As of December 31, 1998, the renovation phase was substantially
complete for computer applications, systems and desktops. For all remaining
components the renovation phase is underway and will be complete before the end
of the second quarter of 1999.
The validation phase consists of the compliance testing of renovated systems.
The validation phase is expected to be complete by mid 1999, after renovation is
accomplished. John Hancock will use its testing facilities through the remainder
of 1999 to perform special functional testing. Special functional testing
includes testing, as required, with material third parties and industry groups
and to perform reviews of "dry run" of year-end activities. Scheduled testing of
John Hancock's material relationships with third parties is underway. It is
anticipated that testing with material business partners will continue through
much of 1999.
Finally, the implementation phase involves the actual implementation of
converted or replaced platforms, applications, databases, utilities, interfaces,
and contingency planning. John Hancock is concurrently performing implementation
during the renovation phase and plans to complete this phase before the end of
the second quarter of 1999.
The costs of the Year 2000 project consist of internal IT personnel, and
external costs such as consultants, programmers, replacement software, and
hardware. The costs of the Year 2000 project are expensed as incurred. The
project is funded partially through a reallocation of resources from
discretionary projects. Through December 31, 1998, John Hancock has incurred and
expensed approximately $9.8 million in related payroll costs for its internal IT
personnel on the project. The estimated range of remaining internal IT personnel
costs of the project is approximately $8 to $9 million. Through December 31,
1998, John Hancock has incurred and expensed approximately $36.4 million in
external costs for the project. The estimated range of remaining external costs
of the project is approximately $35 to $36 million. The total costs of the Year
2000 project, based on management's best estimates, include approximately $18
million in internal IT personnel, $7.4 million in the external modification of
software, $34.2 million for external solution providers, $19.4 million in
replacement costs of non-compliant IT systems and $12.6 million in oversight,
test facilities and other expenses. Accordingly, the estimated range of total
costs of the Year 2000 project, internal and external, is approximately $90 to
$95 million. However, there can be no guarantee that these estimates will be
achieved and actual results could materially differ from those plans. Specific
factors that might cause such material differences include, but are not limited
to, the availability and cost of personnel trained in this area, the ability to
locate and correct all relevant computer codes, and similar uncertainties.
82
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
John Hancock's total Year 2000 project costs include the estimated impact of
external solution providers and are based on presently available information.
However, there is no guarantee that the systems of other companies that John
Hancock's systems rely on will be timely converted, or that a failure to convert
by another company, or a conversion that is incompatible with John Hancock's
systems, would not have material adverse effect on John Hancock. It is
documented in trade publications that companies in foreign countries are not
acting as intensively as domestic companies to remediate Year 2000 issues.
Accordingly, it is expected that Company facilities based outside the United
States face higher degrees of risks from data exchanges with material business
partners. In addition, John Hancock has thousands of individual and business
customers that hold insurance policies, annuities and other financial products
of John Hancock. Nearly all products sold by John Hancock contain date sensitive
data, examples of which are policy expiration dates, birth dates, premium
payment dates. Finally, the regulated nature of John Hancock's industry exposes
it to potential supervisory or enforcement actions relating to Year 2000 issues.
John Hancock's contingency planning initiative related to the Year 2000
project is underway. The plan is addressing John Hancock's readiness as well as
that of material business partners on whom John Hancock depends. John Hancock's
contingency plans are being designed to keep each business unit's operations
functioning in the event of a failure or delay due to the Year 2000 record
format and date calculation changes. Contingency plans are being constructed
based on the foundation of extensive business resumption plans that John Hancock
has maintained and updated periodically, which outline responses to situations
that may affect critical business functions. These plans also provide emergency
operations guidance, which defines a documented order of actions to respond to
problems. These extensive business resumption plans are being enhanced to cover
Year 2000 situations.
83
<PAGE>
ALPHABETICAL INDEX OF KEY WORDS AND PHRASES
This index should help you locate more information about many of the important
concepts in this prospectus.
<TABLE>
<CAPTION>
KEY WORD OR PHRASE PAGE KEY WORD OR PHRASE PAGE
<S> <C> <C> <C>
Account. . . . . . . . 23 5
account value. . . . . 7 30
attained age . . . . . 8
Basic Premium. . . . . 25
basic account value. . 8
Benchmark Value. . . . 8
beneficiary. . . . . . 23 4
business day . . . . . 23
charges. . . . . . . . 7 11
Code . . . . . . . . . 29 9
cost of insurance rates 8 14
Current Death Benefit. 25
date of issue. . . . . 25 25
death benefit. . . . . 3 4
deductions . . . . . . 7
dollar cost averaging. 10 2
Excess Value . . . . . 16
expenses of the Trust. 9 6
Extra Death Benefit. .
fixed investment option 24 7
full surrender . . . . 11 2
fund . . . . . . . . . 2 23
grace period . . . . . 6 1
Guaranteed Death
Benefit . . . . . . . 12 12
insurance charge . . . 8 23
insured person . . . . 4
investment options . . 1 11
JHVLICO. . . . . . . . 23 11
John Hancock Variable
Series Trust . . . . 2 29
lapse. . . . . . . . . 6 16
Level Schedule . . . . 10
loan . . . . . . . . . 11
loan interest. . . . . 12 1
maximum premiums . . . 5 23
minimum insurance
amount. . . . . . . . 13 4
</TABLE>
84
<PAGE>
PROSPECTUS DATED MAY 3, 1999
FLEX-V1
a scheduled premium variable life insurance policy
issued by
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY ("JHVLICO")
JHVLICO LIFE SERVICING OFFICE
-----------------------------
EXPRESS DELIVERY
----------------
529 Main Street (X-4)
Charlestown, MA 02129
U.S. MAIL
---------
P.O. Box 111
Boston, MA 02117
PHONE: 1-800-732-5543 / FAX: 1-617-886-3048
The policy provides an investment option with fixed rates of return declared
by JHVLICO and the following 27 variable investment options:
<TABLE>
<CAPTION>
<S> <C>
VARIABLE INVESTMENT OPTION MANAGED BY
-------------------------- ----------
- ---------------------------------------------------------------------------------------------------------
Managed................................................ Independence Investment Associates, Inc.
Growth & Income........................................ Independence Investment Associates, Inc.
Equity Index........................................... State Street Global Advisors
Large Cap Value........................................ T. Rowe Price Associates, Inc.
Large Cap Growth....................................... Independence Investment Associates, Inc.
Mid Cap Value.......................................... Neuberger Berman, LLC
Mid Cap Growth......................................... Janus Capital Corporation
Real Estate Equity..................................... Independence Investment Associates, Inc.
Small/Mid Cap Growth................................... Wellington Management Company, LLP
Small/Mid Cap CORE..................................... Goldman Sachs Asset Management
Small Cap Value........................................ INVESCO Management & Research, Inc.
Small Cap Growth....................................... John Hancock Advisers, Inc.
Global Equity.......................................... Scudder Kemper Investments, Inc.
International Balanced................................. Brinson Partners, Inc.
International Equity Index............................. Independence International Associates, Inc.
International Opportunities............................ Rowe Price-Fleming International, Inc.
Emerging Markets Equity................................ Montgomery Asset Management, LLC
Short-Term Bond........................................ Independence Investment Associates, Inc.
Bond Index............................................. Mellon Bond Associates, LLP
Sovereign Bond......................................... John Hancock Advisers, Inc.
Global Bond............................................ J.P. Morgan Investment Management, Inc.
High Yield Bond........................................ Wellington Management Company, LLP
Money Market........................................... John Hancock Mutual Life Insurance Company
Brandes International Equity........................... Brandes Investment Partners, L.P.
Turner Core Growth..................................... Turner Investment Partners, Inc.
Frontier Capital Appreciation.......................... Frontier Capital management Company, Inc.
Enhanced U.S. Equity................................... Franklin Portfolio Associates, LLC
- ---------------------------------------------------------------------------------------------------------
</TABLE>
We may add or delete variable investment options in the future.
<PAGE>
When you select one or more of these variable investment options, we invest
your money in the corresponding investment option(s) of the John Hancock
Variable Series Trust I (the "Trust") or of M Fund, Inc. (together, the Trust
and M Fund, Inc. are referred to as the "Series Funds"). The Series Funds are
mutual funds that offer a number of different investment options (which are
called "funds"). The investment results of each variable investment option you
select will depend on those of the corresponding fund of one of the Series
Funds. Attached to this prospectus are prospectuses for the Series Funds that
contain detailed information about each fund offered under the policy. Be sure
to read the prospectuses for the Series Funds before selecting any of the
variable investment options shown on page 1.
GUIDE TO THIS PROSPECTUS
This prospectus contains information that you should know before you buy a
policy or exercise any of your rights under the policy. However, please keep in
mind that this is a prospectus - - it is not the policy. The prospectus
---
simplifies many policy provisions to better communicate the policy's essential
features. Your rights and obligations under the policy will be determined by the
language of the policy itself. When you receive your policy, read it carefully.
This prospectus is arranged in the following way:
. The section which follows is called "Basic Information". It is in a
question and answer format. We suggest you read the Basic Information
section before reading any other section of the prospectus.
. Behind the Basic Information section are illustrations of hypothetical
policy benefits that help clarify how the policy works. These start on
page 17.
. Behind the illustrations is a section called "Additional Information"
that gives more details about the policy. It generally does not repeat
---
information that is in the Basic Information section. A table of contents
for the Additional Information section appears on page 22.
. Behind the Additional Information section are the financial statements
for JHVLICO and Separate Account V. These start on page 40.
. Finally, there is an Alphabetical Index of Key Words and Phrases at the
back of the prospectus on page 79.
After the Alphabetical Index of Key Words and Phrases, this prospectus ends and
the prospectuses for the Series Funds begin.
Please note that the Securities and Exchange Commission ("SEC") has not
approved or disapproved these securities, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
2
<PAGE>
BASIC INFORMATION
This part of the prospectus provides answers to commonly asked questions about
the policy.
<TABLE>
<CAPTION>
Question Pages to See
- --------
<S> <C>
What is the policy?................................................ 4
Who owns the policy?............................................... 4
How can I invest money in the policy?.............................. 4-5
Is there a minimum amount I must invest?........................... 5-6
How will the value of my investment in the policy change over time? 7
What is the "Excess Value" of the policy and how is it applied?....
What charges will JHVLICO deduct from my investment in the policy?. 7-9
What charges will the Series Funds deduct from my investment
in the policy?.................................................... 9
What other charges could JHVLICO impose in the future?............. 10
How can I change my policy's investment allocations?............... 10-11
How can I access my investment in the policy?...................... 11-12
How much will JHVLICO pay when the insured person dies?............ 12-13
How can I change my policy's insurance coverage?................... 13-14
Can I cancel my policy after it's issued?.......................... 14
Can I choose the form in which JHVLICO pays out policy proceeds?... 14
To what extent can JHVLICO vary the terms and conditions of
its policies in particular cases?................................. 15
How will my policy be treated for income tax purposes?............. 15
How do I communicate with JHVLICO?................................. 15-16
</TABLE>
Here are the page numbers where the questions and answers appear:
3
<PAGE>
WHAT IS THE POLICY?
The policy's primary purpose is to provide lifetime protection against economic
loss due to the death of the insured person. The value of the amount you have
invested under the policy may increase or decrease daily based upon the
investment results of the variable investment options that you choose. The
amount we pay to the policy's beneficiary if the insured person dies (we call
this the "death benefit") may be similarly affected.
While the insured person is alive, you will have a number of options under the
policy. Here are some major ones:
. Determine when and how much you invest in the various investment
options
. Borrow amounts you have in the investment options
. Withdraw any amount we consider to be "Excess Value" in your policy
. Change the beneficiary who will receive the death benefit
. Turn in (i.e., "surrender") the policy for the full amount of its
surrender value
. Reduce the amount of insurance by surrendering part of the policy
. Choose the form in which we will pay out the death benefit or other
proceeds
Most of these options are subject to limits that are explained later in this
prospectus.
WHO OWNS THE POLICY?
That's up to the person who applies for the policy. The owner of the policy is
the person who can exercise most of the rights under the policy, such as the
right to choose the investment options or the right to surrender the policy. In
many cases, the person buying the policy is also the person who will be the
owner. However, the application for a policy can name another person or entity
(such as a trust) as owner. Whenever we've used the term "you" in this
prospectus, we've assumed that the reader is the person who has whatever right
or privilege is being discussed. There may be tax consequences if the owner and
the insured person are different, so you should discuss this issue with your tax
adviser.
HOW CAN I INVEST MONEY IN THE POLICY?
Premium Payments
We call the investments you make in the policy "premiums" or "premium
payments". Premiums are scheduled and payable during the lifetime of the insured
person in accordance with our established rules and rates. Premiums are payable
at our Life Servicing Office on or before the due date specified in the policy.
4
<PAGE>
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 business day in the third, sixth and ninth policy
months. In the second policy year, the scheduled due dates are the last business
day in the sixth and twelfth policy months. In the third and all later policy
years, the scheduled due date is the last business day of the policy year.
You 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. You may also pay
amounts in addition to any billed amount. However, each premium payment must be
at least $25. We reserve 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 you with
considerable payment flexibility in meeting the premium requirements of the
policy. Consider a policy with a $1,000 Required Premium and where you pay
$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" on page
__), 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, you 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.
Maximum premium payments
Federal tax law limits the amount of premium payments you can make relative to
the amount of your policy's insurance coverage. We will not knowingly accept any
amount by which a premium payment exceeds the maximum. If you exceed certain
other limits, the law may impose a penalty on amounts you take out of your
policy. We'll monitor your premium payments and let you know if you're about to
exceed this limit. More discussion of these tax law requirements begins on page
29.
Also, we may refuse to accept any amount of an additional premium if that
amount of premium would increase our insurance risk exposure, and the insured
person doesn't provide us with adequate evidence that he or she continues to
meet our requirements for issuing insurance. In no event, however, will we
refuse to accept any premium necessary to prevent the policy from terminating.
Ways to pay premiums
If you pay premiums by check or money order, they must be drawn on a U.S. bank
in U.S. dollars and made payable to "John Hancock Variable Life Insurance
Company." Premiums after the first must be sent to the JHVLICO Life Servicing
Office at the appropriate address shown on page 1 of this prospectus.
5
<PAGE>
We will also accept premiums:
. by wire or by exchange from another insurance company,
. via an electronic funds transfer program (any owner interested in
making monthly premium payments must use this method), or
-------
. if we agree to it, through a salary deduction plan with your
employer.
You can obtain information on these other methods of premium payment by
contacting your JHVLICO representative or by contacting the JHVLICO Life
Servicing Office.
IS THERE A MINIMUM AMOUNT I MUST INVEST?
Minimum Premium Requirements
An amount of Required Premium (see "Required Premiums" 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 us at
our Life 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 business day in the third policy
month and three-quarters of the Required Premium must be received on or before
the last business day 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 business day 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, we count all premiums received when we determine whether the
premium requirement is met on a scheduled due date. This cumulative amount of
premiums received is reduced for this purpose by amounts withdrawn from the
premium component of Excess Value 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 business day of the second or any
later policy year if any Excess Value is available on the scheduled due date.
See "Value Options" on page __.
Failure to satisfy a premium requirement on a scheduled due date may cause the
policy to terminate. See "Lapse" and "Options on Lapse".
6
<PAGE>
Choice of Premium Schedule
At the time of application, you 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 person 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 person. 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
person's 72nd birthday. At the time of the premium recalculation, we determine a
new Basic Premium which is payable through the remaining lifetime of the insured
person.
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>
Required Premiums
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 for extra mortality risk
or additional insurance benefits that 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 "Premium recalculation" on page __.
If the account value on the business day 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,
we will mail a written notice to you within 10 days after any policy anniversary
stating that no premium payment is required in that policy year.
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 policy continues in full
force during the grace period. If the insured person dies
7
<PAGE>
during the grace period, we will deduct the amount in default from the death
benefit. During the grace period, you cannot make transfers among investment
options or make a partial withdrawal or policy loan.
If your policy enters a grace period, we will notify you of how much you will
need to pay to keep the policy in force. If you don't pay at least the required
amount by the end of the grace period, your policy will terminate (i.e., lapse).
Options on Lapse
If a policy lapses, we apply the surrender value on the date of lapse to one
of three options for continued insurance that does not require further payment
of premium: Variable Paid-Up Insurance, Fixed Paid-Up Insurance or Fixed
Extended Term Insurance on the life of the insured person, 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 response to the
investment experience of the variable investment options. 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 surrender value will purchase.
The Variable Paid-Up Insurance option is not available unless its initial
amount is at least $5,000. If you have elected no option 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 person is a substandard
risk. In either of the latter cases, Fixed Paid-Up Insurance is provided.
You may surrender a policy that is being continued under any of these options
for the option's surrender value while the insured person is living. Loans may
be available under the Variable and Fixed Paid-Up Insurance options.
Reinstatement
You can still reactivate (i.e., "reinstate") a lapsed policy within 3 years
from the beginning of the grace period, unless the surrender value has been paid
out or otherwise exhausted or the period of any Fixed Extended Term Insurance
has expired. You will have to provide evidence that the insured person still
meets our requirements for issuing coverage. You will also have to pay a minimum
amount of premium and be subject to the other terms and conditions applicable to
reinstatements, as specified in the policy.
8
<PAGE>
Premium recalculation
You may elect the premium recalculation applicable to any policy on a Modified
Schedule at any time after the first policy anniversary up to the policy
anniversary nearest the insured person's 72nd birthday. If elected, the premium
recalculation will be effected on the policy anniversary next following receipt
at our Life Servicing Office of satisfactory written notice. If not elected
sooner, we will be effect the premium recalculation on the policy anniversary
nearest the insured person'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 person's sex and age, the Guaranteed Death Benefit under the policy and
the account value on the business day 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 person's age at issue of the policy. The
charge (currently1 1/2%) will not exceed 3% of the amount of account value
applied by us 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
person's age at issue. See "Guaranteed Death Benefit Charges" on page __.
HOW WILL THE VALUE OF MY INVESTMENT IN THE POLICY CHANGE OVER TIME?
From each premium payment you make, we deduct the charges described under
"Deductions from premium payments" below. We invest the rest in the investment
options you've elected.
Over time, the amount you've invested in any variable investment option will
--------
increase or decrease the same as if you had invested the same amount directly in
the corresponding fund of the one of the Series Funds and had reinvested all
fund dividends and distributions in additional fund shares; except that we will
deduct certain additional charges which will reduce your account value. We
describe these charges under "What charges will JHVLICO deduct from my
investment in the policy?" below.
The amount you've invested in the fixed investment option will earn interest
-----
at a rate we declare from time to time. We guarantee that this rate will be at
least 4%. If you want to know what the current declared rate is, just call or
write to us. The current declared rate will also appear in the annual statement
we will send you. Amounts you invest in the fixed investment option will not be
---
subject to the mortality and expense risk charge or the guaranteed death benefit
charge described on page 8. Otherwise, the charges applicable to the fixed
investment option are the same as those applicable to the variable investment
options.
At any time, the "account value" of your policy is equal to:
. the amount you invested,
9
<PAGE>
. plus or minus the investment experience of the investment options
you've chosen,
. minus all charges we deduct, and
. minus all partial withdrawals of Excess Value you have made.
If you take a loan on the policy, however, your account value will be computed
somewhat differently. This is discussed beginning on page 11.
WHAT IS THE "EXCESS VALUE" OF THE POLICY AND HOW IS IT APPLIED?
Excess Value and its components
As of the last business day in each policy year, we compare the account value
of the policy against the "Benchmark Value" (described below) to determine if
any "Excess Value" exists under the policy. Excess Value is any amount of
account value greater than the Benchmark Value.
The policy statements that we send you (see "Reports that you will receive" on
page __) will specify the amount of any Excess Value at the end of the reporting
period. If you wish this information at any other time, you may contact your
JHVLICO representative or telephone us at 1-800-732-5543.
Benchmark Value can be thought of as what the guaranteed cash value would be
under an otherwise comparable non-variable whole life policy. It is the amount
we deem necessary to support your policy's benefits at any time based on
accepted actuarial methods and assumptions.
The Benchmark Value depends upon the policy's Guaranteed Death Benefit, the
Required Premium, any outstanding loan, the sex and attained age of the insured
person, and any contingent deferred sales charge. The formula describing
precisely how Benchmark Value is calculated on each policy anniversary is set
forth in the policy. 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. If there is a loan outstanding, the Benchmark
Value will not be less than 110% of the outstanding loan amount. The Benchmark
Value generally increases over the life of the policy, as the attained age of
the insured person increases.
Excess Value may arise from two sources. The "premium component" is that
portion of Excess Value up to the amount by which the cumulative premiums paid
(excluding amounts from this component previously withdrawn) exceed the
cumulative amount of Required Premiums due to date. The "experience component"
is that portion of Excess Value above the premium component and arises out of
favorable investment experience or lower than maximum insurance and expense
charges.
Value Options
If Excess Value is available on a policy anniversary, any premium component
and experience component will be applied under Value Options you elect. Either
component may be
10
<PAGE>
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 your election and in
accordance with our then current rules. A change in an election will be
effective as of the policy anniversary next following its date of receipt in
writing at our Life 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 person'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 "What charges will JHVLICO deduct from my investment
in the policy?" on page __) is made against the account value to cover the risk
assumed by us in providing the increased Guaranteed Death Benefit. The Extra
Death Benefit Value Option may not be available if the insured person 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 "What charges will JHVLICO deduct from my investment in the policy?". You
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 you may take as a partial withdrawal. See "Partial
Withdrawal of Excess Value" on page __. Any decrease is effective at the end of
the business day in which we receive 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 is made against the account value to cover the risk assumed
by us 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
11
<PAGE>
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 person. The
Premium Credit Factor decreases from year to year as the attained age of the
insured person increases. For example, the Premium Credit Factor for a female
age 60 is 13.6798, and for a female age 61 is 13.3382.
WHAT CHARGES WILL JHVLICO DEDUCT FROM MY INVESTMENT IN THE POLICY?
Deductions from premium payments
. Premium processing charge - A charge, not to exceed $2, to cover premium
-------------------------
collection and processing costs. The charge is currently $2 but may be
different for payments made under special billing arrangements acceptable
to us.
. Premium tax charge - A charge to cover state premium taxes we currently
------------------
expect to pay, on average. This charge is currently 2.5% of each premium.
. Premium sales charge - A charge to help defray our sales costs. The
--------------------
charge is 4.5% of the premiums you pay each policy year (after deduction
of the premium processing charge). We currently waive this charge for
policies with a Sum Insured of $250,000 or higher, but continuation of
that waiver is not guaranteed.
Deductions from account value
. Issue charge - A charge to help defray our administrative costs. This
------------
charge has two parts: (1)_a flat dollar charge of $240, and (2) a charge
of 48c per $1,000 of Sum Insured at issue. The charge is deducted in 48
equal monthly installments. If the policy lapses or is surrendered before
the full amount of the charge has been deducted, the remainder will be
deducted from the surrender value.
. Maintenance charge - A monthly charge to help defray our administrative
------------------
costs. This charge is also in two parts: (1) a flat dollar charge of up to
$4, and (2) a charge of 2c per $1,000 of the current Sum Insured. This
charge currently cannot exceed $6.75 per month, but this limit is not
guaranteed and may be withdrawn or modified at any time.
