<PAGE>
As filed with the Securities and Exchange Commission on April 26, 1996
Registration No. 33-75608
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM S-6
Post-Effective Amendment No. 2 to
Registration Statement Under
THE SECURITIES ACT OF 1933
----------------------
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
(Exact name of trust)
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
(Name of depositor)
JOHN HANCOCK PLACE
BOSTON, MASSACHUSETTS 02117
(Complete address of depositor's principal executive offices)
--------------------
FRANCIS C. CLEARY, JR., ESQ.
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
JOHN HANCOCK PLACE, BOSTON, 02117
(Name and complete address of agent for service)
--------------------
Copy to:
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
--
/X/ on May 1, 1996 pursuant to paragraph (b) of Rule 485
--
/ / 60 days after filing pursuant to paragraph (a)(1) of Rule 485
--
/ / on (date) pursuant to paragraph (a)(1) of Rule 485
--
If appropriate check the following box
/ / this post-effective amendment designates a new effective date for a
--
previously filed amendment
Pursuant to the provisions of Rule 24f-2, Registrant has registered an
indefinite amount of the securities being offered and filed its Notice for
fiscal year 1995 pursuant to Rule 24f-2 on February 22, 1996.
FCC0011
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CROSS-REFERENCE TABLE
Form N-8B-2 Item Caption in Prospectus
- ---------------- ---------------------
1, 2 Cover, The Account and Series
Fund John Hancock
3 Inapplicable
4 Cover, Distribution of Policies
5,6 The Account and Series Fund,
State Regulation
7, 8, 9 Inapplicable
10(a),(b),(c),(d),(e) Policy Provisions and Benefits
10(f) Voting Privileges
10(g),(h) Changes that John Hancock
Can Make
10(i) Appendix--Other Policy
Provisions, The Account and
Series Fund
11, 12 Summary, The Account and Series
Fund, Distribution of
Policies
13 Charges and expenses,
Appendix--Illustration of Death
Benefits, Account Values,
Surrender Values and
Accumulated Premiums
14, 15 Summary, Distribution of
Policies, Premiums
16 The Account and Series Fund
17 Summary, Policy
Provisions and Benefits
18 The Account and Series Fund,
Tax Considerations
19 Reports
20 Changes that John Hancock
Can Make
21 Policy Provisions and Benefits
22 Policy Provisions and Benefits
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23 Distribution of Policies
24 Not Applicable
25 John Hancock
26 Not Applicable
27,28,29,30 John Hancock, Board
of Directors and Executive
Officers of John Hancock
31,32,33,34 Not Applicable
35 John Hancock
37 Not Applicable
38,39,40,41(a) Distribution of Policies, John
Hancock, Charges and Expenses
42,43 Not Applicable
44 The Account and Series Fund,
Policy Provisions and Benefits,
Appendix--Illustration of Death
Benefits, Account Values,
Surrender Values and
Accumulated Premiums
45 Not Applicable
46 The Account and Series Fund,
Policy Provisions and Benefits,
Appendix--Illustration of Death
Benefits, Account Values,
Surrender Values and
Accumulated Premiums
47 Not Applicable
48,49,50 Not Applicable
51 Principal Policy Provisions,
Appendix--Other Policy Provisions
52 The Account and Series Fund,
Changes that John Hancock
Can Make
53,54,55,56,57,58,59 Not Applicable
FCC/W3RAK(1490)
<PAGE>
John Hancock Mutual Life
Insurance Company
LOGO (John Hancock)
SCHEDULED PREMIUM VARIABLE LIFE INSURANCE POLICY
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
LIFE AND ANNUITY SERVICES
P.O. BOX 111
BOSTON, MASSACHUSETTS 02117
TELEPHONE 1-800-REAL LIFE (1-800-732-5543)
FAX 617-572-5410
PROSPECTUS MAY 1, 1996
The scheduled premium variable life policy ("Policy") described in this
Prospectus can be funded, at the discretion of the Owner, by up to ten of the
variable subaccounts of John Hancock Mutual Variable Life Insurance Account UV
("Account"), by a fixed subaccount (the "Fixed Account"), or by a combination
of the Fixed Account and up to nine of the variable subaccounts (collectively,
"the subaccounts"). The assets of each variable subaccount will be invested in
a corresponding Portfolio of John Hancock Variable Series Trust I ("Fund"), a
mutual fund advised by John Hancock Mutual Life Insurance Company ("John
Hancock"). The assets of the Fixed Account will be invested in the general
account of John Hancock Mutual Life Insurance Company ("John Hancock").
The prospectus for the Fund, which is attached to this Prospectus, describes
the investment objectives, policies and risks of investing in the Portfolios
of the Fund: Growth and Income (formerly Stock), Large Cap Growth (formerly
Select Stock), Sovereign Bond (formerly Bond), Money Market, Managed, Real
Estate Equity, International Equities (formerly International), Short-Term
U.S. Government, Special Opportunities, Small Cap Growth, Small Cap Value, Mid
Cap Growth, Mid Cap Value, International Balanced, International
Opportunities, Large Cap Value, Strategic Bond and Equity Index. Other
variable subaccounts and Portfolios may be added in the future.
Replacing existing insurance with a Policy described in this Prospectus may
not be to your advantage.
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
IT IS NOT VALID UNLESS ATTACHED TO A CURRENT PROSPECTUS FOR THE FUND.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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TABLE OF CONTENTS
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Page
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SUMMARY................................................................... 1
JOHN HANCOCK.............................................................. 6
THE ACCOUNT AND SERIES FUND............................................... 6
THE FIXED ACCOUNT......................................................... 9
POLICY PROVISIONS AND BENEFITS............................................ 10
Requirements for Issuance of Policy..................................... 10
Premiums................................................................ 10
Account Value and Surrender Value....................................... 14
Death Benefits.......................................................... 15
Death Benefit Options................................................... 15
Definition of Life Insurance............................................ 16
Excess Value............................................................ 16
Partial Withdrawal of Excess Value...................................... 17
Transfers Among Subaccounts............................................. 18
Loan Provisions and Indebtedness........................................ 19
Default and Options on Lapse............................................ 20
Exchange Privilege...................................................... 21
CHARGES AND EXPENSES...................................................... 21
Charges Deducted from Premiums.......................................... 21
Sales Charges........................................................... 21
Administrative Surrender Charge......................................... 23
Reduced Charges for Eligible Groups..................................... 23
Charges Deducted from Account Value..................................... 24
DISTRIBUTION OF POLICIES.................................................. 26
TAX CONSIDERATIONS........................................................ 27
Policy Proceeds......................................................... 27
Charge for John Hancock's Taxes......................................... 28
Corporate and H.R. 10 Plans............................................. 28
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS OF JOHN HANCOCK................. 28
REPORTS................................................................... 29
VOTING PRIVILEGES......................................................... 30
CHANGES THAT JOHN HANCOCK CAN MAKE........................................ 30
STATE REGULATION.......................................................... 31
LEGAL MATTERS............................................................. 31
REGISTRATION STATEMENT.................................................... 31
EXPERTS................................................................... 31
FINANCIAL STATEMENTS...................................................... 31
APPENDIX--OTHER POLICY PROVISIONS......................................... 59
APPENDIX--ILLUSTRATION OF DEATH BENEFITS, ACCOUNT VALUES, SURRENDER VALUES
AND ACCUMULATED PREMIUMS................................................. 61
</TABLE>
THE POLICY DESCRIBED HEREIN IS AVAILABLE ONLY IN NEW YORK. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFERING IN ANY OTHER JURISDICTION. NO PERSON IS
AUTHORIZED TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS.
<PAGE>
INDEX OF DEFINED WORDS AND PHRASES
Below are listed certain words and phrases used in this Prospectus, together
with identification of the page on which each is defined or explained:
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Account Value....................................................... 14
Administrative Surrender Charge..................................... 23
Attained Age........................................................ 15
Base Policy Premium................................................. 11
Basic Account Value................................................. 17
Contingent Deferred Sales Charge.................................... 22
Corridor Factor..................................................... 15
Current Death Benefit............................................... 15
Death Benefit Factor................................................ 15
Excess Value........................................................ 16
Experience Component................................................ 17
Fixed Account....................................................... 9
Grace Period........................................................ 20
Guaranteed Death Benefit............................................ 15
Guaranteed Maximum Recalculation Premium............................ 11
Home Office......................................................... 6
Indebtedness........................................................ 19
Investment Rule..................................................... 12
Loan Account........................................................ 19
Minimum First Premium............................................... 10
Modal............................................................... 10
Premium Component................................................... 17
Premium Recalculation............................................... 11
Required Premium.................................................... 10
Subaccount.......................................................... Cover
Sum Insured......................................................... 15
Surrender Value..................................................... 14
Valuation Date...................................................... 9
</TABLE>
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SUMMARY
WHAT IS THE VARIABLE LIFE POLICY BEING OFFERED?
John Hancock Mutual Life Insurance Company ("John Hancock") issues variable
life insurance policies. The Policies described in this Prospectus are
scheduled annual premium policies that provide for additional premium
flexibilities. Other policies issued by John Hancock are offered by means of
other prospectuses.
The Policies differ from ordinary fixed-benefit life insurance in the way
they work. However, the Policies are the same as fixed-benefit life insurance
in providing lifetime protection against economic loss resulting from the
death of the person insured. The Policies are primarily insurance and not
investments.
The Policies work generally as follows: the Owner periodically gives John
Hancock enough premium to meet the premium schedule selected. John Hancock
takes from each premium an amount for taxes, and, from certain premiums, a
sales charge. John Hancock then places the rest of the premium into as many as
ten subaccounts as directed by the Owner. The assets allocated to each
variable subaccount are invested in shares of the corresponding Portfolio of
the Fund. The currently available Portfolios are identified on the cover of
this Prospectus. The assets allocated to the Fixed Account are invested in the
general account of John Hancock. During the year, John Hancock takes charges
from each subaccount and credits or charges each subaccount with its
respective investment performance. The insurance charge, which is deducted
from the invested assets attributable to each Policy ("Account Value"), varies
monthly with the then attained age of the insured and with the amount of
insurance provided at the start of each month.
The death benefit may be either level or variable as elected by the Owner.
The level death benefit provides a death benefit that generally remains fixed
in amount and an Account Value that varies daily. Two versions of the level
death benefit are available. The variable death benefit provides for a death
benefit and Account Value that may vary daily. John Hancock guarantees that
the death benefit will never be less than the Sum Insured at issue, absent a
partial surrender ("Guaranteed Death Benefit").
At issue of the Policy, the Current Death Benefit is generally well below
the Guaranteed Death Benefit. Whether or not it exceeds the Guaranteed Death
Benefit depends upon the timing and amount of the premium payments, the
investment experience, the activity under the Policy with respect to Policy
loans, additional benefits and the like, the charges made against the Policy,
and the attained age of the insured. Once the Current Death Benefit exceeds
the Guaranteed Death Benefit, the Owner bears the investment risk for any
amount above the Guaranteed Death Benefit, and John Hancock bears the
investment risk for the Guaranteed Death Benefit.
The initial Account Value is the sum of the amounts of the premium that John
Hancock credits to the Policy, after deduction of the initial charges. The
Account Value increases or decreases daily depending on the investment
experience of the subaccounts to which the amounts are allocated at the
direction of the Owner. John Hancock does not guarantee a minimum amount of
Account Value. Therefore, the Owner bears the investment risk for that portion
of the Account Value allocated to the variable subaccounts. The Owner may
surrender a Policy at any time while the insured is living. The Surrender
Value is the Account Value less the sum of any Administrative Surrender Charge
and any Contingent Deferred Sales Charge and less any Indebtedness. If the
Owner surrenders in the early policy years, the amount of Surrender Value
would be low (as compared with other investments without sales charges) and,
consequently, the insurance protection provided prior to surrender would be
costly.
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The minimum Sum Insured at issue is $50,000. All persons insured must be no
more than 75 years of age at issue and meet certain health and other criteria
called "underwriting standards." The smoking status of the insured is
generally reflected in the premiums required and insurance charges made. If
the Sum Insured at issue is at least $100,000, the insured may be eligible for
the "preferred" class, which has the lowest insurance charges for this Policy.
Policies issued under certain circumstances will not directly reflect the sex
of the insured in either the premium rates or the charges and values under the
Policy.
WHAT IS THE AMOUNT OF THE PREMIUMS?
Base Policy Premiums are determined as follows: A fixed premium is
applicable which does not vary until the Policy anniversary nearest the
insured's 70th birthday or, if later, the tenth Policy anniversary. On this
date, in the absence of an earlier election by the Owner, the "Base Policy
Premium" is automatically shifted to a new premium schedule and a new fixed
annual premium becomes payable on a scheduled basis for the remaining life of
the Policy. The new Base Policy Premium depends upon the Policy's Guaranteed
Death Benefit and Account Value at the time of the premium recalculation. The
Owner may request that the Premium Recalculation take place on any Policy
anniversary prior to that nearest the insured's 70th birthday or, if later,
the tenth Policy anniversary. The Base Policy Premium depends upon the Sum
Insured at issue and the insured's age, smoking status and sex (unless the
Policy is sex-neutral). Base Policy Premiums are payable annually or more
frequently over the insured's lifetime. Additional premiums are charged for
Policies in cases involving extra mortality risks and for additional insurance
benefits. These premiums, along with the Base Policy Premiums, are the
Required Premium. There is a 61-day grace period in which to make Required
Premium payments due after the Minimum First Premium is received.
Within limits, Required Premiums may be paid in advance and more than the
Required Premiums may be paid. If the Account Value under a Policy is
sufficiently high, a Required Premium payment otherwise scheduled need not be
paid.
WHAT IS JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV?
The Account is a separate investment account of John Hancock, operated as a
unit investment trust, which supports benefits payable under the Policies.
Each variable subaccount within the Account is invested in a corresponding
Portfolio of John Hancock Variable Series Trust I, a "series" type of mutual
fund. The Portfolios of the Fund which are currently available are Growth and
Income, Large Cap Growth, Sovereign Bond, Money Market, Managed, Real Estate
Equity, International Equities, Short-Term U.S. Government, Special
Opportunities, Small Cap Growth, Small Cap Value, Mid Cap Growth, Mid Cap
Value, International Balanced, International Opportunities, Large Cap Value,
Strategic Bond, and Equity Index.
Each Portfolio has a different investment objective and is managed by John
Hancock. John Hancock receives a fee from the Fund for providing investment
management services with respect to the Growth and Income, Sovereign Bond and
Money Market Portfolios at an annual rate of .25% of the average daily net
assets; with respect to the Large Cap Growth and Managed Portfolios, at an
annual rate of .40% of the first $500 million of the average daily net assets
and at lesser percentages for amounts above $500 million; with respect to the
Short-Term U.S. Government Securities Portfolio, at an annual rate of .50% of
the first $250 million of the average daily net assets and at lesser
percentages for amounts above $250 million; with respect to the Real Estate
Equity Portfolio, at an annual rate of .60% of the first $300 million of the
average daily net assets and at lesser percentages for amounts above $300
million; with respect to the International Portfolio, at an annual rate of
.60% of the first $250 million of the average daily net assets and at lesser
percentages for amounts above $250 million; with respect to the Special
Opportunities Portfolio, at an annual rate of .75% of the first $250 million
of the
2
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average daily net assets and at lesser percentages for amounts above $250
million; with respect to the Equity Index Portfolio at an annual rate of 0.25%
of the average daily net assets; with respect to the Large Cap Value and Small
Cap Growth Portfolios at an annual rate of 0.75% of the average daily net
assets; with respect to the Mid Cap Growth Portfolio at an annual rate of
0.85% for the first $100,000,000 of average daily net assets and at lesser
percentages for amounts above $100,000,000; with respect to the Mid Cap Value
Portfolio at an annual rate of 0.80% of the first $250,000,000 of average
daily net assets and at lesser percentages for amounts above $250,000,000;
with respect to the Small Cap Value Portfolio at an annual rate of 0.80% of
the first $100,000,000 of average daily net assets and at lesser percentages
for amounts above $100,000,000; with respect to the Strategic Bond Portfolio
at an annual rate of 0.75% of the first $25,000,000 of average daily net
assets and at lesser percentages for amounts above $25,000,000; with respect
to the International Opportunities Portfolio at an annual rate of 1% of the
first $20,000,000 of average daily net assets and at lesser percentages for
amounts above $20,000,000; and for the International Balanced Portfolio at an
annual rate of 0.85% of the first $100,000,000 of average daily net assets and
at a lesser percentage for amounts above $100,000,000.
For a full description of the Fund, see the prospectus for the Fund attached
to this Prospectus.
WHAT ARE THE CHARGES MADE BY JOHN HANCOCK?
State Premium Tax and Federal DAC Tax. Charges deducted from each premium
payment, currently 2.35% for state premium taxes and 1.25% as a Federal
deferred acquisition cost or "DAC Tax" charge.
Sales Charge Deduction from Premium. A charge equal to no more than 5% of
all premiums received in any Policy year up to the Required Premium for that
year. John Hancock currently intends to waive this deduction from Required
Premiums received after the first 10 Policy years.
Contingent Deferred Sales Charge. A charge deducted from Account Value if
the Policy lapses or is surrendered during the first 13 Policy years. The
amount of the charge depends upon the year in which lapse or surrender occurs.
The charge will never be higher than 15% of Base Policy Premiums paid to date.
The total charges for sales expenses over the lesser of 20 years or the life
expectancy of the insured will not exceed 9% of the premium payments under the
Policy, assuming all Required Premiums are paid, over that period.
Administrative Surrender Charge. A charge deducted from Account Value if the
Policy lapses or is surrendered in the first 9 Policy years. The amount of the
charge depends upon the year in which lapse or surrender occurs and the amount
of the Policy's Guaranteed Death Benefit at that time. The maximum charge is
$5 per $1000 of Guaranteed Death Benefit.
Issue Charge. A $20 charge deducted monthly from Account Value in the first
Policy year.
Maintenance Charge. A charge deducted monthly from Account Value in an
amount equal to no more than $8 per Policy (currently $6.00).
Insurance Charge. A charge based upon the amount for which John Hancock is
at risk, considering the attained age and risk classification of the insured
and John Hancock's then current monthly insurance rates (never to exceed rates
based on the 1980 CSO Tables) deducted monthly from Account Value. John
Hancock currently intends to reduce this charge beginning in the tenth Policy
year.
Guaranteed Death Benefit Charge. A charge not to exceed 3c per $1000 of
current Sum Insured (currently 1c per $1000) deducted monthly from that
portion of Account Value not attributable to the Fixed Account allocations.
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Charge for Mortality and Expense Risks. A charge made daily at an effective
annual rate of .60% of the assets of the Account.
Charges for Extra Mortality Risks. An additional premium, depending upon the
Sum Insured at issue, age of the insured and the degree of additional
mortality risk, is required if the insured does not qualify for either the
preferred or standard underwriting class. This additional premium is collected
in two ways: up to 8.6% of each year's additional premium is deducted from
premiums when paid and the remainder of each year's additional premium is
deducted monthly from Account Value in equal installments.
Charges for Additional Insurance Benefits. An additional premium is required
if the Owner elects to purchase an additional insurance benefit. This
additional premium is collected in two ways: up to 8.6% of each year's
additional premium is deducted from premiums when paid and the remainder of
the additional premium is deducted monthly from Account Value in equal
installments.
Charge for Partial Withdrawal. A charge of $20 is made at the time of any
partial withdrawal of any Excess Value. No Contingent Deferred Sales Charge or
Administrative Surrender Charge is applicable to any such withdrawals.
See "Charges and Expenses" for a full description of the charges under the
Policy.
IS THERE A CHARGE AGAINST THE ACCOUNT FOR FEDERAL INCOME TAX?
Currently no charge is made against any subaccount for Federal income taxes
but if John Hancock incurs, or expects to incur, income taxes attributable to
any subaccount or this class of Policies in future years, it reserves the
right to make a charge. John Hancock expects that it will continue to be taxed
as a life insurance company. (See "Charge for John Hancock's Taxes".)
WHAT IS THE RELATIONSHIP BETWEEN THE PREMIUM AND THE AMOUNT ALLOCATED TO THE
SUBACCOUNTS?
The initial net premium is allocated by John Hancock from its general
account to one or more of the subaccounts on the date of issue of the Policy.
The initial net premium is the gross premium less the sales charge deducted
from certain premiums and less the charges deducted from all premiums for
state premium taxes and the Federal DAC tax. These charges also apply to
subsequent premium payments. Net premiums derived from payments received after
the issue date are allocated, generally on the date of receipt, to one or more
of the subaccounts as elected by the Owner.
HOW ARE AMOUNTS ALLOCATED TO EACH SUBACCOUNT?
At issue and subsequently thereafter, the Owner will provide us with the
rule ("Investment Rule") we will follow to invest net premiums or other
amounts in any one but not more than ten of the subaccounts. The Owner may
change the Investment Rule under which John Hancock will allocate amounts to
subaccounts. (See "Investment Rule".)
WHAT COMMISSIONS ARE PAID TO AGENTS?
The Policies are sold through agents who are licensed by state authorities
to sell John Hancock's insurance policies. Commissions payable to agents are
described under "Distribution of Policies". Sales expenses in any year are not
equal to the deduction for sales expenses, including any Contingent Deferred
Sales Charge, in that year. Rather, total sales expenses under the Policies
are intended to be recovered over the lifetimes of the insureds covered by the
Policies.
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WHAT IS THE DEATH BENEFIT?
Three death benefit options are available at the time of application for a
Policy.
Option 1: Level Death Benefit. A level death benefit equal to the greater of
the Guaranteed Death Benefit or the Current Death Benefit.
Option 2: Variable Death Benefit. A variable death benefit equal to the
greater of the Guaranteed Death Benefit plus any Excess Value or the Current
Death Benefit.
If neither of the above Options meets the objectives of the Owner, a third
Option may be elected and an endorsement to the Policy will be issued. This
Option is described below.
Option 3: Level Death Benefit With Greater Funding. A level death benefit
equal to the greater of the Guaranteed Death Benefit or the Current Death
Benefit. It differs from the Level Death Benefit Option described above in
that a greater amount of premium payments can generally be made by the Owner.
The Current Death Benefit is equal to the Account Value multiplied by a
Corridor Factor or a Death Benefit Factor. In all three Options, when the
Current Death Benefit exceeds the Guaranteed Death Benefit, the death benefit
will increase whenever the Policy's Account Value increases, and decrease
whenever the Account Value decreases, but never below the Guaranteed Death
Benefit. These factors increase the death benefit if necessary to ensure that
the Policy will continue to qualify as life insurance under the Federal tax
law. See "Death Benefits"; "Death Benefit Options"; "Definition of Life
Insurance" and "Tax Considerations".
HOW DOES THE ACCOUNT VALUE OF A POLICY VARY IN RELATION TO THE SUBACCOUNTS'
INVESTMENT EXPERIENCE?
In general, the Account Value for any day equals the Account Value for the
previous day, increased by any net premium placed in the subaccounts for the
Policy, decreased by any charges made against the Account Value, and increased
or decreased by the investment experience of the subaccounts. No minimum
Account Value for the Policy is guaranteed.
WHAT IS THE LOAN PROVISION AND HOW DOES A LOAN AFFECT THE DEATH BENEFIT,
ACCOUNT VALUE AND SURRENDER VALUE?
After the first Policy year the Owner may obtain a Policy loan. Assuming no
Indebtedness (see below), the maximum amount of any loan in Policy years two
and three is 75% of that portion of the Surrender Value attributable to
variable subaccount investments, plus 100% of that portion of the Surrender
Value attributable to Fixed Account investments; thereafter the maximum is 90%
of that portion of Surrender Value attributable to variable subaccount
investments, plus 100% of that portion of the Surrender Value attributable to
Fixed Account investments. Interest charged on any loan will accrue daily at
an annual rate determined by John Hancock at the start of each Policy Year.
This interest rate will not exceed the greater of (1) the "Published Monthly
Average" (see "Loan Provision and Indebtedness") for the calendar month ending
two months before the calendar month of the Policy anniversary or (2) 5%. A
loan plus accrued interest ("Indebtedness") may be repaid at the discretion of
the Owner in whole or in part in accordance with the terms of the Policy.
While a loan is outstanding, the rate of interest credited to the Account
Value because of the loan will usually be different than the net investment
experience of the subaccounts. Therefore, the Account Value, the Surrender
Value and any death benefit above the Guaranteed Death Benefit are permanently
affected by any loan.
5
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IS THERE A SHORT-TERM CANCELLATION RIGHT?
The Owner may surrender a Policy by delivering or mailing it within 45 days
after the date of Part A of the application, or within 10 days after receipt
of the Policy by the Owner, or within 10 days after mailing by John Hancock of
the Notice of Withdrawal Right, whichever is latest, to John Hancock's Home
Office, or to the agent or agency office through which it was delivered. Any
premium paid on it will be refunded. If required by state law, the refund will
equal the Account Value at the end of the Valuation Period in which the Policy
is received plus all charges or deductions made against premiums plus an
amount reflecting charges against the subaccounts and the investment
management fee of the Fund.
WHAT INVESTMENT TRANSFERS ARE ALLOWED AN OWNER?
The Owner may transfer the Account Value among the variable subaccounts or
into the Fixed Account at any time. Transfers out of the Fixed Account,
however, are subject to restrictions.
ARE THE BENEFITS UNDER A POLICY SUBJECT TO FEDERAL INCOME TAX?
The benefits under Policies described in this Prospectus are expected to
receive the same tax treatment under the Internal Revenue Code of 1986 as
benefits under traditional fixed-benefit life insurance policies. Thus, death
benefits payable under the Policies will not be included in the beneficiary's
gross income. Also, the Owner is not taxed on interest and gains under the
Policy unless and until values are actually received through withdrawal,
surrender, or other distributions.
Under Federal tax law, distributions from Policies on which premiums greater
than a "7-pay" premium limit (as defined in the law) have been paid, will be
subject to special taxation. See "Premiums--7-Pay Premium Limit" and "Policy
Proceeds" for a discussion of how the "7-pay" premium limit may be exceeded
under a Policy. A distribution on such a Policy (called a "modified
endowment") will be taxed to the extent there is any income (gain) to the
Owner and an additional penalty tax may be imposed on the taxable amount.
JOHN HANCOCK
John Hancock, a mutual life insurance company, is authorized to transact a
life insurance and annuity business in Massachusetts and all states.
John Hancock is a company chartered in Massachusetts in 1862. Its Home
Office is at John Hancock Place, Boston, Massachusetts 02117. John Hancock's
assets are over $45 billion.
THE ACCOUNT AND SERIES FUND
The Account, a separate account established under Massachusetts law in 1993
meets the definition of "separate account" under the Federal securities laws
and is registered as a unit investment trust under the Investment Company Act
of 1940 ("1940 Act").
The Account's assets are the property of John Hancock. Each Policy provides
that the portion of the Account's assets equal to the reserves and other
liabilities under the Policy shall not be chargeable with liabilities arising
out of any other business John Hancock may conduct. In addition to the assets
attributable to variable life policies, the Account's assets include assets
derived from charges made by John Hancock. From time to time
6
<PAGE>
these additional assets may be transferred in cash by John Hancock to its
general account. Before making any such transfer, John Hancock will consider
any possible adverse impact the transfer might have on any subaccount.
Additional premiums are charged for Policies where the insured is classified
as a substandard risk and a portion of these premiums is allocated to the
Account.
The Account is registered with the Securities and Exchange Commission (the
"Commission") under the 1940 Act. Such registration does not involve the
supervision by the Commission of the management or policies of the Account or
John Hancock.
The assets in the variable subaccounts are invested in corresponding
Portfolios of the Fund, but the assets of one variable subaccount are not
necessarily legally insulated from liabilities associated with another
variable subaccount. New variable subaccounts may be added or existing
variable subaccounts may be deleted as new Portfolios are added to or deleted
from the Fund and made available to Owners.
SERIES FUND
The Fund is a "series" type of mutual fund registered with the Commission
under the 1940 Act as an open-end diversified management investment company.
The Fund serves as the investment medium for the Account and other unit
investment trust separate accounts established for other variable life
insurance policies and variable annuity contracts. (See the attached Fund
prospectus for a description of a need to monitor for possible conflicts and
other consequences.) A very brief summary of the investment objectives of each
Portfolio is set forth below.
Growth and Income (formerly Stock) Portfolio: to achieve intermediate and
long-term growth of capital, with income as a secondary consideration. This
objective will be pursued by investments principally in common stocks (and in
securities convertible into or with rights to purchase common stocks) of
companies believed by management to offer growth potential over both the
intermediate and long-term.
Large Cap Growth (formerly Select Stock) Portfolio: to achieve above-average
capital appreciation through the ownership of common stocks of companies
believed by management to offer above-average capital appreciation
opportunities. Current income is not an objective of the Portfolio.
Sovereign Bond (formerly Bond) Portfolio: to provide as high a level of
long-term total rate of return as is consistent with prudent investment risk,
through investment in a diversified portfolio of freely marketable debt
securities. Total rate of return consists of current income, including
interest and discount accruals, and capital appreciation.
Money Market Portfolio: to provide maximum current income consistent with
capital preservation and liquidity. It seeks to achieve this objective by
investing in a managed portfolio of high quality money market instruments.
Managed Portfolio: to achieve maximum long-term total return consistent with
prudent investment risk. Investments will be made in common stocks,
convertibles and other fixed income securities and in money market
instruments.
Real Estate Equity Portfolio: to provide above-average income and long-term
growth of capital by investment principally in equity securities of companies
in the real estate and related industries.
International Equities (formerly International) Portfolio: to achieve long-
term growth of capital by investing primarily in foreign equity securities.
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Special Opportunities Portfolio: to achieve long-term capital appreciation
by emphasizing investments in equity securities of issuers in various economic
sectors.
Short-Term U.S. Government Portfolio: to provide a high level of current
income consistent with the maintenance of principal, through investment in a
portfolio of short-term U.S. Treasury securities and U.S. Government agency
securities.
Equity Index Portfolio: to provide investment results that correspond to the
total return of the U.S. market as represented by the S&P 500 utilizing common
stocks that are publicly traded in the United States.
Large Cap Value Portfolio: to provide substantial dividend income, as well
as long-term capital appreciation, through investments in the common stocks of
established companies believed to offer favorable prospects for increasing
dividends and capital appreciation.
Mid Cap Growth Portfolio: to provide long-term growth of capital through a
non-diversified portfolio investing largely in common stocks of mid-sized
companies.
Mid Cap Value Portfolio: to provide long-term growth of capital primarily
through investment in the common stocks of medium capitalization companies
believed by management to sell at a discount to their intrinsic value.
Small Cap Growth Portfolio: to provide long-term growth of capital through a
diversified portfolio investing primarily in common stocks of small
capitalization emerging growth companies.
Small Cap Value Portfolio: to provide long-term growth of capital by
investing in a well diversified portfolio of equity securities of small
capitalization companies exhibiting value characteristics.
Strategic Bond Portfolio: to provide a high total return consistent with
moderate risk of capital and maintenance of liquidity, from a portfolio of
domestic and international fixed income securities.
International Opportunities Portfolio: to provide capital appreciation
through investments in common stocks of primarily well-established, non-United
States companies.
International Balanced Portfolio: to maximize total U.S. dollar return,
consisting of capital appreciation and current income through investment in
non-U.S. equity and fixed income securities.
John Hancock acts as the investment manager for the Fund and John Hancock's
indirectly owned subsidiary, Independence Investment Associates, Inc., with
its principal place of business at 53 State Street, Boston, Massachusetts,
provides sub-investment advice with respect to the Growth and Income, Large
Cap Growth, Equity Index, Managed, Real Estate Equity and Short-Term U.S.
Government Portfolio. Another indirectly owned subsidiary, John Hancock
Advisers, Inc., located at 101 Huntington Avenue, Boston, Massachusetts, and
its subsidiary, John Hancock Advisers International, Limited, located at 34
Dover Street, London, England, provide sub-investment advice with respect to
International Equities Portfolio, and John Hancock Advisers, Inc. does
likewise with respect to the Sovereign Bond, Small Cap Growth and Special
Opportunities Portfolios.
T. Rowe Price Associates, Inc., located at 100 East Pratt St., Baltimore, MD
21202, provides sub-investment advice with respect to the Large Cap Value
Portfolio and, together with its subsidiary, Rowe Price-Fleming International,
Inc., also located at 100 East Pratt St., Baltimore, MD 21202, provides sub-
investment advice with respect to the International Opportunities Portfolio.
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<PAGE>
Invesco Management and Research located at 101 Federal Street, Boston MA
02110, is the sub-investment adviser to the Small Cap Value Portfolio. Janus,
with its principal place of business at 100 Filmore Street, Denver, CO 80206,
is the sub-investment adviser to the Mid Cap Growth Portfolio. Neuberger and
Berman Investment Management of 605 Third Avenue, New York, NY 10158, provides
sub-investment advice to the Mid Cap Value Portfolio. J.P. Morgan Investment
Management Inc., located at 522 Fifth Avenue, New York, NY 10036, provides
investment advice with respect to the Strategic Bond Portfolio and Brinson
Partners, Inc., of 209 S. LaSalle Street, Chicago, IL 60604, does likewise
with respect to the International Balanced Portfolio.
John Hancock will purchase and redeem Fund shares for the Account at their
net asset value without any sales or redemption charges. Shares of the Fund
represent an interest in one of the Portfolios of the Fund which corresponds
to a variable subaccount of the Account. Any dividend or capital gains
distributions received by the Account will be reinvested in Fund shares at
their net asset value as of the dates paid.
On each Valuation Date, shares of each Portfolio are purchased or redeemed
by John Hancock for each variable subaccount based on, among other things, the
amount of net premiums allocated to the variable subaccount, distributions
reinvested, transfers to, from and among variable subaccounts, all to be
effected as of that date. Such purchases and redemptions are effected at the
net asset value per Fund share for each Portfolio determined on that same
Valuation Date. A Valuation Date is any date on which the New York Stock
Exchange is open for trading and on which the Fund values its shares. A
Valuation Period is that period of time from the beginning of the day
following a Valuation Date to the end of the next following Valuation Date.
