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PROSPECTUS DATED MAY 3, 1999
ANNUAL PREMIUM VARIABLE LIFE
scheduled premium variable life insurance policies
issued by
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY ("JOHN HANCOCK")
JOHN HANCOCK LIFE SERVICING OFFICE
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EXPRESS DELIVERY
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529 Main Street (X-4)
Charlestown, MA 02129
U.S. MAIL
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P.O. Box 111
Boston, MA 02117
PHONE: 1-800-732-5543 / FAX: 1-617-886-3048
The policies provide the following 7 variable investment options:
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VARIABLE INVESTMENT OPTION MANAGED BY
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<S> <C>
Managed. . . . . . . . . . . . . . . . . . . . . . . . . . . Independence Investment Associates, Inc.
Growth & Income . . . . . . . . . . . . . . . . . . . . . . Independence Investment Associates, Inc.
Large Cap Growth . . . . . . . . . . . . . . . . . . . . . . Independence Investment Associates, Inc.
Real Estate Equity . . Independence Investment Associates, Inc.
International Equity Index . . . . . . . . . . . . . . . . Independence International Associates, Inc.
Sovereign Bond . . . . . . . . . . . . . . . . . . . . . . John Hancock Advisers, Inc.
Money Market . . . . . John Hancock Mutual Life Insurance Company
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</TABLE>
We may add or delete variable investment options in the future.
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When you select one or more of these variable investment options, we invest
your money in the corresponding investment option(s) of the John Hancock
Variable Series Trust I (the "Trust"). The Trust is a mutual fund that offers a
number of different investment options (which are called "funds"). The
investment results of each variable investment option you select will depend on
those of the corresponding fund of the Trust. Attached to this prospectus is a
prospectus for the Trust that contains detailed information about each fund
offered under the policy. Be sure to read the prospectus for the Trust before
selecting any of the variable investment options shown on page 1.
GUIDE TO THIS PROSPECTUS
This prospectus contains information that you should know before you buy a
policy or exercise any of your rights under the policy. However, please keep in
mind that this is a prospectus - - it is not the policy. The prospectus
---
simplifies many policy provisions to better communicate the policy's essential
features. Your rights and obligations under the policy will be determined by the
language of the policy itself. When you receive your policy, read it carefully.
This prospectus is arranged in the following way:
. The section which follows is called "Basic Information". It is in a
question and answer format. We suggest you read the Basic Information
section before reading any other section of the prospectus.
. Behind the Basic Information section are illustrations of
hypothetical policy benefits that help clarify how the policy works.
These start on page 16.
. Behind the illustrations is a section called "Additional Information"
that gives more details about the policy. It generally does not
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repeat information that is in the Basic Information section. A table
of contents for the Additional Information section appears on page
27.
. Behind the Additional Information section are the financial
statements for John Hancock and Separate Account UV. These start on
page 37.
. Finally, there is an Alphabetical Index of Key Words and Phrases at
the back of the prospectus on page 76.
After the Alphabetical Index of Key Words and Phrases, this prospectus ends and
the Trust prospectus begins.
**********
Please note that the Securities and Exchange Commission ("SEC") has not
approved or disapproved these securities, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
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BASIC INFORMATION
This part of the prospectus provides answers to commonly asked questions about
the policy.
Here are the page numbers where the questions and answers appear:
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Question Pages to See
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<S> <C>
.What is the policy?....................................... 4
.Who owns the policy?...................................... 4
.How can I invest money in the policy?..................... 5
.How much must I invest?................................... 5
.What happens to my remaining policy value if the policy
lapses?................................................... 6
.How will the value of my investment in the policy change
over time?................................................ 6-7
.Will I receive annual dividends?.......................... 7-8
.What charges will John Hancock deduct from my investment
in the policy?............................................ 8-9
.What charges will the Trust deduct from my investment in
the policy?.............................................. 9-10
.What other charges could John Hancock impose in the
future?................................................... 10
.How can I change my policy's investment allocations?...... 10
.How can I access my investment in the policy?............. 11-12
.How much will John Hancock pay when the insured person
dies?..................................................... 12
.Can I cancel my policy after it's issued?................. 13
.Can I choose the form in which John Hancock pays out
policy proceeds?.......................................... 13-14
.How will my policy be treated for income tax purposes?.... 14
.How do I communicate with John Hancock?................... 14-15
</TABLE>
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WHAT IS THE POLICY?
This prospectus describes three types of policies being offered by John
Hancock: a Variable Whole Life Policy, a Variable Whole Life P 50 Policy and a
Variable Whole Life 100 Policy. THE POLICIES DESCRIBED IN THIS PROSPECTUS ARE
AVAILABLE ONLY IN NEW YORK. The minimum death benefit that may be bought is
$25,000 for the Whole Life Policy, $50,000 for the Whole Life P 50 Policy and
$100,000 for the Whole Life 100 Policy. For the Whole Life Policy and the Whole
Life P 50 Policy, all persons insured must meet certain health and other
criteria called "underwriting standards." All persons insured under the Whole
Life 100 Policy must meet "preferred risk" and non-smoking underwriting
standards. All policies may be issued on insured persons between ages of 0 and
75. Discounts are available to insured persons meeting non-smoking underwriting
criteria.
The policy's primary purpose is to provide lifetime protection against
economic loss due to the death of the insured person. The value of the amount
you have invested under the policy may increase or decrease daily based upon the
investment results of the variable investment options that you choose. The
amount we pay to the policy's beneficiary if the insured person dies (we call
this the "death benefit") may be similarly affected.
While the insured person is alive, you will have a number of options under the
policy. Here are some major ones:
. Determine how much of your premium you invest in the various
investment options
. Borrow amounts you have in the investment options
. Change the beneficiary who will receive the death benefit
. Turn in (i.e., "surrender") the policy for the full amount of its
surrender value
. Surrender a portion of the policy
. Choose the form in which we will pay out the death benefit or other
proceeds
Most of these options are subject to limits that are explained later in this
prospectus.
WHO OWNS THE POLICY?
That's up to the person who applies for the policy. The owner of the policy is
the person who can exercise most of the rights under the policy, such as the
right to choose the investment options or the right to surrender the policy. In
many cases, the person buying the policy is also the person who will be the
owner. However, the application for a policy can name another person or entity
(such as a trust) as owner. Whenever we've used the term "you" in this
prospectus, we've assumed that the reader is the person who has whatever right
or privilege is being discussed. There may be tax consequences if the owner and
the insured person are different, so you should discuss this issue with your tax
adviser.
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HOW CAN I INVEST MONEY IN THE POLICY?
Premium Payments
We call the investments you make in the policy "premiums" or "premium
payments".
Ways to pay premiums
If you pay premiums by check or money order, they must be drawn on a U.S. bank
in U.S. dollars and made payable to "John Hancock Mutual Life Insurance
Company." Premiums after the first must be sent to the John Hancock Life
Servicing Office at the appropriate address shown on page 1 of this prospectus.
We will also accept premiums:
. by wire or by exchange from another insurance company,
. via an electronic funds transfer program (any owner interested in
making monthly premium payments must use this method), or
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. if we agree to it, through a salary deduction plan with your
employer.
You can obtain information on these other methods of premium payment by
contacting your John Hancock representative or by contacting the John Hancock
Life Servicing Office.
HOW MUCH MUST I INVEST?
Payment period and frequency.
Premiums are payable annually or more frequently over the insured person's
lifetime in accordance with our published rules and rates. Premiums are payable
on or before the due date specified in the policy. A refund or charge will be
made to effect premium payment to the end of the policy month in which the
insured person dies.
Lapse and reinstatement
If you don't pay a premium when due, you will have a 31 day "grace period" to
make that payment. If you don't pay the premium by the end of the grace period,
your policy will terminate (i.e., lapse). All coverage under the policy will
then cease. Even if the policy terminates in this way, you can still reactivate
(i.e., "reinstate") it within 3 years from the beginning of the grace period,
unless the surrender value has been paid or otherwise exhausted, or the period
of any extended term coverage (discussed below) has expired. You will have to
provide evidence that the insured person still meets our requirements for
issuing coverage. You will also have to pay a prescribed amount of premium and
be subject to the other terms and conditions applicable to reinstatements, as
specified in the policy. If the insured person dies during the grace period, we
will deduct any unpaid premium from the death benefit, prorated to the end of
the month of the insured person's death.
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WHAT HAPPENS TO MY REMAINING POLICY VALUE IF THE POLICY LAPSES?
Prior to the end of the business day immediately preceding the 70th day after
the beginning of the grace period, any policy values available (as determined in
accordance with the policy) may be applied as of the beginning of the grace
period 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 person
commencing at the beginning of the grace period.
Both the Variable and Fixed Paid-Up Insurance options provide an amount of
paid-up whole life insurance which the available policy values will purchase.
The amount of Variable Paid-Up Insurance may then increase or decrease in
accordance with the investment experience of the variable investment options.
The Fixed Paid-Up Insurance option provides a fixed and level amount of
insurance. The Fixed Extended Term Insurance option provides a fixed amount of
insurance determined in accordance with the policy, with the insurance coverage
continuing for as long a period as the available policy values will purchase.
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For example, using the Variable Whole Life P50 Policy (Age 25 years Male-Smoker) illustrated in this
prospectus and the 6% hypothetical gross annual investment return assumption, if an option was elected
and became effective at the end of policy year 5, the insurance coverage provided by the options on lapse
would be as follows:
Variable or Fixed
Paid-Up Whole Life Fixed Extended Term Insurance
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Death Benefit Death Benefit Term in Years and Days
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or
<S> <C> <C>
$10,427 $62,736 12 years 331 days
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</TABLE>
If no option has been elected before the end of the business day immediately
preceding the 70th day after the beginning of the grace period, the Fixed
Extended Term Insurance option automatically applies unless the amount of Fixed
Paid-Up Insurance would equal or exceed the amount of Fixed Extended Term
Insurance or unless the insured person is a substandard risk, in either of which
cases Fixed Paid-Up Insurance is provided.
If the insured person dies after the grace period but before the end of the
business day immediately preceding the 70th day after the beginning of the grace
period and prior to any election, and if the policy is then in force, we will
pay a death benefit equal to the greater of the death benefits provided under
Fixed Extended Term Insurance (if available) or Fixed Paid-Up Insurance
determined in accordance with the policy.
A policy continued under any option may be surrendered for its cash value
while the insured person is living. Loans may be available under the Variable
and Fixed Paid-Up Insurance options, but not under the Fixed Extended Term
Insurance option.
HOW WILL THE VALUE OF MY INVESTMENT IN THE POLICY CHANGE OVER TIME?
From each premium payment you make, we deduct the charges described under
"Deductions from premium payments" below. We invest the rest (your so-called
"net
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premium") in the investment options you've elected. We invest an amount equal to
each net premium for your policy on the date of issue and on each premium due
date thereafter, even if we actually receive your corresponding premium payment
before or after that date.
Over time, the amount you've invested in any variable investment option will
increase or decrease the same as if you had invested the same amount directly in
the corresponding fund of the Trust and had reinvested all fund dividends and
distributions in additional fund shares; except that we will deduct certain
additional charges which will reduce your cash value. We describe these charges
under "What charges will John Hancock deduct from my investment in the policy?"
below.
At any time, the "cash value" of your policy (assuming you take all dividend
payments in cash) is equal to:
. the amount you invested,
. plus or minus the investment experience of the investment options
you've chosen,
. minus all charges we deduct, and
. minus all partial surrenders you have made.
If you take a loan on the policy, however, your cash value will be computed
somewhat differently. This is discussed beginning on page 11.
WILL I RECEIVE ANNUAL DIVIDENDS?
These policies are participating policies which, except while in force as
Fixed Extended Term Insurance, are entitled to the share, if any, of the
divisible surplus which we annually determine and apportion to them. Any share
will be distributed as a dividend payable annually on the policy anniversary
beginning not later than the end of the second policy year for the Variable
Whole Life 100 Policy and not later than the end of the third policy year for
the Variable Whole Life Policy and Variable Whole Life P50 Policy.
Dividends under participating policies may be described as refunds of premiums
which adjust the cost of a policy to the actual level of cost emerging over time
after the policy's issue. Thus, participating policies generally have gross
premiums which are higher than those for comparable non-participating policies.
If a policy is surrendered before dividends become payable, you do not benefit
from having a participating policy.
Both Federal and state law recognize that dividends are considered to be a
refund of a portion of the premium paid and therefore are not treated as income
for Federal or state income tax purposes.
Dividend illustrations published at the time of issue of a policy reflect the
actual recent experience of the issuing insurance company with respect to
factors such as interest, mortality, and
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expenses. State law generally prohibits a company from projecting or estimating
future results. State law also requires that dividends must be based on surplus,
after setting aside certain necessary amounts, and that such surplus must be
apportioned equitably among participating policies. In other words, in principle
and by statute, dividends must be based on actual experience and cannot be
guaranteed at issue of a policy.
Each year our actuaries analyze the current and recent past experience and
compare it to the assumptions used in determining the premium rates at the time
of issue. Some of the more important data studied includes mortality and
withdrawal rates, investment yield in the general account, and actual expenses
incurred in administering the policies. Such data is then allocated to each
dividend class, e.g., by year of issue, age, smoking habits and plan. The
actuaries then determine what dividends can be equitably apportioned to each
Policy class and make a recommendation to our Board of Directors. The Board of
Directors, which has the ultimate authority to ascertain dividends, will vote
the amount of surplus to be apportioned to each policy class, thereby
authorizing the distribution of each year's dividend.
You may in general elect to have any dividend paid or applied under any one of
the following options: paid in cash; applied to premium payments; left to
accumulate with interest of at least3 1/2% a year; purchase fixed paid-up
insurance; purchase one year term insurance; or purchase variable paid-up
insurance.
WHAT CHARGES WILL JOHN HANCOCK DEDUCT FROM MY INVESTMENT IN THE POLICY?
Deductions from premium payments
. Premium tax charge - A charge to cover expected state premium taxes we
------------------
must pay. This charge is 2.5% of each premium.
. Adjustment for premium payment frequency - If you select a premium
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payment mode other than annual (so that we receive your premiums over the
course of the year, rather than all at the beginning), there will be less
value in your policy to support it during the course of the year. To
compensate for the risk to us that this creates, the rate we set for each
non-annual premium includes an additional amount that we retain, rather
than crediting it to your policy.
. Annual administrative charge - A charge of $50 in each policy year to
----------------------------
help defray our annual administrative expenses.
. Charge for extra insurance risk - The amount of premiums we may require
-------------------------------
may include an additional component if the insured person presents
particular mortality risks. We retain these additional amounts to
compensate us for that risk.
. Optional benefits charge - The amount of premiums we require is increased
------------------------
by an additional component to cover any optional rider benefits you choose
for your policy. We retain such additional amounts to compensate us for
the obligations we assume under the rider(s).
. Premium sales charge - A charge not to exceed 9% of the basic annual
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premium during the period equal to the lesser of 20 years or the
anticipated life expectancy of the insured person, based on the 1980
Commissioners Standard Ordinary Mortality Table. (The basic annual premium
is the annual premium less the premiums for any optional
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rider benefits, additional charges for extra mortality risks and the $50
annual administrative charge.) The charge during the first two policy
years shall not exceed 30% of the basic annual premium paid during the
first policy year plus 10% of the basic annual premium paid for the second
policy year. Charges of 10% or less are made for later policy year.
. Additional first year administrative charge - A charge in the first
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policy year at the rate of $13 per $1,000 of the Initial Sum Insured (as
shown in the policy) for a Variable Whole Life Policy, $7 per $1,000 for a
Variable Whole Life P50 Policy and $4 per $1,000 for a Variable Whole Life
100 policy or a pro rata portion thereof, to cover administrative expenses in
connection with the issuance of the policy.
. Risk charge - A charge necessary to cover the risk we assumed that the
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Variable Sum Insured will be less than the guaranteed minimum death benefit.
This charge will vary by age of the insured person but averages approximately
3% of the basic annual premium.
. Deduction for dividends - A deduction for dividends to be paid or
-----------------------
credited in accordance with the dividend scale in effect on the issue date of
the policy. This deduction will vary by age of the insured person and
duration of the policy but is expected to average approximately 5-9% of the
basic annual premium.
Deductions from Account assets
. Insurance charge - A monthly charge for the cost of insurance. To
----------------
determine the charge, we multiply the amount of insurance for which we are at
risk by a cost of insurance rate. The rate is derived from an actuarial
table. The table in your policy will show the maximum cost of insurance
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rates. The cost of insurance rates will never be more than those based on the
1980 Commissioners Standard Ordinary Mortality Tables. Cost of insurance
rates generally increase each year that you own your policy, as the insured
person's attained age increases. (The insured person's "attained age" on any
date is his or her age on the birthday nearest that date.)
. M &E charge - A daily charge for mortality and expense risks we assume.
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This charge is deducted from the variable investment options. The current
charge is at an effective annual rate of .60% of the value of the assets in
each variable investment option. We guarantee that this charge will never
exceed an effective annual rate of .50%.
WHAT CHARGES WILL THE TRUST DEDUCT FROM MY INVESTMENT IN THE POLICY?
The Trust must pay investment management fees and other operating expenses.
These fees and expenses are different for each fund of the Trust and reduce the
investment return of each fund. Therefore, they also indirectly reduce the
return you will earn on any variable investment options you select. The figures
in the following chart are expressed as percentages of each fund's average daily
net assets for 1998 (rounded to two decimal places). The percentages reflect the
investment management fees that were payable for1998 and the 1998 other
operating expenses that would have been allocated to the funds under the
allocation rules currently in effect.
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Total Fund
Investment Other Operating Other Operating Expenses
Fund Name Management Fee Operating Expenses Expenses Absent Reimbursement*
- --------- -------------- ------------------ ---------- --------------------------
<S> <C> <C> <C> <C>
Managed . . . . . . . . . . 0.32% 0.05% 0.37% 0.05%
Growth & Income . . . . . . 0.25% 0.05% 0.30% 0.05%
Large Cap Growth. . . . . . 0.37% 0.05% 0.42% 0.05%
Real Estate Equity. . . . . 0.60% 0.05% 0.65% 0.05%
International Equity Index 0.17% 0.10% 0.27% 0.23%
Sovereign Bond. . . . . . . 0.25% 0.05% 0.30% 0.05%
Money Market. . . . . . . . 0.25% 0.05% 0.30% 0.05%
</TABLE>
* John Hancock reimburses a fund when the fund's other operating expenses exceed
0.10% of the fund's average daily net assets.
WHAT OTHER CHARGES COULD JOHN HANCOCK IMPOSE IN THE FUTURE?
We currently make no charge for our Federal income taxes, but if we incur, or
expect to incur, income taxes attributable to any subaccount of the Account or
this class of policies in future years, we reserve the right to make such a
charge. Any such charge would reduce what you earn on any affected investment
options. However, we expect that no such charge will be necessary.
Under current laws, the state and local taxes (in addition to premium taxes)
we incur are not significant. If there is a material change in applicable state
or local tax laws, we may make charges for such taxes.
HOW CAN I CHANGE MY POLICY'S INVESTMENT ALLOCATIONS?
Future premium payments
At any time, you may change the investment options in which future premium
payments will be invested. You make the original allocation in the application
for the policy. The percentages you select must be in whole numbers of not less
than 10% for any option and must equal 100% in total.
Transfers of existing cash value
You may also transfer your existing cash value from one investment option to
another. To do so, you must tell us how much to transfer, either as a whole
number percentage or as a specific dollar amount.You may not make more than six
transfers in each policy year.
Limitation on number of investment options
Whether through the allocation of premium or through the transfer of existing
cash value, you can never be invested in more than five investment options at
any one time.
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HOW CAN I ACCESS MY INVESTMENT IN THE POLICY?
Full surrender
You may surrender your policy in full at any time for its "surrender value."
You must return your policy when you request a full surrender. The surrender
value will be the policy cash value plus any dividends and interest unpaid or
unapplied, and the cash value of any insurance purchased under any dividend
option with an adjustment to reflect the difference between the gross premium
and the net premium for the period beyond the date of surrender, less any
indebtedness.
Partial Surrender
A policy may be partially surrendered in accordance with our rules. The policy
after the partial surrender must have an Initial Sum Insured at least as great
as the minimum issue size for that type of policy. The premium and the
guaranteed minimum death benefit for the policy will be based on the new Initial
Sum Insured.
Policy loans
You may borrow from your policy at any time after it has been in effect for 1
year by completing a form satisfactory to us or, if the telephone transaction
authorization form has been completed, by telephone. The maximum amount you can
borrow is what we call your "Loan Value." The Loan Value will be 90% of the
total of the policy cash value (assuming no dividends) and any cash value under
the variable paid-up insurance dividend option, plus any cash value under the
fixed paid up insurance dividend option. Interest accrues and is compounded
daily at an effective annual rate equal to the then applicable Variable Loan
Interest Rate. However, if you elect the Fixed Loan Interest Rate, interest
accrues and is compounded daily at an effective annual rate of 8%.
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 $100. You may repay all or a portion of any indebtedness
while the insured person is living and premiums are being duly paid. Any loan is
charged against the variable investment options in proportion to the policy cash
value allocated to the variable investment options and, upon repayment, the
repayment is allocated to the variable investment options in proportion to the
outstanding indebtedness in each variable investment option at such time.
We determine the Variable Loan Interest Rate annually. The Fixed Loan Interest
Rate is 8% for the life of the policy. At the time of issue, you can elect which
loan interest rate will apply to any policy loan. If permitted by the law of the
state in which the policy is issued, you may change a prior choice of loan
interest rate. If at the time of such request there is outstanding indebtedness,
the change will generally become effective on the next policy anniversary.
The Variable Loan Interest Rate determined annually for a policy will apply to
all indebtedness outstanding during the policy year following the date of
determination. The rate will not exceed the higher of5 1/2% or the Published
Monthly Average (as defined below) for the calendar month which is two months
prior to the month in which the date of determination occurs. The Published
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Monthly Average means Moody's Corporate Bond Yield Average as published by
Moody's Investors Service, Inc. or any successor thereto.
The amount of the loan deducted from the investment options is placed in a
special loan account. This special loan account will earn interest at an
effective annual rate that is not more than 2% below the interest rate we are
then charging on the loan (assuming no taxes).
HOW MUCH WILL JOHN HANCOCK PAY WHEN THE INSURED PERSON DIES?
In your application for the policy, you will tell us how much life insurance
coverage you want on the life of the insured person. This is called the "Sum
Insured."
When the insured person dies, we will pay the death benefit minus any
indebtedness. The death benefit will be an amount equal to the greater of the
guaranteed minimum death benefit and the Variable Sum Insured on the date of
death of the insured person. The Variable Sum Insured is an amount equal to the
Initial Sum Insured at issue and thereafter varies, as discussed below.
Guaranteed minimum death benefit
The guaranteed minimum death benefit is equal to the Initial Sum Insured on
the date of issue of the policy. We guarantees that, regardless of what your
variable investment options earn, the death benefit will never be less than the
guaranteed minimum death benefit.
Variable Sum Insured
After the first policy month, the Variable Sum Insured is determined once each
policy month on the Monthly Date. (The Monthly Date is the first day of a policy
month which day immediately follows a business day.) The Variable Sum Insured
remains level during the policy month following the determination.
Changes in the Variable Sum Insured for each policy month are computed by a
formula, filed with the insurance supervisory officials of the jurisdiction in
which the policy has been delivered or issued for delivery. Under the formula
the difference between the applicable Account Net Investment Rate (ANIR) for
each business day and the policy's assumed annual rate of4 1/2% is translated,
on an actuarial basis, into a change in the Variable Sum Insured.
The Variable Sum Insured would increase on the next Monthly Date only if the
applicable ANIR for the last policy month were sufficiently greater than a
monthly rate equivalent to an annual rate of4 1/2% to result in such an
increase. If the ANIR was equivalent to an annual rate of less than4 1/2%, the
Variable Sum Insured would be reduced. The percentage change in the Variable Sum
Insured is not the same as the Account Net Investment Rate, however.
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CAN I CANCEL MY POLICY AFTER IT'S ISSUED?
You have the right to cancel your policy within the latest of the following
periods:
. 10 days after you receive it (this period may be longer in some
states);
. 10 days after mailing by John Hancock of the Notice of Withdrawal
Right; or
. 45 days after the date Part A of the application has been completed.
This is often referred to as the "free look" period. To cancel your policy,
simply deliver or mail the policy to John Hancock at one of the addresses shown
on page 1, or to the John Hancock representative who delivered the policy to
you.
You will receive a refund of any premiums you've paid. The date of
cancellation will be the date of such mailing or delivery.
CAN I CHOOSE THE FORM IN WHICH JOHN HANCOCK PAYS OUT POLICY PROCEEDS?
Choosing a payment option
You may choose to receive proceeds from the policy as a single sum. This
includes proceeds that become payable because of death or full surrender.
Alternatively, you can elect to have proceeds of $1,000 or more applied to any
of a number of other payment options, including the following:
. Option 1 - Proceeds left with us to accumulate with interest
. Option 2A - Equal monthly payments of a specified amount until all
proceeds are paid out
. Option 2B - Equal monthly payments for a specified period of time
. Option 3 - Equal monthly payments for life, but with payments
guaranteed for a specific number of years
. Option 4 - Equal monthly payments for life with no refund
. Option 5 - Equal monthly payments for life with a refund if all of
the proceeds haven't been paid out
You cannot choose an option if the monthly payments under the option would be
less than $50. We will issue a supplementary agreement when the proceeds are
applied to any alternative payment option. That agreement will spell out the
terms of the option in full. We will credit interest on each of the above
options. For Options 1 and 2A, the interest will be at least an effective annual
rate of 3 1/2%.
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Changing a payment option
You can change the payment option at any time before the proceeds are payable.
If you haven't made a choice, the payee of the proceeds has a prescribed period
in which he or she can make that choice.
Tax impact
There may be tax consequences to you or your beneficiary depending upon which
payment option is chosen. You should consult with a qualified tax adviser before
making that choice.
HOW WILL MY POLICY BE TREATED FOR INCOME TAX PURPOSES?
Generally, death benefits paid under policies such as yours are not subject to
income tax. Earnings on your cash value are not subject to income tax as long as
we don't pay them out to you. If we do pay out any amount of your cash value
upon surrender or partial withdrawal, all or part of that distribution should
generally be treated as a return of the premiums you've paid and should not be
subject to income tax. Amounts you borrow are generally not taxable to you.
For further information about the tax consequences of owning a policy, please
read "Tax considerations" beginning of page 31.
HOW DO I COMMUNICATE WITH JOHN HANCOCK?
General Rules
You should mail or express all checks and money orders for premium payments
and loan repayments to the John Hancock Life Servicing Office at the appropriate
address shown on page 1.
Certain requests must be made in writing and be signed and dated by you. They
include the following:
. loans, surrenders or partial surrenders
. transfers of cash value among investment options
. change of allocation among investment options for new premium
payments
. change of beneficiary
. election of payment option for policy proceeds
. tax withholding elections
. election of telephone transaction privilege
14
<PAGE>
You should mail or express these requests to the John Hancock Life Servicing
Office at the appropriate address shown on page 1. You should also send notice
of the insured person's death and related documentation to the John Hancock Life
Servicing Office. We don't consider that we've "received" any communication
until such time as it has arrived at the proper place and in the proper and
complete form.