. Insurance charge - A monthly charge for the cost of insurance. To
----------------
determine the charge, we multiply the amount of insurance for which we are
at risk by a cost of insurance rate. The rate is derived from an actuarial
table. The table in your policy will show the maximum cost of insurance
-------
rates. The cost of insurance rates that we currently apply are generally
less than the maximum rates. We will review the cost of insurance rates at
least every 5 years and may change them from time to time. However, those
rates will never be more than rates based on the 1980 Commissioners'
Standard Ordinary Mortality Tables. The table of rates we use will depend
on the insurance risk characteristics and gender of the insured person,
the current Sum Insured and the length of time the policy has been in
effect. Regardless of the table used, cost of insurance rates generally
increase each year that you own your policy, as the insured person's
attained age increases. (The insured person's "attained age" on any date
is his or her age on the birthday nearest that date.) We will charge lower
current insurance rates under a policy with a current Sum Insured of
$250,000 or more if the insured person is over age 32 and in the standard
underwriting class or is over age 34 and in the preferred underwriting
class.
12
<PAGE>
. Guaranteed death benefit charge - A monthly charge for our guarantee that
-------------------------------
the death benefit will never be less than the Sum Insured. This charge is
currently 1c per $1,000 of the Sum Insured at the time the charge is
deducted. We guarantee that this charge will never exceed 3c per $1,000 of
the Sum Insured at the time the charge is deducted. When an Extra Death
Benefit Value Option is exercised, we guarantee a higher Guaranteed Death
Benefit. When a Basic Premium Reduction Value Option is exercised, we
provide the same Guaranteed Death Benefit with less premiums. In either
event, we make a one-time deduction from the amount applied as
compensation for making the additional guarantee. The current charge is1
1/2% of the amount applied. We may increase this charge, but it will never
exceed 3% of the amount applied.
. Extra mortality risk charge - An insured person who does not qualify for
---------------------------
either the preferred or standard underwriting class must pay an additional
Required Premium because of the extra mortality risk. We collect this
additional premium in two ways: up to 7% of the additional premium is
deducted from premiums when paid and the remainder of the additional
premium is deducted monthly from your policy's 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.
. M &E charge - A daily charge for mortality and expense risks we assume.
-----------
This charge is deducted from the variable investment options. It does not
apply to the fixed investment option. The current charge is at an
effective annual rate of .60% of the value of the assets in each variable
investment option. We guarantee that this charge will never exceed an
effective annual rate of .90%.
. Additional insurance benefits charges - An additional Required premium
-------------------------------------
must be paid if you elect to purchase any additional insurance benefit
that is added to the policy by means of a rider. We collect this
additional premium in two ways: up to 7% of the additional premium is
deducted from premiums when paid and the remainder of the additional
premium is deducted monthly from your policy's account value in equal
installments.
. Premium recalculation charge - 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 person'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 is1 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 person's age at
issue. We may increase this charge, but it will never exceed 3% of the
amount applied.
. Contingent deferred sales charge ("CDSC") - A charge we deduct if the
-----------------------------------------
policy lapses or is surrendered within the first fourteen policy years. We
deduct this charge to compensate us for sales expenses that we would
otherwise not recover in the event of early lapse or surrender. The CDSC
is a percentage of the lesser of (a) the total amount of premiums you have
actually paid before the date of surrender or lapse and (b) the sum of the
Modified Premiums or portions thereof due (whether or not actually paid)
on or before the date of surrender or lapse.
13
<PAGE>
<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 for the last business
day of policy years 8 through 14.
The amount of the CDSC is calculated on the basis of the premium under the
Modified Schedule for the attained age of the insured person at the time the
policy is issued, regardless of whether the policy uses the Level Schedule or
the Modified Schedule. At issue ages higher than 57, the maximum CDSC percentage
is reached at an earlier policy year and may be reduced to zero over a shorter
number of years.
. Partial withdrawal charge - A charge for each partial withdrawal of
-------------------------
Excess Value to compensate us for the administrative expenses of
processing the withdrawal. The charge is equal to the lesser of $25 or 2%
of the amount withdrawn.
WHAT CHARGES WILL THE SERIES FUNDS DEDUCT FROM MY INVESTMENT IN THE POLICY?
The Series Funds must pay investment management fees and other operating
expenses. These fees and expenses are different for each fund of the Series
Funds and reduce the investment return of each fund. Therefore, they also
indirectly reduce the return you will earn on any variable investment options
you select.
The figures in the following chart for the funds of the Trust are expressed as
percentages of each fund's average daily net assets for 1998 (rounded to two
decimal places). The percentages reflect the investment management fees that
were payable for1998 and the 1998 other operating expenses that would have been
allocated to the funds under the allocation rules currently in effect.
<TABLE>
<CAPTION>
Total Fund
Investment Other Operating Other Operating Expenses
Fund Name Management Fee Operating Expenses Expenses Absent Reimbursement*
- --------- -------------- ------------------ ---------- --------------------------
<S> <C> <C> <C> <C>
Managed.................... 0.32% 0.05% 0.37% 0.05%
Growth & Income............ 0.25% 0.05% 0.30% 0.05%
Equity Index............... 0.14% 0.08% 0.22% 0.08%
Large Cap Value............ 0.74% 0.07% 0.81% 0.07%
Large Cap Growth........... 0.37% 0.05% 0.42% 0.05%
Mid Cap Value.............. 0.80% 0.05% 0.85% 0.05%
Mid Cap Growth............. 0.85% 0.08% 0.93% 0.08%
Real Estate Equity......... 0.60% 0.05% 0.65% 0.05%
Small/Mid Cap Growth**..... 0.75% 0.05% 0.80% 0.05%
Small/Mid Cap CORE......... 0.80% 0.10% 0.90% 0.23%
Small Cap Value............ 0.80% 0.07% 0.87% 0.07%
Small Cap Growth........... 0.75% 0.08% 0.83% 0.08%
Global Equity.............. 0.90% 0.10% 1.00% 0.50%
International Balanced..... 0.85% 0.10% 0.95% 0.64%
International Equity Index 0.17% 0.10% 0.27% 0.23%
International Opportunities 0.87% 0.10% 0.97% 0.32%
Emerging Markets Equity.... 1.30% 0.10% 1.40% 0.68%
Short-Term Bond............ 0.30% 0.05% 0.35% 0.05%
Bond Index................. 0.15% 0.05% 0.20% 0.05%
Sovereign Bond............. 0.25% 0.05% 0.30% 0.05%
Global Bond**.............. 0.69% 0.06% 0.75% 0.06%
High Yield Bond............ 0.65% 0.07% 0.72% 0.07%
Money Market............... 0.25% 0.05% 0.30% 0.05%
</TABLE>
14
<PAGE>
* John Hancock reimburses a fund when the fund's other operating expenses
exceed 10% of the fund's average daily net assets.
** Small/Mid Cap Growth was formerly "Diversified Mid Cap Growth" and Global
Bond was formerly "Strategic Bond."
The figures in the following chart for the funds of M Fund, Inc. are
expressed as percentages of each fund's average daily net assets for 1998
(rounded to two decimal places). The percentages reflect the investment
management fees currently payable and the 1998 other operating expenses
allocated to M Fund, Inc.
<TABLE>
<CAPTION>
Other Operating
Other Total Fund Expenses
Investment Operating Operating Absent
Fund Name Management Fee Expenses Expenses Reimbursement*
- --------- -------------- ---------- ---------- ---------------
<S> <C> <C> <C> <C>
Brandes International Equity**........................................... 1.02% 0.25% 1.27% %
Turner Core Growth....................................................... 0.45% 0.25% 0.70% 2.97%
Frontier Capital Appreciation............................................ 0.90% 0.25% 1.15% %
Enhanced U.S. Equity..................................................... 0.55% 0.25% 0.80%
</TABLE>
* M Financial Investment Advisers, Inc. reimburses a fund when the fund's other
operating expenses exceed 0.25% of the fund's average daily net assets.
** Brandes International Equity was formerly "Edinburgh Overseas Equity."
WHAT OTHER CHARGES COULD JHVLICO IMPOSE IN THE FUTURE?
We currently make no charge against account value for our Federal income
taxes, but if we incur, or expect to incur, income taxes attributable to any
subaccount of the Account or this class of policies in future years, we reserve
the right to make such a charge. Any such charge would reduce what you earn on
any affected investment options. However, we expect that no such charge will be
necessary.
Under current laws, we 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, we may make charges
for such taxes.
We also reserve the right to increase the premium tax charge and the DAC tax
charge in order to correspond, respectively, with changes in the state premium
tax levels and with changes in the Federal income tax treatment of the deferred
acquisition costs for this type of policy.
HOW CAN I CHANGE MY POLICY'S INVESTMENT ALLOCATIONS?
15
<PAGE>
Future premium payments
At any time, you may change the investment options in which future premium
payments will be invested. You make the original allocation in the application
for the policy. The percentages you select must be in whole numbers and must
equal 100% in total.
Transfers of existing account value
You may also transfer your existing account value from one investment option
to another. To do so, you must tell us how much to transfer, either as a whole
number percentage or as a specific dollar amount.
Under our current rules, you can make transfers out of any variable investment
--------
option anytime you wish. However, transfers out of the fixed investment option
-----
are currently subject to the following restrictions:
. You can only make such a transfer once a year and only during the 31 day
period following your policy anniversary.
. We must receive the request for such a transfer during the period
beginning 60 days prior to the policy anniversary and ending 30 days after
it.
. The most you can transfer at any one time is the greater of $500 or 20%
of the assets in your fixed investment option.
We reserve the right to impose a minimum amount limit on transfers out of the
fixed investment option. We also reserve the right to impose a charge of up to
$5 for each transfer among investment options of more than 12 in any policy
year.
Limitation on number of investment options
Whether through the allocation of premium or through the transfer of existing
account value, you can never be invested in more than ten investment options at
any one time.
HOW CAN I ACCESS MY INVESTMENT IN THE POLICY?
Full surrender
You may surrender your policy in full at any time. If you do, we will pay you
the account value, less any unpaid charges and policy loans and less any CDSC
that then applies. This is called your "surrender value." You must return your
policy when you request a full surrender.
Partial withdrawals of Excess Value
Under our current administrative rules, you may make a partial withdrawal of
your policy's Excess Value, if any, at any time after the first policy year (see
"Excess Value and its components" on page __). Each partial withdrawal must be
at least $500. There is a charge for each partial withdrawal. We will
automatically reduce the account value of your policy by the amount of the
withdrawal and the related charge. Each investment option will be reduced in the
same proportion as the account value is then allocated among them. Unless the
Current Death
16
<PAGE>
Benefit exceeds the Guaranteed Death Benefit, a partial withdrawal will not
affect the death benefit payable.
Amounts withdrawn from the premium component of Excess Value 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.
Policy loans
You may borrow from your policy at any time after it has been in effect for 1
year by completing a form satisfactory to us or, if the telephone transaction
authorization form has been completed, by telephone. The minimum amount of each
loan is $300, unless the loan is used to pay premiums. The maximum amount you
can borrow is equal to 100% of that portion of your surrender value that is
attributable to the fixed investment option plus one of the following:
. In policy years 2 and 3 - - 75% of that portion of your surrender
value that is attributable to the variable investment options
. In all later policy years - - 90% of that portion of your surrender
value that is attributable to the variable investment options
Interest charged on any loan will accrue daily at an effective annual rate
determined by John Hancock at the start of each policy year. This interest rate
will not exceed the greater of (1) the "Published Monthly Average" (defined
below) for the calendar month ending 2 months before the calendar month of the
policy anniversary or (2) 5%. In jurisdictions where a fixed loan rate is
applicable, we will charge interest at an effective annual rate of 6%. 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. Accrued interest will be
added to the loan daily and will bear interest at the same rate as the original
loan amount.
The amount of the loan is deducted from the investment options in the same
proportion as the account value is then allocated among them and is placed in a
special loan account. This special loan account will earn interest at a rate
that is 1% less than the loan interest rate for the first 20 Policy years and
.5% less than the loan interest rate thereafter. However, if we determine that a
loan will be treated as a taxable distribution because of the differential
between the loan interest rate and the rate being credited on the special loan
account, we reserve the right to decrease the rate credited on the special loan
account to a rate that would, in our reasonable judgement, result in the
transaction being treated as a loan under Federal tax law.You can repay all or
part of a loan at any time.
Each repayment will be allocated among the investment options as follows:
17
<PAGE>
. The same proportionate part of the loan as was borrowed from the
fixed investment option will be repaid to the fixed investment
option.
. The remainder of the repayment will be allocated among the investment
options in the same way a new premium payment would be allocated.
If you want a payment to be used as a loan repayment, you must include
instructions to that effect. Otherwise, all payments will be assumed to be
premium payments.
HOW MUCH WILL JHVLICO PAY WHEN THE INSURED PERSON DIES?
The death benefit payable upon the death of the insured person 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 your request. We guarantee that, regardless of the investment experience of
the investment options, 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 you exercise 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 and the sex and age of the
insured person on the policy anniversary as of which the Option is exercised.
See "Value Options" on page __. The insured person's age on a policy anniversary
is the age of the insured person on his or her birthday nearest that date.
Current Death Benefit. The Current Death Benefit on any date is the account
value on 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
person. The Death Benefit Factor decreases from year to year as the attained age
of the insured person increases. For example, the Death Benefit Factor for a
male age 75 is 1.3546, and 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 - - that is it increases as the account value increases and decreases
as the account value decreases.
HOW CAN I CHANGE MY POLICY'S INSURANCE COVERAGE?
Change of Sum Insured
At any time, you may request a decrease or increase in your Sum Insured,
subject to our administrative rules in effect at the time. For any increase, we
will require evidence that the insured person still meets our requirements for
issuing coverage. This is because such a change increases our insurance risk
exposure.
18
<PAGE>
Partial surrenders
You may partially surrender your policy upon submission of a written request
satisfactory to us in accordance with our rules. Currently, the policy after
partial surrender must have a Sum Insured at least as large as the minimum
amount for which we would issue a policy on the life of the insured person. The
Guaranteed Death Benefit for the policy will be adjusted to prospectively
reflect the new Sum Insured. A pro-rata portion of the account value will be
paid to you and a pro-rata portion of any contingent deferred sales charge will
be deducted. Possible alternatives to the partial surrender of the policy would
be withdrawal of some or all of your Excess Value or taking a policy loan.
Tax consequences
Please read "Tax considerations" starting on page 29 to learn about possible
tax consequences of changing your insurance coverage under the policy.
CAN I CANCEL MY POLICY AFTER IT'S ISSUED?
You have the right to cancel your policy within the latest of the following
periods:
. 10 days after you receive it (this period may be longer in some
states);
. 10 days after mailing by JHVLICO of the Notice of Withdrawal Right;
or
. 45 days after the date Part A of the application has been completed.
This is often referred to as the "free look" period. To cancel your policy,
simply deliver or mail the policy to us at one of the addresses shown on page 1,
or to the JHVLICO representative who delivered the policy to you.
In most states, you will receive a refund of any premiums you've paid. In some
states, the refund will be your account value on the date of cancellation plus
all charges deducted by JHVLICO or the Series Funds prior to that date. The date
of cancellation will be the date of such mailing or delivery.
CAN I CHOOSE THE FORM IN WHICH JHVLICO PAYS OUT POLICY PROCEEDS?
Choosing a payment option
You may choose to receive proceeds from the policy as a single sum. This
includes proceeds that become payable because of death or full surrender.
Alternatively, you can elect to have proceeds of $1,000 or more applied to any
of a number of other payment options, including the following:
. Option 1 - Proceeds left with us to accumulate with interest
. Option 2A - Equal monthly payments of a specified amount until all
proceeds are paid out
19
<PAGE>
. Option 2B - Equal monthly payments for a specified period of time
. Option 3 - Equal monthly payments for life, but with payments
guaranteed for a specific number of years
. Option 4 - Equal monthly payments for life with no refund
. Option 5 - Equal monthly payments for life with a refund if all of
the proceeds haven't been paid out
You cannot choose an option if the monthly payments under the option would be
less than $50. We will issue a supplementary agreement when the proceeds are
applied to any alternative payment option. That agreement will spell out the
terms of the option in full. We will credit interest on each of the above
options. For Options 1 and 2A, the interest will be at least an effective annual
rate of 3 1/2%.
Changing a payment option
You can change the payment option at any time before the proceeds are payable.
If you haven't made a choice, the payee of the proceeds has a prescribed period
in which he or she can make that choice.
Tax impact
There may be tax consequences to you or your beneficiary depending upon which
payment option is chosen. You should consult with a qualified tax adviser before
making that choice.
TO WHAT EXTENT CAN JHVLICO VARY THE TERMS AND CONDITIONS OF ITS POLICIES IN
PARTICULAR CASES?
Listed below are some variations we can make in the terms of our policies. Any
variation will be made only in accordance with uniform rules that we apply
fairly to all of our customers.
State law insurance requirements
Insurance laws and regulations apply to JHVLICO in every state in which its
policies are sold. As a result, various terms and conditions described in the
prospectus may vary depending upon where you reside. These variations will be
reflected in your policy or in endorsements attached to your policy.
Variations in expenses or risks
We may vary the charges and other terms of our policies where special
circumstances result in sales or administrative expenses, mortality risks or
other risks that are different from those normally associated with the policies.
These include the type of variations discussed under "Reduced charges for
eligible classes" on page 28. No variation in any charge will exceed any maximum
stated in this prospectus with respect to that charge.
20
<PAGE>
HOW WILL MY POLICY BE TREATED FOR INCOME TAX PURPOSES?
Generally, death benefits paid under policies such as yours are not subject to
income tax. Earnings on your account value are not subject to income tax as long
as we don't pay them out to you. If we do pay out any amount of your account
value upon surrender or partial withdrawal, all or part of that distribution
should generally be treated as a return of the premiums you've paid and should
not be subject to income tax. Amounts you borrow are generally not taxable to
you.
However, some of the tax rules change if your policy is found to be a
"modified endowment contract." This can happen if you've paid more than a
certain amount of premiums that is prescribed by the tax laws. Additional taxes
and penalties may be payable for policy distributions of any kind.
For further information about the tax consequences of owning a policy, please
read "Tax considerations" beginning of page 29.
HOW DO I COMMUNICATE WITH JHVLICO?
General Rules
You should mail or express all checks and money orders for premium payments
and loan repayments to the JHVLICO Life Servicing Office at the appropriate
address shown on page 1.
Certain requests must be made in writing and be signed and dated by you,
except as discussed below under "Telephone Transactions.". They include the
following:
. loans, surrenders (including partial surrenders) or partial
withdrawals
. transfers of account value among investment options
. change of allocation among investment options for new premium
payments
. change of death benefit option
. change of beneficiary
. election of payment option for policy proceeds
. tax withholding elections
. election of telephone transaction privilege
You should mail or express these requests to the JHVLICO Life Servicing Office
at the appropriate address shown on page 1. You should also send notice of the
insured person's death and related documentation to the JHVLICO Life Servicing
Office. We don't consider that we've "received" any communication until such
time as it has arrived at the proper place and in the proper and complete form.
21
<PAGE>
We have special forms that should be used for a number of the requests
mentioned above. You can obtain these forms from the JHVLICO Life Servicing
Office or your JHVLICO representative. Each communication to us must include
your name, your policy number and the name of the insured person. We cannot
process any request that doesn't include this required information. Any
communication that arrives after the close of our business day, or on a day that
is not a business day, will be considered "received" by us on the next following
business day. Our business day currently closes at 4:00 p.m. Eastern Standard
Time, but special circumstances (such as suspension of trading on a major
exchange) may dictate an earlier closing time.
Telephone Transactions
If you complete a special authorization form, you can request loans, transfers
among investment options and changes of allocation among investment options
simply by telephoning us at 1-800-732-5543 or by faxing us at 1-617-886-3048.
Any fax request should include your name, daytime telephone number, policy
number and, in the case of transfers and changes of allocation, the names of the
investment options involved. We will honor telephone instructions from anyone
who provides the correct identifying information, so there is a risk of loss to
you if this service is used by an unauthorized person. However, you will receive
written confirmation of all telephone transactions. There is also a risk that
you will be unable to place your request due to equipment malfunction or heavy
phone line usage. If this occurs, you should submit your request in writing.
The policies are not designed for professional market timing organizations or
other entities that use programmed and frequent transfers among investment
options. For reasons such as that, we reserve the right to change our telephone
transaction policies or procedures at any time. We also reserve the right to
suspend or terminate the privilege altogether.
22
<PAGE>
ILLUSTRATION OF DEATH BENEFITS, ACCOUNT VALUES, SURRENDER VALUES AND
ACCUMULATED PREMIUMS
The following tables illustrate the changes in death benefit, account value
and surrender value of the policy under certain hypothetical circumstances that
we assume solely for this purpose. Each table separately illustrates the
operation of a policy for a specified issue age, premium payment schedule and
Sum Insured. The amounts shown are for the end of each policy year and assume
that all of the account value is invested in funds that achieve investment
returns at constant annual rates of 0%, 6% and 12% before any fees or expenses.
(Investment return reflects investment income and all realized and unrealized
capital gains and losses.) The tables assume annual Required Premiums that are
paid at the beginning of each policy year for an insured person who is a 35 year
old male standard non-smoker underwriting risk when the policy is issued.
Tables are provided for each of the three death benefit options. The tables
headed "Current Charges" assume that the current rates for all charges deducted
by JHVLICO will apply in each year illustrated, including the reduction in the
monthly insurance charge after the ninth policy year and the waiver after the
tenth policy year of the sales charge deducted from premiums. The tables headed
"Maximum Charges" are the same, except that the maximum permitted rates for all
years are used for all charges. The tables do not reflect any charge that we
reserve the right to make but are not currently making.
With respect to fees and expenses deducted from Series Fund assets, the
amounts shown in all tables reflect (1) investment management fees equivalent to
an effective annual rate of .61%, and (2) an assumed average asset charge for
all other Series Fund operating expenses equivalent to an effective annual rate
of .10%. These rates are the arithmetic average for all funds of the Series
Funds. In other words, they are based on the hypothetical assumption that policy
account values are allocated equally among the variable investment options. The
actual rates associated with any policy will vary depending upon the actual
allocation of policy values among the investment options.
The second column of each table shows the amount you would have at the end of
each policy year if an amount equal to the assumed Required Premiums were
invested to earn interest, after taxes, at 5% compounded annually. This is not a
policy value. It is included for comparison purposes only.
Because your circumstances will no doubt differ from those in the
illustrations that follow, values under your policy will differ, in most cases
substantially. Upon request, we will furnish you with a comparable illustration
reflecting your proposed insured person's issue age, sex and underwriting risk
classification, and the Sum Insured and annual Required Premium amount
requested.
23
<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 $ 370 $ 420 $ 471
2 2,396 100,000 100,000 100,000 1,023 1,168 1,319
3 3,684 100,000 100,000 100,000 1,670 1,955 2,264
4 5,037 100,000 100,000 100,000 2,311 2,783 3,316
5 6,458 100,000 100,000 100,000 2,943 3,654 4,487
6 7,949 100,000 100,000 100,000 3,564 4,568 5,792
7 9,515 100,000 100,000 100,000 4,172 5,527 7,244
8 11,160 100,000 100,000 100,000 4,803 6,568 8,895
9 12,886 100,000 100,000 100,000 5,419 7,655 10,722
10 14,699 100,000 100,000 100,000 6,089 8,861 12,817
11 16,603 100,000 100,000 100,000 6,862 10,234 15,246
12 18,602 100,000 100,000 100,000 7,688 11,729 17,986
13 20,700 100,000 100,000 100,000 8,495 13,275 20,989
14 22,904 100,000 100,000 100,000 9,279 14,870 24,281
15 25,218 100,000 100,000 100,000 10,038 16,517 27,892
16 27,647 100,000 100,000 103,370 10,582 18,026 31,661
17 30,198 100,000 100,000 113,174 11,096 19,588 35,789
18 32,877 100,000 100,000 123,485 11,582 21,205 40,307
19 35,689 100,000 100,000 134,349 12,036 22,878 45,252
20 38,643 100,000 100,000 145,799 12,458 24,611 50,662
25 55,776 100,000 100,000 213,348 14,037 34,252 86,278
30 77,644 100,000 100,000 302,780 14,443 45,767 141,407
35 105,553 100,000 110,729 422,238 12,948 59,087 225,314
40 141,173 100,000 122,628 582,698 8,448 73,944 351,362
45 186,634 100,000 133,743 797,988 0 89,881 536,282
50 244,655 100,000 144,286 1,087,549 0 106,516 802,856
55 318,706 100,000 154,455 1,477,667 0 122,974 1,176,487
</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.
