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PROSPECTUS DATED JUNE 30, 2000
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VARIABLE ESTATE PROTECTION
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a flexible premium variable life survivorship insurance policy
issued by
JOHN HANCOCK LIFE INSURANCE COMPANY
("JOHN HANCOCK")
The policy provides an investment option with fixed rates of return
declared by John Hancock and the following variable investment options:
<TABLE>
<CAPTION>
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VARIABLE INVESTMENT OPTION MANAGED BY
-------------------------- ----------
<S> <C>
Managed................................................... Independence Investment Associates, Inc.
Growth & Income........................................... Independence Investment Associates, Inc.
Fidelity VIP Contrafund(R)................................ Fidelity Management and Research Company
Equity Index.............................................. State Street Global Advisors
Large Cap Value........................................... T. Rowe Price Associates, Inc.
American Leaders Large Cap Value.......................... Federated Investment Management Company
Large Cap Growth.......................................... Independence Investment Associates, Inc.
Large Cap Aggressive Growth............................... Alliance Capital Management L.P.
Fidelity VIP Growth....................................... Fidelity Management and Research Company
AIM V.I. Value............................................ A I M Advisors, Inc.
Janus Aspen Global Technology............................. Janus Capital Corporation
Mid Cap Value............................................. Neuberger Berman, LLC
Fundamental Mid Cap Growth................................ OppenheimerFunds, Inc.
Mid Cap Growth............................................ Janus Capital Corporation
Real Estate Equity........................................ Independence Investment Associates, Inc. and
Morgan Stanley Dean Witter Investment
Management, Inc.
Small/Mid Cap CORE........................................ Goldman Sachs Asset Management
Small/Mid Cap Growth...................................... Wellington Management Company, LLP
Small Cap Value........................................... INVESCO Management & Research, Inc.
Small Cap Growth.......................................... John Hancock Advisers, Inc.
MFS New Discovery......................................... MFS Investment Management(R)
Global Balanced........................................... Brinson Partners, Inc.
Janus Aspen Worldwide Growth.............................. Janus Capital Corporation
Templeton International Securities........................ Templeton Investment Counsel, Inc.
International Equity Index................................ Independence International Associates, Inc.
International Opportunities............................... Rowe Price-Fleming International, Inc.
Morgan Stanley Dean Witter Investment
Emerging Markets Equity................................... Management, Inc.
Short-Term Bond........................................... Independence Investment Associates, Inc.
Bond Index................................................ Mellon Bond Associates, LLP
Active Bond............................................... John Hancock Advisers, Inc.
Core Bond................................................. Federated Investment Management Company
Global Bond............................................... J.P. Morgan Investment Management, Inc.
High Yield Bond........................................... Wellington Management Company, LLP
Money Market.............................................. John Hancock Life Insurance Company
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</TABLE>
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The variable investment options shown on page 1 are those available as of the
date of this prospectus. We may add, modify or delete variable investment
options in the future.
When you select one or more of these variable investment options, we invest
your money in the corresponding investment option(s) of one or more of the
following: the John Hancock Variable Series Trust I, the AIM Variable Insurance
Funds, Inc., the Templeton Variable Products Series Fund, Fidelity's Variable
Insurance Products Fund and Variable Insurance Products Fund II, the Janus Aspen
Series (Service Shares Class), and the MFS Variable Insurance Trust (together,
"the Trusts"). In this prospectus, the investment options of the Trusts are
referred to as "funds". In the prospectuses for the Trusts, the investment
options may be referred to as "funds", "portfolios" or "series".
Each Trust is a so-called "series" type mutual fund registered with the
Securities and Exchange Commission ("SEC"). The investment results of each
variable investment option you select will depend on those of the corresponding
fund of one of the Trusts. Each of the funds is separately managed and has its
own investment objective and strategies. Attached at the end of this prospectus
is a prospectus for each Trust. The Trust prospectuses contain detailed
information about each available fund. Be sure to read those prospectuses
before selecting any of the variable investment options shown on page 1.
* * * * * * * * * * * *
Please note that the 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.
* * * * * * * * * * * *
JOHN HANCOCK LIFE SERVICING OFFICE
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EXPRESS DELIVERY U.S. MAIL
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529 Main Street (X-4) P.O. Box 111
Charleston, MA 02129 Boston, Ma 02117
PHONE: 1-800-732-5543
FAX: 1-617-886-3048
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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
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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 22.
. 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 41.
. Finally, there is an Alphabetical Index of Key Words and Phrases at
the back of the prospectus on page 116.
After the Alphabetical Index of Key Words and Phrases, this prospectus ends and
the prospectuses for the Trusts begin.
**********
3
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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:
<TABLE>
<CAPTION>
Question Beginning on page
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<S> <C>
.What is the policy?........................................... 5
.Who owns the policy?.......................................... 5
.How can I invest money in the policy?......................... 5
.Is there a minimum amount I must invest?...................... 7
.How will the value of my investment in the policy change
over time?................................................... 8
.What charges will John Hancock deduct from my investment
in the policy?............................................... 9
.What charges will the Trusts deduct from my investment in
the policy?.................................................. 11
.What other charges could John Hancock impose in the
future?...................................................... 13
.How can I change my policy's investment allocations?.......... 13
.How can I access my investment in the policy?................. 14
.How much will John Hancock pay when the last insured
person dies?................................................. 16
.How can I change my policy's insurance coverage?.............. 17
.Can I cancel my policy after it's issued?..................... 18
.Can I choose the form in which John Hancock pays out
policy proceeds?............................................. 18
.To what extent can John Hancock vary the terms and
conditions of its policies in particular cases?.............. 19
.How will my policy be treated for income tax purposes?........ 20
.How do I communicate with John Hancock?....................... 20
</TABLE>
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WHAT IS THE POLICY?
This is a so-called "survivorship" policy that provides coverage on two
insured persons. The policy's primary purpose is to provide lifetime protection
against economic loss due to the death of the last surviving 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 upon the death of the
last surviving insured person (we call this the "death benefit") may be
similarly affected.
While either of the insured persons is alive, you will have a number of
options under the policy. Here are some major ones:
. Determine when and how much you invest in the various investment
options
. Borrow or withdraw amounts you have in the investment options
. Change the beneficiary who will receive the death benefit
. Change the amount of insurance
. Turn in (i.e., "surrender") the policy for the full amount of its
surrender value
. Choose the form in which we will pay out the death benefit or other
proceeds
Most of these options are subject to limits that are explained later in this
prospectus.
WHO OWNS THE POLICY?
That's up to the person who applies for the policy. The owner of the policy is
the person who can exercise most of the rights under the policy, such as the
right to choose the investment options or the right to surrender the policy. In
many cases, the person buying the policy is also the person who will be the
owner. However, the application for a policy can name another person or entity
(such as a trust) as owner. Whenever we've used the term "you" in this
prospectus, we've assumed that the reader is the person who has whatever right
or privilege is being discussed. There may be tax consequences if the owner and
the insured person are different, so you should discuss this issue with your tax
adviser.
HOW CAN I INVEST MONEY IN THE POLICY?
Premium Payments
We call the investments you make in the policy "premiums" or "premium
payments". The amount we require as your first premium depends upon the
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specifics of your policy and the insured person. Except as noted below, you can
make any other premium payments you wish at any time. That's why the policy is
called a "flexible premium" policy.
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Minimum premium payment
Each premium payment must be at least $100.
Maximum premium payments
Federal tax law limits the amount of premium payments you can make relative to
the amount of your policy's insurance coverage. We will not knowingly accept any
amount by which a premium payment exceeds the maximum. If you exceed certain
other limits, the law may impose a penalty on amounts you take out of your
policy. We'll monitor your premium payments and let you know if you're about to
exceed this limit. More discussion of these tax law requirements begins on page
35. Also, we may refuse to accept any amount of an additional premium if:
. that amount of premium would increase our insurance risk exposure,
and
. the insured persons don't provide us with adequate evidence that they
continue to meet our requirements for issuing insurance.
In no event, however, will we refuse to accept any premium necessary to prevent
the policy or the guaranteed minimum death benefit feature from terminating. We
reserve the right to limit premium payments above the amount of cumulative
Guaranteed Minimum Death Benefit Premiums (whether or not the guaranteed minimum
death benefit feature described on page 7 is in effect).
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 2 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.
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IS THERE A MINIMUM AMOUNT I MUST INVEST?
Planned Premiums
The Policy Specifications page of your policy will show the "Planned Premium"
for the policy. You choose this amount in the policy application. The premium
reminder notice we send you is based on this amount. You will also choose how
often to pay premiums-- annually, semi-annually, quarterly or monthly. The date
on which such a payment is "due" is referred to in the policy as a "modal
processing date." However, payment of Planned Premiums is not necessarily
required. You need only invest enough to keep the policy in force (see "Lapse
and reinstatement" and "Guaranteed minimum death benefit feature" below).
Lapse and reinstatement
Either your entire policy or the Additional Sum Insured portion of your Total
Sum Insured can terminate (i.e., "lapse") for failure to pay charges due under
the policy. If the guaranteed minimum death benefit feature is in effect, only
the Additional Sum Insured, if any, can lapse. If the guaranteed minimum death
benefit feature is not in effect, the entire policy can lapse. In either case,
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if the policy's surrender value is not sufficient to pay the charges on a
monthly deduction date, we will notify you of how much you will need to pay to
keep any Additional Sum Insured or the policy in force. You will have a 61 day
"grace period" to make that payment. If you don't pay at least the required
amount by the end of the grace period, the Additional Sum Insured or your policy
will lapse. If your policy lapses, all coverage under the policy will cease.
Even if the policy or the Additional Sum Insured terminates in this way, you can
still reactivate (i.e., "reinstate") it within 3 years from the beginning of the
grace period. You will have to provide evidence that the surviving insured
persons still meet our requirements for issuing coverage. You will also have to
pay a minimum amount of premium and be subject to the other terms and conditions
applicable to reinstatements, as specified in the policy. If the guaranteed
minimum death benefit is not in effect and the last surviving insured person
dies during the grace period, we will deduct any unpaid monthly charges from the
death benefit. During such a grace period, you cannot make a partial withdrawal
or policy loan.
Guaranteed minimum death benefit feature
This feature is available only if the insured persons meet certain
underwriting requirements and only if you've elected death benefit Option B (see
"How much will JHVLICO pay when the last insured person dies?" on page 16). The
feature guarantees that your Basic Sum Insured will not lapse during the first
10 policy years, regardless of adverse investment performance, if both of the
following are true:
. any Additional Sum Insured under the policy is not scheduled to
exceed the Basic Sum Insured at any time (see "How much will John
Hancock pay when the last insured person dies?" on page 16), and
. on each monthly deduction date during that 10 year period the amount
of cumulative premiums you have paid accumulated at 4% (less all
withdrawals from the policy accumulated at 4%) equals or exceeds the
sum of all
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Guaranteed Minimum Death Benefit Premiums due to date accumulated at
4%.
The Guaranteed Minimum Death Benefit Premium (or "GMDB Premium) is defined in
the policy and one-twelfth of it is "due" on each monthly deduction date. On the
application for the policy, you may elect for this feature to extend beyond the
tenth policy year. If you so elect, we will impose a special charge for this
feature after the tenth policy year. You may revoke the election at any time.
No GMDB Premium will ever be greater than the so-called "guideline premium"
for the policy as defined in Section 7702 of the Internal Revenue Code. Also,
the GMDB Premiums may change in the event of any change in the Additional Sum
Insured of the policy or any change in the death benefit option (see "How much
will John Hancock pay when the last insured person dies?" on page 16).