We have special forms that should be used for a number of the requests
mentioned above. You can obtain these forms from the John Hancock Life Servicing
Office or your John Hancock representative. Each communication to us must
include your name, your policy number and the name of the insured person. We
cannot process any request that doesn't include this required information. Any
communication that arrives after the close of our business day, or on a day that
is not a business day, will be considered "received" by us on the next following
business day. Our business day currently closes at 4:00 p.m. Eastern Standard
Time, but special circumstances (such as suspension of trading on a major
exchange) may dictate an earlier closing time.
Telephone Transactions
If you complete a special authorization form, you can request loans, transfers
among investment options and changes of allocation among investment options
simply by telephoning us at 1-800-732-5543 or by faxing us at 1-617-886-3048.
Any fax request should include your name, daytime telephone number, policy
number and, in the case of transfers and changes of allocation, the names of the
investment options involved. We will honor telephone instructions from anyone
who provides the correct identifying information, so there is a risk of loss to
you if this service is used by an unauthorized person. However, you will receive
written confirmation of all telephone transactions. There is also a risk that
you will be unable to place your request due to equipment malfunction or heavy
phone line usage. If this occurs, you should submit your request in writing.
The policies are not designed for professional market timing organizations or
other entities that use programmed and frequent transfers among investment
options. For reasons such as that, we reserve the right to change our telephone
transaction policies or procedures at any time. We also reserve the right to
suspend or terminate the privilege altogether.
15
<PAGE>
ILLUSTRATION OF DEATH BENEFITS, CASH VALUES, SURRENDER VALUES AND ACCUMULATED
PREMIUMS
The following tables illustrate the changes in death benefit, cash value and
surrender value of each of the three types of the policy under certain
hypothetical circumstances that we assume solely for this purpose. Each table
separately illustrates the operation of a policy for a specified issue age and
Initial Sum Insured. Each table illustrates the operation of a policy assuming
dividends WHICH ARE NOT GUARANTEED are used to purchase additional variable
paid-up death benefits. The amounts shown are for the end of each policy year
and assume that all of the cash value is invested in funds that achieve
investment returns at constant annual rates of 0%, 6% and 12% before any fees or
expenses. (Investment return reflects investment income and all realized and
unrealized capital gains and losses.) The tables assume annual premiums for a
standard risk that are paid at the beginning of each policy year.
With respect to fees and expenses deducted from Trust assets, the amounts
shown in all tables reflect (1) investment management fees equivalent to an
effective annual rate of .59%, and (2) an assumed average asset charge for all
other Trust operating expenses equivalent to an effective annual rate of .07%.
These rates are the arithmetic average for all funds of the Trust. In other
words, they are based on the hypothetical assumption that policy cash values are
allocated equally among the variable investment options. The actual rates
associated with any policy will vary depending upon the actual allocation of
policy values among the investment options.
The second column of each table shows the amount you would have at the end of
each policy year if an amount equal to the assumed premiums were invested to
earn interest, after taxes, at 5% compounded annually. This is not a policy
value. It is included for comparison purposes only.
The death benefits (and resulting cash values) shown for additional variable
paid-up death benefits purchased with dividends paid under a policy are
illustrative of those which would be paid if investment returns of 0%, 6% and
12% are realized, if our mortality and expense experience in the future is as
currently experienced and if our dividend scale remains unchanged. However, as
experience has clearly shown, conditions cannot be expected to continue
unchanged, and accordingly dividend scales must be expected to change from time
to time. MOREOVER, THERE IS NO GUARANTEE AS TO THE AMOUNT OF DIVIDENDS, IF ANY,
THAT WILL BE PAID UNDER A POLICY. Although the tables are based on the
assumption that dividends will be used to purchase additional variable paid-up
death benefits, other dividend options are available.
Because your circumstances will no doubt differ from those in the
illustrations that follow, values under your policy will differ, in most cases
substantially. Upon request, we will furnish you with a comparable illustration
reflecting your proposed insured person's issue age, sex and underwriting risk
classification, and the Initial Sum Insured requested.
16
<PAGE>
LAN: VARIABLE WHOLE LIFE 100
AGE 25 YEARS MALE--NON-SMOKER
INITIAL SUM INSURED (GUARANTEED MINIMUM DEATH BENEFIT) $135,135
ANNUAL PREMIUM $1,250.00* (PRMS ACCUM MEANS PREMIUMS ACCUMULATED)
<TABLE>
<CAPTION>
Dividends Purchasing Variable Paid-Up Additions (Var Pu Adds) Dividends are Not Guaranteed
0% 6% 12%
------------------------ ------------------------ -------------------------
Death Benefit Death Benefit Death Benefit
Prms Accum ------------------------ ------------------------ -------------------------
at Base Var Pu Base Var Pu Base Var Pu
Year 5%/Annum Policy Adds Total Policy Adds Total Policy Adds Total
- ------- ---------- ------- ------ ------- ------- ------ ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,313 135,135 0 135,135 135,550 0 135,550 142,561 0 142,561
2 2,691 135,135 208 135,343 135,588 208 135,796 143,283 208 143,491
3 4,138 135,135 400 135,535 135,786 410 136,196 147,033 421 147,454
4 5,657 135,135 575 135,710 135,993 608 136,600 151,098 642 151,739
5 7,252 135,135 734 135,869 136,206 799 137,005 155,417 869 156,286
6 8,928 135,135 879 136,014 136,423 986 137,409 159,987 1,105 161,092
7 10,686 135,135 1,011 136,146 136,644 1,168 137,812 164,813 1,350 166,164
8 12,533 135,135 1,153 136,288 136,870 1,374 138,244 169,906 1,679 171,585
9 14,472 135,135 1,302 136,437 137,099 1,601 138,700 175,277 2,126 177,403
10 16,508 135,135 1,458 136,593 137,332 1,853 139,185 180,939 2,712 183,652
15 28,322 135,135 2,420 137,555 138,519 3,981 142,500 213,370 8,251 221,620
20 43,399 135,135 3,384 138,519 139,804 7,708 147,512 255,762 19,892 275,654
25 62,642 135,135 4,103 139,238 141,231 12,607 153,838 312,737 40,264 353,002
30 87,201 135,135 4,595 139,730 142,712 18,666 161,378 386,200 74,054 460,254
35 118,545 135,135 4,986 140,121 144,248 26,213 170,461 481,203 129,322 610,525
Age 65 158,550 135,135 5,342 140,477 145,835 35,315 181,150 604,241 217,588 821,829
</TABLE>
<TABLE>
<CAPTION>
0% 6% 12%
---------------------- ---------------------- -------------------------
Cash Value Cash Value Cash Value
Base Prem ---------------------- ---------------------- -------------------------
Accum at Base Var Pu Base Var Pu Base Var Pu
Year 5%/Annum Policy Adds Total Policy Adds Total Policy Adds Total
- ------- --------- ------ ------ ------ ------ ------ ------ ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,313 94 0 94 99 0 99 105 0 105
2 2,691 934 34 968 995 34 1,028 1,056 34 1,090
3 4,138 1,774 67 1,841 1,937 69 2,007 2,108 71 2,179
4 5,657 2,613 100 2,713 2,929 106 3,035 3,269 112 3,381
5 7,252 3,448 132 3,580 3,968 145 4,112 4,548 158 4,706
6 8,928 4,278 164 4,443 5,056 185 5,241 5,957 208 6,165
7 10,686 5,101 196 5,297 6,192 227 6,420 7,503 264 7,767
8 12,533 5,915 232 6,147 7,379 277 7,656 9,202 340 9,542
9 14,472 6,720 271 6,991 8,614 335 8,949 11,063 447 11,510
10 16,508 7,513 315 7,828 9,899 402 10,301 13,102 591 13,693
15 28,322 11,495 627 12,123 17,345 1,036 18,381 26,840 2,156 28,996
20 43,399 15,037 1,045 16,082 26,110 2,390 28,499 47,986 6,193 54,178
25 62,642 17,723 1,498 19,221 35,800 4,623 40,423 79,639 14,826 94,465
30 87,201 19,972 1,967 21,938 46,822 8,025 54,847 127,290 31,977 159,267
35 118,545 21,708 2,473 24,181 58,936 13,060 71,996 197,510 64,715 262,225
Age 65 158,550 22,958 3,032 25,990 71,982 20,142 92,124 299,610 124,650 424,260
</TABLE>
- ---------
* Corresponding to modal premiums of: Semi-annual $638.73, Quarterly $325.90,
Special Monthly $108.30
DIVIDENDS ILLUSTRATED ARE BASED ON CURRENT SCALES AND EXPERIENCE AND ARE NOT
GUARANTEED. IT IS EMPHASIZED THAT HYPOTHETICAL INVESTMENT RESULTS ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED REPRESENTATIVE 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 AN OWNER. THE DEATH BENEFIT AND CASH 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 NEVERTHELESS 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.
17
<PAGE>
PLAN: VARIABLE WHOLE LIFE 100
AGE 40 YEARS MALE--NON-SMOKER INITIAL SUM INSURED
(GUARANTEED MINIMUM DEATH BENEFIT) $113,968
ANNUAL PREMIUM $2,000.00* (PRMS ACCUM MEANS PREMIUMS ACCUMULATED)
<TABLE>
<CAPTION>
Dividends Purchasing Variable Paid-Up Additions (Var Pu Adds) Dividends are Not Guaranteed
0% 6% 12%
------------------------ ------------------------ -------------------------
Death Benefit Death Benefit Death Benefit
Prms Accum ------------------------ ------------------------ -------------------------
at Base Var Pu Base Var Pu Base Var Pu
Year 5%/Annum Policy Adds Total Policy Adds Total Policy Adds Total
- ------- ---------- ------- ------ ------- ------- ------ ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,100 113,968 0 113,968 114,318 0 114,318 120,231 0 120,231
2 4,305 113,968 102 114,070 114,417 102 114,519 122,111 102 122,213
3 6,620 113,968 196 114,164 114,581 202 114,783 125,257 262 125,519
4 9,051 113,968 282 114,250 114,754 342 115,096 128,695 511 129,206
5 11,604 113,968 362 114,330 114,931 536 115,467 132,341 854 133,196
6 14,284 113,968 459 114,427 115,112 780 115,892 136,184 1,296 137,479
7 17,098 113,968 577 114,545 115,295 1,072 116,367 140,221 1,840 142,061
8 20,053 113,968 735 114,703 115,480 1,437 116,917 144,460 2,529 146,989
9 23,156 113,968 923 114,891 115,667 1,867 117,535 148,909 3,365 152,273
10 26,413 113,968 1,139 115,107 115,857 2,366 118,224 153,577 4,367 157,944
15 45,315 113,968 2,421 116,389 116,823 5,812 122,635 180,222 12,462 192,684
20 69,438 113,968 3,776 117,744 117,844 10,765 128,609 214,207 27,661 241,868
Age 65 100,226 113,968 4,895 118,863 118,945 16,990 135,935 258,552 53,375 311,927
30 139,521 113,968 5,836 119,804 120,069 24,212 144,791 314,489 95,727 410,216
35 189,672 113,968 6,651 120,619 121,212 34,125 155,337 385,101 163,843 548,944
</TABLE>
<TABLE>
<CAPTION>
0% 6% 12%
---------------------- ---------------------- -------------------------
Cash Value Cash Value Cash Value
Base Prem ---------------------- ---------------------- -------------------------
Accum at Base Var Pu Base Var Pu Base Var Pu
Year 5%/Annum Policy Adds Total Policy Adds Total Policy Adds Total
- ------- --------- ------ ------ ------ ------ ------ ------ ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,100 591 0 591 626 0 626 662 0 662
2 4,305 1,986 28 2,014 2,137 28 2,165 2,291 28 2,319
3 6,620 3,350 57 3,407 3,694 58 3,752 4,056 76 4,132
4 9,051 4,682 84 4,767 5,296 102 5,399 5,967 154 6,121
5 11,604 5,984 112 6,096 6,947 166 7,113 8,036 266 8,302
6 14,284 7,254 147 7,401 8,644 250 8,894 10,273 417 10,690
7 17,098 8,494 191 8,685 10,391 356 10,746 12,695 613 13,308
8 20,053 9,705 251 9,956 12,187 493 12,680 15,315 871 16,186
9 23,156 10,886 326 11,212 14,035 662 14,697 18,151 1,198 19,350
10 26,413 12,037 416 12,453 15,934 868 16,801 21,218 1,607 22,826
15 45,315 17,504 1,037 18,541 26,385 2,499 28,884 40,891 5,380 46,270
20 69,438 22,070 1,878 23,948 37,910 5,381 43,291 69,226 13,883 83,110
Age 65 100,226 25,346 2,780 28,126 49,861 9,691 59,552 108,880 30,573 139,453
30 139,521 27,731 3,736 31,467 62,133 15,892 78,025 163,488 61,828 225,316
35 189,672 29,282 4,725 34,007 74,287 24,354 98,641 237,100 117,438 354,538
</TABLE>
- ---------
* Corresponding to modal premiums of: Semi-annual $1,021.60, Quarterly $520.90,
Special Monthly $172.80
DIVIDENDS ILLUSTRATED ARE BASED ON CURRENT SCALES AND EXPERIENCE AND ARE NOT
GUARANTEED. IT IS EMPHASIZED THAT HYPOTHETICAL INVESTMENT RESULTS ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED REPRESENTATIVE 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 AN OWNER. THE DEATH BENEFIT AND CASH 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 NEVERTHELESS 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.
18
<PAGE>
PLAN: VARIABLE WHOLE LIFE P50
AGE 25 YEARS MALE--NON-SMOKER
INITIAL SUM INSURED (GUARANTEED MINIMUM DEATH BENEFIT) $65,723
ANNUAL PREMIUM $700.00* (PRMS ACCUM MEANS PREMIUMS ACCUMULATED)
<TABLE>
<CAPTION>
Dividends Purchasing Variable Paid-Up Additions (Var Pu Adds) Dividends are Not Qualified
0% 6% 12%
---------------------- ---------------------- ------------------------
Death Benefit Death Benefit Death Benefit
Prms Accum ---------------------- ---------------------- ------------------------
at Base Var Pu Base Var Pu Base Var Pu
Year 5%/Annum Policy Adds Total Policy Adds Total Policy Adds Total
- ------- ---------- ------ ------ ------ ------ ------ ------ ------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 735 65,723 0 65,723 65,925 0 65,925 69,335 0 69,335
2 1,507 65,723 0 65,723 65,930 0 65,930 69,442 0 69,442
3 2,317 65,723 175 65,898 66,029 192 66,221 71,304 211 71,515
4 3,168 65,723 352 66,075 66,130 402 66,533 73,289 456 73,745
5 4,061 65,723 527 66,250 66,234 625 66,859 75,389 735 76,124
6 4,999 65,723 702 66,425 66,340 862 67,202 77,607 1,052 78,659
7 5,984 65,723 876 66,599 66,448 1,114 67,562 79,948 1,407 81,356
8 7,019 65,723 1,056 66,779 66,557 1,388 67,945 82,417 1,816 84,234
9 8,105 65,723 1,240 66,963 66,669 1,684 68,352 85,021 2,282 87,302
10 9,245 65,723 1,428 67,151 66,782 2,002 68,784 87,765 2,810 90,575
15 15,860 65,723 2,434 68,157 67,358 4,007 71,365 103,443 6,732 110,175
20 24,303 65,723 3,406 69,129 67,982 6,620 74,601 123,953 13,481 137,433
25 35,079 65,723 4,135 69,858 68,677 9,555 78,232 151,610 23,919 175,529
30 48,833 65,723 4,571 70,294 69,399 12,600 81,999 187,256 39,210 226,466
35 66,385 65,723 4,740 70,463 70,147 15,688 85,835 233,343 61,314 294,657
Age 65 88,788 65,723 4,692 70,415 70,919 18,763 89,682 293,022 92,895 385,917
</TABLE>
<TABLE>
<CAPTION>
0% 6% 12%
---------------------- ---------------------- ------------------------
Cash Value Cash Value Cash Value
Base Prem ---------------------- ---------------------- ------------------------
Accum at Base Var Pu Base Var Pu Base Var Pu
Year 5%/Annum Policy Adds Total Policy Adds Total Policy Adds Total
- ------- --------- ------ ------ ------ ------ ------ ------ ------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 735 13 0 13 14 0 14 15 0 15
2 1,507 423 0 423 450 0 450 476 0 476
3 2,317 834 29 863 908 32 941 985 35 1,021
4 3,168 1,244 61 1,305 1,390 70 1,461 1,548 80 1,628
5 4,061 1,652 95 1,747 1,896 113 2,009 2,168 133 2,301
6 4,999 2,057 131 2,188 2,425 162 2,587 2,850 198 3,048
7 5,984 2,459 170 2,629 2,978 217 3,195 3,600 275 3,874
8 7,019 2,857 212 3,069 3,555 280 3,835 4,423 368 4,790
9 8,105 3,250 258 3,508 4,156 352 4,508 5,324 479 5,804
10 9,245 3,637 309 3,946 4,781 435 5,216 6,312 612 6,925
15 15,860 5,592 631 6,223 8,416 1,043 9,459 12,984 1,759 14,743
20 24,303 7,332 1,051 8,383 12,696 2,052 14,749 23,256 4,197 27,453
25 35,079 8,636 1,509 10,145 17,409 3,503 20,912 38,608 8,808 47,416
30 48,833 9,727 1,956 11,683 22,769 5,417 28,186 61,719 16,933 78,652
35 66,385 10,569 2,351 12,920 28,660 7,817 36,477 95,776 30,686 126,461
Age 65 88,788 11,176 2,664 13,839 35,004 10,702 45,706 145,295 53,222 198,517
</TABLE>
- ---------
* Corresponding to modal premiums of: Semi-annual $357.95, Quarterly $182.90,
Special Monthly $61.00
DIVIDENDS ILLUSTRATED ARE BASED ON CURRENT SCALES AND EXPERIENCE AND ARE NOT
GUARANTEED. IT IS EMPHASIZED THAT HYPOTHETICAL INVESTMENT RESULTS ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED REPRESENTATIVE 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 AN OWNER. THE DEATH BENEFIT AND CASH 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 NEVERTHELESS 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.
19
<PAGE>
PLAN: VARIABLE WHOLE LIFE P50
AGE 40 YEARS MALE--NON-SMOKER
INITIAL SUM INSURED (GUARANTEED MINIMUM DEATH BENEFIT) $62,945
ANNUAL PREMIUM $1,200.00* (PRMS ACCUM MEANS PREMIUMS ACCUMULATED)
<TABLE>
<CAPTION>
Dividends Purchasing Variable Paid-Up Additions (Var Pu Adds) Dividends are Not Guaranteed
0% 6% 12%
---------------------- ---------------------- ------------------------
Death Benefit Death Benefit Death Benefit
Prms Accum ---------------------- ---------------------- ------------------------
at Base Var Pu Base Var Pu Base Var Pu
Year 5%/Annum Policy Adds Total Policy Adds Total Policy Adds Total
- ------- ---------- ------ ------ ------ ------ ------ ------ ------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,260 62,945 0 62,945 63,138 0 63,138 66,404 0 66,404
2 2,583 62,945 0 62,945 63,183 0 63,183 67,251 0 67,251
3 3,972 62,945 98 63,043 63,273 119 63,392 68,979 140 69,119
4 5,431 62,945 212 63,157 63,369 264 63,633 70,870 322 71,192
5 6,962 62,945 338 63,283 63,467 435 63,901 72,875 547 73,422
6 8,570 62,945 472 63,417 63,566 627 64,193 74,988 814 75,802
7 10,259 62,945 605 63,550 63,667 829 64,496 77,207 1,114 78,321
8 12,032 62,945 752 63,697 63,769 1,060 64,830 79,536 1,471 81,007
9 13,893 62,945 903 63,848 63,873 1,311 65,184 81,981 1,879 83,860
10 15,848 62,945 1,061 64,006 63,977 1,584 65,562 84,546 2,345 86,890
15 27,189 62,945 1,911 64,856 64,509 3,297 67,806 99,150 5,778 104,928
20 41,663 62,945 2,691 65,636 65,071 5,414 70,486 117,795 11,414 129,209
Age 65 60,136 62,945 3,279 66,224 65,682 7,724 73,406 142,241 19,839 162,080
30 83,713 62,945 3,713 66,658 66,304 10,211 76,516 173,058 32,226 205,284
35 113,804 62,945 3,971 66,916 66,936 12,826 79,673 211,949 50,237 262,186
</TABLE>
<TABLE>
<CAPTION>
0% 6% 12%
---------------------- ---------------------- ------------------------
Cash Value Cash Value Cash Value
Prms Accum ---------------------- ---------------------- ------------------------
at Base Var Pu Base Var Pu Base Var Pu
Year 5%/Annum Policy Adds Total Policy Adds Total Policy Adds Total
- ------- ---------- ------ ------ ------ ------ ------ ------ ------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,260 251 0 251 266 0 266 281 0 281
2 2,583 1,026 0 1,026 1,101 0 1,101 1,177 0 1,177
3 3,972 1,784 28 1,813 1,962 34 1,996 2,149 41 2,189
4 5,431 2,525 63 2,588 2,848 79 2,927 3,200 97 3,296
5 6,962 3,248 104 3,353 3,760 135 3,895 4,338 170 4,508
6 8,570 3,954 151 4,105 4,699 201 4,900 5,568 262 5,830
7 10,259 4,643 200 4,843 5,664 275 5,939 6,900 371 7,271
8 12,032 5,316 257 5,573 6,657 364 7,021 8,341 507 8,848
9 13,893 5,972 319 6,292 7,679 465 8,144 9,901 669 10,570
10 15,848 6,612 388 7,000 8,729 581 9,310 11,588 863 12,451
15 27,189 9,670 818 10,488 14,530 1,418 15,947 22,435 2,494 24,929
20 41,663 12,227 1,335 13,562 20,933 2,698 23,631 38,068 5,711 43,780
Age 65 60,136 14,029 1,862 15,892 27,533 4,405 31,938 59,900 11,365 71,265
30 83,713 15,340 2,377 17,717 34,311 6,567 40,878 89,965 20,816 110,781
35 113,804 16,191 2,821 19,013 41,023 9,154 50,177 130,493 36,012 166,505
</TABLE>
- ---------
* Corresponding to modal premiums of Semi-annual $613.20, Quarterly $312.90,
Special Monthly $104.00.
DIVIDENDS ILLUSTRATED ARE BASED ON CURRENT SCALES AND EXPERIENCE AND ARE NOT
GUARANTEED. IT IS EMPHASIZED THAT HYPOTHETICAL INVESTMENT RESULTS ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED REPRESENTATIVE 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 AN OWNER. THE DEATH BENEFIT AND CASH 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 NEVERTHELESS 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.
20
<PAGE>
PLAN: VARIABLE WHOLE LIFE P50
AGE 25 YEARS MALE--SMOKER
INITIAL SUM INSURED (GUARANTEED MINIMUM DEATH BENEFIT) $61,670
ANNUAL PREMIUM $700.00* (PRMS ACCUM MEANS PREMIUMS ACCUMULATED)
<TABLE>
<CAPTION>
Dividends Purchasing Variable Paid-Up Additions (Var Pu Adds) Dividends are Not Guaranteed
0% 6% 12%
---------------------- ---------------------- ------------------------
Death Benefit Death Benefit Death Benefit
Prms Accum ---------------------- ---------------------- ------------------------
at Base Var Pu Base Var Pu Base Var Pu
Year 5%/Annum Policy Adds Total Policy Adds Total Policy Adds Total
- ------- ---------- ------ ------ ------ ------ ------ ------ ------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 735 61,670 0 61,670 61,859 0 61,859 65,059 0 65,059
2 1,507 61,670 0 61,670 61,865 0 61,865 65,160 0 65,160
3 2,317 61,670 164 61,834 61,957 181 62,138 66,907 198 67,105
4 3,168 61,670 331 62,001 62,052 378 62,430 68,769 428 69,198
5 4,061 61,670 495 62,165 62,150 586 62,736 70,740 690 71,430
6 4,999 61,670 659 62,329 62,249 809 63,058 72,821 987 73,808
7 5,984 61.670 822 62,492 62,350 1,045 63,395 75,018 1,321 76,339
8 7,019 61,670 991 62,661 62,453 1,303 63,755 77,335 1,705 79,039
9 8,105 61,670 1,163 62,833 62,557 1,580 64,137 79,778 2,141 81,919
10 9,245 61,670 1,339 63,009 62,664 1,879 64,543 82,352 2,637 84,989
15 15,860 61,670 2,283 63,953 63,204 3,760 66,964 97,064 6,317 103,381
20 24,303 61.670 3,195 64,865 63,789 6,211 70,001 116,309 12,650 128,959
25 35,079 61,670 3,880 65,550 64,442 8,965 73,408 142,261 22,445 164,705
30 48,833 61,670 4,289 65,959 65,119 11,823 76,942 175,708 36,793 212,501
35 66,385 61,670 4,448 66,118 65,821 14,721 80,542 218,954 57,534 276,488
Age 65 88,788 61,670 4,402 66,072 66,546 17,606 84,152 274,952 87,168 362,121
</TABLE>
<TABLE>
<CAPTION>
0% 6% 12%
---------------------- ---------------------- ------------------------
Cash Value Cash Value Cash Value
Base Prem ---------------------- ---------------------- ------------------------
Accum at Base Var Pu Base Var Pu Base Var Pu
Year 5%/Annum Policy Adds Total Policy Adds Total Policy Adds Total
- ------- --------- ------ ------ ------ ------ ------ ------ ------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 735 12 0 12 13 0 13 14 0 14
2 1,507 397 0 397 422 0 422 446 0 446
3 2,317 782 28 810 852 30 883 924 33 958
4 3,168 1,167 58 1,224 1,305 66 1,370 1,452 75 1,527
5 4,061 1,550 89 1,639 1,779 106 1,885 2,034 125 2,159
6 4,999 1,930 123 2,053 2,276 152 2,428 2,675 186 2,860
7 5,984 2,307 159 2,466 2,794 203 2,998 3,378 258 3,635
8 7,019 2,681 199 2,880 3,336 263 3,599 4,150 345 4,495
9 8,105 3,049 242 3,292 3,900 331 4,230 4,996 450 5,446
10 9,245 3,413 290 3,702 4,486 408 4,894 5,923 575 6,498
15 15,860 5,247 592 5,839 7,897 979 8,876 12,183 1,651 13,834
20 24,303 6,880 986 7,866 11,913 1,926 13,839 21,822 3,939 25,760
25 35,079 8,103 1,416 9,519 16,335 3,287 19,622 36,227 8,265 44,492
30 48,833 9,127 1,836 10,963 21,365 5,083 26,448 57,913 15,889 73,802
35 66,385 9,918 2,206 12,123 26,893 7,334 34,227 89,870 28,794 118,663
Age 65 88,788 10,487 2,499 12,986 32,846 10,042 42,888 136,335 49,941 186,276
</TABLE>
- ---------
* Corresponding to modal premiums of: Semi-annual $357.95, Quarterly $182.90.
Special Monthly $61.00.
DIVIDENDS ILLUSTRATED ARE BASED ON CURRENT SCALES AND EXPERIENCE AND ARE NOT
GUARANTEED. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS SHOWN
ABOVE ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED REPRESENTATIVE 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 AN OWNER. THE DEATH BENEFIT AND CASH 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 NEVERTHELESS 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.