24
<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 $ 26 $ 54
2 1,524 100,000 100,000 100,000 282 359 440
3 2,344 100,000 100,000 100,000 566 713 874
4 3,204 100,000 100,000 100,000 847 1,087 1,359
5 4,108 100,000 100,000 100,000 1,123 1,481 1,903
6 5,057 100,000 100,000 100,000 1,393 1,897 2,514
7 6,053 100,000 100,000 100,000 1,653 2,333 3,198
8 7,099 100,000 100,000 100,000 1,940 2,826 3,996
9 8,197 100,000 100,000 100,000 2,215 3,337 4,880
10 9,350 100,000 100,000 100,000 2,549 3,939 5,929
11 10,561 100,000 100,000 100,000 2,988 4,680 7,199
12 11,833 100,000 100,000 100,000 3,485 5,510 8,654
13 13,168 100,000 100,000 100,000 3,964 6,358 10,231
14 14,570 100,000 100,000 100,000 4,423 7,221 11,941
15 16,042 100,000 100,000 100,000 4,860 8,097 13,797
16 17,587 100,000 100,000 100,000 5,083 8,796 15,623
17 19,210 100,000 100,000 100,000 5,279 9,504 17,625
18 20,914 100,000 100,000 100,000 5,448 10,223 19,821
19 22,703 100,000 100,000 100,000 5,587 10,950 22,232
20 24,581 100,000 100,000 100,000 5,694 11,684 24,881
25 35,480 100,000 100,000 105,641 5,694 15,420 42,721
30 49,391 100,000 100,000 151,396 4,460 18,992 70,706
35 67,144 100,000 100,000 212,349 1,122 21,638 113,313
40 89,803 100,000 100,000 294,089 0 22,135 177,333
45 118,721 100,000 100,000 403,657 0 17,394 271,275
50 181,786 100,000 100,000 547,590 12,780 26,530 404,245
55 281,964 100,000 100,000 739,585 27,379 51,563 588,841
</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%, $8,644 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.
25
<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 $ 1,064 $ 1,161 $ 1,259
2 4,206 100,000 100,000 100,000 2,385 2,672 2,970
3 6,468 100,000 100,000 100,000 3,677 4,248 4,866
4 8,843 100,000 100,000 100,000 4,940 5,892 6,964
5 11,337 100,000 100,000 100,000 6,175 7,612 9,293
6 13,955 100,000 100,000 100,000 7,369 9,399 11,869
7 16,705 100,000 100,000 100,000 8,536 11,270 14,732
8 19,592 100,000 100,000 100,000 9,730 13,283 17,968
9 22,623 100,000 100,000 100,000 10,886 15,379 21,547
10 25,806 100,000 100,000 100,000 12,125 17,681 25,629
11 29,148 100,000 100,000 100,000 13,539 20,287 30,348
12 32,657 100,000 100,000 100,000 15,049 23,121 35,673
13 36,342 100,000 100,000 100,000 16,516 26,051 41,519
14 40,211 100,000 100,000 106,305 17,940 29,082 47,927
15 44,273 100,000 100,000 117,574 19,311 32,213 54,910
16 48,538 100,000 100,000 129,513 20,279 35,099 62,173
17 53,017 100,000 100,000 142,164 21,187 38,093 70,118
18 57,719 100,000 100,000 155,584 22,035 41,205 78,809
19 62,657 100,000 100,000 169,812 22,816 44,438 88,306
20 67,841 100,000 100,000 184,935 23,531 47,803 98,685
25 97,922 100,000 110,619 276,600 25,966 66,702 166,787
30 136,313 100,000 131,289 402,356 25,197 88,232 270,400
35 185,310 100,000 152,617 579,189 19,880 112,666 427,572
40 247,845 100,000 175,745 833,013 5,637 139,925 663,227
</TABLE>
(1) If premiums are paid more frequently than annually the payments would be
$977.00 semiannually, $488.50 quarterly, or $162.83 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.
26
<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 $ 529 $ 591
2 2,809 100,000 100,000 100,000 1,198 1,376 1,562
3 4,320 100,000 100,000 100,000 1,907 2,257 2,637
4 5,906 100,000 100,000 100,000 2,592 3,173 3,827
5 7,571 100,000 100,000 100,000 3,256 4,127 5,149
6 9,320 100,000 100,000 100,000 3,884 5,111 6,608
7 11,157 100,000 100,000 100,000 4,490 6,139 8,233
8 13,085 100,000 100,000 100,000 5,128 7,267 10,093
9 15,109 100,000 100,000 100,000 5,732 8,431 12,145
10 17,235 100,000 100,000 100,000 6,423 9,752 14,529
11 19,467 100,000 100,000 100,000 7,291 11,324 17,359
12 21,810 100,000 100,000 100,000 8,259 13,070 20,583
13 24,271 100,000 100,000 100,000 9,185 14,852 24,090
14 26,855 100,000 100,000 100,000 10,068 16,670 27,914
15 29,568 100,000 100,000 100,000 10,899 18,519 32,083
16 32,417 100,000 100,000 100,000 11,326 20,047 36,288
17 35,408 100,000 100,000 100,000 11,690 21,601 40,922
18 38,548 100,000 100,000 100,000 11,992 23,184 46,037
19 41,846 100,000 100,000 100,000 12,219 24,787 51,689
20 45,309 100,000 100,000 108,489 12,374 26,417 57,892
25 65,398 100,000 100,000 163,507 11,844 34,919 98,593
30 91,038 100,000 100,000 238,876 7,406 43,257 160,535
35 133,083 100,000 100,000 338,493 20,806 59,828 249,884
40 193,761 100,000 109,934 477,925 46,182 87,527 380,514
</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: $9,418 for a hypothetical gross
investment return of 0%, $4,138 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.
27
<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 $ 346 $ 396 $ 446
2 2,396 100,000 100,000 100,000 975 1,117 1,266
3 3,684 100,000 100,000 100,000 1,600 1,878 2,180
4 5,037 100,000 100,000 100,000 2,218 2,678 3,197
5 6,458 100,000 100,000 100,000 2,827 3,518 4,329
6 7,949 100,000 100,000 100,000 3,425 4,402 5,593
7 9,515 100,000 100,000 100,000 4,011 5,328 6,998
8 11,160 100,000 100,000 100,000 4,620 6,335 8,597
9 12,886 100,000 100,000 100,000 5,213 7,386 10,367
10 14,699 100,000 100,000 100,000 5,863 8,554 12,398
11 16,603 100,000 100,000 100,000 6,614 9,888 14,757
12 18,602 100,000 100,000 100,000 7,418 11,340 17,417
13 20,700 100,000 100,000 100,000 8,200 12,839 20,330
14 22,904 100,000 100,000 100,000 8,960 14,386 23,523
15 25,218 100,000 100,000 100,000 9,696 15,981 27,024
16 27,647 100,000 100,000 100,145 10,213 17,434 30,673
17 30,198 100,000 100,000 109,652 10,702 18,936 34,675
18 32,877 100,000 100,000 119,649 11,162 20,491 39,055
19 35,689 100,000 100,000 130,178 11,591 22,099 43,847
20 38,643 100,000 100,000 141,276 11,988 23,762 49,090
25 55,776 100,000 100,000 206,681 13,428 32,987 83,582
30 77,644 100,000 100,000 293,139 13,670 43,931 136,904
35 105,553 100,000 106,265 408,427 11,964 56,705 217,944
40 141,173 100,000 117,659 562,952 7,148 70,947 339,455
45 186,634 100,000 128,388 770,696 0 86,282 517,941
50 244,655 100,000 138,613 1,050,435 0 102,328 775,458
55 318,706 100,000 148,472 1,427,313 0 118,210 1,136,396
</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.
28
<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 $ 29
2 1,524 100,000 100,000 100,000 235 309 387
3 2,344 100,000 100,000 100,000 495 636 789
4 3,204 100,000 100,000 100,000 754 981 1,240
5 4,108 100,000 100,000 100,000 1,007 1,346 1,746
6 5,057 100,000 100,000 100,000 1,254 1,730 2,315
7 6,053 100,000 100,000 100,000 1,492 2,134 2,951
8 7,099 100,000 100,000 100,000 1,757 2,592 3,698
9 8,197 100,000 100,000 100,000 2,010 3,068 4,525
10 9,350 100,000 100,000 100,000 2,323 3,633 5,510
11 10,561 100,000 100,000 100,000 2,740 4,333 6,710
12 11,833 100,000 100,000 100,000 3,214 5,121 8,085
13 13,168 100,000 100,000 100,000 3,669 5,922 9,572
14 14,570 100,000 100,000 100,000 4,104 6,735 11,182
15 16,042 100,000 100,000 100,000 4,517 7,560 12,927
16 17,587 100,000 100,000 100,000 4,714 8,202 14,628
17 19,210 100,000 100,000 100,000 4,885 8,851 16,490
18 20,914 100,000 100,000 100,000 5,027 9,506 18,531
19 22,703 100,000 100,000 100,000 5,139 10,166 20,769
20 24,581 100,000 100,000 100,000 5,221 10,831 23,227
25 35,480 100,000 100,000 100,000 5,080 14,140 39,746
30 49,391 100,000 100,000 140,960 3,676 17,118 65,832
35 67,144 100,000 100,000 197,696 113 18,894 105,494
40 89,803 100,000 100,000 273,600 0 18,039 164,978
45 118,721 100,000 100,000 375,533 0 11,175 252,374
50 184,931 100,000 100,000 509,121 12,703 19,727 375,846
55 291,490 100,000 100,000 687,400 27,126 45,430 547,293
</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%, $9,583 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.
29
<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 $ 907 $ 999 $ 1,092
2 4,206 100,000 100,000 100,000 2,062 2,330 2,608
3 6,468 100,000 100,000 100,000 3,179 3,705 4,275
4 8,843 100,000 100,000 100,000 4,255 5,126 6,108
5 11,337 100,000 100,000 100,000 5,290 6,597 8,129
6 13,955 100,000 100,000 100,000 6,282 8,118 10,361
7 16,705 100,000 100,000 100,000 7,229 9,693 12,827
8 19,592 100,000 100,000 100,000 8,196 11,388 15,617
9 22,623 100,000 100,000 100,000 9,117 13,141 18,697
10 25,806 100,000 100,000 100,000 10,121 15,083 22,227
11 29,148 100,000 100,000 100,000 11,295 17,307 26,338
12 32,657 100,000 100,000 100,000 12,543 19,719 30,973
13 36,342 100,000 100,000 100,000 13,730 22,190 36,049
14 40,211 100,000 100,000 100,000 14,849 24,719 41,618
15 44,273 100,000 100,000 102,186 15,893 27,303 47,724
16 48,538 100,000 100,000 112,476 16,507 29,594 53,994
17 53,017 100,000 100,000 123,301 17,037 31,946 60,814
18 57,719 100,000 100,000 134,702 17,482 34,365 68,231
19 62,657 100,000 100,000 146,710 17,836 36,855 76,292
20 67,841 100,000 100,000 159,386 18,093 39,421 85,051
25 97,922 100,000 100,000 234,211 17,478 53,503 141,227
30 136,313 100,000 104,422 333,326 11,940 70,176 224,009
35 185,310 100,000 119,687 465,613 0 88,356 343,728
40 247,845 100,000 134,260 642,944 0 106,895 511,898
</TABLE>
(1) If premiums are paid more frequently than annually the payments would be
$977.00 semiannually, $488.50 quarterly, or $162.83 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 is 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.
30
<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 $ 366 $ 423
2 2,809 100,000 100,000 100,000 873 1,031 1,196
3 4,320 100,000 100,000 100,000 1,403 1,708 2,040
4 5,906 100,000 100,000 100,000 1,898 2,395 2,957
5 7,571 100,000 100,000 100,000 2,356 3,093 3,962
6 9,320 100,000 100,000 100,000 2,774 3,802 5,063
7 11,157 100,000 100,000 100,000 3,152 4,521 6,271
8 13,085 100,000 100,000 100,000 3,552 5,313 7,661
9 15,109 100,000 100,000 100,000 3,909 6,113 9,180
10 17,235 100,000 100,000 100,000 4,349 7,049 10,971
11 19,467 100,000 100,000 100,000 4,961 8,210 13,139
12 21,810 100,000 100,000 100,000 5,646 9,495 15,604
13 24,271 100,000 100,000 100,000 6,268 10,772 18,252
14 26,855 100,000 100,000 100,000 6,819 12,031 21,099
15 29,568 100,000 100,000 100,000 7,291 13,263 24,163
16 32,417 100,000 100,000 100,000 7,326 14,113 27,118
17 35,408 100,000 100,000 100,000 7,268 14,923 30,344
18 38,548 100,000 100,000 100,000 7,116 15,691 33,877
19 41,846 100,000 100,000 100,000 6,861 16,409 37,756
20 45,309 100,000 100,000 100,000 6,495 17,068 42,028
25 65,398 100,000 100,000 117,499 2,415 18,911 70,851
30 91,038 100,000 100,000 169,609 0 15,981 113,985
35 147,624 100,000 100,000 232,403 12,703 26,025 171,566
40 237,807 100,000 100,000 313,334 27,126 50,870 249,470
</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%, $8,527 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.
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ADDITIONAL INFORMATION
This section of the prospectus provides additional detailed information that
is not contained in the Basic Information section on pages 3 through 16.
<TABLE>
<CAPTION>
CONTENTS OF THIS SECTION PAGES TO SEE
- ------------------------ ------------
<S> <C>
Description of JHVLICO ..................................... 23
How we support the policy and investment options............ 23-24
Procedures for issuance of a policy......................... 24-25
Commencement of investment performance...................... 25
How we process certain policy transactions.................. 25-27
Effects of policy loans..................................... 27
How we calculate "basic policy value".......................
Additional information about how certain policy charges work 27-28
How we market the policies.................................. 28-29
Tax considerations.......................................... 29-30
Reports that you will receive............................... 31
Voting privileges that you will have........................ 31
Changes that JHVLICO can make as to your policy............. 31-32
Adjustments we make to death benefits....................... 32
When we pay policy proceeds................................. 32-33
Other details about exercising rights and paying benefits... 33
Year 2000 Issues............................................
Legal matters............................................... 33
Registration statement filed with the SEC................... 33
Accounting and actuarial experts............................ 33
Financial statements of JHVLICO and the Account............. 33
List of Directors and Executive Officers of JHVLICO......... 34
</TABLE>
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DESCRIPTION OF JHVLICO
We are JHVLICO, a stock life insurance company chartered in 1979 under
Massachusetts law. We are authorized to transact a life insurance and annuity
business in all states other than New York and in the District of Columbia. We
began selling variable life insurance policies in 1980.
We are regulated and supervised by the Massachusetts Commissioner of
Insurance, who periodically examines our affairs. We also are subject to the
applicable insurance laws and regulations of all jurisdictions in which we are
authorized to do business. We are required to submit annual statements of our
operations, including financial statements, to the insurance departments of the
various jurisdictions in which we do business for purposes of determining
solvency and compliance with local insurance laws and regulations. The
regulation to which we are subject, however, does not provide a guarantee as to
such matters.
We are a wholly-owned subsidiary of John Hancock Mutual Life Insurance Company
("John Hancock"), a company chartered in Massachusetts in 1862. John Hancock's
home office is at John Hancock Place, Boston, Massachusetts 02117. John
Hancock's assets are approximately $67 billion and it has invested over $380
million in JHVLICO in connection with our organization and operation. It is
anticipated that John Hancock will from time to time make additional capital
contributions to JHVLICO to enable us to meet our reserve requirements and
expenses in connection with our business. John Hancock is committed to make
additional capital contributions if necessary to ensure that we maintain a
positive net worth.
HOW WE SUPPORT THE POLICY AND INVESTMENT OPTIONS
Separate Account V
The variable investment options shown on page 1 are in fact subaccounts of
Separate Account V (the "Account"), a separate account established by us under
Massachusetts law. The Account 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"). Such registration does not
involve supervision by the SEC of the management of the Account or JHVLICO.
The Account's assets are the property of JHVLICO. Each policy provides that
amounts we hold in the Account pursuant to the policies cannot be reached by any
other persons who may have claims against us.
The assets in each subaccount are invested in the corresponding fund of one of
the Series Funds, but the assets of one subaccount are not necessarily legally
insulated from liabilities associated with another subaccount. New subaccounts
may be added as new funds are added to the Series Funds and made available to
policy owners. Existing subaccounts may be deleted if existing funds are deleted
from the Series Funds.
We will purchase and redeem Series Fund shares for the Account at their net
asset value without any sales or redemption charges. Shares of the Series Funds
represent an interest in one of the funds of the Series Funds which corresponds
to a subaccount of the Account. Any dividend or capital gains distributions
received by the Account will be reinvested in shares of that same fund at their
net asset value as of the dates paid.
On each business day, shares of each fund are purchased or redeemed by us for
each subaccount based on, among other things, the amount of net premiums
allocated to the subaccount, distributions reinvested, and transfers to, from
and among subaccounts, all to be effected as of that date. Such purchases and
redemptions are effected at each fund's net asset value per share determined for
that same date. A "business day" is any date on which the New York Stock
Exchange is open for trading. We compute policy values for each business day as
of the close of that day (usually 4:00 p.m. Eastern Standard Time).
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Our general account
Our obligations under the policy's fixed investment option are backed by our
general account assets. Our general account consists of assets owned by us other
than those in the Account and in other separate accounts that we may establish.
Subject to applicable law, we have sole discretion over the investment of assets
of the general account and policy owners do not share in the investment
experience of, or have any preferential claim on, those assets. Instead, we
guarantee that the account value allocated to the fixed investment option will
accrue interest daily at an effective annual rate of at least 4% without regard
to the actual investment experience of the general account.
Because of exemptive and exclusionary provisions, interests in our fixed
investment option have not been registered under the Securities Act of 1933 and
our 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 we have been advised that the staff
of the SEC has not reviewed the disclosure in this prospectus relating to the
fixed investment option. Disclosure regarding the fixed investment option may,
however, be subject to certain generally-applicable provisions of the Federal
securities laws relating to accuracy and completeness of statements made in
prospectuses.
PROCEDURES FOR ISSUANCE OF A POLICY
Generally, the policy is available with a minimum Sum Insured at issue of
$25,000 for insured persons with an attained age of less than 25 at the time of
policy issue, and $50,000 for insured persons with attained ages of 25 through
75 at the time of policy issue. At the time of issue, the insured person must
have an attained age of 75 or less. All insured persons must meet certain health
and other insurance risk criteria called "underwriting standards".
Policies issued in Montana or in connection with certain employee plans will
not directly reflect the sex of the insured person in either the premium rates
or the charges or values under the policy. The illustrations set forth in this
prospectus are sex-distinct and, therefore, may not reflect the rates, charges,
or values that would apply to such policies.
Commencement of insurance coverage
After you apply for a policy, it can sometimes take up to several weeks for us
to gather and evaluate all the information we need to decide whether to issue a
policy to you and, if so, what the insured person's rate class should be. After
we approve an application for a policy and assign an appropriate insurance rate
class, we will prepare the policy for delivery. We will not pay a death benefit
under a policy unless the policy is in effect when the insured person dies
(except for the circumstances described under "Temporary insurance coverage
prior to policy delivery" on page 25).
The policy will take effect only if all of the following conditions are
satisfied:
. The policy is delivered to and received by the applicant.
. At least the first Required Premium is received by us.
. Each insured person is living and still meets our health criteria for
issuing insurance.
If all of the above conditions are satisfied, the policy will take effect on
the date shown in the policy as the "date of issue." That is the date on which
we begin to deduct monthly charges. Policy months, policy years and policy
anniversaries are all measured from the date of issue.
Backdating
In order to preserve a younger age at issue for the insured person, we can
designate a date of issue that is up to 60 days earlier than the date that would
otherwise apply. This is referred to as "backdating"
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<PAGE>
and is allowed under state insurance laws. Backdating can also be used in
certain corporate-owned life insurance cases involving multiple policies to
retain a common monthly deduction date.
The conditions for coverage described above under "Commencement of insurance
coverage" must still be satisfied, but in a backdating situation the policy
takes effect retroactively. Backdating results in a lower insurance charge
(because of the insured person's younger age at issue), but monthly charges
begin earlier than would otherwise be the case. Those monthly charges will be
deducted as soon as we receive premiums sufficient to pay them.
Temporary coverage prior to policy delivery
If a specified amount of premium is paid with the application for a policy and
other conditions are met, we will provide temporary term life insurance coverage
on the insured person for a period prior to the time coverage under the policy
takes effect. Such temporary term coverage will be subject to the terms and
conditions described in the application for the policy, including limits on
amount and duration of coverage.
Monthly deduction dates
Each charge that we deduct monthly is assessed against your account value or
the subaccounts at the close of business on the date of issue and at the close
of the first business day in each subsequent policy month.
COMMENCEMENT OF INVESTMENT PERFORMANCE
All premium payments will be allocated among the investment options on the
date as of which they are processed (as discussed below).
HOW WE PROCESS CERTAIN POLICY TRANSACTIONS
Premium payments
We will process any premium payment as of the day we receive it, unless one of
the following exceptions applies:
(1) We will process a payment received prior to a policy's date of issue as if
received on the business day that first precedes the date of issue.
(2) If you pay a sufficient premium to take your policy out of a grace period,
the portion of such premium that equals the overdue Required Premium will be
processed as of that Required Premium's due date.
(3) If the Minimum First Premium is not received prior to the date of issue,
we will process each premium payment received thereafter as if received on the
business day immediately preceding the date of issue until all of the Minimum
First Premium is received.
(4) We will process the portion of any premium payment for which we require
evidence of the insured person's continued insurability only after we have
received such evidence and found it satisfactory to us.
(5) If we receive any premium payment that will cause a policy to become a
modified endowment or will cause a policy to lose its status as life insurance
under the tax laws, we will not accept the excess portion of that premium
payment and will immediately notify the owner. We will refund the excess premium
when the premium payment check has had time to clear the banking system (but in
no case more than two weeks after receipt), except in the following
circumstances:
. The tax problem resolves itself prior to the date the refund is to be
made; or
. The tax problem relates to modified endowment status and we receive a
signed acknowledgment from the owner prior to the refund date instructing
us to process the
35
<PAGE>
premium notwithstanding the tax issues involved.
In the above cases, we will treat the excess premium as having been received
on the date the tax problem resolves itself or the date we receive the signed
acknowledgment. We will then process it accordingly.
(6) If a premium payment is received or is otherwise scheduled to be processed
(as specified above) on a date that is not a business day, the premium payment
will be processed on the business day next following that date.