A full description of the Fund, its investment objectives, policies and
restrictions, its charges, expenses and all other aspects of its operation is
contained in the attached prospectus and the statement of additional
information referred to therein, which should be read together with this
Prospectus.
THE FIXED ACCOUNT
An Owner may allocate premiums to the Fixed Account or transfer all or a
part of the Account Value under a Policy to the Fixed Account. The amount so
allocated or transferred will become a part of John Hancock's general account
assets. John Hancock's general account consists of assets owned by John
Hancock other than those in the Account and in other separate accounts that
have been or may be established by John Hancock. Subject to applicable law,
John Hancock has sole discretion over the investment of assets of the general
account and Owners do not share in the investment experience of those assets.
Instead, John Hancock guarantees that the Account Value allocated to the Fixed
Account will accrue interest daily at an effective annual rate of at least 4%
without regard to the actual investment experience of the general account.
Consequently, if an Owner pays the Required Premiums, allocates all net
premiums only to the Fixed Account, and makes no transfers, partial
withdrawals, or policy loans, the minimum amount and duration of the death
benefit will be determinable and guaranteed. Transfers from the Fixed Account
are subject to certain limitations (see "Transfers Among Subaccounts"), and
charges will vary somewhat for Account Value allocated to the Fixed Account.
See "Charges Deducted From Account Value".
The Account Value in the Fixed Account is equal to the portion of the net
premiums allocated to it, plus any amounts transferred to it and interest
credited to it, minus any charges deducted from it or partial withdrawals or
amounts transferred from it. John Hancock guarantees that interest credited to
the Account Value in the Fixed Account will not be less than an effective
annual rate of 4%. John Hancock may, in its sole discretion, credit higher
rates although it is not obligated to do so. The Owner assumes the risk that
interest credited will not exceed 4% per year. Upon request and in the annual
statement, John Hancock will inform Owners of the then-applicable rate.
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Because of exemptive and exclusionary provisions, interests in John
Hancock's general account have not been registered under the Securities Act of
1933 and the general account has not been registered as an investment company
under the 1940 Act. Accordingly, neither the general account nor any interests
therein are subject to the provisions of these Acts, and John Hancock has been
advised that the staff of the Commission has not reviewed the disclosure in
this prospectus relating to the Fixed Account. Disclosure regarding the Fixed
Account may, however, be subject to certain generally-applicable provisions of
the Federal securities laws relating to accuracy and completeness of
statements made in prospectuses.
POLICY PROVISIONS AND BENEFITS
The discussions which follow under "Death Benefits", "Account Value" and
"Surrender Value" assume that there has been no Policy loan. Benefits and
values are affected if premiums are not paid as scheduled or if a Policy loan
is made.
REQUIREMENTS FOR ISSUANCE OF POLICY
The Policy is generally available with a minimum Sum Insured at issue of
$50,000. All persons insured must be age 75 or under and meet certain health
and other criteria called "underwriting standards". The smoking status of the
insured is reflected in the premiums required and insurance charges made. If
the Sum Insured at issue is at least $100,000, the insured may be eligible for
the "preferred" underwriting class of this Policy, which has the lowest
insurance charges. Policies issued in connection with certain employee plans
will not directly reflect the sex of the insured in either the premium rates
or the charges or values under the Policy. Accordingly, the illustrations set
forth in this Prospectus may differ for such Policies.
PREMIUMS
Payment Schedule. Premiums are scheduled and payable during the lifetime of
the insured in accordance with John Hancock's established rules and rates.
Premiums are payable at John Hancock's Home Office on or before the due date
specified in the Policy.
Scheduled premiums are payable annually or more frequently, depending upon
the premium schedule mode chosen by the Owner. The scheduled payment date of
any premium is the first day of the applicable Modal period. The "Modal"
periods are the monthly, quarterly, semi-annual or annual intervals at which
the Owner elects to have the scheduled premium payments fall due. The Owner
may change the frequency of scheduled premium payments. No additional charge
is made for premium payments made more frequently than annually.
Minimum Premium Requirements. An amount of Required Premium (see below) is
determined by John Hancock at the time of issue of the Policy.
A Minimum First Premium must be received by John Hancock at its Home Office
before the Policy is in full force and effect. The Minimum First Premium is
the first Modal premium. For example, if the Owner has elected a quarterly
Modal premium, one-quarter of the initial Required Premium must be received by
John Hancock at the time of issue of the Policy.
Premium requirements are met by premium payments on a cumulative basis. For
example, the premium requirement on all scheduled due dates of the first
Policy year would be met if the full Required Premium for the first Policy
year were paid at issue of the Policy, regardless of the mode elected.
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Generally, all premiums received, regardless of when received, are counted
by John Hancock when it determines whether the premium requirement is met on a
scheduled due date. This cumulative amount of premiums received is reduced for
this purpose by amounts withdrawn from the Premium Component of Excess Value.
The premium requirement will also be deemed satisfied on any scheduled due
date if any Excess Value is available on that scheduled due date. See "Excess
Value".
Failure to satisfy a premium requirement on a scheduled due date may cause
the Policy to terminate. See "Default and Options on Lapse".
Amount of Required Premium. The Required Premium determined at the start of
each Modal premium period equals an amount for the Sum Insured ("Base Policy
Premium") plus any additional premium because the insured is an extra
mortality risk or because additional insurance benefits have been purchased.
The Base Policy Premium does not change until the Premium Recalculation occurs
or the Policy is partially surrendered.
Premium Recalculation. All Policies are issued on a Modified Schedule as the
basis for the Base Policy Premium. The Base Policy Premium under the Modified
Schedule may increase or decrease upon any Premium Recalculation, whether
automatic or elected earlier by the Owner. A Premium Recalculation must occur
no later than the Policy anniversary nearest the insured's 70th birthday or,
if later, on the tenth Policy anniversary. At the time of the Premium
Recalculation, John Hancock determines a new Base Policy Premium which is
payable through the remaining lifetime of the insured.
The Premium Recalculation applicable to any Policy may be elected by the
Owner at any time up to the Policy anniversary prior to that nearest the
insured's 70th birthday or, if later, the tenth Policy anniversary. If
elected, the Premium Recalculation will be effected on the Policy anniversary
next following receipt by John Hancock at its Home Office of satisfactory
written notice. If not elected sooner, the Premium Recalculation will be
effected automatically by John Hancock as noted above.
The new Base Policy Premium resulting from a Premium Recalculation may be
less than, equal to or greater than the original Base Policy Premium. The new
Base Policy Premium depends on the insured's sex, smoking status, attained
age, the Guaranteed Death Benefit under the Policy and the Account Value on
the Valuation Date immediately preceding the date of the Premium
Recalculation.
A table of Guaranteed Maximum Recalculation Premiums for the insured is
determined by John Hancock and set forth in the Policy. The Guaranteed Maximum
Recalculation Premium increases as the insured's attained age increases. The
new Base Policy Premium will never exceed the Policy's Guaranteed Maximum
Recalculation Premium based on the insured's attained age at the time of the
recalculation.
The Premium Recalculation feature makes it possible for John Hancock to set
a lower Base Policy Premium (and thus a lower Required Premium) at the time of
Policy issuance than would be possible without this feature. If a purchaser at
any time wishes to "lock in" a Base Policy Premium (and Required Premium) for
the life of the Policy, he or she may request a Premium Recalculation at that
time.
The Guaranteed Maximum Recalculation Premium is lowest for a recalculation
at the time a Policy is issued and increases each year the recalculation is
delayed. Accordingly, by delaying the Premium Recalculation, the Owner assumes
the risk that the Base Policy Premium following the recalculation will be
higher than it would have been had the recalculation been performed at the
time the Policy was issued. The longer the delay and the lower the Policy's
Account Value, the greater this risk. On the other hand, an Owner who defers
the Premium Recalculation has the benefit of a lower Base Policy Premium prior
to the recalculation and a longer period of
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time to permit the Policy to accumulate a sufficient amount of Account Value
to reduce the possibility or amount of an increase in the Base Policy Premium
at the time of the recalculation.
If the Policy's Account Value at the time of the Premium Recalculation
exceeds the Policy's Basic Account Value, the Base Policy Premium will be less
following the recalculation than it would have been had the recalculation been
performed at the time of Policy issuance. Otherwise it will be more. As to how
the Basic Account Value is determined, see "Excess Value."
As an example, consider the Policy illustrated on page 59, of this
Prospectus (Death Benefit Option 1 in the amount of $100,000, assuming current
charge rates, for a male standard risk non-smoker age 35 at issue). If no
Premium Recalculation is made at Policy issuance, the Base Policy Premium for
this Policy would be $900 until such time as the Premium Recalculation is
made. Assuming such premium is paid annually until the Premium Recalculation,
and assuming constant gross annual investment returns at the rates set forth
below, the following table illustrates what the Base Policy Premium would be
following a recalculation on the dates shown.
<TABLE>
<CAPTION>
Base Policy Premium Following
Policy Anniversary of Recalculation Assuming Hypothetical Gross
Premium Recalculation Annual Rate of Return of:
- --------------------- ------------------------------------------
0% 6% 12%
------------- ------------- --------------
<S> <C> <C> <C>
0 (Issue Date)......................... $1,414.00 $1,414.00 $1,414.00
5...................................... $1,607.99 $1,581.92 $1,551.41
10...................................... $1,900.30 $1,791.31 $1,635.15
15...................................... $2,334.72 $2,058.15 $1,566.76
20...................................... $3,008.11 $2,433.77 $1,151.92
25...................................... $4,077.27 $2,998.48 $0.00
30...................................... $5,845.15 $3,914.46 $0.00
35*....................................... $8,404.00 $5,561.76 $0.00
</TABLE>
- --------
* Mandatory Premium Recalculation if Owner does not choose earlier date.
A charge will be made if the new Base Policy Premium is below the Guaranteed
Maximum Recalculation Premium for the insured's age at issue of the Policy.
The charge will not exceed 3% (currently 1 1/2%) of the amount by which the
Policy's Account Value exceeds its Basic Account Value at the time of the
Premium Recalculation. See "Guaranteed Minimum Death Benefit Charges." This
charge compensates John Hancock for the risk inherent in "locking in" the Base
Policy Premium at a lower rate than would have been charged if the Premium
Recalculation had been performed at the time of the Policy issuance.
The amount of any Account Value that is considered Excess Value under a
Policy may increase or decrease as a result of a Premium Recalculation. See
"Excess Value."
Billing, Allocation of Premium Payments (Investment Rule). The Owner may at
any time elect to be billed by John Hancock for an amount of premium greater
than the Required Premium otherwise payable. The Owner may also elect to be
billed for premiums on an annual, semi-annual or quarterly basis. An automatic
check-writing program may be available to an Owner interested in making
monthly premium payments. All premiums are payable at John Hancock's Home
Office.
Any premium payment will be processed by John Hancock as of the end of the
Valuation Period in which it is received, unless one of the four exceptions
noted below is applicable. The net premium begins to earn a return in the
Account or Fixed Account, as the case may be, at the close of business on the
date as of which it is
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<PAGE>
processed. Each premium payment will be reduced by the state premium tax
charge, the Federal DAC tax charge and the sales charge deducted from certain
premiums. See "Charges and Expenses". The remainder is the net premium.
The Owner at the time of application must elect an Investment Rule which
will allocate net premiums and any credits to any one or more of the ten
subaccounts. The Owner must select allocation percentages in whole numbers,
the minimum allocation to a subaccount may not be less than 1%, and the total
allocated must equal 100%. The Owner may thereafter change the Investment Rule
prospectively at any time. The change will be effective as to any net premiums
and credits applied after receipt at John Hancock's Home Office of notice
satisfactory to John Hancock. If the Owner requests a change inconsistent with
the transfer provisions, the portion of the request inconsistent with the
transfer provisions will not be effective.
There are four exceptions to the normal practice of processing a premium
payment as of the end of the Valuation Period in which it is received:
(1) A payment received prior to a Policy's date of issue will be
processed as if received on the Valuation Date immediately
preceding the date of issue.
(2) A payment made during a Policy's grace period will be processed as
of the scheduled due date to the extent it represents the amount of
Required Premium in default; any excess will be processed as of the
date of receipt.
(3) If the Minimum First Premium is not received prior to the date of
issue, each payment received thereafter will be processed as if
received on the Valuation Date immediately preceding the issue date
until all of the Minimum First Premium is received.
(4) That portion of any premium that John Hancock delays accepting as
described under "Other Premium Limitations" or "7-Pay Premium
Limit" below, will be processed as of the end of the Valuation
Period in which that amount is accepted.
Flexibility as to Premium Payments. The Owner may pay more than the Required
Premium during a Policy year and may ask to be billed for an amount greater
than any Required Premium. The Owner may also pay amounts in addition to any
billed amount. John Hancock reserves the right to limit premium payments above
the amount of the cumulative Required Premiums due on the Policy. At the time
of Policy issuance, John Hancock will determine whether the planned premium
billing schedule will exceed the 7-pay limit discussed below. If so, John
Hancock will not issue the Policy unless the Owner signs a form acknowledging
that fact.
The ability to pay more than the Required Premium provides the Owner with
considerable payment flexibility in meeting the premium requirements of the
Policy. Consider a Policy with a $1,000 Required Premium and where the Owner
pays $1,250 in each of the first eight Policy years. If none of the additional
premium of $2,000 is withdrawn, the Policy will remain in force for at least
ten years without any further premium payments. During each of these ten
years, the premium received ($1,250 a year for eight years) at least equals
the aggregate Required Premiums ($1,000 a year for 10 years) on the scheduled
payment dates. In other words, the payment of more than the Required Premium
in a year can be relied upon to satisfy the Required Premium requirements in
later years.
7-Pay Premium Limit. Federal tax law modifies the tax treatment of certain
Policy distributions such as loans, surrenders, partial surrenders, and
withdrawals. The application of this modified treatment to any Owner depends
upon whether premiums have been paid at any time during the first 7 Policy
years that exceed a "7-pay" premium as defined in the law. The "7-pay" premium
is greater than the Required Premium but is generally
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<PAGE>
less than the amount an Owner may choose to pay and John Hancock will accept.
The 7-pay limit is the total of net level premiums that would have been
payable at any time for the Policy to be fully paid-up after the payment of 7
level annual premiums. If the total premiums paid exceed the 7-pay limit, the
Policy will be treated as a "modified endowment" which means that the Owner
will be subject to tax to the extent of any income (gain) on any distributions
made from the Policy. A material change in the Policy will result in a new 7-
pay limit and test period. A reduction in the Policy's benefits within the 7-
year period following issuance of, or reinstatement of other material change
in, the Policy may also result in the application of the modified endowment
treatment. See "Policy Proceeds" under "Tax Considerations." If John Hancock
receives any premium payment that will cause a Policy to become a modified
endowment, the excess portion of that premium payment will not be accepted
unless the Owner signs an acknowledgement of that fact. When it identifies
such excess premium, John Hancock sends the Owner immediate notice and refunds
the excess premium if it has not received notice of the acknowledgment by the
time the premium payment check has had a reasonable time to clear the banking
system, but in no case longer than two weeks.
Other Premium Limitations. Federal tax law requires a minimum death benefit
in relation to Account Value. See "Death Benefits--Definition of Life
Insurance". The death benefit of the Policy will be increased if necessary to
ensure that the Policy will continue to satisfy this requirement. If the
payment of a given premium will cause the Policy Account Value to increase to
such an extent that an increase in death benefit is necessary to satisfy
federal tax law requirements, John Hancock has the right to not accept the
excess portion of that premium payment, or to require evidence of insurability
before that portion is accepted. In no event, however, will John Hancock
refuse to accept any Required Premium. Also, if an Owner has elected to use
the "guideline premium and cash value corridor" test for Federal income tax
purposes. John Hancock will not accept the portion of any premium that exceeds
the maximum amount prescribed under that test.
ACCOUNT VALUE AND SURRENDER VALUE
Amount of Account Value. The Account Value increases or decreases depending
upon a number of factors, such as the applicable subaccount's investment
experience, the proportion of the Account Value invested in each subaccount
and the interest credited to any Loan Account established upon the making of a
Policy loan. In general the Account Value for any day equals the Account Value
for the previous day, decreased by charges against the Account Value,
increased or decreased by the investment experience of the subaccounts and
increased by net premiums received. No minimum amount of Account Value is
guaranteed.
A Policy loan will not affect the total amount of Account Value at the time
the loan is made but will result in a different rate of return being credited
to the Loan Account portion of the Account Value.
Amount of Surrender Value. The Surrender Value will be the Account Value
less the sum of any Administrative Surrender Charge, any Contingent Deferred
Sales Charge and any Indebtedness.
The Contingent Deferred Sales Charge is deducted from the Account Value upon
surrender of the Policy during the first thirteen Policy years after issue.
The amount of this charge is set forth in a schedule under "Sales Charges".
The total charges for sales expenses, including the Contingent Deferred Sales
Charge, over the lesser of 20 years or the life expectancy of the insured,
will not exceed 9% of the payments under the Policy, assuming that all
Required Premiums are paid, over that period.
When Policy may be Surrendered. A Policy may be surrendered for its
Surrender Value at any time while the insured is living and the Policy is not
in a grace period. Surrender takes effect and the Surrender Value is
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<PAGE>
determined as of the end of the Valuation Period in which occurs the later of
receipt at John Hancock's Home Office of a signed request and the surrendered
Policy.
When Part of Policy may be Surrendered. A Policy may be partially
surrendered upon submission of a written request satisfactory to John Hancock
in accordance with its rules. Currently, the Policy after partial surrender
must have a Sum Insured at least as large as the minimum amount for which John
Hancock would issue a Policy on the life of the insured. The Guaranteed Death
Benefit and Required Premium for the Policy will be adjusted to reflect the
new Sum Insured. A pro-rata portion of the Account Value will be paid to the
Owner and a pro-rata portion of any Contingent Deferred Sales Charge and any
Administrative Surrender Charge will be deducted. A possible alternative to
the partial surrender of a Policy is the withdrawal of Excess Value. See
"Excess Value".
A surrender or partial surrender may have significant tax consequences. See
"Tax Considerations".
DEATH BENEFITS
The death benefit proceeds are payable upon the death of the insured while
the Policy is in effect. The proceeds will equal the death benefit of the
Policy, plus any additional rider benefits then due, less any Indebtedness.
The death benefit payable under Death Benefit Options 1 and 3, described
below, is the greater of the Guaranteed Death Benefit or the Current Death
Benefit. The death benefit payable under Death Benefit Option 2 described
below is the greater of the Guaranteed Death Benefit, increased by any Excess
Value (see "Excess Value") or the Current Death Benefit.
Guaranteed Death Benefit. The Guaranteed Death Benefit at issue of the
Policy is the same as the Sum Insured at issue shown in the Policy. Thereafter
the Guaranteed Death Benefit may be reduced by a partial surrender on request
of the Owner. John Hancock guarantees that, regardless of the investment
experience of the subaccounts, the death benefit will never be less than the
Guaranteed Death Benefit.
Current Death Benefit. The Current Death Benefit on any date is the Account
Value at the end of the Valuation Period containing that date times either the
Death Benefit Factor or Corridor Factor. The Factor used depends upon the
Death Benefit Option selected by the Owner (see below). The Death Benefit
Factor depends upon the sex, smoking status and the then attained age of the
insured. The Death Benefit Factor decreases slightly from year to year as the
attained age of the insured increases. A complete list of Death Benefit
Factors is set forth in the Policy. The Corridor Factor depends upon the then
attained age of the insured. The Corridor Factor decreases slightly (or
remains the same at older and younger ages) from year to year as the attained
age of the insured increases. A complete list of Corridor Factors is set forth
in the Policy. See "Definition of Life Insurance". The Current Death Benefit
is variable; it increases as the Account Value increases and decreases as the
Account Value decreases.
DEATH BENEFIT OPTIONS
At the time of application for a Policy, the Owner must select from among
three death benefit options. After issue of the Policy the Owner may change
the selection from Option 1 to Option 2 or vice versa, subject to such
evidence of insurability as John Hancock may require. The three options are:
Option 1: Level Death Benefit: Under this option, the death benefit will
equal the Guaranteed Death Benefit, unless the Account Value multiplied by the
Corridor Factor produces a higher death benefit. The Policy will be subject
under this option to the "guideline premium and cash value corridor" test as
defined by Internal
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<PAGE>
Revenue Code ("Code") Section 7702. This option will offer the best
opportunity for the Account Value under a Policy to increase without
increasing the death benefit as quickly as it might under the other options.
When the Current Death Benefit exceeds the Guaranteed Death Benefit, the death
benefit will increase whenever there is an increase in the Policy's Account
Value and will decrease whenever there is a decrease in the Account Value, but
never below the Guaranteed Death Benefit.
Option 2: Variable Death Benefit: Under this option, the death benefit will
equal the Guaranteed Death Benefit, plus any Excess Value, unless the Account
Value multiplied by the Corridor Factor produces a higher death benefit. Under
this option, the Policy will be subject to the "guideline premium and cash
value corridor" test as defined by Code Section 7702. This option will offer
the best opportunity for the Owner who would like to have an increasing death
benefit as early as possible. When the Current Death Benefit exceeds the
Guaranteed Death Benefit plus Excess Value (see below), the death benefit will
increase whenever there is an increase in the Policy's Account Value and will
decrease whenever there is a decrease in the Account Value, but never below
the Guaranteed Death Benefit.
If neither of the above Options meets the objectives of the Owner, a third
Option may be elected and an endorsement to the Policy will be issued. This
Option is described below.
Option 3: Level Death Benefit With Greater Funding: Under this option, the
death benefit will equal the Guaranteed Death Benefit, unless the Account
Value, multiplied by the Death Benefit Factor, gives a higher death benefit.
Under this option, the Policy will be subject to the "cash value accumulation"
test as defined by Code Section 7702. This option will offer the best
opportunity for the Owner who is looking for an increasing death benefit in
later Policy years and/or would like to fund the policy at the "7 pay" limit
for the full 7 years. When the Current Death Benefit exceeds the Guaranteed
Death Benefit, the death benefit will increase whenever there is an increase
in the Policy's Account Value and will decrease whenever there is a decrease
in the Account Value, but never below the Guaranteed Death Benefit.
DEFINITION OF LIFE INSURANCE
Federal tax law requires a minimum death benefit in relation to cash value
for a Policy to qualify as life insurance. The death benefit of a Policy will
be increased if necessary to ensure that the Policy will continue to qualify
as life insurance. One of two tests under current Federal tax law can be used
to determine if a Policy complies with the definition of life insurance in
Section 7702 of the Code.
The "guideline premium and cash value corridor" test limits the amount of
premiums payable under a Policy to a certain amount for an insured of a
particular age and sex. The test also applies a prescribed "Corridor Factor"
to determine a minimum ratio of death benefit to Account Value.
The "cash value accumulation test" also limits the amount of premiums
payable under a Policy to a prescribed amount, using a minimum ratio of death
benefit to a Policy's Account Value, but employs as a standard a "net single
premium" computed in compliance with the Code. If the Account Value under a
Policy is at any time greater than the net single premium at the insured's age
and sex for the proposed death benefit, the death benefit will be increased
automatically by multiplying the Account Value by a "Death Benefit Factor"
computed in compliance with the Code.
EXCESS VALUE
As of the last Valuation Date in each Policy month, the Account Value of the
Policy will be compared against an amount (the Basic Account Value described
below) to determine if any "Excess Value" exists under
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the Policy. Any Excess Value may be withdrawn (as described below) or, if the
Variable Death Benefit Option has been elected, will be used in computing the
amount of variable death benefit. Excess Value is any amount of Account Value
greater than Basic Account Value.
The annual account statement that John Hancock sends to each Owner will
specify the amount of any excess value at the end of the reporting period.
Owners who wish this information at any other time may contact their sales
representative or telephone JHVLICO at 1-800-732-5543.
Generally, the Basic Account Value at any time is what the Policy's Account
Value would have been at that time if level annual premiums (and no additional
premiums) had been paid in the amount of the Maximum Guaranteed Recalculation
Premium at issue and earned a constant net return of 4% per annum and if the
cost of insurance charges had been deducted at the maximum rates set forth in
the Policy, and no other charges. The Maximum Guaranteed Recalculation Premium
at issue is described under "Premiums--Premium Recalculation" and its amount
is specified in each Policy. Notwithstanding the foregoing, if there is a
Policy loan outstanding, the Basic Account Value will not be less than 110% of
Policy Indebtedness. Also, in all cases where optional rider benefits have
been selected, or the insured person is in a substandard risk category, an
additional amount will be added in computing the Basic Account Value to cover
these items through the end of the then-current Policy year. The Basic Account
Value generally increases as the attained age of the insured increases. Basic
Account Value can also be thought of as what the guaranteed cash value would
be under an otherwise comparable non-variable whole life policy. It is the
amount deemed necessary to support the Policy's benefits at any time based on
accepted actuarial methods.
Excess Value may arise from two sources. The Premium Component is Excess
Value up to the amount by which the cumulative premiums paid (excluding
amounts from this component previously withdrawn) exceed the cumulative sum of
Required Premiums. The Premium Component may be zero. The Experience Component
is any amount of Excess Value above the Premium Component and arises out of
favorable investment experience or lower than maximum insurance and expense
charges.
PARTIAL WITHDRAWAL OF EXCESS VALUE
Under John Hancock's current administrative rules, an Owner may withdraw
Excess Value from the Policy on or after the first Policy anniversary. This
privilege, which reduces the Account Value by the amount of the withdrawal and
the associated charge, may be exercised only once in a Policy year and will be
effective as of the end of the Valuation Period in which John Hancock receives
written notice satisfactory to it at its Home Office. The minimum amount that
may be withdrawn is $1,000. Unless the Current Death Benefit exceeds the
Guaranteed Death Benefit, a partial withdrawal will not affect the death
benefit payable. A charge of $20 is made against Account Value for each
partial withdrawal. A withdrawal will reduce the death benefit under the
Variable Death Benefit Option by the amount withdrawn and the associated
charge. A withdrawal may have significant tax consequences. See "Tax
Considerations".
An amount equal to the Excess Value withdrawn will be removed from each
subaccount in the same proportion as the Account Value is then allocated among
the subaccounts. A partial withdrawal is not a loan and, once made, cannot be
repaid. No Contingent Deferred Sales Charge or Administrative Surrender Charge
is deducted upon a partial withdrawal. Amounts withdrawn may reduce the
cumulative amount of premiums received for purposes of determining whether the
premium requirements of the Policy have been met. Moreover, because the
Account Value is reduced by a partial withdrawal, the premium that results
from a Premium Recalculation will be higher because of the partial withdrawal.
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TRANSFERS AMONG SUBACCOUNTS
The Owner may reallocate the amounts held for the Policy in the subaccounts
with no charge. The Owner may either (1) use percentages (in whole numbers) to
be transferred among subaccounts or (2) designate the dollar amount of funds
to be transferred among subaccounts. The reallocation must be such that the
total in the subaccounts after reallocation equals 100% of Account Value.
Transfers out of a variable subaccount will be effective at the end of the
Valuation Period in which John Hancock receives at its Home Office notice
satisfactory to John Hancock. If the Owner requests a reallocation which would
result in amounts being held in more than ten subaccounts, such reallocation
will not be effective and a revised reallocation may be chosen in order that
amounts will be reallocated to no more than ten subaccounts.
Transfers out of the Fixed Account to the variable subaccounts are permitted
only once each Policy year and only during the 31-day period beginning on the
Policy anniversary. Transfers out of the Fixed Account may be requested from
60 days before to 30 days after the Policy anniversary. If received on or
before the Policy anniversary, requests for transfer out of the Fixed Account
will be processed on the Policy anniversary (or the next Valuation Date if the
Policy anniversary does not occur on a Valuation Date); if received after the
Policy anniversary, they will be processed at the end of the Valuation Period
in which John Hancock receives the request at its Home Office. (John Hancock
reserves the right to defer such Fixed Account transfers for six months.)
Transfers among variable subaccounts and transfers into the Fixed Account may
be requested at any time. A maximum of 20% of Fixed Account assets or, if
greater, $500 may be transferred out of the Fixed Account in any Policy year.
Currently, there is no minimum amount limit on transfers out of the Fixed
Account, but John Hancock reserves the right to impose such a limit in the
future. If an Owner requests a transfer out of the Fixed Account 61 days or
more prior to the Policy anniversary, that portion of the reallocation will
not be processed and the Owner's confirmation statement will not reflect a
transfer out of the Fixed Account as to such request.
No transfers may be made while the Policy is in a grace period.
Dollar Cost Averaging. A scheduled monthly transfer option is available to
Owners seeking to take advantage of "dollar cost averaging". This option
provides for the automatic transfer on a monthly basis of a dollar amount
chosen by the Owner from the Money Market Subaccount to any of the other
variable subaccounts.
Eligibility for this option is limited to an Owner who has $2500 or more in
the Money Market Subaccount on the day the transfer is scheduled to begin.
Scheduled transfers may be made to one or more of any other variable
subaccounts but the amount to be transferred monthly to any subaccount must be
$100 or more.
Once the written election is received in form satisfactory to John Hancock
at its Home Office, transfers will begin on approximately the start of the
second month following its receipt. To request an election form or if you have
any questions with respect to this provision, call 1-800-732-5543.
Once elected, the scheduled monthly transfer option will remain in effect
until the receipt of written notice from the Owner by John Hancock at its Home
Office of cancellation of the option, the election of a continued insurance
option on lapse or receipt of notice of the death of the insured, whichever
first occurs.
Telephone Transfers and Policy Loans. Once a written authorization is
completed by the Owner, the Owner may request a transfer or policy loan by
telephoning 1-800-732-5543. During periods of heavy telephone usage,
implementing a telephone transfer or policy loan may be difficult. If an Owner
is unable to reach John Hancock via the above number, the Owner should send a
written request via fax to 1-800-621-0448. (Any requests via fax are
considered telephone requests and are bound by the conditions in the Owner's
signed
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telephone authorization form.) Any fax request should include the Owner's
name, daytime telephone number, Policy number and, in the case of transfers,
the names of the subaccounts from which and to which money will be
transferred. The right to discontinue telephone transactions at any time
without notice to Owners is specifically reserved.
An Owner who authorizes telephone transactions will be liable for any loss,
expense or cost arising out of any unauthorized or fraudulent telephone
instructions which John Hancock reasonably believes to be genuine. John
Hancock employs procedures which include requiring personal identification,
tape recording calls, and providing written confirmation to the Owner. If John
Hancock does not employ reasonable procedures to confirm that instructions
communicated by telephone are genuine, it may be liable for any loss due to
unauthorized or fraudulent instruction.
LOAN PROVISIONS AND INDEBTEDNESS
Loan Provision. Loans may be made at any time a Loan Value is available
after the first Policy year. The Owner may borrow money, assigning the Policy
as the only security for the loan, by completion of a form satisfactory to
John Hancock or, if the telephone transaction authorization form has been
completed, by telephone. Assuming no outstanding Indebtedness in Policy years
two and three, the Loan Value will be 75% of that portion of the Surrender
Value attributable to the variable subaccount investments, plus 100% of that
portion of the Surrender Value attributable to Fixed Account investments and,
in later Policy years, 90% of that portion of the Surrender Value attributable
to variable subaccount investments, plus 100% of that portion of the Surrender
Value attributable to Fixed Account investments. Interest charged on any loan
will accrue daily at an annual rate determined by John Hancock at the start of
each Policy Year. This interest rate will not exceed the greater of (1) the
"Published Monthly Average" (defined below) for the calendar month ending 2
months before the calendar month of the Policy anniversary or (2) 5%. The
"Published Monthly Average" means Moody's Corporate Bond Yield Average--
Monthly Average Corporates, as published by Moody's Investors Service, Inc.,
or if the average is no longer published, a substantially similar average
established by the insurance regulator where the Policy is issued.
The amount of any outstanding loan plus accrued interest is called the
"Indebtedness". Except when used to pay premiums, a loan will not be permitted
unless it is at least $300. The Owner may repay all or a portion of any
Indebtedness while the insured is living and the Policy is not in a grace
period. When a loan is made, an amount equal to the loan proceeds will be
transferred out of the Account and the Fixed Account, as applicable. This
amount is allocated to the Loan Account, a portion of John Hancock's general
account. Each subaccount will be reduced in the same proportion as the Account
Value is then allocated among the subaccounts. Upon each loan repayment, the
same proportionate amount of the entire loan as was borrowed from the Fixed
Account will be repaid to the Fixed Account. The remainder of the loan
repayment will be allocated to the appropriate subaccounts as stipulated in
the current Investment Rule. For example, if the entire loan outstanding is
$3000 of which $1000 was borrrowed from the Fixed Account, then upon a
repayment of $1500, $500 would be allocated to the Fixed Account and the
remaining $1000 would be allocated to the appropriate subaccounts as
stipulated in the current Investment Rule. If an Owner wishes any payment to
constitute a loan repayment (rather than a premium payment), the Owner must so
specify.
Effect of Loan and Indebtedness. A loan does not directly affect the amount
of the Required Premium. While the Indebtedness is outstanding, that portion
of the Account Value that is in the Loan Account is credited interest at a
rate that is 1% less than the loan interest rate for the first 20 Policy years
and, thereafter, .5% less than the loan interest rate. This rate will usually
be different than the net return for the subaccounts. Since the Loan Account
and the remaining portion of the Account Value will generally have different
rates of investment
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return, any death benefit above the Guaranteed Death Benefit, the Account
Value, and the Surrender Value are permanently affected by any Indebtedness,
whether or not repaid in whole or in part. The amount of any Indebtedness is
subtracted from the amount otherwise payable when the Policy proceeds become
payable.
Whenever the Indebtedness equals or exceeds the Surrender Value, the Policy
terminates 31 days after notice has been mailed by John Hancock to the Owner
and any assignee of record at their last known addresses, unless a repayment
of the excess Indebtedness is made within that period.
If a Policy is a modified endowment at the time a loan is made, that loan
may have significant tax consequences. See "Tax Considerations".