If the guaranteed minimum death benefit test is not satisfied on any monthly
deduction date, we will notify you immediately and tell you how much you will
need to pay to keep the feature in effect. You will have 61 days after default
to make that payment. If you don't pay at least the required amount by the end
of that period, the feature will lapse. The feature may be reinstated in
accordance with the terms of the policy within 5 years after the monthly
deduction date on which default occurred. If it is reinstated more than 1 year
after such monthly deduction date, we will require evidence that the surviving
insured persons still meet our requirements for issuing coverage. We may refuse
to reinstate the feature more than once during the life of the policy.
The guaranteed minimum death benefit feature applies only to the Basic Sum
Insured. It does not apply to any amount of Additional Sum Insured (see "How
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much will John Hancock pay when the last insured person dies?" on page 16).
If there are monthly charges that remain unpaid because of this feature, we
will deduct such charges when there is sufficient surrender value to pay them.
HOW WILL THE VALUE OF MY INVESTMENT IN THE POLICY CHANGE OVER TIME?
From each premium payment you make, we deduct the charges described under
"Deductions from premium payments" below. We invest the rest in the investment
options you've elected. Special investment rules apply to premiums processed
prior to the 20th day after your policy becomes effective. (See "Commencement of
investment performance" beginning on page 31.)
Over time, the amount you've invested in any variable investment option will
increase or decrease the same as if you had invested the same amount directly in
the corresponding fund of the Trust and had reinvested all fund dividends and
distributions in additional fund shares; except that we will deduct certain
additional charges which will reduce your account value. We describe these
charges under "What charges will John Hancock deduct from my investment in the
policy?" below.
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The amount you've invested in the fixed investment option will earn interest
at a rate we declare from time to time. We guarantee that this rate will be at
least 4%. If you want to know what the current declared rate is, just call or
write to us. The current declared rate will also appear in the annual statement
we will send you. Amounts you invest in the fixed investment option will not be
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subject to the mortality and expense risk charge described on page 10.
Otherwise, the charges applicable to the fixed investment option are the same as
those applicable to the variable investment options.
At any time, the "account value" of your policy is equal to:
. the amount you invested,
. plus or minus the investment experience of the investment options
you've chosen,
. minus all charges we deduct, and
. minus all withdrawals you have made.
If you take a loan on the policy, however, your account value will be computed
somewhat differently. This is discussed beginning on page 15.
WHAT CHARGES WILL JOHN HANCOCK DEDUCT FROM MY INVESTMENT IN THE POLICY?
Deductions from premium payments
. Premium tax charge - A charge to cover state premium taxes we currently
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expect to pay, on average. This charge is currently 2.35% of each premium.
. DAC tax charge - A charge to cover the increased Federal income tax
--------------
burden that we currently expect will result from receipt of premiums. This
charge is currently 1.25% of each premium.
. Premium processing charge - A charge to help defray our administrative
-------------------------
costs. This charge is 1.25% of each premium. For policies with a Total Sum
Insured of $5 million or more, this charge will be reduced to as low as
.50%
. Sales charge - A charge to help defray our sales costs. The charge for
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premiums paid in the first policy year is 30% of premiums paid up to the
Target Premium, and 3.5% of premiums paid in excess of the Target Premium.
The charge for premiums paid after the first policy year up to the Target
Premium is 15% in policy years 2 through 5, 10% in policy years 6 through
10, up to 4% (currently 3%) in policy years 11 through 20, and up to 3%
(currently 0%) thereafter. The charge for premiums paid after the first
policy year in excess of the Target Premium is 3.5% in policy years 2
through 10, 3% in policy years 11 through 20, and up to 3% (currently 0%)
thereafter. If the younger of the insured persons is age 71 or older when
the policy is issued, there will be no sales charges deducted from
premiums paid after the eleventh policy year. Because policies of this
type were first offered in 1993, the foregoing waiver and the lower
current rates after policy year 10 are not yet applicable to any policy.
The "Target Premium" is
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<PAGE>
determined at the time the policy is issued and will appear in the "Policy
Specifications" section of the policy.
. Optional benefits charge - A charge imposed for certain optional
------------------------
insurance benefits added to the policy by means of a rider.
Deductions from account value
. Issue charge - A monthly charge to help defray our administrative costs.
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This charge has two parts: (1) a flat dollar amount of $55.55 deducted
only during the first five policy years, and (2) a charge of 2c per $1,000
of Total Sum Insured at issue that is deducted only during the first three
policy years. The second part of this monthly charge is guaranteed not to
exceed $200.
. Administrative charge - A monthly charge to help defray our
---------------------
administrative costs. This charge also has two parts: (1) a flat dollar
charge of up to $10 (currently $7.50), and (2) a charge of 3c per $1,000
of Total Sum Insured at issue (currently 1c per $1,000 of Total Sum
Insured at issue). However, for policies with a Total Sum Insured at issue
of $5 million or more, the first part of this charge is currently zero.
. Insurance charge - A monthly charge for the cost of insurance. To
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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 that we currently apply are generally
less than the maximum rates. We will review the cost of insurance rates at
least every 5 years and may change them from time to time. However, those
rates will never be more than the maximum rates shown in the policy. The
table of rates we use will depend on the insurance risk characteristics
and (usually) gender of each of the insured persons, the Total Sum Insured
and the length of time the policy has been in effect. Regardless of the
table used, cost of insurance rates generally increase each year that you
own your policy, as each insured person's attained age increases. (An
insured person's "attained age" on any date is his or her age on the
birthday nearest that date.) The insurance charge is not affected by the
death of the first insured person to die.
. Extra mortality charge - A monthly charge specified in your policy for
----------------------
additional mortality risk if either of the insured persons is subject to
certain types of special insurance risk.
. M &E charge - A daily charge for mortality and expense risks we assume.
-----------
This charge is deducted from the variable investment options. It does not
apply to the fixed investment option. We guarantee that this charge will
never exceed an effective annual rate of .90%. The effective annual rate
will vary depending upon the Total Sum Insured at issue. The current
charge levels are as follows: .625% for a Total Sum Insured of at least
$500,000 but less than $5 million, .575% for a Total Sum Insured of at
least $5 million but less than $15 million, and .525% for a Total Sum
Insured of $15 million or more.
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. Guaranteed minimum death benefit charge - A monthly charge beginning in the
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eleventh policy year if the guaranteed minimum death benefit feature is
elected to extend beyond the first ten policy years. This charge is currently
1c per $1,000 of Basic Sum Insured at issue and is guaranteed not to exceed
3c per $1,000 of Basic Sum Insured at issue. Because policies of this type
were first offered in 1993, this charge is not yet applicable to any policy
at the current rate.
. Policy split option rider charge - A monthly charge if this rider is elected
--------------------------------
at the time of application for the policy. The charge is 3c per $1,000 of
current Total Sum Insured.
. Optional benefits charge - Monthly charges for certain other optional
------------------------
insurance benefits added to the policy by means of a rider. We currently
offer a number of such optional riders, such as the accidental death benefit
rider.
. Partial withdrawal charge - A charge for each partial withdrawal of account
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value to compensate us for the administrative expenses of processing the
withdrawal. The charge is equal to the lesser of $20 or 2% of the withdrawal
amount.
What charges will the Trust deduct from my investment in the policy?
The Trusts must pay investment management fees and other operating expenses.
These fees and expenses are different for each fund 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 following figures for the funds are based on historical fund expenses, as
a percentage (rounded to two decimal places) of each fund's average daily net
assets for 1999, except as indicated in the Notes appearing at the end of this
table. Expenses of the funds are not fixed or specified under the terms of the
policy, and those expenses may vary from year to year.
<TABLE>
<CAPTION>
Investment Distribution and Other Operating Total Fund Other Operating
Management Service Expenses With Operating Expenses Absent
Fund Name Fee (12b-1) Fees Reimbursement Expenses Reimbursement
--------- ---------- ---------------- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
John Hancock Variable Series Trust I
(Note 1):
Managed................................. 0.32% N/A 0.03% 0.35% 0.03%
Growth & Income......................... 0.25% N/A 0.03% 0.28% 0.03%
Equity Index............................ 0.14% N/A 0.00% 0.14% 0.08%
Large Cap Value......................... 0.74% N/A 0.10% 0.84% 0.11%
American Leaders Large Cap Value........ 0.80% N/A 0.10% 0.90% N/A
Large Cap Growth........................ 0.36% N/A 0.03% 0.39% 0.03%
Large Cap Aggressive Growth............. 0.98% N/A 0.10% 1.08% 0.19%
Mid Cap Value........................... 0.80% N/A 0.10% 0.90% 0.12%
Mid Cap Growth.......................... 0.82% N/A 0.10% 0.92% 0.11%
Fundamental Mid Cap Growth.............. 0.85% N/A 0.10% 0.95% 0.24%
Real Estate Equity...................... 0.60% N/A 0.10% 0.70% 0.10%
Small/Mid Cap CORE...................... 0.80% N/A 0.10% 0.90% 0.66%
Small/Mid Cap Growth.................... 0.75% N/A 0.10% 0.85% 0.10%
Small Cap Value......................... 0.80% N/A 0.10% 0.90% 0.16%
Small Cap Growth........................ 0.75% N/A 0.10% 0.85% 0.14%
Global Balanced *....................... 0.85% N/A 0.10% 0.95% 0.46%
International Equity Index.............. 0.16% N/A 0.10% 0.26% 0.22%
International Opportunities............. 0.87% N/A 0.10% 0.97% 0.29%
Emerging Markets Equity................. 1.27% N/A 0.10% 1.37% 2.17%
</TABLE>
11
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<TABLE>
<CAPTION>
Investment Distribution and Other Operating Total Fund Other Operating
Management Service Expenses With Operating Expenses Absent
Fund Name Fee (12b-1) Fees Reimbursement Expenses Reimbursement
--------- ---------- ---------------- --------------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
Short-Term Bond........................ 0.30% N/A 0.10% 0.40% 0.13%
Bond Index............................. 0.15% N/A 0.10% 0.25% 0.20%
Active Bond *.......................... 0.25% N/A 0.03% 0.28% 0.03%
Core Bond.............................. 0.70% N/A 0.10% 0.80% N/A
Global Bond............................ 0.69% N/A 0.10% 0.79% 0.15%
High Yield Bond........................ 0.65% N/A 0.10% 0.75% 0.39%
Money Market........................... 0.25% N/A 0.06% 0.31% 0.06%
AIM Variable Insurance Funds, Inc.:
AIM V.I. Value......................... 0.61% N/A 0.15% 0.76% 0.15%
Variable Insurance Products Fund -
Service Class (Note 2):
Fidelity VIP Growth.................... 0.58% 0.10% 0.07% 0.75% 0.09%
Variable Insurance Products Fund II -
Service Class (Note 2):
Fidelity VIP Contrafund(R)............. 0.58% 0.10% 0.07% 0.75% 0.10%
Franklin Templeton Variable Insurance
Products Trust - Class 2 Shares (Note
3):
Templeton International Securities..... 0.69% 0.25% 0.19% 1.13% 0.19%
Janus Aspen Series - Service Shares
Class (Note 4):
Janus Aspen Global Technology.......... 0.65% 0.25% 0.13% 1.03% 0.13%
Janus Aspen Worldwide Growth........... 0.65% 0.25% 0.05% 0.95% 0.05%
MFS Variable Insurance Trust
(Note 5):
MFS New Discovery...................... 0.90% N/A 0.17% 1.07% 1.59%
</TABLE>
Notes to Fund Expense Table
(1) John Hancock Variable Series Trust I funds' percentages reflect
management fees and other fund expenses based on the allocation
methodology and expense reimbursement policy adopted April 23, 1999.