Transfers among investment options
Any reallocation among investment options must be such that the total in all
investment options after reallocation equals 100% of account value. Transfers
out of a variable investment option will be effective at the end of the business
day in which we receive at our Life Servicing Office notice satisfactory to us.
If received on or before the policy anniversary, requests for transfer out of
the fixed investment option will be processed on the policy anniversary (or the
next business day if the policy anniversary does not occur on a business day).
If received after the policy anniversary, such a request will be processed at
the end of the business day in which we receive the request at our Life
Servicing Office. If you request a transfer out of the fixed investment option
61 days or more prior to the policy anniversary, we will not process that
portion of the reallocation, and your confirmation statement will not reflect a
transfer out of the fixed investment option as to such request. Currently, there
is no minimum amount limit on transfers into the fixed investment option, but we
reserve the right to impose such a limit in the future. We have the right to
defer transfers of amounts out of the fixed investment option for up to six
months.
Telephone transfers and policy loans
Once you have completed a written authorization, you may request a transfer or
policy loan by telephone or by fax. If the fax request option becomes
unavailable, another means of telecommunication will be substituted.
If you authorize telephone transactions, you will be liable for any loss,
expense or cost arising out of any unauthorized or fraudulent telephone
instructions which we reasonably believe to be genuine, unless such loss,
expense or cost is the result of our mistake or negligence. We employ 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 we do not
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine, we may be liable for any loss due to unauthorized or
fraudulent instructions.
Effective date of other policy transactions
Reinstatements of lapsed policies take effect on the monthly deduction date on
or next following the date we approve your request.
We process loans, surrenders, partial withdrawals, partial surrenders and loan
repayments as of the day we receive such request or repayment.
EFFECTS OF POLICY LOANS
The account value, the surrender value, and any death benefit above the
Guaranteed Death Benefit are permanently affected by any loan, whether or not it
is repaid in whole or in part. This is because the amount of the loan is
deducted from the investment options and placed in a special loan account. The
investment options and the special loan account will generally have different
rates of investment return.
The amount of the outstanding loan (which includes accrued and unpaid
interest) is subtracted from the amount otherwise payable when the policy
proceeds become payable.
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Whenever the outstanding loan exceeds the surrender value of the policy, the
policy will terminate 31 days after we have mailed notice of termination to you
(and to any assignee of record at such assignee's last known address), unless a
repayment of such excess is made within that period.
ADDITIONAL INFORMATION ABOUT HOW CERTAIN POLICY CHARGES WORK
Sales expenses and related charges
The sales charges (i.e., the premium sales charge and the CDSC) help to
compensate us for the cost of selling our policies. (See "What charges will
JHVLICO deduct from my investment in the policy?" in the Basic Information
section of this prospectus.) The amount of the charges in any policy year does
not specifically correspond to sales expenses for that year. We expect to
recover our total sales expenses over the life of the policies. To the extent
that the sales charges do not 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 our
general assets. (See "How we market the policies" on page 28.)
Effect of premium payment pattern
You may structure the timing and amount of premium payments to minimize the
sales charges, although doing so involves certain risks. Paying more than one
Required Premium in any policy year could reduce your total sales charges.
Accelerating the payment of Required Premiums to earlier policy years could
result in a larger CDSC and/or cause aggregate premiums paid to exceed the
policy's 7-pay premium limit and, as a result, cause the policy to become a
modified endowment, with adverse tax consequences to you upon receipt of policy
distributions. (See "Tax consequences" beginning on page 29.) On the other hand,
to pay less than the amount of Required Premiums by their due dates runs the
risk that the policy will lapse, resulting in loss of coverage and additional
charges.
Monthly charges
We deduct the monthly charges described in the Basic Information section from
your policy's investment options in proportion to the amount of account value
you have in each. For each month that we cannot deduct any charge because of
insufficient account value, the uncollected charges will accumulate and be
deducted when and if sufficient account value becomes available.
The insurance under the policy continues in full force during any grace period
but, if the insured person dies during the policy grace period, the amount of
unpaid monthly charges is deducted from the death benefit otherwise payable.
Reduced charges for eligible classes
The charges 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 we anticipate that the sales to the members of the class will
result in lower than normal sales or administrative expenses, lower taxes or
lower risks to us. We will make these reductions in accordance with our rules in
effect at the time of the application for a policy. The factors we consider 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 lapse and surrender rates 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 result in a reduction
in sales or administrative expenses, lower taxes or lower risks. Any reduction
in charges will be reasonable and will apply uniformly to all prospective policy
purchasers in the class and will not unfairly discriminate against any owner.
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HOW WE MARKET THE POLICIES
Signator Investors, Inc. ("Signator"), an indirect wholly-owned subsidiary of
John Hancock located at 197 Clarendon Street, Boston, MA 02117, is registered as
a broker-dealer under the Securities Exchange Act of 1934 and is a member of the
National Association of Securities Dealers, Inc. and the Securities Investor
Protection Corporation. Signator acts as principal underwriter and principal
distributor of the policies pursuant to a sales agreement among John Hancock,
Signator, JHVLICO, and the Account. Signator also serves as principal
underwriter for John Hancock Variable Annuity Accounts U, I and V, John Hancock
Mutual Variable Life Insurance Account UV and John Hancock Variable Life
Accounts V and S, all of which are registered under the 1940 Act. Signator is
also the principal underwriter for John Hancock Variable Series Trust I.
Applications for policies are solicited by agents who are licensed by state
insurance authorities to sell JHVLICO's policies and who are also registered
representatives ("representatives") of Signator 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
person's risk classification. JHVLICO will make the appropriate refund if a
policy ultimately is not issued or is returned under the "free look" 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.
Signator's representatives are compensated for sales of the policies on a
commission and service fee basis by Signator, and JHVLICO reimburses Signator
for such compensation and for other direct and indirect expenses (including
agency expense allowances, general agent, district manager and supervisor's
compensation, agent's training allowances, deferred compensation and insurance
benefits of agents, general agents, district managers and supervisors, agency
office clerical expenses and advertising) actually incurred in connection with
the marketing and sale of the policies.
The maximum commission payable to a Signator representative for selling a
policy is 45% of the premium that would be payable under a Modified Schedule in
the first policy year, 7.5% of any such premiums payable in the second policy
year, and 5% of any such premiums received by us in each policy year thereafter.
The maximum commission on any premium paid in any policy year in excess of such
Modified Schedule premium is 3%.
Representatives with less than four years of service with Signator 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.
The policies are also sold through other registered broker-dealers that have
entered into selling agreements with Signator 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 Signator's 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. Signator will compensate the
broker-dealers as provided in the selling agreements, and JHVLICO will reimburse
Signator for such amounts and for certain other direct expenses in connection
with marketing the policies through other broker-dealers.
Representatives of Signator and the other broker-dealers mentioned above may
also earn "credits" toward qualification for attendance at certain business
meetings sponsored by John Hancock.
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The offering of the policies is intended to be continuous, but neither JHVLICO
nor Signator is obligated to sell any particular amount of policies.
TAX CONSIDERATIONS
This description of federal income tax consequences is only a brief summary
and is not intended as tax advice. Tax consequences will vary based on your own
particular circumstances, and for further information you should consult a
qualified tax advisor. Federal, state and local tax laws, regulations and
interpretations can change from time to time. As a result, the tax consequences
to you and the beneficiary may be altered, in some cases retroactively.
Policy proceeds
We believe the policy will receive the same federal income and estate tax
treatment as fixed benefit life insurance policies. Section 7702 of the Internal
Revenue Code (the "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 satisfy that definition. We will monitor compliance with these standards.
If the policy complies with the definition of life insurance, we believe the
death benefit under the policy will be excludable from the beneficiary's gross
income under the Code. In addition, increases in account value as a result of
interest or investment experience will not be subject to federal income tax
unless and until values are actually received through distributions.
Distributions for tax purposes can include amounts received upon full or partial
surrender or partial withdrawals. You may also be deemed to have received a
distribution for tax purposes if you assign all or part of your policy rights or
change your policy's ownership.
In general, the owner will be taxed on the amount of distributions that exceed
the premiums paid under the policy. But under certain circumstances within the
first 15 policy years, the owner may be taxed on a distribution even if total
withdrawals do not exceed total premiums paid. Any taxable distribution will be
ordinary income to the owner (rather than capital gains).
We also believe 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 outstanding loan that
was not previously considered income (as discussed below) will be treated as if
it had been distributed to the owner if the policy terminates for any reason.
It is possible that, despite our monitoring, a policy might fail to qualify as
life insurance under Section 7702 of the Code. This could happen, for example,
if we inadvertently failed to return to you any premium payments that were in
excess of permitted amounts, or if a Series Fund failed to meet certain
investment diversification or other requirements of the Code. If this were to
occur, you would be subject to income tax on the income and gains under the
policy for the period of the disqualification and for subsequent periods and the
death benefit proceeds would lose their non-taxable status.
In the past, the United States Treasury Department has stated that it
anticipated issuing guidelines prescribing circumstances in which the ability of
a policy owner to direct his or her investment to particular funds may cause the
policy owner, rather than the insurance company, to be treated as the owner of
the shares of those funds. In that case, any income and gains attributable to
those shares would be included in your current gross income for federal income
tax purposes. Under current law, however, we believe that we, and not the owner
of a policy, would be considered the owner of the fund's shares for tax
purposes.
Tax consequences of ownership or receipt of policy proceeds under federal,
state and local estate, inheritance, gift and other tax laws depend on the
circumstances of each owner or beneficiary.
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Because there may be unfavorable tax consequences (including recognition of
taxable income and the loss of income tax-free treatment for any death benefit
payable to the beneficiary), you should consult a qualified tax adviser prior to
changing the policy's ownership or making any assignment of ownership interests.
7-pay premium limit
At the time of policy issuance, we will determine whether the premium payments
for which we will bill you will exceed the 7-pay limit discussed below. If so,
our standard procedures prohibit issuance of the policy unless you sign a form
acknowledging that fact.
The 7-pay limit is the total of net level premiums that would have been
payable at any time for a comparable fixed policy to be fully "paid-up" after
the payment of 7 equal annual premiums. "Paid-up" means that no further premiums
would be required to continue the coverage in force indefinitely, based on
certain prescribed assumptions. If the total premiums paid at any time during
the first 7 policy years exceed the 7-pay limit, the policy will be treated as a
"modified endowment", which can have adverse tax consequences.
The owner will be taxed on distributions and loans from a "modified endowment"
to the extent of any income (gain) to the owner (on an income-first basis). The
distributions and loans affected will be those made on or after, and within the
two year period prior to, the time the policy becomes a modified endowment.
Additionally, a 10% penalty tax may be imposed on taxable portions of such
distributions or loans that are made before the owner attains age 591/2.
Furthermore, any time there is a "material change" in a policy (such as a Sum
Insured increase, the addition of certain other policy benefits after issue, a
change in death benefit option, or reinstatement of a lapsed policy), the policy
will have a new 7-pay limit as if it were a newly-issued policy. This is true
even for policies entered into prior to June 21, 1988. If a prescribed portion
of the policy's then account value, plus all other premiums paid within 7 years
after the material change, at any time exceed the new 7-pay limit, the policy
will become a modified endowment.
Moreover, if benefits under a policy are reduced (such as a partial surrender,
a reduction in the Sum Insured, or the reduction or cancellation of certain
rider benefits) during the 7 years in which a 7-pay test is being applied, the
7-pay limit will be recalculated based on the reduced benefits. If the premiums
paid to date are greater than the recalculated 7-pay limit, the policy will
become a modified endowment.
All modified endowments issued by the same insurer (or its affiliates) to the
owner during any calendar year generally will be treated as one contract for the
purpose of applying the modified endowment rules. A policy received in exchange
for a modified endowment will itself also be a modified endowment. You should
consult your tax advisor if you have questions regarding the possible impact of
the 7-pay limit on your policy.
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. We are not responsible for compliance with the
terms of any such plan or with the requirements of applicable provisions of the
Code.
REPORTS THAT YOU WILL RECEIVE
At least annually, we will send you a statement setting forth at least the
following information as of the end of the most recent reporting period: the Sum
Insured, the account value, the portion of the account value in each investment
option, the surrender value, premiums received and charges deducted from
premiums since the last report, and any outstanding
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policy loan (and interest charged for the preceding policy year). Moreover, you
also will receive confirmations of transfers among investment options, policy
loans, partial withdrawals and certain other policy transactions. Premium
payments not in response to a billing notice are "unscheduled" and will be
separately confirmed. Therefore, if you make a premium payment that differs by
more than $25 from that billed, you will receive a separate confirmation of that
premium payment.
Semiannually we will send you a report containing the financial statements of
each Series Fund, including a list of securities held in each fund.
VOTING PRIVILEGES THAT YOU WILL HAVE
All of the assets in the subaccounts of the Account are invested in shares of
the corresponding funds of the Series Funds. We will vote the shares of each of
the funds of the Series Funds which are deemed attributable to variable life
insurance policies at regular and special meetings of the Series Funds'
shareholders in accordance with instructions received from owners of such
policies. Shares of the Series Funds held in the Account which are not
attributable to such policies, as well as shares for which instructions from
owners are not received, will be represented by us at the meeting. We will vote
such shares for and against each matter in the same proportions as the votes
based upon the instructions received from the owners of such policies.
We determine the number of a fund's shares held in a subaccount attributable
to each owner by dividing the amount of a policy's account value held in the
subaccount by the net asset value of one share in the fund. Fractional votes
will be counted. We determine the number of shares as to which the owner may
give instructions as of the record date for the Series Funds' meeting. Owners of
policies may give instructions regarding the election of the Board of Trustees
or Board of Directors of the Series Fund, ratification of the selection of
independent auditors, approval of Series Fund investment advisory agreements and
other matters requiring a shareholder vote. We will furnish owners with
information and forms to enable owners to give voting instructions.
However, we may, in certain limited circumstances permitted by the SEC's
rules, disregard voting instructions. If we do disregard voting instructions,
you will receive a summary of that action and the reasons for it in the next
semi-annual report to owners.
CHANGES THAT JHVLICO CAN MAKE AS TO YOUR POLICY
Changes relating a Series Fund or the Account
The voting privileges described in this prospectus reflect our 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, we reserve the right to proceed in accordance with any
such revised requirements. We also reserve 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 your policy belongs from the Account to another separate account or
subaccount, (2) to operate the Account as a "management-type investment company"
under the 1940 Act, or in any other form permitted by law, the investment
adviser of which would be JHVLICO, an affiliate or John Hancock, (3) to
deregister the Account under the 1940 Act, (4) to substitute for the fund shares
held by a subaccount any other investment permitted by law, and (5) to take any
action necessary to comply with or obtain any exemptions from the 1940 Act. We
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.
41
<PAGE>
Other permissible changes
We reserve the right to make any changes in the policy necessary to ensure the
policy is within the definition of life insurance under the Federal tax laws and
is in compliance with any changes in Federal or state tax laws.
In our policies, we reserve the right to make certain changes if they would
serve the best interests of policy owners or would be appropriate in carrying
out the purposes of the policies. Such changes include the following:
. Changes necessary to comply with or obtain or continue exemptions under
the federal securities laws
. Combining or removing investment options
. Changes in the form of organization of any separate account
Any such changes will be made only to the extent permitted by applicable laws
and only in the manner permitted by such laws. When required by law, we will
obtain your approval of the changes and the approval of any appropriate
regulatory authority.
ADJUSTMENTS WE MAKE TO DEATH BENEFITS
If the insured person commits suicide within certain time periods, the amount
of death benefit we pay will be limited as described in the policy. Also, if an
application misstated the age or gender of the insured person, we will adjust
the amount of any death benefit as described in the policy.
WHEN WE PAY POLICY PROCEEDS
General
We will pay any death benefit, withdrawal, surrender value or loan within 7
days after we receive the last required form or request (and, with respect to
the death benefit, any other documentation that may be required). If we don't
have information about the desired manner of payment within 7 days after the
date we receive notification of the insured person's death, we will pay the
proceeds as a single sum, normally within 7 days thereafter.
Delay to challenge coverage
We may challenge the validity of your insurance policy based on any material
misstatements made to us in the application for the policy. We cannot make such
a challenge, however, beyond certain time limits that are specified in the
policy.
Delay for check clearance
We reserve the right to defer payment of that portion of your account value
that is attributable to a premium payment made by check for a reasonable period
of time (not to exceed 15 days) to allow the check to clear the banking system.
Delay of separate account proceeds
We reserve the right to defer payment of any death benefit, loan or other
distribution that is derived from a variable investment option if (a) the New
York Stock Exchange is closed (other than customary weekend and holiday
closings) or trading on the New York Stock Exchange is restricted; (b) an
emergency exists, as a result of which disposal of securities is not reasonably
practicable or it is not reasonably practicable to fairly determine the account
value; or (c) the SEC by order permits the delay for the protection of owners.
Transfers and allocations of account value among the investment options may also
be postponed under these circumstances. If we need to defer calculation of
separate account values for any of the foregoing reasons, all delayed
transactions will be processed at the next values that we do compute.
OTHER DETAILS ABOUT EXERCISING RIGHTS AND PAYING BENEFITS
Joint ownership
If more than one person owns a policy, all owners must join in most requests
to exercise rights under the policy.
42
<PAGE>
Assigning your policy
You may assign your rights in the policy to someone else as collateral for a
loan or for some other reason. Assignments do not require the consent of any
revocable beneficiary. A copy of the assignment must be forwarded to us. We are
not responsible for any payment we make or any action we take before we receive
notice of the assignment in good order. Nor are we responsible for the validity
of the assignment. An absolute assignment is a change of ownership. All
collateral assignees of record must consent to any full surrender, partial
withdrawal or loan from the policy.
Your beneficiary
You name your beneficiary when you apply for the policy. The beneficiary is
entitled to the proceeds we pay following the insured person's death. You may
change the beneficiary during the insured person's lifetime. Such a change
requires the consent of any irrevocable named beneficiary. A new beneficiary
designation is effective as of the date you sign it, but will not affect any
payments we make before we receive it. If no beneficiary is living when the
insured person dies, we will pay the insurance proceeds to the owner or the
owner's estate.
YEAR 2000 ISSUES
The advent of the Year 2000 presents a technological challenge to JHVLICO. In
close cooperation with John Hancock Mutual Life Insurance Company, its parent,
JHVLICO has developed and is executing a plan to modify or replace significant
portions of JHVLICO's computer information and automated technologies so that
its systems will function properly with respect to dates in the year 2000 and
thereafter. The plan also involves coordination and testing with business
partners to ensure that external factors do not adversely impact JHVLICO's
systems. JHVLICO presently believes that with modifications to existing systems
and conversions to new technologies, the year 2000 will not pose significant
operational problems for its computer systems. However, if certain modifications
and conversions are not made, or are not completed on time, the year 2000 issue
could have an adverse impact on the operations of JHVLICO.
JHVLICO has substantially completed the process of remediating its systems and
expects the compliance testing component of the project to be substantially
complete by June, 1999. This completion target was derived utilizing numerous
assumptions of future events, including availability of certain resources and
other factors. However, there can be no guarantee that this estimate will be
achieved, that these steps will be sufficient or that actual results may not
differ materially from those anticipated. For more information about the impact
of year 2000, please refer to Note 12 of the Notes to Statutory-Basis Financial
Statements of John Hancock Variable Life Insurance Company included in this
prospectus.
LEGAL MATTERS
The legal validity of the policies described in this prospectus has been
passed on by Ronald J. Bocage, Vice President and Counsel for JHVLICO. Messrs.
Freedman, Levy, Kroll & Simonds, Washington, D.C., have advised us on certain
Federal securities law matters in connection with the policies.
REGISTRATION STATEMENT FILED WITH THE SEC
This prospectus omits certain information contained in the Registration
Statement which has been filed with the SEC. More details may be obtained from
the SEC upon payment of the prescribed fee.
ACCOUNTING AND ACTUARIAL 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 has
been included in reliance on their reports given on their authority as experts
in accounting and auditing.
43
<PAGE>
Actuarial matters included in this prospectus have been examined by Deborah A.
Poppel, F.S.A., an Actuary of JHVLICO.
FINANCIAL STATEMENTS OF JHVLICO AND THE ACCOUNT
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.
44
<PAGE>
LIST 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 Principal Occupations
- --------- ---------------------
<S> <C>
David F. D'Alessandro Chairman of the Board and Chief Executive Officer of
JHVLICO; President and Chief Operating Officer, John
Hancock Mutual Life Insurance Company.
Michele G. Van Leer Vice Chairman of the Board and President of JHVLICO;
Senior Vice President, John Hancock Mutual Life
Insurance Company.
Joseph A. Tomlinson Director and Vice President of JHVLICO; Vice President,
John Hancock Mutual Life Insurance Company.
Ronald J. Bocage Director, Vice President and Counsel of JHVLICO; Vice
President and Counsel, John Hancock Mutual Life
Insurance Company.
Thomas J. Lee Director of JHVLICO; Vice President, John Hancock
Mutual Life Insurance Company.
Robert R. Reitano Director of JHVLICO; Vice President, John Hancock
Mutual Life Insurance Company.
Malcolm Cheung Director of JHVLICO; Second Vice President, John
Hancock Mutual Life Insurance Company
Robert S. Paster Director of JHVLICO; Second Vice President, 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 Controller, John
Hancock Mutual Life Insurance Company.
</TABLE>
The business address of all Directors and officers of JHVLICO is John Hancock
Place, Boston, Massachusetts 02117.