DEFAULT AND OPTIONS ON LAPSE
Premium Grace Period, Default and Lapse. Any Required Premium, unless paid
in advance, is in default if not paid on or before its Modal scheduled payment
date, but the Policy provides a 61-day grace period for the payment of each
such amount. (This grace period does not apply to the receipt of the Minimum
First Premium.) The insurance continues in full force during the grace period
but, if the insured dies during the grace period, the amount in default is
deducted from the death benefit otherwise payable. The premium requirement may
also be satisfied and, thus, default may be avoided, if any Excess Value is
available on the scheduled due date.
Written notice will be furnished to the Owner at his or her last known
address, at least 31 days prior to the end of the grace period, specifying the
minimum amount which must be paid to continue the Policy in force on a premium
paying basis after the end of the grace period. If a payment at least equal to
the amount in default is not received by the end of the grace period, the
Policy will lapse. If payment by the Owner of an amount at least equal to the
amount in default is received prior to the end of the grace period, the Policy
will no longer be in default. The portion of the payment equal to the amount
in default will be processed as if it had been received the day it was due;
any excess payment will be processed as of the end of the Valuation Period in
which it is received. See "Premium Payments".
Options on Lapse. If a Policy lapses, the Surrender Value on the date of
lapse is applied under one of the following options for continued insurance
not requiring further payment of premiums. These options provide for Variable
or Fixed Paid-Up Insurance or Fixed Extended Term Insurance on the life of the
insured commencing on the date of lapse.
Both the Variable and Fixed Paid-Up Insurance options provide an amount of
paid-up whole life insurance, determined in accordance with the Policy, which
the Surrender Value will purchase. The amount of Variable Paid-Up Insurance
may then increase or decrease, subject to any guarantee, in accordance with
the investment experience of the subaccounts. The Fixed Paid-Up Insurance
option provides a fixed and level amount of insurance. The Fixed Extended Term
Insurance option provides a fixed amount of insurance determined in accordance
with the Policy, with the insurance coverage continuing for as long a period
as the available Policy values will purchase.
If no option has been elected before the end of the grace period, the Fixed
Extended Term Insurance option automatically applies unless the amount of
Fixed Paid-Up Insurance would equal or exceed the amount of Fixed Extended
Term Insurance or unless the insured is a substandard risk, in either of which
cases Fixed Paid-Up Insurance is provided.
The Variable Paid-Up Insurance option is not available unless the initial
amount of Variable Paid-Up Insurance is at least $5,000.
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A Policy continued under any option may be surrendered for its Surrender
Value while the insured is living. Loans may be available under the Variable
and Fixed Paid-Up Insurance options.
Reinstatement. The Policy may be reinstated in accordance with its terms
(including evidence of insurability satisfactory to John Hancock and payment
of the required premium and charges) within 3 years after the beginning of the
grace period unless the Surrender Value has been paid or otherwise exhausted
or the period of any Fixed Extended Term Insurance has expired.
EXCHANGE PRIVILEGE
The Owner may transfer the entire Account Value under the Policy to the
Fixed Account at any time, creating a non-variable Policy. The exchange will
be effective at the end of the Valuation Period in which John Hancock receives
at its Home Office notice of the transfer satisfactory to John Hancock.
-------------------------
The foregoing description of Policy provisions is qualified by reference to
the specimen Policy which has been filed as an exhibit to the Registration
Statement.
CHARGES AND EXPENSES
CHARGES DEDUCTED FROM PREMIUMS
In addition to part of the sales charge (see "Sales Charges" below), the
following charges are deducted from premiums:
State Premium Tax Charge. A charge equal to 2.35% of each premium payment
will be deducted from each premium payment. Premium taxes vary from state to
state, ranging from zero to 4% currently. A charge of 2.35% is made regardless
of the premium tax imposed by any state. The 2.35% rate is the average rate
expected to be paid on premiums received in all states over the lifetimes of
the insureds covered by the Policies.
Federal DAC Tax Charge. A charge currently equal to 1.25% of each premium
payment will be deducted from each premium payment to cover the estimated cost
to John Hancock of the Federal income tax treatment of the Policies' deferred
acquisition costs--commonly referred to as the "DAC Tax". John Hancock has
determined that this charge is reasonable in relation to John Hancock's
increased Federal income tax burden under the Internal Revenue Code resulting
from the receipt of premiums. John Hancock will not increase this charge under
outstanding Policies, but reserves the right, subject to any required
regulatory approval, to change this charge for Policies not yet issued in
order to correspond with changes in the Federal income tax treatment of the
Policies' deferred acquisition costs.
SALES CHARGES
Charges are made to compensate John Hancock for the cost of selling the
Policy. This cost includes agents' commissions, advertising, and the printing
of the prospectuses and sales literature. The amount of the charge in any
Policy year cannot be specifically related to sales expenses for that year.
John Hancock expects to recover its total sales expenses over the period the
Policies are in effect. To the extent that sales charges are insufficient to
cover total sales expenses, the sales expenses may be recovered from other
sources, including gains from the charge for mortality and expense risks and
other gains with respect to the Policies, or from John Hancock's general
assets. See "Distribution of Policies."
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From Premiums. Part of the sales charge is deducted from premiums received.
This amount is 5% of the premiums received in any Policy year that do not
exceed that year's total Required Premium. John Hancock currently intends to
make this deduction only in the first 10 Policy years, but this is not
contractually guaranteed and the right is reserved to continue deductions over
a longer period. Because the Policies were first offered for sale in 1994, no
Policies have yet been outstanding for more than 10 years.
John Hancock will waive a portion of the sales charge (it is currently
waiving a portion equal to 1 1/2% of the Required Premium) otherwise to be
deducted on a Policy with a current Sum Insured of $250,000 or higher. The
continuation of this waiver is not contractually guaranteed and the waiver may
be withdrawn or modified by John Hancock in the future.
No sales charge is deducted from a premium payment received in excess of
Required Premium in any Policy year. Paying more than one Required Premium in
any Policy year could reduce the Owner's total sales charges. For example, if
a Required Premium of $1,000 were paid in each of the first two Policy years,
the total sales charges deducted would be $100. If instead both of these
Required Premiums were paid during the first Policy year, the total sales
charge deducted would be only $50. Nevertheless, attempting to accelerate or
decelerate premium payments to reduce the potential sales charge deducted from
premiums is not recommended. Any such acceleration of premium payments could
result in a greater Contingent Deferred Sales Charge (and, hence, a greater
overall sales charge) if the Policy were surrendered and would increase the
likelihood that the Policy would become a modified endowment (see "Tax
Considerations--Policy Proceeds"). On the other hand, to pay less than the
amount of Required Premiums by their due dates is to run the risk that the
Policy will lapse, in which case the Owner will lose insurance coverage and be
subject to additional charges.
Contingent Deferred Sales Charge. The remainder of the sales charge will be
deducted only if the Policy is surrendered or stays in default past its grace
period. This second part is the Contingent Deferred Sales Charge. The
Contingent Deferred Sales Charge, however, will not be deducted for a Policy
that lapses or is surrendered on or after the Policy's thirteenth anniversary,
and it will be reduced for a Policy that lapses or is surrendered between the
end of the seventh Policy year and the end of the thirteenth Policy year.
The Contingent Deferred Sales Charge is a percentage of the lesser of (a)
the total amount of premiums paid before the date of surrender or lapse and
(b) the sum of the Base Policy Premiums due on or before the date of surrender
or lapse. (For this purpose Base Policy Premiums are pro-rated through the end
of the Policy Month in which the surrender or lapse occurs).
<TABLE>
<CAPTION>
Maximum Contingent Deferred Sales
Charge as a Percentage of Base Policy
Premiums Due Through Effective
For Surrenders or Lapses Effective During: Date of Surrender or Lapse
------------------------------------------ -------------------------------------
<S> <C>
Policy Years 1-6....................... 15.00%
Policy Year 7.......................... 12.85%
Policy Year 8.......................... 10.00%
Policy Year 9.......................... 7.77%
Policy Year 10......................... 6.00%
Policy Year 11......................... 4.55%
Policy Year 12......................... 2.92%
Policy Year 13......................... 1.54%
Policy Year 14 and Later............... 0%
</TABLE>
- --------
The amount of the Contingent Deferred Sales Charge is calculated on the
basis of the Base Policy Premium for the age of the insured at the time of
issue of the Policy.
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The absence of any need to pay a Required Premium because of the existence
of Excess Value on a scheduled due date does not impact the amount of Base
Policy Premiums deemed to have been due to date for purposes of the Contingent
Deferred Sales Charge. For example, if the size of the Account Value is
sufficiently large that the Required Premium for the fifth Policy year
otherwise payable need not be paid and the Owner surrenders the Policy at the
end of the fifth Policy year, the Contingent Deferred Sales Charge would be
based on the sum of five Base Policy Premiums on the Policy (or, if less, the
total amount of premiums actually paid during all five Policy years).
Similarly, if a Premium Recalculation is required or effected, the amount of
premiums due to the date of any subsequent surrender or lapse for purposes of
calculating the Contingent Deferred Sales Charge will continue to be based on
the Base Policy Premium in effect prior to such recalculation.
The Contingent Deferred Sales Charge reaches its maximum at the end of the
sixth Policy year, stays level in the seventh Policy year and is reduced in
each Policy year thereafter until it reaches zero in Policy year 14. At issue
ages higher than age 54, the maximum is reached at an earlier Policy year, and
may be reduced to zero over a shorter number of years.
ADMINISTRATIVE SURRENDER CHARGE
A charge is made if the Policy is surrendered or lapses in the first nine
Policy years to recover administrative expenses relating to the issue of the
Policy which would not otherwise be recouped. The maximum charge in Policy
years 1 through 6 is $5 per $1,000 of Guaranteed Death Benefit, in Policy
years 7 and 8 is $4 per $1,000 of Guaranteed Death Benefit and in Policy year
9 is $3 per $1,000 of Guaranteed Death Benefit. For insureds age 24 or less at
issue, this charge will never be more than $200 and will be charged only in
the first four Policy years. Currently a Policy with a Guaranteed Death
Benefit at time of surrender or lapse of $250,000 or more is not charged. A
Policy of less than $250,000 Guaranteed Death Benefit at time of surrender or
lapse is not currently charged if the surrender or lapse is after the fourth
Policy year and is charged no more than $300 if the surrender or lapse is in
the first four Policy years. These lower current charges may be withdrawn or
modified by John Hancock at some future date.
This charge is made to compensate John Hancock for expenses incurred in
connection with the underwriting, issuance and maintenance of the Policy which
may not be recovered upon an early surrender or lapse of the Policy.
REDUCED CHARGES FOR ELIGIBLE GROUPS
The sales charges, Administrative Surrender Charge and Issue Charge
(described below) otherwise applicable may be reduced with respect to Policies
issued to a class of associated individuals or to a trustee, employer or
similar entity where John Hancock anticipates that the sales to the members of
the class will result in lower than normal sales and administrative expenses.
These reductions will be made in accordance with John Hancock's rules in
effect at the time of the application for a Policy. The factors considered by
John Hancock in determining the eligibility of a particular group for reduced
charges, and the level of the reduction, are as follows: the nature of the
association and its organizational framework; the method by which sales will
be made to the members of the class; the facility with which premiums will be
collected from the associated individuals and the association's capabilities
with respect to administrative tasks; the anticipated persistency of the
Policies; the size of the class of associated individuals and the number of
years it has been in existence; and any other such circumstances which justify
a reduction in sales or administrative expenses. Any reduction will be
reasonable and will apply uniformly to all prospective Policy purchasers in
the class and will not be unfairly discriminatory to the interests of any
Policy Owner.
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CHARGES DEDUCTED FROM ACCOUNT VALUE
The following charges are deducted from Account Value:
Issue Charge. John Hancock will deduct from Account Value an Issue Charge
equal to $20 per month for the first twelve Policy months to compensate John
Hancock for expenses incurred in connection with the issuance of the Policy,
other than sales expenses. Such expenses include medical examinations,
insurance underwriting costs, and costs incurred in processing applications
and establishing permanent Policy records.
Maintenance Charge. John Hancock will deduct from Account Value a monthly
charge not to exceed $8 per Policy. The current monthly charge is $6 per
Policy.
This charge is to compensate John Hancock for administrative expenses,
including recordkeeping, processing death claims and surrenders, making Policy
changes, reporting and other communications to Owners and other similar
expense and overhead costs.
Insurance Charge. The insurance charge deducted monthly from Account Value
is based on the attained age of the insured and the amount at risk. The amount
at risk is the difference between the death benefit and the Account Value. The
amount of the insurance charge is determined by multiplying John Hancock's
then current monthly rate for insurance by the amount at risk.
Current monthly rates for insurance are based on the sex, age, smoking
status, underwriting class of the insured and the length of time the Policy
has been in effect. John Hancock may change these rates from time to time, but
they will never be more than the guaranteed maximum rates based on the 1980
Commissioners' Standard Ordinary Mortality Tables set forth in the Policy.
A reduction in the insurance charge may be made to a Policy beginning on the
first day of the first month in the tenth Policy year. This reduction is not
guaranteed but it is John Hancock's present intention to effect this reduction
in the tenth and following Policy years as long as the Policy is in force.
The amount of the reduction will depend upon the length of time the Policy
has been in force. In the tenth Policy year the monthly insurance charge will
be reduced by an amount equal to a percentage of the then Account Value. This
percentage will begin at an annual effective rate of .20% in the tenth Policy
year and increase annually by .01% through and including the thirtieth Policy
year. Thereafter the percentage reduction each year the Policy remains in
force will be at an annual effective rate of .40%.
For example, it is expected that the reduction percentage in Policy year 11
would be at an effective annual rate of .21%, in Policy year 20 would be .30%
and in Policy year 30 would be .40%.
John Hancock reserves the right to modify or discontinue this reduction.
Because the Policies were first offered for sale in 1994, no reductions have
yet been made.
Lower current insurance rates are offered at most ages for insureds who
qualify as non-smokers. To qualify, an insured must meet additional
requirements that relate to smoking habits.
John Hancock also charges lower current insurance rates under a Policy with
a current Sum Insured of $250,000 or higher, but these lower rates are not
contractually guaranteed and may be withdrawn at some future date.
Guaranteed Death Benefit Charge. John Hancock deducts a charge from that
portion of the Account Value attributable to the variable subaccounts for the
minimum death benefit that has been guaranteed. John Hancock
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guarantees that the death benefit will never be less than the Sum Insured. In
return for making this guarantee, John Hancock currently makes a monthly
charge of 1c per $1000 of the current Sum Insured. This charge may be
increased by John Hancock but will never exceed 3c per $1000 of the current
Sum Insured.
When a Premium Recalculation is effected, and the new Base Policy Premium is
less than the Guaranteed Maximum Recalculated Premium for the insured's age at
issue of the Policy, a one-time deduction is made from the amount applied as
compensation for the additional guarantee. The current charge is 1 1/2% of the
portion of the Account Value applied to reduce the new Base Policy Premium to
an amount below the Guaranteed Maximum Recalculated Premium for the insured's
age at issue. This charge may be increased by John Hancock but it will never
exceed 3% of the amount applied.
Charge for Mortality and Expense Risks. A daily charge is made for mortality
and expense risks assumed by John Hancock at an effective annual rate of .60%
of the value of the Account's assets attributable to the Policies. This charge
begins when amounts under a Policy are first allocated to the Account. The
mortality risk assumed is that insureds may live for a shorter period of time
than estimated and, therefore, a greater amount of death benefit than expected
will be payable in relation to the amount of premiums received. The expense
risk assumed is that expenses incurred in issuing and administering the
Policies will be greater than estimated. John Hancock will realize a gain from
this charge to the extent it is not needed to provide for benefits and
expenses under the Policies.
Charges for Extra Mortality Risks. An insured who does not qualify for
either the preferred or standard underwriting class must pay an additional
Required Premium because of the extra mortality risk. This additional premium
is collected in two ways: up to 8.6% of the additional premium is deducted
from premiums when paid and the remainder of the additional premium is
deducted monthly from Account Value in equal installments.
Charges for Additional Insurance Benefits. An additional Required Premium
must be paid if the Owner elects to purchase an additional insurance benefit.
This additional premium is collected in two ways: up to 8.6% of the additional
premium is deducted from premiums when paid and the remainder of the
additional premium is deducted monthly from Account Value in equal
installments.
Charges for Taxes. Currently no charge is made against Account Value for
John Hancock's Federal income taxes but if John Hancock incurs, or expects to
incur, income taxes attributable to the Account or this class of Policies in
future years, it reserves the right to make a charge and any charge would
affect what the subaccounts earn. Charges for other taxes, if any,
attributable to the subaccounts may also be made.
Charge for Partial Withdrawal. On or after the first Policy anniversary, the
Owner may withdraw all or part of any Excess Value in the Policy. The amount
to be withdrawn must be at least $1000. An administrative charge equal to $20
will be deducted from the Account Value on the date of withdrawal.
Guarantee of Premiums and Certain Charges. The Policy's Base Policy Premium
is guaranteed not to increase, except that a larger Base Policy Premium may
result from the Premium Recalculation. The state premium tax charge, the
Federal DAC tax charge, mortality and expense risk charge, the charge for
partial withdrawals and the Issue Charge are guaranteed not to increase over
the life of the Policy. The maintenance charge, the Guaranteed Death Benefit
Charge, the sales charges, the Administrative Surrender Charge and the
insurance charge are guaranteed not to exceed the maximums set forth in the
Policy.
Fund Investment Management Fee. The Account purchases shares of the Fund at
net asset value, a value which reflects the deduction from the assets of the
Fund of its investment management fee which is described
25
<PAGE>
briefly in the summary of this prospectus and of certain non-advisory
operating expenses. For a full description of these deductions, see the
attached prospectus for the Fund.
The monthly deductions from Account Value described above are deducted on
the date of issue and on the first day of each Policy month thereafter. These
deductions are made from the Subaccounts in proportion to the amount of
Account Value in each. For each month that John Hancock is unable to deduct
any charge because there is insufficient Account Value, the uncollected
charges will accumulate and be deducted when and if sufficient Account Value
is available.
DISTRIBUTION OF POLICIES
Applications are solicited by agents who are licensed by state insurance
authorities to sell John Hancock's Policies and who are also registered
representatives of John Hancock or other broker-dealer firms. John Hancock
performs insurance underwriting, determines whether to accept or reject the
application for a Policy and the insured's risk classification and acts as the
principal underwriter of the Policies. John Hancock will make the appropriate
refund if a Policy ultimately is not issued or is returned under the short-
term cancellation provision. Officers and employees of John Hancock are
covered by a blanket bond by a commercial carrier in the amount of $25
million.
John Hancock's representatives are compensated for sales of the Policies on
a commission and service fee basis by John Hancock and for other direct and
indirect expenses (including agency expense allowances, general agent,
district manager and supervisor's compensation, agent's training allowances,
deferred compensation and insurance benefits of agents, general agents,
district managers and supervisors, agency office clerical expenses and
advertising) actually incurred in connection with the marketing and sale of
the Policies.
The maximum commission payable to an agent for selling a Policy is 50% of
the Base Policy Premiums (prior to any Premium Recalculation) that would be
payable in the first Policy year, 8% of such premiums payable in the second,
third and fourth Policy years and 3% of any such premiums received by John
Hancock in later years. The maximum commission on any other premium paid in
any year is 3%.
Agents with less than four years of service with John Hancock and agents
compensated on salary plus bonus or level commission programs may be paid on a
different basis. Agents who meet certain productivity and persistency
standards with respect to the sale of policies issued by John Hancock will be
eligible for additional compensation.
John Hancock is registered with the Commission under the Securities Exchange
Act of 1934 as a broker-dealer and is a member of the National Association of
Securities Dealers, Inc. John Hancock is not a member of the Securities
Investor Protection Corporation because it is exempt from membership in that
organization. The Policies may be sold through other registered broker-dealers
whose representatives are authorized by applicable law to sell variable life
insurance policies. The commissions which will be paid out by such broker-
dealers to their registered representatives will be in accordance with their
established rules. The commission rates may be more or less than those set
forth above for John Hancock's agents. In addition, their qualified registered
representatives may be reimbursed by the broker-dealers under expense
reimbursement allowance programs in any year for approved voucherable expenses
incurred.
John Hancock serves as principal underwriter for other separate accounts
registered under the 1940 Act: John Hancock Variable Annuity Accounts U, I and
V and John Hancock Variable Life Accounts U, V and S. John Hancock is also the
investment manager and principal underwriter for the Fund.
26
<PAGE>
TAX CONSIDERATIONS
The below description of Federal income tax consequences is only a brief
summary and is not intended as tax advice. For further information consult a
qualified tax advisor. Federal, state and local tax laws can change from time
to time and, as a result, the tax consequences to the Owner and beneficiary
may be altered.
POLICY PROCEEDS
Although the Policy contains provisions not found in fixed benefit life
insurance policies, John Hancock believes the Policy will receive the same
Federal income and estate tax treatment. Section 7702 of the Internal Revenue
Code ("Code") defines life insurance for Federal tax purposes. If certain
standards are met at issue and over the life of the Policy, the Policy will
come within that definition. John Hancock will monitor compliance with these
standards. Furthermore, John Hancock reserves the right to make any changes in
the Policy necessary to ensure the Policy is within the definition of life
insurance.
John Hancock believes that the death benefit under the Policy will be
excludable from the beneficiary's gross income under Section 101 of the Code.
In addition, increases in Account Value as a result of interest or investment
experience will not be subject to Federal income tax unless and until values
are actually received through withdrawal, surrender or other distributions.
A surrender, partial surrender or withdrawal may have tax consequences. For
example, the Owner will be taxed on a surrender to the extent that the
surrender value exceeds the net premiums paid under the Policy, i.e., ignoring
premiums paid for optional benefits and riders. But under certain
circumstances within the first 15 Policy years the Owner may be taxed on a
withdrawal of Policy values even if total withdrawals do not exceed total
premiums paid.
John Hancock also believes that, except as noted below, loans received under
the Policy will be treated as indebtedness of an Owner and that no part of any
loan will constitute income to the Owner. However, the amount of any loan
outstanding will be taxed to the Owner when a Policy lapses.
Distributions under Policies on which premiums greater than the "7-pay"
limit have been paid will be treated as distributions from a "modified
endowment," which are subject to taxation based on Federal tax legislation.
The Owner of such a Policy will be taxed on distributions such as loans,
surrenders, partial surrenders and withdrawals to the extent of any income
(gain) to the Owner (income-first basis). The distributions affected will be
those made on or after, and within the two year period prior to, the time the
Policy becomes a modified endowment. Additionally, a 10% penalty tax may be
imposed on income distributed before the Owner attains age 59 1/2.
Furthermore, any time there is a "material change" in a Policy (such as an
increase in Sum Insured, the addition of certain other Policy benefits after
issue, or reinstatement of a lapsed policy), the Policy will be subject to a
new "7-pay" test, with the possibility of a tax on distributions if it were
subsequently to become a modified endowment. Moreover, if benefits under a
Policy are reduced (such as a reduction in the Sum Insured or death benefit or
the reduction or cancellation of certain rider benefits, or Policy
termination) during the 7 years in which the 7-pay test is being applied, the
7-pay limit will be recalculated based on the reduced benefits. If the
premiums paid to date are greater than the recalculated 7-pay limit, the
policy will become a modified endowment.
All modified endowment contracts issued by the same insurer (or affiliates)
to the Owner during any calendar year generally will be treated as one
contract for the purpose of applying these rules. Your tax advisor should be
consulted if you have questions regarding the possible impact of the 7-pay
limit on your Policy.
27
<PAGE>
Federal estate and state and local estate, inheritance and other tax
consequences of ownership or receipt of Policy proceeds depend on the
circumstances of each Owner or beneficiary.
CHARGE FOR JOHN HANCOCK'S TAXES
Except for the DAC Tax charge, currently John Hancock makes no charge for
Federal income taxes that may be attributable to this class of Policies. If
John Hancock incurs, or expects to incur, income taxes attributable to this
class of Policies or any subaccount in the future, it reserves the right to
make a charge for those taxes.
Under current laws, John Hancock may incur state and local taxes (in
addition to premium taxes) in several states. At present, these taxes are not
significant. If there is a material change in applicable state or local tax
laws, charges for such taxes may be made.
CORPORATE AND H.R. 10 PLANS
The Policy may be acquired in connection with the funding of retirement
plans satisfying the qualification requirements of Section 401 of the Code. If
so, the Code provisions relating to such plans and life insurance benefits
thereunder should be carefully scrutinized.
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS OF JOHN HANCOCK
The Directors and Executive Officers of John Hancock and their principal
occupations during the past five years are as follows:
<TABLE>
<CAPTION>
Directors Principal Occupations
--------- ---------------------
<S> <C>
Samuel W. Bodman Chairman of the Board and Chief Executive Officer,
Cabot Corporation (chemicals)
Nelson S. Gifford Director, formerly Chairman of the Board, Dennison
Manufacturing Company, Inc. (paper products).
William L. Boyan President and Chief Operating Officer, John Hancock
E. James Morton Director, formerly Chairman of the Board, John Hancock
John F. Magee Chairman of the Board, Arthur D. Little, Inc. (manage-
ment consultant).
John M. Connors, Jr. President and Chief Executive Officer, Hill, Holliday,
Connors, Cosmopoulos, Inc. (advertising).
Stephen L. Brown Chairman of the Board and Chief Executive Officer,
John Hancock
Thomas L. Phillips Director, formerly Chairman of the Board, Raytheon
Company (electronics).
I. MacAllister Booth Retired; formerly Chairman of the Board, Polaroid Cor-
poration (photographic products)
C. Vincent Vappi Retired, formerly Chairman of the Board, Vappi & Com-
pany, Inc. (construction).
Randolph W. Bromery Interim President, Springfield College.
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
Directors Principal Occupations
--------- ---------------------
<S> <C>
Delbert C. Staley Retired; formerly Chairman of the Board,
NYNEX Corporation (telephone utility).
David F. D'Alessandro Senior Executive Vice President, John Han-
cock
Joan T. Bok Chairman of the Board, New England Electric
System (electric utility).
Robert E. Fast Partner, Hale and Dorr (law firm).
Foster L. Aborn Vice Chairman of the Board, John Hancock
Kathleen F. Feldstein President, Economic Studies Inc. (consul-
tant).
Lawrence K. Fish Chairman and Chief Executive Officer, Citi-
zens Financial Group (banking).
Richard F. Syron Chairman of the Board and Chief Executive
Officer, American Stock Exchange.
Michael C. Hawley President and Chief Operating Officer, The
Gillette Company (razors).
<CAPTION>
Executive Officers
------------------
<S> <C>
Diane M. Capstaff Executive Vice President
Thomas E. Moloney Executive Vice President
Richard S. Scipione General Counsel
Bruce E. Skrine Vice President and Secretary
</TABLE>
The business address of all Directors and officers of John Hancock is John
Hancock Place, Boston, Massachusetts 02117.
REPORTS
In each Policy year (except while the Policy is continued in effect under a
fixed option on lapse) a statement will be sent to the Owner setting forth the
amount of the Current and Guaranteed Death Benefits, the Account Value, the
portion of the Account Value in each subaccount, the Surrender Value, premiums
received and charges deducted from premium since the last report, and any
outstanding indebtedness (and interest charged for the preceding Policy year)
as of the last day of such year. Moreover, confirmations will be furnished to
Owners of transfers among subaccounts, Policy loans, partial withdrawals of
Excess Value and certain other Policy transactions. Premium payments not in
response to a billing notice are "unscheduled" and will be separately
confirmed. Therefore, an Owner who makes a premium payment that differs by
more than $25 from that billed will receive a separate confirmation of that
premium payment.
Owners will be sent semiannually a report containing the financial
statements of the Fund, including a list of securities held in each Portfolio.
29
<PAGE>
VOTING PRIVILEGES
All of the assets in the variable subaccounts of the Account are invested in
shares of the corresponding Portfolios of the Fund. John Hancock will vote the
shares of each of the Portfolios of the Fund which are deemed attributable to
Policies at regular and special meetings of the Fund's shareholders in
accordance with instructions received from Owners of policies. Shares of the
Fund held in the Account which are not attributable to policies and shares for
which instructions from Owners are not received will be represented by John
Hancock at the meeting and will be voted for and against each matter in the
same proportions as the votes based upon the instructions received from the
owners of all policies funded through the Account's corresponding variable
subaccounts.
The number of Fund shares held in each variable subaccount deemed
attributable to each Owner is determined by dividing the amount of a Policy's
Account Value held in the variable subaccount by the net asset value of one
share in the corresponding Fund Portfolio in which the assets of that variable
subaccount are invested. Fractional votes will be counted. The number of
shares as to which the Owner may give instructions will be determined as of
the record date for the Fund's meeting.
Owners of Policies may give instructions regarding the election of the Board
of Trustees of the Fund, ratification of the selection of independent
auditors, approval of Fund investment advisory agreements and other matters
requiring a vote under the 1940 Act. Owners will be furnished information and
forms by John Hancock in order that voting instructions may be given.
John Hancock may, when required by state insurance regulatory authorities,
disregard voting instructions if the instructions require that the shares be
voted so as to change the investment objectives of the Portfolios of the Fund
or to approve or disapprove an investment advisory or underwriting contract
for the Fund. John Hancock also may disregard voting instructions in favor of
changes initiated by an Owner or the Fund's Board of Trustees in an investment
policy, investment adviser or principal underwriter of the Fund, if John
Hancock (i) reasonably disapproves of such changes and (ii) in the case of a
change of investment policy or investment adviser, makes a good-faith
determination that the proposed change is contrary to state law or prohibited
by state regulatory authorities or that the change would be inconsistent with
a variable subaccount's investment objectives or would result in the purchase
of securities which vary from the general quality and nature of investments
and investment techniques utilized by other separate accounts of John Hancock
or of an affiliated life insurance company, which separate accounts have
investment objectives similar to those of the variable subaccount. In the
event John Hancock does disregard voting instructions, a summary of that
action and the reasons for such action will be included in the next semi-
annual report to Owners.
CHANGES THAT JOHN HANCOCK CAN MAKE
The voting privileges described in this Prospectus are afforded based on
John Hancock's understanding of applicable Federal securities law
requirements. To the extent that applicable law, regulations or
interpretations change to eliminate or restrict the need for such voting
privileges, John Hancock reserves the right to proceed in accordance with any
such revised requirements. John Hancock also reserves the right, subject to
compliance with applicable law, including approval of Owners if so required,
(1) to transfer assets determined by John Hancock to be associated with the
class of policies to which the Policies belong from the Account to another
separate account or variable subaccount by withdrawing the same percentage of
each investment in the Account with appropriate adjustments to avoid odd lots
and fractions, (2) to operate the Account as a "management-type investment
company" under the 1940 Act, or in any other form permitted by law, the
investment adviser of which would be
30
<PAGE>
John Hancock or an affiliate, (3) to deregister the Account under the 1940
Act, (4) to substitute for the Portfolio shares held by a subaccount any other
investment permitted by law, and (5) to take any action necessary to comply
with or obtain any exemptions from the 1940 Act. John Hancock would notify
Owners of any of the foregoing changes and, to the extent legally required,
obtain approval of Owners and any regulatory body prior thereto. Such notice
and approval, however, may not be legally required in all cases.
STATE REGULATION
John Hancock is subject to regulation and supervision by the Massachusetts
Commissioner of Insurance who periodically examines its affairs. It also is
subject to the applicable insurance laws and regulations of all jurisdictions
in which it is authorized to do business.
John Hancock is required to submit annual statements of its operations,
including financial statements, to the insurance departments of the various
jurisdictions in which it does business for purposes of determining solvency
and compliance with local insurance laws and regulations.
LEGAL MATTERS
Legal matters in connection with the Policies described in this Prospectus
have been passed on by Francis C. Cleary, Jr., Counsel for John Hancock.
Messrs. Freedman, Levy, Kroll & Simonds, Washington, D.C., have advised John
Hancock on certain Federal securities law matters in connection with the
Policies.
REGISTRATION STATEMENT
This Prospectus omits certain information contained in the Registration
Statement which has been filed with the Commission. More details may be
obtained from the Securities and Exchange Commission upon payment of the
prescribed fee.
EXPERTS
The financial statements of John Hancock and the Account included in this
Prospectus have been audited by Ernst & Young LLP, independent auditors, for
the periods indicated in their reports thereon which appear elsewhere herein
and have been included in reliance on their reports given on their authority
as experts in accounting and auditing.
Actuarial matters included in this Prospectus have been examined by Randi M.
Sterrn, F.S.A., an Actuary of John Hancock.
FINANCIAL STATEMENTS
The financial statements of John Hancock included herein should be
distinguished from the financial statements of the Account and should be
considered only as bearing upon the ability of John Hancock to meet its
obligations under the Policies.
31
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Short-Term
Select Money Real Special U.S.
Stock Bond International Market Estate Equity Opportunities Stock Government
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
----------- ----------- ------------- ----------- ------------- ------------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investment in
shares of
portfolios of
John Hancock
Variable Series
Trust I, at
value........... $ 9,312,773 $46,330,265 $2,926,534 $18,732,426 $2,450,601 $952,172 $111,633,780 $79,674
Policy loans and
accrued interest
receivable...... 1,036,670 8,821,458 156,200 2,264,893 156,219 -- 19,832,901 --
Receivable from
John Hancock
Variable Series
Trust I......... 2,251 28,577 8,433 10,350 7,860 7,240 55,463 6
----------- ----------- ---------- ----------- ---------- -------- ------------ -------
Total assets.... 10,351,694 55,180,300 3,091,167 21,007,669 2,614,680 959,412 131,522,144 79,680
LIABILITIES
Payable to John
Hancock Variable
Series Trust I.. 1,763 26,061 8,290 9,344 7,738 7,194 49,440 2
Payable to John
Hancock Mutual
Life Insurance
Company.........
Asset charges
payable ........ 488 2,516 143 1,006 122 46 6,023 4
----------- ----------- ---------- ----------- ---------- -------- ------------ -------
Total
liabilities..... 2,251 28,577 8,433 10,350 7,860 7,240 55,463 6
----------- ----------- ---------- ----------- ---------- -------- ------------ -------
Net assets....... $10,349,443 $55,151,723 $3,082,734 $20,997,319 $2,606,820 $952,172 $131,466,681 $79,674
=========== =========== ========== =========== ========== ======== ============ =======
<CAPTION>
Managed
Subaccount
-----------
<S> <C>
ASSETS
Investment in
shares of
portfolios of
John Hancock
Variable Series
Trust I, at
value........... $62,301,402
Policy loans and
accrued interest
receivable...... 8,932,761
Receivable from
John Hancock
Variable Series
Trust I......... 54,142
-----------
Total assets.... 71,288,305
LIABILITIES
Payable to John
Hancock Variable
Series Trust I.. 50,846
Payable to John
Hancock Mutual
Life Insurance
Company.........