Under the policy, John Hancock Life Insurance Company voluntarily
reimburses a fund when the fund's "other fund expenses" exceed 0.10% of
the fund's average daily net assets (0.00% for Equity Index). The
percentages for the American Leaders Large Cap Value Fund and the Core
Bond Fund are estimates because the funds were not in operation prior to
the date of this prospectus.
* Global Balanced was formerly "International Balanced" and Active Bond
was formerly "Sovereign Bond".
(2) A portion of the brokerage commissions that certain of the Fidelity VIP
funds pay was used to reduce fund expenses. In addition, through
arrangements with certain funds' custodian, credits realized as a result
of uninvested cash balances were used to reduce a portion of each
applicable fund's expenses. Without these reductions, the operating
expenses of the funds would have been higher, as shown in the last
column of this table.
(3) On February 8, 2000, shareholders of each fund approved a merger and
reorganization that combined the Templeton International Equity Fund
with the Templeton International Securities Fund, effective May 1, 2000.
Shareholders of the Templeton International Securities Fund had approved
new
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<PAGE>
management fees, which apply to the combined funds effective May 1,
2000. The table shows restated total expenses for the fund based on the
new fees and the assets, as of December 31, 1999, of the Templeton
International Securities Fund. However, if the table reflected both the
new fees and the combined assets of the Templeton International Equity
Fund and the Templeton International Securities Fund, the estimated
expenses for the two funds combined after May 1, 2000 would be:
Management Fees 0.65%, Distribution and Service Fees 0.25%, Other
Expenses 0.20%, and Total Fund Operating Expenses 1.10%.
(4) The percentages for the new Service Shares Class of the Janus Aspen
Global Technology Fund and the Janus Aspen Worldwide Growth Fund are
estimates because the Service Shares Class was not in operation in 1999.
All such estimates have been made without regard to the effect of any
expense offset arrangements.
(5) MFS Variable Insurance Trust funds have an expense offset arrangement
which reduces each fund's custodian fee based upon the amount of cash
maintained by the fund with its custodian and dividend disbursing agent.
Each fund may enter into other such arrangements and directed brokerage
arrangements, which would also have the effect of reducing the fund's
expenses. Expenses do not take into account these expense reductions,
and are therefore higher than the actual expenses of the fund. MFS
Investment Management(R) (also doing business as Massachusetts Financial
Services Company) has contractually agreed to bear expense for the New
Discovery Fund, subject to reimbursement by the fund, such that such
fund's "other fund expenses" shall not exceed 0.15% of the average daily
net assets of the fund during the current fiscal year.
What other charges could John Hancock impose in the Future?
Except for the DAC tax charge, we currently make no charge for our Federal
income taxes. However, if we incur, or expect to incur, additional income taxes
attributable to any subaccount of the Account or this class of policies in
future years, we reserve the right to make a charge for such taxes. Any such
charge would reduce what you earn on any affected investment options. However,
we expect that no such charge will be necessary.
We also reserve the right to increase the premium tax charge and the DAC tax
charge in order to correspond, respectively, with changes in the state premium
tax levels and with changes in the Federal income tax treatment of the deferred
acquisition costs for this type of policy.
Under current laws, we may incur state and local taxes (in addition to premium
taxes) in several states. At present, these taxes are not significant. If there
is a material change in applicable state or local tax laws, we may make charges
for such taxes.
How can I change my policy's investment allocations?
Future premium payments
At any time, you may change the investment options in which future premium
payments will be invested. You make the original allocation in the application
for the policy. The percentages you select must be in whole numbers and must
total 100%.
13
<PAGE>
Transfers of existing account value
You may also transfer your existing account value from one investment option
to another. To do so, you must tell us how much to transfer, either as a whole
number percentage or as a specific dollar amount.
Under our current rules, you can make transfers out of any variable
investment option anytime you wish. However, transfers out of the fixed
investment option are currently subject to the following restrictions:
. You can only make such a transfer once a year and only during the 31 day
period following your policy anniversary.
. We must receive the request for such a transfer during the period beginning
60 days prior to the policy anniversary and ending 30 days after it.
. The most you can transfer at any one time is the greater of $500 or 25% of
the assets in your fixed investment option.
We reserve the right to impose a minimum amount limit on transfers out of the
fixed investment option. We also reserve the right to impose limits on the
number and frequency of transfers out of the variable investment options.
Dollar cost averaging
This is a program of automatic monthly transfers out of the Money Market
investment option into one or more of the other variable investment options. You
choose the investment options and the dollar amount and timing of the transfers.
The program is designed to reduce the risks that result from market
fluctuations. It does this by spreading out the allocation of your money to
investment options over a longer period of time. This allows you to reduce the
risk of investing most of your money at a time when market prices are high.
Obviously, the success of this strategy depends on market trends and is not
guaranteed.
How can I access my investment in the policy?
Full surrender
You may surrender your policy in full at any time. If you do, we will pay you
the account value less any policy loans plus, if surrender occurs in the second
policy year, a refund of a certain portion of sales charges equal to 5% of
premiums paid in the second policy year up to the Target Premium. This is called
your "surrender value." You must return your policy when you request a full
surrender.
Partial withdrawals
You may make a partial withdrawal of your surrender value at any time. Each
partial withdrawal must be at least $1,000. There is a charge (usually $20) for
each partial withdrawal. We will automatically reduce the account value of your
policy by the amount of the withdrawal and the related charge. Each investment
option will be reduced in the same proportion as the account value is then
allocated among them. We will not permit a partial withdrawal if it would
14
<PAGE>
cause your account value to fall below 3 months' worth of monthly charges (see
"Deductions from account value" on page 10). We also reserve the right to refuse
any partial withdrawal that would cause the policy's Total Sum Insured to fall
below $500,000. Any partial withdrawal (other than a Terminated ASI Withdrawal
Amount, as described below) will reduce your death benefit under any of the
death benefit options (see "How much will John Hancock pay when the last insured
person dies?" on page 16) and under the guaranteed death benefit feature (see
page 7). Under Option A, such a partial withdrawal will reduce the Total Sum
Insured. Under Option B, such a partial withdrawal will reduce your account
value. Under the guaranteed death benefit feature, such a partial withdrawal
will reduce the Basic Sum Insured. A "Terminated ASI Withdrawal Amount" is any
partial withdrawal made while there is an Additional Sum Insured under the
policy that later lapses as described on page 7. The total of all Terminated ASI
Withdrawal Amounts cannot exceed the Additional Sum Insured in effect
immediately before the Additional Sum Insured lapses.
Policy loans
You may borrow from your policy at any time by completing a form satisfactory
to us or, if the telephone transaction authorization form has been completed, by
telephone. However, you can't borrow from your policy during a "grace period"
(see "Lapse and reinstatement" on page 7). The maximum amount you can borrow is
90% of your surrender value.
The minimum amount of each loan is $500. The interest charged on any loan is
an effective annual rate of 5% in the first 20 policy years and 4.5% thereafter.
Accrued interest will be added to the loan daily and will bear interest at the
same rate as the original loan amount. The amount of the loan is deducted from
the investment options in the same proportion as the account value is then
allocated among them and is placed in a special loan account. This special loan
account will earn interest at an effective annual rate of 4.0%. However, if we
determine that a loan will be treated as a taxable distribution because of the
differential between the loan interest rate and the rate being credited on the
special loan account, we reserve the right to decrease the rate credited on the
special loan account to a rate that would, in our reasonable judgement, result
in the transaction being treated as a loan under Federal tax law.
You can repay all or part of a loan at any time. Each repayment will be
allocated among the investment options as follows:
. The same proportionate part of the loan as was borrowed from the fixed
investment option will be repaid to the fixed investment option.
. The remainder of the repayment will be allocated among the investment
options in the same way a new premium payment would be allocated.
If you want a payment to be used as a loan repayment, you must include
instructions to that effect. Otherwise, all payments will be assumed to be
premium payments.
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<PAGE>
How much will John Hancock pay when the last 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 persons. This is called the "Total
Sum Insured." Total Sum Insured is composed of the Basic Sum Insured and any
Additional Sum Insured you elect. The only limitations on how much Additional
Sum Insured you can have is that it must be equal to the Basic Sum Insured at
the time of policy issue and cannot exceed 400% of the Basic Sum Insured at any
time thereafter. There are a number of factors you should consider in
determining whether to elect coverage in the form of Basic Sum Insured or in the
form of Additional Sum Insured. These factors are discussed under "Basic Sum
Insured vs. Additional Sum Insured" on page 30.
When the last of the two insured persons dies, we will pay the death benefit
minus any outstanding loans. There are two ways of calculating the death
benefit. You choose which one you want in the application. The two death benefit
options are:
. Option A - The death benefit will equal the greater of (1) the Total Sum
Insured plus any optional extra death benefit, if elected (as described
below), or (2) the minimum insurance amount (as described below).
. Option B - The death benefit will equal the greater of (1) the Total Sum
Insured plus your policy's account value on the date of death of the
last surviving insured person, or (2) the minimum insurance amount.
For the same premium payments, the death benefit under Option B will tend to
be higher than the death benefit under Option A. On the other hand, the monthly
insurance charge will be higher under Option B to compensate us for the
additional insurance risk. Because of that, the account value will tend to be
higher under Option A than under Option B for the same premium payments.
Optional extra death benefit feature
If you elect the Option A death benefit, you may also elect this optional
extra death benefit feature. The optional extra death benefit is determined on
each annual processing date as follows:
. First, we multiply your account value by a factor specified in the
policy. The factor is based on the age of the younger insured person.
. We will then subtract your Total Sum Insured.
Any excess is the optional extra death benefit for the remainder of that
policy year. This feature may result in the Option A death benefit being higher
than the minimum insurance amount. Although there is no special charge for this
feature, your monthly insurance charge will be based on that higher death
benefit amount. Election of this feature must be made in the application for the
policy. You may revoke that election at any time, but there may be adverse
16
<PAGE>
tax consequences if you do. An "annual processing date" is the first business
day of a policy year.
The minimum insurance amount
In order for a policy to qualify as life insurance under Federal tax law,
there has to be a minimum amount of insurance in relation to account value. For
policies of this type, we will apply the "cash value accumulation test" as
described in Federal tax law. Under the cash value accumulation test, we compute
the minimum insurance amount on each monthly deduction date by multiplying the
account value on that date by the death benefit factor applicable on that date.
The death benefit factors are derived by applying the cash value accumulation
test. The death benefit factor decreases for each year the policy remains in
effect. A table showing the factor for each policy year will appear in the
policy.
Policy split option
At the time of policy issue, you may elect a rider that will permit the Total
Sum Insured to be evenly split into two separate policies, one for each insured
person, but only if the insured persons get divorced or certain Federal tax law
changes occur. The rider may be cancelled at any time, but it will automatically
terminate on the date of death of the first insured person to die or on the
policy anniversary nearest the older insured person's 80th birthday, whichever
is earlier. A policy split could have adverse tax consequences, so check with
your tax adviser before electing this rider.
When the last insured person reaches 100
If the last surviving insured person or the younger of two living insureds
reaches attained age 100, the surrender value will become payable to the policy
beneficiary and the death benefit will no longer be payable.
How can I change my policy's insurance coverage?