45
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Directors and Policyholders 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, 1998
and 1997, 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 opinion, because of the effects of the matter described in the
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, 1998 and 1997, 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, 1998 and 1997, 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 19, 1999
46
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
December 31
--------------------
1998 1997
--------- -----------
(In millions)
<S> <C> <C>
ASSETS
Bonds--Note 6......................................... $1,185.8 $1,092.7
Preferred stocks...................................... 36.5 17.2
Common stocks......................................... 3.1 2.3
Investment in affiliates.............................. 81.7 79.1
Mortgage loans on real estate--Note 6................. 388.1 273.9
Real estate........................................... 41.0 39.9
Policy loans.......................................... 137.7 106.8
Cash items:
Cash in banks....................................... 11.4 83.1
Temporary cash investments.......................... 8.5 60.1
-------- --------
19.9 143.2
Premiums due and deferred............................. 32.7 33.8
Investment income due and accrued..................... 29.8 24.7
Other general account assets.......................... 47.5 16.8
Assets held in separate accounts...................... 6,595.2 4,691.1
-------- --------
TOTAL ASSETS.......................................... $8,599.0 $6,521.5
======== ========
OBLIGATIONS AND STOCKHOLDER'S EQUITY
OBLIGATIONS
Policy reserves..................................... $1,652.0 $1,124.3
Federal income and other taxes payable--Note 1...... 44.3 36.1
Other general account obligations................... 150.9 481.9
Transfers from separate accounts, net............... (190.3) (146.8)
Asset valuation reserve--Note 1..................... 21.9 18.6
Obligations related to separate accounts............ 6,589.4 4,685.7
-------- --------
TOTAL OBLIGATIONS..................................... 8,268.2 6,199.8
STOCKHOLDER'S EQUITY
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.................................. (49.2) (58.3)
-------- --------
TOTAL STOCKHOLDER'S EQUITY............................ 330.8 321.7
-------- --------
TOTAL OBLIGATIONS AND STOCKHOLDER'S EQUITY............ $8,599.0 $6,521.5
======== ========
</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
-----------------------
1998 1997
----------- -------------
(In millions)
<S> <C> <C>
INCOME
Premiums........................................ $1,272.3 $ 872.7
Net investment income--Note 3................... 122.8 89.7
Other, net...................................... 618.1 449.1
-------- --------
2,013.2 1,411.5
BENEFITS AND EXPENSES
Payments to policyholders and beneficiaries..... 301.4 264.0
Additions to reserves to provide for future
payments to policyholders and beneficiaries... 1,360.2 826.2
Expenses of providing service to policyholders
and obtaining new insurance
--Note 5...................................... 274.2 233.2
State and miscellaneous taxes................... 28.1 19.1
-------- --------
1,963.9 1,342.5
-------- --------
GAIN FROM OPERATIONS BEFORE FEDERAL INCOME
TAXES AND NET REALIZED CAPITAL LOSSES....... 49.3 69.0
Federal income taxes--Note 1...................... 33.1 38.5
-------- --------
GAIN FROM OPERATIONS BEFORE NET REALIZED
CAPITAL
LOSSES...................................... 16.2 30.5
Net realized capital losses--Note 4............... (0.6) (3.0)
-------- --------
NET INCOME................................... 15.6 27.5
Unassigned deficit at beginning of year........... (58.3) (96.9)
Net unrealized capital (losses) gains and other
adjustments--Note 4.............................. (6.0) 5.0
Other reserves and adjustments.................... (0.5) 6.1
-------- --------
UNASSIGNED DEFICIT AT END OF YEAR................. $ (49.2) $ (58.3)
======== ========
</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
-----------------------
1998 1997
----------- ------------
(In millions)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Insurance premiums............................... $1,275.3 $ 877.0
Net investment income............................ 118.2 89.9
Benefits to policyholders and beneficiaries...... (275.5) (245.2)
Dividends paid to policyholders.................. (22.3) (18.7)
Insurance expenses and taxes..................... (296.9) (267.2)
Net transfers to separate accounts............... (874.4) (715.2)
Other, net....................................... 551.3 408.9
-------- -------
NET CASH PROVIDED FROM OPERATIONS............. 475.7 129.5
-------- -------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Bond purchases................................... (618.8) (621.6)
Bond sales....................................... 340.7 197.3
Bond maturities and scheduled redemptions........ 111.8 34.1
Bond prepayments................................. 76.5 51.6
Stock purchases.................................. (23.4) (15.7)
Proceeds from stock sales........................ 1.9 6.7
Real estate purchases............................ (4.2) (1.3)
Real estate sales................................ 2.1 0.4
Other invested assets purchases.................. 0.0 (1.0)
Proceeds from the sale of other invested assets.. 0.0 0.3
Mortgage loans issued............................ (145.5) (94.5)
Mortgage loan repayments......................... 33.2 32.4
Other, net....................................... (435.2) 393.1
-------- -------
NET CASH USED IN INVESTING ACTIVITIES......... (660.9) (18.2)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in short-term note payable.......... 61.9 0.0
-------- -------
NET CASH PROVIDED FROM FINANCING ACTIVITIES... 61.9 0.0
-------- -------
(DECREASE) INCREASE IN CASH AND TEMPORARY CASH
INVESTMENTS....................................... (123.3) 111.3
Cash and temporary cash investments at beginning of
year.............................................. 143.2 31.9
-------- -------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF YEAR $ 19.9 $ 143.2
======== =======
</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 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 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; (8) no provision is made for the deferred income tax
effects of temporary differences between book and tax basis reporting; and (9)
certain items, including modifications to required policy reserves resulting
from changes in actuarial assumptions, are recorded directly to unassigned
deficit rather than being reflected in income. The effects of the foregoing
variances from GAAP have not been determined but are presumed to be material.
The significant accounting practices of the Company are as follows:
Pending Statutory Standards: During March 1998, the NAIC adopted the
codification of statutory accounting practices, which is effective in 2001.
Codification 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. Codification will
require adoption by the various states before it becomes the prescribed
statutory basis of accounting for insurance companies domesticated within those
states. Accordingly, before codification becomes effective for the Company, the
Massachusetts Division of Insurance must adopt codification as the prescribed
basis of accounting on which domestic insurers must report their statutory-basis
results to the Division of Insurance. The impact of any such changes on the
Company's unassigned deficit is not expected to 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.
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
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 fair value. The discount or premium on bonds is amortized using the
interest method.
Investments in affiliates are included on the statutory equity method.
Loan-backed bonds and structured securities are valued at amortized cost using
the interest method including anticipated prepayments. Prepayment assumptions
are obtained from broker dealer surveys or internal estimates and are based on
the current interest rate and economic environment. The retrospective
adjustment method is used to value all such securities except for
interest-only securities, which are valued using the prospective method.
The net interest effect of interest rate and currency rate swap transactions
is recorded as an adjustment of interest income as incurred. The initial cost
of interest rate cap agreements is amortized to net investment income over the
life of the related agreement. Gains and losses on financial futures contracts
used as hedges against interest rate fluctuations are deferred and recognized
in income over the period being hedged.
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 $3.0 million in 1998 and $2.1 million in
1997.
Real estate acquired in satisfaction of debt and real estate held for sale are
carried at the lower of cost or fair value.
Policy loans are carried at outstanding principal balance, not in excess of
policy cash surrender value.
Asset Valuation and Interest Maintenance Reserves: The Asset Valuation Reserve
(AVR) is computed in accordance with the prescribed NAIC formula and represents
a provision for possible fluctuations in the value of bonds, equity securities,
mortgage loans, real estate and other invested assets. Changes to the AVR are
charged or credited directly to the unassigned deficit.
The Company also records the NAIC prescribed Interest Maintenance Reserve (IMR)
that represents that portion of the after tax net accumulated unamortized
realized capital gains and losses on sales of fixed income securities,
principally bonds and mortgage loans, attributable to changes in the general
level of interest rates. Such gains and losses are deferred and amortized into
income over the remaining expected lives of the investments sold. At December
31, 1998, the IMR, net of 1998 amortization of $2.4 million, amounted to $10.7
million, which is included in policy reserves. The corresponding 1997 amounts
were $1.2 million and $7.8 million, respectively.
Goodwill: The excess of cost over the statutory book value of the net assets of
life insurance business acquired was $11.4 million and $13.1 million at December
31, 1998 and 1997, respectively, and generally is amortized over a ten-year
period using a straight-line method.
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
Separate Accounts: Separate account assets and liabilities reported in the
accompanying statements of financial position represent funds that are
separately administered, principally for variable life insurance policies, and
for which the contractholder, rather than the Company, generally bears the
investment risk. Separate account obligations are intended to be satisfied from
separate account assets and not from assets of the general account. Separate
accounts generally are reported at fair value. The operations of the separate
accounts are not included in the statement 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 Value Disclosure 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 certain
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. See Note 11.
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.
Fair values for futures contracts are based on quoted market prices. Fair
values for interest rate swap, cap agreements, and currency swap agreements
are based on current settlement values. The current settlement values are
based on brokerage quotes that utilize pricing models or formulas using
current assumptions.
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, 1998.
Capital Gains and Losses: Realized capital gains and losses are determined using
the specific identification method. 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.
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
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; and4 1/2% interest for policies issued in 1995
through 1998.
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 basis 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 $38.2 million in 1998 and $29.6 million in 1997.
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.
Amounts for disputed tax issues relating to the prior years are charged or
credited directly to policyholders' contingency reserve.
Adjustments to Policy Reserves: From time to time, the Company finds it
appropriate to modify certain required policy reserves because of changes in
actuarial assumptions. Reserve modifications resulting from such determinations
are recorded directly to stockholder's equity. During 1997, the Company refined
certain actuarial assumptions inherent in the calculation of reserves related to
AIDS claims under individual life insurance policies resulting in a $6.4 million
increase in stockholder's equity at December 31, 1997. No additional refinements
were made during 1998.
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.
Reclassification: Certain 1997 amounts have been reclassified to conform to the
1998 presentation.
53
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 2--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 1998 and 1997.
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 was subsequently renamed Investors Partner Life Company
(IPL) on March 5, 1998. IPL manages the business assumed from Charter and does
not currently issue new business.
NOTE 3--NET INVESTMENT INCOME
Investment income has been reduced by the following amounts:
<TABLE>
<CAPTION>
1998 1997
------- --------
(In millions)
<S> <C> <C>
Investment expenses........................................ $ 8.3 $5.0
Interest expense........................................... 2.4 0.7
Depreciation expense....................................... 0.8 1.1
Investment taxes........................................... 0.7 0.4
----- ----
$12.2 $7.2
===== ====
</TABLE>
NOTE 4--NET CAPITAL GAINS (LOSSES) AND OTHER ADJUSTMENTS
Net realized capital gains (losses) consist of the following items:
<TABLE>
<CAPTION>
1998 1997
------ --------
(In millions)
<S> <C> <C>
Net gains from asset sales.................................. $ 7.6 $ 0.8
Capital gains tax........................................... (2.9) (0.7)
Net capital gains transferred to IMR........................ (5.3) (3.1)
----- -----
Net Realized Capital Losses............................... $(0.6) $(3.0)
===== =====
</TABLE>
Net unrealized capital (losses) gains and other adjustments consist of the
following items:
<TABLE>
<CAPTION>
1998 1997
--------------- --------
(In millions)
<S> <C> <C>
Net (losses) gains from changes in security values
and book value adjustments........................ $ (2.7) $ 7.0
Increase in asset valuation reserve................ (3.3) (2.0)
-------------- -----
$ (6.0) $ 5.0
============== =====
</TABLE>
54
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 5--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 1998 and 1997 to reflect continuing changes in
the Company's operations. The amount of the service fee charged to the Company
was $157.5 million and $123.6 million in 1998 and 1997, 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 $0.7 million and
$0.9 million in 1998 and 1997, 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.
The Company has a modified coinsurance agreement with John Hancock to reinsure
50% of 1994 through 1998 issues of flexible premium variable life insurance and
scheduled premium variable life insurance policies. In connection with this
agreement, John Hancock transferred $4.9 million and $22.0 million of cash for
tax, commission, and expense allowances to the Company, which increased the
Company's net gain from operations by $22.2 million and $10.1 million in 1998
and 1997, respectively.
The Company also has a modified coinsurance agreement with John Hancock to
reinsure 50% of 1995 through 1998 issues of certain retail annuity contracts
(Independence Preferred and Declaration). In connection with this agreement, the
Company received a net cash payment of $12.7 million in 1998 and made a net cash
payment of $1.1 million in 1997 for surrender benefits, tax, reserve increase,
commission, expense allowances and premium. This agreement increased the
Company's net gain from operations by $8.4 million and $9.8 million in 1998 and
1997, respectively.
Effective January 1, 1997, the Company entered into a stop-loss agreement with
John Hancock to reinsure mortality claims in excess of 110% of expected
mortality claims in 1998 and 1997 for all policies that are not reinsured under
any other indemnity agreement. In connection with the agreement, John Hancock
received $1.0 million in 1998 and transferred $2.4 million in 1997 of cash for
mortality claims to the Company, which decreased by $0.5 million and increased
by $1.3 million the Company's net gain from operations in 1998 and 1997,
respectively.
At December 31, 1998, the Company had outstanding a short-term note of $61.9
million payable to an affiliate at a variable rate of interest. The note is part
of a revolving line of credit. Interest paid in 1998 was $2.9 million. The note
is included in other general account obligations.
55
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 6--INVESTMENTS
The statement value and fair value of bonds are shown below:
<TABLE>
<CAPTION>
Gross Gross
Statement Unrealized Unrealized Fair
December 31, 1998 Value Gains Losses Value
----------------- --------- ---------- ---------- ----------
(In millions)
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies..... $ 5.1 $ 0.1 $ 0.0 $ 5.2
Obligations of states and
political subdivisions........ 3.2 0.3 0.0 3.5
Corporate securities........... 925.2 50.4 15.0 960.6
Mortgage-backed securities..... 252.3 10.0 0.1 262.2
-------- ----- ----- --------
Total bonds.................. $1,185.8 $60.8 $15.1 $1,231.5
======== ===== ===== ========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1997
-----------------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. government corporations and agencies $ 254.5 $ 0.2 $0.1 $ 254.6
Obligations of states and political
subdivisions.............................. 12.1 1.0 0.0 13.1
Debt securities issued by foreign
governments............................... 0.2 0.0 0.0 0.2
Corporate securities....................... 712.7 43.9 2.7 753.9
Mortgage-backed securities................. 113.2 3.5 0.0 116.7
-------- ----- ---- --------
Total bonds.............................. $1,092.7 $48.6 $2.8 $1,138.5
======== ===== ==== ========
</TABLE>
The statement value and fair value of bonds at December 31, 1998, 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................................ $ 57.3 $ 59.1
Due after one year through five years.................. 283.4 294.1
Due after five years through ten years................. 374.9 388.7
Due after ten years.................................... 217.9 227.4
-------- --------
933.5 969.3
Mortgage-backed securities............................. 252.3 262.2
-------- --------
$1,185.8 $1,231.5
======== ========
</TABLE>
Gross gains of $3.4 million in 1998 and $1.1 million in 1997 and gross losses of
$0.7 million in 1998 and $4.5 million in 1997 were realized from the sale of
bonds.
At December 31, 1998, bonds with an admitted asset value of $8.6 million were on
deposit with state insurance departments to satisfy regulatory requirements.
The cost of common stocks was $2.1 million and $0.0 million at December 31, 1998
and 1997, respectively. At December 31, 1998, gross unrealized appreciation on
common stocks totaled $1.3 million, and gross unrealized
56
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 6--INVESTMENTS--CONTINUED
depreciation totaled $0.3 million. The fair value of preferred stock totaled
$36.5 million at December 31, 1998 and $17.2 million at December 31, 1997.
Bonds with amortized cost of $0.9 million were non-income producing for the
twelve months ended December 31, 1998.
At December 31, 1998, 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 Geographic Statement
Property Type Value Concentration Value
------------- --------- ------------- ---------
(In millions) (In millions)
<S> <C> <C> <C>
Apartments........... $106.4 East North Central... $ 56.4
Hotels............... 9.6 East South Central... 0.9
Industrial........... 71.9 Middle Atlantic...... 26.2
Office buildings..... 78.2 Mountain............. 27.5
Retail............... 29.6 New England.......... 36.9
Agricultural......... 71.5 Pacific.............. 96.4
Other................ 20.9 South Atlantic....... 83.8
West North Central... 13.1
West South Central... 43.3
Other................ 3.6
------ ------
$388.1 $388.1
====== ======
</TABLE>
At December 31, 1998, the fair values of the commercial and agricultural
mortgage loans portfolios were $331.3 million and $70.0 million, respectively.
The corresponding amounts as of December 31, 1997 were approximately $243.8
million and $42.0 million, respectively.
The maximum and minimum lending rates for mortgage loans during 1998 were 9.19%
and 6.82% for agricultural loans and 8.88% and 6.56% for other properties.
Generally, the maximum percentage of any loan to the value of security at the
time of the loan, exclusive of insured, 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.
NOTE 7--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 1998 were $590.2 million, $21.5 million, and $8.2 million,
respectively. The corresponding amounts in 1997 were $427.4 million, $18.3
million, and $10.1 million, respectively.
57
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 7--REINSURANCE--CONTINUED
Reinsurance ceded contracts do not relieve the Company from its obligations to
policyholders. The Company remains liable to its policyholders for the portion
reinsured to the extent that any reinsurer does not meet its obligations for
reinsurance ceded to it under the reinsurance agreements. Failure of the
reinsurers to honor their obligations could result in losses to the Company;
consequently, estimates are established for amounts deemed or estimated to be
uncollectible. To minimize its exposure to significant losses from reinsurance
insolvencies, the Company evaluates the financial condition of its reinsurers
and monitors concentration of credit risk arising from similar characteristics
of the reinsurer.
Neither the Company, nor any of its related parties, control, either directly or
indirectly, any external reinsurers with which the Company conducts business. No
policies issued by the Company have been reinsured with a foreign company which
is controlled, either directly or indirectly, by a party not primarily engaged
in the business of insurance.
The Company has not entered into any reinsurance agreements in which the
reinsurer may unilaterally cancel any reinsurance for reasons other than
nonpayment of premiums or other similar credits. The Company does not have any
reinsurance agreements in effect in which the amount of losses paid or accrued
through December 31, 1998 would result in a payment to the reinsurer of amounts
which, in the aggregate and allowing for offset of mutual credits from other
reinsurance agreements with the same reinsurer, exceed the total direct premiums
collected under the reinsured policies.
NOTE 8--FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The notional amounts, carrying values and estimated fair values of the Company's
derivative instruments were as follows at December 31:
<TABLE>
<CAPTION>
Assets (Liabilities)
Number of Contracts/ ---------------------------------------
Notional Amounts 1998 1997
--------------------- --------------------- ----------------
Carrying Fair Carrying Fair
1998 1997 Value Value Value Value
---------- ---------- ---------- --------- -------- --------
($ In millions)
<S> <C> <C> <C> <C> <C> <C>
Futures contracts to
sell securities..... 947 367 $(0.5) $ (0.5) $(0.4) $(0.4)
Interest rate swap
agreements.......... $365.0 $245.0 -- (17.7) -- (7.8)
Interest rate cap
agreements.......... 89.4 89.4 3.1 3.1 1.4 1.4
Currency rate swap
agreements.......... 15.8 14.3 -- (3.3) -- (2.1)
</TABLE>
The Company uses futures contracts, interest rate swap, cap agreements, and
currency rate swap agreements for other than trading purposes to hedge and
manage its exposure to changes in interest rate levels, foreign exchange rate
fluctuations and to manage duration mismatch of assets and liabilities.
The futures contracts expire in 1999. The interest rate swap agreements expire
in 1999 to 2009. The interest rate cap agreements expire in 2006 to 2007. The
currency rate swap agreements expire in 2006 to 2009.
The Company's exposure to credit risk is the risk of loss from a counterparty
failing to perform to the terms of the contract. The Company continually
monitors its position and the credit ratings of the counterparties to these
derivative instruments. To limit exposure associated with counterparty
nonperformance on interest rate and currency swap agreements, the Company enters
into master netting agreements with its counterparties. The Company believes the
risk of incurring losses due to nonperformance by its counterparties is remote
and that such losses, if any, would be immaterial. Futures contracts trade on
organized exchanges and, therefore, have minimal credit risk.
58
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 9--POLICY RESERVES, POLICYHOLDERS' AND BENEFICIARIES' FUNDS AND OBLIGATIONS
RELATED TO SEPARATE ACCOUNTS
The Company's annuity reserves and deposit fund liabilities that are subject to
discretionary withdrawal, with and without adjustment, are summarized as
follows:
<TABLE>
<CAPTION>
December 31, 1998 Percent
----------------- ---------
(In millions)
<S> <C> <C>
Subject to discretionary withdrawal (with
adjustment)
With market value adjustment.................. $ 0.9 0.1%
At book value less surrender charge........... 1,677.9 88.8
-------- -----
Total with adjustment...................... 1,678.8 88.9
Subject to discretionary withdrawal at book value
(without adjustment)........................... 203.6 10.8
Not subject to discretionary withdrawal--general
account........................................ 6.5 0.3
-------- -----
Total annuity reserves and deposit
liabilities............................... $1,888.9 100.0%
======== =====
</TABLE>
NOTE 10--COMMITMENTS AND CONTINGENCIES
The Company has extended commitments to purchase long-term bonds and issue real
estate mortgages totaling $5.9 million and $24.8 million, respectively, at
December 31, 1998. 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 estimated fair value of the commitments described
above is $32.1 million at December 31, 1998. The majority of these commitments
expire in 1999.
In the normal course of its business operations, the Company is involved with
litigation from time to time with claimants, beneficiaries and others, and a
number of litigation matters were pending as of December 31, 1998. 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 or results of operations of the Company.
59
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 11--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
---------------------------------------------
1998 1997
----------------------- -------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
----------- ----------- --------- -----------
(In millions)
<S> <C> <C> <C> <C>
Assets
Bonds--Note 6............. $1,185.8 $1,231.5 $1,092.7 $1,138.5
Preferred stocks--Note 6.. 36.5 36.5 17.2 17.2
Common stocks--Note 6..... 3.1 3.1 2.3 2.3
Mortgage loans on real
estate--Note 6.......... 388.1 401.3 273.9 285.8
Policy loans--Note 1...... 137.7 137.7 106.8 106.8
Cash and cash
equivalents--Note 1..... 19.9 19.9 143.2 143.2
Derivatives assets
(liabilities) relating
to:--Note 8
Futures contracts......... (0.5) (0.5) (0.4) (0.4)
Interest rate swaps....... -- (17.7) -- (7.8)
Currency rate swaps....... -- (3.3) -- (2.1)
Interest rate caps........ 3.1 3.1 1.4 1.4
Liabilities
Commitments--Note 10...... -- 32.1 -- 194.5
</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.
NOTE 12--IMPACT OF YEAR 2000 (UNAUDITED)
The Company relies on John Hancock, its parent company, for information
processing services. John Hancock is executing its plan to address the impact of
the Year 2000 issues that result from computer programs being written using two
digits to reflect the year rather than four to define the applicable year and
century. Historically, the first two digits were hardcoded to save memory. Many
of John Hancock's computer programs that have date-sensitive software, including
those relied upon by the Company, may recognize a date using "00" as the year
1900 rather than the year 2000. This could result in an information technology
(IT) system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices or engage in similar normal business activities. In addition,
non-IT systems including, but not limited to, security alarms, elevators and
telephones are subject to malfunction due to their dependence on embedded
technology such as microcontrollers for proper operation. As described, the Year
2000 project presents a number of challenges for financial institutions since
the correction of Year 2000 issues in IT and non-IT systems will be complex and
costly for the entire industry.
John Hancock began to address the Year 2000 project as early as 1994. John
Hancock's plan to address the Year 2000 Project includes an awareness campaign,
an assessment period, a renovation stage, validation work and an implementation
of Company solutions.
The continuous awareness campaign serves several purposes: defining the problem,
gaining executive level support and sponsorship, establishing a team and overall
strategy, and assessing existing information system management resources.
Additionally, the awareness campaign establishes an education process to ensure
that all employees are aware of the Year 2000 issue and knowledgeable of their
role in securing solutions.
60
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 12--IMPACT OF YEAR 2000 (UNAUDITED)--CONTINUED
The assessment phase, which was completed for both IT and non-IT systems as of
April 1998, included the identification, inventory, analysis, and prioritization
of IT and non-IT systems and processes to determine their conversion or
replacement.
The renovation stage reflects the conversion, validation, replacement, or
elimination of selected platforms, applications, databases and utilities,
including the modification of applicable interfaces. Additionally, the
renovation stage includes performance, functionality, and regression testing and
implementation. As of December 31, 1998, the renovation phase was substantially
complete for computer applications, systems and desktops. For all remaining
components, the renovation phase is underway and will be complete before the end
of the second quarter of 1999.
The validation phase consists of the compliance testing of renovated systems.
The validation phase is expected to be complete by mid 1999, after renovation is
accomplished. Testing facilities will be used through the remainder of 1999 to
perform special functional testing. Special functional testing includes testing,
as required, with material third parties and industry groups and performing
reviews of "dry runs" of year-end activities. Scheduled testing of material
relationships with third parties, including those impacting the Company, is
underway. It is anticipated that testing with material business partners will
continue through much of 1999.
Finally, the implementation phase involves the actual implementation of
converted or replaced platforms, applications, databases, utilities, interfaces,
and contingency planning. Implementation is being performed concurrently during
the renovation phase and is expected to be completed before the end of the
second quarter of 1999.