Asset charges
payable ........ 3,296
-----------
Total
liabilities..... 54,142
-----------
Net assets....... $71,234,163
===========
</TABLE>
See accompanying notes.
32
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Select Stock Bond
Subaccount Subaccount
----------------------------------------- -------------------------------------------
For the Period For the Period
from from
October 4, October 4,
1993 1993
(commencement (commencement
Year ended Year ended of operations) to Year ended Year ended of operations) to
December 31 December 31 December 31 December 31 December 31 December 31
1995 1994 1993 1995 1994 1993
----------- ----------- ----------------- ----------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Investment in-
come:
Distributions
received from
the portfolios
of John Hancock
Variable Series
Trust I......... $ 754,115 $ 288,656 $ 200,562 $3,504,747 $ 2,780,967 $ 686,594
Interest income
on policy loans. 67,279 54,175 28,819 641,677 622,042 429,402
---------- --------- --------- ---------- ----------- ----------
Total income.... 821,394 342,831 229,381 4,146,424 3,403,009 1,115,996
Expenses:
Mortality and
expense risks
and other
charges......... 48,056 31,565 6,281 286,349 257,251 61,758
---------- --------- --------- ---------- ----------- ----------
Net investment
income.......... 773,338 311,266 223,100 3,860,075 3,145,758 1,054,238
Net realized and
unrealized gain
(loss) on
investments:
Net realized
gain (loss) .... 23,090 (35,449) (45) (127,733) (215,268) (7,963)
Net unrealized
appreciation
(depreciation)
during the year. 1,225,784 (298,196) (152,267) 4,205,161 (3,583,940) (865,311)
---------- --------- --------- ---------- ----------- ----------
Net realized and
unrealized gain
(loss) on
investments..... 1,248,874 (333,645) (152,312) 4,077,428 (3,799,208) (873,274)
---------- --------- --------- ---------- ----------- ----------
Net increase
(decrease) in net
assets resulting
from operations.. $2,022,212 $ (22,379) $ 70,788 $7,937,503 $ (653,450) $ 180,964
========== ========= ========= ========== =========== ==========
<CAPTION>
International Money Market
Subaccount Subaccount
----------------------------------------- -----------------------------------------
For the Period For the Period
from from
October 4, October 4,
1993 1993
(commencement (commencement
Year ended Year ended of operations) to Year ended Year ended of operations) to
December 31 December 31 December 31 December 31 December 31 December 31
1995 1994 1993 1995 1994 1993
----------- ----------- ----------------- ----------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Investment in-
come:
Distributions
received from
the portfolios
of John Hancock
Variable Series
Trust I......... $ 29,692 $ 32,660 $19,111 $810,091 $284,469 $ 53,402
Interest income
on policy loans. 9,853 7,477 2,557 155,058 148,601 107,771
-------- --------- ------- -------- -------- --------
Total income.... 39,545 40,137 21,668 965,149 433,070 161,173
Expenses:
Mortality and
expense risks
and other
charges......... 15,495 9,653 1,034 96,074 52,620 12,668
-------- --------- ------- -------- -------- --------
Net investment
income.......... 24,050 30,484 20,634 869,075 380,450 148,505
Net realized and
unrealized gain
(loss) on
investments:
Net realized
gain (loss) .... 14,367 11,225 2,973 -- -- --
Net unrealized
appreciation
(depreciation)
during the year. 164,490 (159,108) 62,914 -- -- --
-------- --------- ------- -------- -------- --------
Net realized and
unrealized gain
(loss) on
investments..... 178,857 (147,883) 65,887 -- -- --
-------- --------- ------- -------- -------- --------
Net increase
(decrease) in net
assets resulting
from operations.. $202,907 $(117,399) $86,521 $869,075 $380,450 $148,505
======== ========= ======= ======== ======== ========
</TABLE>
See accompanying notes.
33
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF OPERATIONS--CONTINUED
<TABLE>
<CAPTION>
Special
Real Estate Equity Opportunities
Subaccount Subaccount
----------------------------------------- -----------------------------
For the Period
from For the Period
October 4, from
1993 May 6, 1994
(commencement (commencement
Year ended Year ended of operations) to Year ended of operations) to
December 31 December 31 December 31 December 31 December 31
1995 1994 1993 1995 1994
----------- ----------- ----------------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
Investment in-
come:
Distributions
received from
the portfolios
of John Hancock
Variable Series
Trust I......... $153,495 $ 99,568 $ 15,939 $ 22,718 $ 746
Interest income
on policy loans. 12,322 10,386 4,645 -- --
-------- -------- --------- -------- -------
Total income.... 165,817 109,954 20,584 22,718 746
Expenses:
Mortality and
expense risks
and other
charges......... 13,502 9,807 1,662 3,017 289
-------- -------- --------- -------- -------
Net investment
income.......... 152,315 100,147 18,922 19,701 457
Net realized and
unrealized gain
(loss) on
investments:
Net realized
gain (loss) .... (39,490) (17,561) (3,306) 9,743 77
Net unrealized
appreciation
(depreciation)
during the year. 155,992 (47,683) (63,670) 126,004 (1,412)
-------- -------- --------- -------- -------
Net realized and
unrealized gain
(loss) on
investments..... 116,502 (65,244) (66,976) 135,747 (1,335)
-------- -------- --------- -------- -------
Net increase
(decrease) in
net assets
resulting from
operations....... $268,817 $ 34,903 $(48,054) $155,448 $ (878)
======== ======== ========= ======== =======
<CAPTION>
Short-Term
U.S.
Government
Stock Subaccount Subaccount Managed Subaccount
------------------------------------------ ----------------------------- ---------------------------------------
For the Period
For the Period from
from For the Period October 4,
October 4, from 1993
1993 May 1, 1994 (commencement
(commencement (commencement of operations)
Year ended Year ended of operations) to Year ended of operations) to Year ended Year ended to
December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31
1995 1994 1993 1995 1994 1995 1994 1993
----------- ------------ ----------------- ----------- ----------------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment in-
come:
Distributions
received from
the portfolios
of John Hancock
Variable Series
Trust I......... $10,687,455 $ 5,320,942 $ 5,347,556 $2,749 $ 239 $ 5,946,035 $ 2,136,167 $ 2,133,124
Interest income
on policy loans. 1,397,618 1,289,505 844,843 -- -- 626,984 554,232 372,441
----------- ----------- ----------- ------ ----- ----------- ----------- -----------
Total income.... 12,085,073 6,610,447 6,192,399 2,749 239 6,573,019 2,690,399 2,505,565
Expenses:
Mortality and
expense risks
and other
charges......... 646,807 529,971 121,956 295 22 356,869 299,763 69,919
----------- ----------- ----------- ------ ----- ----------- ----------- -----------
Net investment
income.......... 11,438,266 6,080,476 6,070,443 2,454 217 6,216,150 2,390,636 2,435,646
Net realized and
unrealized gain
(loss) on
investments:
Net realized
gain (loss) .... 85,385 (249,230) 7,903 477 (6) (6,127) (182,296) (2,062)
Net unrealized
appreciation
(depreciation)
during the year. 17,351,805 (5,560,223) (3,787,331) 1,735 (282) 7,134,666 (2,984,103) (1,721,053)
----------- ----------- ----------- ------ ----- ----------- ----------- -----------
Net realized and
unrealized gain
(loss) on
investments..... 17,437,190 (5,809,453) (3,779,428) 2,212 (288) 7,128,539 (3,166,399) (1,723,115)
----------- ----------- ----------- ------ ----- ----------- ----------- -----------
Net increase
(decrease) in
net assets
resulting from
operations....... $28,875,456 $ 271,023 $ 2,291,015 $4,666 $ (71) $13,344,689 $ (775,763) $ 712,531
=========== =========== =========== ====== ===== =========== =========== ===========
</TABLE>
See accompanying notes.
34
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Select Stock Bond
Subaccount Subaccount
------------------------------------------- ----------------------------------------
For the Period
For the Period from
from October 4,
October 4, 1993
1993 (commencement
(commencement of
Year ended Year ended of operations) to Year ended Year ended operations) to
December 31 December 31 December 31 December 31 December 31 December 31
1995 1994 1993 1995 1994 1993
----------- ----------- ----------------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Increase
(decrease) in
net assets from
operations:
Net investment
income.......... $ 773,338 $ 311,266 $ 223,100 $ 3,860,075 $ 3,145,758 $ 1,054,238
Net realized
gains (losses).. 23,090 (35,449) (45) (127,733) (215,268) (7,963)
Net unrealized
appreciation
(depreciation)
during the year. 1,225,784 (298,196) (152,267) 4,205,161 (3,583,940) (865,311)
----------- ---------- ---------- ----------- ----------- -----------
Net increase
(decrease) in
net assets
resulting from
operations...... 2,022,212 (22,379) 70,788 7,937,503 (653,450) 180,964
From policyholder
transactions:
Net contributions
from
policyholders... 3,921,962 3,110,357 774,582 8,741,178 9,292,171 2,130,456
Net benefits to
policyholders... (2,170,453) (1,704,646) 3,341,695 (8,117,059) (8,795,613) 35,919,978
Net increase in
policy loans.... 181,384 187,506 636,435 344,088 454,821 7,716,686
----------- ---------- ---------- ----------- ----------- -----------
Net increase in
net assets from
policyholder
transactions.... 1,932,893 1,593,217 4,752,712 968,207 951,379 45,767,120
----------- ---------- ---------- ----------- ----------- -----------
Net increase in
net assets..... 3,955,105 1,570,838 4,823,500 8,905,710 297,929 45,948,084
Net assets:
Beginning of
period.......... 6,394,338 4,823,500 -- 46,246,013 45,948,084 --
----------- ---------- ---------- ----------- ----------- -----------
End of period.... $10,349,443 $6,394,338 $4,823,500 $55,151,723 $46,246,013 $45,948,084
=========== ========== ========== =========== =========== ===========
<CAPTION>
International Money Market
Subaccount Subaccount
---------------------------------------- ----------------------------------------
For the Period For the Period
from from
October 4, October 4,
1993 1993
(commencement (commencement
of of
Year ended Year ended operations) to Year ended Year ended operations) to
December 31 December 31 December 31 December 31 December 31 December 31
1995 1994 1993 1995 1994 1993
------------ ------------ -------------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Increase
(decrease) in
net assets from
operations:
Net investment
income.......... $ 24,050 $ 30,484 $ 20,634 $ 869,075 $ 380,450 $ 148,505
Net realized
gains (losses).. 14,367 11,225 2,973 -- -- --
Net unrealized
appreciation
(depreciation)
during the year. 164,490 (159,108) 62,914 -- -- --
---------- ---------- ---------- ----------- ---------- ----------
Net increase
(decrease) in
net assets
resulting from
operations...... 202,907 (117,399) 86,521 869,075 380,450 148,505
From policyholder
transactions:
Net contributions
from
policyholders... 1,439,112 1,997,179 467,433 13,611,860 2,450,447 380,938
Net benefits to
policyholders... (927,937) (636,005) 418,803 (2,969,848) (2,597,488) 6,535,046
Net increase in
policy loans.... 27,649 54,609 69,862 149,842 25,104 2,013,388
---------- ---------- ---------- ----------- ---------- ----------
Net increase in
net assets from
policyholder
transactions.... 538,824 1,415,783 956,098 10,791,854 (121,937) 8,929,372
---------- ---------- ---------- ----------- ---------- ----------
Net increase in
net assets..... 741,731 1,298,384 1,042,619 11,660,929 258,513 9,077,877
Net assets:
Beginning of
period.......... 2,341,003 1,042,619 -- 9,336,390 9,077,877 --
---------- ---------- ---------- ----------- ---------- ----------
End of period.... $3,082,734 $2,341,003 $1,042,619 $20,997,319 $9,336,390 $9,077,877
========== ========== ========== =========== ========== ==========
</TABLE>
See accompanying notes.
35
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF CHANGES IN NET ASSETS--CONTINUED
<TABLE>
<CAPTION>
Special
Real Estate Equity Opportunities
Subaccount Subaccount
---------------------------------------- -----------------------------
For the Period
from
October 4, For the Period
1993 from
(commencement May 6, 1994
of (commencement
Year ended Year ended operations) to Year ended of operations) to
December 31 December 31 December 31 December 31 December 31
1995 1994 1993 1995 1994
----------- ----------- -------------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
Increase
(decrease) in
net assets from
operations:
Net investment
income.......... $ 152,315 $ 100,147 $ 18,922 $ 19,701 $ 457
Net realized
gains (losses).. (39,490) (17,561) (3,306) 9,743 77
Net unrealized
appreciation
(depreciation)
during the year. 155,992 (47,683) (63,670) 126,004 (1,412)
---------- ---------- ---------- -------- --------
Net increase
(decrease) in
net assets
resulting from
operations...... 268,817 34,903 (48,054) 155,448 (878)
From policyholder
transactions:
Net contributions
from
policyholders... 1,086,721 1,225,072 372,968 774,566 201,268
Net benefits to
policyholders... (814,812) (573,521) 904,219 (164,561) (13,671)
Net increase in
policy loans.... (13,207) 57,955 105,759 0 --
---------- ---------- ---------- -------- --------
Net increase in
net assets from
policyholder
transactions..... 258,702 709,506 1,382,946 610,005 187,597
---------- ---------- ---------- -------- --------
Net increase in
net assets..... 527,519 744,409 1,334,892 765,453 186,719
Net assets:
Beginning of
period.......... 2,079,301 1,334,892 -- 186,719 --
---------- ---------- ---------- -------- --------
End of period.... $2,606,820 $2,079,301 $1,334,892 $952,172 $186,719
========== ========== ========== ======== ========
<CAPTION>
Short-Term
U.S.
Government
Stock Subaccount Subaccount Managed Subaccount
----------------------------------------- ----------------------------- ----------------------------------------
For the Period For the Period
from from
October 4, For the Period October 4,
1993 from 1993
(commencement May 1, 1994 (commencement
of (commencement of
Year ended Year ended operations) to Year ended of operations) to Year ended Year ended operations) to
December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31
1995 1994 1993 1995 1994 1995 1994 1993
------------- ------------ -------------- ----------- ----------------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase
(decrease) in
net assets from
operations:
Net investment
income.......... $ 11,438,266 $ 6,080,476 $ 6,070,443 $ 2,454 $ 217 $ 6,216,150 $ 2,390,636 $ 2,435,646
Net realized
gains (losses).. 85,385 (249,230) 7,903 477 (6) (6,127) (182,296) (2,062)
Net unrealized
appreciation
(depreciation)
during the year. 17,351,805 (5,560,223) (3,787,331) 1,735 (282) 7,134,666 (2,984,103) (1,721,053)
------------ ----------- ----------- ------- ------- ----------- ------------ -----------
Net increase
(decrease) in
net assets
resulting from
operations...... 28,875,456 271,023 2,291,015 4,666 (71) 13,344,689 (775,763) 712,531
From policyholder
transactions:
Net contributions
from
policyholders... 20,933,714 20,019,801 3,883,758 68,539 21,611 13,141,463 13,309,384 3,377,066
Net benefits to
policyholders... (16,972,544) (16,374,221) 69,401,930 (14,808) (263) (11,680,334) (10,118,793) 41,295,282
Net increase in
policy loans.... 1,898,826 1,394,155 15,843,768 0 -- 1,120,431 723,705 6,784,502
------------ ----------- ----------- ------- ------- ----------- ------------ -----------
Net increase in
net assets from
policyholder
transactions..... 5,859,996 5,039,735 89,129,456 53,731 21,348 2,581,560 3,914,296 51,456,850
------------ ----------- ----------- ------- ------- ----------- ------------ -----------
Net increase in
net assets..... 34,735,452 5,310,758 91,420,471 58,397 21,277 15,926,249 3,138,533 52,169,381
Net assets:
Beginning of
period.......... 96,731,229 91,420,471 -- 21,277 -- 55,307,914 52,169,381 --
------------ ----------- ----------- ------- ------- ----------- ------------ -----------
End of period.... $131,466,681 $96,731,229 $91,420,471 $79,674 $21,277 $71,234,163 $55,307,914 $52,169,381
============ =========== =========== ======= ======= =========== ============ ===========
</TABLE>
See accompanying notes.
36
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 1. ORGANIZATION
John Hancock Mutual Variable Life Insurance Account UV (the Account) is a
separate investment account of John Hancock Mutual Life Insurance Company
(JHMLICO). The Account was created on August 16, 1993. The Account commenced
operations on October 4, 1993 as a result of a transfer of net assets from two
existing separate accounts, John Hancock Variable Life Account U (JHVLAU) and
John Hancock Variable Life Account V (JHVLAV). John Hancock Mutual Variable
Life Insurance Account UV was formed to fund variable life insurance policies
(Policies) issued by JHMLICO. The Account is operated as a unit investment
trust registered under the Investment Company Act of 1940, as amended, and
currently consists of nine subaccounts. The assets of each subaccount are
invested exclusively in shares of a corresponding portfolio of John Hancock
Variable Series Trust I (the Fund). New subaccounts may be added as new
portfolios are added to the Fund, or as other investment options are
developed, and made available to policyowners. The nine portfolios of the Fund
which are currently available are Select Stock, Bond, International, Money
Market, Real Estate Equity, Special Opportunities, Stock, Short-Term U.S.
Government and Managed. Each portfolio has a different investment objective.
The net assets of the Account may not be less than the amount required under
state insurance law to provide for death benefits (without regard to the
minimum death benefit guarantee) and other policy benefits. Additional assets
are held in JHMLICO'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 JHMLICO. The portion of the
Account's assets applicable to the policies may not be charged with
liabilities arising out of any other business JHMLICO may conduct.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
Valuation of Investments
Investment in shares of the Fund are valued at the reported net asset values
of the respective portfolios. Investment transactions are recorded on the
trade date. Dividend income is recognized on the ex-dividend date. Realized
gains and losses on sales of fund shares are determined on the basis of
identified cost.
Federal Income Taxes
The operations of the Account are included in the federal income tax return
of JHMLICO, which is taxed as a life insurance company under the Internal
Revenue Code. JHMLICO has the right to charge the Account any federal income
taxes, or provision for federal income taxes, attributable to the operations
of the Account or to the Policies funded in the Account. Currently, JHMLICO
does not make a charge for income or other taxes. Charges for state and local
taxes, if any, attributable to the Account may also be made.
Expenses
JHMLICO assumes mortality and expense risks of the variable life insurance
policies for which asset charges are deducted at various rates ranging from
.525% to .625%, depending on the type of policy, of net assets (excluding
policy loans) of the Account. Additionally, a monthly charge at varying levels
for the cost of extra insurance is deducted from the net assets of the
Account.
37
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
JHMLICO makes certain deductions for administrative expenses and state
premium taxes from premium payments before amounts are transferred to the
Account.
Policy Loans
Policy loans represent outstanding loans plus accrued interest. Interest is
accrued (net of a charge for policy loan administration determined at an
annual rate of .75% of the aggregate amount of policyowner indebtedness) and
compounded daily.
NOTE 3. TRANSACTIONS WITH AFFILIATES
JHMLICO acts as the distributor, principal underwriter and investment
advisor for the Fund.
Certain officers of the Account are officers and directors of JHMLICO or the
Fund.
NOTE 4. DETAILS OF INVESTMENTS
The details of the shares owned and cost and value of investments in the
portfolios of the Fund at December 31, 1995 were as follows:
<TABLE>
<CAPTION>
Portfolio Shares Owned Cost Value
--------- ------------ ----------- -----------
<S> <C> <C> <C>
Select Stock.............................. 536,192 $ 8,537,452 $ 9,312,773
Bond...................................... 4,574,603 46,574,355 46,330,265
International............................. 187,483 2,858,238 2,926,534
Money Market.............................. 1,873,372 18,773,711 18,732,426
Real Estate Equity........................ 209,521 2,405,959 2,450,601
Special Opportunities..................... 72,219 827,580 952,172
Stock..................................... 8,007,462 103,629,530 111,633,780
Short-Term U.S. Government................ 7,787 78,221 79,674
Managed................................... 4,538,676 59,872,578 62,301,402
</TABLE>
Purchases, including reinvestment of dividend distributions, and proceeds
from the sales of shares in the portfolios of the Fund during 1995, were as
follows:
<TABLE>
<CAPTION>
Portfolio Purchases Sales
--------- ---------- ---------
<S> <C> <C>
Select Stock.............................................. $2,998,468 $ 478,935
Bond...................................................... 6,586,137 2,116,423
International............................................. 935,730 401,257
Money Market.............................................. 13,092,516 1,587,249
Real Estate Equity........................................ 829,282 404,509
Special Opportunities..................................... 698,554 68,848
Stock..................................................... 19,241,967 3,915,114
Short-Term U.S. Government................................ 71,209 15,024
Managed................................................... 11,383,468 3,752,413
</TABLE>
38
<PAGE>
REPORTS OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Policyholders
John Hancock Mutual Variable Life Insurance Account UV
of John Hancock Mutual Life Insurance Company
We have audited the accompanying statement of assets and liabilities of John
Hancock Mutual Variable Life Insurance Account UV (the "Account") (comprising,
respectively, the Select Stock, Bond, International, Money Market, Real Estate
Equity, Special Opportunities, Stock, Short-Term U.S. Government, and Managed
Subaccounts) as of December 31, 1995, and the related statements of operations
and statements of changes in net assets for 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 Mutual Variable Life Insurance Account
UV at December 31, 1995, and the results of their operations and the changes
in their net assets for each of the periods indicated, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Boston, Massachusetts
February 9, 1996
----------------
To the Directors and Policyholders
John Hancock Mutual Life Insurance Company
We have audited the accompanying statements of financial position of John
Hancock Mutual Life Insurance Company as of December 31, 1995 and 1994, and
the related summary of operations and changes in policyholders' contingency
reserves and statements of cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of John Hancock Mutual Life
Insurance Company at December 31, 1995 and 1994, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles for mutual life insurance companies
and with reporting practices prescribed or permitted by the Commonwealth of
Massachusetts Division of Insurance.
ERNST & YOUNG LLP
Boston, Massachusetts
February 7, 1996
39
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
December 31
-------------------
1995 1994
--------- ---------
(In millions)
<S> <C> <C>
ASSETS
Bonds--Note 6............................................... $21,108.5 $19,884.0
Stocks:
Preferred................................................. 338.8 274.4
Common.................................................... 130.9 115.9
Investments in affiliates................................. 1,265.3 1,089.4
--------- ---------
1,735.0 1,479.7
Mortgage loans on real estate--Note 6....................... 8,801.5 8,274.2
Real estate:
Company occupied.......................................... 377.4 385.2
Investment properties..................................... 1,949.5 1,765.5
--------- ---------
2,326.9 2,150.7
Policy loans................................................ 1,621.3 1,669.2
Cash items:
Cash in banks and offices................................. 286.6 336.7
Temporary cash investments................................ 254.1 556.2
--------- ---------
540.7 892.9
Premiums due and deferred................................... 234.0 230.9
Investment income due and accrued........................... 597.5 578.2
Other general account assets................................ 883.0 979.4
Assets held in separate accounts............................ 12,928.2 10,712.5
--------- ---------
TOTAL ASSETS................................................ $50,776.6 $46,851.7
========= =========
Obligations and Policyholders' Contingency Reserves
OBLIGATIONS
Policy reserves........................................... $17,711.4 $16,817.9
Policyholders' and beneficiaries' funds................... 14,724.8 13,974.8
Dividends payable to policyholders........................ 378.6 377.6
Policy benefits in process of payment..................... 217.1 224.4
Other policy obligations.................................. 159.6 256.5
Asset valuation reserve--Note 1........................... 1,014.3 835.7
Federal income and other accrued taxes--Note 1............ 250.5 231.8
Other general account obligations......................... 873.2 1,120.7
Obligations related to separate accounts.................. 12,913.6 10,682.3
--------- ---------
TOTAL OBLIGATIONS........................................... 48,243.1 44,521.7
Policyholders' Contingency Reserves
Surplus notes--Note 2..................................... 450.0 450.0
Special contingency reserve for group insurance........... 193.1 191.7
General contingency reserve............................... 1,890.4 1,688.3
--------- ---------
TOTAL POLICYHOLDERS' CONTINGENCY RESERVES................... 2,533.5 2,330.0
--------- ---------
TOTAL OBLIGATIONS AND POLICYHOLDERS' CONTINGENCY RESERVES... $50,776.6 $46,851.7
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
40
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
SUMMARY OF OPERATIONS AND CHANGES IN POLICYHOLDERS' CONTINGENCY RESERVES
<TABLE>
<CAPTION>
Year ended December 31
------------------------
1995 1994
----------- -----------
(In millions)
<S> <C> <C>
Income
Premiums, annuity considerations and pension fund
contributions..................................... $ 8,127.8 $ 7,617.4
Net investment income--Note 4...................... 2,678.5 2,557.8
Other, net......................................... 90.8 64.1
----------- -----------
10,897.1 10,239.3
Benefits and Expenses
Payments to policyholders and beneficiaries:
Death benefits................................... 787.4 817.6
Accident and health benefits..................... 321.3 350.2
Annuity benefits................................. 1,342.7 1,273.9
Surrender benefits and annuity fund withdrawals.. 5,243.6 4,759.3
Matured endowments............................... 19.8 20.8
----------- -----------
7,714.8 7,221.8
Additions to reserves to provide for future
payments to policyholders and beneficiaries....... 1,497.0 1,503.5
Expenses of providing service to policyholders and
obtaining new insurance:
Field sales compensation and expenses............ 277.4 303.2
Home office and general expenses................. 455.8 437.3
Cost of restructuring.............................. 0.0 57.8
Payroll, state premium and miscellaneous taxes..... 78.6 72.1
----------- -----------
10,023.6 9,595.7
----------- -----------
GAIN FROM OPERATIONS BEFORE DIVIDENDS TO
POLICYHOLDERS, FEDERAL INCOME TAXES AND NET
REALIZED CAPITAL GAINS (LOSSES)............... 873.5 643.6
Dividends to policyholders........................... 465.9 385.0
Federal income taxes--Note 1......................... 128.5 59.7
----------- -----------
594.4 444.7
----------- -----------
GAIN FROM OPERATIONS BEFORE NET REALIZED
CAPITAL GAINS (LOSSES)........................ 279.1 198.9
Net realized capital gains (losses)--Note 5.......... 21.2 (35.3)
----------- -----------
NET INCOME..................................... 300.3 163.6
Other increases (decreases) in policyholders' contin-
gency reserves:
Net unrealized capital losses and other adjust-
ments--Note 5..................................... (85.1) (118.2)
Valuation reserve changes--Note 1.................. 0.0 41.0
Net gain from separate accounts.................... 2.6 0.8
Issuance of surplus notes.......................... 0.0 450.0
Prior years' federal income taxes.................. (36.8) (26.2)
Other reserves and adjustments..................... 22.5 4.3
----------- -----------
NET INCREASE IN POLICYHOLDERS' CONTINGENCY
RESERVES...................................... 203.5 515.3
Policyholders' contingency reserves at beginning of
year................................................ 2,330.0 1,814.7
----------- -----------
POLICYHOLDERS' CONTINGENCY RESERVES AT END OF YEAR... $ 2,533.5 $ 2,330.0
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
41
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31
------------------------
1995 1994
----------- -----------
(In millions)
<S> <C> <C>
Cash Flows From Operating Activities:
Insurance premiums, annuity considerations and de-
posits............................................ $ 8,280.3 $ 7,827.5
Net investment income.............................. 2,756.9 2,560.0
Benefits to policyholders and beneficiaries........ (7,917.6) (7,417.0)
Dividends paid to policyholders.................... (464.9) (391.4)
Insurance expenses and taxes....................... (795.1) (801.0)
Net transfers (to) from separate accounts.......... 132.0 (548.4)
Other, net......................................... (154.7) (88.1)
----------- -----------
NET CASH PROVIDED FROM OPERATIONS................ 1,836.9 1,141.6
----------- -----------
Cash Flows Used In Investing Activities:
Bond purchases..................................... (6,456.9) (6,834.2)
Bond sales......................................... 2,874.9 2,530.2
Bond maturities and scheduled redemptions.......... 1,600.6 1,437.6
Bond prepayments................................... 795.9 620.8
Stock purchases.................................... (224.3) (282.7)
Proceeds from stock sales.......................... 131.4 70.8
Real estate purchases.............................. (375.1) (255.9)
Real estate sales.................................. 365.0 280.6
Other invested assets purchases.................... (46.5) (66.5)
Proceeds from the sale of other invested assets.... 251.1 169.3
Mortgage loans issued.............................. (2,041.6) (1,547.7)
Mortgage loan repayments........................... 1,277.9 1,391.8
Other, net......................................... (554.6) 845.3
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES............ (2,402.2) (1,640.6)
----------- -----------
Cash Flows From Financing Activities:
Issuance of surplus notes.......................... 0.0 450.0
Issuance of REMIC notes payable.................... 213.1 0.0
----------- -----------
NET CASH PROVIDED FROM FINANCING ACTIVITIES...... 213.1 450.0
----------- -----------
DECREASE IN CASH AND TEMPORARY CASH INVESTMENTS...... (352.2) (49.0)
Cash and temporary cash investments at beginning of
year................................................ 892.9 941.9
----------- -----------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF YEAR... $ 540.7 $ 892.9
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
42
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES
John Hancock Mutual Life Insurance Company (the Company) provides a broad
range of financial services and insurance products. The Company's insurance
operations focus principally in three segments: the Retail Sector, which
encompasses the Company's individual life, annuity, and long-term care
operations; Business Insurance, its group life, health, and long-term care
operations including administrative services provided to group customers; and
Group Pension, which offers single premium annuity and guaranteed investment
contracts through both the general and separate accounts. In addition, through
its subsidiaries and affiliates, the Company also offers a wide range of
investment management and advisory services and other related products
including domestic property and casualty insurance, life insurance products
for the Canadian market, a full range of retail and institutional securities
brokerage services, investment management and advisory services, sponsorship
and distribution of mutual funds, real estate financing and management, and
various other financial services. Investments in these subsidiaries and other
affiliates are recorded on the statutory equity method.
The Company is licensed in all fifty of the United States, the District of
Columbia, Puerto Rico, Guam, the US Virgin Islands, and Canada. The Company
distributes its individual products in North America primarily through a
career agency system. The career agency system is composed of company owned,
unionized branch offices and independent general agencies. The Company also
distributes its individual products through several alternative distribution
channels.
The Company distributes its group benefit products through group
representatives, who are John Hancock employees or through intermediaries, in
key markets nationwide.
The Company markets pension and other investment-related products primarily to
sponsors of retirement and savings plans covering employees of private sector
companies, and plans covering public employees and collective bargaining
unions and non-profit organizations. Products are marketed and sold through a
combination of group pension field employee representatives, as well as
marketing personnel and investment professionals employed by the Company.
The preparation of the financial statements of insurance companies requires
management to make estimates and assumptions that affect amounts reported in
the financial statements and accompanying notes. Such estimates and
assumptions could change in the future as more information becomes known,
which could impact the amounts reported and disclosed herein.
Basis of Presentation: The financial statements have been prepared on the
basis of accounting practices prescribed or permitted by the Commonwealth of
Massachusetts Division of Insurance and in conformity with the practices of
the National Association of Insurance Commissioners, which are currently
considered generally accepted accounting principles for mutual life insurance
companies. However, in April 1993, the Financial Accounting Standard Board
(FASB) issued Interpretation 40, "Applicability of Generally Accepted
Accounting Principles to Mutual Life Insurance and Other Enterprises"
(Interpretation). The Interpretation, as amended, is effective for 1996 annual
financial statements and thereafter, and no longer will allow statutory-basis
financial statements to be described as being prepared in conformity with
generally accepted accounting principles (GAAP). Upon the effective date of
the Interpretation in order for their financial statements to be described as
being prepared in conformity with GAAP, mutual life insurance companies will
be required to adopt all
43
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
applicable authoritative GAAP pronouncements in any general-purpose financial
statements that they may issue. The Company has not quantified the effects of
the application of the Interpretation on its financial statements.
The Company has not yet determined whether for general purposes it will
continue to issue statutory-basis financial statements or statements adopting
all applicable authoritative GAAP pronouncements. If the Company decides that
its general purpose financial statements will be prepared in accordance with
GAAP rather than statutory accounting practices, the financial statements
included herein would have to be restated to reflect all applicable
authoritative GAAP pronouncements, including Statement of Financial Accounting
Standards (SFAS) Nos. 60, 97, and 113, and the American Institute of Certified
Public Accountants' Statement of Position 95-1, which addresses the accounting
for long-duration and short-duration insurance and reinsurance contracts,
including all participating business.
The significant accounting practices of the Company are as follows:
Revenues and Expenses: Premium revenues are recognized over the premium-paying
period of the policies whereas expenses, including the acquisition costs of
new business, are charged to operations as incurred and policyholder dividends
are provided as paid or accrued.
Cash and Temporary Cash Investments: Cash includes currency on hand and demand
deposits with financial institutions. Temporary cash investments are short-
term, highly-liquid investments both readily convertible to known amounts of
cash and so near maturity that there is insignificant risk of changes in value
because of changes in interest rates.
Valuation of Assets: General account investments are carried at amounts
determined on the following bases:
Bond and stock values are carried as prescribed by the National Association
of Insurance Commissioners (NAIC): bonds generally at amortized amounts or
cost, preferred stocks generally at cost and common stocks at market. The
discount or premium on bonds is amortized using the interest method.
Investments in affiliates are included on the statutory equity method.
Mortgage loans are carried at outstanding principal balance or amortized
cost.
Investment and company occupied real estate is carried at depreciated cost,
less encumbrances. Depreciation on investment and company occupied real
estate is recorded on a straight-line basis.