21
<PAGE>
PLAN: VARIABLE WHOLE LIFE P50
AGE 40 YEARS MALE--SMOKER
INITIAL SUM INSURED (GUARANTEED MINIMUM DEATH BENEFIT) $57,644
ANNUAL PREMIUM $1,200.00* (PRMS ACCUM MEANS PREMIUMS ACCUMULATED)
<TABLE>
<CAPTION>
Dividends Purchasing Variable Paid-Up Additions (Var Pu Adds) Dividends are Not Guaranteed
0% 6% 12%
---------------------- ---------------------- ------------------------
Death Benefit Death Benefit Death Benefit
Prms Accum ---------------------- ---------------------- ------------------------
at Base Var Pu Base Var Pu Base Var Pu
Year 5%/Annum Policy Adds Total Policy Adds Total Policy Adds Total
- ------- ---------- ------ ------ ------ ------ ------ ------ ------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,260 57,644 0 57,644 57,821 0 57,821 60,812 0 60,812
2 2,583 57,644 0 57,644 57,862 0 57,862 61,587 0 61,587
3 3,972 57,644 90 57,734 57,945 109 58,053 63,170 128 63,299
4 5,431 57,644 194 57,838 58,032 242 58,274 64,902 295 65,197
5 6,962 57,644 309 57,953 58,122 398 58,520 66,738 501 67,239
6 8,570 57,644 432 58,076 58,213 574 58,787 68,672 746 69,418
7 10,259 57,644 554 58,198 58,305 759 59,065 70,705 1,020 71,725
8 12,032 57,644 688 58,332 58,399 971 59,370 72,838 1,347 74,185
9 13,893 57,644 827 58,471 58,494 1,201 59,695 75,077 1,721 76,797
10 15,848 57,644 972 58,616 58,589 1,451 60,040 77,425 2,148 79,573
15 27,189 57,644 1,750 59,394 59,076 3,019 62,096 90,800 5,291 96,092
20 41,663 57,644 2,464 60,108 59,591 4,959 64,550 107,875 10,453 118,327
Age 65 60,136 57,644 3,003 60,647 60,151 7,073 67,224 130,262 18,169 148,430
30 83,712 57,644 3,400 61,044 60,720 9,351 70,072 158,484 29,512 187,996
35 113,803 57,644 3,637 61,281 61,299 11,746 73,045 194,100 46,007 240,106
</TABLE>
<TABLE>
<CAPTION>
0% 6% 12%
---------------------- ---------------------- ------------------------
Cash Value Cash Value Cash Value
Base Prem ---------------------- ---------------------- ------------------------
Accum at Base Var Pu Base Var Pu Base Var Pu
Year 5%/Annum Policy Adds Total Policy Adds Total Policy Adds Total
- ------- --------- ------ ------ ------ ------ ------ ------ ------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,260 230 0 230 244 0 244 258 0 258
2 2,583 940 0 940 1,008 0 1,008 1,078 0 1,078
3 3,972 1,634 26 1,660 1,797 31 1,828 1,968 37 2,005
4 5,431 2,312 58 2,370 2,608 72 2,681 2,930 88 3,019
5 6,962 2,975 96 3,070 3,444 123 3,567 3,972 156 4,128
6 8,570 3,621 138 3,759 4,303 184 4,487 5,099 240 5,339
7 10,259 4,252 183 4,435 5,187 252 5,439 6,319 340 6,659
8 12,032 4,868 235 5,103 6,097 333 6,430 7,639 464 8,103
9 13,893 5,469 292 5,762 7,032 426 7,458 9,067 613 9,680
10 15,848 6,055 355 6,410 7,994 532 8,526 10,612 790 11,402
15 27,189 8,856 749 9,605 13,306 1,298 14,604 20,545 2,284 22,830
20 41,663 11,197 1,222 12,420 19,170 2,471 21,641 34,862 5,230 40,093
Age 65 60,136 12,848 1,705 14,553 25,214 4,034 29,249 54,855 10,408 65,263
30 83,712 14,048 2,177 16,225 31,421 6,014 37,435 82,389 19,063 101,451
35 113,803 14,828 2,584 17,412 37,568 8,383 45,951 119,504 32,979 152,483
</TABLE>
- ---------
* Corresponding to modal premiums of: Semi-Annual $613.20, Quarterly $312.90,
Special Monthly $104.00
DIVIDENDS ILLUSTRATED ARE BASED ON CURRENT SCALES AND EXPERIENCE AND ARE NOT
GUARANTEED. IT IS EMPHASIZED THAT HYPOTHETICAL INVESTMENT RESULTS ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED REPRESENTATIVE 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 AN OWNER. THE DEATH BENEFIT AND CASH 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 NEVERTHELESS 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.
22
<PAGE>
PLAN: VARIABLE WHOLE LIFE
AGE 25 YEARS MALE--NON-SMOKER
INITIAL SUM INSURED (GUARANTEED MINIMUM DEATH BENEFIT) $28,930
ANNUAL PREMIUM $350.00* (PRMS ACCUM MEANS PREMIUMS ACCUMULATED)
<TABLE>
<CAPTION>
Dividends Purchasing Variable Paid-Up Additions (Var Pu Adds) Dividends are Not Guaranteed
0% 6% 12%
---------------------- ---------------------- ------------------------
Death Benefit Death Benefit Death Benefit
Prms Accum ---------------------- ---------------------- ------------------------
at Base Var Pu Base Var Pu Base Var Pu
Year 5%/Annum Policy Adds Total Policy Adds Total Policy Adds Total
- ------- ---------- ------ ------ ------ ------ ------ ------ ------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 368 28,930 0 28,930 29,019 0 29,019 30,520 0 30,520
2 753 28,930 0 28,930 29,021 0 29,021 30,567 0 30,567
3 1,159 28,930 26 28,956 29,065 26 29,090 31,387 33 31,419
4 1,584 28,930 49 28,979 29,109 61 29,171 32,260 81 32,341
5 2,031 28,930 79 29,009 29,155 106 29,261 33,185 143 33,328
6 2,500 28,930 114 29,044 29,202 160 29,361 34,161 222 34,383
7 2,992 28,930 152 29,082 29,249 222 29,471 35,192 316 35,508
8 3,509 28,930 199 29,129 29,297 296 29,593 36,279 432 36,711
9 4,052 28,930 251 29,181 29,346 382 29,729 37,424 573 37,997
10 4,622 28,930 310 29,240 29,396 482 29,878 38,632 739 39,371
15 7,930 28,930 1,001 29,931 29,650 1,533 31,183 45,534 2,474 48,008
20 12,152 28,930 1,741 30,671 29,924 3,006 32,931 54,562 5,636 60,198
25 17,540 28,930 2,208 31,138 30,230 4,526 34,756 66,736 10,369 77,105
30 24,416 28,930 2,440 31,370 30,548 6,022 36,570 82,426 17,198 99,625
35 33,193 28,930 2,513 31,443 30,877 7,507 38,384 102,713 27,021 129,734
Age 65 44,394 28,930 2,479 31,409 31,217 8,977 40,194 128,983 41,035 170,018
</TABLE>
<TABLE>
<CAPTION>
0% 6% 12%
--------------------- ---------------------- ----------------------
Cash Value Cash Value Cash Value
Base Prem --------------------- ---------------------- ----------------------
Accum at Base Var Pu Base Var Pu Base Var Pu
Year 5%/Annum Policy Adds Total Policy Adds Total Policy Adds Total
- ------- --------- ------ ------ ----- ------ ------ ------ ------ ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 368 6 0 6 6 0 6 7 0 7
2 753 186 0 186 198 0 198 209 0 209
3 1,159 367 4 371 400 4 404 434 5 439
4 1,584 547 9 556 612 11 623 681 14 695
5 2,031 727 14 741 835 19 854 954 26 980
6 2,500 905 21 927 1,068 30 1,098 1,255 42 1,296
7 2,992 1,082 30 1,112 1,311 43 1,354 1,585 62 1,646
8 3,509 1,257 40 1,297 1,565 60 1,625 1,947 88 2,034
9 4,052 1,430 52 1,483 1,829 80 1,909 2,344 120 2,464
10 4,622 1,601 67 1,668 2,105 105 2,209 2,779 161 2,940
15 7,930 2,462 260 2,721 3,705 399 4,104 5,715 646 6,362
20 12,152 3,227 538 3,765 5,589 932 6,521 10,237 1,755 11,991
25 17,540 3,801 806 4,607 7,663 1,659 9,322 16,994 3,818 20,813
30 24,416 4,282 1,044 5,326 10,022 2,589 12,612 27,167 7,427 34,595
35 33,193 4,652 1,247 5,899 12,616 3,740 16,356 42,159 13,523 55,682
Age 65 44,394 4,919 1,407 6,327 15,408 5,120 20,528 63,956 23,510 87,466
</TABLE>
- ---------
* Corresponding to modal premiums of: Semi-annual $179.28, Quarterly $91.90,
Special Monthly $30.90
DIVIDENDS ILLUSTRATED ARE BASED ON CURRENT SCALES AND EXPERIENCE AND ARE NOT
GUARANTEED. IT IS EMPHASIZED THAT HYPOTHETICAL INVESTMENT RESULTS ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED REPRESENTATIVE 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 AN OWNER. THE DEATH BENEFIT AND CASH 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 NEVERTHELESS 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.
23
<PAGE>
PLAN: VARIABLE WHOLE LIFE
AGE 40 YEARS MALE--NON-SMOKER
INITIAL SUM INSURED (GUARANTEED MINIMUM DEATH BENEFIT) $28,661
ANNUAL PREMIUM $600.00* (PRMS ACCUM MEANS PREMIUMS ACCUMULATED)
<TABLE>
<CAPTION>
Dividends Purchasing Variable Paid-Up Additions (Var Pu Adds) Dividends are Not Guaranteed
0% 6% 12%
---------------------- ---------------------- -----------------------
Death Benefit Death Benefit Death Benefit
Prms Accum ---------------------- ---------------------- -----------------------
at Base Var Pu Base Var Pu Base Var Pu
Year 5%/Annum Policy Adds Total Policy Adds Total Policy Adds Total
- ------- ---------- ------ ------ ------ ------ ------ ------ ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 630 28,661 0 28,661 28,749 0 28,749 30,236 0 30,236
2 1,291 28,661 0 28,661 28,752 0 28,752 30,284 0 30,284
3 1,986 28,661 15 28,676 28,795 17 28,812 31,101 26 31,127
4 2,715 28,661 35 28,696 28,839 50 28,889 31,965 72 32,037
5 3,481 28,661 64 28,725 28,884 94 28,978 32,873 136 33,009
6 4,285 28,661 102 28,763 28,929 152 29,082 33,825 221 34,046
7 5,129 28,661 142 28,803 28,975 217 29,192 34,823 320 35,144
8 6,016 28,661 190 28,851 29,021 296 29,317 35,870 445 36,315
9 6,947 28,661 245 28,906 29,068 386 29,455 36,968 592 37,559
10 7,924 28,661 305 28,966 29,116 489 29,604 38,119 765 38,884
15 13,594 28,661 1,041 29,702 29,355 1,584 30,939 44,623 2,551 47,174
20 20,831 28,661 1,800 30,461 29,610 3,043 32,652 52,948 5,621 58,569
Age 65 30,068 28,661 2,260 30,921 29,891 4,474 34,365 64,018 9,994 74,012
30 41,856 28,661 2,512 31,173 30,177 5,897 36,074 77,947 16,251 94,198
35 56,901 28,661 2,630 31,291 30,466 7,342 37,809 95,511 25,239 120,750
</TABLE>
<TABLE>
<CAPTION>
0% 6% 12%
--------------------- ---------------------- ----------------------
Cash Value Cash Value Cash Value
Base Prem --------------------- ---------------------- ----------------------
Accum at Base Var Pu Base Var Pu Base Var Pu
Year 5%/Annum Policy Adds Total Policy Adds Total Policy Adds Total
- ------- --------- ------ ------ ----- ------ ------ ------ ------ ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 630 12 0 12 12 0 12 13 0 13
2 1,291 371 0 371 394 0 394 417 0 417
3 1,986 722 4 726 787 5 792 854 8 861
4 2,715 1,065 11 1,076 1,191 15 1,206 1,327 22 1,348
5 3,481 1,401 20 1,421 1,608 29 1,637 1,839 42 1,881
6 4,285 1,728 32 1,761 2,037 49 2,085 2,392 71 2,463
7 5,129 2,048 47 2,095 2,477 72 2,549 2,991 107 3,098
8 6,016 2,360 65 2,425 2,931 102 3,032 3,639 153 3,792
9 6,947 2,664 87 2,751 3,397 137 3,534 4,341 211 4,551
10 7,924 2,961 112 3,073 3,877 179 4,056 5,099 282 5,380
15 13,594 4,406 446 4,851 6,558 681 7,239 10,014 1,101 11,115
20 20,831 5,618 893 6,511 9,525 1,516 11,041 17,112 2,812 19,924
Age 65 30,068 6,429 1,283 7,712 12,530 2,552 15,082 26,959 5,725 32,684
30 41,856 7,018 1,608 8,626 15,616 3,792 19,408 40,521 10,497 51,018
35 56,901 7,398 1,868 9,267 18,672 5,240 23,912 58,804 18,092 76,897
</TABLE>
- ---------
* Corresponding to modal premiums of: Semi-Annual $306.90. Quarterly $156.90,
Special Monthly $52.40.
DIVIDENDS ILLUSTRATED ARE BASED ON CURRENT SCALES AND EXPERIENCE AND ARE NOT
GUARANTEED. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS SHOWN
ABOVE ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED REPRESENTATIVE 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 AN OWNER. THE DEATH BENEFIT AND CASH 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 NEVERTHELESS FLUCTUATED
ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN
BE MADE THAT THESE HYPOTHETICAL INVESTMENT RESULTS CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
24
<PAGE>
PLAN: VARIABLE WHOLE LIFE
AGE 25 YEARS MALE--SMOKER
INITIAL SUM INSURED (GUARANTEED MINIMUM DEATH BENEFIT) $27,223
ANNUAL PREMIUM $350.00* (PRMS ACCUM MEANS PREMIUMS ACCUMULATED)
<TABLE>
<CAPTION>
Dividends Purchasing Variable Paid-Up Additions (Var Pu Adds) Dividends are Not Guaranteed
0% 6% 12%
---------------------- ---------------------- ------------------------
Death Benefit Death Benefit Death Benefit
Prms Accum ---------------------- ---------------------- ------------------------
at Base Var Pu Base Var Pu Base Var Pu
Year 5%/Annum Policy Adds Total Policy Adds Total Policy Adds Total
- ------- ---------- ------ ------ ------ ------ ------ ------ ------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 368 27,223 0 27,223 27,307 0 27,307 28,719 0 28,719
2 753 27,223 0 27,223 27,309 0 27,309 28,764 0 28,764
3 1,159 27,223 24 27,247 27,350 24 27,374 29,535 31 29,565
4 1,584 27,223 47 27,270 27,392 58 27,450 30,357 76 30,433
5 2,031 27,223 74 27,297 27,435 100 27,534 31,227 135 31,361
6 2,500 27,223 107 27,330 27,479 150 27,629 32,146 209 32,354
7 2,992 27,223 143 27,366 27,523 208 27,732 33,115 297 33,413
8 3,509 27,223 187 27,410 27,569 278 27,847 34,138 407 34,545
9 4,052 27,223 236 27,459 27,615 360 27,975 35,216 539 35,755
10 4,622 27,223 291 27,514 27,662 453 28,115 36,353 696 37,048
15 7,930 27,223 942 28,165 27,900 1,443 29,343 42,847 2,328 45,175
20 12,152 27,223 1,638 28,861 28,159 2,829 30,987 51,342 5,303 56,646
25 17,540 27,223 2,077 29,300 28,447 4,258 32,705 62,798 9,757 72,555
30 24,416 27,223 2,296 29,519 28,746 5,667 34,412 77,563 16,183 93,746
35 33,193 27,223 2,365 29,588 29,055 7,064 36,119 96,653 25,426 122,079
Age 65 44,394 27,223 2,332 29,555 29,375 8,447 37,822 121,372 38,613 159,985
</TABLE>
<TABLE>
<CAPTION>
0% 6% 12%
--------------------- ---------------------- ----------------------
Cash Value Cash Value Cash Value
Base Prem --------------------- ---------------------- ----------------------
Accum at Base Var Pu Base Var Pu Base Var Pu
Year 5%/Annum Policy Adds Total Policy Adds Total Policy Adds Total
- ------- --------- ------ ------ ----- ------ ------ ------ ------ ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 368 5 0 5 6 0 6 6 0 6
2 753 175 0 175 186 0 186 197 0 197
3 1,159 345 4 349 376 4 380 408 5 413
4 1,584 515 8 523 576 10 586 641 13 654
5 2,031 684 13 697 785 18 803 898 24 922
6 2,500 852 20 872 1,005 28 1,033 1,181 39 1,220
7 2,992 1,018 28 1,046 1,234 41 1,274 1,491 58 1,549
8 3,509 1,183 38 1,221 1,473 56 1,529 1,832 82 1,914
9 4,052 1,346 49 1,395 1,721 75 1,797 2,205 113 2,319
10 4,622 1,506 63 1,570 1,980 98 2,079 2,615 152 2,766
15 7,930 2,316 244 2,561 3,486 375 3,861 5,378 608 5,986
20 12,152 3,037 506 3,543 5,259 877 6,136 9,633 1,651 11,284
25 17,540 3,577 758 4,335 7,211 1,561 8,772 15,992 3,593 19,585
30 24,416 4,029 983 5,012 9,431 2,436 11,867 25,564 6,989 32,553
35 33,193 4,378 1,173 5,551 11,871 3,519 15,391 39,671 12,725 52,396
Age 65 44,394 4,629 1,324 5,953 14,499 4,818 19,317 60,182 22,122 82,305
</TABLE>
- ---------
* Corresponding to modal premiums of: Semi-Annual $179.28, Quarterly $91.90,
Special Monthly $30.90
DIVIDENDS ILLUSTRATED ARE BASED ON CURRENT SCALES AND EXPERIENCE AND ARE NOT
GUARANTEED. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS SHOWN
ABOVE ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED REPRESENTATIVE 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 AN OWNER. THE DEATH BENEFIT AND CASH 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 NEVERTHELESS FLUCTUATED
ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN
BE MADE THAT THESE HYPOTHETICAL INVESTMENT RESULTS CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
25
<PAGE>
PLAN: VARIABLE WHOLE LIFE
AGE 40 YEARS MALE--SMOKER
INITIAL SUM INSURED (GUARANTEED MINIMUM DEATH BENEFIT) $26,354
ANNUAL PREMIUM $600.00* (PRMS ACCUM MEANS PREMIUMS ACCUMULATED)
<TABLE>
<CAPTION>
Dividends Purchasing Variable Paid-Up Additions (Var Pu Adds) Dividends are Not Guaranteed
0% 6% 12%
---------------------- ---------------------- -----------------------
Death Benefit Death Benefit Death Benefit
Prms Accum ---------------------- ---------------------- -----------------------
at Base Var Pu Base Var Pu Base Var Pu
Year 5%/Annum Policy Adds Total Policy Adds Total Policy Adds Total
- ------- ---------- ------ ------ ------ ------ ------ ------ ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 630 26,354 0 26,354 26,435 0 26,435 27,802 0 27,802
2 1,292 26,354 0 26,354 26,437 0 26,437 27,846 0 27,846
3 1,986 26,354 14 26,368 26,477 16 26,493 28,598 24 28,621
4 2,715 26,354 32 26,386 26,518 46 26,563 29,392 66 29,458
5 3,481 26,354 59 26,413 26,559 87 26,646 30,227 125 30,352
6 4,285 26,354 93 26,447 26,601 140 26,741 31,102 203 31,306
7 5,129 26,354 130 26,484 26,643 199 26,842 32,020 294 32,315
8 6,016 26,354 175 26,529 26,685 272 26,958 32,983 409 33,392
9 6,947 26,354 225 26,579 26,729 355 27,084 33,992 544 34,536
10 7,924 26,354 281 26,635 26,772 449 27,222 35,050 704 35,754
15 13,594 26,354 957 27,311 26,992 1,456 28,449 41,031 2,346 43,377
20 20,832 26,354 1,655 28,009 27,226 2,798 30,024 48,686 5,168 53,854
Age 65 30,068 26,354 2,078 28,432 27,485 4,114 31,599 58,865 9,190 68,055
30 41,856 26,354 2,310 28,664 27,748 5,423 33,170 71,673 14,943 86,616
35 56,902 26,354 2,418 28,772 28,014 6,751 34,765 87,823 23,207 111,030
</TABLE>
<TABLE>
<CAPTION>
0% 6% 12%
---------------------- ----------------------- -----------------------
Cash Value Cash Value Cash Value
Base Prem ---------------------- ----------------------- -----------------------
Accum at Base Var Pu Base Var Pu Base Var Pu
Year 5%/Annum Policy Adds Total Policy Adds Total Policy Adds Total
- ------- ---------- ------ ------- ----- ------ ------- ------ ------ ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 630 11 0 11 11 0 11 12 0 12
2 1,292 341 0 341 362 0 362 383 0 383
3 1,986 664 4 668 723 5 728 785 7 792
4 2,715 980 10 989 1,095 14 1,109 1,220 20 1,240
5 3,481 1,288 18 1,306 1,479 27 1,506 1,691 39 1,729
6 4,285 1,589 30 1,619 1,873 45 1,918 2,200 65 2,265
7 5,129 1,883 43 1,926 2,278 66 2,344 2,750 98 2,848
8 6,016 2,170 60 2,230 2,695 93 2,788 3,346 141 3,487
9 6,947 2,450 80 2,530 3,124 126 3,250 3,991 194 4,185
10 7,924 2,723 103 2,825 3,565 165 3,729 4,688 259 4,947
15 13,594 4,051 410 4,461 6,030 626 6,656 9,208 1,012 10,221
20 20,832 5,166 821 5,987 8,759 1,394 10,153 15,734 2,586 18,320
Age 65 30,068 5,912 1,180 7,092 11,522 2,346 13,868 24,789 5,264 30,053
30 41,856 6,453 1,479 7,932 14,359 3,487 17,846 37,260 9,652 46,912
35 56,902 6,803 1,718 8,521 17,169 4,818 21,987 54,071 16,636 70,707
</TABLE>
- ---------
* Corresponding to Modal Premiums of: Semi-annual $306.90, Quarterly $156.90,
Special Monthly $52.40
DIVIDENDS ILLUSTRATED ARE BASED ON CURRENT SCALES AND EXPERIENCE AND ARE NOT
GUARANTEED. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS SHOWN
ABOVE ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED REPRESENTATIVE 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 AN OWNER. THE DEATH BENEFIT AND CASH 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 NEVERTHELESS FLUCTUATED
ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN
BE MADE THAT THESE HYPOTHETICAL INVESTMENT RESULTS CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
26
<PAGE>
ADDITIONAL INFORMATION
This section of the prospectus provides additional detailed information that
is not contained in the Basic Information section on pages 3 through 15.
<TABLE>
<CAPTION>
CONTENTS OF THIS SECTION PAGES TO SEE
- ------------------------ ------------
<S> <C>
Description of John Hancock ............... 28
How we support the policy and investment options 28
How we process certain policy transactions 28-29
Effects of policy loans................... 29
Additional information about how certain policy charges work 29-30
How we market the policies................ 30-31
Tax considerations........................ 31-32
Reports that you will receive............. 32
Voting privileges that you will have...... 32
Changes that John Hancock can make as to your policy 32-33
Adjustments we make to death benefits..... 33
When we pay policy proceeds............... 33-34
Other details about exercising rights and paying benefits 34
Year 2000 Issues.......................... 34
Legal matters............................. 34-35
Registration statement filed with the SEC. 35
Accounting and actuarial experts.......... 35
Financial statements of John Hancock and the Account 35
List of Directors and Executive Officers of John Hancock 36
</TABLE>
27
<PAGE>
DESCRIPTION OF JOHN HANCOCK
We are John Hancock, a mutual life insurance company chartered in
Massachusetts in 1862. Our Home Office is at John Hancock Place, Boston,
Massachusetts 02117. We are authorized to transact a life insurance and annuity
business in all states and in the District of Columbia. As of the end of 1998,
our assets were approximately $67 billion.
We are regulated and supervised by the Massachusetts Commissioner of
Insurance, who periodically examines our affairs. We also are subject to the
applicable insurance laws and regulations of all jurisdictions in which we are
authorized to do business. We are required to submit annual statements of our
operations, including financial statements, to the insurance departments of the
various jurisdictions in which we do business for purposes of determining
solvency and compliance with local insurance laws and regulations. The
regulation to which we are subject, however, does not provide a guarantee as to
such matters.
HOW WE SUPPORT THE POLICY AND INVESTMENT OPTIONS
Separate Account UV
The variable investment options shown on page 1 are in fact subaccounts of
Separate Account UV (the "Account"), a separate account established by us under
Massachusetts law. The Account meets the definition of "separate account" under
the Federal securities laws and is registered as a unit investment trust under
the Investment Company Act of 1940 ("1940 Act"). Such registration does not
involve supervision by the SEC of the management of the Account or John Hancock.
The Account's assets are the property of John Hancock. Each policy provides
that amounts we hold in the Account pursuant to the policies cannot be reached
by any other persons who may have claims against us.
The assets in each subaccount are invested in the corresponding fund of the
Trust, but the assets of one subaccount are not necessarily legally insulated
from liabilities associated with another subaccount. New subaccounts may be
added as new funds are added to the Trust and made available to policy owners.
Existing subaccounts may be deleted if existing funds are deleted from the
Trust.
We will purchase and redeem Trust shares for the Account at their net asset
value without any sales or redemption charges. Shares of the Trust represent an
interest in one of the funds of the Trust which corresponds to a subaccount of
the Account. Any dividend or capital gains distributions received by the Account
will be reinvested in shares of that same fund at their net asset value as of
the dates paid.
On each business day, shares of each fund are purchased or redeemed by us for
each subaccount based on, among other things, the amount of net premiums
allocated to the subaccount, distributions reinvested, and transfers to, from
and among subaccounts, all to be effected as of that date. Such purchases and
redemptions are effected at each fund's net asset value per share determined for
that same date. A "business day" is any date on which the New York Stock
Exchange is open for trading. We compute policy values for each business day as
of the close of that day (usually 4:00 p.m. Eastern Standard Time).
HOW WE PROCESS CERTAIN POLICY TRANSACTIONS
Monthly deduction dates
Each charge that we deduct monthly is assessed against your cash value or the
subaccounts at the close of business on the date of issue and at the close of
the first business day in each subsequent policy month. The "date of issue" is
the date on which the policy takes effect. Policy months, policy years and
policy anniversaries are all measured from that date.
takes
28
<PAGE>
Transfers among investment options
Any reallocation among investment options must be such that the total in all
investment options after reallocation equals 100% of cash value. Transfers out
of a variable investment option will be effective at the end of the business day
in which we receive at our Life Servicing Office notice satisfactory to us.
Telephone transfers and policy loans
Once you have completed a written authorization, you may request a transfer or
policy loan by telephone or by fax. If the fax request option becomes
unavailable, another means of telecommunication will be substituted.
If you authorize telephone transactions, you will be liable for any loss,
expense or cost arising out of any unauthorized or fraudulent telephone
instructions which we reasonably believe to be genuine, unless such loss,
expense or cost is the result of our mistake or negligence. We employ procedures
which provide safeguards against the execution of unauthorized transactions, and
which are reasonably designed to confirm that instructions received by telephone
are genuine. These procedures include requiring personal identification, tape
recording calls, and providing written confirmation to the owner. If we do not
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine, we may be liable for any loss due to unauthorized or
fraudulent instructions.