The costs of the Year 2000 project consist of internal IT personnel and external
costs such as consultants, programmers, replacement software, and hardware. The
costs of the Year 2000 project are expensed as incurred. The project is funded
partially through a reallocation of resources from discretionary projects.
Through December 31, 1998, John Hancock has incurred and expensed approximately
$9.8 million in related payroll costs for its internal IT personnel on the
project. The estimated range of remaining internal IT personnel costs of the
project is approximately $8 to $9 million. Through December 31, 1998, John
Hancock has incurred and expensed approximately $36.4 million in external costs
for the project. The estimated range of remaining external costs of the project
is approximately $35 to $36 million. The total costs of the Year 2000 project to
John Hancock, based on management's best estimates, include approximately $18
million in internal IT personnel, $7.4 million in the external modification of
software, $34.2 million for external solution providers, $19.4 million in
replacement costs of non-compliant IT systems and $12.6 million in oversight,
test facilities and other expenses. Accordingly, the estimated range of total
costs of the Year 2000 project to John Hancock, internal and external, is
approximately $90 to $95 million. However, there can be no guarantee that these
estimates will be achieved and actual results could materially differ from those
plans. Specific factors that might cause such material differences include, but
are not limited to, the availability and cost of personnel trained in this area,
the ability to locate and correct all relevant computer codes, and similar
uncertainties.
61
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 12--IMPACT OF YEAR 2000 (UNAUDITED)--CONTINUED
John Hancock's total Year 2000 project costs include the estimated impact of
external solution providers and are based on presently available information.
However, there is no guarantee that the systems of other companies that John
Hancock's systems rely on will be timely converted, or that a failure to convert
by another company, or a conversion that is incompatible with John Hancock's
systems, including those upon which the Company relies, would not have material
adverse effect on John Hancock or the Company. It is documented in trade
publications that companies in foreign countries are not acting as intensively
as domestic companies to remediate Year 2000 issues. Accordingly, it is expected
that Company facilities based outside the United States face higher degrees of
risks from data exchanges with material business partners. In addition, the
Company has numerous customers that hold products of the Company. Nearly all
products sold by the Company contain date sensitive data, examples of which are
policy expiration dates, birth dates and premium payment dates. Finally, the
regulated nature of the Company's industry exposes it to potential supervisory
or enforcement actions relating to Year 2000 issues.
John Hancock's contingency planning initiative related to the Year 2000 project
is underway. The plan is addressing John Hancock's readiness as well as that of
material business partners on whom John Hancock and the Company depend. John
Hancock's contingency plans are being designed to keep each subsidiary's
operations functioning in the event of a failure or delay due to the Year 2000
record format and date calculation changes. Contingency plans are being
constructed based on the foundation of extensive business resumption plans that
John Hancock has maintained and updated periodically, which outline responses to
situations that may affect critical business functions. These plans also provide
emergency operations guidance, which defines a documented order of actions to
respond to problems. These extensive business resumption plans are being
enhanced to cover Year 2000 situations.
62
<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, Emerging Markets Equity, International Equity
Index (formerly, International Equities), Global Equity, Small Cap Growth,
International Balanced, Mid Cap Growth, Large Cap Value, Money Market, Mid Cap
Value, Diversified Mid Cap Growth (formerly, Special Opportunities), Bond Index,
Small/Mid Cap CORE, Real Estate Equity, Growth & Income, Managed, Short-Term
Bond (formerly, Short-Term U.S. Government), Small Cap Value, International
Opportunities, Equity Index, High Yield Bond, Strategic Bond, Turner Core
Growth, Brandes International Equity (formerly, Edinburgh International Equity),
and Frontier Capital Appreciation Subaccounts) as of December 31, 1998, the
related statements of operations and 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,
1998, 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 10, 1999
63
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
LARGE CAP SOVEREIGN EMERGING INTERNATIONAL
GROWTH BOND MARKETS EQUITY EQUITY INDEX
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------ ----------- -------------- ---------------
<S> <C> <C> <C> <C>
ASSETS
Investment in shares
of portfolios of John
Hancock Variable
Series Trust I,
at value............ $318,056,515 $85,780,562 $ 1,689 $44,324,924
Investments in shares
of portfolios of M
Fund Inc., at value -- -- -- --
Receivable from:
John Hancock Variable
Series Trust I..... 18,077 4,200 -- 7,865
M Fund Inc..........
------------ ----------- ---------- -----------
Total assets......... 318,074,592 85,784,762 1,689 44,332,789
LIABILITIES
Payable to:
John Hancock Variable
Life Insurance
Company............ 12,873 2,791 -- 7,160
M Fund Inc.......... -- -- -- --
Asset charges payable 5,204 1,410 -- 705
------------ ----------- ---------- -----------
Total liabilities.... 18,077 4,201 -- 7,865
------------ ----------- ---------- -----------
Net assets............ $318,056,515 $85,780,561 $ 1,689 $44,324,924
============ =========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
GLOBAL SMALL CAP INTERNATIONAL MID CAP
EQUITY GROWTH BALANCED GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Investment in shares of
portfolios of John
Hancock Variable Series
Trust I,
at value.............. $1,885 $13,486,064 $1,731,100 $11,219,643
Investments in shares of
portfolios of M Fund
Inc., at value........ -- -- -- --
Receivable from:
John Hancock Variable
Series Trust I....... -- 4,459 2,752 3,110
M Fund Inc............
------ ----------- ---------- -----------
Total assets........... 1,885 13,490,523 1,733,852 11,222,753
LIABILITIES
Payable to:
John Hancock Variable
Life Insurance Company -- 4,242 2,723 2,932
M Fund Inc............ -- -- -- --
Asset charges payable.. -- 216 28 178
------ ----------- ---------- -----------
Total liabilities...... -- 4,458 2,751 3,110
------ ----------- ---------- -----------
Net assets............. $1,885 $13,486,065 $1,731,101 $11,219,643
====== =========== ========== ===========
</TABLE>
See accompanying notes.
64
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
DIVERSIFIED MID
LARGE CAP MONEY CAP BOND SMALL/
VALUE MARKET MID CAP VALUE GROWTH INDEX MID CAP CORE
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ------------ ------------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investment in shares of portfolios of
John Hancock Variable Series Trust I, at
value.................................. $10,716,976 $ 21,026,260 $ 16,254,342 $45,483,238 $ 4,190 $ 56,040
Investments in shares of portfolios of M
Fund Inc., at value.................... -- -- -- -- -- --
Receivable from:
John Hancock Variable Series Trust I... 6,475 80,158 22,469 5,483 -- 1
M Fund Inc............................. -- -- -- -- -- --
----------- ------------ ------------ ----------- ------------ -------------
Total assets............................ 10,723,451 21,106,418 16,276,811 45,488,721 4,190 56,041
LIABILITIES
Payable to:
John Hancock Variable Life Insurance
Company............................... 6,300 79,813 22,206 4,773 -- --
M Fund Inc............................. -- -- -- -- -- --
Asset charges payable................... 176 344 263 711 -- 1
----------- ------------ ------------ ----------- ------------ -------------
Total liabilities....................... 6,476 80,157 22,469 5,484 -- 1
----------- ------------ ------------ ----------- ------------ -------------
Net assets.............................. $10,716,975 $ 21,026,261 $ 16,254,342 $45,483,237 $ 4,190 $ 56,040
=========== ============ ============ =========== ============ =============
</TABLE>
<TABLE>
<CAPTION>
REAL ESTATE GROWTH & SHORT-TERM SMALL CAP INTERNATIONAL
EQUITY INCOME MANAGED BOND VALUE OPPORTUNITIES
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ------------ ------------ ---------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investment in shares of portfolios of John
Hancock Variable Series Trust I, at value $34,249,612 $552,313,331 $450,747,024 $6,046,092 $9,873,799 $17,088,499
Investments in shares of portfolios of M Fund
Inc., at value.............................. -- -- -- -- -- --
Receivable from:
John Hancock Variable Series Trust I 16,722 87,919 418,038 1,234 5,346 5,154
M Fund Inc.................................. -- -- -- -- -- --
----------- ------------ ------------ ---------- ---------- -----------
Total assets................................. 34,266,334 552,401,250 451,165,062 6,047,326 9,879,245 17,093,653
LIABILITIES
Payable to:
John Hancock Variable Life Insurance Company 16,186 78,844 410,639 1,145 5,188 4,874
M Fund Inc.................................. -- -- -- -- -- --
Asset charges payable........................ 536 9,075 7,398 89 158 280
----------- ------------ ------------ ---------- ---------- -----------
Total liabilities............................ 16,722 87,919 418,037 1,234 5,346 5,154
----------- ------------ ------------ ---------- ---------- -----------
Net assets................................... $34,249,612 $552,313,331 $450,747,025 $6,046,092 $9,873,799 $17,088,499
=========== ============ ============ ========== ========== ===========
</TABLE>
See accompanying notes.
65
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
TURNER BRANDES FRONTIER
EQUITY HIGH YIELD CORE INTERNATIONAL CAPITAL
INDEX BOND STRATEGIC BOND GROWTH EQUITY APPRECIATION
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ---------- -------------- ---------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investment in shares of portfolios of John
Hancock Variable Series Trust I, at value... $26,799,569 $1,765 $4,608,410 $2,774,457 $1,355,068 $7,229,794
Investments in shares of portfolios of M Fund
Inc., at value.............................. -- -- -- -- -- --
Receivable from:
John Hancock Variable Series Trust I........ 76,155 -- 3,774 235 22 272
M Fund Inc.................................. -- -- -- -- -- --
----------- ------ ---------- ---------- ---------- ----------
Total assets................................. 26,875,724 1,765 4,612,184 2,774,692 1,355,090 7,230,066
LIABILITIES
Payable to:
John Hancock Variable Life Insurance
Company.................................... 75,715 -- 3,698 190 -- 156
M Fund Inc.................................. -- -- -- -- -- --
Asset charges payable........................ 440 -- 76 45 22 116
----------- ------ ---------- ---------- ---------- ----------
Total liabilities............................ 76,155 -- 3,774 235 22 272
----------- ------ ---------- ---------- ---------- ----------
Net assets................................... $26,799,569 $1,765 $4,608,410 $2,774,457 $1,355,068 $7,229,794
=========== ====== ========== ========== ========== ==========
</TABLE>
See accompanying notes.
66
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENTS OF OPERATIONS
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
LARGE CAP GROWTH SUBACCOUNT SOVEREIGN BOND SUBACCOUNT
------------------------------------- -------------------------------------
1998 1997 1996 1998 1997 1996
----------- ----------- ------------ ----------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I........... $31,074,914 $19,906,569 $22,706,338 $6,701,784 $5,517,405 $ 4,518,056
M Fund Inc..................................... -- -- -- -- -- --
----------- ----------- ----------- ---------- ---------- -----------
Total investment income......................... 31,074,914 19,906,569 22,706,338 6,701,784 5,517,405 4,518,056
Expenses:
Mortality and expense risks.................... 1,577,321 1,152,388 789,368 486,757 417,812 352,330
----------- ----------- ----------- ---------- ---------- -----------
Net investment income........................... 29,497,593 18,754,181 21,916,970 6,215,027 5,099,593 4,165,726
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss)....................... 7,477,359 5,377,678 2,555,654 125,377 (316,608) (136,401)
Net unrealized appreciation (depreciation)
during the period............................. 50,180,004 24,886,516 (2,922,417) (432,666) 1,592,275 (1,537,488)
----------- ----------- ----------- ---------- ---------- -----------
Net realized and unrealized gain (loss) on
investments.................................... 57,657,363 30,264,194 (366,763) (307,289) 1,275,667 (1,673,889)
----------- ----------- ----------- ---------- ---------- -----------
Net increase in net assets resulting from
operations..................................... $87,154,956 $49,018,375 $21,550,207 $5,907,738 $6,375,260 $ 2,491,837
=========== =========== =========== ========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
EMERGING GLOBAL
MARKETS EQUITY EQUITY
SUBACCOUNT INTERNATIONAL EQUITY INDEX SUBACCOUNT SUBACCOUNT
-------------- -------------------------------------- ------------
1998** 1998 1997 1996 1998**
-------------- ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I...... $ 1 $6,864,977 $ 2,032,258 $ 460,651 $ 2
M Fund Inc........... -- -- -- -- --
--- ---------- ----------- ---------- ---
Total investment
income............... 1 6,864,977 2,032,258 460,651 2
Expenses:
Mortality and expense
risks . . . . . . . 258,595 249,823 209,866 1
--- ---------- ----------- ---------- ---
Net investment income 1 6,606,382 1,782,435 250,785 1
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss) . . . . . . (1) 1,270,070 958,182 156,348 --
Net unrealized
appreciation
(depreciation)
during the period . (4) 23,662 (4,981,747) 2,539,023 69
--- ---------- ----------- ---------- ---
Net realized and
unrealized gain
(loss) on investments
. . . . . . . . . . (5) 1,293,732 (4,023,565) 2,695,371 69
--- ---------- ----------- ---------- ---
Net increase
(decrease) in net
assets resulting from
operations . . . . . $(4) $7,900,114 $(2,241,130) $2,946,156 $70
=== ========== =========== ========== ===
</TABLE>
- ---------
** From May 1, 1998 (commencement of operations).
See accompanying notes.
67
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
SMALL CAP GROWTH SUBACCOUNT INTERNATIONAL BALANCED SUBACCOUNT
--------------------------------- -------------------------------------------
1998 1997 1996* 1998 1997 1996*
----------- --------- ---------- --------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I . . . . . $ -- $ 3,380 $ 1,404 $ 111,976 $ 62,258 $ 11,409
M Fund Inc. . . . . . . . . . . . . . . . . . -- -- -- -- -- --
---------- -------- --------- --------- -------------- ---------------
Total investment income . . . . . . . . . . . . -- 3,380 1,404 111,976 62,258 11,409
Expenses:
Mortality and expense risks . . . . . . . . . 57,076 33,986 6,704 8,831 6,972 1,311
---------- -------- --------- --------- -------------- ---------------
Net investment income (loss) . . . . . . . . . (57,076) (30,606) (5,300) 103,145 55,286 10,098
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss) . . . . . . . . . . . 157,975 116,210 (210,939) 20,527 29,092 1,642
Net unrealized appreciation (depreciation)
during the
period . . . . . . . . . . . . . . . . . . . 1,605,647 732,330 (86,846) 108,042 (68,785) 18,954
---------- -------- --------- --------- -------------- ---------------
Net realized and unrealized gain (loss) on
investments. . . . . . . . . . . . . . . . . . 1,763,622 848,540 (297,785) 128,569 (39,693) 20,596
---------- -------- --------- --------- -------------- ---------------
Net increase (decrease) in net assets resulting
from operations . . . . . . . . . . . . . . . $1,706,546 $817,934 $(303,085) $ 231,714 $ 15,593 $ 30,694
========== ======== ========= ========= ============== ===============
</TABLE>
<TABLE>
<CAPTION>
MID CAP GROWTH SUBACCOUNT LARGE CAP VALUE SUBACCOUNT
------------------------------ ------------------------------
1998 1997 1996* 1998 1997 1996*
---------- --------- ------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I . . $ 993,504 $ -- $ 7,102 $ 560,242 $259,192 $ 36,343
M Fund Inc. . . . . -- -- -- -- -- --
---------- -------- ------- --------- -------- --------
Total investment
income . . . . . . . 993,504 7,102 560,242 259,192 36,343
Expenses:
Mortality and expense
risks . . . . . . . 42,815 20,278 4,054 54,311 23,604 3,072
---------- -------- ------- --------- -------- --------
Net investment income
(loss) . . . . . . . 950,689 (20,278) 3,048 505,931 235,588 33,271
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain . 338,131 64,078 168 364,328 147,209 3,072
Net unrealized
appreciation
(depreciation)
during the
period . . . . . . 1,477,149 567,677 38,250 (186,805) 547,716 87,225
---------- -------- ------- --------- -------- --------
Net realized and
unrealized gain on
investments. . . . . 1,815,280 631,755 38,418 177,523 694,925 90,297
---------- -------- ------- --------- -------- --------
Net increase in net
assets resulting from
operations . . . . . $2,765,969 $611,477 $41,466 $ 683,454 $930,513 $123,568
========== ======== ======= ========= ======== ========
</TABLE>
- ---------
* From May 1, 1996 (commencement of operations).
See accompanying notes.
68
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
MONEY MARKET SUBACCOUNT MID CAP VALUE SUBACCOUNT
------------------------------ ----------------------------------
1998 1997 1996 1998 1997 1996*
---------- -------- -------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I . . $1,110,309 $895,867 $918,057 $ 142,246 $ 972,249 $ 28,018
M Fund Inc. . . . . -- -- -- -- --
---------- -------- -------- ----------- ---------- --------
Total investment
income . . . . . . . 1,110,309 895,867 918,057 142,246 972,249 28,018
Expenses:
Mortality and expense
risks . . . . . . . 125,891 101,168 105,920 95,456 36,967 2,232
---------- -------- -------- ----------- ---------- --------
Net investment income 984,418 794,699 812,137 46,790 935,282 25,786
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain. . -- -- -- 470,277 148,954 2,034
Net unrealized
appreciation
(depreciation)
during the
period . . . . . . -- -- -- (2,496,498) 58,693 102,527
---------- -------- -------- ----------- ---------- --------
Net realized and
unrealized gain
(loss) on investments -- -- -- (2,026,221) 207,647 104,561
---------- -------- -------- ----------- ---------- --------
Net increase
(decrease) in net
assets resulting from
operations . . . . . $ 984,418 $794,699 $812,137 $(1,979,431) $1,142,929 $130,347
========== ======== ======== =========== ========== ========
</TABLE>
<TABLE>
<CAPTION>
SMALL/MID CAP
DIVERSIFIED MID CAP BOND INDEX CORE
GROWTH SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------------------------ ---------- ---------------
1998 1997 1996 1998** 1998**
---------- ------------ ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I . . $ 863,342 $ 5,058,010 $1,789,171 $ 62 $ --
M Fund Inc. . . . . -- -- -- -- --
---------- ----------- ---------- ---- ------
Total investment
income . . . . . . . 863,342 5,058,010 1,789,171 62
Expenses:
Mortality and expense
risks . . . . . . . 281,235 296,759 188,016 1 14
---------- ----------- ---------- ---- ------
Net investment income
(loss) . . . . . . . 582,107 4,761,251 1,601,155 61 (14)
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain . 1,879,057 4,458,015 1,418,069 -- --
Net unrealized
appreciation
(depreciation)
during the period . 3,090 (7,254,086) 4,977,778 (88) 4,448
---------- ----------- ---------- ---- ------
Net realized and
unrealized gain
(loss) on investments 1,882,147 (2,796,071) 6,395,847 (88) 4,448
---------- ----------- ---------- ---- ------
Net increase
(decrease) in net
assets resulting from
operations . . . . . $2,464,254 $ 1,965,180 $7,997,002 $(27) $4,434
========== =========== ========== ==== ======
</TABLE>
- ---------
* From May 1, 1996 (commencement of operations).
** From May 1, 1998 (commencement of operations).
See accompanying notes.
69
<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
----------------------------------------
1998 1997 1996
------------- ----------- ------------
<S> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I . . . . . $ 2,281,310 $ 2,934,672 $ 1,610,938
M Fund Inc. . . . . . . . . . . . . . . . . . -- -- --
------------ ----------- ------------
Total investment income . . . . . . . . . . . . 2,281,310 2,934,672 1,610,938
Expenses:
Mortality and expense risks . . . . . . . . . 219,763 212,177 145,276
------------ ----------- ------------
Net investment income . . . . . . . . . . . . . 2,061,547 2,722,495 1,465,662
Net realized and unrealized gain (loss) on
investments:
Net realized gain . . . . . . . . . . . . . . 903,492 751,985 184,058
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . . . (10,193,226) 2,343,294 5,976,712
------------ ----------- ------------
Net realized and unrealized gain (loss) on
investments. . . . . . . . . . . . . . . . . . (9,289,734) 3,095,279 6,160,770
------------ ----------- ------------
Net increase (decrease) in net assets resulting
from operations . . . . . . . . . . . . . . . $ (7,228,187) $ 5,817,774 $ 7,626,432
============ =========== ============
<CAPTION>
GROWTH & INCOME
SUBACCOUNT
--------------------------------------
1998 1997 1996
------------ ----------- -------------
<S> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I . . . . . $ 54,199,315 $52,442,930 $37,254,741
M Fund Inc. . . . . . . . . . . . . . . . . . -- -- --
------------ ----------- -----------
Total investment income . . . . . . . . . . . . 54,199,315 52,442,930 37,254,741
Expenses:
Mortality and expense risks . . . . . . . . . 2,856,645 2,178,739 1,542,729
------------ ----------- -----------
Net investment income . . . . . . . . . . . . . 51,342,670 50,264,191 35,712,012
Net realized and unrealized gain (loss) on
investments:
Net realized gain . . . . . . . . . . . . . . 12,465,262 7,351,086 3,938,033
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . . . 60,549,503 32,872,184 6,429,197
------------ ----------- -----------
Net realized and unrealized gain (loss) on
investments. . . . . . . . . . . . . . . . . . 73,014,765 40,223,270 10,367,230
------------ ----------- -----------
Net increase (decrease) in net assets resulting
from operations . . . . . . . . . . . . . . . $124,357,435 $90,487,461 $46,079,242
============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
MANAGED SHORT-TERM BOND
SUBACCOUNT SUBACCOUNT
-------------------------------------- --------------------------------
1998 1997 1996 1998 1997 1996
----------- ----------- ------------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I . . $42,558,328 $34,981,042 $ 37,205,797 $ 318,055 $ 216,077 $140,926
M Fund Inc. . . . . -- -- -- -- -- --
----------- ----------- ------------ --------- --------- --------
Total investment
income . . . . . . . 42,558,328 34,981,042 37,205,797 318,055 216,077 140,926
Expenses:
Mortality and expense
risks . . . . . . . 2,438,618 2,035,959 1,678,618 27,623 17,975 12,366
----------- ----------- ------------ --------- --------- --------
Net investment income 40,119,710 32,945,083 35,527,179 290,432 198,102 128,560
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . 5,216,094 3,754,808 3,555,551 13,933 (12,481) 20,920
Net unrealized
appreciation
(depreciation)
during the period . 28,230,322 19,460,056 (11,690,944) (45,745) 24,408 (69,771)
----------- ----------- ------------ --------- --------- --------
Net realized and
unrealized gain
(loss) on investments 33,446,416 23,214,864 (8,135,393) (31,8120) 11,927 (48,851)
----------- ----------- ------------ --------- --------- --------
Net increase in net
assets resulting from
operations . . . . . $73,566,126 $56,159,947 $ 27,391,786 $ 258,620 $ 210,029 $ 79,709
=========== =========== ============ ========= ========= ========
</TABLE>
See accompanying notes.