Real estate acquired in satisfaction of debt and held for sale, which is
classified with investment properties, is carried at the lower of cost or
market as of the date of foreclosure.
Policy loans are carried at outstanding principal balance, not in excess of
policy cash surrender value.
Other invested assets, which are classified with other general account
assets, include real estate and energy joint ventures and limited
partnerships and are valued based on the Company's equity in the underlying
net assets.
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
44
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
of bonds, equity securities, mortgage loans, real estate and other invested
assets. The Company makes additional contributions to the AVR in excess of the
required amounts to account for potential losses and risks in the investment
portfolio when the Company believes such provisions are prudent. Changes to
the AVR are charged or credited directly to policyholders' contingency
reserves.
The Company also records the NAIC prescribed Interest Maintenance Reserve
(IMR) that represents that portion of the after tax net accumulated
unamortized realized capital gains and losses on sales of fixed income
securities, principally bonds and mortgage loans, attributable to changes in
the general level of interest rates. Such gains and losses are deferred and
amortized into income over the remaining expected lives of the investments
sold. At December 31, 1995, the IMR, net of 1995 amortization of $16.4
million, amounted to $69.5 million which is included in other policy
obligations. The corresponding 1994 amounts were $17.1 million and $52.7
million, respectively.
Property and Equipment: Data processing equipment, included in other general
account assets, is reported at depreciated cost, with depreciation recorded on
a straight-line basis. Nonadmitted furniture and equipment also is depreciated
on a straight-line basis. The useful lives of these assets range from three to
twenty years.
Separate Accounts: Separate account assets (valued at market) and obligations
are included as separate captions in the statements of financial position. The
change in separate account surplus is recognized through direct charges or
credits to policyholders' contingency reserves.
Fair Values of Financial Instruments: Statement of Financial Accounting
Standards (SFAS) No. 107, "Disclosure about Fair Value of Financial
Instruments," requires disclosure of fair value information about financial
instruments, whether or not recognized in the statement of financial position,
for which it is practicable to estimate the value. In situations where quoted
market prices are not available, fair values are based on estimates using
present value or other valuation techniques. SFAS No. 107 excludes certain
financial instruments and all nonfinancial instruments from its disclosure
requirements. Therefore, the aggregate fair value amounts presented do not
represent the underlying value of the Company.
The methods and assumptions utilized by the Company in estimating its fair
value disclosures for financial instruments are as follows:
The carrying amounts reported in the statement of financial position for
cash and temporary cash investments approximate their fair values.
Fair values for public bonds are obtained from an independent pricing
service. Fair values for private placement securities and publicly traded
bonds not provided by the independent pricing service are estimated by the
Company by discounting expected future cash flows using current market
rates applicable to the yield, credit quality and maturity of the
investments. The fair values for common and preferred stocks, other than
subsidiary investments which are carried at equity values, are based on
quoted market prices.
The fair value for mortgage loans is estimated using discounted cash flow
analyses using interest rates adjusted to reflect the credit
characteristics of the underlying loans. Mortgage loans with similar
45
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
characteristics and credit risks are aggregated into qualitative categories
for purposes of the fair value calculations.
The carrying amounts in the statement of financial position for policy
loans approximates their fair value.
The fair value of interest rate swaps and currency rate swaps is estimated
using a discounted cash flow method adjusted for the difference between the
rate of the existing swap and the current swap market rate. Discounted cash
flows in foreign currencies are converted to U.S. dollars using current
exchange rates.
The fair value for outstanding commitments to purchase long-term bonds and
issue real estate mortgages is estimated using a discounted cash flow
method incorporating adjustments for the difference in the level of
interest rates between the dates the commitments were made and December 31,
1995. The fair value for commitments to purchase real estate approximates
the amount of the initial commitment.
Fair values for the Company's guaranteed investment contracts are estimated
using discounted cash flow calculations, based on interest rates currently
being offered for similar contracts with maturities consistent with those
remaining for the contracts being valued. The fair value for fixed-rate
deferred annuities is the cash surrender value, which represents the
account value less applicable surrender charges. Fair values for immediate
annuities without life contingencies and supplementary contracts without
life contingencies are estimated based on discounted cash flow calculations
using current market rates.
Capital Gains and Losses: Realized capital gains and losses, net of taxes and
amounts transferred to the IMR, are included in net income. Unrealized gains
and losses, which consist of market value and book value adjustments, are
shown as adjustments to policyholders' contingency reserves.
Interest Rate and Currency Rate Swap Contracts and Financial Futures
Contracts: The net interest effect of interest rate and currency rate swap
transactions is recorded as an adjustment of interest income as incurred.
Gains and losses on financial futures contracts used as hedges against
interest rate fluctuations are deferred and recognized in income over the
period being hedged.
Foreign Exchange Gains and Losses: Foreign exchange gains and losses are
reflected as direct credits or charges to policyholders' contingency reserves
through unrealized capital gains and losses.
Policy Reserves: Reserves for traditional individual life insurance policies
are maintained using the 1941, 1958 and 1980 Commissioner's Standard Ordinary
and American Experience mortality tables, with assumed interest rates ranging
from 2 1/2% to 6%, and using principally the net level premium method for
policies issued prior to 1978 and a modified preliminary term method for
policies issued in 1979 and later. Annuity and supplementary contracts with
life contingency reserves are based principally on modifications of the 1937
Standard Annuity Table, the Group Annuity Mortality Tables for 1951, 1971 and
1983, the 1971 Individual Annuity Mortality Table and the a-1983 Individual
Annuity Mortality Table, with interest rates ranging from 2% to 11 1/4%.
Reserves for deposit administration funds and immediate participation
guarantee funds are based on accepted actuarial methods at various interest
rates. Accident and health policy reserves generally are calculated using
either the two-year preliminary term or the net level premium method based on
various morbidity tables.
46
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
The statement value and fair value for investment-type insurance contracts are
as follows:
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
------------------- -------------------
Statement Fair Statement Fair
Value Value Value Value
--------- --------- --------- ---------
(In millions)
<S> <C> <C> <C> <C>
Guaranteed investment contracts........ $12,014.3 $12,325.3 $11,333.3 $10,966.3
Fixed-rate deferred and immediate annu-
ities................................. 3,494.5 3,478.6 2,918.5 2,840.3
Supplementary contracts without life
contingencies......................... 39.6 40.7 36.5 35.4
--------- --------- --------- ---------
$15,548.4 $15,844.6 $14,288.3 $13,842.0
========= ========= ========= =========
</TABLE>
Federal Income Taxes: Federal income taxes are provided in the financial
statements based on amounts determined to be payable as a result of operations
within the current accounting period. The operations of the Company and its
subsidiaries and affiliates are combined in filing a consolidated federal
income tax return for the group. The federal income taxes of the Company are
determined on a separate return basis with certain adjustments.
Income before taxes differs from taxable income principally due to tax-exempt
investment income, dividends-received tax deductions, the limitation placed on
the tax deductibility of mutual companies' policyholder dividends, accelerated
depreciation, differences in policy and contract liabilities for tax return
and financial statement purposes, capitalization of policy acquisition
expenses for tax purposes and other adjustments prescribed by the Internal
Revenue Code.
Amounts for disputed tax issues relating to prior years are charged or
credited directly to policyholders' contingency reserves. No provision is
generally recognized for timing differences that may exist between financial
reporting and taxable income.
At December 31, 1994, the Company's subsidiaries had total estimated tax loss
carryforwards for federal income tax purposes of $26.5 million expiring in
years 2003 to 2005. After the 1994 federal income tax return was filed on
September 15, 1995, the Company's subsidiaries remaining tax loss
carryforwards for federal income tax purposes totaled $9.9 million. It is
expected that these losses will be fully utilized in the 1995 federal income
tax return. Certain subsidiaries acquired by the Company have additional
potential tax loss carryforwards of $117.8 million expiring in years 1996 to
1998. These amounts also may be used in the consolidated tax return but only
to offset future taxable income related to those subsidiaries. The Company
made federal tax payments of $211.5 million in 1995 and $78.8 million in 1994.
Adjustments to Policy Reserves and Policyholders' and Beneficiaries'
Funds: From time to time, the Company finds it appropriate to modify certain
required policy reserves because of changes in actuarial assumptions or
increased benefits. Reserve modifications resulting from such determinations
are recorded directly to policyholders' contingency reserves. During 1994, the
Company refined certain actuarial assumptions inherent
47
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
in the calculation of preconversion yearly renewable term and gross premium
deficiency reserves resulting in a $41.0 million increase in policyholders'
contingency reserves at December 31, 1994.
Reinsurance: Premiums, commissions, expense reimbursements, benefits and
reserves related to reinsured business are accounted for on bases consistent
with those used in accounting for the original policies issued and the terms
of the reinsurance contracts. Premiums ceded to other companies have been
reported as a reduction of premium income. Amounts applicable to reinsurance
ceded for future policy benefits, unearned premium reserves and claim
liabilities have been reported as reductions of these items.
Restructuring Charge: In 1994, the Company provided for restructuring charges
of $57.8 million in accordance with the Company's plan to reduce its cost
structure and consolidate operations. The restructuring charge includes
severance costs and facilities consolidation expenses. During 1995 and 1994,
the Company paid $32.9 million and $10.7 million, respectively, under its
restructuring plan. The remaining liability for restructuring charges at
December 31, 1995 was $14.2 million.
Reclassifications: Certain 1994 amounts have been reclassified to permit
comparison with the corresponding 1995 amounts.
NOTE 2--SURPLUS NOTES
On February 25, 1994, the Company issued $450 million of surplus notes that
bear interest at 7 3/8% and are scheduled to mature on February 15, 2024. The
issuance of the surplus notes was approved by the Massachusetts Division of
Insurance and any payment of interest on and principal of the notes may be
made only with the prior approval of the Commissioner of the Massachusetts
Division of Insurance. Surplus notes are reported as surplus rather than
liabilities. Interest paid on the notes during 1995 and 1994 were $33.2
million and $15.7 million, respectively.
NOTE 3--BORROWED MONEY
At December 31, 1995, the Company had a $500 million syndicated line of
credit. There are 29 banks who joined the syndicate of lenders under the
leadership of Morgan Guaranty Trust Company of New York. The banks will commit
when requested to loan funds for a period of two years at prevailing interest
rates as determined in accordance with the line of credit agreement. The
agreement does not contain a material adverse change clause. As of December
31, 1995, no amounts had been borrowed under this agreement.
In 1995 the Company issued $213.1 million of debt through a Real Estate
Mortgage Investment Conduit (REMIC). As collateral to the debt, the Company
pledged $1,065.8 million of commercial mortgages to the REMIC Trust. The debt
was issued in two notes of equal amounts with last scheduled payment dates on
March 25, 1997 and June 25, 1998, respectively. The interest rates on the two
notes are calculated on a floating basis, based on LIBOR rates, and were
6.1575% and 6.2075%, respectively, at December 31, 1995. The outstanding
balances of the Notes totaled $213.1 million at December 31, 1995 and are
included in other general account obligations.
48
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 4--NET INVESTMENT INCOME
Investment income has been reduced by the following amounts:
<TABLE>
<CAPTION>
1995 1994
------ ------
(In millions)
<S> <C> <C>
Investment expenses.............................................. $332.9 $291.2
Interest expense................................................. 38.3 19.8
Depreciation on real estate and other invested assets............ 62.7 54.7
Real estate and other investment taxes........................... 61.2 61.3
------ ------
$495.1 $427.0
====== ======
</TABLE>
NOTE 5--NET CAPITAL GAINS (LOSSES) AND OTHER ADJUSTMENTS
Net realized capital gains (losses) consist of the following items:
<TABLE>
<CAPTION>
1995 1994
------ ------
(In millions)
<S> <C> <C>
Gains (losses) from asset sales and foreclosures............... $118.6 $(41.5)
Capital gains tax.............................................. (64.2) (20.2)
Net capital (gains) losses transferred to the IMR.............. (33.2) 26.4
------ ------
Net Realized Capital Gains (Losses).......................... $ 21.2 $(35.3)
====== ======
</TABLE>
Net unrealized capital losses and other adjustments consist of the following
items:
<TABLE>
<CAPTION>
1995 1994
------ -------
(In millions)
<S> <C> <C>
Gains from changes in security values and book value adjust-
ments......................................................... $ 93.4 $ 36.4
Increase in asset valuation reserve............................ (178.5) (154.6)
------ -------
Net Unrealized Capital Losses and Other Adjustments.......... $(85.1) $(118.2)
====== =======
</TABLE>
49
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 6--INVESTMENTS
The statement value and fair value of bonds are shown below:
<TABLE>
<CAPTION>
Gross Gross
Statement Unrealized Unrealized
Value Gains Losses Fair Value
--------- ---------- ---------- ----------
(In millions)
Year ended December 31, 1995
----------------------------
<S> <C> <C> <C> <C>
U.S. treasury securities and
obligations of U.S. government
corporations and agencies............ $ 638.5 $ 42.5 $ 0.2 $ 680.8
Obligations of states and political
subdivisions......................... 194.1 20.6 0.1 214.6
Debt securities issued by foreign gov-
ernments............................. 297.7 42.2 0.0 339.9
Corporate securities.................. 18,358.6 1,818.3 73.9 20,103.0
Mortgage-backed securities............ 1,619.6 57.9 20.8 1,656.7
--------- -------- ------ ---------
Totals.............................. $21,108.5 $1,981.5 $ 95.0 $22,995.0
========= ======== ====== =========
<CAPTION>
Year ended December 31, 1994
----------------------------
<S> <C> <C> <C> <C>
U.S. treasury securities and
obligations of U.S. government
corporations and agencies............ $ 1,545.1 $ 1.8 $128.6 $ 1,418.3
Obligations of states and political
subdivisions......................... 170.6 4.5 1.7 173.4
Debt securities issued by foreign gov-
ernments............................. 143.5 9.8 0.5 152.8
Corporate securities.................. 16,208.9 471.1 401.8 16,278.2
Mortgage-backed securities............ 1,815.9 4.8 44.1 1,776.6
--------- -------- ------ ---------
Totals.............................. $19,884.0 $ 492.0 $576.7 $19,799.3
========= ======== ====== =========
</TABLE>
The statement value and fair value of bonds at December 31, 1995, by
contractual maturity, are shown below. Maturities will differ from contractual
maturities because eligible borrowers may exercise their right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Statement Value Fair Value
--------------- ----------
(In millions)
<S> <C> <C>
Due in one year or less.............................. $ 1,408.9 $ 1,456.4
Due after one year through five years................ 6,406.1 6,795.4
Due after five years through ten years............... 5,969.7 6,551.4
Due after ten years.................................. 5,704.2 6,535.1
--------- ---------
19,488.9 21,338.3
Mortgage-backed securities........................... 1,619.6 1,656.7
--------- ---------
$21,108.5 $22,995.0
========= =========
</TABLE>
Proceeds from sales of bonds during 1995 and 1994 were $2.9 billion and $2.5
billion, respectively. Gross gains of $69.7 million in 1995 and $16.6 million
in 1994 and gross losses of $44.3 million in 1995 and $99.3 million in 1994
were realized on these transactions.
The cost of common stocks was $78.1 million and $82.1 million at December 31,
1995 and 1994, respectively. At December 31, 1995, gross unrealized
appreciation on common stocks totaled $76.3 million, and gross
50
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 6--INVESTMENTS--CONTINUED
unrealized depreciation totaled $23.5 million. The fair value of preferred
stock totaled $338.8 million at December 31, 1995 and $281.6 million at
December 31, 1994.
Mortgage loans with outstanding principal balances of $115.5 million, bonds
with amortized cost of $32.8 million and real estate with depreciated cost of
$28.5 million were nonincome producing for the twelve months ended December
31, 1995.
Restructured commercial mortgage loans aggregated $466.0 million and $507.1
million as of December 31, 1995 and 1994, respectively. The expected gross
interest income that would have been recorded had the loans been current in
accordance with the original loan agreements and the actual interest income
recorded were as follows:
<TABLE>
<CAPTION>
Year ended
December 31
-------------
1995 1994
------ ------
(In millions)
<S> <C> <C>
Expected.................................................... $ 47.0 $ 54.5
Actual...................................................... $ 26.8 34.2
</TABLE>
Generally, the terms of the restructured mortgage loans call for the Company
to receive some form or combination of an equity participation in the
underlying collateral, excess cash flows or an effective yield at the maturity
of the loans sufficient to meet the original terms of the loans.
At December 31, 1995, the mortgage loan portfolio was diversified by
geographic region and specific collateral property type as displayed below.
The Company controls credit risk through credit approvals, limits and
monitoring procedures.
<TABLE>
<CAPTION>
Property
Type Statement Value
-------- ---------------
(In millions)
<S> <C>
Apartments................ $2,374.6
Hotels.................... 164.4
Industrial................ 780.4
Office buildings.......... 1,823.6
Retail.................... 1,545.1
1-4 Family................ 9.5
Agricultural.............. 1,607.0
Other..................... 496.9
--------
$8,801.5
========
</TABLE>
<TABLE>
<CAPTION>
Geographic
Concentration Statement Value
------------- ---------------
(In millions)
<S> <C>
East North Central....... $ 822.7
East South Central....... 178.2
Middle Atlantic.......... 1,861.1
Mountain................. 431.3
New England.............. 915.6
Pacific.................. 2,253.4
South Atlantic........... 1,611.7
West North Central....... 217.7
West South Central....... 447.4
Other.................... 62.4
--------
$8,801.5
========
</TABLE>
At December 31, 1995, the fair values of the commercial and agricultural
mortgage loan portfolios were $7.6 billion and $1.8 billion, respectively. The
corresponding amounts as of December 31, 1994 were approximately $6.5 billion
and $1.7 billion, respectively.
51
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 7--REINSURANCE
Premiums, benefits and reserves associated with reinsurance assumed in 1995
were $455.2 million, $276.7 million, and $12.7 million, respectively. The
corresponding amounts in 1994 were $385.9 million, $266.0 million, and $12.1
million, respectively.
The Company cedes business to reinsurers to share risks under life, health and
annuity contracts for the purpose of reducing exposure to large losses.
Premiums, benefits and reserves ceded to reinsurers in 1995 were $281.0
million, $217.0 million and $185.4 million, respectively. The corresponding
amounts in 1994 were $246.7 million, $203.2 million and $217.3 million,
respectively.
The Company has a coinsurance agreement with another insurer to cede 100% of
its individual disability business. Reserves ceded under this agreement,
included in the amount shown above, were $212.7 million at December 31, 1995
and $184.5 million at December 31, 1994.
To the extent that an assuming reinsurance company is unable to meet its
obligations under a reinsurance agreement, the Company remains liable as the
direct insurer on all risks reinsured.
NOTE 8--BENEFIT PLANS
The Company provides retirement benefits to substantially all employees and
general agency personnel. These benefits are provided through both defined
benefit and defined contribution pension plans. Pension benefits under the
defined benefit plans are based on years of service and average compensation
generally during the five years prior to retirement. The Company's funding
policy for qualified defined benefit plans is to contribute annually an amount
in excess of the minimum annual contribution required under the Employee
Retirement Income Security Act (ERISA). This amount is limited by the maximum
amount that can be deducted for federal income tax purposes. The funding
policy for nonqualified defined benefit plans is to contribute the amount of
the benefit payments made during the year. Plan assets consist principally of
listed equity securities, corporate obligations and U.S. government
securities.
Defined contribution plans include The Investment Incentive Plan (TIP) and the
Savings and Investment Plan (SIP). Employees are eligible to participate in
TIP after one year of service and may contribute up to the lesser of 15% of
their salary or $9,240 annually to the plan. The Company matches the first 2%
of pre-tax contributions and makes an additional annual profit sharing
contribution for employees who have completed at least two years of service.
Through SIP, marketing representatives, sales managers and agency managers are
eligible to contribute up to the lesser of 13% of their salary or $9,240. The
Company matches the first 3% of pretax contributions for marketing
representatives and the first 2% of pretax contributions for sales managers
and agency managers. The Company makes an annual profit sharing contribution
of up to 1% for sales managers and agency managers who have completed at least
two years of service.
The Company provides additional compensation to certain employees based on
achievement of annual and long-term corporate financial objectives.
52
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 8--BENEFIT PLANS--CONTINUED
Pension expense is summarized as follows:
<TABLE>
<CAPTION>
Year ended
December 31
----------------
1995 1994
------- -------
(In millions)
<S> <C> <C>
Defined benefit plans:
Service cost--benefits earned during the period............. $ 30.1 $ 46.5
Interest cost on the projected benefit obligation........... 103.5 96.1
Actual return on plan assets................................ (369.5) 29.4
Net amortization and deferral............................... 260.5 (144.7)
------- -------
24.6 27.3
Defined contribution plans.................................... 19.8 15.8
------- -------
Total pension expense..................................... $ 44.4 $ 43.1
======= =======
</TABLE>
Assumptions used in accounting for the defined benefit pension plans were as
follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Discount rate....................................................... 7.50% 8.00%
Weighted rate of increase in compensation levels.................... 5.10% 5.30%
Expected long-term rate of return on assets......................... 7.75% 8.25%
</TABLE>
The following table sets forth the funded status and actuarially determined
amounts related to the Company's defined benefit pension plans:
<TABLE>
<CAPTION>
Year ended December 31
------------------------
1995 1994
----------- -----------
(In millions)
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation.......................... $ (1,242.9) $ (1,108.9)
=========== ===========
Accumulated benefit obligation..................... $ (1,300.3) $ (1,151.0)
=========== ===========
Projected benefit obligation......................... $ (1,480.0) $ (1,350.2)
Plan assets fair value............................... 1,645.3 1,355.0
----------- -----------
Excess of plan assets over projected benefit obliga-
tion................................................ 165.3 4.8
Unrecognized net (gain) loss......................... (139.1) 36.3
Prior service cost not yet recognized in net periodic
pension cost........................................ 50.0 57.7
Unrecognized net asset, net of amortization.......... (111.2) (126.6)
----------- -----------
Net pension liability................................ $ (35.0) $ (27.8)
=========== ===========
</TABLE>
Since 1988, the Massachusetts Division of Insurance has provided the Company
with approval to recognize the pension plan prepaid expense, if any, in
accordance with the requirements of SFAS No. 87, "Employers' Accounting for
Pensions." The Company furnishes the Division of Insurance with an actuarial
certification of the prepaid expense computation on an annual basis.
53
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 9--OTHER POSTRETIREMENT BENEFIT PLANS
In addition to the Company's defined benefit pension plans, the Company has
employee welfare plans for medical, dental, and life insurance covering most
of its retired employees and general agency personnel. Substantially all
employees may become eligible for these benefits if they reach retirement age
while employed by the Company. The postretirement health care and dental
coverages are contributory based on service for post January 1, 1992 non-union
retirees. A small portion of pre-January 1, 1992 non-union retirees also
contribute. The applicable contributions are based on service.
In 1993, the Company changed its method of accounting for the costs of its
retiree benefit plans to the accrual method and elected to amortize its
transition liability for retirees and fully eligible or vested employees over
twenty years.
Since 1993, the Company funded a portion of the postretirement obligation. The
Company's policy is to fund postretirement benefits for non-union employees to
the maximum amount that can be deducted for federal income tax purposes and to
fund the benefits for union employees, which are fully tax qualified, at
sufficient amounts so that the total accrued liability related to
postretirement benefits is zero. As of December 31, 1995, plan assets related
to non-union employees were comprised of an irrevocable health insurance
contract to provide future health benefits to retirees while plan assets
related to union employees were comprised of approximately 60% equity
securities and 40% fixed income investments. The following table shows the
plans' combined funding status for vested benefits reconciled with the amounts
recognized in the Company's statements of financial position.
<TABLE>
<CAPTION>
December 31
-------------------------------------
1995 1994
------------------ ------------------
Medical Medical
and Life and Life
Dental Insurance Dental Insurance
Plans Plans Plans Plans
------- --------- ------- ---------
(In millions)
<S> <C> <C> <C> <C>
Accumulated postretirement benefit obli-
gation:
Retirees............................... $(236.5) $(89.2) $(239.2) $(76.5)
Fully eligible active plan partici-
pants................................. (42.9) (20.1) (51.3) (22.2)
------- ------ ------- ------
(279.4) (109.3) (290.5) (98.7)
Plan assets at fair value................ 96.9 0.0 59.9 0.0
------- ------ ------- ------
Accumulated postretirement benefit
obligation in excess of plan assets..... (182.5) (109.3) (230.6) (98.7)
Unrecognized prior service cost.......... 18.2 5.8 22.2 6.2
Unrecognized prior net gain.............. (84.2) (4.2) (63.9) (12.3)
Unrecognized transition obligation....... 272.9 83.3 288.9 88.2
------- ------ ------- ------
Accrued postretirement benefit cost...... $ 24.4 $(24.4) $ 16.6 $(16.6)
======= ====== ======= ======
</TABLE>
Net postretirement benefits costs for the years ended December 31, 1995 and
1994 were $50.2 million and $52.1 million, respectively, and include the
expected cost of such benefits for newly eligible or vested employees,
interest cost, and amortization of the transition liability.
54
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 9--OTHER POSTRETIREMENT BENEFIT PLANS--CONTINUED
Net periodic postretirement benefits cost included the following components:
<TABLE>
<CAPTION>
December 31
------------------------------------
1995 1994
------------------ -----------------
Medical Medical
and Life and Life
Dental Insurance Dental Insurance
Plans Plans Plans Plans
------- --------- ------- ---------
(In millions)
<S> <C> <C> <C> <C>
Eligibility cost............................ $ 5.3 $ 1.5 $ 6.1 $ 2.3
Interest cost............................... 21.1 7.8 19.9 6.8
Actual return on plan assets................ (15.5) 0.0 (2.1) 0.0
Net amortization and deferral............... 25.0 5.0 14.4 4.7
------ ----- ----- -----
Net periodic postretirement benefit cost.... $ 35.9 $14.3 $38.3 $13.8
====== ===== ===== =====
</TABLE>
The discount rate used in determining the accumulated postretirement benefit
obligation at December 31, 1995 was 7.5% (8.0% for 1994). The annual assumed
rate of increase in the health care cost trend rate for the medical coverages
is 8.25% for 1996 (9.75% was assumed for 1995) and is assumed to decrease
gradually to 5.5% in 2001 and remain at that level thereafter. The health care
cost trend rate assumption has a significant effect on the amounts reported.
For example, increasing the assumed health care cost trend rates by one
percentage point in each year would increase the accumulated post retirement
benefit obligation for the medical coverages as of December 31, 1995 by $35.0
million and the aggregate of the eligibility and interest cost components of
net periodic postretirement benefit cost by $3.6 million for 1995 and $2.7
million for 1994.
Postretirement welfare benefits for non-vested employees are not reflected in
the above expenses or accumulated postretirement benefit obligations. As of
December 31, 1995, the accumulated postretirement benefit obligations for non-
vested employees amounted to $67.7 million for medical and dental plans and
$10.8 million for life insurance plans. The corresponding amounts as of
December 31, 1994 were $70.4 million and $9.1 million, respectively.
NOTE 10--AFFILIATES
The Company has subsidiaries and affiliates in a variety of industries
including domestic and foreign life insurance and domestic property casualty
insurance, real estate, mutual funds, investment brokerage and various other
financial services entities.
Total assets of unconsolidated affiliates amounted to $9.5 billion at December
31, 1995 and $7.8 billion at December 31, 1994; total liabilities amounted to
$8.3 billion at December 31, 1995 and $6.7 billion at December 31, 1994; and
total net income was $89.5 million in 1995 and $61.9 million in 1994.
The Company customarily engages in transactions with its unconsolidated
affiliates, including the cession and assumption of certain insurance business
under the terms of established reinsurance agreements. Various services are
performed by the Company for certain affiliates for which the Company is
reimbursed on the basis of cost. Certain affiliates have entered into various
financial arrangements relating to borrowings and capital maintenance under
which agreements the Company would be obligated in the event of nonperformance
by an affiliate (see Note 14).
55
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 10--AFFILIATES--CONTINUED
The Company received dividends of $9.7 million and $10.1 million in 1995 and
1994, respectively, from unconsolidated affiliates.
NOTE 11--FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Company enters into interest rate swap contracts for the purpose of
converting the interest rate characteristics (fixed or variable) of certain
investments to match those of related insurance liabilities. Maturities of
current agreements range from 1996 to 2005. These swaps involve, to varying
degrees, interest rate risk in excess of amounts recognized in the statement
of financial position.
The Company enters into currency rate swap agreements to manage exposure to
foreign exchange rate fluctuations. Maturities of current agreements range
through 2009. Should the counterparty fail to meet the terms of the contract,
the Company's market risk is limited to the currency rate differential.
The Company enters into interest rate cap contracts to manage exposure on
underlying security values due to a rise in interest rates. Maturities of
current agreements range through 2001.
The Company also uses financial futures contracts to hedge risks associated
with interest rate fluctuations on sales of guaranteed investment contracts.
The Company is subject to the risks associated with changes in the value of
the underlying securities; however, such changes in value generally are offset
by opposite changes in the value of the hedged items. The contract or notional
amounts of the contracts represent the extent of the Company's involvement but
not the future cash requirements, as the Company intends to close the open
positions prior to settlement.
The contract or notional amount of the foregoing financial instruments, which
indicates the Company's involvement and, in certain instances, maximum credit
risk related to those instruments, is as follows:
<TABLE>
<CAPTION>
December 31
-----------------
1995 1994
-------- --------
(In millions)
<S> <C> <C>
Futures contracts to purchase securities.................... $ 62.2 $ 147.9
======== ========
Futures contracts to sell securities........................ $ 299.9 $ 98.1
======== ========
Notional amount of interest rate swaps, currency rate swaps,
and interest rate caps to:
Receive variable rates.................................... $1,735.0 $ 916.0
======== ========
Receive fixed rates....................................... $1,756.3 $1,365.2
======== ========
</TABLE>
The Company continually monitors its positions and the credit ratings of the
counterparties to these financial instruments. The Company believes the risk
of incurring losses due to nonperformance by its counterparties is remote and
that any such losses would be immaterial.
Based on market rates in effect at December 31, 1995, the Company's interest
rate swaps, currency rate swaps, and interest rate caps represented (assets)
liabilities to the Company with fair values of $37.0 million, $23.3 million
and $(0.3) million, respectively. The corresponding amounts as of December 31,
1994 were $12.0 million, $15.4 million, and $(1.5) million, respectively.
56
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 12--LEASES
The Company leases office space and furniture and equipment under various
operating leases. Rental expenses for all operating leases totaled $32.2
million in 1995 and $35.2 million in 1994. At December 31, 1995, future
minimum rental commitments under noncancellable operating leases for office
space and furniture and equipment totaled approximately $44.3 million.
NOTE 13--POLICYHOLDERS' RESERVES AND BENEFICIARIES' FUNDS
The Company's annuity reserves and deposit fund liabilities that are subject
to discretionary withdrawal (with adjustment), subject to discretionary
withdrawal (without adjustment), and not subject to discretionary withdrawal
provisions are summarized as follows:
<TABLE>
<CAPTION>
December 31, 1995 Percent
----------------- -------
(In millions)
<S> <C> <C>
Subject to discretionary withdrawal (with adjust-
ment):
With market value adjustment....................... $ 2,517.0 7.3%
At book value less surrender charge................ 2,502.2 7.3
--------- -----
Total with adjustment.............................. 5,019.2 14.6
Subject to discretionary withdrawal (without ad-
justment) at book value........................... 594.8 1.7
Subject to discretionary withdrawal--separate ac-
counts............................................ 10,813.9 31.4
Not subject to discretionary withdrawal:
General account.................................... 16,634.4 48.3
Separate accounts.................................. 1,387.2 4.0
--------- -----
Total annuity reserves and deposit liabilities--be-
fore reinsurance.................................... 34,449.5 100.0%
=====
Less reinsurance ceded............................... (0.2)
---------
Net annuity reserves and deposit fund liabilities.... $34,449.3
=========
</TABLE>
Activity in the liability for accident and health unpaid claims is:
<TABLE>
<CAPTION>
1995 1994
------ ------
(In millions)
<S> <C> <C>
Balance at January 1............................................ $216.2 $210.6
Less reinsurance recoverables................................. (7.3) (4.6)
------ ------
Net balance at January 1........................................ 208.9 206.0
------ ------
Incurred related to:
Current year.................................................. 301.0 350.4
Prior years................................................... (25.2) (40.4)
------ ------
Total incurred.................................................. 275.8 310.0
------ ------
Paid related to:
Current year.................................................. 192.0 231.2
Prior years................................................... 89.0 75.9
------ ------
Total paid...................................................... 281.0 307.1
------ ------
Net balance at December 31...................................... 203.7 208.9
Plus reinsurance recoverable.................................. 4.0 7.3
------ ------
Balance at December 31.......................................... $207.7 $216.2
====== ======
</TABLE>
57
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 13--POLICYHOLDERS' RESERVES AND BENEFICIARIES' FUNDS--CONTINUED
As a result of favorable changes in claim estimates and a decline in fully
insured business, the liability for prior year claims decreased in 1995 and
1994.
NOTE 14--COMMITMENTS AND CONTINGENCIES
The Company has extended commitments to purchase long-term bonds, preferred
stocks, and real estate and issue real estate mortgages totaling $620.7
million, $19.1 million, $5.0 million and $396.6 million, respectively, at
December 31, 1995. If funded, loans related to real estate mortgages would be
fully collateralized by related properties. The Company monitors the credit
worthiness of borrowers under long-term bond commitments and requires
collateral as deemed necessary. The fair value of the commitments described
above is $1.1 billion at December 31, 1995. The majority of these commitments
expire in 1996.
During 1991, the Company entered into a credit support and collateral pledge
agreement with the Federal National Mortgage Association (FNMA). Under the
agreement, the Company sold $1.042 billion of multi-family loans and acquired
an equivalent amount of FNMA securities. FNMA is guarantying the full face
value of the bonds to the bondholders. However, the Company has agreed to
absorb the first 15% of original principal and interest losses (less buy-
backs) for the pool of loans involved, but is not required to commit
collateral to support this loss contingency. Historically, the Company has
experienced total losses as a percentage of its multi-family mortgage
portfolio of approximately 3%. Mortgage loan buy-backs required by FNMA in
1995 and 1994 amounted to $29.5 million and $12.7 million, respectively. There
were no losses associated with these buy-backs. At December 31, 1995, the
remaining pool of loans had an outstanding principal balance of $591.2
million.