Effective date of other policy transactions
Reinstatements of lapsed policies take effect on the monthly deduction date on
or next following the date we approve your request.
We process loans, surrenders, partial surrenders and loan repayments as of the
day we receive such request or repayment.
EFFECTS OF POLICY LOANS
The cash value, the surrender value, and any death benefit above the face
amount are permanently affected by any loan, whether or not it is repaid in
whole or in part. This is because the amount of the loan is deducted from the
investment options and placed in a special loan account. The investment options
and the special loan account will generally have different rates of investment
return.
The amount of any outstanding indebtedness is subtracted from the amount
otherwise payable when the policy proceeds become payable.
Whenever the outstanding indebtedness equals or exceeds the policy's cash
value (plus any cash values under a dividend option providing paid-up
insurance), the policy will terminate 31 days after we have mailed notice of
termination to you (and to any assignee of record at such assignee's last known
address) specifying the minimum amount that must be paid to avoid termination,
unless a repayment of at least the amount specified is made within that period.
ADDITIONAL INFORMATION ABOUT HOW CERTAIN POLICY CHARGES WORK
Sales expenses and related charges
The premium sales charges help to compensate us for the cost of selling our
policies. (See "What charges will John Hancock deduct from my investment in the
policy?" in the Basic Information section of this prospectus.) The amount of the
charges in any policy year does not specifically correspond to sales expenses
for that year. We expect to recover our total sales expenses over the life of
the policies. To the extent that the sales charges do not cover total sales
expenses, the sales expenses may be recovered from other sources, including
gains from the charge for mortality and expense risks and other gains with
respect to the policies, or from our general assets. (See "How we market the
policies" on page 30.)
29
<PAGE>
Monthly charges
We deduct the monthly charges described in the Basic Information section from
your policy's investment options in proportion to the amount of cash value you
have in each.
HOW WE MARKET THE POLICIES
Signator Investors, Inc. ("Signator"), an indirect wholly-owned subsidiary of
John Hancock located at 197 Clarendon Street, Boston, MA 02117, is registered as
a broker-dealer under the Securities Exchange Act of 1934 and is a member of the
National Association of Securities Dealers, Inc. and the Securities Investor
Protection Corporation. Signator acts as principal underwriter and principal
distributor of the policies pursuant to a sales agreement among John Hancock,
Signator, John Hancock Variable Life Insurance Company, and the Account.
Signator also serves as principal underwriter for John Hancock Variable Annuity
Accounts U, I and V, John Hancock Mutual Variable Life Insurance Account UV and
John Hancock Variable Life Accounts V and S, all of which are registered under
the 1940 Act. Signator is also the principal underwriter for John Hancock
Variable Series Trust I.
Applications for policies are solicited by agents who are licensed by state
insurance authorities to sell John Hancock's policies and who are also
registered representatives ("representatives") of Signator or other
broker-dealer firms, as discussed below. John Hancock performs insurance
underwriting and determines whether to accept or reject the application for a
policy and each insured person's risk classification. John Hancock will make the
appropriate refund if a policy ultimately is not issued or is returned under the
"free look" provision. Officers and employees of John Hancock are covered by a
blanket bond by a commercial carrier in the amount of $25 million.
Signator's representatives are compensated for sales of the policies on a
commission and service fee basis by Signator, and John Hancock reimburses
Signator for such compensation and for other direct and indirect expenses
(including agency expense allowances, general agent, district manager and
supervisor's compensation, agent's training allowances, deferred compensation
and insurance benefits of agents, general agents, district managers and
supervisors, agency office clerical expenses and advertising) actually incurred
in connection with the marketing and sale of the policies.
The maximum commission payable to a Signator representative for selling a
policy is 55% of the premium paid in the first policy year, 15% of the premium
paid in the second policy year, 10% of the premium paid in the third through
sixth policy years, 5% of the premium paid in the sixth through tenth policy
years, and 3% of the premium paid in each policy year thereafter.
Representatives with less than four years of service with Signator and those
compensated on salary plus bonus or level commission programs may be paid on a
different basis. Representatives who meet certain productivity and persistency
standards with respect to the sale of policies issued by John Hancock and its
affiliates will be eligible for additional compensation.
The policies may also be sold through other registered broker-dealers that
have entered into selling agreements with Signator and whose representatives are
authorized by applicable law to sell variable life insurance policies. The
commissions which will be paid by such broker-dealers to their representatives
will be in accordance with their established rules. The commission rates may be
more or less than those set forth above for Signator's representatives. In
addition, their qualified registered representatives may be reimbursed by the
broker-dealers under expense reimbursement allowance programs in any year for
approved voucherable expenses incurred. Signator will compensate the
broker-dealers as provided in the selling agreements, and John Hancock will
reimburse Signator for such amounts and for certain other direct expenses in
30
<PAGE>
connection with marketing the policies through other broker-dealers.
Representatives of Signator and the other broker-dealers mentioned above may
also earn "credits" toward qualification for attendance at certain business
meetings sponsored by John Hancock.
Neither John Hancock nor Signator is obligated to sell any particular amount
of policies.
TAX CONSIDERATIONS
This description of federal income tax consequences is only a brief summary
and is not intended as tax advice. Tax consequences will vary based on your own
particular circumstances, and for further information you should consult a
qualified tax advisor. Federal, state and local tax laws, regulations and
interpretations can change from time to time. As a result, the tax consequences
to you and the beneficiary may be altered, in some cases retroactively.
Policy proceeds
We believe the policy will receive the same federal income and estate tax
treatment as fixed benefit life insurance policies. Section 7702 of the Internal
Revenue Code (the "Code") defines life insurance for federal tax purposes. If
certain standards are met at issue and over the life of the policy, the policy
will satisfy that definition. We will monitor compliance with these standards.
If the policy complies with the definition of life insurance, we believe the
death benefit under the policy will be excludable from the beneficiary's gross
income under the Code. In addition, increases in cash value as a result of
interest or investment experience will not be subject to federal income tax
unless and until values are actually received through distributions.
Distributions for tax purposes can include amounts received upon surrender or
partial surrender. You may also be deemed to have received a distribution for
tax purposes if you assign all or part of your policy rights or change your
policy's ownership.
In general, the owner will be taxed on the amount of distributions that exceed
the premiums paid under the policy. But under certain circumstances within the
first 15 policy years, the owner may be taxed on a distribution even if total
withdrawals do not exceed total premiums paid. Any taxable distribution will be
ordinary income to the owner (rather than capital gains).
We also believe that, except as noted below, loans received under the policy
will be treated as indebtedness of an owner and that no part of any loan will
constitute income to the owner. However, the amount of any outstanding loan that
was not previously considered income (as discussed below) will be treated as if
it had been distributed to the owner if the policy terminates for any reason.
It is possible that, despite our monitoring, a policy might fail to qualify as
life insurance under Section 7702 of the Code. This could happen, for example,
if we inadvertently failed to return to you any premium payments that were in
excess of permitted amounts, or if the Trust failed to meet certain investment
diversification or other requirements of the Code. If this were to occur, you
would be subject to income tax on the income and gains under the policy for the
period of the disqualification and for subsequent periods and the death benefit
would lose its tax-free character.
In the past, the United States Treasury Department has stated that it
anticipated issuing guidelines prescribing circumstances in which the ability of
a policy owner to direct his or her investment to particular funds may cause the
policy owner, rather than the insurance company, to be treated as the owner of
the shares of those funds. In that case, any income and gains attributable to
those shares would be included in your current gross income for federal income
tax purposes. Under current law, however, we believe that we, and not the owner
of a policy, would be considered the owner of the fund's shares for tax
purposes.
31
<PAGE>
Tax consequences of ownership or receipt of policy proceeds under federal,
state and local estate, inheritance, gift and other tax laws depend on the
circumstances of each owner or beneficiary.
Because there may be unfavorable tax consequences (including recognition of
taxable income and the loss of income tax-free treatment for any death benefit
payable to the beneficiary), you should consult a qualified tax adviser prior to
changing the policy's ownership or making any assignment of ownership interests.
Corporate and H.R. 10 plans
The policy may be acquired in connection with the funding of retirement plans
satisfying the qualification requirements of Section 401 of the Code. If so, the
Code provisions relating to such plans and life insurance benefits thereunder
should be carefully scrutinized. We are not responsible for compliance with the
terms of any such plan or with the requirements of applicable provisions of the
Code.
REPORTS THAT YOU WILL RECEIVE
At least annually, we will send you a statement setting forth the following
information as of the end of the most recent reporting period: the amount of the
death benefit and cash value, and any outstanding policy loan (and interest
charged for the preceding policy year). Moreover, you also will receive
confirmations of transfers among investment options, policy loans, partial
surrenders and certain other policy transactions.
Semiannually we will send you a report containing the financial statements of
the Trust, including a list of securities held in each fund.
VOTING PRIVILEGES THAT YOU WILL HAVE
All of the assets in the subaccounts of the Account are invested in shares of
the corresponding funds of the Trust. We will vote the shares of each of the
funds of the Trust which are deemed attributable to variable life insurance
policies at regular and special meetings of the Trust's shareholders in
accordance with instructions received from owners of such policies. Shares of
the Trust held in the Account which are not attributable to such policies, as
well as shares for which instructions from owners are not received, will be
represented by us at the meeting. We will vote such shares for and against each
matter in the same proportions as the votes based upon the instructions received
from the owners of such policies.
We determine the number of a fund's shares held in a subaccount attributable
to each owner by dividing the amount of a policy's cash value held in the
subaccount by the net asset value of one share in the fund. Fractional votes
will be counted. We determine the number of shares as to which the owner may
give instructions as of the record date for the Trust's meeting. Owners of
policies may give instructions regarding the election of the Board of Trustees
of the Trust, ratification of the selection of independent auditors, approval of
Trust investment advisory agreements and other matters requiring a shareholder
vote. We will furnish owners with information and forms to enable owners to give
voting instructions.
However, we may, in certain limited circumstances permitted by the SEC's
rules, disregard voting instructions. If we do disregard voting instructions,
you will receive a summary of that action and the reasons for it in the next
semi-annual report to owners.
CHANGES THAT JOHN HANCOCK CAN MAKE AS TO YOUR POLICY
Changes relating to the Trust or the Account
The voting privileges described in this prospectus reflect our understanding
of applicable Federal securities law requirements. To the extent that applicable
law, regulations or interpretations change to eliminate or restrict the need for
such voting privileges, we reserve the right to proceed in
32
<PAGE>
accordance with any such revised requirements. We also reserve the right,
subject to compliance with applicable law, including approval of owners if so
required, (1) to transfer assets determined by John Hancock to be associated
with the class of policies to which your policy belongs from the Account to
another separate account or subaccount, (2) to operate the Account as a
"management-type investment company" under the 1940 Act, or in any other form
permitted by law, the investment adviser of which would be John Hancock or an
affiliate, (3) to deregister the Account under the 1940 Act, (4) to substitute
for the fund shares held by a subaccount any other investment permitted by law,
and (5) to take any action necessary to comply with or obtain any exemptions
from the 1940 Act. We would notify owners of any of the foregoing changes and,
to the extent legally required, obtain approval of owners and any regulatory
body prior thereto. Such notice and approval, however, may not be legally
required in all cases.
Other permissible changes
We reserve the right to make any changes in the policy necessary to ensure the
policy is within the definition of life insurance under the Federal tax laws and
is in compliance with any changes in Federal or state tax laws.
In our policies, we reserve the right to make certain changes if they would
serve the best interests of policy owners or would be appropriate in carrying
out the purposes of the policies. Such changes include the following:
. Changes necessary to comply with or obtain or continue exemptions under
the federal securities laws
. Combining or removing investment options
. Changes in the form of organization of any separate account
Any such changes will be made only to the extent permitted by applicable laws
and only in the manner permitted by such laws. When required by law, we will
obtain your approval of the changes and the approval of any appropriate
regulatory authority.
ADJUSTMENTS WE MAKE TO DEATH BENEFITS
If the insured person commits suicide within certain time periods, the amount
of death benefit we pay will be limited as described in the policy. Also, if an
application misstated the age or gender of the insured person, we will adjust
the amount of any death benefit as described in the policy.
WHEN WE PAY POLICY PROCEEDS
General
We will pay any death benefit, surrender value or loan within 7 days after we
receive the last required form or request (and, with respect to the death
benefit, any other documentation that may be required). If we don't have
information about the desired manner of payment within 7 days after the date we
receive notification of the insured person's death, we will pay the proceeds as
a single sum, normally within 7 days thereafter.
Delay to challenge coverage
We may challenge the validity of your insurance policy based on any material
misstatements made to us in the application for the policy. We cannot make such
a challenge, however, beyond certain time limits that are specified in the
policy.
Delay for check clearance
We reserve the right to defer payment of that portion of your cash value that
is attributable to a premium payment made by check for a reasonable period of
time (not to exceed 15 days) to allow the check to clear the banking system.
Delay of separate account proceeds
We reserve the right to defer payment of any death benefit, loan or other
distribution that is derived from a variable investment option if (a) the New
York Stock Exchange is closed (other than customary
33
<PAGE>
weekend and holiday closings) or trading on the New York Stock Exchange is
restricted; (b) an emergency exists, as a result of which disposal of securities
is not reasonably practicable or it is not reasonably practicable to fairly
determine the cash value; or (c) the SEC by order permits the delay for the
protection of owners. Transfers and allocations of cash value among the
investment options may also be postponed under these circumstances. If we need
to defer calculation of separate cash values for any of the foregoing reasons,
all delayed transactions will be processed at the next values that we do
compute.
OTHER DETAILS ABOUT EXERCISING RIGHTS AND PAYING BENEFITS
Joint ownership
If more than one person owns a policy, all owners must join in most requests
to exercise rights under the policy.
Assigning your policy
You may assign your rights in the policy to someone else as collateral for a
loan or for some other reason. Assignments do not require the consent of any
revocable beneficiary. A copy of the assignment must be forwarded to us. We are
not responsible for any payment we make or any action we take before we receive
notice of the assignment in good order. Nor are we responsible for the validity
of the assignment. An absolute assignment is a change of ownership. All
collateral assignees of record must consent to any full surrender, partial
withdrawal or loan from the policy.
Your beneficiary
You name your beneficiary when you apply for the policy. The beneficiary is
entitled to the proceeds we pay following the insured person's death. You may
change the beneficiary during the insured person's lifetime. Such a change
requires the consent of any irrevocable named beneficiary. A new beneficiary
designation is effective as of the date you sign it, but will not affect any
payments we make before we receive it. If no beneficiary is living when the
insured person dies, we will pay the insurance proceeds to the owner or the
owner's estate.
YEAR 2000 ISSUES
The advent of the Year 2000 presents a technological challenge to John
Hancock. John Hancock has developed and is executing a plan to modify or replace
significant portions of its computer information and automated technologies so
that its systems will function properly with respect to dates in the year 2000
and thereafter. The plan also involves coordination and testing with business
partners to ensure that external factors do not adversely impact John Hancock's
systems. John Hancock presently believes that with modifications to existing
systems and conversions to new technologies, the year 2000 will not pose
significant operational problems for its computer systems. However, if certain
modifications and conversions are not made, or are not completed on time, the
year 2000 issue could have an adverse impact on the operations of John Hancock.
John Hancock has substantially completed the process of remediating its
systems and expects the compliance testing component of the project to be
substantially complete by June, 1999. This completion target was derived
utilizing numerous assumptions of future events, including availability of
certain resources and other factors. However, there can be no guarantee that
this estimate will be achieved, that these steps will be sufficient or that
actual results may not differ materially from those anticipated. For more
information about the impact of year 2000, please refer to Note 15 of the Notes
to Statutory-Basis Financial Statements of John Hancock Mutual Life Insurance
Company included in this prospectus.
LEGAL MATTERS
The legal validity of the policies described in this prospectus has been
passed on by Ronald J. Bocage, Vice President and Counsel for John Hancock.
34
<PAGE>
Messrs. Freedman, Levy, Kroll & Simonds, Washington, D.C., have advised us on
certain Federal securities law matters in connection with the policies.
REGISTRATION STATEMENT FILED WITH THE SEC
This prospectus omits certain information contained in the Registration
Statement which has been filed with the SEC. More details may be obtained from
the SEC upon payment of the prescribed fee.
ACCOUNTING AND ACTUARIAL EXPERTS
The financial statements of 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 Malcolm Cheung, F.S.A.,an Actuary and Second
Vice President of John Hancock.
FINANCIAL STATEMENTS OF JOHN HANCOCK AND THE ACCOUNT
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.
35
<PAGE>
LIST 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 Principal, Fleetwing Capital Management (financial
services)
E. James Morton Director, formerly Chairman of the Board and Chief
Executive Officer, John Hancock
John M. Connors, Jr. President and Chief Executive Officer and Director,
Hill, Holliday, Connors, Cosmopoulos, Inc.
(advertising).
Stephen L. Brown Chairman of the Board and Chief Executive Officer,
John Hancock
I. MacAllister Booth Retired Chairman of the Board and Chief Executive
Officer, Polaroid Corporation (photographic
products)
Robert J. Tarr, Jr. Former President, Chief Executive Officer and Chief
Operations Officer, Harcourt General, Inc.
(publishing)
David F. D'Alessandro President and Chief Operating Officer, John Hancock
Joan T. Bok Chairman of the Board, New England Electric System
(electric utility).
Robert E. Fast Senior Partner, Hale and Dorr (law firm).
Foster L. Aborn Vice Chairman of the Board, John Hancock
Richard F. Syron Chairman of the Board and Chief Executive Officer,
American Stock Exchange.
Kathleen F. Feldstein President, Economic Studies, Inc. (economic
consulting).
Michael C. Hawley President and Chief Operating Officer, The Gillette
Company (razors, etc.).
Edward H. Linde President and Chief Executive Officer, Boston
Properties, Inc. (real estate)
Wayne A. Budd Group President, Bell Atlantic - New England
(telecommunications)
Executive Officers
------------------
Diane M. Capstaff Executive Vice President
Thomas E. Moloney Executive Vice President
Richard S. Scipione General Counsel
Barry J. Rubenstein Vice President, Counsel and Secretary
</TABLE>
The business address of all Directors and officers of John Hancock is John
Hancock Place, Boston, Massachusetts 02117.
36
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Directors and Policyholders John Hancock Mutual Life Insurance Company
We have audited the accompanying statutory-basis statements of financial
position of John Hancock Mutual Life Insurance Company as of December 31, 1998
and 1997, and the related statutory-basis statements of operations and changes
in policyholders' contingency reserves and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described in Note 1 to the financial statements, the Company presents its
financial statements in conformity with accounting practices prescribed or
permitted by the Commonwealth of Massachusetts Division of Insurance, which
practices differ from generally accepted accounting principles. The variances
between such practices and generally accepted accounting principles also are
described in Note 1. The effects on the financial statements of these variances
are not reasonably determinable but are presumed to be material.
In our opinion, because of the effects of the matter described in the
preceding paragraph, the financial statements referred to above do not present
fairly, in conformity with generally accepted accounting principles, the
financial position of John Hancock Mutual Life Insurance Company at December 31,
1998 and 1997, or the results of its operations or its cash flows for the years
then ended.
Also, in our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of John Hancock Mutual
Life Insurance Company at December 31, 1998 and 1997, and the results of its
operations and its cash flows for the years then ended in conformity with
accounting practices prescribed or permitted by the Commonwealth of
Massachusetts Division of Insurance.
ERNST & YOUNG LLP
Boston, Massachusetts
February 19, 1999
37
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
December 31
-------------------------
1998 1997
-------------- -----------
(In millions)
<S> <C> <C>
ASSETS
Bonds--Note 6 . . . . . . . . . . . . . . . . . . $ 23,353.0 $22,986.0
Stocks:
Preferred . . . . . . . . . . . . . . . . . . 844.7 640.6
Common . . . . . . . . . . . . . . . . . . . . 269.3 256.9
Investments in affiliates . . . . . . . . . . 1,520.3 1,442.0
-------------- ----------
2,634.3 2,339.5
Mortgage loans on real estate--Note 6 . . . . . . 8,223.7 7,851.2
Real estate:
Company occupied . . . . . . . . . . . . . . . 372.2 375.1
Investment properties . . . . . . . . . . . . 1,472.1 1,893.4
-------------- ----------
1,844.3 2,268.5
Policy loans . . . . . . . . . . . . . . . . . . 1,573.8 1,577.3
Cash items:
Cash in banks and offices . . . . . . . . . . 241.5 176.0
Temporary cash investments . . . . . . . . . . 1,107.4 548.8
-------------- ----------
1,348.9 724.8
Premiums due and deferred . . . . . . . . . . . . 253.4 222.3
Investment income due and accrued . . . . . . . . 527.5 505.8
Other general account assets . . . . . . . . . . 1,156.6 948.6
Assets held in separate accounts . . . . . . . . 17,447.0 16,021.7
-------------- ----------
TOTAL ASSETS. . . . . . . . . . . . . . . . . . . $ 58,362.5 $55,445.7
============== ==========
OBLIGATIONS AND POLICYHOLDERS' CONTINGENCY
RESERVES
OBLIGATIONS
Policy reserves . . . . . . . . . . . . . . . . $ 19,804.8 $19,206.6
Policyholders' and beneficiaries' funds . . . . 14,216.9 13,985.1
Dividends payable to policyholders . . . . . . 449.1 399.7
Policy benefits in process of payment . . . . . 111.4 115.5
Other policy obligations . . . . . . . . . . . 322.6 214.8
Asset valuation reserve--Note 1 . . . . . . . . 1,289.6 1,165.7
Federal income and other accrued taxes--Note 1 211.5 96.9
Other general account obligations . . . . . . . 1,109.3 1,084.5
Obligations related to separate accounts . . . 17,458.6 16,019.1
-------------- ----------
TOTAL OBLIGATIONS . . . . . . . . . . . . . . . . 54,973.8 52,287.9
POLICYHOLDERS' CONTINGENCY RESERVES
Surplus notes--Note 2 . . . . . . . . . . . . . 450.0 450.0
Special contingency reserve for group insurance 160.0 151.8
General contingency reserve . . . . . . . . . . 2,778.7 2,556.0
-------------- ----------
TOTAL POLICYHOLDERS' CONTINGENCY RESERVES . . . 3,388.7 3,157.8
-------------- ----------
TOTAL OBLIGATIONS AND POLICYHOLDERS'CONTINGENCY
RESERVES . . . . . . . . . . . . . . . . . . . . $ 58,362.5 $55,445.7
============== ==========
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
38
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF OPERATIONS AND CHANGES IN POLICYHOLDERS'
CONTINGENCY RESERVES
<TABLE>
<CAPTION>
Year ended December 31
-----------------------
1998 1997
----------- ----------
(In millions)
<S> <C> <C>
INCOME
Premiums, annuity considerations and pension fund
contributions. . . . . . . . . . . . . . . . . $ 8,844.0 $ 7,371.6
Net investment income--Note 4 . . . . . . . . . 2,956.2 2,856.1
Other, net . . . . . . . . . . . . . . . . . . . 233.8 196.4
--------- ----------
12,034.0 10,424.1
BENEFITS AND EXPENSES
Payments to policyholders and beneficiaries:
Death benefits . . . . . . . . . . . . . . . 582.9 737.4
Accident and health benefits . . . . . . . . 76.9 121.4
Annuity benefits . . . . . . . . . . . . . . 1,612.4 1,668.2
Surrender benefits and annuity fund
withdrawals. . . . . . . . . . . . . . . . . 6,712.4 6,293.1
Matured endowments . . . . . . . . . . . . . 20.7 21.0
--------- ----------
9,005.3 8,841.1
Additions to reserves to provide for future
payments to policyholders and beneficiaries . 1,106.7 (122.6)
Expenses of providing service to policyholders
and obtaining new insurance:
Field sales compensation and expenses . . . . 290.7 278.3
Home office and general expenses . . . . . . 529.0 493.0
Payroll, state premium and miscellaneous taxes . 52.0 49.9
--------- ----------
10,983.7 9,539.7
--------- ----------
GAIN FROM OPERATIONS BEFORE DIVIDENDS TO
POLICYHOLDERS, FEDERAL INCOME TAXES AND
NET REALIZED CAPITAL GAINS (LOSSES) . . . 1,050.3 884.4
Dividends to policyholders . . . . . . . . . . . . 446.0 398.2
Federal income tax (credit) expense--Note 1 . . . (2.8) 18.9
--------- ----------
448.8 417.1
--------- ----------
GAIN FROM OPERATIONS BEFORE NET REALIZED
CAPITAL GAINS (LOSSES) . . . . . . . . . 607.1 467.3
Net realized capital gains (losses)--Note 5 . . . 0.7 (89.8)
--------- ----------
NET INCOME . . . . . . . . . . . . . . . . 607.8 377.5
Other increases (decreases) in policyholders'
contingency reserves:
Net unrealized capital (losses) gains and other
adjustments--Note 5 . . . . . . . . . . . . . (214.5) 58.6
Valuation reserve changes--Note 1 . . . . . . . 0.0 1.4
Prior years' federal income taxes . . . . . . . (25.5) (35.6)
Other reserves and adjustments, net . . . . . . (136.9) (100.2)
--------- ----------
NET INCREASE IN POLICYHOLDERS' CONTINGENCY
RESERVES. . . . . . . . . . . . . . . . . 230.9 301.7
Policyholders' contingency reserves at beginning of
year. . . . . . . . . . . . . . . . . . . . . . . 3,157.8 2,856.1
--------- ----------
POLICYHOLDERS' CONTINGENCY RESERVES AT END OF YEAR $ 3,388.7 $ 3,157.8
========= ==========
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
39
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31
-----------------------
1998 1997
----------- -------------
(In millions)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Insurance premiums, annuity considerations and
deposits . . . . . . . . . . . . . . . . . . . $ 8,945.5 $ 7,518.8
Net investment income . . . . . . . . . . . . . 2,952.8 2,988.7
Benefits to policyholders and beneficiaries . . (9,190.4) (9,030.3)
Dividends paid to policyholders . . . . . . . . (396.6) (394.0)
Insurance expenses and taxes . . . . . . . . . . (874.4) (828.6)
Net transfers from separate accounts . . . . . . 131.1 832.7
Other, net . . . . . . . . . . . . . . . . . . . (181.7) (720.9)
---------- -----------
NET CASH PROVIDED FROM OPERATIONS . . . . . . 1,386.3 366.4
---------- -----------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Bond purchases . . . . . . . . . . . . . . . . . (12,403.6) (18,003.6)
Bond sales . . . . . . . . . . . . . . . . . . . 8,447.8 13,541.1
Bond maturities and scheduled redemptions . . . 2,537.7 2,927.6
Bond prepayments . . . . . . . . . . . . . . . . 1,202.7 1,096.3
Stock purchases . . . . . . . . . . . . . . . . (623.2) (1,125.7)
Proceeds from stock sales . . . . . . . . . . . 378.4 921.7
Real estate purchases . . . . . . . . . . . . . (147.6) (243.0)
Real estate sales . . . . . . . . . . . . . . . 630.5 444.5
Other invested assets purchases . . . . . . . . (185.3) (171.1)
Proceeds from the sale of other invested assets 120.5 109.3
Mortgage loans issued . . . . . . . . . . . . . (1,978.5) (1,165.8)
Mortgage loan repayments . . . . . . . . . . . . 1,575.6 1,176.9
Other, net . . . . . . . . . . . . . . . . . . . (38.6) (333.8)
---------- -----------
NET CASH USED IN INVESTING ACTIVITIES . . . . (483.6) (825.6)
---------- -----------
CASH FLOWS USED IN FINANCING ACTIVITIES:
Net decrease in short-term note payable . . . . (75.0) (16.4)
Repayment of REMIC notes payable . . . . . . . . (203.6) (216.3)
---------- -----------
NET CASH USED IN FINANCING ACTIVITIES . . . . (278.6) (232.7)
---------- -----------
INCREASE (DECREASE) IN CASH AND TEMPORARY CASH
INVESTMENTS . . . . . . . . . . . . . . . . . . . 624.1 (691.9)
Cash and temporary cash investments at beginning of
year. . . . . . . . . . . . . . . . . . . . . . . 724.8 1,416.7
---------- -----------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF YEAR $ 1,348.9 $ 724.8
========== ===========
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
40
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS 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 business units: the Retail Sector, which encompasses
the Company's individual life, annuity, and long-term care operations; Group
Pension, which offers single premium annuity and guaranteed investment contracts
through both the general and separate accounts; and Business Insurance, its
group life, health, and long-term care operations including administrative
services provided to group customers. 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 life insurance products
for the Canadian market, 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.