Increase in coverage
The Basic Sum Insured and Additional Sum Insured generally cannot be
increased after policy issue. However, you may request an increase in the
Additional Sum Insured. You will have to provide us with evidence that the
surviving insured persons still meet our requirements for issuing insurance
coverage. As to when an approved increase would take effect, see "Effective date
of other policy transactions" on page 32.
Decrease in coverage
The Basic Sum Insured and Additional Sum Insured generally cannot be
decreased after policy issue. However, you may request a reduction in the
Additional Sum Insured, but only if:
. the remaining Total Sum Insured will be at least $500,000, and
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<PAGE>
. the remaining Total Sum Insured will at least equal the minimum required
by the tax laws to maintain the policy's life insurance status.
We may refuse any decrease in Additional Sum Insured if it would cause the
death benefit to reflect an increase pursuant to the optional extra death
benefit feature. As to when an approved decrease would take effect, see
"Effective date of other policy transactions" on page 32.
Change of death benefit option
Changes of death benefit option are not permitted under our current
administrative rules. We expect to be able to allow a change from Option B to
Option A in the near future, but that is not guaranteed.
Tax consequences
Please read "Tax considerations" starting on page 35 to learn about possible
tax consequences of changing your insurance coverage under the policy.
Can I cancel my policy after it's issued?
You have the right to cancel your policy within the latest of the following
periods:
. 10 days after you receive it (this period may be longer in some states);
. 10 days after mailing by 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 2, or to the John Hancock representative who delivered the policy to
you.
In most states, you will receive a refund of any premiums you've paid. In
some states, the refund will be your account value on the date of cancellation
plus all charges deducted by John Hancock or the Trust prior to that date. The
date of cancellation will be the date of such mailing or delivery.
Can I choose the form in which 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
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<PAGE>
. 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%.
Changing a payment option
You can change the payment option at any time before the proceeds are
payable. If you haven't made a choice, the payee of the proceeds has a
prescribed period in which he or she can make that choice.
Tax impact
There may be tax consequences to you or your beneficiary depending upon which
payment option is chosen. You should consult with a qualified tax adviser before
making that choice.
To what extent can John Hancock vary the terms and conditions of its policies
in particular cases?
Listed below are some variations we can make in the terms of our policies.
Any variation will be made only in accordance with uniform rules that we apply
fairly to all of our customers.
State law insurance requirements
Insurance laws and regulations apply to John Hancock in every state in which
its policies are sold. As a result, various terms and conditions of your
insurance coverage may vary from the terms and conditions described in this
prospectus, depending upon where you reside. These variations will be reflected
in your policy or in endorsements attached to your policy.
Variations in expenses or risks
We may vary the charges and other terms of our policies where special
circumstances result in sales or administrative expenses, mortality risks or
other risks that are different from those normally associated with the policies.
These include the type of variations discussed under
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<PAGE>
"Reduced charges for eligible classes" on page 33. No variation in any charge
will exceed any maximum stated in this prospectus with respect to that charge.
How will my policy be treated for income tax purposes?
Generally, death benefits paid under policies such as yours are not subject
to income tax. Earnings on your account value are not subject to income tax as
long as we don't pay them out to you. If we do pay out any amount of your
account value upon surrender or partial withdrawal, all or part of that
distribution should generally be treated as a return of the premiums you've paid
and should not be subject to income tax. Amounts you borrow are generally not
taxable to you.
However, some of the tax rules change if your policy is found to be a
"modified endowment contract." This can happen if you've paid more than a
certain amount of premiums that is prescribed by the tax laws. Additional taxes
and penalties may be payable for policy distributions of any kind.
For further information about the tax consequences of owning a policy, please
read "Tax considerations" beginning on page 35.
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 2.
Certain requests must be made in writing and be signed and dated by you. They
include the following:
. loans, surrenders or partial withdrawals
. transfers of account value among investment options
. change of allocation among investment options for new premium payments
. change of death benefit option
. increase or decrease in Total Sum Insured
. change of beneficiary
. election of payment option for policy proceeds
. tax withholding elections
. election of telephone transaction privilege
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<PAGE>
You should mail or express these requests to the John Hancock Life Servicing
Office at the appropriate address shown on page 2. You should also send notice
of an 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 persons or entities that use programmed or 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.
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<PAGE>
ILLUSTRATION OF DEATH BENEFITS, ACCOUNT VALUES,
SURRENDER VALUES AND ACCUMULATED PREMIUMS
The following tables illustrate the changes in death benefit, account value
and surrender value of the policy under certain hypothetical circumstances that
we assume solely for this purpose. Each table separately illustrates the
operation of a policy for specified issue ages, premium payment schedule and
Total Sum Insured. The amounts shown are for the end of each policy year and
assume that all of the account value is invested in funds that achieve
investment returns at constant annual rates of 0%, 6% and 12% (i.e., before any
fees or expenses deducted from Trust assets). After the deduction of average
fees and expenses at the Trust level (as described below) the corresponding net
annual rates of return would be -.77%, 5.18% and 11.14%. Investment return
reflects investment income and all realized and unrealized capital gains and
losses. The tables assume annual Planned Premiums that are paid at the beginning
of each policy year for a male insured person who is 55 years old and a
preferred underwriting risk when the policy is issued and for a female insured
person who is 50 years old and a preferred underwriting risk when the policy is
issued.
Tables are provided for each of the two death benefit options. The tables
headed "Current Charges" assume that the current rates for all charges deducted
by John Hancock will apply in each year illustrated. The tables headed "Maximum
Charges" are the same, except that the maximum permitted rates for all years are
used for all charges. The tables do not reflect any charge that we reserve the
right to make but are not currently making. The tables assume that the
guaranteed minimum death benefit has not been elected beyond the tenth policy
year and that no Additional Sum Insured or optional rider benefits have been
elected.
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 .66%, and (2) an assumed average asset charge for all
other Trust operating expenses equivalent to an effective annual rate of .11%.
These rates are the arithmetic average for all funds of the Trust. In other
words, they are based on the hypothetical assumption that policy account values
are allocated equally among the variable investment options. The actual rates
associated with any policy will vary depending upon the actual allocation of
policy values among the investment options. The charge shown above for all other
Trust operating expenses reflects reimbursements to certain funds as described
in the footnotes to the table beginning on page 11. We currently expect those
reimbursement arrangements to continue indefinitely, but that is not guaranteed.
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 Planned Premiums were
invested to earn interest, after taxes, at 5% compounded annually. This is not a
policy value. It is included for comparison purposes only.
Because your circumstances will no doubt differ from those in the
illustrations that follow, values under your policy will differ, in most cases
substantially. Upon request, we will furnish you with a comparable illustration
reflecting your proposed insured persons' issue ages, sex and underwriting risk
classification, and the Total Sum Insured and annual Planned Premium amount
requested.
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<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE SURVIVORSHIP
$1,000,000 SUM INSURED ($500,000 BASIC SUM INSURED; $500,000 ADDITIONAL
SUM INSURED)
MALE, ISSUE AGE 55, PREFERRED UNDERWRITING CLASS
FEMALE, ISSUE AGE 50, PREFERRED UNDERWRITING CLASS
OPTION A DEATH BENEFIT
NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH POLICY YEAR
PLANNED PREMIUM: $15,969*
USING CURRENT CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
---------------------------------- --------------------------------
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at ---------------------------------- ----------------------------------
Year 5% annual interest 0% 6% 12% 0% 6% 12%
------- ------------------ ---------- ---------- ---------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 16,768 $1,000,000 $1,000,000 $1,000,000 $ 11,206 $ 11,910 $ 12,614
2 34,374 1,000,000 1,000,000 1,000,000 23,410 25,584 27,839
3 52,861 1,000,000 1,000,000 1,000,000 35,443 39,877 44,654
4 72,271 1,000,000 1,000,000 1,000,000 47,545 55,060 63,474
5 92,653 1,000,000 1,000,000 1,000,000 59,475 70,928 84,257
6 114,053 1,000,000 1,000,000 1,000,000 72,288 88,608 108,347
7 136,524 1,000,000 1,000,000 1,000,000 84,914 107,081 134,944
8 160,118 1,000,000 1,000,000 1,000,000 97,349 126,376 164,306
9 184,891 1,000,000 1,000,000 1,000,000 109,592 146,527 196,715
10 210,904 1,000,000 1,000,000 1,000,000 121,636 167,563 232,484
11 238,217 1,000,000 1,000,000 1,000,000 134,237 190,317 272,793
12 266,895 1,000,000 1,000,000 1,000,000 146,611 214,054 317,271
13 297,008 1,000,000 1,000,000 1,000,000 158,745 238,806 366,346
14 328,626 1,000,000 1,000,000 1,000,000 170,623 264,602 420,488
15 361,825 1,000,000 1,000,000 1,000,000 182,222 291,471 480,225
16 396,684 1,000,000 1,000,000 1,049,444 193,516 319,440 546,112
17 433,286 1,000,000 1,000,000 1,150,730 204,471 348,535 618,717
18 471,718 1,000,000 1,000,000 1,258,589 215,045 378,780 698,686
19 512,072 1,000,000 1,000,000 1,373,705 225,190 410,199 786,720
20 554,444 1,000,000 1,000,000 1,496,764 234,843 442,816 883,575
25 800,279 1,000,000 1,000,000 2,266,829 275,856 628,276 1,535,049
30 1,114,034 1,000,000 1,127,474 3,399,081 291,297 851,474 2,567,002
35 1,514,473 1,000,000 1,355,580 5,093,482 256,219 1,110,886 4,174,064
</TABLE>
* The illustrations assume that Planned Premiums equal to the Target Premium are
paid at the start of each Policy Year. The Death Benefit and Surrender Value
will differ if premiums are paid in different amounts or frequencies, if
policy loans are taken, or if Guaranteed Minimum Death Benefit after the tenth
Policy Year, or optional rider benefits are elected.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY THE OWNER. THE
DEATH BENEFIT AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT RETURN AVERAGE 0%, 6%, OR 12% OVER
A PERIOD OF YEARS, BUT ALSO FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
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<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE SURVIVORSHIP
$1,000,000 SUM INSURED ($500,000 BASIC SUM INSURED; $500,000 ADDITIONAL
SUM INSURED)
MALE, ISSUE AGE 55, PREFERRED UNDERWRITING CLASS
FEMALE, ISSUE AGE 50, PREFERRED UNDERWRITING CLASS
OPTION B DEATH BENEFIT
NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH POLICY YEAR
PLANNED PREMIUM: $15,969*
USING CURRENT CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
---------------------------------- -------------------------------
Assuming Hypothetical Assuming Hypothetical
End of Planned Premiums Gross Annual Return of Gross Annual Return of
Policy Accumulated at ---------------------------------- -------------------------------
Year 5% Annual Interest 0% 6% 12% 0% 6% 12%
------- ------------------ ---------- ---------- ---------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 16,768 $1,011,205 $1,011,910 $1,012,614 $ 11,205 $ 11,910 $ 12,614
2 34,374 1,023,408 1,025,582 1,027,837 23,408 25,582 27,837
3 52,861 1,035,439 1,039,872 1,044,648 35,439 39,872 44,648
4 72,271 1,047,538 1,055,052 1,063,464 47,538 55,052 63,464
5 92,653 1,059,464 1,070,914 1,084,239 59,464 70,914 84,239
6 114,053 1,072,271 1,088,587 1,108,319 72,271 88,587 108,319
7 136,524 1,084,889 1,107,049 1,134,902 84,889 107,049 134,902
8 160,118 1,097,315 1,126,329 1,164,241 97,315 126,329 164,241
9 184,891 1,109,543 1,146,458 1,196,617 109,543 146,458 196,617
10 210,904 1,121,568 1,167,463 1,232,338 121,568 167,463 232,338
11 238,217 1,134,149 1,190,184 1,272,590 134,149 190,184 272,590
12 266,895 1,146,492 1,213,868 1,316,978 146,492 213,868 316,978
13 297,008 1,158,581 1,238,540 1,365,912 158,581 238,540 365,912
14 328,626 1,170,390 1,264,215 1,419,836 170,390 264,215 419,836
15 361,825 1,181,891 1,290,903 1,479,235 181,891 290,903 479,235
16 396,684 1,193,044 1,318,607 1,544,637 193,044 318,607 544,637
17 433,286 1,203,803 1,347,319 1,616,612 203,803 347,319 616,612
18 471,718 1,214,106 1,377,015 1,695,775 214,106 377,015 695,775
19 512,072 1,223,882 1,407,661 1,782,795 223,882 407,661 782,795
20 554,444 1,233,041 1,439,198 1,878,389 233,041 439,198 878,389
25 800,279 1,268,458 1,610,417 2,518,582 268,458 610,417 1,518,582
30 1,114,034 1,268,271 1,786,209 3,527,234 268,271 786,209 2,527,234
35 1,514,473 1,199,713 1,927,352 5,095,022 199,713 927,352 4,095,022
</TABLE>
* The illustrations assume that Planned Premiums equal to the Target Premium are
paid at the start of each Policy Year. The Death Benefit and Surrender Value
will differ if premiums are paid in different amounts or frequencies, if
policy loans are taken, or if Guaranteed Minimum Death Benefit after the tenth
Policy Year, or optional rider benefits are elected.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY THE OWNER. THE
DEATH BENEFIT AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT RETURN AVERAGE 0%, 6%, OR 12% OVER
A PERIOD OF YEARS, BUT ALSO FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
24
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE SURVIVORSHIP
$1,000,000 SUM INSURED ($500,000 BASIC SUM INSURED; $500,000 ADDITIONAL
SUM INSURED)
MALE, ISSUE AGE 55, PREFERRED UNDERWRITING CLASS
FEMALE, ISSUE AGE 50, PREFERRED UNDERWRITING CLASS
OPTION A DEATH BENEFIT
NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH POLICY YEAR
PLANNED PREMIUM: $15,969*
USING MAXIMUM CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
---------------------------------- -------------------------------
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at ---------------------------------- -------------------------------
Year 5% annual interest 0% 6% 12% 0% 6% 12%
------- ------------------ ---------- ---------- ---------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 16,768 $1,000,000 $1,000,000 $1,000,000 $ 10,906 $ 11,600 $ 12,294
2 34,374 1,000,000 1,000,000 1,000,000 22,735 24,864 27,076
3 52,861 1,000,000 1,000,000 1,000,000 34,279 38,599 43,262
4 72,271 1,000,000 1,000,000 1,000,000 45,760 53,050 61,230
5 92,653 1,000,000 1,000,000 1,000,000 56,919 67,981 80,885
6 114,053 1,000,000 1,000,000 1,000,000 68,789 84,486 103,520
7 136,524 1,000,000 1,000,000 1,000,000 80,278 101,507 128,269
8 160,118 1,000,000 1,000,000 1,000,000 91,356 119,035 155,324
9 184,891 1,000,000 1,000,000 1,000,000 101,997 137,062 184,895
10 210,904 1,000,000 1,000,000 1,000,000 112,164 155,572 217,213
11 238,217 1,000,000 1,000,000 1,000,000 122,322 175,082 253,104
12 266,895 1,000,000 1,000,000 1,000,000 131,898 195,045 292,336
13 297,008 1,000,000 1,000,000 1,000,000 140,822 215,419 335,224
14 328,626 1,000,000 1,000,000 1,000,000 149,001 236,143 382,121
15 361,825 1,000,000 1,000,000 1,000,000 156,331 257,149 433,429
16 396,684 1,000,000 1,000,000 1,000,000 162,694 278,364 489,622
17 433,286 1,000,000 1,000,000 1,024,951 167,907 299,662 551,089
18 471,718 1,000,000 1,000,000 1,113,071 171,918 321,039 617,904
19 512,072 1,000,000 1,000,000 1,205,448 174,521 342,375 690,359
20 554,444 1,000,000 1,000,000 1,302,370 175,525 363,570 768,820
25 800,279 1,000,000 1,000,000 1,867,041 146,151 462,870 1,264,321
30 1,114,034 1,000,000 1,000,000 2,598,076 4,131 529,465 1,962,079
35 1,514,473 ** 1,000,000 3,553,271 ** 511,756 2,911,875
</TABLE>
* The illustrations assume that Planned Premiums equal to the Target Premium
are paid at the start of each Policy Year. The Death Benefit and Surrender
Value will differ if premiums are paid in different amounts or frequencies,
if policy loans are taken, or if Guaranteed Minimum Death Benefit after the
tenth Policy Year, or optional rider benefits are elected.
** Policy lapses unless additional premium payments are made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY THE OWNER. THE
DEATH BENEFIT AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT RETURN AVERAGE 0%, 6%, OR 12% OVER
A PERIOD OF YEARS, BUT ALSO FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
25
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE SURVIVORSHIP
$1,000,000 SUM INSURED ($500,000 BASIC SUM INSURED; $500,000 ADDITIONAL
SUM INSURED)
MALE, ISSUE AGE 55, PREFERRED UNDERWRITING CLASS
FEMALE, ISSUE AGE 50, PREFERRED UNDERWRITING CLASS
OPTION B DEATH BENEFIT
NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH POLICY YEAR
PLANNED PREMIUM: $15,969*
USING MAXIMUM CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
---------------------------------- -------------------------------
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at ---------------------------------- -------------------------------
Year 5% annual interest 0% 6% 12% 0% 6% 12%
------- ------------------ ---------- ---------- ---------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 16,768 $1,010,906 $1,011,599 $1,012,293 $ 10,906 $ 11,599 $ 12,293
2 34,374 1,022,732 1,024,861 1,027,072 22,732 24,861 27,072
3 52,861 1,034,269 1,038,588 1,043,250 34,269 38,588 43,250
4 72,271 1,045,735 1,053,021 1,061,196 45,735 53,021 61,196
5 92,653 1,056,868 1,067,919 1,080,810 56,868 67,919 80,810
6 114,053 1,068,694 1,084,366 1,103,369 68,694 84,366 103,369
7 136,524 1,080,115 1,101,295 1,127,993 80,115 101,295 127,993
8 160,118 1,091,093 1,118,680 1,154,846 91,093 118,680 154,846
9 184,891 1,101,594 1,136,498 1,184,107 101,594 136,498 184,107
10 210,904 1,111,567 1,154,707 1,215,959 111,567 154,707 215,959
11 238,217 1,121,463 1,173,793 1,251,164 121,463 173,793 251,164
12 266,895 1,130,693 1,193,171 1,289,405 130,693 193,171 289,405
13 297,008 1,139,165 1,212,745 1,330,880 139,165 212,745 330,880
14 328,626 1,146,759 1,232,389 1,375,776 146,759 232,389 375,776
15 361,825 1,153,339 1,251,949 1,424,280 153,339 251,949 424,280
16 396,684 1,158,756 1,271,251 1,476,582 158,756 271,251 476,582
17 433,286 1,162,776 1,290,022 1,532,797 162,776 290,022 532,797
18 471,718 1,165,333 1,308,149 1,593,227 165,333 308,149 593,227
19 512,072 1,166,177 1,325,319 1,658,007 166,177 325,319 658,007
20 554,444 1,165,080 1,341,228 1,727,306 165,080 341,228 727,306
25 800,279 1,119,341 1,386,600 2,144,905 119,341 386,600 1,144,905
30 1,114,034 ** 1,309,366 2,669,628 ** 309,366 1,669,628
35 1,514,473 ** ** 3,255,940 ** ** 2,255,940
</TABLE>
* The illustrations assume that Planned Premiums equal to the Target Premium
are paid at the start of each Policy Year. The Death Benefit and Surrender
Value will differ if premiums are paid in different amounts or frequencies,
if policy loans are taken, or if Guaranteed Minimum Death Benefit after the
tenth Policy Year, or optional rider benefits are elected.
** Policy lapses unless additional premium payments are made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY THE OWNER. THE
DEATH BENEFIT AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT RETURN AVERAGE 0%, 6%, OR 12% OVER
A PERIOD OF YEARS, BUT ALSO FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR 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 4 through 21.
<TABLE>
<CAPTION>
CONTENTS OF THIS SECTION BEGINNING ON PAGE
------------------------ -----------------
<S> <C>
Description of John Hancock................................... 28
How we support the policy and investment options.............. 28
Procedures for issuance of a policy........................... 29
Basic Sum Insured vs. Additional Sum Insured.................. 30
Commencement of investment performance........................ 31
How we process certain policy transactions.................... 31
Effects of policy loans....................................... 32
Additional information about how certain policy charges work.. 33
How we market the policies.................................... 34
Tax considerations............................................ 35
Reports that you will receive................................. 37
Voting privileges that you will have.......................... 37
Changes that John Hancock can make as to your policy.......... 37
Adjustments we make to death benefits......................... 38
When we pay policy proceeds................................... 38
Other details about exercising rights and paying benefits..... 39
Legal matters................................................. 39
Registration statement filed with the SEC..................... 39
Accounting and actuarial experts.............................. 39
Financial statements of John Hancock and the Account.......... 39
List of Directors and Executive Officers of John Hancock...... 40
</TABLE>
27
<PAGE>
DESCRIPTION OF JOHN HANCOCK
We are John Hancock Life Insurance Company, a Massachusetts stock life
insurance company. On February 1, 2000, John Hancock Mutual Life Insurance
Company (which was chartered in Massachusetts in 1862) converted to a stock
company by "demutualizing" and changed its name to John Hancock Life Insurance
Company. As part of the demutualization process, John Hancock Life Insurance
Company became a subsidiary of John Hancock Financial Services, Inc., a newly
formed publicly-traded corporation. 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 December
31, 1999, our assets were approximately $71 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 one of
the Trusts. New subaccounts may be added as new funds are added to the Trusts
and made available to policy owners. Existing subaccounts may be deleted if
existing funds are deleted from the Trusts.
We will purchase and redeem Trust shares for the Account at their net asset
value without any sales or redemption charges. Shares of a 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).
Our general account
Our obligations under the policy's fixed investment option are backed by our
general account assets. Our general account consists of assets owned by us other
than those in the Account and in other separate accounts that we may establish.
Subject to
28
<PAGE>
applicable law, we have sole discretion over the investment of assets of the
general account and policy owners do not share in the investment experience of,
or have any preferential claim on, those assets. Instead, we guarantee that the
account value allocated to the fixed investment option will accrue interest
daily at an effective annual rate of at least 4% without regard to the actual
investment experience of the general account.
Because of exemptive and exclusionary provisions, interests in our fixed
investment option have not been registered under the Securities Act of 1933 and
our general account has not been registered as an investment company under the
1940 Act. Accordingly, neither the general account nor any interests therein are
subject to the provisions of these acts, and we have been advised that the staff
of the SEC has not reviewed the disclosure in this prospectus relating to the
fixed investment option. Disclosure regarding the fixed investment option may,
however, be subject to certain generally-applicable provisions of the Federal
securities laws relating to accuracy and completeness of statements made in
prospectuses.