70
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
SMALL CAP VALUE INTERNATIONAL OPPORTUNITIES
SUBACCOUNT SUBACCOUNT
------------------------------ --------------------------------
1998 1997 1996* 1998 1997 1996*
---------- --------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I . . $ 54,320 $537,451 $32,693 $ 85,655 $ 85,488 $ 5,631
M Fund Inc. . . . . -- -- -- -- -- --
--------- -------- ------- ---------- --------- --------
Total investment
income . . . . . . . 54,320 537,451 32,693 85,655 85,488 5,631
Expenses:
Mortality and expense
risks . . . . . . . 51,961 21,374 2,395 64,058 27,161 3,818
--------- -------- ------- ---------- --------- --------
Net investment income 2,359 516,077 30,298 21,597 58,327 1,813
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . 254,157 179,065 (1,418) 196,024 104,001 2,596
Net unrealized
appreciation
(depreciation)
during the period . (813,644) (60,841) 66,350 1,366,734 (279,934) 98,849
--------- -------- ------- ---------- --------- --------
Net realized and
unrealized gain
(loss) on investments (559,487) 118,224 64,932 1,562,758 (175,933) 101,445
--------- -------- ------- ---------- --------- --------
Net increase
(decrease) in net
assets resulting from
operations . . . . . $(557,128) $634,301 $95,230 $1,584,355 $(117,606) $103,258
========= ======== ======= ========== ========= ========
</TABLE>
<TABLE>
<CAPTION>
EQUITY INDEX HIGH YIELD BOND STRATEGIC BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------------------- --------------- ---------------------------
1998 1997 1996* 1998** 1998 1997 1996*
---------- ---------- ------- --------------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I . . . $ 700,367 $ 289,092 $27,780 $12 $217,011 $155,751 $13,269
M Fund Inc. . . . . . . . . . . . . . . . -- -- -- -- -- -- --
---------- ---------- ------- --- -------- -------- -------
Total investment income . . . . . . . . . . 700,367 289,092 27,780 12 217,011 155,751 13,269
Expenses:
Mortality and expense risks . . . . . . . 108,231 33,761 2,194 1 23,315 10,483 675
---------- ---------- ------- --- -------- -------- -------
Net investment income . . . . . . . . . . . 592,136 255,331 25,586 11 193,696 145,268 12,594
Net realized and unrealized gain (loss) on
investments:
Net realized gain . . . . . . . . . . . . 997,526 72,875 4,690 -- 25,425 4,242 1,272
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . 2,882,597 973,872 58,797 (9) 91,397 7,679 (2,250)
---------- ---------- ------- --- -------- -------- -------
Net realized and unrealized gain (loss) on
investments. . . . . . . . . . . . . . . . 3,880,123 1,046,747 63,487 (9) 116,822 11,921 (978)
---------- ---------- ------- --- -------- -------- -------
Net increase in net assets resulting from
operations . . . . . . . . . . . . . . . . $4,472,259 $1,302,078 $89,073 $ 2 $310,518 $157,189 $11,616
========== ========== ======= === ======== ======== =======
</TABLE>
- ---------
* From May 1, 1996 (commencement of operations).
** From May 1, 1998 (commencement of operations).
See accompanying notes.
71
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
BRANDES FRONTIER
TURNER CORE GROWTH INTERNATIONAL EQUITY CAPITAL APPRECIATION
SUBACCOUNT SUBACCOUNT SUBACCOUNT
--------------------------- -------------------------- -----------------------------
1998 1997 1996* 1998 1997 1996* 1998 1997 1996*
-------- ------- --------- -------- --------- ----- --------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series
Trust I . . . . . . . . . . . . . . $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
M Fund Inc. . . . . . . . . . . . . 48,858 22,593 91 76,526 11,174 362 14,932 59,777 --
-------- ------- -------- -------- -------- ---- -------- ------- ---------
Total investment income . . . . . . . 48,858 22,593 91 76,526 11,174 362 14,932 59,777 --
Expenses:
Mortality and expense risks . . . . 4,430 828 1,556 6,543 2,688 74 24,050 7,104 1,628
-------- ------- -------- -------- -------- ---- -------- ------- ---------
Net investment income (loss) . . . . 44,428 21,765 (1,465) 69,983 8,486 288 (9,118) 52,673 (1,628)
Net realized and unrealized gain
(loss) on investments:
Net realized gain (loss) . . . . . . 38,125 1,020 (75,788) 8,487 371 (30) 89,974 10,828 (130,154)
Net unrealized appreciation
(depreciation) during the period . 318,448 17,720 -- 101,256 (32,110) 220 524,011 28,386 1,432
-------- ------- -------- -------- -------- ---- -------- ------- ---------
Net realized and unrealized gain
(loss) on investments . . . . . . . 356,573 18,740 (75,788) 109,743 (31,739) 190 613,985 39,214 (128,722)
-------- ------- -------- -------- -------- ---- -------- ------- ---------
Net increase (decrease) in net assets
resulting from operations . . . . . $401,001 $40,505 $(77,253) $179,726 $(23,253) $478 $604,867 $91,887 $(130,350)
======== ======= ======== ======== ======== ==== ======== ======= =========
</TABLE>
- ---------
* From May 1, 1996 (commencement of operations).
See accompanying notes.
72
<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 SOVEREIGN BOND
SUBACCOUNT SUBACCOUNT
------------------------------------------ ------------------------------------------
1998 1997 1996 1998 1997 1996
------------- ------------- ------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . . $ 29,497,593 $ 18,754,181 $ 21,916,970 $ 6,215,027 $ 5,099,593 $ 4,165,726
Net realized gains (losses) . . . . . 7,477,359 5,377,678 2,555,654 125,377 (316,608) (136,401)
Net unrealized appreciation
(depreciation) during the period . . 50,180,004 24,886,516 (2,922,417) (432,666) 1,592,275 (1,537,488)
------------ ------------ ------------ ------------ ------------ ------------
Net increase in net assets resulting
from operations . . . . . . . . . . . 87,154,956 49,018,375 21,550,207 5,907,738 6,375,260 2,491,837
From policyholder transactions:
Net premiums from policyholders . . . 50,518,731 50,870,640 51,040,008 17,861,340 21,348,125 20,848,505
Net benefits to policyholders . . . . (40,022,049) (32,643,981) (33,079,850) (15,352,996) (14,778,316) (15,298,035)
------------ ------------ ------------ ------------ ------------ ------------
Net increase in net assets resulting
from policyholder transactions . . . 10,496,682 18,226,659 17,960,158 2,508,344 6,569,809 5,550,470
------------ ------------ ------------ ------------ ------------ ------------
Net increase in net assets . . . . . . 97,651,638 67,245,034 39,510,365 8,416,082 12,945,069 8,042,307
Net assets at beginning of period . . 220,404,877 153,159,843 113,649,478 77,364,479 64,419,410 56,377,103
------------ ------------ ------------ ------------ ------------ ------------
Net assets at end of period . . . . . $318,056,515 $220,404,877 $153,159,843 $ 85,780,561 $ 77,364,479 $ 64,419,410
============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
EMERGING
MARKETS GLOBAL
EQUITY INTERNATIONAL EQUITY EQUITY
SUBACCOUNT INDEX SUBACCOUNT SUBACCOUNT
---------- ------------------------------------------ ------------
1998** 1998 1997 1996 1998**
---------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets from
operations:
Net investment income $ 1 $ 6,606,382 $ 1,782,435 $ 250,785 $ 1
Net realized gains
(losses). . . . . . (1) 1,270,070 958,182 156,348 --
Net unrealized
appreciation
(depreciation)
during the period . (4) 23,662 (4,981,747) 2,539,023 69
------ ------------ ------------ ------------ ------
Net increase
(decrease) in net
assets resulting from
operations . . . . . (4) 7,900,114 (2,241,130) 2,946,156 70
From policyholder
transactions:
Net premiums from
policyholders . . . 1,730 11,092,106 17,654,531 17,279,404 1,850
Net benefits to
policyholders . . . (37) (16,638,267) (12,889,618) (11,711,164) (35)
------ ------------ ------------ ------------ ------
Net increase
(decrease) in net
assets resulting from
policyholder
transactions . . . . 1,691 (5,546,159) 4,764,913 5,568,240 1,815
------ ------------ ------------ ------------ ------
Net increase in net
assets . . . . . . . 1,689 2,353,955 2,523,783 8,514,396 1,885
Net assets at
beginning of period 0 41,970,969 39,447,186 30,932,790 0
------ ------------ ------------ ------------ ------
Net assets at end of
period . . . . . . . $1,689 $ 44,324,924 $ 41,970,969 $ 39,447,186 $1,885
====== ============ ============ ============ ======
</TABLE>
- ---------
** From May 1, 1998 (commencement of operations).
See accompanying notes.
73
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
SMALL CAP INTERNATIONAL BALANCED
GROWTH SUBACCOUNT SUBACCOUNT
--------------------------------------- ----------------------------------------
1998 1997 1996 1998 1997 1996
------------ ------------ ------------ ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) . . . . . . . $ (57,076) $ (30,606) $ (5,300) $ 103,145 $ 55,286 $ 10,098
Net realized gains (losses) . . . . . . . 157,975 116,210 (210,939) 20,527 29,092 1,642
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . 1,605,647 732,330 (86,846) 108,042 (68,785) 18,954
----------- ----------- ----------- ----------- ----------- ------------
Net increase (decrease) in net assets
resulting from operations . . . . . . . . 1,706,546 817,934 (303,085) 231,714 15,593 30,694
From policyholder transactions:
Net premiums from policyholders . . . . . 6,942,071 7,111,430 5,020,648 775,469 1,210,054 777,316
Net benefits to policyholders . . . . . . (3,551,395) (2,474,024) (1,784,150) (433,887) (811,533) (64,319)
----------- ----------- ----------- ----------- ----------- ------------
Net increase in net assets resulting from
policyholder transactions . . . . . . . . 3,390,766 4,637,406 3,236,498 341,582 398,521 712,997
----------- ----------- ----------- ----------- ----------- ------------
Net increase in net assets . . . . . . . . 5,097,312 5,455,340 2,933,413 573,296 414,114 743,691
Net assets at beginning of period . . . . . 8,388,753 2,933,413 0 1,157,805 743,691 0
----------- ----------- ----------- ----------- ----------- ------------
Net assets at end of period . . . . . . . . $13,486,065 $ 8,388,753 $ 2,933,413 $ 1,731,101 $ 1,157,805 $ 743,691
=========== =========== =========== =========== =========== ============
</TABLE>
<TABLE>
<CAPTION>
MID CAP GROWTH LARGE CAP VALUE
SUBACCOUNT SUBACCOUNT
-------------------------------------- --------------------------------------
1998 1997 1996* 1998 1997 1996*
------------ ------------ ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) . . . . . . . . $ 950,689 $ (20,278) $ 3,048 $ 505,931 $ 235,588 $ 33,271
Net realized gains . . . . . . . . . . . . . 338,131 64,078 168 364,328 147,209 3,072
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . . 1,477,149 567,677 38,250 (186,805) 547,716 87,225
----------- ----------- ---------- ----------- ----------- ----------
Net increase in net assets resulting from
operations . . . . . . . . . . . . . . . . . 2,765,969 611,477 41,466 683,454 930,513 123,568
From policyholder transactions:
Net premiums from policyholders . . . . . . . 6,310,992 3,564,986 2,413,439 6,344,623 5,175,373 1,814,755
Net benefits to policyholders . . . . . . . . (2,644,280) (1,603,972) (240,434) (2,846,246) (1,416,071) (92,994)
----------- ----------- ---------- ----------- ----------- ----------
Net increase in net assets resulting from
policyholder transactions . . . . . . . . . . 3,666,712 1,961,014 2,173,005 3,498,377 3,759,302 1,721,761
----------- ----------- ---------- ----------- ----------- ----------
Net increase in net assets . . . . . . . . . . 6,432,681 2,572,491 2,214,471 4,181,831 4,689,815 1,845,329
Net assets at beginning of period . . . . . . 4,786,962 2,214,471 0 6,535,144 1,845,329 0
----------- ----------- ---------- ----------- ----------- ----------
Net assets at end of period . . . . . . . . . $11,219,643 $ 4,786,962 $2,214,471 $10,716,975 $ 6,535,144 $1,845,329
=========== =========== ========== =========== =========== ==========
</TABLE>
- ---------
* From May 1, 1996 (commencement of operations).
See accompanying notes.
74
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
MONEY MARKET MID CAP VALUE
SUBACCOUNT SUBACCOUNT
------------------------------------------ --------------------------------------
1998 1997 1996 1998 1997 1996*
------------- ------------- ------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . . . . $ 984,418 $ 794,699 $ 812,137 $ 46,790 $ 935,282 $ 25,786
Net realized gains . . . . . . . . . . . -- -- -- 470,277 148,954 2,034
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . -- -- -- (2,496,498) 58,693 102,527
------------ ------------ ------------ ----------- ----------- ----------
Net increase in net assets resulting from
operations. . . . . . . . . . . . . . . . 984,418 794,699 812,137 (1,979,431) 1,142,929 130,347
From policyholder transactions:
Net premiums from policyholders . . . . . 29,578,379 19,719,031 24,680,961 12,176,727 12,224,626 1,258,509
Net benefits to policyholders . . . . . . (26,039,389) (21,386,542) (27,801,448) (7,125,389) (1,523,046) (50,930)
------------ ------------ ------------ ----------- ----------- ----------
Net increase (decrease) in net assets
resulting from policyholder transactions 3,538,991 (1,667,511) (3,120,487) 5,051,338 10,701,580 1,207,579
------------ ------------ ------------ ----------- ----------- ----------
Net increase (decrease) in net assets . . 4,523,409 (872,812) (2,308,350) 3,071,907 11,844,509 1,337,926
Net assets at beginning of period . . . . 16,502,852 17,375,664 19,684,014 13,182,435 1,337,926 0
------------ ------------ ------------ ----------- ----------- ----------
Net assets at end of period . . . . . . . $ 21,026,261 $ 16,502,852 $ 17,375,664 $16,254,342 $13,182,435 $1,337,926
============ ============ ============ =========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
SMALL/MID CAP
DIVERSIFIED MID CAP GROWTH BOND INDEX CORE
SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------------------------------ ---------- ---------------
1998 1997 1996 1998** 1998**
------------- ------------- ------------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets from
operations:
Net investment income
(loss). . . . . . . $ 582,107 $ 4,761,251 $ 1,601,155 $ 61 $ (14)
Net realized gains . 1,879,057 4,458,015 1,418,069 -- --
Net unrealized
appreciation
(depreciation)
during the
period . . . . . . 3,090 (7,254,086) 4,977,778 (88) 4,448
------------ ------------ ------------ ------ -------
Net increase
(decrease) in net
assets resulting from
operations . . . . . 2,464,254 1,965,180 7,997,002 (27) 4,434
From policyholder
transactions:
Net premiums from
policyholders . . . 15,336,392 26,820,224 30,839,359 4,217 51,606
Net benefits to
policyholders . . . (24,152,376) (23,391,073) (12,562,876) -- --
------------ ------------ ------------ ------ -------
Net increase
(decrease) in net
assets resulting from
policyholder
transactions . . . . (8,815,986) 3,429,151 18,276,483 4,217 51,606
------------ ------------ ------------ ------ -------
Net increase
(decrease) in net
assets . . . . . . . (6,351,732) 5,394,331 26,273,485 4,190 56,040
Net assets at
beginning of period 51,834,969 46,440,638 20,167,153 0 0
------------ ------------ ------------ ------ -------
Net assets at end of
period . . . . . . . $ 45,483,237 $ 51,834,969 $ 46,440,638 $4,190 $56,040
============ ============ ============ ====== =======
</TABLE>
- ---------
* From May 1, 1996 (commencement of operations).
** From May 1, 1998 (commencement of operations).
See accompanying notes.
75
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
REAL ESTATE EQUITY GROWTH & INCOME
SUBACCOUNT SUBACCOUNT
------------------------------------------ ------------------------------------------
1998 1997 1996 1998 1997 1996
------------- ------------- ------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . . $ 2,061,547 $ 2,722,495 $ 1,465,662 $ 51,342,670 $ 50,264,191 $ 35,712,012
Net realized gains . . . . . . . . . 903,492 751,985 184,058 12,465,262 7,351,086 3,938,033
Net unrealized appreciation
(depreciation) during the period . . (10,193,226) 2,343,294 5,976,712 60,549,503 32,872,184 6,429,197
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations . . . . . . (7,228,187) 5,817,774 7,626,432 124,357,435 90,487,461 46,079,242
From policyholder transactions:
Net premiums from policyholders . . . 9,200,146 13,842,210 10,025,714 92,202,780 94,961,660 93,961,136
Net benefits to policyholders . . . . (10,281,699) (8,886,892) (8,112,734) (79,305,839) (70,387,297) (57,300,211)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from policyholder
transactions. . . . . . . . . . . . . (1,081,553) 4,955,318 1,912,980 12,896,941 24,574,363 36,660,925
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets (8,309,740) 10,773,092 9,539,412 137,254,376 115,061,824 82,740,167
Net assets at beginning of period . . 42,559,352 31,786,260 22,246,848 415,058,955 299,997,131 217,256,964
------------ ------------ ------------ ------------ ------------ ------------
Net assets at end of period . . . . . $ 34,249,612 $ 42,559,352 $ 31,786,260 $552,313,331 $415,058,955 $299,997,131
============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
MANAGED SHORT-TERM BOND
SUBACCOUNT SUBACCOUNT
------------------------------------------ ---------------------------------------
1998 1997 1996 1998 1997 1996
------------- ------------- ------------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . . . $ 40,119,710 $ 32,945,083 $ 35,527,179 $ 290,432 $ 198,102 $ 128,560
Net realized gains (losses) . . . . . . 5,216,094 3,754,808 3,555,551 13,933 (12,481) 20,920
Net unrealized appreciation
(depreciation) during the period . . . 28,230,322 19,460,056 (11,690,944) (45,745) 24,408 (69,771)
------------ ------------ ------------ ----------- ----------- -----------
Net increase in net assets resulting from
operations . . . . . . . . . . . . . . . 73,566,126 56,159,947 27,391,786 258,620 210,029 79,709
From policyholder transactions:
Net premiums from policyholders . . . . 67,707,213 71,811,719 71,167,775 3,006,341 3,042,915 2,675,105
Net benefits to policyholders . . . . . (60,791,416) (61,937,355) (56,734,361) (1,696,858) (1,790,137) (2,206,096)
------------ ------------ ------------ ----------- ----------- -----------
Net increase in net assets resulting from
policyholder transactions . . . . . . . 6,915,797 9,874,364 14,433,414 1,309,481 1,252,778 469,009
------------ ------------ ------------ ----------- ----------- -----------
Net increase in net assets . . . . . . . 80,481,923 66,034,311 41,825,200 1,568,101 1,462,806 548,718
Net assets at beginning of period . . . . 370,265,102 304,230,791 262,405,591 4,477,991 3,015,184 2,466,466
------------ ------------ ------------ ----------- ----------- -----------
Net assets at end of period . . . . . . . $450,747,025 $370,265,102 $304,230,791 $ 6,046,092 $ 4,477,991 $ 3,015,184
============ ============ ============ =========== =========== ===========
</TABLE>
See accompanying notes.
76
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
SMALL CAP VALUE INTERNATIONAL OPPORTUNITIES
SUBACCOUNT SUBACCOUNT
-------------------------------------- --------------------------------------
1998 1997 1996* 1998 1997 1996*
------------ ------------ ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . . . . . . $ 2,359 $ 516,077 $ 30,298 $ 21,597 $ 58,327 $ 1,813
Net realized gains (losses) . . . . . . . . . 254,157 179,065 (1,418) 196,024 104,001 2,596
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . . (813,644) (60,841) 66,350 1,366,734 (279,934) 98,849
----------- ----------- ---------- ----------- ----------- ----------
Net increase (decrease) in net assets resulting
from operations . . . . . . . . . . . . . . . (557,128) 634,301 95,230 1,584,355 (117,606) 103,258
From policyholder transactions:
Net premiums from policyholders . . . . . . . 7,056,456 6,430,967 1,344,453 11,422,860 6,249,522 2,395,587
Net benefits to policyholders . . . . . . . . (3,706,669) (1,313,921) (109,889) (2,428,740) (1,882,431) (238,306)
----------- ----------- ---------- ----------- ----------- ----------
Net increase in net assets resulting from
policyholder transactions . . . . . . . . . . 3,349,786 5,117,046 1,234,564 8,994,120 4,367,091 2,157,281
----------- ----------- ---------- ----------- ----------- ----------
Net increase in net assets . . . . . . . . . . 2,792,658 5,751,347 1,329,794 10,578,475 4,249,485 2,260,539
Net assets at beginning of period . . . . . . 7,081,141 1,329,794 0 6,510,024 2,260,539 0
----------- ----------- ---------- ----------- ----------- ----------
Net assets at end of period . . . . . . . . . $ 9,873,799 $ 7,081,141 $1,329,794 $17,088,499 $ 6,510,024 $2,260,539
=========== =========== ========== =========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
HIGH YIELD
EQUITY INDEX BOND
SUBACCOUNT SUBACCOUNT
-------------------------------------- ------------
1998 1997 1996* 1998**
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Increase (decrease) in
net assets from
operations:
Net investment income $ 592,136 $ 255,331 $ 25,586 $ 11
Net realized gains . . 997,526 72,875 4,690 --
Net unrealized
appreciation
(depreciation) during
the period . . . . . 2,882,597 973,872 58,797 (9)
----------- ----------- ---------- ------
Net increase in net
assets resulting from
operations . . . . . . 4,472,259 1,302,078 89,073 2
From policyholder
transactions:
Net premiums from
policyholders . . . . 18,349,859 9,373,895 1,242,668 1,791
Net benefits to
policyholders . . . . (6,452,625) (1,445,089) (132,549) (28)
----------- ----------- ---------- ------
Net increase in net
assets resulting from
policyholder
transactions . . . . . 11,897,234 7,928,806 1,110,119 1,763
----------- ----------- ---------- ------
Net increase in net
assets . . . . . . . . 16,369,493 9,230,884 1,199,192 1,765
Net assets at beginning
of period . . . . . . 10,430,076 1,199,192 0 0
----------- ----------- ---------- ------
Net assets at end of
period . . . . . . . . $26,799,569 $10,430,076 $1,199,192 $1,765
=========== =========== ========== ======
</TABLE>
- ---------
* From May 1, 1996 (commencement of operations).
** From May 1, 1998 (commencement of operations).
See accompanying notes.