On February 28, 1997, the Company sold a major portion of its group insurance
business to UNICARE Life & Health Insurance Company (UNICARE), a wholly-owned
subsidiary of WellPoint Health Networks Inc. The business sold includes the
Company's group accident and health business and related group life business and
Cost Care, Inc., Hancock Association Services Group and Tri-State, Inc., all
indirect wholly-owned subsidiaries of the Company. The Company retained its
group long-term care operations. Assets equal to liabilities of approximately
$562.4 million at February 28, 1997, subject to the completion of a closing
audit, were transferred to UNICARE in connection with the sale. The gain from
operations was not significant. The insurance business sold was transferred to
UNICARE through a 100% coinsurance agreement. The Company remains liable to its
policyholders to the extent that UNICARE does not meet its contractual
obligations under the coinsurance agreement.
The Company has secured a $397.0 million letter of credit facility with a group
of banks. The banks have agreed to issue a letter of credit to the Company
pursuant to which the Company may draw up to $397.0 million for any claims not
satisfied by UNICARE under the coinsurance agreement after the Company has
incurred the first $113.0 million of losses from such claims. The amount
available pursuant to the letter of credit agreement and any letter of credit
issued thereunder will be automatically reduced on a scheduled basis consistent
with the anticipated runoff of liabilities related to the business reinsured
under the coinsurance agreement. The letter of credit and any letter of credit
issued thereunder are scheduled to expire on March 1, 2002.
The Company is domiciled in the Commonwealth of Massachusetts and 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, including banks, brokers/ dealers and
direct marketing efforts.
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 Company distributes its group benefit products through group
representatives, who are John Hancock employees or through intermediaries, in
key markets nationwide.
41
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
The preparation of financial statements requires management to make estimates
and assumptions that affect amounts reported in the financial statements and
accompanying notes. Such estimates and assumptions could change in the future as
more information becomes known, which could impact the amounts reported and
disclosed herein.
Basis of Presentation: The financial statements have been prepared using
accounting practices prescribed or permitted by the Commonwealth of
Massachusetts Division of Insurance and in conformity with the practices of the
National Association of Insurance Commissioners (NAIC), which practices differ
from generally accepted accounting principles (GAAP).
The significant differences from GAAP include: (1) policy acquisition costs are
charged to expense as incurred rather than deferred and amortized over the
related premium-paying period; (2) policy reserves are based on statutory
mortality, morbidity, and interest requirements without consideration of
withdrawals and Company experience; (3) certain assets designated as
"nonadmitted assets" are excluded from the balance sheet by direct charges to
surplus; (4) reinsurance recoverables are netted against reserves and claim
liabilities rather than reflected as an asset; (5) bonds held as available for
sale are recorded at amortized cost or market value as determined by the NAIC
rather than at fair value; (6) an Asset Valuation Reserve and Interest
Maintenance Reserve as prescribed by the NAIC are not calculated under GAAP.
Under GAAP, realized capital gains and losses are reported in the income
statement on a pretax basis as incurred and investment valuation allowances are
provided when there has been a decline in value deemed other than temporary; (7)
investments in affiliates are carried at their net equity value with changes in
value being recorded directly to policyholders' contingency reserves rather than
consolidated in the financial statements; (8) no provision is made for the
deferred income tax effects of temporary differences between book and tax basis
reporting; (9) certain items, including modifications to required policy
reserves resulting from changes in actuarial assumptions are recorded directly
to policyholders' contingency reserves rather than being reflected in income;
and (10) surplus notes are reported as surplus rather than as liabilities. The
effects of the foregoing variances from GAAP have not been determined, but are
presumed to be material.
The significant accounting practices of the Company are as follows:
Pending Statutory Standards: During March 1998, the NAIC adopted the
codification of statutory accounting practices, which is effective in 2001.
Codification will likely change, to some extent, prescribed statutory accounting
practices and may result in changes to the accounting practices that the Company
uses to prepare its statutory-basis financial statements. Codification will
require adoption by the various states before it becomes the prescribed
statutory basis of accounting for insurance companies domesticated within those
states. Accordingly, before codification becomes effective for the Company, the
Massachusetts Division of Insurance must adopt codification as the prescribed
basis of accounting on which domestic insurers must report their statutory-basis
results to the Division of Insurance. The impact of any such changes on the
Company's statutory surplus is not expected to be material.
Revenues and Expenses: Premium revenues are recognized over the premium-paying
period of the policies whereas expenses, including the acquisition costs of new
business, are charged to operations as incurred and policyholder dividends are
provided as paid or accrued.
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.
42
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
Valuation of Assets: General account investments are carried at amounts
determined on the following bases:
Bond and stock values are carried as prescribed by the NAIC; bonds generally
at amortized amounts or cost, preferred stocks generally at cost and common
stocks at fair value. The discount or premium on bonds is amortized using the
interest method.
Investments in affiliates are included on the statutory equity method.
Loan-backed bonds and structured securities are valued at amortized cost using
the interest method including anticipated prepayments. Prepayment assumptions
are obtained from broker dealer surveys or internal estimates and are based on
the current interest rate and economic environment. The retrospective
adjustment method is used to value all such securities except for
interest-only securities, which are valued using the prospective method.
The net interest effect of interest rate and currency rate swap transactions
is recorded as an adjustment of interest income as incurred. The initial cost
of interest rate cap and floor agreements is amortized to net investment
income over the life of the related agreement. Gains and losses on financial
futures contracts used as hedges against interest rate fluctuations are
deferred and recognized in income over the period being hedged. Net premiums
related to equity collar positions are amortized into income on a
straight-line basis over the term of the collars. The collars are carried at
fair value, with changes in fair value reflected directly in policyholders'
contingency reserves.
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. During 1998, the Company made a
strategic decision to sell the majority of its commercial real estate
portfolio. Properties with a book value of $533.8 million were sold in 1998,
and an additional $1.1 billion of real estate is expected to be sold in 1999.
Net gains on the properties sold in 1998 amounted to $64.3 million. Those
properties to be sold subsequent to December 31, 1998 are carried at the lower
of depreciated cost at the date a determination to sell was made or fair
value. Accumulated depreciation amounted to $370.0 million and $470.5 million
at December 31, 1998 and 1997, respectively.
Real estate acquired in satisfaction of debt and real estate held for sale,
which are classified with investment properties, are carried at the lower of
cost or fair value.
Policy loans are carried at outstanding principal balance, not in excess of
policy cash surrender value.
Other invested assets, which are classified with other general account assets,
include real estate and energy joint ventures and limited partnerships and
generally 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 of bonds, equity securities,
mortgage loans, real estate and other invested assets. The Company historically
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. During 1998, in connection with
the Company's plans to dispose of certain real estate holdings, additional
contributions were recorded that resulted in the AVR exceeding the prescribed
maximum reserve level by $111.3 million. The Company received permission from
the Massachusetts Division of Insurance to record its AVR in excess of the
prescribed maximum reserve level. Changes to the AVR are charged or credited
directly to policyholders' contingency reserves.
43
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
The Company also records the NAIC prescribed Interest Maintenance Reserve (IMR)
that represents that portion of the after tax net accumulated unamortized
realized capital gains and losses on sales of fixed income securities,
principally bonds and mortgage loans, attributable to changes in the general
level of interest rates. Such gains and losses are deferred and amortized into
income over the remaining expected lives of the investments sold. At December
31, 1998, the IMR, net of 1998 amortization of $34.9 million, amounted to $261.6
million which is included in other policy obligations. The corresponding 1997
amounts were $25.2 million and $165.6 million, respectively.
Property and Equipment: Data processing equipment, which amounted to $31.4
million in 1998 and $30.0 million in 1997 and is included in other general
account assets, is reported at depreciated cost, with depreciation recorded on a
straight-line basis. Non-admitted furniture and equipment also is depreciated on
a straight-line basis. The useful lives of these assets range from three to
twenty years. Depreciation expense was $20.1 million in 1998 and $21.8 million
in 1997.
Separate Accounts: Separate account assets and liabilities reported in the
accompanying statements of financial position represent funds that are
separately administered, principally for annuity contracts and variable life
insurance policies, and for which the contractholder, rather than the Company,
generally bears the investment risk. Separate account obligations are intended
to be satisfied from separate account assets and not from assets of the general
account. Separate accounts generally are reported at fair value. The operations
of the separate accounts are not included in the statement of operations;
however, income earned on amounts initially invested by the Company in the
formation of new separate accounts is included in other income.
Fair Value Disclosure of Financial Instruments: Statement of Financial
Accounting Standards (SFAS) No. 107, "Disclosure about Fair Value of Financial
Instruments," requires disclosure of fair value information about certain
financial instruments, whether or not recognized in the statement of financial
position, for which it is practicable to estimate the value. In situations where
quoted market prices are not available, fair values are based on estimates using
present value or other valuation techniques. SFAS No. 107 excludes certain
financial instruments and all nonfinancial instruments from its disclosure
requirements. Therefore, the aggregate fair value amounts presented do not
represent the underlying value of the Company. See Note 14.
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 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
approximate their fair values.
44
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
Fair values for futures contracts are based on quoted market prices. Fair
values for interest rate swap, cap and floor agreements, swaptions, and
currency swap agreements and equity collar agreements are based on current
settlement values. The current settlement values are based on brokerage quotes
that utilize pricing models or formulas using current assumptions.
The fair value for outstanding commitments to purchase long-term bonds and
issue real estate mortgages is estimated using a discounted cash flow method
incorporating adjustments for the difference in the level of interest rates
between the dates the commitments were made and December 31, 1998. The fair
value for commitments to purchase other invested assets 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 are determined using
the specific identification method. Realized capital gains and losses, net of
taxes and amounts transferred to the IMR, are included in net income. Unrealized
gains and losses, which consist of market value and book value adjustments, are
shown as adjustments to policyholders' contingency reserves.
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: Life, annuity, and accident and health benefit reserves are
developed by actuarial methods and are determined based on published tables
using statutorily specified interest rates and valuation methods that will
provide, in the aggregate, reserves that are greater than or equal to the
minimum or guaranteed policy cash values or the amounts required by the
Commonwealth of Massachusetts Division of Insurance. Reserves for 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 from2 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 generally
ranging from 2% to8 3/4%.
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.
45
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS 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, 1998 December 31, 1997
-------------------- --------------------
Statement Fair Statement Fair
Value Value Value Value
--------- --------- --------- -----------
(In millions)
<S> <C> <C> <C> <C>
Guaranteed investment contracts $12,666.9 $12,599.7 $11,499.4 $11,516.8
Fixed-rate deferred and immediate
annuities . . . . . . . . . . . 4,375.0 4,412.2 4,289.1 4,290.4
Supplementary contracts without
life contingencies . . . . . . 42.7 44.7 40.9 42.1
--------- --------- --------- ----------
$17,084.6 $17,056.6 $15,829.4 $15,849.3
========= ========= ========= ==========
</TABLE>
Federal Income Taxes: Federal income taxes are reported in the financial
statements based on amounts determined to be payable as a result of operations
within the current accounting period. The operations of the Company 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.
When determining its consolidated federal income tax expense, the Company uses a
number of estimated amounts that may change when the actual tax return is
completed. In addition, the Company must also use an estimated differential
earnings rate (DER) to compute the equity tax portion of its federal income tax
expense. Because the DER is set by the Internal Revenue Service after completion
of the financial statements, a true-up adjustment (i.e., effect of the
difference between the estimated and final DER) is necessary.
Amounts for disputed tax issues relating to prior years are charged or credited
directly to policyholders' contingency reserves.
The Company made federal tax payments of $74.9 million in 1998 and $146.4
million in 1997.
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. Reserve modifications
resulting from such determinations are recorded directly to policyholders'
contingency reserves. During 1997, the Company refined certain actuarial
assumptions inherent in the calculation of reserves related to guaranteed
investment contracts and AIDS claims under individual insurance policies
resulting in a net $1.4 million increase in policyholders' contingency reserves
at December 31, 1997. No additional refinements were made during 1998.
Reinsurance: Premiums, commissions, expense reimbursements, benefits and
reserves related to reinsured business are accounted for on bases consistent
with those used in accounting for the original policies issued and the terms of
the reinsurance contracts. Premiums ceded to other companies have been reported
as a reduction of premium income. Amounts applicable to reinsurance ceded for
future policy benefits, unearned premium reserves and claim liabilities have
been reported as reductions of these items.
46
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
Guaranty Fund Assessments: Guaranty fund assessments are accrued when the
Company receives notice that an amount is payable to a guaranty fund.
Reclassification: Certain 1997 amounts have been reclassified to conform to the
1998 presentation.
NOTE 2--SURPLUS NOTES
On February 25, 1994, the Company issued $450 million of surplus notes that bear
interest at7 3/8% and are scheduled to mature on February 15, 2024. The issuance
of the surplus notes was approved by the Commonwealth of 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 Commonwealth of
Massachusetts Division of Insurance. Surplus notes are reported as part of
policyholders' contingency reserves rather than liabilities. Interest of $33.2
million was paid on the notes during 1998 and 1997.
NOTE 3--BORROWED MONEY
At December 31, 1998, the Company had a $500 million syndicated line of credit.
There are 26 banks that are part of the syndicate which is under the leadership
of Morgan Guaranty Trust Company of New York. The banks will commit, when
requested, to loan funds at prevailing interest rates as determined in
accordance with the line of credit agreement, which terminates on June 30, 2001.
The agreement does not contain a material adverse change clause. Under the terms
of the agreement, the Company is required to maintain certain minimum levels of
net worth and comply with certain other covenants. As of December 31, 1998,
these covenants were met; however, 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. In
addition, the Company guaranteed the timely payment of principal and interest on
the debt. The debt was issued in two notes of equal amounts. The interest rates
on the class A1 and A2 notes are calculated on a floating basis, based on the
monthly LIBOR rates plus 22 and 27 basis points, respectively. The LIBOR rates
were 5.06% and 5.72%, respectively, at December 31, 1998 and 1997. The class A1
notes were fully repaid on March 25, 1997 and the class A2 notes were fully
repaid on June 25, 1998. The outstanding balances of the notes totaled $42.6
million at December 31, 1997 and are included in other general account
obligations.
In 1996, the Company issued $292.0 million of additional debt through a REMIC
(REMIC II). As collateral to the debt, the Company pledged $1,455.4 million of
commercial mortgages to the REMIC II Trust. The debt was issued in two notes.
The interest rates on the class A1 and A2 notes are calculated on a floating
basis, based on the monthly LIBOR rate plus 5 and 19 basis points, respectively.
The class A1 notes were fully repaid on December 26, 1997 and the class A2 notes
were fully repaid on December 28, 1998. The outstanding balances of the notes
totaled $161.0 million at December 31, 1997 and are included in other general
account obligations.
At December 31, 1997, the Company had a short-term note of $75.0 million payable
to an affiliate at a variable rate of interest. The note, which is included in
other general account obligations, was repaid on January 5, 1998.
Interest paid on borrowed money was $6.6 million and $21.2 million during 1998
and 1997, respectively.
47
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 4--NET INVESTMENT INCOME
Investment income has been reduced by the following amounts:
<TABLE>
<CAPTION>
1998 1997
------ --------
(In millions)
<S> <C> <C>
Investment expenses . . . . . . . . . . . . . . . . . . . . $317.5 $339.6
Interest expense . . . . . . . . . . . . . . . . . . . . . . 44.3 57.9
Depreciation on real estate and other invested assets . . . 41.6 76.6
Real estate and other investment taxes . . . . . . . . . . . 60.1 61.5
------ -------
$463.5 $535.6
====== =======
</TABLE>
NOTE 5--NET CAPITAL GAINS (LOSSES) AND OTHER ADJUSTMENTS
Net realized capital gains (losses) consist of the following items:
<TABLE>
<CAPTION>
1998 1997
-------- ---------
(In millions)
<S> <C> <C>
Net gains from asset sales and foreclosures . . . . . . . $ 303.3 $ 63.4
Capital gains tax . . . . . . . . . . . . . . . . . . . . (171.7) (84.1)
Net capital gains transferred to the IMR . . . . . . . . (130.9) (69.1)
------- -------
Net Realized Capital Gains (Losses) . . . . . . . . . . $ 0.7 $(89.8)
======= =======
</TABLE>
Net unrealized capital (losses) gains and other adjustments consist of the
following items:
<TABLE>
<CAPTION>
1998 1997
-------- ----------
(In millions)
<S> <C> <C>
Net (losses) gains from changes in security values and
book value adjustments . . . . . . . . . . . . . . . . $ (90.6) $ 159.5
Increase in asset valuation reserve . . . . . . . . . . (123.9) (100.9)
------- -------
Net Unrealized Capital (Losses) Gains and Other
Adjustments. . . . . . . . . . . . . . . . . . . . . $(214.5) $ 58.6
======= =======
</TABLE>
48
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 6--INVESTMENTS
The statement value and fair value of bonds are shown below:
<TABLE>
<CAPTION>
Gross Gross
Statement Unrealized Unrealized
December 31, 1998 Value Gains Losses Fair Value
----------------- --------- ---------- ---------- ------------
(In millions)
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S.
government corporations and
agencies . . . . . . . . . . $ 123.3 $ 5.9 $ 0.0 $ 129.2
Obligations of states and
political subdivisions . . . 86.4 9.9 0.0 96.3
Debt securities issued by
foreign governments . . . . 264.5 29.4 8.2 285.7
Corporate securities . . . . 18,155.4 1,567.7 294.4 19,428.7
Mortgage-backed securities . 4,723.4 181.2 5.2 4,899.4
--------- ---------- ------ ----------
Total bonds . . . . . . . . $23,353.0 $1,794.1 $307.8 $24,839.3
========= ========== ====== ==========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1997
-----------------
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies . . . . . $ 258.9 $ 9.3 $ 0.0 $ 268.2
Obligations of states and political
subdivisions. . . . . . . . . . . 149.6 16.3 0.0 165.9
Debt securities issued by foreign
governments. . . . . . . . . . . . 259.7 53.2 0.1 312.8
Corporate securities . . . . . . . . 17,336.1 1,485.9 113.4 18,708.6
Mortgage-backed securities . . . . . 4,981.7 115.9 28.3 5,069.3
--------- -------- ------ ----------
Total bonds. . . . . . . . . . . $22,986.0 $1,680.6 $141.8 $24,524.8
========= ======== ====== ==========
</TABLE>
The statement value and fair value of bonds at December 31, 1998, by contractual
maturity, are shown below. Maturities will differ from contractual maturities
because eligible borrowers may exercise their right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Statement Fair
Value Value
--------- -----------
(In millions)
<S> <C> <C>
Due in one year or less . . . . . . . . . . . . . . . . $ 1,569.1 $ 1,622.2
Due after one year through five years . . . . . . . . . 5,597.3 5,922.5
Due after five years through ten years . . . . . . . . 5,335.6 5,666.5
Due after ten years . . . . . . . . . . . . . . . . . . 6,127.6 6,728.7
--------- ----------
18,629.6 19,939.9
Mortgage-backed securities . . . . . . . . . . . . . . 4,723.4 4,899.4
--------- ----------
$23,353.0 $24,839.3
========= ==========
</TABLE>
Gross gains of $126.4 million in 1998 and $61.5 million in 1997 and gross losses
of $62.3 million in 1998 and $86.6 million in 1997 were realized from the sale
of bonds.
At December 31, 1998, bonds with an admitted asset value of $18.9 million were
on deposit with state insurance departments to satisfy regulatory requirements.
49
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 6--INVESTMENTS--CONTINUED
The cost of common stocks was $258.4 million and $148.0 million at December 31,
1998 and 1997, respectively. At December 31, 1998, gross unrealized appreciation
on common stocks totaled $64.9 million, and gross unrealized depreciation
totaled $54.0 million. The fair value of preferred stock totaled $832.4 million
at December 31, 1998 and $695.8 million at December 31, 1997.
The Company participates in a security lending program for the purpose of
enhancing income on securities held. At December 31, 1998 and 1997, $421.5
million and $217.0 million, respectively, of the Company's bonds and stocks were
on loan to various brokers/dealers, but were fully collateralized by cash and
U.S. government securities in an account held in trust for the Company. Such
assets reflect the extent of the Company's involvement in securities lending,
not the Company's risk of loss.
Mortgage loans with outstanding principal balances of $56.4 million, bonds with
amortized cost of $105.1 million and real estate with depreciated cost of $14.6
million were non-income producing for the twelve months ended December 31, 1998.
Restructured commercial mortgage loans aggregated $230.5 million and $314.3
million as of December 31, 1998 and 1997, 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
------------------------------
1998 1997
----------------------- -------
(In millions)
<S> <C> <C>
Expected . . . . . . . . . . . . . . . . . . $22.5 $33.8
Actual . . . . . . . . . . . . . . . . . . . 11.6 24.9
</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, 1998, the mortgage loan portfolio was diversified by geographic
region and specific collateral property type as displayed below. The Company
controls credit risk through credit approvals, limits and monitoring procedures.
<TABLE>
<CAPTION>
Statement Geographic Statement
Property Type Value Concentration Value
-------------- ------------- ------------- ---------------
(In millions) (In millions)
<S> <C> <C> <C>
Apartments . . . . . . $1,722.7 East North Central . $1,164.3
Hotels . . . . . . . . 283.2 East South Central . 137.1
Industrial . . . . . . 894.9 Middle Atlantic . . . 1,408.5
Office buildings . . . 2,094.0 Mountain . . . . . . 345.0
Retail . . . . . . . . 1,589.6 New England . . . . . 791.1
1-4 Family . . . . . . 6.4 Pacific . . . . . . . 1,848.7
Agricultural . . . . . 1,298.3 South Atlantic . . . 1,531.3
Other . . . . . . . . 334.6 West North Central . 287.5
West South Central . 602.2
Other . . . . . . . . 108.0
------------- -------------
$8,223.7 $8,223.7
============= =============
</TABLE>
50
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 6--INVESTMENTS--CONTINUED
At December 31, 1998, the fair values of the commercial and agricultural
mortgage loan portfolios were $7.3 billion and $1.3 billion, respectively. The
corresponding amounts as of December 31, 1997 were approximately $6.7 billion
and $1.5 billion, respectively.
The maximum and minimum lending rates for mortgage loans during 1998 were 9.68%
and 6.82% for agricultural loans, 9.25% and 6.73% for other properties, and 7.5%
and 6.65% for purchase money mortgages. Generally, the percentage of any loan to
the value of security at the time of the loan, exclusive of insured, guaranteed
or purchase money mortgages, is 75%. For city mortgages, fire insurance is
carried on all commercial and residential properties at least equal to the
excess of the loan over the maximum loan which would be permitted by law on the
land without the building, except as permitted by regulations of the Federal
Housing Commission on loans fully insured under the provisions of the National
Housing Act. For agricultural mortgage loans, fire insurance is not normally
required on land based loans except in those instances where a building is
critical to the farming operation. Fire insurance is required on all
agri-business facilities in an aggregate amount equal to the loan balance.
NOTE 7--REINSURANCE
Premiums, benefits and reserves associated with reinsurance assumed in 1998 were
$784.0 million, $310.0 million, and $7.7 million, respectively. The
corresponding amounts in 1997 were $787.1 million, $386.6 million, and $7.5
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 1998 were $873.9 million,
$772.5 million and $712.2 million, respectively. The corresponding amounts in
1997 were $801.8 million, $767.9 million and $594.9 million, respectively.
Premiums, benefits, and reserves ceded related to the group accident and health
and related group life business sold in 1997, included in the amounts above,
were $458.2 million, $481.2 million, and $238.6 million, respectively, at
December 31, 1998. The corresponding amounts in 1997 were $487.4 million, $503.3
million, and $247.9 million, respectively.
Amounts recoverable on paid claims and funds withheld from reinsurers were as
follows:
<TABLE>
<CAPTION>
December 31
--------------
1998 1997
------ --------
(In millions)
<S> <C> <C>
Reinsurance recoverables . . . . . . . . . . . . . . $18.6 $12.5
Funds withheld from reinsurers . . . . . . . . . . . 49.5 35.1
</TABLE>
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 $251.1 million at December 31, 1998 and $236.3
million at December 31, 1997.
John Hancock Variable Life Insurance Company (Variable Life, a wholly-owned
affiliate) has a modified coinsurance agreement with the Company to reinsure 50%
of Variable Life's 1994 through 1998 issues of flexible premium variable life
insurance and scheduled premium variable life insurance policies. In connection
with this agreement, the Company transferred $4.9 million and $22.0 million of
cash for tax, commission, and expense allowances to Variable Life, which
decreased the Company's net gain from operations by $22.2 million and $10.1
million in 1998 and 1997, respectively.
51
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 7--REINSURANCE--CONTINUED
Variable Life also has a modified coinsurance agreement with the Company to
reinsure 50% of Variable Life's 1995 through 1998 issues of certain retail
annuity contracts (Independence Preferred and Declaration). In connection with
this agreement, the Company made a net cash payment of $12.7 million in 1998 and
received a net cash payment of $1.1 million in 1997 of cash for surrender
benefits, tax, reserve increase, commission, expense allowances and premium.
This agreement decreased the Company's net gain from operations by $8.4 million
and $9.8 million in 1998 and 1997, respectively.
Effective January 1, 1997, Variable Life entered into a stop-loss agreement with
the Company to reinsure mortality claims in excess of 110% of expected mortality
claims in 1998 and 1997 for all policies that are not reinsured under any other
indemnity agreement. In connection with the agreement, the Company received $1.0
million and transferred $2.4 million of cash for mortality claims to Variable
Life, which increased by $0.5 million and decreased by $1.3 million the
Company's net gain from operations in 1998 and 1997, respectively.
Reinsurance ceded contracts do not relieve the Company from its obligations to
policyholders. The Company remains liable to its policyholders for the portion
reinsured to the extent that any reinsurer does not meet its obligations for
reinsurance ceded to it under the reinsurance agreements. Failure of the
reinsurers to honor their obligations could result in losses to the Company;
consequently, estimates are established for amounts deemed or estimated to be
uncollectible. To minimize its exposure to significant losses from reinsurance
insolvencies, the Company evaluates the financial condition of its reinsurers
and monitors concentration of credit risk arising from similar characteristics
of the insurer.