PROCEDURES FOR ISSUANCE OF A POLICY
Generally, the policy is available with a minimum Basic Sum Insured at issue
of $250,000. Since the Additional Sum Insured must equal the Basic Sum Insured
at issue, that means the minimum Total Sum Insured at issue is generally
$500,000. At the time of issue, each insured person must have an attained age of
at least 20 and no more than 80. All insured persons must meet certain health
and other insurance risk criteria called "underwriting standards".
Policies issued in Montana or in connection with certain employee plans will
not directly reflect the sex of the insured persons in either the premium rates
or the charges or values under the policy. The illustrations set forth in this
prospectus are sex-distinct and, therefore, may not reflect the rates, charges,
or values that would apply to such policies.
Minimum Initial Premium
The Minimum Initial Premium must be received by us at our Life Servicing
Office in order for the policy to be in full force and effect. There is no grace
period for the payment of the Minimum Initial Premium. The Minimum Initial
Premium is determined by us based on the characteristics of each of the insured
persons, the Total Sum Insured at issue, and the policy options you have
selected.
Commencement of insurance coverage
After you apply for a policy, it can sometimes take up to several weeks for us
to gather and evaluate all the information we need to decide whether to issue a
policy to you and, if so, what the insured persons' rate classes should be.
After we approve an application for a policy and assign an appropriate insurance
rate class, we will prepare the policy for delivery. We will not pay a death
benefit under a policy unless the policy is in effect when the last surviving
insured person dies (except for the circumstances described under "Temporary
insurance coverage prior to policy delivery" on page 30).
The policy will take effect only if all of the following conditions are
satisfied:
. The policy is delivered to and received by the applicant.
. The Minimum Initial Premium is received by us.
. Each insured person is living and still meets our health criteria for
issuing insurance.
If all of the above conditions are satisfied, the policy will take effect on the
date shown in the policy as the "date of issue." That is the date on which we
begin to deduct monthly charges. Policy months, policy years and policy
anniversaries are all measured from the date of issue.
29
<PAGE>
Backdating
In order to preserve a younger age at issue for one or both of the insured
persons, we can designate a date of issue that is up to 60 days earlier than the
date that would otherwise apply. This is referred to as "backdating" and is
allowed under state insurance laws. Backdating can also be used in certain
corporate-owned life insurance cases involving multiple policies to retain a
common monthly deduction date.
The conditions for coverage described above under "Commencement of insurance
coverage" must still be satisfied, but in a backdating situation the policy
always takes effect retroactively. Backdating results in a lower insurance
charge (because of an insured person's younger age at issue), but monthly
charges begin earlier than would otherwise be the case. Those monthly charges
will be deducted as soon as we receive premiums sufficient to pay them.
Temporary coverage prior to policy delivery
If a specified amount of premium is paid with the application for a policy and
other conditions are met, we will provide temporary survivorship term life
insurance coverage on the insured persons for a period prior to the time
coverage under the policy takes effect. Such temporary term coverage will be
subject to the terms and conditions described in the application for the policy,
including limits on amount and duration of coverage.
Monthly deduction dates
Each charge that we deduct monthly is assessed against your account value or
the subaccounts at the close of business on the date of issue and at the close
of the first business day in each subsequent policy month.
BASIC SUM INSURED VS. ADDITIONAL SUM INSURED
As noted earlier in this prospectus, you should consider a number of factors
in determining whether to elect coverage in the form of Basic Sum Insured or in
the form of Additional Sum Insured.
The amount of sales charge deducted from premiums and from account value and
the amount of compensation paid to the selling insurance agent will be less if
coverage is included as Additional Sum Insured, rather than as Basic Sum
Insured. On the other hand, the amount of any Additional Sum Insured is not
included in the guaranteed minimum death benefit feature. Therefore, if the
policy's surrender value is insufficient to pay the monthly charges as they fall
due (including the charges for the Additional Sum Insured), the Additional Sum
Insured coverage will lapse, even if the Basic Sum Insured stays in effect
pursuant to the guaranteed minimum death benefit feature.
Generally, you will incur lower sales charges and have more flexible coverage
with respect to the Additional Sum Insured than with respect to the Basic Sum
Insured. If this is your priority, you may wish to maximize the proportion of
the Additional Sum Insured. However, if your priority is to take advantage of
the guaranteed minimum death benefit feature, the proportion of the Policy's
Total Sum Insured that is guaranteed can be increased by taking out more
coverage as Basic Sum Insured at the time of policy issuance.
If you want to purchase Additional Sum Insured, you may select from among
several forms of it: a level amount of coverage; an amount of coverage that
increases on each policy anniversary up to a prescribed limit; an amount of
coverage that increases on each policy anniversary to the amount of premiums
paid during prior policy years plus the Planned Premium for the current policy
year, subject to certain limits; or a combination of those forms of coverage.
Any decision you make to modify the amount of Additional Sum Insured coverage
after issue can have significant tax consequences (see "Tax Considerations"
beginning on page 35).
30
<PAGE>
COMMENCEMENT OF INVESTMENT PERFORMANCE
Any premium payment processed prior to the twentieth day after the date of
issue will automatically be allocated to the Money Market investment option. On
the later of the date such payment is received or the twentieth day following
the date of issue, the portion of the Money Market investment option
attributable to such payment will be reallocated automatically among the
investment options you have chosen.
All other premium payments will be allocated among the investment options you
have chosen as soon as they are processed.
HOW WE PROCESS CERTAIN POLICY TRANSACTIONS
Premium payments
We will process any premium payment as of the day we receive it, unless one of
the following exceptions applies:
(1) We will process a payment received prior to a policy's date of issue as if
received on the date of issue.
(2) If the Minimum Initial Premium is not received prior to the date of issue,
we will process each premium payment received thereafter as if received on the
business day immediately preceding the date of issue until all of the Minimum
Initial Premium is received.
(3) We will process the portion of any premium payment for which we require
evidence of an insured person's continued insurability only after we have
received such evidence and found it satisfactory to us.
(4) If we receive any premium payment that we think will cause a policy to
become a modified endowment or will cause a policy to lose its status as life
insurance under the tax laws, we will not accept the excess portion of that
premium payment and will immediately notify the owner. We will refund the excess
premium when the premium payment check has had time to clear the banking system
(but in no case more than two weeks after receipt), except in the following
circumstances:
. The tax problem resolves itself prior to the date the refund is to be
made; or
. The tax problem relates to modified endowment status and we receive a
signed acknowledgment from the owner prior to the refund date instructing
us to process the premium notwithstanding the tax issues involved.
In the above cases, we will treat the excess premium as having been received on
the date the tax problem resolves itself or the date we receive the signed
acknowledgment. We will then process it accordingly.
(5) If a premium payment is received or is otherwise scheduled to be processed
(as specified above) on a date that is not a business day, the premium payment
will be processed on the business day next following that date.
Transfers among investment options
Any reallocation among investment options must be such that the total in all
investment options after reallocation equals 100% of account value. Transfers
out of a variable investment option will be effective at the end of the business
day in which we receive at our Life Servicing Office notice satisfactory to us.
If received on or before the policy anniversary, requests for transfer out of
the fixed investment option will be processed on the policy anniversary (or the
next business day if the policy anniversary does not occur on a business day).
If received after the policy anniversary, such a request will be processed at
the end of the business day in which we receive the request at our Life
Servicing Office. If you request a transfer out of the fixed investment option
61 days or more prior to the policy anniversary, we will not process that
portion of the reallocation, and your confirmation statement will not reflect a
transfer out of the fixed investment option as to such request.
31
<PAGE>
Currently, there is no minimum amount limit on transfers into the fixed
investment option, but we reserve the right to impose such a limit in the
future. We have the right to defer transfers of amounts out of the fixed
investment option for up to six months.
Dollar cost averaging
Scheduled transfers under this option may be made from the Money Market
investment option to not more than nine other variable investment options.
However, the amount transferred to any one investment option must be at least
$100.
Once we receive the election in form satisfactory to us at our Life Servicing
Office, transfers will begin on the second monthly deduction date following its
receipt. If you have any questions with respect to this provision, call 1-800-
732-5543.
Once elected, the scheduled monthly transfer option will remain in effect for
so long as you have at least $2,500 of your account value in the Money Market
investment option, or until we receive written notice from you of cancellation
of the option or notice of the death of the last surviving insured person. We
reserve the right to modify, terminate or suspend the dollar cost averaging
program at any time.
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
The following transactions take effect on the policy anniversary on or next
following the date we approve the request:
. Total Sum Insured decreases
. Additional Sum Insured increases
. Change of death benefit option from Option B to Option A, when and if
permitted by our administrative rules (see "Change of death benefit option" on
page 18)
Reinstatements of lapsed policies take effect on the monthly deduction date on
or next following the date we approve the request for reinstatement.
We process loans, surrenders, partial withdrawals and loan repayments as of
the day we receive such request or repayment.
EFFECTS OF POLICY LOANS
The account value, the surrender value, and any death benefit above the Total
Sum Insured are permanently affected by any loan, whether or not it is repaid in
whole or in part. This is because the amount of the loan is deducted from the
investment options and placed in a special loan account. The investment options
and the special loan account will generally have different rates of investment
return.
The amount of the outstanding loan (which includes accrued and unpaid
interest) is subtracted from the amount otherwise payable when the policy
proceeds become payable.
Whenever the outstanding loan exceeds 90% of your account value, the policy
will terminate 31 days after we have mailed notice of termination to you
32
<PAGE>
(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 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 34.)
Effect of premium payment pattern
You may structure the timing and amount of premium payments to minimize the
sales charges, although doing so involves certain risks. Paying less than one
Target Premium in the first policy year or paying more than one Target Premium
in any policy year could reduce your total sales charges over time. For example,
if the Target Premium was $10,000 and you paid a premium of $10,000 in each of
the first ten policy years, you would pay total sales charges of $14,000. If you
paid $20,000 (i.e., two times the Target Premium amount) in every other policy
year up to the ninth policy year, you would pay total sales charges of only
$9,750. However, delaying the payment of Target Premiums to later policy years
could increase the risk that the guaranteed minimum death benefit feature will
lapse and the account value will be insufficient to pay monthly policy charges
as they come due. As a result, the policy or any Additional Sum Insured may
lapse and eventually terminate. Conversely, accelerating the payment of Target
Premiums to earlier policy years could cause aggregate premiums paid to exceed
the policy's 7-pay premium limit and, as a result, cause the policy to become a
modified endowment, with adverse tax consequences to you upon receipt of policy
distributions. (See "Tax consequences" beginning on page 35.)
Monthly charges
We deduct the monthly charges described in the Basic Information section from
your policy's investment options in proportion to the amount of account value
you have in each. For each month that we cannot deduct any charge because of
insufficient account value, the uncollected charges will accumulate and be
deducted when and if sufficient account value becomes available.
The insurance under the policy continues in full force during any grace period
but, if the last surviving insured person dies during the policy grace period,
the amount of unpaid monthly charges is deducted from the death benefit
otherwise payable.
Reduced charges for eligible classes
The charges otherwise applicable (including the M&E charge) may be reduced
with respect to policies issued to a class of associated individuals or to a
trustee, employer or similar entity where we anticipate that the sales to the
members of the class will result in lower than normal sales or administrative
expenses, lower taxes or lower risks to us. We will make these reductions in
accordance with our rules in effect at the time of the application for a policy.