77
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
STRATEGIC BOND TURNER CORE
SUBACCOUNT GROWTH SUBACCOUNT
---------------------------------- ---------------------------------------
1998 1997 1996* 1998 1997 1996*
----------- ----------- --------- ----------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets from
operations:
Net investment income
(loss). . . . . . . $ 193,696 $ 145,268 $ 12,594 $ 44,428 $ 21,765 $ (1,465)
Net realized gains
(losses). . . . . . 25,425 4,242 1,272 38,125 1,020 (75,788)
Net unrealized
appreciation
(depreciation)
during the period . 91,397 7,679 (2,250) 318,448 17,720 --
---------- ---------- -------- ---------- ------------ -----------
Net increase
(decrease) in net
assets resulting from
operations . . . . . 310,518 157,189 11,616 401,001 40,505 (77,253)
From policyholder
transactions:
Net premiums from
policyholders . . . 2,562,718 2,575,091 495,203 2,940,093 209,202 1,525,222
Net benefits to
policyholders . . . (892,634) (522,585) (88,706) (811,472) (7,612) (1,445,229)
---------- ---------- -------- ---------- ------------ -----------
Net increase in net
assets resulting from
policyholder
transactions . . . . 1,670,084 2,052,506 406,497 2,128,621 201,590 79,993
---------- ---------- -------- ---------- ------------ -----------
Net increase in net
assets . . . . . . . 1,980,602 2,209,695 418,113 2,529,622 242,095 2,740
Net assets at
beginning of period 2,627,808 418,113 0 244,835 2,740 0
---------- ---------- -------- ---------- ------------ -----------
Net assets at end of
period . . . . . . . $4,608,410 $2,627,808 $418,113 $2,774,457 $ 244,835 $ 2,740
========== ========== ======== ========== ============ ===========
</TABLE>
<TABLE>
<CAPTION>
BRANDES FRONTIER CAPITAL
INTERNATIONAL EQUITY APPRECIATION
SUBACCOUNT SUBACCOUNT
------------------------------- --------------------------------------
1998 1997 1996* 1998 1997 1996*
----------- --------- -------- ------------ ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets from
operations:
Net investment income
(loss). . . . . . . $ 69,983 $ 8,486 $ 288 $ (9,118) $ 52,673 $ (1,628)
Net realized gains
(losses). . . . . . 8,487 371 (30) 89,974 10,828 (130,154)
Net unrealized
appreciation
(depreciation)
during the period . 101,256 (32,110) 220 524,011 28,386 1,432
---------- -------- ------- ----------- ---------- -----------
Net increase
(decrease) in net
assets resulting from
operations . . . . . 179,726 (23,253) 478 604,867 91,887 (130,350)
From policyholder
transactions:
Net premiums from
policyholders . . . 457,393 764,978 64,120 5,165,104 2,429,648 1,568,562
Net benefits to
policyholders . . . (76,919) (10,047) (1,407) (1,076,779) (47,057) (1,376,088)
---------- -------- ------- ----------- ---------- -----------
Net increase in net
assets resulting from
policyholder
transactions . . . . 380,473 754,931 62,713 4,088,325 2,382,591 192,474
---------- -------- ------- ----------- ---------- -----------
Net increase in net
assets . . . . . . . 560,199 731,678 63,191 4,693,192 2,474,478 62,124
Net assets at
beginning of period 794,869 63,191 0 2,536,602 62,124 0
---------- -------- ------- ----------- ---------- -----------
Net assets at end of
period . . . . . . . $1,355,068 $794,869 $63,191 $ 7,229,794 $2,536,602 $ 62,124
========== ======== ======= =========== ========== ===========
</TABLE>
- ---------
* From May 1, 1996 (commencement of operations).
See accompanying notes.
78
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
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-six 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-six Portfolios of the Fund and M Fund which are currently available are
the Large Cap Growth, Sovereign Bond, Emerging Markets Equity, International
Equity Index (formerly, International Equities), Global Equity, Small Cap
Growth, International Balanced, Mid Cap Growth, Large Cap Value, Money Market,
Mid Cap Value, Diversified Mid Cap Growth (formerly, Special Opportunities),
Bond Index, Small/Mid Cap CORE, Real Estate Equity, Growth & Income, Managed,
Short-Term Bond (formerly, Short-Term U.S. Government), Small Cap Value,
International Opportunities, Equity Index, High Yield Bond, Strategic Bond,
Turner Core Growth, Brandes International Equity (formerly, Edinburgh
International Equity) and Frontier Capital Appreciation Portfolios. 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.
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 underlying Portfolio 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.
79
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
NOTES TO FINANCIAL STATEMENTS--(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 .60% 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.
3. 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.
4. DETAILS OF INVESTMENTS
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, 1998 were as follows:
<TABLE>
<CAPTION>
SUBACCOUNT SHARES OWNED COST VALUE
---------- ------------ ------------ --------------
<S> <C> <C> <C>
Large Cap Growth . . . . . . 12,142,245 $235,402,483 $318,056,515
Sovereign Bond . . . . . . . 8,645,835 84,807,507 85,780,562
Emerging Markets Equity . . . 238 1,694 1,689
International Equity Index . 2,848,543 45,974,251 44,324,924
Global Equity . . . . . . . . 191 1,816 1,885
Small Cap Growth . . . . . . 1,038,384 11,234,932 13,486,064
International Balanced . . . 155,612 1,672,887 1,731,100
Mid Cap Growth . . . . . . . 742,261 9,136,569 11,219,643
Large Cap Value . . . . . . . 764,391 10,268,840 10,716,976
Money Market . . . . . . . . 2,102,626 21,026,261 21,026,260
Mid Cap Value . . . . . . . . 1,334,115 18,589,620 16,254,342
Diversified Mid Cap Growth . 2,853,472 45,109,983 45,483,238
Bond Index . . . . . . . . . 411 4,278 4,190
Small/Mid Cap CORE . . . . . 6,214 51,592 56,040
Real Estate Equity . . . . . 2,748,812 35,643,163 34,249,612
Growth & Income . . . . . . . 28,334,899 432,637,528 552,313,331
Managed . . . . . . . . . . . 28,827,116 396,549,399 450,747,024
Short-Term Bond . . . . . . . 601,695 6,083,594 6,046,092
Small Cap Value . . . . . . . 852,010 10,681,936 9,873,899
International Opportunities . 1,399,021 15,902,850 17,088,499
Equity Index . . . . . . . . 1,513,867 22,884,303 26,799,569
High Yield Bond . . . . . . . 191 1,774 1,765
Strategic Bond . . . . . . . 434,780 4,511,586 4,608,410
Turner Core Growth . . . . . 155,520 2,438,293 2,774,457
Brandes International Equity 125,006 1,285,922 1,355,068
Frontier Capital Appreciation 479,112 6,677,398 7,229,794
</TABLE>
80
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Purchases, including reinvestment of dividend distributions and proceeds from
sales of shares in the Portfolios of the Fund and of M Fund during 1998, were as
follows:
<TABLE>
<CAPTION>
SUBACCOUNT PURCHASES SALES
---------- ------------ -------------
<S> <C> <C>
Large Cap Growth . . . . . . . . . . $ 60,056,615 $20,062,340
Sovereign Bond . . . . . . . . . . . 17,193,357 8,469,956
Emerging Markets Equity . . . . . . 1,738 45
International Equity Index . . . . . 13,298,411 12,238,188
Global Equity . . . . . . . . . . . 1,830 14
Small Cap Growth . . . . . . . . . . 5,212,634 1,878,945
International Balanced . . . . . . . 891,556 446,831
Mid Cap Growth . . . . . . . . . . . 6,196,277 1,578,875
Large Cap Value . . . . . . . . . . 5,544,671 1,540,362
Money Market . . . . . . . . . . . . 24,150,417 19,627,008
Mid Cap Value . . . . . . . . . . . 10,174,189 5,076,062
Diversified Mid Cap Growth . . . . . 8,870,815 17,104,694
Bond Index . . . . . . . . . . . . . 4,279 1
Small/Mid Cap CORE . . . . . . . . . 51,605 13
Real Estate Equity . . . . . . . . . 6,973,005 5,993,011
Growth & Income . . . . . . . . . . 101,104,853 36,865,243
Managed . . . . . . . . . . . . . . 76,770,686 29,735,180
Short-Term Bond . . . . . . . . . . 3,072,537 1,472,622
Small Cap Value . . . . . . . . . . 5,794,840 2,442,693
International Opportunities . . . . 10,647,007 1,631,290
Equity Index . . . . . . . . . . . . 16,107,138 3,617,768
High Yield Bond . . . . . . . . . . 1,802 28
Strategic Bond . . . . . . . . . . . 2,667,370 803,590
Turner Core Growth . . . . . . . . . 3,052,385 879,335
Brandes International Equity . . . . 530,820 80,364
Frontier Capital Appreciation . . . 5,113,856 1,034,648
</TABLE>
5. IMPACT OF YEAR 2000 (UNAUDITED)
The John Hancock Variable Life Account V, along with John Hancock Mutual Life
Insurance Company, its ultimate parent (together, John Hancock), is executing
its plan to address the impact of the Year 2000 issues that result from computer
programs being written using two digits to reflect the year rather than four to
define the applicable year and century. Historically, the first two digits were
hardcoded to save memory. Many of the John Hancock's computer programs that have
date-sensitive software may recognize a date using ''00'' as the year 1900
rather than the year 2000. This could result in an information technology (IT)
system failure or miscalculations causing disruptions of operations, including,
among other things, a temporary inability to process transactions, send invoices
or engage in similar normal business activities. In addition, non-IT systems
including, but not limited to, security alarms, elevators and telephones are
subject to malfunction due to their dependence on embedded technology such as
microcontrollers for proper operation. As described, the Year 2000 project
presents a number of challenges for financial institutions since the correction
of Year 2000 issues in IT and non-IT systems will be complex and costly for the
entire industry.
81
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
John Hancock began to address the Year 2000 project as early as 1994. John
Hancock's plan to address the Year 2000 Project includes an awareness campaign,
an assessment period, a renovation stage, validation work and an implementation
of Company solutions.
The continuous awareness campaign serves several purposes: defining the
problem, gaining executive level support and sponsorship, establishing a team
and overall strategy, and assessing existing information system management
resources. Additionally, the awareness campaign establishes an education process
to ensure that all employees are aware of the Year 2000 issue and knowledgeable
of their role in securing solutions.
The assessment phase, which was completed for both IT and non-IT systems as of
April 1998, included the identification, inventory, analysis, and prioritization
of IT and non-IT systems and processes to determine their conversion or
replacement.
The renovation stage reflects the conversion, validation, replacement, or
elimination of selected platforms, applications, databases and utilities,
including the modification of applicable interfaces. Additionally, the
renovation stage includes performance, functionality, and regression testing and
implementation. As of December 31, 1998, the renovation phase was substantially
complete for computer applications, systems and desktops. For all remaining
components the renovation phase is underway and will be complete before the end
of the second quarter of 1999.
The validation phase consists of the compliance testing of renovated systems.
The validation phase is expected to be complete by mid 1999, after renovation is
accomplished. John Hancock will use its testing facilities through the remainder
of 1999 to perform special functional testing. Special functional testing
includes testing, as required, with material third parties and industry groups
and to perform reviews of "dry run" of year-end activities. Scheduled testing of
John Hancock's material relationships with third parties is underway. It is
anticipated that testing with material business partners will continue through
much of 1999.
Finally, the implementation phase involves the actual implementation of
converted or replaced platforms, applications, databases, utilities, interfaces,
and contingency planning. John Hancock is concurrently performing implementation
during the renovation phase and plans to complete this phase before the end of
the second quarter of 1999.
The costs of the Year 2000 project consist of internal IT personnel, and
external costs such as consultants, programmers, replacement software, and
hardware. The costs of the Year 2000 project are expensed as incurred. The
project is funded partially through a reallocation of resources from
discretionary projects. Through December 31, 1998, John Hancock has incurred and
expensed approximately $9.8 million in related payroll costs for its internal IT
personnel on the project. The estimated range of remaining internal IT personnel
costs of the project is approximately $8 to $9 million. Through December 31,
1998, John Hancock has incurred and expensed approximately $36.4 million in
external costs for the project. The estimated range of remaining external costs
of the project is approximately $35 to $36 million. The total costs of the Year
2000 project, based on management's best estimates, include approximately $18
million in internal IT personnel, $7.4 million in the external modification of
software, $34.2 million for external solution providers, $19.4 million in
replacement costs of non-compliant IT systems and $12.6 million in oversight,
test facilities and other expenses. Accordingly, the estimated range of total
costs of the Year 2000 project, internal and external, is approximately $90 to
$95 million. However, there can be no guarantee that these estimates will be
achieved and actual results could materially differ from those plans. Specific
factors that might cause such material differences include, but are not limited
to, the availability and cost of personnel trained in this area, the ability to
locate and correct all relevant computer codes, and similar uncertainties.
82
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT V
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
John Hancock's total Year 2000 project costs include the estimated impact of
external solution providers and are based on presently available information.
However, there is no guarantee that the systems of other companies that John
Hancock's systems rely on will be timely converted, or that a failure to convert
by another company, or a conversion that is incompatible with John Hancock's
systems, would not have material adverse effect on John Hancock. It is
documented in trade publications that companies in foreign countries are not
acting as intensively as domestic companies to remediate Year 2000 issues.
Accordingly, it is expected that Company facilities based outside the United
States face higher degrees of risks from data exchanges with material business
partners. In addition, John Hancock has thousands of individual and business
customers that hold insurance policies, annuities and other financial products
of John Hancock. Nearly all products sold by John Hancock contain date sensitive
data, examples of which are policy expiration dates, birth dates, premium
payment dates. Finally, the regulated nature of John Hancock's industry exposes
it to potential supervisory or enforcement actions relating to Year 2000 issues.
John Hancock's contingency planning initiative related to the Year 2000
project is underway. The plan is addressing John Hancock's readiness as well as
that of material business partners on whom John Hancock depends. John Hancock's
contingency plans are being designed to keep each business unit's operations
functioning in the event of a failure or delay due to the Year 2000 record
format and date calculation changes. Contingency plans are being constructed
based on the foundation of extensive business resumption plans that John Hancock
has maintained and updated periodically, which outline responses to situations
that may affect critical business functions. These plans also provide emergency
operations guidance, which defines a documented order of actions to respond to
problems. These extensive business resumption plans are being enhanced to cover
Year 2000 situations.
83
<PAGE>
ALPHABETICAL INDEX OF KEY WORDS AND PHRASES
This index should help you locate more information about many of the important
concepts in this prospectus.
<TABLE>
<CAPTION>
KEY WORD OR PHRASE PAGE KEY WORD OR PHRASE PAGE
<S> <C> <C> <C>
Account. . . . . . . . 23 30
account value. . . . . 7
attained age . . . . . 8 25
Basic Premium. . . . . 8
basic account value. . 8
Benchmark Value. . . . 4
beneficiary. . . . . . 23
business day . . . . . 23 11
charges. . . . . . . . 7 9
Code . . . . . . . . . 29 14
cost of insurance rates 8 25
Current Death Benefit. 25
date of issue. . . . . 25 4
death benefit. . . . . 3
deductions . . . . . . 7 2
dollar cost averaging. 10 16
Excess Value . . . . . 6
expenses of the Series
Funds . . . . . . . . 9
Extra Death Benefit. . 7
fixed investment option 24 2
full surrender . . . . 11 23
fund . . . . . . . . . 2 2
grace period . . . . . 6 1
Guaranteed Death
Benefit . . . . . . . 12 12
insurance charge . . . 8 23
insured person . . . . 4
investment options . . 1 11
JHVLICO. . . . . . . . 23 11
John Hancock Variable
Series Trust . . . . 2 29
lapse. . . . . . . . . 6 16
Level Schedule . . . . 10
loan . . . . . . . . . 11
loan interest. . . . . 12 1
maximum premiums . . . 5 23
minimum insurance
amount. . . . . . . . 13 4
Minimum First Premium. 5
</TABLE>
84
<PAGE>
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that Section.
REPRESENTATION OF REASONABLENESS
John Hancock Variable Life Insurance Company represents that the fees and
charges deducted under the Policies, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred, and the
risks assumed by the insurance company.
UNDERTAKING REGARDING INDEMNIFICATION
Pursuant to Section X of JHVLICO's Bylaws and Section 67 of the
Massachusetts Business Corporation Law, JHVLICO indemnifies each director,
former director, officer, and former officer, and his heirs and legal
representatives from liability incurred or imposed in connection with any legal
action in which he may be involved by reason of any alleged act or omission as
an officer or a director of JHVLICO.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following Papers and Documents:
The facing sheet.
Cross-Reference Table.
The prospectus including twenty-three subaccounts consisting of __ pages
and the prospectus including twenty-seven subaccounts consisting of __
pages.
The undertaking to file reports.
The undertaking regarding indemnification.
The signatures.
<PAGE>
The following exhibits:
1.A. (1) JHVLICO Board Resolution establishing the separate account included
in Post-Effective Amendment No 10 to this Form S-6 Registration
Statement, filed March 5, 1996.
(2) Not Applicable
(3) (a) Form of Distribution Agreement by and among John Hancock
Distributors, Inc., John Hancock Mutual Life Insurance Company,
and John Hancock Variable Life Insurance Company, incorporated
by reference from Pre-Effective Amendment No. 2 to Form S-6
Registration Statement of John Hancock Variable Life Account S
(File No. 333-15075) filed April 18, 1997.
(b) Specimen Variable Contracts Selling Agreement between John
Hancock Distributors, Inc., and selling broker-dealers,
incorporated by reference from Pre-Effective Amendment No. 2 to
Form S-6 Registration Statement of John Hancock Variable Life
Account S (File No. 333-15075) filed April 18, 1997.
(c) Schedule of sales commissions included in Exhibit I A. (3) (a)
above.
(4) Not Applicable
(5) (a) Form of scheduled premium variable life insurance policy,
included in the initial filing of this Form S-6 Registration
Statement, filed August 18, 1987.
(b) Form of endorsement (FO189E) for scheduled annual premium
variable life insurance policy to reflect availability of a
fixed subaccount, included in Post-Effective Amendment No. 3 to
this Form S-6 Registration Statement, filed in April, 1989.
(c) Form of endorsement (FO289E) for scheduled annual premium
variable life insurance policy to describe variable loan rate,
included in Post-Effective Amendment No. 3 to this Form S-6
Registration Statement, filed in April, 1989.
(6) (a) JHVLICO Certificate of Incorporation included in Post-Effective
Amendment No. 10 to this Form S-6 Registration Statement, filed
March 5, 1996.
(b) JHVLICO By-laws included in Post-Effective Amendment No.10 to
this Form S-6 Registration Statement, filed March 5, 1996.
(7) Not Applicable.
<PAGE>
(8) Not Applicable.
(9) Not Applicable.
(10) Form of application for Policy, included in the initial filing of
this Form S-6 Registration Statement, filed August 18, 1987.
2. Included as exhibit 1.A (5) above
3. Opinion and consent of counsel as to securities being registered, included
in Post-Effective Amendment No. 3 to this Form S-6 Registration Statement,
filed in April, 1989.
4. Not Applicable
5. Not Applicable
6. Opinion and consent of actuary.
7. Consent of independent auditors (Filed herewith).
8. Memorandum describing JHVLICO's issuance, transfer and redemption
procedures for the policy pursuant to Rule 6e-2(b)(l2)(ii), and method of
computing adjustments in payments and values of Policy upon conversion to
a fixed benefit policy pursuant to Rule 6e2(b)(13)(v)(B), included in
Post-Effective Amendment No. 3 to this Form S-6 Registration Statement
filed in April, 1989.
9. Power of Attorney for Ronald J. Bocage, incorporated by reference from
Form 10-K annual report of John Hancock Variable Life Insurance Company
(File No. 33-62895) filed March 28, 1997. Powers of attorney for
Tomlinson, D'Alessandro, Luddy, Lee, Reitano, Van Leer, and Paster
included in Post-Effective Amendment No. 10 to this Form S-6 Registration
Statement filed March 5, 1996.
10. Opinion of counsel as to eligibility of this Post-Effective Amendment for
filing pursuant to Rule 485(b) (Filed herewith).
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the John
Hancock Variable Life Insurance Company has duly caused this amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunder
duly authorized, and its seal to be hereunto fixed and attested, all in the City
of Boston and Commonwealth of Massachusetts on the 29th day of April, 1999.
JOHN HANCOCK VARIABLE LIFE
INSURANCE COMPANY
(SEAL)
By /s/ MICHELE G. VAN LEER
-----------------------
Michele G. Van Leer
President
Attest: /s/ SANDRA M. DADALT
----------------------
Sandra M. DaDalt
Assistant Secretary
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment to the Registration Statement has been signed below by the
following persons in the capacities with John Hancock Variable Life Insurance
Company and on the dates indicated.
Signatures Title Date
- ---------- ----- ----
/s/ PATRICK F. SMITH
- --------------------
Patrick F. Smith Controller (Principal Accounting April 29, 1999
Officer and Acting Principal
Financial Officer)
/s/ MICHELE G. VAN LEER
- -----------------------
Michele G. Van Leer Vice Chairman of the Board
for herself and as and President(Acting Principal
Attorney-in-Fact Executive Officer) April 29, 1999
For: David F. D'Alessandro Chairman of the Board
Robert S. Paster Director
Thomas J. Lee Director
Malcolm Cheung Director
Joseph A. Tomlinson Director
Barbara L. Luddy Director
Ronald J. Bocage Director
Robert R. Reitano Director
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, certifies that it meets all of the requirements for effectiveness of
this Registration Statement pursuant to Rule 485(b) under the Securities Act of
1933 and has duly caused this Post-Effective Amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, and its seal to be hereunto fixed and attested, all in the City of
Boston and Commonwealth of Massachusetts on the 29th day of April, 1999.
On behalf of the Registrant
By John Hancock Variable Life Insurance Company
(Depositor)
(SEAL)
By /s/ Michele G. Van Leer
-----------------------
Michele G. Van Leer
President
Attest /s/ SANDRA M. DADALT
----------------------
Sandra M. DaDalt
Assistant Secretary
<PAGE>
EXHIBIT 6
[John Hancock Mutual Life Insurance Company Letterhead]
April 30, 1999
Board of Directors of the John Hancock Variable Life Insurance Company
Re: Actuarial Opinion:
Members of the Board:
This opinion is furnished in connection with the filing the Amendment
to the Registration Statement on Form S-6 in which this opinion is being filed
as an exhibit, pursuant to the Securities Act of 1933, as amended, with respect
to variable life insurance policies under which amounts will be allocated to one
or more of the subaccounts of one or more variable life insurance separate
accounts. The policies described in the prospectus(es) in said Amendment.
The policy form was reviewed under my direction, and I am familiar with
the amended Registration Statement and exhibits. In my opinion, the
illustrations of policy benefits, values, and accumulated premiums shown in the
prospectus(es) (or appendix thereto) included in the Amendment, based on the
assumptions stated with the illustrations, are consistent with the provisions of
the policies Such assumptions, including, to the extent applicable, the current
cost of insurance rates, current scheduled rates of other charges, current
dividend scales, and any other currently scheduled credits, are reasonable. The
policies have not been designed so as to make the relationship between premiums
and benefits, as shown in the illustrations, appear disproportionately more
favorable to a prospective purchaser of a policy for an insured person(s) with
the characteristics illustrated than to a prospective purchaser of a policy for
an insured person(s) with other characteristics; nor have the particular
examples set forth in the illustrations been selected for the purpose of making
this relationship appear more favorable.
I hereby consent to the filing of this opinion as an exhibit to the
amended Registration Statement and to the use of my name under the heading
"Experts" or "Accounting and Actuarial Experts" in the propectus(es).
Deborah A. Poppel, FSA
Senior Associate Actuary
<PAGE>
EXHIBIT 7
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Accounting and
actuarial experts" in the Prospectus and to the use of our reports dated
February 10, 1999, with respect to the financial statements of John Hancock
Variable Life Account V, and February 19, 1999, with respect to the financial
statements of John Hancock Variable Life Insurance Company, included in this
Post-Effective Amendment No. 14 to the Registration Statement (Form S-6, No. 33-
16611).
/s/Ernst & Young LLP
ERNST & YOUNG LLP
Boston, Massachusetts
April 28, 1999
<PAGE>
EXHIBIT 10
[LETTERHEAD OF JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY]
April 26, 1999
United States Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
John Hancock Variable Life Account V
File Nos. 33-16611 and 811-5290
Commissioners:
This opinion is being furnished with respect to the filing of
Post-Effective Amendment No. 14 under the Securities Act of 1933 on the Form S-6
Registration Statement of John Hancock Variable Life Account V as required by
Rule 485 under the 1933 Act.
We have acted as counsel to Registrant for the purpose of preparing this
Post-Effective Amendment which is being filed pursuant to paragraph (b) of Rule
485 and hereby represent to the Commission that in our opinion this
Post-Effective Amendment does not contain disclosures which would render it
ineligible to become effective pursuant to paragraph (b).
We hereby consent to the filing of this opinion with and as a part of
this Post-Effective Amendment to Registrant's Registration Statement with the
Commission.
Very truly yours,
/s/ Sandra M. DaDalt
--------------------
Sandra M. DaDalt
Counsel