The Company has a support agreement with JHVLICo under which the Company
agrees to continue directly or indirectly to own all of JHVLICo's common stock
and maintain JHVLICo's net worth at not less than $1 million.
The Company has a support agreement with John Hancock Capital Corporation
(JHCC) under which the Company agrees to continue directly or indirectly to
own all of JHCC's common stock and maintain JHCC's net worth at not less than
$1 million. JHCC's outstanding borrowings as of December 31, 1995 were $363.6
million for short-term borrowings and $142.7 million for notes payable.
The Company is subject to insurance guaranty fund laws in the states in which
it does business. These laws assess insurance companies amounts to be used to
pay benefits to policyholders and claimants of insolvent insurance companies.
Many states allow these assessments to be credited against future premium
taxes. The Company believes such assessments in excess of amounts accrued will
not materially affect its financial position.
In the normal course of its business operations, the Company is involved in
litigation from time to time with claimants, beneficiaries and others, and a
number of litigation matters were pending as of December 31, 1995. It is the
opinion of management, after consultation with counsel, that the ultimate
liability with respect to these claims, if any, will not materially affect the
financial position of the Company.
58
<PAGE>
APPENDIX--OTHER POLICY PROVISIONS
SETTLEMENT PROVISIONS
In place of a single payment, an amount of $1,000 or more payable under the
Policy as a benefit or as the Surrender Value, if any, may be left with John
Hancock under the terms of a supplementary agreement. The agreement will be
issued when the proceeds are applied through the election of any one of the
options below.
The following options are subject to the restrictions and limitations stated
in the Policy.
Option 1--Interest Income at the declared rate but not less than 3 1/2% a
year on proceeds held on deposit.
Option 2A--Income of a Specified Amount, with payments each year totaling
at least 1/12th of the proceeds, until the proceeds, with interest credited
at the declared rate but not less than 3 1/2% a year on unpaid balances,
are fully paid.
Option 2B--Income for a Fixed Period, with each payment as declared.
Option 3--Life Income with Payments for a Guaranteed Period.
Option 4--Life Income without Refund at the death of the Payee of any
part of the proceeds applied. Only one payment is made if the Payee dies
before the second payment is due.
Option 5--Life Income with Cash Refund at the death of the Payee of the
amount, if any, equal to the proceeds applied less the sum of all income
payments made.
No election of an option may provide for income payments of less than $50.
Other options may be arranged with John Hancock's approval.
ADDITIONAL INSURANCE BENEFITS
On payment of an additional premium and subject to certain age and insurance
underwriting requirements, certain additional provisions, such as an
Accidental Death Benefit, which are subject to the restrictions and
limitations set forth therein, may be included in a Policy.
GENERAL PROVISIONS
BENEFICIARY. The Beneficiary will be as shown in the application for the
Policy, unless thereafter changed by the Owner in accordance with the terms of
the Policy. If the insured dies and there is no surviving Beneficiary, the
Owner will be the Beneficiary, but if the insured was the Owner, the Owner's
estate will be the Beneficiary.
ASSIGNMENT. The Owner's interest in the Policy may be assigned without the
consent of any revocable Beneficiary. John Hancock will not be on notice of
any assignment unless it is in writing and until a duplicate of the original
assignment has been filed at John Hancock's Home Office. John Hancock assumes
no responsibility for the validity or sufficiency of any assignment.
MISSTATEMENT OF AGE OR SEX. If the age or sex of the insured has been
misstated, John Hancock will adjust the benefits payable to reflect the
correct age or sex.
59
<PAGE>
SUICIDE. If the insured commits suicide, while sane or insane, within 2
years (except where state law requires a shorter period) from the issue date
shown in the Policy, John Hancock will pay in place of all other benefits an
amount equal to the premium paid less any Indebtedness on the date of death
and any withdrawals. If the suicide is more than 2 years from the issue date
but within 2 years of any increase in death benefit due to payment of any
premium in excess of the Required Premium or change in Death Benefit Option
the benefits payable will not include the increased benefit but will include
the excess premium.
AVIATION ACTIVITY EXCLUSION. If the insured dies in an aviation accident
while a crew member on other than a commercial aircraft and the Policy
provides at the request of the Owner for a limited benefit in such situation,
John Hancock will pay in place of all other benefits an amount equal to the
greater of the premium paid or the Surrender Value, less any Indebtedness.
INCONTESTABILITY. The Policy, except for any provision for a disability
benefit or additional benefits provisions added after issue, shall be
incontestable other than for nonpayment of premiums after it has been in force
during the lifetime of the insured for 2 years from its issue date. If,
however, evidence of insurability is required with respect to any increase in
death benefit, it shall be incontestable after the increase has been in force
for 2 years from the increase date.
DEFERRAL OF DETERMINATION AND PAYMENTS. If the Policy is not on a fixed non-
forfeiture option, payment of any death, surrender, withdrawal or loan
proceeds will ordinarily be made within seven days after receipt at John
Hancock's Home Office of all documents required for any such payment.
Approximately two-thirds of the claims for death proceeds which are made
within two years after the date of issue of the Policy will be investigated to
determine whether the claim should be contested and payment of these claims
will therefore be delayed.
John Hancock may defer any transaction requiring a determination of Account
Value for any period during which: (1) the disposal or valuation of the
Account's assets is not reasonably practicable because the New York Stock
Exchange is closed or conditions are such that, under the Commission's rules
and regulations, trading is restricted or an emergency is deemed to exist or
(2) the Commission by order permits postponement of such actions for the
protection of John Hancock Owners.
Under a Policy being continued under a fixed non-forfeiture option, payment
of the cash value or loan proceeds may be deferred by John Hancock for up to
six months after receipt of a request therefor. Interest will be accrued at an
annual rate of 3 1/2% if such a deferment extends beyond 29 days.
The foregoing description of Policy provisions is qualified by reference to
the specimen Policy which has been filed as an exhibit to the Registration
Statement.
60
<PAGE>
APPENDIX--ILLUSTRATION OF DEATH BENEFITS, ACCOUNT VALUES,
SURRENDER VALUES AND ACCUMULATED PREMIUMS
The following tables illustrate the changes in death benefit, Account Value
and Surrender Value of the Policy, disregarding any Policy loans. Each table
separately illustrates the operation of a Policy for an identified issue age,
premium schedule and Sum Insured and shows how the death benefit, Account
Value and Surrender Value (reflecting the deduction of surrender charges, if
any) may vary over an extended period of time assuming hypothetical rates of
investment return (i.e., investment income and capital gains and losses,
realized or unrealized) equivalent to constant gross annual rates of 0%, 6%
and 12%. The tables are based on given annual premiums paid at the beginning
of each Policy year and will assist in a comparison of the values set forth in
the tables with those under other variable life insurance policies which may
be issued by John Hancock or other companies. Tables are provided for each of
the three available death benefit options. The values for a Policy would be
different from those shown if premiums are paid in different amounts or at
different times or if the actual gross rates of investment return average 0%,
6% or 12% over a period of years, but nevertheless fluctuated above or below
the average for individual Policy years.
The amounts shown for the death benefit, Account Value and Surrender Value
are as of the end of each Policy year. The tables headed "Using Current
Charges" assume that current monthly rates for insurance and current charges
for expenses (including John Hancock's intended waiver after ten Policy years
of the sales charge deducted from certain premiums and its intended reduction
in the tenth Policy year in the insurance charge deducted monthly from Account
Value) will be made in each year illustrated. The tables headed "Using Maximum
Charges" assumes that the maximum (guaranteed) charge will be made for the
monthly rates for insurance and for expense charges in each year illustrated
without waivers or reductions. The amounts shown in all tables reflect an
average asset charge for the daily investment advisory expense charges to the
Portfolios of the Fund (equivalent to an effective annual rate of .60%) and an
assumed average asset charge for the annual nonadvisory operating expenses of
each Portfolio of the Fund (equivalent to an effective annual rate of .19%).
For a description of expenses charged to the Portfolios, including the
reimbursement of any Portfolio for annual non-advisory operating expenses in
excess of an effective annual rate of .25%, a continuing obligation of the
Fund's investment adviser, see the attached prospectus for the Fund. The
charges for the daily investment management fee and the annual non-advisory
operating expenses are based on the hypothetical assumption that Policy values
are allocated equally among the variable subaccounts. The actual charges and
expenses associated with any Policy will vary depending upon the actual
allocation of Policy values among subaccounts.
The tables reflect that no charge is currently made to the Account for
Federal income taxes. However, John Hancock reserves the right to make such a
charge in the future and any charge would require higher rates of investment
return in order to produce the same Policy values.
The second column of each table shows the amount to which the total premiums
paid to the end of a Policy year during the premium paying period would
accumulate if an amount equal to those premiums were invested to earn
interest, after taxes, at 5% compounded annually.
John Hancock will furnish upon request a comparable illustration reflecting
the proposed insured's age, sex, underwriting risk classification and the Sum
Insured at issue or premium amount requested, and assuming annual premiums and
that the proposed insured is not in a substandard underwriting risk
classification.
61
<PAGE>
DEATH BENEFIT OPTION 1: --LEVEL DEATH BENEFIT
ILLUSTRATION ASSUMES CURRENT CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK
SUM INSURED AT ISSUE (GUARANTEED DEATH BENEFIT): $100,000
$900 BASE POLICY PREMIUM (1)
<TABLE>
<CAPTION>
Death Benefit(3) Account Value(3) Surrender Value(3)
-------------------------------- -------------------------------- --------------------------------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of: Annual Investment Return of: Annual Investment Return of:
Policy At 5% Interest -------------------------------- -------------------------------- --------------------------------
Year Per Year(2) 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
- ------ -------------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 945 100,000 100,000 100,000 323 356 390 0 0 0
2 1,937 100,000 100,000 100,000 873 967 1,065 303 397 495
3 2,979 100,000 100,000 100,000 1,405 1,595 1,802 700 890 1,097
4 4,073 100,000 100,000 100,000 1,919 2,241 2,605 1,079 1,401 1,765
5 5,222 100,000 100,000 100,000 2,414 2,904 3,479 1,739 2,229 2,804
6 6,428 100,000 100,000 100,000 2,889 3,584 4,431 2,079 2,774 3,621
7 7,694 100,000 100,000 100,000 3,341 4,279 5,468 2,531 3,469 4,658
8 9,024 100,000 100,000 100,000 3,770 4,989 6,598 3,050 4,269 5,878
9 10,420 100,000 100,000 100,000 4,175 5,713 7,828 3,545 5,083 7,198
10 11,886 100,000 100,000 100,000 4,565 6,466 9,191 4,025 5,926 8,651
11 13,425 100,000 100,000 100,000 4,976 7,283 10,732 4,526 6,833 10,282
12 15,042 100,000 100,000 100,000 5,361 8,120 12,423 5,046 7,805 12,108
13 16,739 100,000 100,000 100,000 5,721 8,977 14,280 5,541 8,797 14,100
14 18,521 100,000 100,000 100,000 6,053 9,856 16,322 6,053 9,856 16,322
15 20,392 100,000 100,000 100,000 6,356 10,753 18,567 6,356 10,753 18,567
16 22,356 100,000 100,000 100,000 6,629 11,671 21,040 6,629 11,671 21,040
17 24,419 100,000 100,000 100,000 6,862 12,601 23,759 6,862 12,601 23,759
18 26,585 100,000 100,000 100,000 7,048 13,539 26,751 7,048 13,539 26,751
19 28,859 100,000 100,000 100,000 7,184 14,480 30,044 7,184 14,480 30,044
20 31,247 100,000 100,000 100,000 7,263 15,420 33,672 7,263 15,420 33,672
25 45,102 100,000 100,000 100,000 6,576 19,934 58,479 6,576 19,934 58,479
30 62,785 100,000 100,000 120,995 3,172 23,413 100,829 3,172 23,413 100,829
35 85,353 100,000 100,000 196,302 0 23,764 170,697 0 23,764 170,697
40 142,635 100,000 100,000 293,236 1,781 39,744 279,272 1,781 39,744 279,272
45 215,744 100,000 100,000 482,900 0 34,278 459,905 0 34,278 459,905
</TABLE>
- --------
(1) Assumes annual premium payments of $900 per year until the premium
recalculation at age 70 and annual recalculated premium amounts
thereafter. If premiums are paid more frequently than annually, the above
values shown would be affected.
(2) Assumes payment of recalculated annual premium amounts of $5,809 after age
70. As indicated in note (3) below, the actual recalculated premium may be
lower or higher than this amount.
(3) Assumes payment of recalculated premiums after age 70 in annual amounts of
$8,404 at 0%, $5,809 6% and $0 at 12%, subject to any maximums required to
maintain the Policy's status for federal income tax purposes.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT
RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY
THE OWNER. THE DEATH BENEFIT, ACCOUNT VALUE AND SURRENDER VALUE FOR A POLICY
WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT
RETURN AVERAGE 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE
OR BELOW THE AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE
MADE THAT THESE HYPOTHETICAL INVESTMENT RESULTS CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
62
<PAGE>
DEATH BENEFIT OPTION 1: LEVEL DEATH BENEFIT
ILLUSTRATION ASSUMES GUARANTEED CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK
SUM INSURED AT ISSUE (GUARANTEED DEATH BENEFIT): $100,000
$900 BASE POLICY PREMIUM (1)
<TABLE>
<CAPTION>
Death Benefit(3) Account Value(3) Surrender Value(3)
-------------------------------- -------------------------------- --------------------------------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of: Annual Investment Return of: Annual Investment Return of:
Policy At 5% Interest -------------------------------- -------------------------------- --------------------------------
Year Per Year(2) 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
- ------ -------------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 945 100,000 100,000 100,000 276 307 339 0 0 0
2 1,937 100,000 100,000 100,000 778 866 958 8 96 188
3 2,979 100,000 100,000 100,000 1,264 1,440 1,633 359 535 728
4 4,073 100,000 100,000 100,000 1,732 2,030 2,367 692 990 1,327
5 5,222 100,000 100,000 100,000 2,181 2,633 3,165 1,006 1,458 1,990
6 6,428 100,000 100,000 100,000 2,611 3,251 4,033 1,301 1,941 2,723
7 7,694 100,000 100,000 100,000 3,018 3,881 4,976 1,808 2,671 3,766
8 9,024 100,000 100,000 100,000 3,404 4,523 6,003 2,284 3,403 4,883
9 10,420 100,000 100,000 100,000 3,765 5,175 7,118 2,835 4,245 6,188
10 11,886 100,000 100,000 100,000 4,102 5,839 8,334 3,562 5,299 7,794
11 13,425 100,000 100,000 100,000 4,412 6,511 9,658 3,962 6,061 9,208
12 15,042 100,000 100,000 100,000 4,693 7,190 11,098 4,378 6,875 10,783
13 16,739 100,000 100,000 100,000 4,944 7,874 12,668 4,764 7,694 12,488
14 18,521 100,000 100,000 100,000 5,164 8,564 14,380 5,164 8,564 14,380
15 20,392 100,000 100,000 100,000 5,348 9,255 16,249 5,348 9,255 16,249
16 22,356 100,000 100,000 100,000 5,496 9,947 18,289 5,496 9,947 18,289
17 24,419 100,000 100,000 100,000 5,601 10,633 20,517 5,601 10,633 20,517
18 26,585 100,000 100,000 100,000 5,658 11,308 22,948 5,658 11,308 22,948
19 28,859 100,000 100,000 100,000 5,661 11,966 25,604 5,661 11,966 25,604
20 31,247 100,000 100,000 100,000 5,602 12,598 28,505 5,602 12,598 28,505
25 45,102 100,000 100,000 100,000 4,147 15,131 47,784 4,147 15,131 47,784
30 62,785 100,000 100,000 100,000 0 15,525 79,544 0 15,525 79,544
35 85,353 100,000 100,000 152,207 0 10,772 132,354 0 10,772 132,354
40 150,868 100,000 100,000 221,590 0 15,987 211,039 0 15,987 211,039
45 234,483 100,000 100,000 356,624 0 0 339,642 0 0 339,642
</TABLE>
- --------
(1) Assumes annual premium payments of $900 per year until the premium
recalculation at age 70 and annual recalculated premium amounts
thereafter. If premiums are paid more frequently than annually, the above
values shown would be affected.
(2) Assumes payment of recalculated annual premium amounts of $7,228 after age
70. As indicated in note (3) below, the actual recalculated premium may be
lower or higher than this amount.
(3) Assumes payment of recalculated premiums after age 70 in annual amounts of
$8,404 at 0%, $7,228 at 6% and $0 at 12%, subject to any maximums required
to maintain the Policy's status for federal income tax purposes.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT
RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY
THE OWNER. THE DEATH BENEFIT, ACCOUNT VALUE AND SURRENDER VALUE FOR A POLICY
WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT
RETURN AVERAGE 0%, 5% OR 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE
OR BELOW THE AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE
MADE THAT THESE HYPOTHETICAL INVESTMENT RESULTS CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
63
<PAGE>
DEATH BENEFIT OPTION 2: VARIABLE DEATH BENEFIT
ILLUSTRATION ASSUMES CURRENT CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK
SUM INSURED AT ISSUE (GUARANTEED DEATH BENEFIT): $100,000
$900 BASE POLICY PREMIUM (1)
<TABLE>
<CAPTION>
Death Benefit(3) Account Value(3) Surrender Value(3)
-------------------------------- -------------------------------- --------------------------------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of: Annual Investment Return of: Annual Investment Return of:
Policy At 5% Interest -------------------------------- -------------------------------- --------------------------------
Year Per Year(2) 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
- ------ -------------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 945 100,000 100,000 100,000 323 356 390 0 0 0
2 1,937 100,000 100,000 100,000 873 967 1,065 303 397 495
3 2,979 100,000 100,000 100,000 1,405 1,595 1,802 700 890 1,097
4 4,073 100,000 100,000 100,000 1,919 2,241 2,605 1,079 1,401 1,765
5 5,222 100,000 100,000 100,000 2,414 2,904 3,479 1,739 2,229 2,804
6 6,428 100,000 100,000 100,000 2,889 3,584 4,431 2,079 2,774 3,621
7 7,694 100,000 100,000 100,000 3,341 4,279 5,468 2,531 3,469 4,658
8 9,024 100,000 100,000 100,000 3,770 4,989 6,598 3,050 4,269 5,878
9 10,420 100,000 100,000 100,000 4,175 5,713 7,828 3,545 5,083 7,198
10 11,886 100,000 100,000 100,000 4,565 6,466 9,191 4,025 5,926 8,651
11 13,425 100,000 100,000 100,000 4,976 7,283 10,732 4,526 6,833 10,282
12 15,042 100,000 100,000 100,000 5,361 8,120 12,423 5,046 7,805 12,108
13 16,739 100,000 100,000 100,000 5,721 8,977 14,280 5,541 8,797 14,100
14 18,521 100,000 100,000 100,000 6,053 9,856 16,322 6,053 9,856 16,322
15 20,392 100,000 100,000 100,000 6,356 10,753 18,567 6,356 10,753 18,567
16 22,356 100,000 100,000 100,173 6,629 11,671 21,040 6,629 11,671 21,040
17 24,419 100,000 100,000 101,272 6,862 12,601 23,757 6,862 12,601 23,757
18 26,585 100,000 100,000 102,601 7,048 13,539 26,737 7,048 13,539 26,737
19 28,859 100,000 100,000 104,187 7,184 14,480 30,008 7,184 14,480 30,008
20 31,247 100,000 100,000 106,064 7,263 15,420 33,598 7,263 15,420 33,598
25 45,102 100,000 100,000 121,108 6,576 19,934 57,607 6,576 19,934 57,607
30 62,785 100,000 100,000 150,402 3,172 23,413 96,351 3,172 23,413 96,351
35 85,353 100,000 100,000 203,738 0 23,764 159,166 0 23,764 159,166
40 142,635 100,000 104,578 284,760 1,781 38,194 257,817 1,781 38,194 257,817
45 215,744 100,000 100,000 442,603 0 31,391 421,527 0 31,391 421,527
</TABLE>
- --------
(1) Assumes annual premium payments of $900 per year until the premium
recalculation at age 70 and annual recalculated premium amounts
thereafter. If premiums are paid more frequently than annually, the above
values shown would be affected.
(2) Assumes payment of recalculated annual premium amounts of $5,809 after age
70. As indicated in note (3) below, the actual recalculated premium may be
lower or higher than this amount.
(3) Assumes payment of recalculated premiums after age 70 in annual amounts of
$8,404 at 0%, $5,809 at 6% and $0 at 12%, subject to any maximum required
to maintain the Policy's status for federal income tax purposes.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT
RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY
THE OWNER. THE DEATH BENEFIT, ACCOUNT VALUE AND SURRENDER VALUE FOR A POLICY
WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT
RETURN AVERAGE 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE
OR BELOW THE AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE
MADE THAT THESE HYPOTHETICAL INVESTMENT RESULTS CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
64
<PAGE>
DEATH BENEFIT OPTION 2: VARIABLE DEATH BENEFIT
ILLUSTRATION ASSUMES GUARANTEED CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK SUM INSURED AT ISSUE
(GUARANTEED DEATH BENEFIT): $100,000 $900 BASE POLICY PREMIUM (1)
<TABLE>
<CAPTION>
Death Benefit(3) Account Value(3) Surrender Value(3)
-------------------------------- -------------------------------- --------------------------------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of: Annual Investment Return of: Annual Investment Return of:
Policy At 5% Interest -------------------------------- -------------------------------- --------------------------------
Year Per Year(2) 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
- ------ -------------- --------- -------- --------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 945 100,000 100,000 100,000 276 307 339 0 0 0
2 1,937 100,000 100,000 100,000 778 866 958 8 96 188
3 2,979 100,000 100,000 100,000 1,264 1,440 1,633 359 535 728
4 4,073 100,000 100,000 100,000 1,732 2,030 2,367 692 990 1,327
5 5,222 100,000 100,000 100,000 2,181 2,633 3,165 1,006 1,458 1,990
6 6,428 100,000 100,000 100,000 2,611 3,251 4,033 1,301 1,941 2,723
7 7,694 100,000 100,000 100,000 3,018 3,881 4,976 1,808 2,671 3,766
8 9,024 100,000 100,000 100,000 3,404 4,523 6,003 2,284 3,403 4,883
9 10,420 100,000 100,000 100,000 3,765 5,175 7,118 2,835 4,245 6,188
10 11,886 100,000 100,000 100,000 4,102 5,839 8,334 3,562 5,299 7,794
11 13,425 100,000 100,000 100,000 4,412 6,511 9,658 3,962 6,061 9,208
12 15,042 100,000 100,000 100,000 4,693 7,190 11,098 4,378 6,875 10,783
13 16,739 100,000 100,000 100,000 4,944 7,874 12,688 4,764 7,694 12,488
14 18,521 100,000 100,000 100,000 5,164 8,564 14,380 5,164 8,564 14,380
15 20,392 100,000 100,000 100,000 5,348 9,255 16,249 5,348 9,255 16,249
16 22,356 100,000 100,000 100,000 5,496 9,947 18,289 5,496 9,947 18,289
17 24,419 100,000 100,000 100,000 5,601 10,633 20,517 5,601 10,633 20,517
18 26,585 100,000 100,000 100,000 5,658 11,308 22,948 5,658 11,308 22,948
19 28,859 100,000 100,000 100,000 5,661 11,966 25,604 5,661 11,966 25,604
20 31,247 100,000 100,000 100,969 5,602 12,598 28,503 5,602 12,598 28,503
25 45,102 100,000 100,000 110,966 4,147 15,131 47,465 4,147 15,131 47,465
30 62,785 100,000 100,000 130,989 0 15,525 76,938 0 15,525 76,938
35 85,353 100,000 100,000 167,604 0 10,772 123,033 0 10,772 123,033
40 150,868 100,000 100,000 218,826 0 15,434 191,883 0 15,434 191,883
45 234,483 100,000 100,000 324,082 0 0 303,284 0 0 303,284
</TABLE>
- --------
(1) Assumes annual premium payments of $900 per year until the premium
recalculation at age 70 and annual recalculated premium amounts
thereafter. If premiums are paid more frequently than annually, the above
values shown would be affected.
(2) Assumes payment of recalculated annual premium amounts of $7,228 after age
70. As indicated in note (3) below, the actual recalculated premium may be
lower or higher than this amount.
(3) Assumes payment of recalculated premiums after age 70 in annual amounts of
$8,404 at 0%, $7,228 at 6% and $0 at 12%, subject to any maximums required
to maintain the Policy's status for federal income tax purposes.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT
RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY
THE OWNER. THE DEATH BENEFIT, ACCOUNT VALUE AND SURRENDER VALUE FOR A POLICY
WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT
RETURN AVERAGE 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE
OR BELOW THE AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE
MADE THAT THESE HYPOTHETICAL INVESTMENT RESULTS CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
65
<PAGE>
DEATH BENEFIT OPTION 3: LEVEL DEATH BENEFIT WITH GREATER FUNDING
ILLUSTRATION ASSUMES CURRENT CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK SUM INSURED AT ISSUE
(GUARANTEED DEATH BENEFIT): $100,000 $900 BASE POLICY PREMIUM (1)
<TABLE>
<CAPTION>
Death Benefit(3) Account Value(3) Surrender Value(3)
-------------------------------- -------------------------------- --------------------------------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of: Annual Investment Return of: Annual Investment Return of:
Policy At 5% Interest -------------------------------- -------------------------------- --------------------------------
Year Per Year(2) 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
- ------ -------------- --------- -------- --------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 945 100,000 100,000 100,000 323 356 390 0 0 0
2 1,937 100,000 100,000 100,000 873 967 1,065 303 397 495
3 2,979 100,000 100,000 100,000 1,405 1,595 1,802 700 890 1,097
4 4,073 100,000 100,000 100,000 1,919 2,241 2,605 1,079 1,401 1,765
5 5,222 100,000 100,000 100,000 2,414 2,904 3,479 1,739 2,229 2,804
6 6,428 100,000 100,000 100,000 2,889 3,584 4,431 2,079 2,774 3,621
7 7,694 100,000 100,000 100,000 3,341 4,279 5,468 2,531 3,469 4,658
8 9,024 100,000 100,000 100,000 3,770 4,989 6,598 3,050 4,269 5,878
9 10,420 100,000 100,000 100,000 4,175 5,713 7,828 3,545 5,083 7,198
10 11,886 100,000 100,000 100,000 4,565 6,466 9,191 4,025 5,926 8,651
11 13,425 100,000 100,000 100,000 4,976 7,283 10,732 4,526 6,833 10,282
12 15,042 100,000 100,000 100,000 5,361 8,120 12,423 5,046 7,805 12,108
13 16,739 100,000 100,000 100,000 5,721 8,977 14,280 5,541 8,797 14,100
14 18,521 100,000 100,000 100,000 6,053 9,856 16,322 6,053 9,856 16,322
15 20,392 100,000 100,000 100,000 6,356 10,753 18,567 6,356 10,753 18,567
16 22,356 100,000 100,000 100,000 6,629 11,671 21,040 6,629 11,671 21,040
17 24,419 100,000 100,000 100,000 6,862 12,601 23,759 6,862 12,601 23,759
18 26,585 100,000 100,000 100,000 7,048 13,539 26,751 7,048 13,539 26,751
19 28,859 100,000 100,000 100,000 7,184 14,480 30,044 7,184 14,480 30,044
20 31,247 100,000 100,000 100,000 7,263 15,420 33,672 7,263 15,420 33,672
25 45,102 100,000 100,000 113,311 6,576 19,934 58,314 6,576 19,934 58,314
30 62,785 100,000 100,000 165,106 3,172 23,413 97,007 3,172 23,413 97,007
35 85,353 100,000 100,000 235,773 0 23,764 155,770 0 23,764 155,770
40 142,635 100,000 100,000 325,483 16,177 48,358 237,787 16,177 48,358 237,787
45 215,744 100,000 102,204 451,336 30,905 80,947 357,466 30,905 80,947 357,466
</TABLE>
- --------
(1) Assumes annual premium payments of $900 per year until the premium
recalculation at age 70 and annual recalculated premium amounts
thereafter. If premiums are paid more frequently than annually, the above
values shown would be affected.
(2) Assumes payment of recalculated annual premium amounts of $5,809 after age
70. As indicated in note (3) below, the actual recalculated premium may be
lower or higher than this amount.
(3) Assumes payment of recalculated premiums after age 70 in annual amounts of
$8,404 at 0%, $5,809 at 6% and $0 at 12%.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT
RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY
THE OWNER. THE DEATH BENEFIT, ACCOUNT VALUE AND SURRENDER VALUE FOR A POLICY
WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT
RETURN AVERAGE 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE
OR BELOW THE AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE
MADE THAT THESE HYPOTHETICAL INVESTMENT RESULTS CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
66
<PAGE>
DEATH BENEFIT OPTION 3: LEVEL DEATH BENEFIT WITH GREATER FUNDING
ILLUSTRATION ASSUMES GUARANTEED CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK SUM INSURED AT ISSUE
(GUARANTEED DEATH BENEFIT): $100,000 $900 BASE POLICY PREMIUM (1)
<TABLE>
<CAPTION>
Death Benefit(3) Account Value(3) Surrender Value(3)
-------------------------------- -------------------------------- --------------------------------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of: Annual Investment Return of: Annual Investment Return of:
Policy At 5% Interest -------------------------------- -------------------------------- --------------------------------
Year Per Year(2) 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
- ------ -------------- -------- -------- --------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 945 100,000 100,000 100,000 276 307 339 0 0 0
2 1,937 100,000 100,000 100,000 778 866 958 8 96 188
3 2,979 100,000 100,000 100,000 1,264 1,440 1,633 359 535 728
4 4,073 100,000 100,000 100,000 1,732 2,030 2,367 692 990 1,327
5 5,222 100,000 100,000 100,000 2,181 2,633 3,165 1,006 1,458 1,990
6 6,428 100,000 100,000 100,000 2,611 3,251 4,033 1,301 1,941 2,723
7 7,694 100,000 100,000 100,000 3,018 3,881 4,976 1,808 2,671 3,766
8 9,024 100,000 100,000 100,000 3,404 4,523 6,003 2,284 3,403 4,883
9 10,420 100,000 100,000 100,000 3,765 5,175 7,118 2,835 4,245 6,188
10 11,886 100,000 100,000 100,000 4,102 5,839 8,334 3,562 5,299 7,794
11 13,425 100,000 100,000 100,000 4,412 6,511 9,658 3,962 6,061 9,208
12 15,042 100,000 100,000 100,000 4,693 7,190 11,098 4,378 6,875 10,783
13 16,739 100,000 100,000 100,000 4,944 7,874 12,668 4,764 7,694 12,488
14 18,521 100,000 100,000 100,000 5,164 8,564 14,380 5,164 8,564 14,380
15 20,392 100,000 100,000 100,000 5,348 9,255 16,249 5,348 9,255 16,249
16 22,356 100,000 100,000 100,000 5,496 9,947 18,289 5,496 9,947 18,289
17 24,419 100,000 100,000 100,000 5,601 10,633 20,517 5,601 10,633 20,517
18 26,585 100,000 100,000 100,000 5,658 11,308 22,948 5,658 11,308 22,948
19 28,859 100,000 100,000 100,000 5,661 11,966 25,604 5,661 11,966 25,604
20 31,247 100,000 100,000 100,000 5,602 12,598 28,505 5,602 12,598 28,505
25 45,102 100,000 100,000 100,000 4,147 15,131 47,784 4,147 15,131 47,784
30 62,785 100,000 100,000 132,867 0 15,525 78,065 0 15,525 78,065
35 85,353 100,000 100,000 185,887 0 10,772 122,811 0 10,772 122,811
40 150,868 100,000 100,000 248,477 6,412 32,194 181,529 6,412 32,194 181,529
45 234,483 100,000 100,000 333,496 11,219 55,449 264,134 11,219 55,449 264,134
</TABLE>
- --------
(1) Assumes annual premium payments of $900 per year until the premium
recalculation at age 70 and annual recalculated premium amounts
thereafter. If premiums are paid more frequently than annually, the above
values shown would be affected.
(2) Assumes payment of recalculated annual premium amounts of $7,228 after age
70. As indicated in note (3) below, the actual recalculated premium may be
lower or higher than this amount.
(3) Assumes payment of recalculated premiums after age 70 in annual amounts of
$8,404 at 0%, $7,228 at 6% and $0 at 12%.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT
RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY
THE OWNER. THE DEATH BENEFIT, ACCOUNT VALUE AND SURRENDER VALUE FOR A POLICY
WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT
RETURN AVERAGE 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE
OR BELOW THE AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE
MADE THAT THESE HYPOTHETICAL INVESTMENT RESULTS CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
67
<PAGE>
POLICIES ISSUED BY JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
JOHN HANCOCK PLACE, BOSTON, MASSACHUSETTS 02117
S8138 5/93
<PAGE>
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that Section.
UNDERTAKING REGARDING INDEMNIFICATION
Pursuant to Article 9 of John Hancock's Bylaws and Section 67 of the
Massachusetts Business Corporation Law, John Hancock 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 John Hancock.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following Papers and Documents:
The facing sheet.
Cross-Reference Table.
The prospectus consisting of 67 pages.
The undertaking to file reports.
The undertaking regarding indemnification.
The signatures.
The following exhibits:
<PAGE>
I.A. (1) John Hancock Board Resolution establishing the separate account.
(2) Not Applicable
(3) (a) Distribution Agreement and Amendment.
(b) Specimen Selling Agreement.
(c) Schedule of sales commissions included in Exhibit 1. A.
(3) (a) above.
(4) Not Applicable
(5) Form of scheduled premium variable life insurance policy included in
the initial filing of this Form S-6 Registration Statement, filed
February 22, 1994.
(6) Charter and By-Laws of John Hancock Mutual Life Insurance Company.
(7) Not Applicable.
(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 February 22, 1994.