Neither the Company, nor any of its related parties, control, either directly or
indirectly, any external reinsurers with which the Company conducts business. No
policies issued by the Company have been reinsured with a foreign company which
is controlled, either directly or indirectly, by a party not primarily engaged
in the business of insurance.
The Company has not entered into any reinsurance agreements in which the
reinsurer may unilaterally cancel any reinsurance for reasons other than
nonpayment of premiums or other similar credits. The Company does not have any
reinsurance agreements in effect in which the amount of losses paid or accrued
through December 31, 1998 would result in a payment to the reinsurer of amounts
which, in the aggregate and allowing for offset of mutual credits from other
reinsurance agreements with the same reinsurer, exceed the total direct premiums
collected under the reinsured policies.
NOTE 8--BENEFITS PLANS AND OTHER POSTRETIREMENT 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. Benefits related to the
Company's defined benefit pension plans paid to employees and retirees covered
by annuity contracts issued by the Company amounted to $92.6 million in 1998 and
$89.7 million in 1997.
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.
52
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 8--BENEFITS PLANS AND OTHER POSTRETIREMENT BENEFIT PLANS--CONTINUED
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 $10,000 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 $10,000. The Company
matches the first 3% of pretax contributions for marketing representatives and
the first 2% of pre-tax 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 expense for defined contribution plans was $8.1 million and $6.2 million in
1998 and 1997, respectively.
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.
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 has 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 approximately zero. As of December 31, 1998, 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 70% equity securities and 30% fixed
income investments.
The Company provides additional compensation to employees based on achievement
of annual and long-term corporate financial objectives.
53
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 8--BENEFITS PLANS AND OTHER POSTRETIREMENT BENEFIT PLANS--CONTINUED
The changes in benefit obligation and plan assets are summarized as follows:
<TABLE>
<CAPTION>
Year ended December 31
-------------------------------------------
Pension Benefits Other Benefits
----------------------- -----------------
1998 1997 1998 1997
----------- ----------- -------- --------
(In millions)
<S> <C> <C> <C> <C>
Change in benefit
obligation:
Benefit obligation at
beginning of year . . . $1,704.0 $1,582.3 $ 381.0 $ 400.5
Service cost . . . . . . 32.8 30.7 6.8 8.5
Interest cost . . . . . . 115.5 109.3 24.4 25.5
Actuarial loss/(gain) . . 55.5 77.5 (16.8) (22.2)
Benefits paid . . . . . . (99.4) (95.8) (28.5) (31.3)
Benefit obligation at end
of year . . . . . . . . 1,808.4 1,704.0 366.9 381.0
Change in plan assets:
Fair value of plan assets
at beginning of year . . 1,995.5 1,787.6 172.7 132.4
Actual return of plan
assets . . . . . . . . . 296.1 295.5 39.9 31.0
Employer contribution . . 10.0 8.2 2.6 9.3
Benefits paid . . . . . . (99.4) (95.8) 0.0 0.0
Fair value of plan assets
at end of year . . . . . 2,202.2 1,995.5 215.2 172.7
Funded status . . . . . . 393.8 291.5 (151.7) (208.3)
Unrecognized actuarial
loss . . . . . . . . . . (292.0) (219.6) (163.0) (127.1)
Unrecognized prior service
cost . . . . . . . . . . 23.1 29.6 17.8 19.7
Unrecognized net
transition (asset)
obligation . . . . . . . (23.9) (35.5) 294.3 315.2
--------- --------- ------- -------
Net amount recognized . . $ 101.0 $ 66.0 $ (2.6) $ (0.5)
========= ========= ======= =======
</TABLE>
The assumptions used in accounting for the benefit plans were as follows:
<TABLE>
<CAPTION>
Year ended December 31
----------------------------------------
Pension Benefits Other Benefits
----------------------- ---------------
1998 1997 1998 1997
----------- ----------- ------- -------
<S> <C> <C> <C> <C>
Discount rate . . . . . . . 6.75% 7.00% 6.75% 7.00%
Expected return on plan
assets . . . . . . . . . . 8.50% 8.50% 8.50% 8.50%
Rate of compensation
increase . . . . . . . . . 4.56% 4.77% 4.00% 4.00%
</TABLE>
For measurement purposes, a 5.75 percent annual rate of increase in the per
capita cost of covered health care benefits was assumed for 1999. The rate was
assumed to decrease gradually to 5.00 percent in 2001 and remain at that level
thereafter.
54
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 8--BENEFITS PLANS AND OTHER POSTRETIREMENT BENEFIT PLANS--CONTINUED
Net periodic benefit (credit) cost includes the following components:
<TABLE>
<CAPTION>
Year Ended December 31
-----------------------------------------
Pension Benefits Other Benefits
------------------------ ---------------
1998 1997 1998 1997
----------- ----------- ------- ---------
(in millions)
<S> <C> <C> <C> <C>
Service cost . . . . . . . . . . $ 32.7 $ 30.7 $ 6.8 $ 8.5
Interest cost . . . . . . . . . 115.5 109.3 24.4 25.5
Expected return on plan assets . (165.5) (147.9) (39.9) (31.0)
Amortization of transition
(asset) obligation . . . . . . (11.6) (11.7) 20.9 20.9
Amortization of prior service
cost. . . . . . . . . . . . . . 6.5 6.6 1.9 1.9
Recognized actuarial (gain) loss (2.6) (1.0) 19.0 15.0
-------- -------- ------ -------
Net periodic benefit (credit)
cost . . . . . . . . . . . . $ (25.0) $ (14.0) $ 33.1 $ 40.8
======== ======== ====== =======
</TABLE>
Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plans. A one-percentage point change in assumed
health care cost trend rates would have the following effects:
<TABLE>
<CAPTION>
1-Percentage Point 1-Percentage Point
Increase Decrease
------------------ ------------------
(In millions)
<S> <C> <C>
Effect on total of service and
interest costs . . . . . . . . $ 2.9 $ (2.5)
Effect on postretirement benefit
obligations. . . . . . . . . . 28.7 (25.9)
</TABLE>
NOTE 9--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 majority-owned affiliates amounted to $13.8
billion at December 31, 1998 and $12.4 billion at December 31, 1997; total
liabilities amounted to $12.5 billion at December 31, 1998 and $11.1 billion at
December 31, 1997; and total net income was $148.5 million in 1998 and $184.8
million in 1997.
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 (See Note 7). 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 13).
The Company received dividends of $62.2 million and $65.9 million in 1998 and
1997, respectively, from unconsolidated affiliates.
55
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 10--FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The notional amounts, carrying values and estimated fair values of the Company's
derivative instruments are as follows at December 31:
<TABLE>
<CAPTION>
Number of Contracts/ Assets (Liabilities)
Notional Amounts 1998 1997
--------------------- --------------------- ----------------
Carrying Fair Carrying Fair
1998 1997 Value Value Value Value
---------- ---------- ---------- ---------- -------- -------
($ In millions)
<S> <C> <C> <C> <C> <C> <C>
Futures contracts to
sell securities . . $ 11,286 $ 3,733 $(3.1) $ (3.1) $ (2.5) $ (2.5)
Futures contracts to
acquire securities . 1,464 1,359 (0.3) (0.3) 1.2 1.2
Interest rate swap
agreements . . . . . 7,684.0 7,254.7 -- (159.1) -- (58.3)
Interest rate cap
agreements . . . . . 115.0 115.0 0.4 0.4 0.6 0.6
Interest rate floor
agreements . . . . . 125.0 125.0 0.7 0.7 0.4 0.4
Interest rate swaption
agreements . . . . . 0.0 34.2 -- 0.0 -- 0.0
Currency rate swap
agreements . . . . . 2,881.5 221.5 -- 16.2 -- (9.7)
Equity collar
agreements . . . . . -- -- 28.6 28.6 (14.1) (14.1)
</TABLE>
Financial futures contracts are used principally 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 contracts 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 futures contracts expire in 1999.
The Company uses futures contracts, interest rate swap, cap and floor
agreements, swaptions, and currency rate swap agreements for other than trading
purposes to hedge and manage its exposure to changes in interest rate levels,
foreign exchange rate fluctuations and to manage duration mismatch of assets and
liabilities.
The Company invests in common stock that is subject to fluctuations from market
value changes in stock prices. The Company sometimes seeks to reduce its market
exposure to such holdings by entering into equity collar agreements. A collar
consists of a call that limits the Company's potential for gain from
appreciation in the stock price as well as a put that limits the Company's loss
potential from a decline in the stock price.
The interest rate swap agreements expire in 1999 to 2028. The interest rate cap
and floor agreements expire in 2000 to 2007. Interest rate swaption agreements
expire in 2025. The currency rate swap agreements expire in 1999 to 2018. The
equity collar agreements expire in 2003.
The Company's exposure to credit risk is the risk of loss from a counterparty
failing to perform to the terms of the contract. The Company continually
monitors its position and the credit ratings of the counterparties to these
derivative instruments. To limit exposure associated with counterparty
nonperformance on interest rate and currency swap agreements, the Company enters
into master netting agreements with its counterparties. The Company believes the
risk of incurring losses due to nonperformance by its counterparties is remote
and that such losses, if any, would be immaterial. Futures contracts trade on
organized exchanges and, therefore, have minimal credit risk.
56
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 11--LEASES
The Company leases office space and furniture and equipment under various
operating leases including furniture and equipment leased under a series of
sales-leaseback agreements with a nonaffiliated organization. Rental expense for
all operating leases totaled $26.2 million in 1998 and $27.4 million in 1997.
Future minimum rental commitments under noncancellable operating leases for
office space and furniture and equipment are as follows:
<TABLE>
<CAPTION>
December 31, 1998
-------------------
(In millions)
<S> <C>
1999. . . . . . . . . . . . . . . . . . . . . . . . . . . $19.0
2000. . . . . . . . . . . . . . . . . . . . . . . . . . . 16.5
2001. . . . . . . . . . . . . . . . . . . . . . . . . . . 13.5
2002. . . . . . . . . . . . . . . . . . . . . . . . . . . 10.0
2003. . . . . . . . . . . . . . . . . . . . . . . . . . . 5.9
Thereafter. . . . . . . . . . . . . . . . . . . . . . . . 7.5
-----
Total minimum payments . . . . . . . . . . . . . . . . . $72.4
=====
</TABLE>
NOTE 12--POLICY RESERVES, POLICYHOLDERS' AND BENEFICIARIES' FUNDS AND
OBLIGATIONS RELATED TO SEPARATE ACCOUNTS
The Company's annuity reserves and deposit fund liabilities and related separate
account 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, 1998 Percent
----------------- ---------
(In millions)
<S> <C> <C>
Subject to discretionary withdrawal (with
adjustment):
With market value adjustment . . . . . . . . $ 792.0 2.0%
At book value less surrender charge . . . . . 2,773.8 7.1
--------- -----
Total with adjustment . . . . . . . . . . 3,565.8 9.1
Subject to discretionary withdrawal (without
adjustment) at book value . . . . . . . . . 3,782.8 9.8
Subject to discretionary withdrawal--separate
accounts . . . . . . . . . . . . . . . . . . 14,809.7 38.1
Not subject to discretionary withdrawal:
General account . . . . . . . . . . . . . . . 15,375.2 39.6
Separate accounts . . . . . . . . . . . . . . 1,301.5 3.4
--------- -----
Total annuity reserves, deposit fund liabilities
and separate accounts--before reinsurance . . . 38,835.0 100.0%
=====
Less reinsurance ceded . . . . . . . . . . . . . (0.1)
---------
Net annuity reserves, deposit fund liabilities
and separate accounts . . . . . . . . . . . . . $38,834.9
=========
</TABLE>
Any liquidation costs associated with the $14.8 billion of separate accounts
subject to discretionary withdrawal are sustained by the separate account
contractholders and not by the general account.
57
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 13--COMMITMENTS AND CONTINGENCIES
The Company has extended commitments to purchase long-term bonds, preferred and
common stocks, and other invested assets and issue real estate mortgages
totaling $329.1 million, $72.0 million, $214.1 million and $471.4 million,
respectively, at December 31, 1998. 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 estimated fair value of the
commitments described above is $1.1 billion at December 31, 1998. The majority
of these commitments expire in 1999.
During 1996, the Company entered into a credit support and collateral pledge
agreement with the Federal National Mortgage Association (FNMA). Under the
agreement, the Company sold $532.8 million of commercial mortgage loans and
acquired an equivalent amount of FNMA securities. The Company completed similar
transactions with FNMA in 1991 for $1.042 billion and in 1993 for $71.9 million.
FNMA is guarantying the full face value of the bonds of the three transactions
to the bondholders. However, the Company has agreed to absorb the first 12.25%
of the principal and interest losses (less buy-backs) for the pools of loans
involved in the three transactions, based on the total outstanding principal
balance of $1.036 billion as of July 1, 1996, but is not required to commit
collateral to support this loss contingency. At December 31, 1998, the aggregate
outstanding principal balance of all the remaining pools of loans from 1991,
1993, and 1996 was $602.8 million.
Historically, the Company has experienced losses of less than one percent on its
multi-family mortgage portfolio. Mortgage loan buy-backs required by the FNMA in
1998 and 1997 amounted to $4.6 million and $4.1 million, respectively.
During 1996, the Company entered into a credit support and collateral pledge
agreement with the Federal Home Loan Mortgage Corporation (FHLMC). Under the
agreement, the Company sold $535.3 million of multi-family loans and acquired an
equivalent amount of FHLMC securities. FHLMC is guarantying the full face value
of the bonds to the bondholders. However, the Company has agreed to absorb the
first 10.5% 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 of less
than one percent on its multi-family loan portfolio. At December 31, 1998, the
aggregate outstanding principal balance of the pools of loans was $445.8
million. There were no mortgage loans buy-backs in 1998 and 1997.
The Company has a support agreement with Variable Life under which the Company
agrees to continue directly or indirectly to own all of Variable Life's common
stock and maintain Variable Life's net worth at not less than $1 million.
The Company has a support agreement with John Hancock Capital Corporation
(JHCC), a non-consolidated wholly-owned subsidiary, 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, 1998 were $411.7 million for short-term borrowings
and $173.4 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 with
litigation from time to time with claimants, beneficiaries and others, and a
number of litigation matters were pending as of December 31, 1998. It is the
opinion of management, after consultation with counsel, that the ultimate
liability with respect to these claims, if any, will not materially affect the
financial position or results of operations of the Company.
58
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 13--COMMITMENTS AND CONTINGENCIES--CONTINUED
During 1997, the Company entered into a court approved settlement relating to a
class action lawsuit involving certain individual life insurance policies sold
from 1979 through 1996. In entering into the settlement, the Company
specifically denied any wrongdoing. The Company has established a litigation
reserve in connection with the settlement to provide for relief to class members
and for legal and administrative costs associated with the settlement. The
reserve has been charged, net of the related tax effect, directly to
policyholders' contingency reserves of the Company. Given the uncertainties
associated with estimating the reserve, it is possible that the final cost of
the settlement could be different from the amounts presently provided for by the
Company. However, the Company does not believe that the ultimate resolution of
the settlement will have a material adverse effect on the Company's financial
position.
NOTE 14--FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and fair values of the
Company's financial instruments:
<TABLE>
<CAPTION>
December 31
---------------------------------------------
1998 1997
--------------------- ---------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- ---------- ---------- ----------
(In millions)
<S> <C> <C> <C> <C>
Assets
Bonds--Note 6 . . . $23,353.0 $24,839.3 $22,986.0 $24,524.8
Preferred
stocks--Note 6 . . 844.7 832.4 640.6 695.8
Common stocks--Note 6 269.3 269.3 256.9 256.9
Mortgage loans on
real estate--Note 6 8,223.7 8,619.7 7,851.2 8,215.9
Policy loans--Note 1 1,573.8 1,573.8 1,577.3 1,577.3
Cash and cash
equivalents--Note 1 1,348.9 1,348.9 724.8 724.8
Liabilities
Guaranteed investment
contracts--Note 1 . 12,666.9 12,599.7 11,499.4 11,516.8
Fixed rate deferred
and immediate
annuities--Note 1 . 4,375.0 4,412.2 4,289.1 4,290.4
Supplementary
contracts without
life contingencies--
Note 1 . . . . . . 42.7 44.7 40.9 42.1
Derivatives assets
(liabilities) relating
to:--Note 10
Futures contracts . . . (3.4) (3.4) (1.3) (1.3)
Interest rate swaps . . -- (159.1) -- (58.3)
Currency rate swaps . . -- 16.2 -- (9.7)
Interest rate caps . . 0.4 0.4 0.6 0.6
Interest rate floors . 0.7 0.7 0.4 0.4
Equity collar agreements 28.6 28.6 (14.1) (14.1)
Commitments--Note 13 . -- 1,114.2 -- 1,332.3
</TABLE>
The carrying amounts in the table are included in the statutory-basis statements
of financial position. The methods and assumptions utilized by the Company in
estimating its fair value disclosures are described in Note 1.
59
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 15--IMPACT OF YEAR 2000 (UNAUDITED)
The Company is executing its plan to address the impact of the Year 2000 issues
that result from computer programs being written using two digits to reflect the
year rather than four to define the applicable year and century. historically,
the first two digits were hardcoded to save memory.
Many of the Company's computer programs that have date-sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in an information technology (IT) system failure or miscalculations
causing disruptions of operations, including, among other things, a temporary
inability to process transactions, send invoices or engage in similar normal
business activities. In addition, non-IT systems including, but not limited to,
security alarms, elevators and telephones are subject to malfunction due to
their dependence on embedded technology such as microcontrollers for proper
operation. As described, the Year 2000 project presents a number of challenges
for financial institutions since the correction of Year 2000 issues in IT and
non-IT systems will be complex and costly for the entire industry.
The Company began to address the Year 2000 project as early as 1994. The
Company's plan to address the Year 2000 Project includes an awareness campaign,
an assessment period, a renovation stage, validation work and an implementation
of Company solutions.
The continuous awareness campaign serves several purposes: defining the problem,
gaining executive level support and sponsorship, establishing a team and overall
strategy, and assessing existing information system management resources.
Additionally, the awareness campaign establishes an education process to ensure
that all employees are aware of the Year 2000 issue and knowledgeable of their
role in securing solutions.
The assessment phase, which was completed for both IT and non-IT systems as of
April 1998, included the identification, inventory, analysis, and prioritization
of IT and non-IT systems and processes to determine their conversion or
replacement.
The renovation stage reflects the conversion, validation, replacement, or
elimination of selected platforms, applications, databases and utilities,
including the modification of applicable interfaces. Additionally, the
renovation stage includes performance, functionality, and regression testing and
implementation. As of December 31, 1998, the renovation phase was substantially
complete for computer applications, systems and desktops. For all remaining
components, the renovation phase is underway and will be complete before the end
of the second quarter of 1999.
The validation phase consists of the compliance testing of renovated systems.
The validation phase is expected to be complete by mid 1999, after renovation is
accomplished. Testing facilities will be used through the remainder of 1999 to
perform special functional testing. Special functional testing includes testing,
as required, with material third parties and industry groups and performing
reviews of "dry runs" of year-end activities. Scheduled testing of material
relationships with third parties is underway. It is anticipated that testing
with material business partners will continue through much of 1999.
Finally, the implementation phase involves the actual implementation of
converted or replaced platforms, applications, databases, utilities, interfaces,
and contingency planning. Implementation is being performed concurrently during
the renovation phase and is expected to be completed before the end of the
second quarter of 1999.
60
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 15--IMPACT OF YEAR 2000 (UNAUDITED)--CONTINUED
The costs of the Year 2000 project consist of internal IT personnel and external
costs such as consultants, programmers, replacement software, and hardware. The
costs of the Year 2000 project are expensed as incurred. The project is funded
partially through a reallocation of resources from discretionary projects.
Through December 31, 1998, The Company has incurred and expensed approximately
$9.8 million in related payroll costs for its internal IT personnel on the
project. The estimated range of remaining internal IT personnel costs of the
project is approximately $8 to $9 million. Through December 31, 1998, the
Company has incurred and expensed approximately $36.4 million in external costs
for the project. The estimated range of remaining external costs of the project
is approximately $35 to $36 million. The total costs of the Year 2000 project to
the Company, based on management's best estimates, include approximately $18
million in internal IT personnel, $7.4 million in the external modification of
software, $34.2 million for external solution providers, $19.4 million in
replacement costs of non-compliant IT systems and $12.6 million in oversight,
test facilities and other expenses. Accordingly, the estimated range of total
costs of the Year 2000 project internal and external, is approximately $90 to
$95 million. However, there can be no guarantee that these estimates will be
achieved and actual results could materially differ from those plans. Specific
factors that might cause such material differences include, but are not limited
to, the availability and cost of personnel trained in this area, the ability to
locate and correct all relevant computer codes, and similar uncertainties.
The Company's total Year 2000 project costs include the estimated impact of
external solution providers and are based on presently available information.
However, there is no guarantee that the systems of other companies that the
Company's systems rely on will be timely converted, or that a failure to convert
by another company, or a conversion that is incompatible with the Company's
systems, would not have material adverse effect on the Company. It is documented
in trade publications that companies in foreign countries are not acting as
intensively as domestic companies to remediate Year 2000 issues. Accordingly, it
is expected that Company facilities based outside the United States face higher
degrees of risks from data exchanges with material business partners. In
addition, the Company has thousands of individual and business customers that
hold insurance policies, annuities and other financial products of the company.
Nearly all products sold by the Company contain date sensitive data, examples of
which are policy expiration dates, birth dates and premium payment dates.
Finally, the regulated nature of the Company's industry exposes it to potential
supervisory or enforcement actions relating to Year 2000 issues.
The Company's contingency planning initiative related to the Year 2000 project
is underway. The plan is addressing the Company's readiness as well as that of
material business partners on whom the Company depends. The Company's
contingency plans are being designed to keep each subsidiary's operations
functioning in the event of a failure or delay due to the Year 2000 record
format and date calculation changes. Contingency plans are being constructed
based on the foundation of extensive business resumption plans that the Company
has maintained and updated periodically, which outline responses to situations
that may affect critical business functions. These plans also provide emergency
operations guidance, which defines a documented order of actions to respond to
problems. These extensive business resumption plans are being enhanced to cover
Year 2000 situations.
61
<PAGE>
REPORT 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 Large Cap Growth, Sovereign Bond, International Equity Index
(formerly, International Equities), Small Cap Growth, International Balanced,
Mid Cap Growth, Large Cap Value, Money Market, Mid Cap Value, Diversified Mid
Cap Growth (formerly, Special Opportunities), Real Estate Equity, Growth &
Income, Managed, Short-Term Bond (formerly, Short-Term U.S. Government), Small
Cap Value, International Opportunities, Equity Index, Strategic Bond, Turner
Core Growth, Brandes International Equity (formerly, Edinburgh International
Equity) Frontier Capital Appreciation, Emerging Markets Equity, Global Equity,
Bond Index, Small/Mid Cap CORE and High-Yield Bond Subaccounts) as of December
31, 1998, and the related statements of operations and statements of changes in
net assets for each of the periods indicated therein. These financial statements
are the responsibility of the Account's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of each of the respective
subaccounts constituting John Hancock Mutual Variable Life Insurance Account UV
at December 31, 1998, the results of their operations and changes in their net
assets for each of the periods indicated, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Boston, Massachusetts
February 10, 1999
62
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
LARGE CAP SOVEREIGN INTERNATIONAL SMALL CAP INTERNATIONAL MID CAP LARGE CAP
GROWTH BOND EQUITY INDEX GROWTH BALANCED GROWTH VALUE
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ----------- ------------- ---------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in shares of
portfolios of John Hancock
Variable Series Trust I, at value $29,089,283 $67,185,725 $4,843,434 $1,802,291 $ 210,332 $ 1,473,582 $3,774,075
Investments in shares of
portfolios of M Fund Inc., at
value. . . . . . . . . . . . . . -- -- -- -- -- -- --
Policy loans and accrued interest
receivable . . . . . . . . . . . 1,968,975 9,925,170 263,940 -- -- -- --
Receivable from:
John Hancock Variable Series
Trust I . . . . . . . . . . . . 21,267 7,561 763 2,331 1,855 2,479 8,037
M Fund Inc. . . . . . . . . . . -- -- -- -- -- -- --
----------- ----------- ---------- ---------- -------------- ------------ ----------
Total assets . . . . . . . . . . 31,079,525 77,118,456 5,108,137 1,804,622 212,187 1,476,061 3,782,112
LIABILITIES
Payable to John Hancock Mutual
Life Insurance Company . . . . . 20,777 6,369 683 2,302 1,852 2,456 7,975
Asset charges payable . . . . . . 490 1,192 80 29 3 23 62
----------- ----------- ---------- ---------- -------------- ------------ ----------
Total liabilities . . . . . . . . 21,267 7,561 763 2,331 1,855 2,479 8,037
----------- ----------- ---------- ---------- -------------- ------------ ----------
Net assets . . . . . . . . . . . $31,058,258 $77,110,895 $5,107,374 $1,802,291 $ 210,332 $ 1,473,582 $3,774,075
=========== =========== ========== ========== ============== ============ ==========
</TABLE>
<TABLE>
<CAPTION>
DIVERSIFIED
MONEY MID CAP MID CAP REAL ESTATE GROWTH &
MARKET VALUE GROWTH EQUITY INCOME MANAGED
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ---------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in shares of portfolios of
John Hancock Variable Series Trust I,
at value . . . . . . . . . . . . . . $47,242,706 $6,049,829 $4,916,238 $5,305,959 $267,925,840 $ 98,661,041
Investments in shares of portfolios of
M Fund Inc., at value . . . . . . . . -- -- -- -- -- --
Policy loans and accrued interest
receivable. . . . . . . . . . . . . . 2,027,110 -- -- 225,050 29,167,555 12,154,307
Receivable from:
John Hancock Variable Series
Trust I . . . . . . . . . . . . . . 2,757,264 2,873 1,517 3,585 96,540 63,052
M Fund Inc. . . . . . . . . . . . . . -- -- -- -- -- --
----------- ---------- ---------- ---------- ------------ ------------
Total assets . . . . . . . . . . . . . 52,027,080 6,052,702 4,917,755 5,534,594 297,189,935 110,878,400
LIABILITIES
Payable to John Hancock Mutual Life
Insurance Company . . . . . . . . . . 2,757,795 2,775 1,439 3,498 91,946 62,013
Asset charges payable . . . . . . . . 754 98 78 88 4,593 1,724
----------- ---------- ---------- ---------- ------------ ------------
Total liabilities . . . . . . . . . . 2,758,549 2,873 1,517 3,586 96,539 63,737
----------- ---------- ---------- ---------- ------------ ------------
Net assets . . . . . . . . . . . . . . $49,268,531 $6,049,829 $4,916,238 $5,531,008 $297,093,396 $110,814,663
=========== ========== ========== ========== ============ ============
<CAPTION>
SHORT-TERM
BOND
SUBACCOUNT
------------
<S> <C>
ASSETS
Investments in shares of portfolios of $496,489
John Hancock Variable Series Trust I,
at value . . . . . . . . . . . . . .
Investments in shares of portfolios of --
M Fund Inc., at value . . . . . . . .
Policy loans and accrued interest --
receivable. . . . . . . . . . . . . .
Receivable from:
John Hancock Variable Series 76
Trust I . . . . . . . . . . . . . .