The factors we consider in determining the eligibility of a particular group for
reduced charges, and the level of the reduction, are as follows: the nature of
the association and its organizational framework; the method by which sales will
be made to the members of the class; the facility with which premiums will be
collected from the associated individuals and the association's capabilities
with
33
<PAGE>
respect to administrative tasks; the anticipated lapse and surrender rates of
the policies; the size of the class of associated individuals and the number of
years it has been in existence; the aggregate amount of premiums paid; and any
other such circumstances which result in a reduction in sales or administrative
expenses, lower taxes or lower risks. Any reduction in charges will be
reasonable and will apply uniformly to all prospective policy purchasers in the
class and will not unfairly discriminate against any owner.
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, and John Hancock Variable Life Accounts U, 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 45% of the Target Premium paid in the first policy year, 5% of the
Target Premium paid in each of the second through fifth policy years, and 3% of
the Target Premium paid in each policy year thereafter. The maximum commission
on any premium paid in any policy year in excess of the Target Premium is 3%.
Representatives with less than four years of service with Signator and those
compensated on salary plus bonus or level commission programs may be paid on a
different basis. Representatives who meet certain productivity and persistency
standards with respect to the sale of policies issued by John Hancock will be
eligible for additional compensation.
The policies are also sold through other registered broker-dealers that have
entered into selling agreements with Signator and whose representatives are
authorized by applicable law to sell variable life insurance policies. The
commissions which will be paid by such broker-dealers to their representatives
will be in accordance with their established rules. The commission rates may be
more or less than those set forth above for Signator's representatives. In
addition, their qualified registered representatives may be reimbursed by the
broker-dealers under expense reimbursement allowance
34
<PAGE>
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 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.
The offering of the policies is intended to be continuous, but 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 account value as a result of
interest or investment experience will not be subject to federal income tax
unless and until values are actually received through distributions.
Distributions for tax purposes can include amounts received upon surrender or
partial withdrawals. You may also be deemed to have received a distribution for
tax purposes if you assign all or part of your policy rights or change your
policy's ownership.
In general, the owner will be taxed on the amount of distributions that exceed
the premiums paid under the policy. But under certain circumstances within the
first 15 policy years, the owner may be taxed on a distribution even if total
withdrawals do not exceed total premiums paid. Any taxable distribution will be
ordinary income to the owner (rather than capital gains).
We also believe that, except as noted below, loans received under the policy
will be treated as indebtedness of an owner and that no part of any loan will
constitute income to the owner. However, the amount of any outstanding loan that
was not previously considered income (as discussed below) will be treated as if
it had been distributed to the owner if the policy terminates for any reason.
It is possible that, despite our monitoring, a policy might fail to qualify as
life insurance under Section 7702 of the Code. This could happen, for example,
if we inadvertently failed to return to you any premium payments that were in
excess of permitted amounts, or if the Trust failed to meet certain investment
diversification or other requirements of the Code. If this were to occur, you
would be subject to income tax on the income and gains under the policy for the
period of the disqualification and for subsequent periods.
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
35
<PAGE>
shares would be included in your current gross income for federal income tax
purposes. Under current law, however, we believe that we, and not the owner of a
policy, would be considered the owner of the fund's shares for tax purposes.
Tax consequences of ownership or receipt of policy proceeds under federal,
state and local estate, inheritance, gift and other tax laws depend on the
circumstances of each owner or beneficiary.
Because there may be unfavorable tax consequences (including recognition of
taxable income and the loss of income tax-free treatment for any death benefit
payable to the beneficiary), you should consult a qualified tax adviser prior to
changing the policy's ownership or making any assignment of ownership interests.
7-pay premium limit
At the time of policy issuance, we will determine whether the Planned Premium
schedule will exceed the 7-pay limit discussed below. If so, our standard
procedures prohibit issuance of the policy unless you sign a form acknowledging
that fact.
The 7-pay limit is the total of net level premiums that would have been
payable at any time for a comparable fixed policy to be fully "paid-up" after
the payment of 7 equal annual premiums. "Paid-up" means that no further premiums
would be required to continue the coverage in force until maturity, based on
certain prescribed assumptions. If the total premiums paid at any time during
the first 7 policy years exceed the 7-pay limit, the policy will be treated as a
"modified endowment", which can have adverse tax consequences.
The owner will be taxed on distributions and loans from a "modified endowment"
to the extent of any income (gain) to the owner (on an income-first basis). The
distributions and loans affected will be those made on or after, and within the
two year period prior to, the time the policy becomes a modified endowment.
Additionally, a 10% penalty tax may be imposed on taxable portions of such
distributions or loans that are made before the owner attains age 591/2.
Furthermore, any time there is a "material change" in a policy (such as an
increase in Additional Sum Insured, the addition of certain other policy
benefits after issue, a change in death benefit option, or reinstatement of a
lapsed policy), the policy will have a new 7-pay limit as if it were a newly-
issued policy. If a prescribed portion of the policy's then account value, plus
all other premiums paid within 7 years after the material change, at any time
exceed the new 7-pay limit, the policy will become a modified endowment.
Moreover, if benefits under a policy are reduced (such as a reduction in the
Total Sum Insured or death benefit or the reduction or cancellation of certain
rider benefits) during the 7 years in which a 7-pay test is being applied, the
7-pay limit will be recalculated based on the reduced benefits. If the premiums
paid to date are greater than the recalculated 7-pay limit, the policy will
become a modified endowment.
All modified endowments issued by the same insurer (or its affiliates) to the
owner during any calendar year generally will be treated as one contract for the
purpose of applying the modified endowment rules. A policy received in exchange
for a modified endowment will itself also be a modified endowment. You should
consult your tax advisor if you have questions regarding the possible impact of
the 7-pay limit on your policy.
Corporate and H.R. 10 plans
The policy may be acquired in connection with the funding of retirement plans
satisfying the qualification requirements of Section 401 of the Code. If so, the
Code provisions relating to such plans and life insurance benefits thereunder
should be carefully scrutinized. We are not responsible for compliance with the
terms of any such plan or with the requirements of applicable provisions of the
Code.
36
<PAGE>
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, the Basic Sum Insured and the Additional Sum Insured, the account
value, the portion of the account value in each investment option, the surrender
value, premiums received and charges deducted from premiums since the last
report, and any outstanding policy loan (and interest charged for the preceding
policy year). Moreover, you also will receive confirmations of premium payments,
transfers among investment options, policy loans, partial withdrawals 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 account value held in the
subaccount by the net asset value of one share in the fund. Fractional votes
will be counted. We determine the number of shares as to which the owner may
give instructions as of the record date for the Trust's meeting. Owners of
policies may give instructions regarding the election of the Board of Trustees
of the Trust, ratification of the selection of independent auditors, approval of
Trust investment advisory agreements and other matters requiring a shareholder
vote. We will furnish owners with information and forms to enable owners to give
voting instructions.
However, we may, in certain limited circumstances permitted by the SEC's
rules, disregard voting instructions. If we do disregard voting instructions,
you will receive a summary of that action and the reasons for it in the next
semi-annual report to owners.
CHANGES THAT 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 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 beJohn 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
37
<PAGE>
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 either 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 either insured person, we will
adjust the amount of any death benefit as described in the policy.
WHEN WE PAY POLICY PROCEEDS
General
We will pay any death benefit, withdrawal, surrender value or loan within 7
days after we receive the last required form or request (and, with respect to
the death benefit, any other documentation that may be required). If we don't
have information about the desired manner of payment within 7 days after the
date we receive notification of the death of the last surviving insured person,
we will pay the proceeds as a single sum, normally within 7 days thereafter.
Delay to challenge coverage
We may challenge the validity of your insurance policy based on any material
misstatements made to us in the application for the policy. We cannot make such
a challenge, however, beyond certain time limits that are specified in the
policy.
Delay for check clearance
We reserve the right to defer payment of that portion of your account value
that is attributable to a premium payment made by check for a reasonable period
of time (not to exceed 15 days) to allow the check to clear the banking system.
Delay of separate account proceeds
We reserve the right to defer payment of any death benefit, loan or other
distribution that is derived from a variable investment option if (a) the New
York Stock Exchange is closed (other than customary weekend and holiday
closings) or trading on the New York Stock Exchange is restricted; (b) an
emergency exists, as a result of which disposal of securities is not reasonably
practicable or it is not reasonably practicable to fairly determine the account
value; or (c) the SEC by order permits the delay for the protection of owners.
Transfers and allocations of account value among the investment options may also
be postponed under these circumstances. If we need to defer calculation of
separate account values for any of the foregoing reasons, all delayed
transactions will be processed at the next values that we do compute.
38
<PAGE>
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 death of the last surviving
insured person. You may change the beneficiary during that 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 last surviving insured person dies, we will pay
the insurance proceeds to the owner or the owner's estate.
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.
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 certain of the financial
statements of 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 Todd G.
Engelsen, 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.
In addition to those financial statements of the Account included herein that
have been audited by Ernst & Young LLP, this prospectus also contains unaudited
financial statements of the Account for a period subsequent to the audited
financial statements.
The most current financial statements for John Hancock are those as of
December 31,1999. We do not prepare such financial statements more often than
annually. Moreover, we believe that any additional benefit you would get from
more recent financial statements would not justify our cost in preparing them.
(This is true even though we would not necessarily have to incur the expense of
an independant audit of those financial statements.) In this connection, we
represent that there have been no material adverse changes in our financial
condition or operations between December 31, 1999 and the date of this
prospectus.
39
<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>
Stephen L. Brown.......... Chairman of the Board and Chief Executive Officer, John Hancock
David F. D'Alessandro..... President, Chief Operations Officer and Chief Executive Officer-Elect, John Hancock
Foster L. Aborn........... Vice Chairman of the Board and Chief Investment Officer, John Hancock
Samuel W. Bodman.......... Chairman of the Board and Chief Executive Officer, Cabot Corporation (chemicals)
I. MacAllister Booth...... Retired Chairman of the Board and Chief Executive Officer, Polaroid Corporation
(photographic products)
Wayne A. Budd............. Group President, Bell Atlantic - New England (telecommunications)
John M. Connors, Jr....... Chairman and Chief Executive Officer and Director, Hill, Holliday, Connors, Cosmopoulos, Inc.
(advertising).
Robert E. Fast............ Senior Partner, Hale and Dorr (law firm).
Kathleen F. Feldstein..... President, Economic Studies, Inc. (economic consulting).
Nelson S. Gifford......... Principal, Fleetwing Capital Management (financial services)
Michael C. Hawley......... Chairman and Chief Executive Officer, The Gillette Company (razors, etc.)
Edward H. Linde........... President and Chief Executive Officer, Boston Properties, Inc. (real estate)
Judith A, McHale.......... President and Chief Operating Officer, Discovery Communications, Inc. (multimedia communications)
E. James Morton........... Director, formerly Chairman of the Board and Chief Executive Officer, John Hancock
Richard F. Syron.......... Chairman of the Board, President and Chief Executive Officer, Thermo Electron Corp. (scientific and
industrial instruments)
Robert J. Tarr, Jr........ Former President, Chief Executive Officer and Chief Operations Officer, Harcourt General, Inc.
(publishing)
<CAPTION>
Other Executive Officers
------------------------
<S> <C>
Thomas E. Moloney........ Chief Financial Officer
Richard S. Scipione...... General Counsel
Derek Chilvers........... Chairman and Chief Executive Officer of John Hancock International Holdings, Inc.
John M. DeCiccio......... Executive Vice President and Chief Investment Officer-Elect
Maureen R. Ford.......... President, Broker-Dealer Distribution and Financial Advisory Network
Kathleen M. Graveline.... Executive Vice President - Retail
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.