2. Included as exhibit 1.A(5) above
<PAGE>
3. Opinion and consent of counsel as to securities being registered included
in Pre-Effective Amendment No. 1 to this Form S-6 Registration Statement,
filed in July, 1994.
4. Not Applicable
5. Not Applicable
6. Opinion and consent of actuary..
7. Consent of independent auditors.
8. Memorandum describing John Hancock's issuance, transfer and redemption
procedures for the policy pursuant to Rule 6e-2(b)(l2)(ii).
9. Powers of attorney for Bodman, Gifford, Boyan, Morton, Magee, Connors,
Brown, Phillips, Booth, Vappi, Bromery, Staley, D'Alessandro, Fast, Aborn,
Bok, Feldstein, Fish and Syron included in Post-Effective Amendment No 1 to
this Form S-6 Registration Statement filed in April, 1995; powers of
attorney for Michael C. Hawley.
10. Opinion of counsel as to eligibility of this Post-Effective Amendment
for filing pursuant to Rule 485(b).
RAK0102.DOC
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the John
Hancock Mutual Life Insurance Company has duly caused this Post-Effective
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 8th
day of April, 1996.
JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY
(SEAL)
By WILLIAM L. BOYAN
----------------
William L. Boyan
President
Attest: FRANCIS C. CLEARY, JR.
----------------------
Francis C. Cleary, Jr.
Counsel
RAK0115.DOC
<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 Mutual Life Insurance
Company and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)
THOMAS E. MOLONEY
- -----------------
Thomas E. Moloney April 8, 1996
JANET A. PENDLETON
- ------------------ (Principal
Janet A. Pendleton Accounting Officer) April 8, 1996
Chairman of the Board and
Chief Executive Officer
STEPHEN L. BROWN (Principal Executive Officer)
- ----------------
Stephen L. Brown
for himself and as
Attorney-in-Fact April 8, 1996
<TABLE>
<CAPTION>
FOR: Foster L. Aborn Vice Chairman of the Board
William L. Boyan President, Chief Operating Officer & Director
David F. D'Alessandro Senior Executive Vice President & Director
<S> <C> <C> <C>
Nelson S. Gifford Director E. James Morton Director
John F. Magee Director Thomas L. Phillips Director
John M. Connors Director Joan T. Bok Director
Delbert C. Staley Director Robert E. Fast Director
C. Vincent Vappi Director Samuel W. Bodman Director
Randolph W. Bromery Director Lawrence K. Fish Director
I. MacAllister Booth Director Kathleen F. Feldstein Director
Michael C. Hawley Director
</TABLE>
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, John Hancock Mutual Variable Life Insurance Account UV, 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 8th day of April, 1996.
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
(Registrant)
By John Hancock Mutual Life Insurance Company
(Depositor)
(SEAL)
By WILLIAM L. BOYAN
----------------
William L. Boyan
President
Attest: FRANCIS C. CLEARY, JR.
----------------------
Francis C. Cleary, Jr.
Counsel
RAK0102.DOC
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> SELECT STOCK SUBACCOUNT
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
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<INVESTMENTS-AT-VALUE> 9,312,773
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<TOTAL-ASSETS> 10,351,694
<PAYABLE-FOR-SECURITIES> 1,763
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 488
<TOTAL-LIABILITIES> 2,251
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<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 10,349,443
<DIVIDEND-INCOME> 754,115
<INTEREST-INCOME> 67,279
<OTHER-INCOME> 0
<EXPENSES-NET> 48,056
<NET-INVESTMENT-INCOME> 773,338
<REALIZED-GAINS-CURRENT> 23,090
<APPREC-INCREASE-CURRENT> 1,225,784
<NET-CHANGE-FROM-OPS> 2,022,212
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<NUMBER-OF-SHARES-SOLD> 2,998,468
<NUMBER-OF-SHARES-REDEEMED> 478,935
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<GROSS-EXPENSE> 48,056
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> BONO SUBACCOUNT
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 46,574,355
<INVESTMENTS-AT-VALUE> 46,330,265
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<TOTAL-ASSETS> 55,180,300
<PAYABLE-FOR-SECURITIES> 26,061
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,516
<TOTAL-LIABILITIES> 28,577
<SENIOR-EQUITY> 0
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<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 55,151,723
<DIVIDEND-INCOME> 3,504,747
<INTEREST-INCOME> 641,677
<OTHER-INCOME> 0
<EXPENSES-NET> 286,349
<NET-INVESTMENT-INCOME> 3,860,075
<REALIZED-GAINS-CURRENT> (127,733)
<APPREC-INCREASE-CURRENT> 4,205,161
<NET-CHANGE-FROM-OPS> 7,937,503
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,586,137
<NUMBER-OF-SHARES-REDEEMED> 2,116,423
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 8,905,710
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 286,349
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> INTERNATIONAL SUBACCOUNT
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 2,858,238
<INVESTMENTS-AT-VALUE> 2,926,534
<RECEIVABLES> 164,633
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,091,167
<PAYABLE-FOR-SECURITIES> 8,290
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 143
<TOTAL-LIABILITIES> 8,433
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 3,082,734
<DIVIDEND-INCOME> 29,692
<INTEREST-INCOME> 9,853
<OTHER-INCOME> 0
<EXPENSES-NET> 15,495
<NET-INVESTMENT-INCOME> 24,050
<REALIZED-GAINS-CURRENT> 14,367
<APPREC-INCREASE-CURRENT> 164,490
<NET-CHANGE-FROM-OPS> 202,907
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 935,730
<NUMBER-OF-SHARES-REDEEMED> 401,257
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 741,731
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 15,495
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> MONEY MARKET SUBACCOUNT
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 18,773,711
<INVESTMENTS-AT-VALUE> 18,732,426
<RECEIVABLES> 2,275,243
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<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 21,007,669
<PAYABLE-FOR-SECURITIES> 9,344
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<OTHER-ITEMS-LIABILITIES> 1,006
<TOTAL-LIABILITIES> 10,350
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<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 20,997,319
<DIVIDEND-INCOME> 810,091
<INTEREST-INCOME> 155,058
<OTHER-INCOME> 0
<EXPENSES-NET> 96,074
<NET-INVESTMENT-INCOME> 869,075
<REALIZED-GAINS-CURRENT> 0
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<NET-CHANGE-FROM-OPS> 380,450
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<NUMBER-OF-SHARES-SOLD> 13,092,516
<NUMBER-OF-SHARES-REDEEMED> 1,587,249
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 11,660,929
<ACCUMULATED-NII-PRIOR> 0
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<GROSS-EXPENSE> 96,074
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> REAL ESTATE EQUITY SUBACCOUNT
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 2,405,959
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> SPECIAL OPPORTUNITIES SUBACCOUNT
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> STOCK SUBACCOUNT
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
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<NET-ASSETS> 131,466,681
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 8
<NAME> MANAGED SUBACCOUNT
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
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<NET-ASSETS> 71,234,163
<DIVIDEND-INCOME> 5,946,035
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<NET-INVESTMENT-INCOME> 6,216,150
<REALIZED-GAINS-CURRENT> (6,127)
<APPREC-INCREASE-CURRENT> 7,134,666
<NET-CHANGE-FROM-OPS> 13,344,689
<EQUALIZATION> 0
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<NUMBER-OF-SHARES-SOLD> 11,383,468
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<NAME> SHORT-TERM U.S. GOVERNMENT SUBACCOUNT
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<PAGE>
EXHIBIT 1. A. (1)
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
Boston, Massachusetts
VOTE OF BOARD OF DIRECTORS
Meeting of May 10, 1993
VOTED, with respect to separate investment accounts:
(a) To establish one or more separate investment accounts (the
"Account"), pursuant to Section 132 G of Chapter 175 of the Massachusetts
General Laws, as amended, for the funds attributable to individual life policies
on a variable basis to be issued by the Company. The Officers of the Company
may determine the designation of the Account and may from time to time change
its designation as they may deem necessary and appropriate.
(b) To allocate to the Account amounts to provide for life insurance
(including benefits incidental thereto) payable in fixed or variable amounts or
both and the income, gains and losses, realized or unrealized, attributable to
the Account shall be credited to or charged against the Account without regard
to the other income, gains or losses of the Company.
(c) To authorize the registration of the Account as an investment company
under the Investment Company Act of 1940 and the registration of the variable
life insurance policies issued in connection with the Account as securities
under the Securities Act of 1933, and to authorize and empower the Chairman of
the Board, the Vice Chairman, the President, any Executive Vice President or the
Secretary of the Company ("Officers of the Company") to take all action
necessary to comply with the Acts, including but not limited to the execution
and filing of registration statements and amendments thereto, applications for
exemptions from the provisions of the Act as may be necessary or desirable and
amendments thereto, and agreements for the administration of the Account and for
the distribution of variable life insurance policies carrying an interest in the
Account assets and any other actions necessary under all other applicable
federal and state laws and regulations.
(d) To authorize the Officers of the Company to take all actions
necessary to register the Account as a unit investment trust under the
Investment Company Act of 1940, and to take such related actions as they deem
necessary and appropriate to carry out the foregoing, including, without
limitation, the following: determining that the fundamental investment policy
of the Account shall be to invest or reinvest the assets in securities issued by
such investment companies registered under
<PAGE>
-2-
the Investment Company Act of 1940 as the Officers may designate pursuant to the
provisions of the variable life insurance products issued by the Company;
establishing one or more subaccounts within the Account to which net premiums
under the variable life policies will be allocated in accordance with
instructions received from policyowners, reserving to the officers the authority
to increase or decrease the number of subaccounts in the Account as they deem
necessary or appropriate; and investing each subaccount only in the shares of a
single mutual fund or a single portfolio of an investment company organized as a
series fund pursuant to the investment Company Act of 1940.
(e) To authorize the Officers of the Company to deposit such amount in
the Account or in each subaccount thereof as may be necessary or appropriate to
facilitate the Account's operations; to transfer funds from time to time between
the Company's general account and the Account as deemed appropriate and
consistent with the terms of the variable life insurance policies and applicable
laws; and to establish criteria by which the Company shall institute procedures
to provide for a pass-through of voting rights to the owners of variable life
insurance policies issued by the Company, as required by applicable laws, with
respect to the shares of any investment companies which are held in the Account.
(f) To appoint Francis C. Cleary, Jr., Counsel, as agent for service of
process or the like for the Company to receive notices and communications from
the Securities and Exchange Commission with respect to such Registration
Statements or exemptive applications and amendments thereto as may be filed on
behalf of the Company concerning the Account or the variable life insurance
policies, and to exercise the powers given to such agent in the rules and
regulations of the Securities and Exchange Commission under the Securities Act
of 1933, the Investment Company Act of 1940, or the Securities Exchange Act of
1934.
(g) To authorize the Officers of the Company to do or cause to be done
all things necessary or desirable, as may be advised by counsel, to comply with,
or obtain exemptions from, federal, state or local statutes or regulations that
may be applicable to the issuance and sale of variable life insurance products
by the Company.
(h) To authorize the Company to act as the depositor for the Account and
provide all administrative services in connection with the establishment and
maintenance of the Account and in connection with the issuance and sale of
variable life insurance policies, all on such terms and subject to such
modifications as the Officers deem necessary or appropriate to effectuate the
foregoing.
<PAGE>
-3-
(i) To authorize the Officers of the Company to contract with a suitable
investment company under the Investment Company Act of 1940, the shares of which
shall be purchased by the Company in order to serve as an investment vehicle for
the Account and, further, that the Officers are authorized to do all things as
they deem necessary and appropriate to carry out the foregoing.
(j) To empower the Management Committee to authorize the execution and
delivery of such instruments and such other action as it may deem necessary or
desirable in order to carry out the purpose and intent of this vote and to
comply with applicable federal or state laws and regulations.
RAEBURN B. HATHAWAY
-------------------
Raeburn B. Hathaway
Senior Vice President
and Secretary
FCC0232.DOC
<PAGE>
Exhibit 1.A..(3) (a)
DISTRIBUTION AGREEMENT
AGREEMENT, made as of the 26th day of August, 1993, by and between
John Hancock Mutual Life Insurance Company ("John Hancock") and, on its own
behalf and on behalf of its several existing and future separate accounts
registered under the Investment Company Act of 1940 (the "Investment Company
Act"), including without limitation John Hancock Variable Life Accounts U, V and
S, John Hancock Variable Life Insurance Company ("JHVLICO").
WHEREAS, John Hancock is the principal underwriter of John Hancock
Variable Series Trust I ("the Fund"), a series mutual fund whose shareholders
are separate accounts of insurance companies, including JHVLICO, pursuant to an
Underwriting and Administrative Services Agreement dated as of January 15, 1986
("Underwriting Agreement");
WHEREAS, insurance companies issue variable life insurance and annuity
products under which net premiums or considerations are allocated to such
separate accounts for investment in the Fund;
WHEREAS, the Fund is registered as an open-end investment company under
the Investment Company Act;
WHEREAS, John Hancock is registered as a broker-dealer under the
Securities Exchange Act of 1934 ("1934 Act") and is a member of the National
Association of Securities Dealers, Inc.;
WHEREAS, JHVLICO will issue variable life insurance policies ("Policies")
whose net premiums are or will be allocated to JHVLICO's registered separate
accounts; and
WHEREAS, John Hancock and JHVLICO wish to enter into this Agreement
defining the conditions under which John Hancock will distribute the Contracts;
NOW THEREFORE, John Hancock and JHVLICO hereby agree as follows:
1. John Hancock shall offer for sale and sell Policies on behalf of
JHVLICO in each state and other jurisdictions in which such policies may be
lawfully sold. Such offering or sale shall be on such terms and conditions and
shall provide for such lawful compensation to John Hancock as John Hancock and
JHVLICO shall determine, provided that such terms, conditions and compensation
shall be as set forth in or not inconsistent with a prospectus meeting the
requirements of Section 10(a) of the Securities Act of 1933, as amended, and
containing the required information for or forming a part of a registration
statement effective under said Act.
Applications for Policies shall be solicited by insurance agents of JHVLICO
who are duly and appropriately licensed for the sale of such Policies in each
such state or other jurisdiction. John Hancock shall have responsibility for
arranging for such licensing. John Hancock shall review completed applications
for Policies in terms of suitability (except to the extent that responsibility
for suitability determinations is assumed by other broker-dealers pursuant to
the selling agreements referred to in paragraph 10 below) and insurance
underwriting and shall determine whether to accept or reject any application in
accordance with underwriting rules established by JHVLICO. John Hancock will
determine an insured's risk classification pursuant to its own underwriting
rules. Initial and subsequent premium payments under Policies shall be made by
check payable to JHVLICO. JHVLICO will refund any premiums paid if a Policy is
not issued or is surrendered under the short-term cancellation provision.
<PAGE>
2. John Hancock shall pay its registered representatives acting as
JHVLICO's agents commissions and service fees in accordance with its then
applicable compensation rules and procedures. The maximum commission payable to
an agent for selling a policy shall be as set forth in Exhibit A appended
hereto. JHVLICO will reimburse John Hancock for commissions, any service fees
and for other direct and indirect expenses (including agency expense allowances,
general agent, district manager and supervisor compensation, agent training
allowances, deferred compensation and insurance benefits of agents, general
agents, district managers and supervisors, agency office clerical expenses and
advertising) actually incurred in connection with the marketing and sale of
Policies.
3. The books, accounts and records of John Hancock and JHVLICO as to all
transactions hereunder shall be maintained so as to disclose clearly and
accurately the nature and details of the transactions, including particularly
such accounting information as is necessary to support the reasonableness of the
amounts to be paid by JHVLICO hereunder and to ensure compliance with applicable
regulatory and reporting requirements. To the extent that either of John Hancock
or JHVLICO maintains on behalf of the other any records required to be
maintained by the other pursuant to 1940 Act Rules 30a- or 30a-2 under the
Investment Company Act or pursuant to 1934 Act Rules 17a-3 and 17a-4, such
records are the property of the party so required to maintain them and will be
surrendered promptly to that party upon its request.
4. This Agreement shall terminate automatically if it shall be assigned or
if the Underwriting Agreement is terminated. This Agreement may be terminated at
any time on 60 days' written notice to the other party hereto, without the
payment of any penalty, by John Hancock or JHVLICO.
5. John Hancock will pay the expenses of preparing and printing
registration statements, prospectuses and sales literature, all fees and
expenses in connection with John Hancock's qualification as a broker-dealer and
all other expenses relating to the offering, sale or delivery of Policies.
JHVLICO will reimburse John Hancock for registration fees under the Securities
Act of 1933, the costs associated with the preparation and printing of
registration statements, prospectuses and sales literature and for like expenses
actually incurred in connection with the offering, sale and delivery of
Policies.
6. In offering, selling and delivering Policies, John Hancock will duly
conform in all respects with the laws of the United States and of each state in
which Policies may be offered for sale by it pursuant to this Agreement.
Applications will be solicited by registered representatives of John Hancock or
any other broker-dealer who have been duly licensed. In connection with the
offering, sale or delivery of Policies, John Hancock will not give any
information or make any representation other than information and
representations contained in or not inconsistent with a prospectus meeting the
requirement of Section 10(a) of the Securities Act of 1933 and containing the
required information for or forming a part of a registration statement which is
effective under said Act.
7. John Hancock agrees that, in the absence of a fixed account or if no
suitable fixed-dollar policy is available from JHVLICO, it will issue a policy
of fixed benefit insurance without evidence of insurability in exchange for any
Policy whenever the Owner of a Policy elects to exchange the Policy in
accordance with its provisions.
8. JHVLICO undertakes to guarantee the performance of all of John
Hancock's obligations, imposed by Section 27(f) of the Investment Company Act of
1940, as amended, and Rules 6e-2(b)(l4)(vi), 6e-3(T)(b)(l3)(vi) and 27d-2(b)
adopted by the Securities and Exchange Commission, to make refunds of charges
required of the principal underwriter of Policies issued in connection with the
registered separate account.
<PAGE>
9. No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought.
10. John Hancock and JHVLICO may agree with one or more broker-dealers
registered under the Securities Exchange Act of 1934 for the sale of the
Policies funded by the registered separate account. Any broker-dealer offering,
selling or delivering Policies will agree with John Hancock and JHVLICO to
conform duly in all respects with the laws of the United States and of each
state in which Contracts may be offered for sale by it. No agent or
representative of any such broker-dealer shall solicit applications for Policies
until duly licensed and appointed by JHVLICO as a life insurance agent of
JHVLICO in the appropriate jurisdiction. John Hancock will compensate other
broker-dealers as provided in the selling agreements with such other broker-
dealers, and JHVLICO will reimburse John Hancock for such amounts.
11. This Agreement shall be subject to the applicable provisions of the
Federal securities laws and the rules, regulations, and rulings thereunder,
including such exemptions as the Securities and Exchange Commission may grant,
and the terms hereof shall be interpreted and construed in accordance therewith.
12. John Hancock shall, in connection with its obligations hereunder,
comply with all laws and regulations, whether Federal or state, and whether
relating to insurance or securities, including but not limited to the
recordkeeping and sales supervision requirements of such laws and regulations
and rules of the National Association of Securities Dealers, Inc.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year above written.
Date: August 26, l993
John Hancock Mutual Life Insurance Company
By: WILLIAM L. BOYAN
----------------
William L. Boyan
President
Date: August 26, 1993
John Hancock Variable Life Insurance Company
By: HENRY D. SHAW/
--------------
Henry D., Shaw
President
FCC/W3RAK(97)
<PAGE>
AMENDMENT TO DISTRIBUTION AGREEMENT
BY AND BETWEEN
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
AND
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
AGREEMENT made this 1st day of August, 1994, by and between John Hancock
Mutual Life Insurance Company ("John Hancock") and John Hancock Variable Life
Insurance Company ("JHVLICO"), on its own behalf and on behalf of its several
existing and future separate accounts registered under the Investment Company
Act of 1940 (the "Investment Company Act"), including without limitation John
Hancock Variable Life Accounts U, V and S and John Hancock Variable Annuity
Account I.
WHEREAS, John Hancock and JHVLICO are parties to a distribution agreement
dated August 26, 1993 (the "Distribution Agreement") governing the terms and
conditions under which John Hancock has undertaken to offer for sale and sell on
behalf of JHVLICO, in each state and other jurisdiction where lawfully
permitted, certain variable life insurance policies, issued by JHVLICO, whose
net premiums are or will be allocated to JHVLICO's registered separate accounts;
WHEREAS, JHVLICO will continue to issue such variable life insurance
policies and will begin to issue variable annuity contracts whose net premiums
are or will be allocated to certain JHVLICO registered separate accounts;
WHEREAS, John Hancock and JHVLICO wish to enter into this Amendment
redefining the conditions and terms of the Distribution Agreement and Exhibit A
thereto;
NOW THEREFORE, in consideration of the premises and covenants contained
herein, John Hancock and JHVLICO hereby amend the Distribution Agreement and
Exhibit A thereto and agree to the following terms:
1. Any reference to "variable life insurance policies" in the Distribution
Agreement shall be read "variable life insurance policies and variable
annuity contracts"; and
2. Except as otherwise specified in this Amendment, any reference to
"Policies" or "policies" in the Distribution Agreement shall include
variable life insurance policies, issued by JHVLICO, whose net premiums are
or will be allocated to certain JHVLICO registered separate accounts and
variable annuity contracts, issued by JHVLICO, whose net premiums are or
will be allocated to certain JHVLICO registered separate accounts; and
3. The phrase "With respect to life insurance policies only" should be added
to the beginning of provision seven in the Distribution Agreement; and
4. The commission schedule for John Hancock Variable Annuity Account I should
be included in
<PAGE>
Exhibit A, as shown in the attachment to this Amendment.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and on its behalf by its duly authorized representative as
of the day and year indicated.
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
BY: STEPHEN L. BROWN AUGUST 2, 1994
---------------- --------------
Stephen L. Brown (date)
Chairman and Chief Executive Officer
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
on its own behalf and on behalf of its
several existing and future registered
separate accounts
BY: HENRY D. SHAW AUGUST 5, 1994
-------------- --------------
Henry D. Shaw (date)
President
EXHIBIT A
Scheduled Premium Policy (Flex V)
Maximum commission of 50% of premium paid under Modified Schedule of
premiums in Policy year 1, 10% of such premiums in Policy years 2-4, and 3% of
any other premiums.
Annual Premium Policy (VLI)
Maximum commission of 55% of premium paid in Policy year 1, 15% of
premium paid in Policy year 2, 10% of premium paid in Policy years 3-5, 5% of
premium paid in Policy years 6-10, and 3% of any other premiums.
Single Premium Policy
Maximum commission of 3%.
Flexible Premium Variable Survivorship Policy (VEP)
Maximum commission of 45% of Target Premium paid in Policy year 1, 5%
of Target Premium paid in Policy years 2-5, 3% of Target Premium paid in any
subsequent years, and 3% of any excess premium in any year.
Individual Deferred Combination Fixed/Variable Annuity Contract (Independence
Preferred)
Maximum commission of 3% of premium on contracts issued to Annuitants
issue age 0-70, maximum commission of 2% of premium on contracts issued to
Annuitants issue ages 71 and above.
<PAGE>
Revised Flexible Premium Policy (New Flex V)
Maximum Commission of 50% of premium paid up to Required Premium in
Policy year 1, 8% of such premiums in Policy years 2-4, and 3% of any other
premiums.
Universal Variable Policy (MVL)
Maximum commission of 50% of premium paid up to Required Premium paid
in Policy year 1, 6% of the Target Premium for Policy years 2-4; 3% of the
Target Premium in each year thereafter, and 3% of excess premium in any year.
Variable COLI Policy (VCOLI)
Maximum commission of 14% of Target Premium in Policy years 1-10; 3% of
Target Premium in Policy years 11 and thereafter; and 2% of any excess premium
paid.
Universal Variable Policy (MVL II)
Maximum commission of 20% of Target Premium in Policy year 1, plus 6%
of the Target Premium for the first Policy year which will be payable in each of
Policy years 2-4; 6% of the Target Premium for Policy years 2-4; 3% of the
Target Premium paid in each year thereafter; and 3% of excess premium in any
year.
(Exhibit A, as amended, December 6, 1995)
FCC0233.DOC
<PAGE>
EXHIBIT 1.A.(3)(b)
EXHIBIT 1.A.(3)(b)
VARIABLE CONTRACTS
SELLING AGREEMENT
John Hancock Mutual Life Insurance Company ("JHMLICO"), as the distributor and
principal underwriter, and ("the Broker/Dealer"), enter into this agreement
effective with its execution by the Broker/Dealer for the purpose of authorizing
the Broker/Dealer to solicit applications for variable life insurance and
annuity contracts ("Contracts") distributed by JHMLICO on its own behalf and on
behalf of John Hancock Variable Life Insurance Company ("JHVLICO"), a subsidiary
of JHMLICO. The parties represent as follows:
1. JHMLICO is engaged in the issuance of variable annuity contracts and
JHVLICO is engaged in the issuance of variable life insurance contracts,
both in accordance with Federal securities laws and the applicable laws of
those states in which the Contracts have been qualified for sale. The
Contracts are considered securities under the Securities Act of 1933;
therefore, distribution of the Contracts is made through JHMLICO as a
registered broker/dealer under the Securities Act of 1934 and as a member
of the National Association of Securities Dealers, Inc. ("NASD").
2. The Broker/Dealer certifies that it is a registered Broker/Dealer under the
Securities Exchange Act of 1934 and a member of the NASD. The
Broker/Dealer agrees to abide by all rules and regulations of the NASD,
including its Rules of Fair Practice, and to comply with all applicable
state and Federal laws and the rules and regulations of authorized
regulatory agencies affecting the sale of the Contracts.
3. The Broker/Dealer will select persons to be registered and supervised by it
who will be trained and qualified to solicit applications for the Contracts
in conformance with applicable state and Federal laws and regulations.
Persons so trained and qualified will be registered representatives of the
Broker/Dealer in accordance with the rules of the NASD and they will be
properly licensed to represent JHMLICO or JHVLICO or both in accordance
with the state insurance laws of those jurisdictions in which the Contracts
may lawfully be distributed and in which they solicit applications for such
Contracts.
4. The Broker/Dealer will take reasonable steps to ensure that its registered
representatives shall not make recommendations to applicants to purchase
Contracts in the absence of reasonable grounds to believe the purchase of
each Contract is suitable for the applicant. The procedure will include
review of all proposals and applications for Contracts for suitability and
completeness and correctness as to form as well as review and endorsement
on an internal record of the Broker/Dealer of
<PAGE>
-2-
the transactions. The Broker/Dealer will promptly forward to JHMLICO all
applications found suitable, together with any payments received with the
applications, without deduction or reduction. JHMLICO reserves the right
to reject any Contract application and return any payment made in
connection with an application which is rejected. Contracts issued on
applications accepted by JHMLICO or JHVLICO will be forwarded to the
registered representative of the Broker/Dealer for delivery to the Contract
owner.
5. The Broker/Dealer will perform the selling functions required by this
agreement only in accordance with the terms and conditions of the then
current prospectus applicable to the Contracts and will make no
representations not included in the prospectus or in any authorized
supplemental material. Any material prepared or used by the Broker/Dealer
or its registered representatives, which describes or must describe the
Contracts, or uses the name of JHVLICO, JHMLICO or the logos or Service
Marks of either must be approved by JHMLICO in writing prior to any such
use.
6. JHMLICO will provide Broker/Dealer with prospectuses, and any supplements
or amendments thereto, describing the Contracts subject to this Agreement.
JHMLICO is responsible for maintaining in effect in accordance with the
requirements of the Securities and Exchange Commission each Registration
Statement of which the prospectus is part. JHMLICO will immediately notify
Broker/Dealer of the issuance of any stop order or any Federal or state
regulatory proceeding which would prevent the sale of Contracts in any
state or jurisdiction.
7. Compensation payable on sales of the Contracts solicited by the
Broker/Dealer will be paid to the Broker/Dealer by JHMLICO in accordance
with the compensation schedules defined under the John Hancock Mutual Life
Insurance Company/M Financial Group Master Agreement dated December 5, 1991
and the Producer Agreements related thereto, as in effect at the time the
contract premiums or considerations are received by JHMLICO or JHVLICO.
Compensation to the registered representative for contracts solicited by
the registered representative will be governed by an agreement between the
Broker/Dealer and its registered representative. To the extent requested by
Broker/Dealer, registered representative compensation may be paid directly
to such registered representative by JHMLICO or JHVLICO. A portion of the
compensation otherwise payable to Broker/Dealer pursuant to the
compensation schedules applicable to the Contracts shall be payable to
Mutual Service Corporation (MSC) in accordance with the agreement in effect
between M Financial Group and MSC (currently 2% of first year commissions,
1% of renewal commissions). To the extent requested by Broker/Dealer and
its registered representative, registered representative compensation shall
be paid to JH Networking Insurance Agency ("NIA") for allocation to The
John Hancock/M Financial Group Deferred Commission Plan, as in effect at
the time the compensation becomes payable.
8. In the event of any surrender of a Contract within the 10 day "free look"
period or, in the case of a variable life insurance policy, within 10 days
after the mailing of the Notice of Withdrawal Right, any compensation
payable to Broker/Dealer or its registered representatives will not be
payable or will be refunded if priorly paid, in accordance with the terms
of the M Producer's Contract appended as Exhibit A to the Master Agreement.
<PAGE>
-3-
9. This agreement may not be assigned except by mutual consent and will
continue for an indefinite term, subject to the termination by either party
by ten days advance written notice to the other party, except that in the
event JHMLICO or the Broker/Dealer ceases to be a registered broker/dealer
or a member of the NASD, this agreement will immediately terminate. Upon
its termination, all authorizations, rights and obligations shall cease,
except the agreement in Section 11, the indemnifications in Section 12 and
the payment of any accrued but unpaid compensation to the Broker/Dealer.
10. For the purpose of compliance with any applicable Federal or state
securities laws or regulations, the Broker/Dealer acknowledges and agrees
that in performing the services covered by this agreement, it is acting in
the capacity of an independent "broker" or "dealer" as defined by the By-
Laws of the NASD and not as an agent or employee of either JHMLICO or
JHVLICO or any registered investment company. In furtherance of its
responsibilities as a broker or dealer, the Broker/Dealer acknowledges that
it is responsible for statutory and regulatory compliance in securities
transactions involving any business produced by its registered
representatives concerning the Contracts.
For the purpose of compliance with any applicable state insurance laws or
regulations, the Broker/Dealer acknowledges and agrees that only while
performing the insurance selling functions reflected by this agreement are
the Broker/Dealer's registered representatives acting as the licensed
insurance agents of JHMLICO or JHVLICO or both and in that capacity are
authorized only to solicit applications for the Contracts which will not
become effective until acceptance by JHMLICO or JHVLICO.
11. The Broker/Dealer and JHMLICO jointly agree to cooperate fully in any
insurance or securities regulatory investigation or proceeding or judicial
proceeding arising in connection with any Contract. Without limiting the
foregoing:
a. Broker/Dealer will be notified promptly of any customer complaint or
notice of any regulatory authority investigation or proceeding or
judicial proceeding received by JHMLICO with respect to any
Contract.
b. Broker/Dealer will promptly notify JHMLICO of any customer complaint
or notice of any regulatory authority investigation or proceeding or
judicial proceeding received by Broker/Dealer with respect to any
Contract.
12. (1) JHMLICO agrees to indemnify and hold harmless Broker/Dealer and each
person who controls or is associated with Broker/Dealer against any
losses, claims, damages or liabilities, joint or several, to which
Broker/Dealer or such controlling or associated person may become
subject under the 1933 Act or otherwise insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of a
material fact required to be stated therein or necessary to make the
statements therein not misleading contained (i) in any Registration
Statement, any Prospectus or any document executed by JHMLICO or
JHVLICO specifically for the purpose of qualifying a Contract for sale
under the laws of any jurisdiction or (ii) in any written information
or sales material authorized for and supplied or furnished to
Broker/Dealer and its agents or representatives by
<PAGE>
-4-
JHMLICO, its employees or agents, in connection with the sale of the
Contract and JHMLICO will reimburse Broker/Dealer and each such
controlling person for legal or other expenses reasonably incurred by
Broker/Dealer or such controlling person in connection with
investigating or defending any such loss, claim, damage, liability or
action.
(2) Broker/Dealer agrees to indemnify and hold harmless such director or
officer may become subject under the 1933 Act and state JHMLICO and each
of its directors and officers against any insurance losses, claims,
damages or liabilities to which JHMLICO and any laws or otherwise
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon:
(a) any unauthorized use of sales materials or any verbal or written
misrepresentations or any unlawful sales practices concerning a
Contract by Broker/Dealer or
(b) claims by agents or representatives or employees of Broker/
Dealer for commissions or other compensation or remuneration
of any type or
(c) failure by agents, representatives or employees of Broker/Dealer
to comply with all applicable state insurance laws and
regulations including but not limited to state licensing
requirements, rebate statutes and replacement regulations, and
the provisions of this Agreement; and Broker will reimburse
JHMLICO and any director or officer for any legal or other
expenses reasonably incurred by JHMLICO or such director or
officer in connection with investigating or defending any such
loss, claim, damage, liability or action.
(3) After receipt by a party entitled to indemnification of notice of the
commencement of any action, if a claim in respect thereof is to be made
against any person obligated to provide indemnification, such
indemnified party will notify the indemnifying party in writing of the
commencement thereof as soon as practicable thereafter, and the omission
so to notify the indemnifying party will not relieve it from any
liability except to the extent that the omission results in a failure of
actual notice to the indemnifying party, and such indemnifying party is
damaged solely as a result of the failure to give such notice.
13. All notices to JHMLICO should be mailed to:
Mr. Henry D. Shaw, Senior Vice President
John Hancock Mutual Life Insurance Company
John Hancock Place
P. O. Box 111
Boston, MA 02117
<PAGE>
-5-
All notices to the Broker/Dealer will be duly given if mailed to the
address shown below.
14. This agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts.
In reliance on the representations set forth and in consideration of the
undertakings described, the parties represented below do hereby contract
and agree.