M Fund Inc. . . . . . . . . . . . . . --
--------
Total assets . . . . . . . . . . . . . 496,565
LIABILITIES
Payable to John Hancock Mutual Life 68
Insurance Company . . . . . . . . . .
Asset charges payable . . . . . . . . 8
--------
Total liabilities . . . . . . . . . . 76
--------
Net assets . . . . . . . . . . . . . . $496,489
========
</TABLE>
See accompanying notes.
63
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
TURNER BRANDES
SMALL CAP INTERNATIONAL EQUITY STRATEGIC CORE INTERNATIONAL
VALUE OPPORTUNITIES INDEX BOND GROWTH EQUITY
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ------------- ---------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in shares
of portfolios of John
Hancock Variable
Series Trust I, at
value. . . . . . . . $2,550,502 $4,181,723 $7,247,833 $470,424 $ -- $ --
Investments in shares
of portfolios of M
Fund Inc.,
at value . . . . . . -- -- -- -- 125,007 255,755
Policy loans and
accrued interest
receivable . . . . . -- -- -- -- -- --
Receivable from:
John Hancock Variable
Series Trust I . . 4,417 2,936 13,979 4,071 2 4
M Fund Inc. . . . . -- -- -- -- -- --
---------- ---------- ---------- -------- -------- --------
Total assets . . . . 2,554,919 4,184,659 7,261,812 474,495 125,009 255,759
LIABILITIES
Payable to John
Hancock Mutual Life
Insurance
Company . . . . . . 4,376 2,867 13,860 4,063 -- --
Asset charges payable 41 68 119 8 2 4
---------- ---------- ---------- -------- -------- --------
Total liabilities . . 4,417 2,935 13,979 4,071 2 4
---------- ---------- ---------- -------- -------- --------
Net assets . . . . . $2,550,502 $4,181,724 $7,247,833 $470,424 $125,007 $255,755
========== ========== ========== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
FRONTIER EMERGING SMALL/
CAPITAL MARKETS GLOBAL BOND MID CAP HIGH YIELD
APPRECIATION EQUITY EQUITY INDEX CORE BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------ ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in shares
of portfolios of John
Hancock Variable
Series Trust I, at
value. . . . . . . . $ -- $729 $16,495 $14,549 $32,699 $5,453
Investments in shares
of portfolios of M
Fund Inc.,
at value . . . . . . 2,533,128 -- -- -- -- --
Policy loans and
accrued interest
receivable . . . . . -- -- -- -- -- --
Receivable from:
John Hancock Variable
Series Trust I . . 41 -- -- -- 1 --
M Fund Inc. . . . . -- -- -- -- -- --
---------- ---- ------- ------- ------- ------
Total assets . . . . 2,533,169 729 16,495 14,549 32,700 5,453
LIABILITIES
Payable to John
Hancock Mutual Life
Insurance
Company . . . . . . -- -- -- -- -- --
Asset charges payable 41 -- -- -- 1 --
---------- ---- ------- ------- ------- ------
Total liabilities . . 41 0 0 0 1 0
---------- ---- ------- ------- ------- ------
Net assets . . . . . $2,533,128 $729 $16,495 $14,549 $32,699 $5,453
========== ==== ======= ======= ======= ======
</TABLE>
See accompanying notes.
64
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF OPERATIONS
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
LARGE CAP GROWTH SOVEREIGN BOND
SUBACCOUNT SUBACCOUNT
---------------------------------- -------------------------------------
1998 1997 1996 1998 1997 1996
---------- ---------- ---------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions
received from:
John Hancock
Variable Series
Trust I . . . . . $2,836,032 $1,686,429 $1,905,476 $5,266,576 $4,454,173 $ 3,765,421
M Fund Inc. . . . . -- -- -- -- -- --
Interest income on
policy loans . . . 128,186 103,747 83,974 727,807 696,074 678,580
---------- ---------- ---------- ---------- ---------- -----------
Total investment
income . . . . . . . 2,964,218 1,790,176 1,989,450 5,994,383 5,150,247 4,444,001
Expenses:
Mortality and expense
risks . . . . . . . 143,859 99,710 69,829 415,570 370,612 325,346
---------- ---------- ---------- ---------- ---------- -----------
Net investment income 2,820,359 1,690,466 1,919,621 5,578,813 4,779,635 4,118,655
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . 433,509 292,430 145,304 (142,628) (230,607) (169,158)
Net unrealized
appreciation
(depreciation)
during the period . 4,558,660 2,142,494 3,756 (102,600) 1,277,686 (1,418,707)
---------- ---------- ---------- ---------- ---------- -----------
Net realized and
unrealized gain
(loss) on investments 4,992,169 2,434,924 149,060 (245,228) 1,047,079 (1,587,865)
---------- ---------- ---------- ---------- ---------- -----------
Net increase in net
assets resulting from
operations . . . . . $7,812,528 $4,125,390 $2,068,681 $5,333,585 $5,826,714 $ 2,530,790
========== ========== ========== ========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY SMALL CAP GROWTH
SUBACCOUNT SUBACCOUNT
------------------------------ ----------------------------
1998 1997 1996 1998 1997 1996*
-------- ---------- -------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions
received from:
John Hancock
Variable Series
Trust I . . . . . $743,339 $ 195,240 $ 42,110 $ -- $ 436 $ 160
M Fund Inc. . . . . -- -- -- -- -- --
Interest income on
policy loans . . . 17,802 15,746 13,158 -- -- --
-------- --------- -------- -------- ------- -------
Total investment
income . . . . . . . 761,141 210,986 55,268 -- 436 160
Expenses:
Mortality and expense
risks . . . . . . . 26,542 24,261 19,834 8,233 4,231 538
-------- --------- -------- -------- ------- -------
Net investment income
(loss) . . . . . . . 734,599 186,725 35,434 (8,233) (3,795) (378)
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . 52,891 50,829 25,854 21,741 6,475 (690)
Net unrealized
appreciation
(depreciation)
during the period . 13,239 (463,778) 217,574 204,674 92,108 (5,174)
-------- --------- -------- -------- ------- -------
Net realized and
unrealized gain
(loss) on investments 66,130 (412,949) 243,428 226,415 98,583 (5,864)
-------- --------- -------- -------- ------- -------
Net increase
(decrease) in net
assets resulting from
operations . . . . . $800,729 $(226,224) $278,862 $218,182 $94,788 $(6,242)
======== ========= ======== ======== ======= =======
</TABLE>
- ---------
* From May 1, 1996 (commencement of operations).
See accompanying notes.
65
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
INTERNATIONAL BALANCED MID CAP GROWTH
SUBACCOUNT SUBACCOUNT
--------------------------- -------------------------------------
1998 1997 1996* 1998 1997 1996*
-------- --------- ------ ------------ --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions
received from:
John Hancock
Variable Series
Trust I . . . . . $ 12,240 $ 3,972 $ 734 $ 130,303 $ -- $ 411
M Fund Inc. . . . . -- -- -- -- -- --
Interest income on
policy loans . . . -- -- -- -- -- --
-------- -------- ------ ------------ -------- ------------
Total investment
income . . . . . . . 12,240 3,972 734 130,303 -- 411
Expenses:
Mortality and expense
risks . . . . . . . 826 392 81 5,242 2,164 292
-------- -------- ------ ------------ -------- ------------
Net investment income
(loss) . . . . . . . 11,414 3,580 653 125,061 (2,164) 199
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . 1,050 429 9 26,192 5,866 (17)
Net unrealized
appreciation
(depreciation)
during the period . 12,294 (4,312) 899 193,946 66,874 1,684
-------- -------- ------ ------------ -------- ------------
Net realized and
unrealized gain
(loss) on investments 13,344 (3,883) 908 220,138 72,740 1,667
-------- -------- ------ ------------ -------- ------------
Net increase
(decrease) in net
assets resulting from
operations . . . . . $ 24,758 $ (303) $1,561 $ 345,199 $ 70,576 $ 1,786
======== ======== ====== ============ ======== ============
</TABLE>
<TABLE>
<CAPTION>
LARGE CAP VALUE MONEY MARKET
SUBACCOUNT SUBACCOUNT
-------------------------- --------------------------------
1998 1997 1996* 1998 1997 1996
-------- -------- ------ ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions
received from:
John Hancock
Variable Series
Trust I . . . . . $185,232 $ 57,265 $2,056 $2,249,510 $641,356 $1,073,915
M Fund Inc. . . . . -- -- -- -- -- --
Interest income on
policy loans . . . -- -- -- 154,162 148,802 160,206
-------- -------- ------ ---------- -------- ----------
Total investment
income . . . . . . . 185,232 57,265 2,056 2,403,672 790,158 1,234,121
Expenses:
Mortality and expense
risks . . . . . . . 15,356 3,303 218 263,735 81,437 134,461
-------- -------- ------ ---------- -------- ----------
Net investment income 169,876 53,962 1,838 2,139,937 708,721 1,099,660
Net realized and
unrealized gain on
investments:
Net realized gain . 68,953 17,858 588 -- -- --
Net unrealized
appreciation during
the period . . . . 64,132 80,036 4,787 -- -- --
-------- -------- ------ ---------- -------- ----------
Net realized and
unrealized gain on
investments. . . . . 133,085 97,894 5,375 -- -- --
-------- -------- ------ ---------- -------- ----------
Net increase in net
assets resulting from
operations . . . . . $302,961 $151,856 $7,213 $2,139,937 $708,721 $1,099,660
======== ======== ====== ========== ======== ==========
</TABLE>
- ---------
* From May 1, 1996 (commencement of operations).
See accompanying notes.
66
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
MID CAP VALUE DIVERSIFIED MID CAP
SUBACCOUNT GROWTH
---------------------------------- --------------------------------------------
1998 1997 1996* 1998 1997 1996
-------------- -------- -------- ------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I . . . . $ 53,920 $150,951 $ 5,010 $ 93,281 $ 407,765 $ 114,600
M Fund Inc. . . . . . . . . . . . . . . . . -- -- -- -- -- --
Interest income on policy loans . . . . . . . -- -- -- -- -- --
------------- -------- -------- ------------- ------------- -------------
Total investment income . . . . . . . . . . . 53,920 150,951 5,010 93,281 407,765 114,600
Expenses:
Mortality and expense risks . . . . . . . . . 34,857 7,632 572 26,942 22,030 10,841
------------- -------- -------- ------------- ------------- -------------
Net investment income . . . . . . . . . . . . 19,063 143,319 4,438 66,339 385,735 103,759
Net realized and unrealized gain (loss) on
investments:
Net realized gain . . . . . . . . . . . . . . 74,634 10,646 8,413 33,249 276,956 81,916
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . . (944,401) 145,409 14,211 126,465 (477,912) 264,010
------------- -------- -------- ------------- ------------- -------------
Net realized and unrealized gain (loss) on
investments . . . . . . . . . . . . . . . . . (869,767) 156,055 22,624 159,714 (200,956) 345,926
------------- -------- -------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from
operations . . . . . . . . . . . . . . . . . $ (850,704) $299,374 $ 27,062 $ 226,053 $ 184,779 $ 449,685
============= ======== ======== ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
REAL ESTATE EQUITY GROWTH & INCOME
SUBACCOUNT SUBACCOUNT
-------------------------------- -------------------------------------
1998 1997 1996 1998 1997 1996
------------ -------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions
received from:
John Hancock
Variable Series
Trust I . . . . . $ 343,976 $330,296 $177,243 $26,306,209 $25,377,474 $18,406,284
M Fund Inc. . . . . -- -- -- -- -- --
Interest income on
policy loans . . . 17,260 15,261 13,041 1,996,131 1,728,054 1,562,266
----------- -------- -------- ----------- ----------- -----------
Total investment
income . . . . . . . 361,236 345,557 190,284 28,302,340 27,105,528 19,968,550
Expenses:
Mortality and expense
risks . . . . . . . 33,890 25,420 16,931 1,466,469 1,136,268 842,055
----------- -------- -------- ----------- ----------- -----------
Net investment income 327,346 320,137 173,353 26,835,871 25,969,260 19,126,495
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain . 158,205 181,015 39,891 3,223,935 1,982,518 820,430
Net unrealized
appreciation
(depreciation)
during the period . (1,546,717) 165,392 637,301 32,918,552 18,247,212 4,555,481
----------- -------- -------- ----------- ----------- -----------
Net realized and
unrealized gain
(loss) on investments (1,388,512) 346,407 677,192 36,142,487 20,229,730 5,375,911
----------- -------- -------- ----------- ----------- -----------
Net increase
(decrease) in net
assets resulting from
operations . . . . . $(1,061,166) $666,544 $850,545 $62,978,358 $46,198,990 $24,502,406
=========== ======== ======== =========== =========== ===========
</TABLE>
- ---------
* From May 1, 1996 (commencement of operations).
See accompanying notes.
67
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
MANAGED SHORT-TERM BOND
SUBACCOUNT SUBACCOUNT
------------------------------------- --------------------------------
1998 1997 1996 1998 1997 1996
----------- ----------- ------------ --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions
received from:
John Hancock
Variable Series
Trust I . . . . . $ 9,347,788 $ 7,891,222 $ 8,705,892 $ 27,350 $1,036,747 $201,830
M Fund Inc. . . . . -- -- -- -- -- --
Interest income on
policy loans . . . 854,487 768,231 705,413 -- -- --
----------- ----------- ----------- -------- ---------- --------
Total investment
income . . . . . . . 10,202,275 8,659,453 9,411,305 27,350 1,036,747 201,830
Expenses:
Mortality and expense
risks . . . . . . . 577,276 497,030 426,946 2,680 121,572 15,305
----------- ----------- ----------- -------- ---------- --------
Net investment income 9,624,999 8,162,423 8,984,359 24,670 915,175 186,525
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . 791,245 437,661 230,806 265 (27,616) 577
Net unrealized
appreciation
(depreciation)
during the
period . . . . . . 6,629,458 4,941,061 (2,103,918) (4,247) 226,435 225,129
----------- ----------- ----------- -------- ---------- --------
Net realized and
unrealized gain
(loss) on investments 7,420,703 5,378,722 (1,873,112) (3,982) 198,819 225,706
----------- ----------- ----------- -------- ---------- --------
Net increase in net
assets resulting from
operations . . . . . $17,045,702 $13,541,145 $ 7,111,247 $ 20,688 $1,113,994 $412,231
=========== =========== =========== ======== ========== ========
</TABLE>
<TABLE>
<CAPTION>
SMALL CAP VALUE INTERNATIONAL OPPORTUNITIES
SUBACCOUNT SUBACCOUNT
----------------------------- -----------------------------
1998 1997 1996* 1998 1997 1996*
---------- --------- ------ --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions
received from:
John Hancock
Variable Series
Trust I . . . . . $ 12,675 $ 95,844 $1,653 $ 33,443 $ 5,284 $ 482
M Fund Inc. . . . . -- -- -- -- -- --
Interest income on
policy loans . . . -- -- -- -- -- --
--------- -------- ------ -------- -------- ------
Total investment
income . . . . . . . 12,675 95,844 1,653 33,443 5,284 482
Expenses:
Mortality and expense
risks . . . . . . . 11,853 3,270 128 21,581 1,697 295
--------- -------- ------ -------- -------- ------
Net investment income 822 92,574 1,525 11,862 3,587 187
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain . 29,257 19,812 11 33,474 3,191 57
Net unrealized
appreciation
(depreciation)
during the
period . . . . . . (105,331) (12,804) 2,702 272,314 (12,223) 7,271
--------- -------- ------ -------- -------- ------
Net realized and
unrealized gain
(loss) on investments (76,074) 7,008 2,713 305,788 (9,032) 7,328
--------- -------- ------ -------- -------- ------
Net increase
(decrease) in net
assets resulting from
operations . . . . . $ (75,252) $ 99,582 $4,238 $317,650 $ (5,445) $7,515
========= ======== ====== ======== ======== ======
</TABLE>
- ---------
* From May 1, 1996 (commencement of operations).
See accompanying notes.
68
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
EQUITY INDEX STRATEGIC BOND
SUBACCOUNT SUBACCOUNT
----------------------------- ------------------------
1998 1997 1996* 1998 1997 1996*
---------- -------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions
received from:
John Hancock
Variable Series
Trust I . . . . . $ 185,267 $ 54,601 $ 4,958 $19,628 $ 9,400 $ 539
M Fund Inc. . . . . -- -- -- -- --
Interest income on
policy loans . . . -- -- -- -- -- --
---------- -------- ------- ------- ------- ------
Total investment
income . . . . . . . 185,267 54,601 4,958 19,628 9,400 539
Expenses:
Mortality and expense
risks . . . . . . . 27,141 5,346 287 1,979 658 30
---------- -------- ------- ------- ------- ------
Net investment income 158,126 49,255 4,671 17,649 8,742 509
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . 443,879 14,525 620 3,991 348 36
Net unrealized
appreciation
(depreciation)
during the period . 585,673 146,714 6,278 4,308 1,260 8
---------- -------- ------- ------- ------- ------
Net realized and
unrealized gain
(loss) on investments 1,029,552 161,239 6,898 8,299 1,608 44
---------- -------- ------- ------- ------- ------
Net increase
(decrease) in net
assets resulting from
operations . . . . . $1,187,678 $210,494 $11,569 $25,948 $10,350 $ 553
========== ======== ======= ======= ======= ======
</TABLE>
<TABLE>
<CAPTION>
TURNER CORE GROWTH BRANDES INTERNATIONAL EQUITY
SUBACCOUNT SUBACCOUNT
------------------------ -----------------------------
1998 1997 1996* 1998 1997 1996*
------- ------- ------ -------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions
received from:
John Hancock
Variable Series
Trust I . . . . . . $ -- $ -- $ -- $ -- $ -- $ --
M Fund Inc. . . . . 2,231 6,373 958 14,444 1,796 510
Interest income on
policy loans . . . . -- -- -- -- -- --
------- ------- ------ ------- ------- -------
Total investment
income. . . . . . . 2,231 6,373 958 14,444 1,796 510
Expenses:
Mortality and expense
risks. . . . . . . 565 301 83 1,158 684 173
------- ------- ------ ------- ------- -------
Net investment income 1,666 6,072 875 13,286 1,112 337
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . 2,780 839 48 600 888 (91)
Net unrealized
appreciation
(depreciation)
during the period . 22,686 6,487 784 8,581 (1,473) (1,056)
------- ------- ------ ------- ------- -------
Net realized and
unrealized gain
(loss) on investments 25,466 7,326 832 9,181 (585) (1,147)
------- ------- ------ ------- ------- -------
Net increase
(decrease) in net
assets resulting from
operations. . . . . $27,132 $13,398 $1,707 $22,467 $ 527 $ (810)
======= ======= ====== ======= ======= =======
</TABLE>
- ---------
* From May 1, 1996 (commencement of operations).
See accompanying notes.
69
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
EMERGING SMALL/ HIGH
MARKETS GLOBAL BOND MID CAP YIELD
FRONTIER CAPITAL APPRECIATION EQUITY EQUITY INDEX CORE BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------------------ ---------- ---------- ---------- ---------- ------------
1998 1997 1996* 1998** 1998** 1998** 1998** 1998**
---------- --------- --------- ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series
Trust I . . . . . . . . . . . . $ -- $ -- $ -- $ 1 $ 117 $ 296 $ -- $ 50
M Fund Inc. . . . . . . . . . . 12,832 6,463 -- -- -- -- -- --
Interest income on policy loans . -- -- -- -- -- -- -- --
------- ------- ------ ---- ----- ----- ------- -----
Total investment income . . . . . 12,832 6,463 -- 1 117 296 -- 50
Expenses:
Mortality and expense risks . . . 13,446 1,409 477 0 60 11 48 2
------- ------- ------ ---- ----- ----- ------- -----
Net investment income . . . . . . (614) 5,054 (477) 1 57 285 (48) 48
Net realized and unrealized gain
(loss) on investments:
Net realized gain (loss) . . . . 23,061 8,970 6,683 (1) (16) (26) (1,957) (108)
Net unrealized appreciation
(depreciation) during the period (840) 32,469 1,317 (48) (303) (147) 1,888 (19)
------- ------- ------ ---- ----- ----- ------- -----
Net realized and unrealized gain
(loss) on investments . . . . . . 22,221 41,439 8,000 (48) (319) (173) (69) (127)
------- ------- ------ ---- ----- ----- ------- -----
Net increase (decrease) in net
assets resulting from operations $21,607 $46,493 $7,523 $(48) $(262) $ 112 $ (117) $ (79)
======= ======= ====== ==== ===== ===== ======= =====
</TABLE>
- ---------
* From May 1, 1996 (commencement of operations).
** From May 1, 1998 (commencement of operations).
See accompanying notes.
70
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
LARGE CAP GROWTH SOVEREIGN BOND
SUBACCOUNT SUBACCOUNT
--------------------------------------- ---------------------------------------
1998 1997 1996 1998 1997 1996
------------ ------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) . . . . . . . $ 2,820,359 $ 1,690,466 $ 1,919,621 $ 5,578,813 $ 4,779,635 $ 4,118,655
Net realized gain (loss) . . . . . . . . . 433,509 292,430 145,304 (142,628) (230,607) (169,158)
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . 4,558,660 2,142,494 3,756 (102,600) 1,277,686 (1,418,707)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations . . . . . . . . . 7,812,528 4,125,390 2,068,681 5,333,585 5,826,714 2,530,790
From policyholder transactions:
Net premiums from policyholders . . . . . . 6,922,934 5,387,401 4,588,842 10,038,753 10,001,325 12,282,665
Net benefits to policyholders . . . . . . . (4,268,727) (3,728,476) (3,100,493) (8,215,396) (8,526,521) (8,373,358)
Net increase in policy loans . . . . . . . 399,407 326,883 174,445 241,068 474,983 344,564
----------- ----------- ----------- ----------- ----------- -----------
Net increase in net assets resulting from
policyholder transactions . . . . . . . . . 3,053,614 1,985,808 1,662,794 2,064,425 1,949,787 4,253,871
----------- ----------- ----------- ----------- ----------- -----------
Net increase in net assets . . . . . . . . . 10,866,142 6,111,198 3,731,475 7,398,010 7,776,501 6,784,661
Net assets at beginning of period . . . . . 20,192,116 14,080,918 10,349,443 69,712,885 61,936,384 55,151,723
----------- ----------- ----------- ----------- ----------- -----------
Net assets at end of period . . . . . . . . $31,058,258 $20,192,116 $14,080,918 $77,110,895 $69,712,885 $61,936,384
=========== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY SMALL CAP GROWTH
SUBACCOUNT SUBACCOUNT
--------------------------------------- ---------------------------------
1998 1997 1996 1998 1997 1996*
------------ ------------ ------------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets from
operations:
Net investment income
(loss). . . . . . . $ 734,599 $ 186,725 $ 35,434 $ (8,233) $ (3,795) $ (378)
Net realized gain
(loss). . . . . . . 52,891 50,829 25,854 21,741 6,475 (690)
Net unrealized
appreciation
(depreciation)
during the period . 13,239 (463,778) 217,574 204,674 92,108 (5,174)
----------- ----------- ----------- ---------- --------- --------
Net increase
(decrease) in net
assets resulting from
operations . . . . . 800,729 (226,224) 278,862 218,182 94,788 (6,242)
From policyholder
transactions:
Net premiums from
policyholders . . . 1,489,281 1,504,962 1,691,043 891,480 809,492 276,720
Net benefits to
policyholders . . . (1,389,338) (1,091,126) (1,137,159) (269,586) (199,118) (13,425)
Net increase in
policy loans . . . 42,026 13,761 47,823 -- -- --
----------- ----------- ----------- ---------- --------- --------
Net increase in net
assets resulting from
policyholder
transactions . . . . 141,969 427,597 601,707 621,894 610,374 263,295
----------- ----------- ----------- ---------- --------- --------
Net increase in net
assets . . . . . . . 942,698 201,373 880,569 840,076 705,162 257,053
Net assets at
beginning of period 4,164,676 3,963,303 3,082,734 962,215 257,053 0
----------- ----------- ----------- ---------- --------- --------
Net assets at end of
period . . . . . . . $ 5,107,374 $ 4,164,676 $ 3,963,303 $1,802,291 $ 962,215 $257,053
=========== =========== =========== ========== ========= ========
</TABLE>
- ---------
* From May 1, 1996 (commencement of operations).
See accompanying notes.
71
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
INTERNATIONAL BALANCED MID CAP GROWTH
SUBACCOUNT SUBACCOUNT
-------------------------------------- --------------------------------------------
1998 1997 1996* 1998 1997 1996*
------------- ------------- --------- ------------ -------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) . . . . . $ 11,414 $ 3,580 $ 653 $ 125,061 $ (2,164) $ 119
Net realized gain (loss) . . . . . . . 1,050 429 9 26,192 5,866 (17)
Net unrealized appreciation
(depreciation) during the period . . . 12,294 (4,312) 899 193,946 66,874 1,684
------------ ------------ -------- ----------- ------------- --------------
Net increase (decrease) in net assets
resulting from operations . . . . . . . 24,758 (303) 1,561 345,199 70,576 1,786
From policyholder transactions:
Net premiums from policyholders . . . . 150,466 62,380 32,725 722,359 457,341 172,848
Net benefits to policyholders . . . . . (50,204) (9,531) (1,520) (211,806) (125,239) (9,482)
Net increase in policy loans . . . . . -- -- -- -- -- --
------------ ------------ -------- ----------- ------------- --------------
Net increase in net assets resulting from
policyholder transactions . . . . . . . 100,262 52,849 31,205 560,553 332,102 163,366
------------ ------------ -------- ----------- ------------- --------------
Net increase in net assets . . . . . . . 125,020 52,546 32,766 905,752 402,678 165,152
Net assets at beginning of period . . . 85,312 32,766 0 567,830 165,152 0
------------ ------------ -------- ----------- ------------- --------------
Net assets at end of period . . . . . . $ 210,322 $ 85,312 $ 32,766 $ 1,473,582 $ 567,830 $ 165,152
============ ============ ======== =========== ============= ==============
</TABLE>
<TABLE>
<CAPTION>
LARGE CAP VALUE MONEY MARKET
SUBACCOUNT SUBACCOUNT
---------------------------------- -----------------------------------------
1998 1997 1996* 1998 1997 1996
----------- ----------- --------- ------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Increase in net assets from operations:
Net investment income (loss) . . . . . . . . . $ 169,876 $ 53,962 $ 1,838 $ 2,139,937 $ 708,721 $ 1,099,660
Net realized gain (loss) . . . . . . . . . . . 68,953 17,858 588 -- -- --
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . . . 64,132 80,036 4,787 -- -- --
---------- ---------- -------- ------------ ----------- ------------
Net increase (decrease) in net assets resulting
from operations . . . . . . . . . . . . . . . 302,961 151,856 7,213 2,139,937 708,721 1,099,660
From policyholder transactions:
Net premiums from policyholders . . . . . . . 2,321,441 1,506,756 107,940 55,692,824 11,210,536 34,216,886
Net benefits to policyholders . . . . . . . . (528,449) (85,021) (10,621) (22,850,788) (9,620,370) (44,096,427)
Net increase (decrease) in policy loans . . . -- -- -- (198,682) 103,247 (134,332)
---------- ---------- -------- ------------ ----------- ------------
Net increase (decrease) in net assets resulting
from policyholder transactions . . . . . . . . 1,792,991 1,421,735 97,319 32,643,354 1,693,413 (10,013,873)
---------- ---------- -------- ------------ ----------- ------------
Net increase (decrease) in net assets . . . . . 2,095,952 1,573,591 104,532 34,783,291 2,402,134 (8,914,213)
Net assets at beginning of period . . . . . . . 1,678,123 104,532 0 14,485,240 12,083,106 20,997,319
---------- ---------- -------- ------------ ----------- ------------
Net assets at end of period . . . . . . . . . . $3,774,075 $1,678,123 $104,532 $ 49,268,531 $14,485,240 $ 12,083,106
========== ========== ======== ============ =========== ============
</TABLE>
- ---------
* From May 1, 1996 (commencement of operations).