John Hancock Mutual Life Broker-Dealer
Insurance Company
By: By:
-------------------------- ---------------------------
Title: Title:
----------------------- ------------------------
Date of Execution Date of Execution
------------ -------------
FCC0234.DOC
<PAGE>
EXHIBIT 6
April 5,1996
Board of Directors
John Hancock Variable Life Insurance Company
Members of the Board:
This opinion is furnished in connection with the filing of this Post-Effective
Amendment to the Registration Statement on Form S-6 by John Hancock Variable
Life Insurance Company (JHVLICO) under the Securities Act of 1933, as amended,
with respect to the scheduled premium variable life insurance policy under which
amounts will be allocated by JHVLICO to one or more of the subaccounts of John
Hancock Variable Life Account V ("Account"). The scheduled premium policy is
described in the prospectus included in the amended Registration Statement.
The policy form was prepared under my direction, and I am familiar with the
amended Registration Statement and exhibits thereto. In my opinion:
1. Except to the extent that exemptive relief has been obtained, the "sales
load", as defined in paragraph (c) (4) of Rule 6(e)-2 under the Investment
Company Act of 1940, will not exceed 9 per centum of the payments to be
made thereon during the period equal to the lesser of 20 years or the
anticipated life expectancy of the insured named in the policy based on
the 1980 Commissioners Standard Ordinary Mortality Tables. Such sales load
during the first two policy years will not exceed 30 per centum of
payments made for the first policy year plus 10 per centum of payments
made for the second policy year.
2. Except to the extent that exemptive relief has been obtained, the
proportionate amount of sales load deducted from any payment during the
policy period will not exceed the proportionate amount deducted from any
prior payment during the policy period.
<PAGE>
-2-
3. The illustrations of death benefit, account value, surrender value, and
accumulated premiums shown in the appendix of the scheduled premium
prospectus included in the amended Registration Statement, based on the
assumptions stated in the illustrations, are consistent with the
provisions of the policy. The policies have not been designed so as to
make the relationship between premiums and benefits, as shown in the
illustrations, appear disproportionately more favorable to a prospective
purchaser of a policy for a standard risk nonsmoker male age 35, than to
prospective purchasers of policies for a male at other ages or in another
risk classification or for a female nor have the particular examples set
forth in the illustrations been selected for the purpose of making this
relationship more favorable.
4. The charge for federal taxes that is imposed under the policy is
reasonable in relation to JHVLICO's increased tax burden under Section
848 of the Internal Revenue Code of 1986, resulting from JHVLICO's
receipt of such premiums. The cost to JHVLICO of capital used to satisfy
its increased tax burden under Section 848 is, in essence, JHVLICO's
targeted rate of return. The targeted rate of return is reasonable and
the factors taken into account by JHVLICO in determining such targeted
rate of return are appropriate factors to consider.
I hereby consent to the filing of this opinion as an exhibit to the amended
Registration Statement and to the use of my name relating to actuarial matters
under the heading "Experts" in the prospectus.
/s/ Randi M. Sterrn
-------------------
Randi M. Sterrn FSA
Senior Associate Actuary
FCC0239.DOC
<PAGE>
EXHIBIT 7
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Prospectus and to the use of our reports dated February 9, 1996, with respect to
the financial statements of John Hancock Mutual Variable Life Insurance Account
UV and dated February 7, 1996 with respect to the financial statements of John
Hancock Mutual Life Insurance Company, included in this Post-Effective Amendment
No. 2 to the Registration Statement (Form S-6, No. 33-75608).
/s/Ernst & Young LLP
ERNST & YOUNG LLP
Boston, Massachusetts
April 22, 1996
FCC0238.DOC
<PAGE>
EXHIBIT 8
June, 1993 (as amended January, 1994)
Description of JHMLICO's and JHVLICO's Issuance,
Transfer and Redemption Procedures for Policies
Pursuant to Rule 6e-2(b) (12) (ii)
and
Method of Effecting Conversion to Fixed Benefit Policies
Pursuant to Rule 6e-2(b) (13) (v) (B).
--------------------------------------
Set forth below is the information called for under Rule 6e-2(b) (12)
(ii) and Rule 6e-2(b) (13) (v) (B) under the Investment Company Act
1940 ("1940 Act") regarding certain procedures under John Hancock
Mutual Life Insurance Company's ("JHMLICO") and John Hancock Variable
Life Insurance Company's ("JHVLICO") Scheduled Premium Variable Life
Insurance Policies (hereinafter referred to individually as the
"Policy" and collectively as the "Policies").
Rule 6e-2(b) (12) (ii) provides an exemption for a variable life
insurance separate account, its sponsoring insurance company, its
investment adviser and its principal underwriter from Sections 22(d),
22(e) and 27(c) (1) of the 1940 Act and Rule 22c-1 thereunder for
issuance, transfer and redemption procedures under a variable life
insurance Policy to the extent necessary to assure compliance with
Rule 6e-2, state insurance law or established administrative
procedures of the life insurance company. The Rule requires, as a
condition for exemption, that such procedures be reasonable, fair and
nondiscriminatory, and be disclosed in the registration statement
filed with respect to such variable life insurance policies.
JHMLICO and JHVLICO represent that their procedures meet the foregoing
standards of Rule 6e-2(b) (12) (ii), based on the following facts and
circumstances:
1. Because of the insurance nature of the Policies and, in certain
instances, as a result of the requirements of the state insurance
laws, the procedures necessarily differ in significant respects from
the procedures for mutual funds and contractual plans for which the
1940 Act was designed.
<PAGE>
-2-
2. Many of the procedures have been adapted from those established and
utilized in connection with the administration of JHMLICO's fixed
benefit life insurance policies and earlier versions of variable life
insurance policies issued by its subsidiary, JHVLICO.
3. Certain procedures, including the 24-month conversion right to
fixed benefit policies, are required by Rule 6e-2.
4. JHMLICO and JHVLICO, in structuring their procedures to comply with
Rule 6e-2, state insurance laws, and their established administrative
procedures, have attempted to meet the intent of the 1940 Act to the
extent deemed feasible.
5. Generally speaking, the state insurance laws to which both JHMLICO
and JHVLICO are subject reflect the fundamental principle that the
procedures shall not be unfair, unreasonable or unjustly
discriminatory to any policyholder.
6. Because of the intricate insurance methodology underlying the
procedures, it is often difficult to determine, with certainty,
whether and to what extent a particular procedure, or a given step to
that procedure, deviates from a specific requirement of Section 22(d),
22(e) or 27(c) (1) of the 1940 Act or Rule 22c-1 thereunder.
Accordingly, the summary below includes the principal Policy
provisions and procedures that might be deemed to constitute, either
directly or indirectly, accommodation of the 1940 Act requirements and
insurance practices. Given the complexities of the Policies'
operations, the summary, although comprehensive, does not attempt to
treat each and every mechanical variation or permutation that might
occur and does not repeat every provision or procedure that is already
set forth in the registration statement or exhibits thereto. At the
same time, the summary, in order to provide a comprehensive view of
the procedures, includes certain procedural steps that do not
constitute a deviation from the Sections and Rule cited above.
Rule 6e-2(b) (13) (v) (B) grants an exemption for a variable life
insurance separate account, its sponsoring insurance company, its
investment adviser and its principal underwriter from Section 27(d) of
the 1940 Act for variable life insurance policies which allow the
policyholder to convert a variable life insurance policy into a fixed
benefit life insurance policy at any time during the first 24 months
after issuance. The Rule requires, as a condition for exemption, that
the method of computing any adjustments made in payments or cash
values to reflect variances between the payments and
<PAGE>
-3-
cash values under the original policy and new policy be set out in an
exhibit to the registration statement filed with respect to the
variable life insurance Policy. JHMLICO's and JHVLICO's Policies
provide for such a conversion privilege. No adjustments in payments
and cash values are made upon exercise of that privilege, as described
below.
This memorandum divides the information called for by Rules 6e-2(b)
(12) (ii) and 6e-2(b) (13) (v) (B) into three parts. The first part
summarizes procedures under the policies which might be deemed to
involve, either directly or indirectly, a "redemption" within the
meaning of the 1940 Act. The second part summarizes procedures which
might be deemed to involve, either directly or indirectly, a
"purchase" transaction. The third part summarizes the procedures for
converting a Policy to a fixed benefit Policy.*/
-
Except as otherwise defined herein, capitalized terms used in this
memorandum have the same meaning as are defined in the prospectus
contained in the applicable registration statement.
_____________________
*/ If an Owner requests a "purchase" or "redemption" transaction which
-
is impossible (for example, allocation of a loan or partial surrender
to subaccounts which have insufficient assets to support said
allocation) or impermissible (such as a reduction in the Basic Death
Benefit below the minimum required amount), JHMLICO will notify the
Policy Owner to determine what action, if any, the Policy Owner wishes
to take instead. This exhibit refers to procedures as they affect the
respective variable accounts of JHMLICO and JHVLICO ("the Account")
used in funding the Policies. Except as otherwise stated herein,
these procedures do not necessarily reflect the Fixed Account under
the Policies which is held in the General Account of each insurer.
Whenever reference is made herein to JHMLICO it should also be read as
JHVLICO, insofar as JHVLICO and its Account are concerned, each
insurer having adopted identical procedures.
<PAGE>
-4-
I. "Redemption" Procedures:
Surrender and Related Transactions
----------------------------------
JHMLICO's Policies provide for the payment of monies to a policyholder
("Owner") or beneficiary upon presentation to JHMLICO of a Policy.
Such presentation might be deemed to constitute, either directly or
indirectly, a "redemption" of the Owner's interest within the meaning
of the 1940 Act. Set forth below is a summary of the principal policy
provisions and procedures which might be viewed as involving such a
"redemption". The principal difference between such "redemptions" and
redemptions it the mutual fund or contractual plan context is that
under the Policies, the payee may be deemed not to receive a pro rata
or proportionate share of the assets in JHMLICO's account within the
meaning of the 1940 Act. The amount received by the payee will depend
upon the particular benefit for which the Policy is presented,
including, for example the Surrender Value or Death Benefit.
There are also certain Policy provisions -- such as options on lapse
-- under which the Policy will not be presented to JHMLICO but which
will affect the Owner's benefits and involve a transfer of the assets
supporting the Policy reserve out of the Account. Finally, state
insurance law may require that certain requirements be met before
JHMLICO is permitted to make payments to the payee.
A. Surrender Values
----------------
If the insured party under a Policy ("Insured") is alive, JHMLICO will
pay, within seven days, the Surrender Value next computed after
receipt, at its Home Office, of the Policy and a signed request for
surrender. Computations with respect to the investment experience of
the subaccounts will be made as of 4:00 p.m., New York City time, on
each day during which the New York Stock Exchange is open for trading
and on which the fund values its shares. This will enable JHMLICO to
pay the Surrender Value based on the next computed value after a
request is received. While no premium is in default, the Surrender
Value is equal to the Account Value less any indebtedness, less any
Contingent Deferred Sales Charges and less any Administrative
Surrender Charge. In general, the Account Value for any day equals
the Policy Account Value for the previous day, increased by any net
premium and decreased by any charges against the Account Value,
accumulated at the subaccount's rate of return after charges against
the Account. The Contingent Deferred Sales Charge is deducted from
the Policy Account Value upon surrender of the Policy during the first
thirteen Policy years after issue. (It is deducted for fewer than
thirteen years at certain issue ages).
<PAGE>
5
The amount of this charge is calculated on the basis of the premium
under the Modified Schedule for the issue age of the Policy. Lower
percentages apply at higher issue ages. The total charge for sales
load, including the Contingent Deferred Sales Charge, over the lesser
of 20 years or the life expectancy of the insured, will not exceed 9%
of the Basic Premium at issue over that period. No minimum amount of
Policy Account Value is guaranteed. JHMLICO will make the payment of
the Surrender Value out of its General Account and transfer assets
from the Account to the General Account for the amounts held for the
Policy in the Account.
The Administrative Surrender Charge is deducted from a Policy's
Account Value upon its surrender or lapse in the first nine Policy
years after issue. The amount of this charge is determined as an
amount per thousand of Guaranteed Death Benefit. Currently the charge
is waived for a Policy with more than $250,000 of Guaranteed Death
Benefit at the time of surrender or lapse and is reduced for all other
Policies.
In lieu of payment of the Surrender Value upon surrender of a Policy
in a single sum, an election may be made to apply all or a portion of
the proceeds under one of the benefit settlement options described in
the Policy or, with the approval of JHMLICO, under other optional
methods of settlement available from JHMLICO. The election may be
made by the Owner during the Insured's lifetime, or, if no election is
in effect at death, by the beneficiary. The benefit settlement
options are subject to the restrictions and limitations set forth in
the Policy.
B. Partial Surrender
-----------------
A Policy may be partially surrendered in accordance with Rule 6e-2(b)
(12) (ii). The Policy after the Partial Surrender must have an
initial Sum Insured at least as great as the minimum issue size for
that type or Policy.
When a Policy is partially surrendered, there is a proportionate
reduction in Death Benefit, Account Value, Surrender Value, Contingent
Deferred Sales Charge, Administrative Surrender Charge, Required
Premium Target, Loans, Rider/Rating Premium, and Basic Premium.
If there is an outstanding Policy loan on the Policy, the outstanding
indebtedness after the Partial Surrender can not exceed the then
current available Loan Value.
Partial Surrenders will be effected as of the end of the Valuation
Period in which all materials necessary to complete the Partial
Surrender (including a written request in proper form and the Policy)
are received at JHMLICO's Home Office. Similar to the surrender
transaction, JHMLICO will pay, within seven days, the resulting
Surrender Value computed.
<PAGE>
-6-
C. Death Claims
------------
JHMLICO will pay a death benefit to the beneficiary within seven days
after receipt at its Home Office of due proof of death of the Insured,
and all other requirements necessary 1/ to make payment. Provided the
-
Policy is in full force, 2/ the Death Benefit will be the greater of
-
(1) the Guaranteed Death Benefit (and Excess Value, if any, under the
variable death benefit option) plus all premiums received after the
last processing date prior to the Insured's date of death less any
indebtedness on the date of death, and (2) the Account Value at the
end of the Valuation Period in which death occurs multiplied by the
applicable Death Benefit Factor or Corridor Factor, as applicable,
less any indebtedness on the date of death. The Death Benefit is also
less any premium in default if death occurs during the 61 day grace
period. The Guaranteed Death Benefit is equal to the Basic Death
Benefit.
The proceeds payable on death also reflect interest from the date of
death to the date of payment.
JHMLICO will make payment of the Death Benefit out of its General
Account, and will transfer assets from the Account to the General
Account in an amount equal to the amount held in the Account for the
Policy terminated by death. The excess of the Guaranteed Death
Benefit over the Current Death Benefit, if any, will be paid out of a
General Account reserve maintained for that purpose.
In lieu of payment of the Death Benefit in a single sum, a settlement
option may be selected as described in Section I.A, above.
---------------
1/State insurance laws impose various requirements, such as receipt of
-
a tax waiver before payment of the Death Benefit may be made. In
addition, payment of the Death Benefit is subject to the provisions of
the Policy regarding suicide and incontestability.
2/"In full force", means that the insurance under the Policy is being
-
continued for the greater of the Guaranteed Death Benefit and the
Current Death Benefit, and that no unpaid premium is more than 61 days
overdue.
<PAGE>
-7-
D. Default and Options on Lapse
----------------------------
On each applicable processing date, JHMLICO compares the Cumulative
Premium Balance under a Policy on the immediately preceding Valuation
Date with the Required Premium Target on such Valuation Date. If the
Cumulative Premium Balance is then less than the Required Premium
Target for the Policy, the Policy can be in default on that Processing
Date. The premium requirement will also be deemed satisfied on the
last Valuation Date of any Policy month if adequate Excess Value
(defined below) is available on the scheduled due date. If both of
the tests fail, the Policy is in default. The difference between the
Cumulative Premium Balance and the Required Premium Target is the
amount in default.
The Policy provides that any amount in default may be paid within a
61-day grace period after the date of default. Written notice will be
furnished to the Owner at his or her last known address, at least 61
days prior to the end of the grace period, specifying the minimum
amount which must be paid to continue the Policy in force on a premium
paying basis after the end of the grace period. If a payment at least
equal to the amount in default is not received by the end of the grace
period the Policy will lapse. If payment by the Owner of an amount in
default is received prior to the end of the grace period, the Policy
will no longer be in default. The portion of the payment equal to the
amount in default will be processed as if it had been received on the
processing date of the Cumulative Premium Test; any excess payment
will be processed as of the date of receipt.
The insurance continues in full force during the grace period but, if
the insured dies during the grace period, the amount in default will
be deducted from the amount of Death Benefit otherwise payable.
If a Policy lapses, the Surrender Value under the Policy on the date
of lapse is applied under one of the following options for continued
insurance not requiring further payment of premiums. These options
provide for Variable or Fixed paid-Up Insurance or Fixed Extended Term
Insurance on the life of the insured commencing on the date of lapse.
Both the Variable and Fixed Paid-Up Insurance options provide an
amount of paid-up whole life insurance determined in accordance with
the Policy which the Surrender Value will purchase. The amount of
Variable Paid-Up Insurance may then increase or decrease, subject to
any guarantee, in accordance with the investment experience of the
subaccount. The Fixed Extended Term Insurance option provides a fixed
amount of insurance determined in accordance with the Policy, with the
insurance coverage continuing for as long a period as the available
Policy values will purchase.
<PAGE>
8
If no option has been elected before the end of the grace period, the
Fixed Extended Term insurance option automatically applies unless the
amount of Fixed Paid-Up Insurance would equal or exceed the amount of
Fixed Extended Term Insurance or unless the insured is a substandard
risk, in either of which cases Fixed Paid-Up Insurance is provided.The
Variable Paid-Up Insurance option is not available unless the initial
amount of Variable Paid-Up Insurance is at least $5000.
A Policy continued under any option may be surrendered for its
Surrender Value while the insured is living. Loans may be available
under the Variable and Fixed Paid-Up Insurance options.
E. Policy Loan
-----------
Loans may be made at any time a Loan Value is available after the
first Policy year. The Owner may borrow money on completion of a form
satisfactory to JHMLICO assigning the Policy as the only security for
the loan. Payment of the loan will be made from JHMLICO's Home
Office. The Loan Value will be 75% of the Surrender Value in Policy
years two and three and 90% of the Surrender Value in later Policy
years. Interest accrues and is compounded daily at an effective
annual rate determined by John Hancock at the start of each Policy
year. This interest rate will not exceed the greater of (1) the
"Published Monthly Average" (defined below) for the calendar month
ending 2 months before the calendar month of the Policy anniversary or
(2)5%. The "Published Monthly Average" means Moody's Corporate Bond
Yield Average-Monthly Average Corporate, as published by Moody's
Investors Service, Inc., or if the average is no longer published, a
substantially similar average established by the insurance regulator
where the Policy is issued.
The amount of any outstanding loan plus accrued interest is called the
"indebtedness". Except when used to pay premiums, a loan will not be
permitted unless its is at least $300. The Owner may repay all or a
portion of any indebtedness while the insured is living and premiums
are being duly paid. When a loan is made, shares are redeemed in an
aggregate equal to the amount of the loan and this aggregate value is
allocated to the Loan Account. The shares redeemed will be redeemed
in each subaccount in the same proportion as the Account Value is then
allocated among the subaccounts. Upon each loan repayment, the same
proportionate amount of the entire loan as was borrowed from the Fixed
Account will be repaid to the Fixed Account. The remainder of the
loan repayment will be allocated to the appropriate subaccounts as
stipulated in the current Investment Rule.
<PAGE>
9
Loan interest which is not paid by a Policy anniversary will be added
to the loan principal by automatically effecting an additional Policy
loan. Amounts transferred to the Policy loan account are credited
with interest at 1% less than the loan interest rate per annum for the
first 20 Policy years and .50% less than the loan interest rate per
annum in years 21 and beyond, which interest is transferred to the
subaccount when the loan is repaid, according to the Investment Rule
then in affect.
A loan does not directly affect the amount of the Required Premium.
While the indebtedness is outstanding, that portion of the Account
Value that is in the Loan Account is credited with interest at a rate
of 1% less than the loan rate for the first 20 Policy years and .50%
less than the loan rate in years 21 and later, a rate which will
usually be different than the net return for the subaccounts. Since
the Loan Account and the remaining portion of the Account Value will
generally have different rates of investment return, any Death Benefit
above the Guaranteed Death Benefit, the Account Value, and the
Surrender Value are permanently affected by any indebtedness, whether
or not repaid in whole or in part. The amount of any outstanding
indebtedness is subtracted from the amount otherwise payable when the
Policy proceeds become payable.
Whenever the indebtedness equals or exceeds the Surrender Value, the
Policy terminates 31 days after notice has been mailed by JHMLICO to
the Owner and any assignee of record at their last known addresses,
unless a repayment of the excess indebtedness is made within that
period.
F. Transfers Among Variable Subaccounts
------------------------------------
The Owner may reallocate the amounts held for the Policy in the
variable subaccounts in each Policy year without charge. The Owner may
use either percentages (in whole numbers) or designate the dollar
amount of funds to be transferred between subaccounts. The
reallocation must be such that the total in the subaccounts after
reallocation equals 100%. The change will be effective at the end of
the Valuation Period in which JHMLICO receives at its Home Office
notice satisfactory to JHMLICO.
G. Conversion Privilege
--------------------
The conversion privilege provided in a accordance with Rule 6e-2(b)
(13) (v) (B) under the 1940 Act is discussed under III. below.
H. Partial Withdrawal of Excess Value
----------------------------------
An Owner may withdraw Excess Value from the Policy on or
<PAGE>
10
after the first Policy anniversary. This privilege, which reduces the
Account Value by the amount of the withdrawal and the associated
charge, may be exercised only once in a Policy year and will be
effective as of the end of the Valuation Period in which JHMLICO
receives written notice satisfactory to it at its Home Office. The
minimum amount that may be withdrawn is $500. Unless the Current
Death Benefit exceeds the Guaranteed Death Benefit, a partial
withdrawal will not affect the Death Benefit Payable. An amount equal
to $25 is charged against Account Value for each partial withdrawal.
When a withdrawal of Excess Value is made, the Premium Component, if
any, is treated as having been withdrawn first. Amounts withdrawn
from the Premium Component reduce the cumulative premium balance.
II. Purchase and Related Transactions
--------------------------------------
Set out below is a summary of the principal provisions of the Policies
and administrative procedures thereunder that might be deemed to
constitute, either directly or indirectly, a "purchase" transaction
within the meaning of the 1940 Act. The summary shows that, because of
the insurance nature of the Policies, the procedures involved
necessarily differ in certain significant respects form the purchase
procedures for mutual funds and contractual plans. The chief
differences revolve around the premium rate structure and the
insurance underwriting (i.e., evaluation of risk) process. There are
also certain Policy provisions -- such as reinstatement -- which do
not result in the issuance of a Policy but which required certain
payments by the Owner and involve a transfer of assets supporting the
Policy reserve into the Account.
A. Premium Schedules and Underwriting Standards
--------------------------------------------
Premiums for JHMLICO's Policies will not be the same for all Owners.
The chief reason is that the principle of pooling and distribution of
mortality risks is based upon the assumption that each Owner pays a
premium commensurate with the Insured's mortality risk which is
actuarially determined based upon factors such as age, sex, smoking
status, health and occupation. In the context of life insurance as
contrasted with mutual funds, a uniform premium (or "public offering
price") for all Insured's would discriminate unfairly in favor of
those Insured's representing greater mortality risks to the
disadvantage of those representing lesser risks. Accordingly,
although there will be no uniform "Public offering price" for all
Insured's, there will be a single "price" for all Insured's in a given
actuarial category.
<PAGE>
11
The Policies will be offered and sold pursuant to established premium
schedules 3/ and underwriting standards and in accordance with state
-
insurance laws. Such laws prohibit unfair discrimination among
Policyholders, but recognize that premiums may be based upon factors
such as age, sex, smoking status, health, and occupation. In a few
states, the premiums and values under the Policies will not directly
reflect the sex of the insured.
----------------
3/In accordance with industry practice, JHMLICO will establish
-
procedures to handle errors in initial and subsequent premium payments
to collect underpayments, except for de minimis amounts.
<PAGE>
-12
B. Application and Initial Premium Processing
------------------------------------------
Upon receipt of a completed application from a proposed Owner, JHMLICO
will follow certain insurance underwriting (i.e., evaluation of risk)
procedures designed to determine whether the proposed Insured is
insurable. This process may involve such verification procedures as
medical examinations and may require that further information be
provided by the proposed Insured before a determination can be made.
A Policy cannot be issued, i.e., physically issued through JHMLICO's
computerized issue system until this underwriting procedure has been
completed.
The date on which a Policy is issued is referred to as the "date of
Issue". The date of issue coincides with the beginning of a Valuation
Period. It represents the commencement of the suicide and contestable
periods for purposes of the Policies. It is also the date as of which
the insurance age of the proposed Insured is determined. It
represents the first day of the Policy year and therefore determines
the Policy anniversary. It also marks the commencement of the
variability of benefits.
These processing procedures are designed to provide immediate benefits
to the proposed Owner in connection with payment of the initial
premium and will not dilute any benefit payable to an existing Owner.
Although a Policy cannot be issued until after the underwriting
process has been completed, the proposed Insured will receive
immediate insurance coverage, if he has paid his minimum first
premium, subject to the other terms and conditions of JHMLICO's
Receipt and Conditional Temporary Insurance Agreement. If the minimum
first premium is paid with the application and the Policy is issued as
applied for, the date of issue in general will be the last of the Part
A date or the Part B date of the application or the date of most
recent evidence of insurability, so that variability of benefits will
commence as of that date. If the minimum first premium is not paid
with the application, the date of issue will be the actual date the
application is processed for issue or the next valid issue date
provided the Owner pays the necessary premium. Except as referred to
above, no coverage will take effect with respect to a Policy until the
minimum first premium has been paid and the Policy is delivered to the
Owner while the insured is living and has not consulted, been
examined, or treated by a doctor since the latest Part B of the
application was completed. If coverage under a Policy never goes into
effect, any premium paid will be returned without interest.
JHMLICO will require that the Policy be delivered and the minimum
initial premium paid within a specific period to protect itself
against anti-selection by the proposed Owner
<PAGE>
13
resulting from deterioration in the Insured's health. Generally, the
period will not exceed 60 days from the date of completion of the
latest of Parts A and B of the application and any required medical
examination.
JHMLICO will transfer the appropriate amount from its general account
to the Account on the date the Policy is approved. The appropriate
amount will be calculated as though the net premium had in fact been
transferred from the General Account to the Account commencing on the
date the Policy is issued.
C. Premium Recalculation
---------------------
The premium Recalculation applicable to any Policy on a Modified
Schedule may be elected by the Owner at any time up to the Policy
anniversary nearest the Insured's 70th birthday, or, if later, the
tenth Policy Anniversary. If elected, the Premium Recalculation will
be effected on the Policy anniversary next following receipt by
JHMLICO at its Home office of satisfactory written notice. If not
elected sooner, the Premium Recalculation will be effected by JHMLICO
on the Policy anniversary nearest the Insured's 70th birthday, or, if
later, the tenth Policy Anniversary.
The new Basic Premium resulting from a Premium Recalculation may be
less than, equal to or greater than the original Basic Premium but it
will never exceed the Guaranteed Maximum Recalculation Premium for the
attained age shown in the Policy. The new Basic Premium depends on
the Insured's sex, smoking status and age, the Guaranteed Death
Benefit under the Policy and the Account Value on the Valuation Date
immediately preceding the date of the premium Recalculation.
D. Reinstatement Provision
-----------------------
The Policy may be reinstated within 3 years after the beginning of the
grace period unless the Surrender Value has been paid or otherwise
exhausted, or the period of any extended term insurance has expired.
A Policy will be reinstated upon receipt by JHMLICO of a written
application for reinstatement and production of evidence of
insurability satisfactory to JHMLICO and payment of an amount equal to
the sum of (a) and (b), each accumulated at an effective annual rate
of 6% to the date of reinstatement, where:
(a) is the difference between the Required Premium Target and the
Cumulative Premium Balance at the date of lapse, and
(b) is all Required Annual Premiums for the period between the date of
lapse and the date of reinstatement.
<PAGE>
14
On the date of reinstatement the Policy will have (i) a Sum Insured as
if no lapse had occurred and (ii) indebtedness equal to any
indebtedness at the end of the day immediately preceding the date of
reinstatement.
The Account Value on the date of reinstatement will be the sum of (a)
through (c) less (d) through (f) where:
(a) is the Surrender Value of the nonforfeiture option in effect on
the date of reinstatement plus any indebtedness on the date of
reinstatement;
(b) is the amount in Premium Payment above;
(c) is the deferred sales charge and administrative surrender charge
adjustment (as defined below);
(d) is the aggregate premium expense charges, i.e. sales charge,
premium tax charge and Federal DAC tax charge; and (e) is the sum of
all Maintenance Charges and charges for Riders and ratings, if any,
that would have been made from the date of lapse to the date of
reinstatement if the Policy had not lapsed, with interest an effective
annual rate of 6% to the date of reinstatement.
The deferred sales charge adjustment is the smaller of (a) and (b)
where:
(a) is the deferred sales charge and administrative surrender charge
applicable if the Policy were surrendered immediately after
reinstatement; and
(b) is the deferred sales charge and administrative surrender charge
made on the date of lapse.
In order to assist a lapsed Owner in making a considered judgment as
to whether to reinstate, JHMLICO may calculate the amount payable upon
reinstatement and "freeze" the amount for up to ten days.
F. Repayment of Loan
-----------------
The Owner may repay all or a portion of any indebtedness while the
insured is living and premiums are duly paid. When a loan is made,
shares are redeemed in an aggregate value equal to the amount of the
loan and this aggregate value is transferred to the general account
and carried as a Loan Account. The shares redeemed will be redeemed
in each subaccount in the same proportion as the Account Value is then
allocated among the subaccounts. Upon each loan repayment, the same
proportionate amount of the entire loan
<PAGE>
15
as was borrowed from the Fixed Account will be repaid to the Fixed
Account. The remainder of the loan repayment will be allocated to the
appropriate subaccounts as stipulated in the current Investment Rule.
While the indebtedness is outstanding, that portion of the Account
Value that is in the Loan Account is credited with interest at a rate
of at 1% less than the loan rate in the first 20 Policy years and .50%
less than the loan rate in years 21 and beyond, a rate which will
usually be different than the net return for the subaccounts. Since
the Loan Account and the remaining portion of the Account Value will
generally have different rates of investment return, any Death Benefit
above the Guaranteed Death Benefit, the Account Value, and the
Surrender Value are permanently affected by any indebtedness, whether
or not repaid in whole or in part. The amount of any outstanding
indebtedness is subtracted from the amount otherwise payable when the
Policy proceeds become payable.
G. Correction of Misstatement of Age or Sex
----------------------------------------
If JHMLICO discovers that the age or sex of the Insured has been
misstated, JHMLICO will reconstruct the Policy by determining what
benefits the premium paid would have purchased at the correct age or
sex. Special adjustments may have to be made if the resultant face
amount is below JHMLICO's minimum size Policy.
Once the benefits are redetermined, JHMLICO will make the necessary
adjustment in the reserve assets in the Account to reflect the
redetermined benefits and the correct age and sex of the Insured.
III. Conversion of Policy
--------------------
JHMLICO's Policies, in accordance with Rule 6e-2(b) (v) (b) under the
1940 Act, provide that the Owner within 24 months of issue, or any
time after thereafter, may transfer the entire Account Value under the
Policy to the Fixed Account thus creating a non-variable or fixed
benefit life insurance Policy. This conversion privilege is designed
to permit an Owner to change his or her mind and to obtain a fixed
benefit Policy.
FCC0253.DOC
<PAGE>
EXHIBIT 9
John Hancock Variable Annuity and Variable Life Insurance Accounts
------------------------------------------------------------------
POWER OF ATTORNEY
The undersigned member of the Board of Directors of John Hancock Mutual
Life Insurance Company does hereby constitute and appoint Stephen L. Brown,
Foster L. Aborn, William L. Boyan, Richard S. Scipione and Bruce E. Skrine, and
each of them individually, with full power of substitution, his or her true and
lawful attorneys and agents to execute, in the name of, and on behalf of, the
undersigned as a member of said Board of Directors, the Registration Statements
under the Securities Act of 1933 and the Investment Company Act of 1940, and
each amendment to the Registration Statements, to be filed for John Hancock
Variable Annuity Account U, John Hancock Mutual Variable Life Insurance Account
UV and any other variable annuity or variable life insurance account of John
Hancock Mutual Life Insurance Company with the Securities and Exchange
Commission and to take any and all action and to execute in the name of, and on
behalf of, the undersigned as a member of said Board of Directors or otherwise
any and all instruments, including applications for exemptions from such Acts,
which said attorneys and agents deem necessary or advisable to enable any
variable annuity or variable life insurance account of John Hancock Mutual Life
Insurance Company to comply with the Securities Act of 1933, as amended, the
Investment Company Act of 1940, as amended, and the rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof; and
the undersigned hereby ratifies and confirms as his or her own act and deed all
that each of said attorneys and agents shall do or cause to have done by virtue
hereof. Each of said attorneys and agents shall have, and may exercise, all of
the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand on
the date shown.
September 30, 1995 /s/ Michael C. Hawley
--------------------------- ------------------------------
Date Director
FCC0241.DOC
<PAGE>
EXHIBIT 10
April 5, 1996
United States Securities
and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Gentlemen:
This opinion is being furnished with respect to the filing of this post-
effective amendment of the Registrant's Registration Statement with the
Securities and Exchange Commission as required by Rule 485 under the Securities
Act of 1933.
We have acted as counsel to Registrant for the purpose of preparing this
post-effective amendment which is being filed pursuant to paragraph (b) of Rule
485 and hereby represent to the Commission that in our opinion this post-
effective amendment does not contain disclosures which would render it
ineligible to become effective pursuant to paragraph (b).
We hereby consent to the filing of this opinion with and as a part of this
post-effective amendment to Registrant's Registration Statement with the
Commission.
Very truly yours,
/s/ Francis C. Cleary Jr.
------------------------
Francis C. Cleary, Jr.
Vice President and Counsel
FCC0240.DOC