See accompanying notes.
72
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
MID CAP VALUE DIVERSIFIED MID CAP GROWTH
SUBACCOUNT SUBACCOUNT
----------------------------------------- ------------------------------------------
1998 1997 1996* 1998 1997 1996
------------ ------------ -------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . . $ 19,063 $ 143,319 $ 4,438 $ 66,339 $ 385,735 $ 103,759
Net realized gain . . . . . . . . . . 74,634 10,646 8,413 33,249 276,956 81,916
Net unrealized appreciation
(depreciation) during the period . . (944,401) 145,409 14,211 126,465 (477,912) 264,010
----------- ----------- ------------- ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations . . . . . . (850,704) 299,374 27,062 226,053 184,779 449,685
From policyholder transactions:
Net premiums from policyholders . . . 5,639,732 1,620,752 284,225 1,812,711 2,554,133 2,077,582
Net benefits to policyholders . . . . (775,357) (112,395) (82,860) (1,214,489) (1,628,677) (497,713)
Net increase in policy loans . . . . . -- -- -- -- -- --
----------- ----------- ------------- ------------ ------------ ------------
Net increase in net assets resulting
from policyholder transactions . . . . 4,864,375 1,508,357 201,365 598,224 925,456 1,579,869
----------- ----------- ------------- ------------ ------------ ------------
Net increase in net assets . . . . . . 4,013,671 1,807,731 228,427 824,277 1,110,235 2,029,554
Net assets at beginning of period . . . 2,036,158 228,427 0 4,091,961 2,981,726 952,172
----------- ----------- ------------- ------------ ------------ ------------
Net assets at end of period . . . . . . $ 6,049,829 $ 2,036,158 $ 228,427 $ 4,916,238 $ 4,091,961 $ 2,981,726
=========== =========== ============= ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
REAL ESTATE EQUITY GROWTH & INCOME
SUBACCOUNT SUBACCOUNT
--------------------------------------- ------------------------------------------
1998 1997 1996 1998 1997 1996
------------ ------------ ------------ ------------- ------------- ---------------
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . . . $ 327,346 $ 320,137 $ 173,353 $ 26,835,871 $ 25,969,260 $ 19,126,495
Net realized gain (loss) . . . . . . . . 158,205 181,015 39,891 3,223,935 1,982,518 820,430
Net unrealized appreciation
(depreciation) during the period . . . (1,546,717) 165,392 637,301 32,918,552 18,247,212 4,555,481
----------- ----------- ----------- ------------ ------------ ------------
Net increase in net assets resulting from
operations . . . . . . . . . . . . . . . (1,061,166) 666,544 850,545 62,978,358 46,198,990 24,502,406
From policyholder transactions:
Net premiums from policyholders . . . . 3,382,263 1,748,132 1,161,434 35,108,834 30,351,780 32,903,369
Net benefits to policyholders . . . . . (1,663,696) (1,218,783) (1,008,266) (29,649,984) (24,619,851) (21,130,764)
Net increase in policy loans . . . . . . (1,103) 34,311 33,973 3,672,137 3,346,307 1,965,133
----------- ----------- ----------- ------------ ------------ ------------
Net increase in net assets resulting from
policyholder transactions . . . . . . . 1,717,464 563,660 187,141 9,130,987 9,078,236 13,737,738
----------- ----------- ----------- ------------ ------------ ------------
Net increase in net assets . . . . . . . 656,298 1,230,204 1,037,686 72,109,345 55,277,226 38,240,144
Net assets at beginning of period . . . . 4,874,710 3,644,506 2,606,820 224,984,051 169,706,825 131,466,681
----------- ----------- ----------- ------------ ------------ ------------
Net assets at end of period . . . . . . . $ 5,531,008 $ 4,874,710 $ 3,644,506 $297,093,396 $224,984,051 $169,706,825
=========== =========== =========== ============ ============ ============
</TABLE>
- ---------
* From May 1, 1996 (commencement of operations).
See accompanying notes.
73
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
MANAGED SHORT-TERM BOND
SUBACCOUNT SUBACCOUNT
------------------------------------------ -----------------------------------------
1998 1997 1996 1998 1997 1996
------------- ------------- ------------- ------------- ------------- --------------
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . . $ 9,624,999 $ 8,162,423 $ 8,984,359 $ 24,670 $ 915,175 $ 186,525
Net realized gain (loss) . . . . . . . 791,245 437,661 230,806 265 (27,616) 577
Net unrealized appreciation
(depreciation) during the period . . 6,629,458 4,941,061 (2,103,918) (4,247) 226,435 225,129
------------ ------------ ------------ ------------ ------------ -----------
Net increase in net assets resulting
from
operations . . . . . . . . . . . . . . 17,045,702 13,541,145 7,111,247 20,688 1,113,994 412,231
From policyholder transactions:
Net premiums from policyholders . . . 13,116,210 13,194,907 14,481,195 420,697 116,602 24,721,092
Net benefits to policyholders . . . . (14,539,301) (14,539,295) (12,942,967) (71,999) (26,168,835) (147,655)
Net increase in policy loans . . . . . 1,134,137 1,257,640 719,880 -- -- --
------------ ------------ ------------ ------------ ------------ -----------
Net increase (decrease) in net assets
resulting from policyholder
transactions . . . . . . . . . . . . . (288,954) (86,748) 2,258,108 348,698 (26,052,233) 24,573,437
------------ ------------ ------------ ------------ ------------ -----------
Net increase (decrease) in net assets . 16,756,748 13,454,397 9,369,355 369,386 (24,938,239) 24,985,668
Net assets at beginning of period . . . 94,057,915 80,603,518 71,234,163 127,103 25,065,342 79,674
------------ ------------ ------------ ------------ ------------ -----------
Net assets at end of period . . . . . . $110,814,663 $ 94,057,915 $ 80,603,518 $ 496,489 $ 127,103 $25,065,342
============ ============ ============ ============ ============ ===========
</TABLE>
<TABLE>
<CAPTION>
SMALL CAP VALUE INTERNATIONAL OPPORTUNITIES
SUBACCOUNT SUBACCOUNT
--------------------------------- --------------------------------
1998 1997 1996* 1998 1997 1996*
----------- ----------- -------- ----------- --------- -----------
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets from
operations:
Net investment income $ 822 $ 92,574 $ 1,525 $ 11,862 $ 3,587 $ 187
Net realized gain . 29,257 19,812 11 33,474 3,191 57
Net unrealized
appreciation
(depreciation)
during the period . (105,331) (12,804) 2,702 272,314 (12,223) 7,271
---------- ---------- ------- ---------- -------- --------
Net increase
(decrease) in net
assets resulting from
operations . . . . . (75,252) 99,582 4,238 317,650 (5,445) 7,515
From policyholder
transactions:
Net premiums from
policyholders . . . 1,644,666 1,224,547 63,825 3,814,201 295,915 141,907
Net benefits to
policyholders . . . (270,585) (137,364) (3,155) (339,134) (46,736) (4,149)
Net increase in
policy loans . . . -- -- -- -- -- --
---------- ---------- ------- ---------- -------- --------
Net increase in net
assets resulting from
policyholder
transactions . . . . 1,374,081 1,087,183 60,670 3,475,067 249,179 137,758
---------- ---------- ------- ---------- -------- --------
Net increase in net
assets . . . . . . . 1,298,829 1,186,765 64,908 3,792,717 243,734 145,273
Net assets at
beginning of period 1,251,673 64,908 0 389,007 145,273 0
---------- ---------- ------- ---------- -------- --------
Net assets at end of
period . . . . . . . $2,550,502 $1,251,673 $64,908 $4,181,724 $389,007 $145,273
========== ========== ======= ========== ======== ========
</TABLE>
- ---------
* From May 1, 1996 (commencement of operations).
See accompanying notes.
74
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
EQUITY INDEX STRATEGIC BOND
SUBACCOUNT SUBACCOUNT
---------------------------------- -----------------------------
1998 1997 1996* 1998 1997 1996*
----------- ----------- --------- --------- --------- ----------
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Increase in net assets
from operations:
Net investment income $ 158,126 $ 49,255 $ 4,671 $ 17,649 $ 8,742 $ 509
Net realized gain . 443,879 14,525 620 3,991 348 36
Net unrealized
appreciation during
the period . . . . 585,673 146,714 6,278 4,308 1,260 8
---------- ---------- -------- -------- -------- -------
Net increase in net
assets resulting from
operations . . . . . 1,187,678 210,494 11,569 25,948 10,350 553
From policyholder
transactions:
Net premiums from
policyholders . . . 4,822,053 1,827,052 234,122 381,024 161,548 13,347
Net benefits to
policyholders . . . (885,493) (149,826) (9,816) (83,865) (37,799) (682)
Net increase in
policy loans . . . -- -- -- -- -- --
---------- ---------- -------- -------- -------- -------
Net increase in net
assets resulting from
policyholder
transactions . . . . 3,936,560 1,677,226 224,306 297,159 123,749 12,665
---------- ---------- -------- -------- -------- -------
Net increase in net
assets . . . . . . . 5,124,238 1,887,720 235,875 323,107 134,099 13,218
Net assets at
beginning of period 2,123,595 235,875 0 147,317 13,218 0
---------- ---------- -------- -------- -------- -------
Net assets at end of
period . . . . . . . $7,247,833 $2,123,595 $235,875 $470,424 $147,317 $13,218
========== ========== ======== ======== ======== =======
</TABLE>
<TABLE>
<CAPTION>
TURNER CORE GROWTH BRANDES INTERNATIONAL EQUITY
SUBACCOUNT SUBACCOUNT
---------------------------- -----------------------------
1998 1997 1996* 1998 1997 1996*
--------- -------- -------- --------- --------- ----------
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets from
operations:
Net investment income $ 1,666 $ 6,072 $ 875 $ 13,286 $ 1,112 $ 337
Net realized gain
(loss). . . . . . . 2,780 839 48 600 888 (91)
Net unrealized
appreciation
(depreciation)
during the period . 22,686 6,487 784 8,581 (1,473) (1,056)
-------- ------- ------- -------- -------- -------
Net increase
(decrease) in net
assets resulting from
operations . . . . . 27,132 13,398 1,707 22,467 527 (810)
From policyholder
transactions:
Net premiums from
policyholders . . . 39,069 33,658 28,147 141,892 82,259 91,573
Net benefits to
policyholders . . . (9,834) (7,208) (1,062) (34,941) (45,350) (1,860)
Net increase in
policy loans . . . -- -- -- -- -- --
-------- ------- ------- -------- -------- -------
Net increase in net
assets resulting from
policyholder
transactions . . . . 29,235 26,450 27,085 106,951 36,909 89,713
-------- ------- ------- -------- -------- -------
Net increase in net
assets . . . . . . . 56,367 39,848 28,792 129,418 37,436 88,903
Net assets at
beginning of period 68,640 28,792 0 126,339 88,903 0
-------- ------- ------- -------- -------- -------
Net assets at end of
period . . . . . . . $125,007 $68,640 $28,792 $255,755 $126,339 $88,903
======== ======= ======= ======== ======== =======
</TABLE>
- ---------
* From May 1, 1996 (commencement of operations).
See accompanying notes.
75
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
EMERGING SMALL/ HIGH
MARKETS GLOBAL BOND MID CAP YIELD
FRONTIER CAPITAL APPRECIATION EQUITY EQUITY INDEX CORE BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
-------------------------------- ---------- ---------- ---------- ---------- ------------
1998 1997 1996* 1998** 1998** 1998** 1998** 1998**
----------- --------- --------- ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income (loss) . . $ (614) $ 5,054 $ (477) $ 1 $ 57 $ 285 $ (48) $ 48
Net realized gain (loss) . . . . 23,061 8,970 6,683 (1) (16) (26) (1,957) (108)
Net unrealized appreciation
(depreciation) during the period (840) 32,469 1,317 (48) (303) (147) 1,888 (19)
---------- -------- -------- ---- ------- ------- -------- ---------
Net increase (decrease) in net
assets resulting from operations 21,607 46,493 7,523 (48) (262) 112 (117) (79)
From policyholder transactions:
Net premiums from policyholders 2,465,299 138,553 230,461 784 17,519 16,730 52,673 108,274
Net benefits to policyholders . (227,386) (70,647) (78,775) (7) (762) (2,293) (19,857) (102,742)
Net increase in policy loans . . -- -- -- -- -- -- -- --
---------- -------- -------- ---- ------- ------- -------- ---------
Net increase in net assets
resulting from policyholder
transactions . . . . . . . . . . 2,237,913 67,906 151,686 777 16,757 14,437 32,816 5,532
---------- -------- -------- ---- ------- ------- -------- ---------
Net increase in net assets . . . 2,259,520 114,399 159,209 729 16,495 14,549 32,699 5,453
Net assets at beginning of period 273,608 159,209 0 0 0 0 0 0
---------- -------- -------- ---- ------- ------- -------- ---------
Net assets at end of period . . . $2,533,128 $273,608 $159,209 $729 $16,495 $14,549 $ 32,699 $ 5,453
========== ======== ======== ==== ======= ======= ======== =========
</TABLE>
- ---------
* From May 1, 1996 (commencement of operations).
** From May 1, 1998 (commencement of operations).
See accompanying notes.
76
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
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 or John Hancock). 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 twenty-six
subaccounts. The assets of each subaccount are invested exclusively in shares of
a corresponding Portfolio of John Hancock Variable Series Trust I (the Fund) or
of M Fund Inc. (M Fund). New subaccounts may be added as new Portfolios are
added to the Fund or to M Fund, or as other investment options are developed,
and made available to policyholders. The twenty-six Portfolios of the Fund and M
Fund which are currently available are the Large Cap Growth, Sovereign Bond,
International Equity Index (formerly, International Equities), Small Cap Growth,
International Balanced, Mid Cap Growth, Large Cap Value, Money Market, Mid Cap
Value, Diversified Mid Cap Growth (formerly, Special Opportunities), Real Estate
Equity, Growth & Income, Managed, Short-Term Bond (formerly, Short-Term U.S.
Government), Small Cap Value, International Opportunities, Equity Index,
Strategic Bond, Turner Core Growth, Brandes International Equity (formerly,
Edinburgh International Equity) Frontier Capital Appreciation, Emerging Markets
Equity, Global Equity, Bond Index, Small/Mid Cap CORE and High Yield Bond
Portfolios. Each Portfolio has a different investment objective.
The net assets of the Account may not be less than the amount required under
state insurance law to provide for death benefits (without regard to the minimum
death benefit guarantee) and other policy benefits. Additional assets are held
in 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.
2. SIGNIFICANT ACCOUNTING POLICIES
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, and disclosure of
contingent assets and liabilities, at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Valuation of Investments
Investment in shares of the Fund and of M Fund are valued at the reported net
asset values of the respective Portfolios. Investment transactions are recorded
on the trade date. Dividend income is recognized on the ex-dividend date.
Realized gains and losses on sales of respective Portfolio shares are determined
on the basis of identified cost.
Federal Income Taxes
The operations of the Account are included in the federal income tax return of
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.
77
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Expenses
JHMLICO assumes mortality and expense risks of the variable life insurance
policies for which asset charges are deducted at various rates ranging from .50%
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.
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 policyholder indebtedness) and
compounded daily.
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.
78
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. DETAILS OF INVESTMENTS
The details of the shares owned and cost and value of investments in the
Portfolios of the Fund and of M Fund at December 31, 1998 were as follows:
<TABLE>
<CAPTION>
SUBACCOUNT SHARES OWNED COST VALUE
---------- ------------ ------------ --------------
--------------------------------------------------------------------------
<S> <C> <C> <C>
Large Cap Growth . . . . . . 1,110,523 $ 21,789,053 $ 29,089,283
Sovereign Bond . . . . . . . 6,771,659 67,673,435 67,185,725
International Equities Index 311,263 5,008,102 4,843,434
Small Cap Growth . . . . . . 138,771 1,510,683 1,802,291
International Balanced . . . 18,907 201,451 210,332
Mid Cap Growth . . . . . . . 97,488 1,211,077 1,473,582
Large Cap Value . . . . . . . 269,187 3,625,121 3,774,075
Money Market . . . . . . . . 4,724,271 47,242,706 47,242,706
Mid Cap Value . . . . . . . . 496,463 6,834,611 6,049,829
Diversified Mid Cap Growth . 308,429 4,879,083 4,916,238
Real Estate Equity . . . . . 425,847 6,005,341 5,305,959
Growth & Income . . . . . . . 13,745,190 204,200,346 267,925,840
Managed . . . . . . . . . . . 6,309,777 86,765,615 98,661,041
Short-Term Bond . . . . . . . 49,410 500,882 496,489
Small Cap Value . . . . . . . 220,083 2,665,935 2,550,502
International Opportunities . 342,354 3,914,392 4,181,723
Equity Index . . . . . . . . 409,419 6,509,168 7,247,833
Strategic Bond . . . . . . . 44,382 464,847 470,424
Turner Core Growth . . . . . 7,007 95,050 125,007
Brandes International Equity 23,594 249,703 255,755
Frontier Capital Appreciation 167,868 2,500,182 2,533,128
Emerging Markets . . . . . . 103 777 729
Global Equity . . . . . . . . 1,681 16,798 16,495
Bond Index . . . . . . . . . 1,428 14,696 14,549
Small/Mid Cap CORE . . . . . 3,626 30,811 32,699
High Yield Bond . . . . . . . 591 5,472 5,453
</TABLE>
79
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Purchases, including reinvestment of dividend distributions and proceeds from
the sales of shares in the Portfolios of the Fund and of M Fund during 1998,
were as follows:
<TABLE>
<CAPTION>
SUBACCOUNT PURCHASES SALES
---------- ----------- -------------
--------------------------------------------------------------------
<S> <C> <C>
Large Cap Growth . . . . . . . . . . . $ 6,774,969 $ 1,312,334
Sovereign Bond . . . . . . . . . . . . 11,567,936 4,169,838
International Equities Index . . . . . 1,784,110 951,538
Small Cap Growth . . . . . . . . . . . 806,640 192,979
International Balanced . . . . . . . . 126,798 15,122
Mid Cap Growth . . . . . . . . . . . . 807,563 121,950
Large Cap Value . . . . . . . . . . . . 2,359,015 396,146
Money Market . . . . . . . . . . . . . 56,538,955 21,551,247
Mid Cap Value . . . . . . . . . . . . . 5,537,800 654,362
Diversified Mid Cap Growth . . . . . . 1,324,819 660,257
Real Estate Equity . . . . . . . . . . 2,869,843 824,508
Growth & Income . . . . . . . . . . . . 42,879,493 10,719,822
Managed . . . . . . . . . . . . . . . . 14,154,576 5,992,753
Short-Term Bond . . . . . . . . . . . . 447,882 74,515
Small Cap Value . . . . . . . . . . . . 1,649,871 274,967
International Opportunities . . . . . . 3,882,937 396,009
Equity Index . . . . . . . . . . . . . 6,624,974 2,530,288
Strategic Bond . . . . . . . . . . . . 394,527 79,721
Turner Core Growth . . . . . . . . . . 42,112 11,211
Brandes International Equity . . . . . 151,328 31,092
Frontier Capital Appreciation . . . . . 2,487,618 250,320
Emerging Markets . . . . . . . . . . . 785 7
Global Equity . . . . . . . . . . . . . 17,047 233
Bond Index . . . . . . . . . . . . . . 17,026 2,304
Small/Mid Cap CORE . . . . . . . . . . 41,751 8,983
High Yield Bond . . . . . . . . . . . . 6,547 967
</TABLE>
5. IMPACT OF YEAR 2000 (UNAUDITED)
The John Hancock Mutual Variable Life Insurance Account UV, along with John
Hancock Mutual Life Insurance Company, its ultimate parent (together, John
Hancock), is executing its plan to address the impact of the Year 2000 issues
that result from computer programs being written using two digits to reflect the
year rather than four to define the applicable year and century. Historically,
the first two digits were hardcoded to save memory. Many of the John Hancock's
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in an
information technology (IT) system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices or engage in similar normal business
activities. In addition, non-IT systems including, but not limited to, security
alarms, elevators and telephones are subject to malfunction due to their
dependence on embedded technology such as microcontrollers for proper operation.
As described, the Year 2000 project presents a number of challenges for
financial institutions since the correction of Year 2000 issues in IT and non-IT
systems will be complex and costly for the entire industry.
John Hancock began to address the Year 2000 project as early as 1994. John
Hancock's plan to address the Year 2000 Project includes an awareness campaign,
an assessment period, a renovation stage, validation work and an implementation
of Company solutions.
80
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The continuous awareness campaign serves several purposes: defining the
problem, gaining executive level support and sponsorship, establishing a team
and overall strategy, and assessing existing information system management
resources. Additionally, the awareness campaign establishes an education process
to ensure that all employees are aware of the Year 2000 issue and knowledgeable
of their role in securing solutions.
The assessment phase, which was completed for both IT and non-IT systems as of
April 1998, included the identification, inventory, analysis, and prioritization
of IT and non-IT systems and processes to determine their conversion or
replacement.
The renovation stage reflects the conversion, validation, replacement, or
elimination of selected platforms, applications, databases and utilities,
including the modification of applicable interfaces. Additionally, the
renovation stage includes performance, functionality, and regression testing and
implementation. As of December 31, 1998, the renovation phase was substantially
complete for computer applications, systems and desktops. For all remaining
components the renovation phase is underway and will be complete before the end
of the second quarter of 1999.
The validation phase consists of the compliance testing of renovated systems.
The validation phase is expected to be complete by mid 1999, after renovation is
accomplished. John Hancock will use its testing facilities through the remainder
of 1999 to perform special functional testing. Special functional testing
includes testing, as required, with material third parties and industry groups
and to perform reviews of "dry run" of year-end activities. Scheduled testing of
John Hancock's material relationships with third parties is underway. It is
anticipated that testing with material business partners will continue through
much of 1999.
Finally, the implementation phase involves the actual implementation of
converted or replaced platforms, applications, databases, utilities, interfaces,
and contingency planning. John Hancock is concurrently performing implementation
during the renovation phase and plans to complete this phase before the end of
the second quarter of 1999.
The costs of the Year 2000 project consist of internal IT personnel, and
external costs such as consultants, programmers, replacement software, and
hardware. The costs of the Year 2000 project are expensed as incurred. The
project is funded partially through a reallocation of resources from
discretionary projects. Through December 31, 1998, John Hancock has incurred and
expensed approximately $9.8 million in related payroll costs for its internal IT
personnel on the project. The estimated range of remaining internal IT personnel
costs of the project is approximately $8 to $9 million. Through December 31,
1998, John Hancock has incurred and expensed approximately $36.4 million in
external costs for the project. The estimated range of remaining external costs
of the project is approximately $35 to $36 million. The total costs of the Year
2000 project, based on management's best estimates, include approximately $18
million in internal IT personnel, $7.4 million in the external modification of
software, $34.2 million for external solution providers, $19.4 million in
replacement costs of non-compliant IT systems and $12.6 million in oversight,
test facilities and other expenses. Accordingly, the estimated range of total
costs of the Year 2000 project, internal and external, is approximately $90 to
$95 million. However, there can be no guarantee that these estimates will be
achieved and actual results could materially differ from those plans. Specific
factors that might cause such material differences include, but are not limited
to, the availability and cost of personnel trained in this area, the ability to
locate and correct all relevant computer codes, and similar uncertainties.
81
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
John Hancock's total Year 2000 project costs include the estimated impact of
external solution providers and are based on presently available information.
However, there is no guarantee that the systems of other companies that John
Hancock's systems rely on will be timely converted, or that a failure to convert
by another company, or a conversion that is incompatible with John Hancock's
systems, would not have material adverse effect on John Hancock. It is
documented in trade publications that companies in foreign countries are not
acting as intensively as domestic companies to remediate Year 2000 issues.
Accordingly, it is expected that Company facilities based outside the United
States face higher degrees of risks from data exchanges with material business
partners. In addition, John Hancock has thousands of individual and business
customers that hold insurance policies, annuities and other financial products
of John Hancock. Nearly all products sold by John Hancock contain date sensitive
data, examples of which are policy expiration dates, birth dates, premium
payment dates. Finally, the regulated nature of John Hancock's industry exposes
it to potential supervisory or enforcement actions relating to Year 2000 issues.
John Hancock's contingency planning initiative related to the Year 2000
project is underway. The plan is addressing John Hancock's readiness as well as
that of material business partners on whom John Hancock depends. John Hancock's
contingency plans are being designed to keep each business unit's operations
functioning in the event of a failure or delay due to the Year 2000 record
format and date calculation changes. Contingency plans are being constructed
based on the foundation of extensive business resumption plans that John Hancock
has maintained and updated periodically, which outline responses to situations
that may affect critical business functions. These plans also provide emergency
operations guidance, which defines a documented order of actions to respond to
problems. These extensive business resumption plans are being enhanced to cover
Year 2000 situations.
82
<PAGE>
ALPHABETICAL INDEX OF KEY WORDS AND PHRASES
This index should help you locate more information about many of the important
concepts in this prospectus.
<TABLE>
<CAPTION>
KEY WORD OR PHRASE PAGE KEY WORD OR PHRASE PAGE
<S> <C> <C> <C>
Account. . . . . . . . 28 mortality and expense risk charge 9
attained age . . . . . 9 optional benefits................ 8
beneficiary. . . . . . 34 owner............................ 4
business day . . . . . 28 Paid-Up Whole Life............... 6
cash value . . . . . . 7 partial surrender................ 11
charges. . . . . . . . 8 payment options.................. 13
Code . . . . . . . . . 31 policy anniversary............... 28
cost of insurance rates 9 policy year...................... 28
date of issue. . . . . 28 Premium; premium payment......... 5
death benefit. . . . . 4 prospectus....................... 2
deductions . . . . . . 8 receive; receipt................. 15
dividends . . . . . . 7 reinstate; reinstatement......... 5
expenses of the Trust. 9 SEC.............................. 2
Fixed Extended Term. . 6 Separate Account U............... 28
full surrender . . . . 11 Servicing Office................. 1
fund . . . . . . . . . 2 special loan account............. 11
grace period . . . . . 5 subaccount....................... 28
guaranteed minimum
death benefit . . . . 12 surrender........................ 11
insurance charge . . . 9 surrender value.................. 11
insured person . . . . 4 tax considerations............... 31
investment options . . 1 telephone transfers.............. 15
John Hancock . . . . . 28 transfers of cash value.......... 10
John Hancock Variable
Series Trust . . . . 2 variable investment options...... 1
lapse. . . . . . . . . 5 Variable Sum Insured............. 12
loan . . . . . . . . . 11 we; us........................... 28
loan interest. . . . . 11 you; your........................ 4
monthly deduction date 28
</TABLE>
83
<PAGE>
[LOGO OF JOHN HANCOCK APPEARS HERE]
Policies Issued by John Hancock Mutual Life Insurance Company
John Hancock Place, Boston, Massachusetts 02117
H6001UVNY 5/99