40
<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, 1999
and 1998, 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 auditing standards generally
accepted in the United States. 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 accounting principles generally accepted in the United
States. The variances between such practices and accounting principles generally
accepted in the United States 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 accounting principles generally accepted in the
United States, the financial position of John Hancock Mutual Life Insurance
Company at December 31, 1999 and 1998 or the results of its operations or its
cash flows for the years then ended.
However, 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, 1999 and 1998, 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
March 10, 2000
41
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF FINANCIAL POSITION
December 31
----------------------
1999 1998
--------- ----------
(in millions)
Assets
Bonds--Note 6.................................. $26,188.1 $23,353.0
Stocks:
Preferred.................................... 926.6 844.7
Common....................................... 458.4 269.3
Investments in affiliates.................... 1,465.8 1,520.3
--------- ---------
2,850.8 2,634.3
Mortgage loans on real estate--Note 6.......... 9,165.9 8,223.7
Real estate:
Company occupied............................. 366.6 372.2
Investment properties........................ 501.7 1,472.1
--------- ---------
868.3 1,844.3
Policy loans................................... 1,577.8 1,573.8
Cash items:
Cash in banks and offices.................... 292.6 241.5
Temporary cash investments................... 868.0 1,107.4
--------- ---------
1,160.6 1,348.9
Premiums due and deferred...................... 234.8 253.4
Investment income due and accrued.............. 574.8 527.5
Other general account assets................... 1,364.7 1,156.6
Assets held in separate accounts............... 16,746.0 17,447.0
--------- ---------
TOTAL ASSETS................................... $60,731.8 $58,362.5
========= =========
The accompanying notes are an integral part of the statutory-basis financial
statements.
42
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
December 31
----------------------
1999 1998
---------- ---------
(in millions)
<S> <C> <C>
Obligations and Policyholders' Contingency Reserves
OBLIGATIONS
Policy reserves................................................... $20,574.1 $19,804.8
Policyholders' and beneficiaries' funds........................... 16,128.3 14,216.9
Dividends payable to policyholders................................ 464.8 449.1
Policy benefits in process of payment............................. 132.3 111.4
Other policy obligations.......................................... 304.7 322.6
Asset valuation reserve--Note 1................................... 1,242.9 1,289.6
Federal income and other accrued Taxes--Note 1.................... (12.1) 211.5
Other general account obligations................................. 1,695.0 1,109.3
Obligations related to separate accounts.......................... 16,745.1 17,458.6
--------- ---------
TOTAL OBLIGATIONS................................................... 57,275.1 54,973.8
Policyholders' Contingency Reserves
Surplus note--Note 2.............................................. 450.0 450.0
Special contingency reserve for group insurance................... 153.4 160.0
General contingency reserve....................................... 2,853.3 2,778.7
--------- ---------
TOTAL POLICYHOLDERS' CONTINGENCY RESERVES........................... 3,456.7 3,388.7
--------- ---------
TOTAL OBLIGATIONS AND POLICYHOLDERS' CONTINGENCY
RESERVES........................................................... $60,731.8 $58,362.5
========= =========
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
43
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF OPERATIONS AND CHANGES IN POLICYHOLDERS'
CONTINGENCY RESERVES
<TABLE>
<CAPTION>
Year ended December 31
-----------------------
1999 1998
--------- ---------
(In millions)
<S> <C> <C>
Income
Premiums, annuity considerations and pension fund contributions.... $ 9,622.9 $ 8,844.0
Net investment income--Note 4...................................... 3,033.4 2,956.2
Other, net......................................................... 241.9 233.8
--------- ---------
12,898.2 12,034.0
Benefits and Expenses
Payments to policyholders and beneficiaries:
Death benefits.................................................. 675.6 582.9
Accident and health benefits.................................... 94.4 76.9
Annuity benefits................................................ 1,734.3 1,612.4
Surrender benefits and annuity fund withdrawals................. 7,410.6 6,712.4
Matured endowments.............................................. 18.6 20.7
--------- ---------
9,933.5 9,005.3
Additions to reserves to provide for future payments to
policyholders and beneficiaries.................................. 1,238.9 1,106.7
Expenses of providing service to policyholders and obtaining new
insurance:
Field sales compensation and expenses........................... 248.8 290.7
Home office and general expenses................................ 717.8 529.0
Payroll, state premium and miscellaneous taxes..................... 48.9 52.0
--------- ---------
12,187.9 10,983.7
--------- ---------
GAIN FROM OPERATIONS BEFORE DIVIDENDS TO POLICYHOLDERS,
FEDERAL INCOME TAXES AND NET REALIZED CAPITAL GAINS......... 710.3 1,050.3
Dividends to policyholders........................................... 461.1 446.0
Federal income tax credit--Note 1.................................... (216.9) (2.8)
--------- ---------
244.2 443.2
--------- ---------
GAIN FROM OPERATIONS BEFORE NET REALIZED CAPITAL GAINS....... 466.1 607.1
Net realized capital gains--Note 5................................... 29.0 0.7
--------- ---------
NET INCOME................................................... 495.1 607.8
Other increases/(decreases) in policyholders'
contingency reserves:
Net unrealized capital losses and other adjustments--Note 5........ (147.0) (214.5)
Prior years' federal income taxes.................................. (21.9) (25.5)
Other reserves and adjustments, net--Notes 1, 7 and 13............. (258.2) (136.9)
--------- ---------
NET INCREASE IN POLICYHOLDERS' CONTINGENCY RESERVES.......... 68.0 230.9
Policyholders' contingency reserves at beginning of year............. 3,388.7 3,157.8
--------- ---------
POLICYHOLDERS' CONTINGENCY RESERVES AT END OF YEAR................... $ 3,456.7 $ 3,388.7
========= =========
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
44
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31
-------------------------
1999 1998
----------- -----------
(In millions)
<S> <C> <C>
Cash Flows from Operating Activities:
Insurance premiums, annuity considerations and deposits............ $ 9,816.6 $ 8,945.5
Net investment income.............................................. 2,966.1 2,952.8
Benefits to policyholders and beneficiaries........................ (10,047.9) (9,190.4)
Dividends paid to policyholders.................................... (445.4) (396.6)
Insurance expenses and taxes....................................... (1,015.3) (874.4)
Net transfers from separate accounts............................... 1,436.6 131.1
Other, net......................................................... (264.2) (181.7)
---------- ----------
NET CASH PROVIDED FROM OPERATIONS............................... 2,446.5 1,386.3
---------- ----------
Cash Flows used in Investing Activities:
Bond purchases..................................................... (15,946.3) (12,403.6)
Bond sales......................................................... 10,098.5 8,447.8
Bond maturities and scheduled redemptions.......................... 2,443.9 2,537.7
Bond prepayments................................................... 644.9 1,202.7
Stock purchases.................................................... (2,546.2) (623.2)
Proceeds from stock sales.......................................... 2,174.0 378.4
Real estate purchases.............................................. (188.7) (147.6)
Real estate sales.................................................. 1,258.4 630.5
Other invested assets purchases.................................... (127.9) (185.3)
Proceeds from the sale of other invested assets.................... 358.4 120.5
Mortgage loans issued.............................................. (2,254.2) (1,978.5)
Mortgage loan repayments........................................... 1,267.3 1,575.6
Other, net......................................................... 183.1 (38.6)
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES........................... (2,634.8) (483.6)
---------- ----------
Cash Flows used in Financing Activities:
Net decrease in short-term note payable............................ 0.0 (75.0)
Repayment of REMIC notes payable................................... 0.0 (203.6)
---------- ----------
NET CASH USED IN FINANCING ACTIVITIES........................... 0.0 (278.6)
---------- ----------
(DECREASE) INCREASE IN CASH AND TEMPORARY CASH INVESTMENTS........... (188.3) 624.1
Cash and temporary cash investments at beginning of year............. 1,348.9 724.8
---------- ----------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF YEAR................... $ 1,160.6 $ 1,348.9
========== ==========
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
45
<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. Pursuant to a Plan of
Reorganization, effective February 1, 2000, the Company converted from a mutual
life insurance company to a stock life insurance company and became a wholly
owned subsidiary of John Hancock Financial Services, Inc., which is a holding
company. See Note 15--Subsequent Events.
The Company offers financial products in two major groups: (i) its retail
business, which offers protection and asset gathering products primarily to
retail consumers; and (ii) the investment and pension business, which offers
guaranteed and structured financial products primarily to institutional
customers. In addition, there is a corporate business unit. The Company's
reportable business units are strategic business units offering different
products and services. The reportable business units are managed separately, as
they focus on different products, markets or distribution channels.
In the Retail-Protection business unit, the Company offers a variety of
individual life insurance and individual and group long-term care insurance
products, including participating whole life, term life, and retail and group
long-term care insurance. Products are distributed through multiple distribution
channels, including insurance agents and brokers and alternative distribution
channels that include banks, financial planners, direct marketing and the
Internet.
In the Retail-Asset Gathering business unit, the Company offers individual
annuities, consisting of fixed deferred annuities, fixed immediate annuities,
single premium immediate annuities, and variable annuities. This business unit
distributes its products through distribution channels including insurance
agents and brokers affiliated with the Company, securities brokerage firms,
financial planners, and banks.
In the Investment and Pension business unit, the Company offers a variety of
retirement products to qualified defined benefit plans, defined contribution
plans and non-qualified buyers. The Company's products include guaranteed
investment contracts, funding agreements, single premium annuities, and general
account participating annuities and fund type products. These contracts provide
non-guaranteed, partially guaranteed, and fully guaranteed investment options
through general and separate account products. The business unit distributes its
products through a combination of dedicated regional representatives, pension
consultants and investment professionals.
The Corporate business unit primarily consists of certain corporate operations
and businesses that are either disposed or in run-off. Corporate operations
primarily include certain financing activities, income on capital not
specifically allocated to the business units and certain non-recurring expenses
not allocated to the business units. The disposed businesses primarily consist
of group health operations.
The Company established a "corporate account" as part of the Corporate business
unit to facilitate the capital management process. The corporate account
contains capital not allocated to support the operations of the Company's
business units.
Late in the fourth quarter of 1999, the Company transferred certain assets from
the business units to the corporate account. These assets include investments in
certain subsidiaries and the home office real estate complex (collectively
referred to as "corporate purpose assets"). Historically, the Company has
allocated the investment performance or other earnings of corporate purpose
assets among all of the business units. However, subsequent to the conversion to
a stock life insurance company, the Company will centrally manage the
performance of corporate purpose assets through the corporate account.
The asset transfer directly affected certain group pension participating
contractholders because those contracts have participating features under which
crediting rates and dividends are affected directly by portfolio earnings.
Certain participating contractholders participate in contract experience related
to net investment income and realized capital gains and losses in the general
account. These participating contractholders were compensated for transferred
assets
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
based on the fair value of the assets transferred, which amounted to $771.7
million. These participating contractholders were credited with their portion of
the difference between the fair value and carrying value of the assets
transferred through the crediting rates and dividends on their contracts. The
after-tax amount of the transfer was $170.8 million which was charged directly
to policyholders' contingency reserve.
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 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 or future estimated gross profits or gross
margins; (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 codified
statutory accounting principles ("Codification") effective January 1, 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
Commonwealth of Massachusetts must adopt Codification as the prescribed basis of
accounting on which domestic insurers must report their statutory-basis results
to the Division of Insurance. At this time, it is anticipated that the
Commonwealth of Massachusetts will adopt Codification effective January 1, 2001.
The impact of any such changes on the Company's statutory surplus is not
expected to be material.
47
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
Revenues and Expenses: Premium revenues are recognized over the premium-paying
period of the policies whereas expenses, including the acquisition costs of new
business, are charged to operations as incurred and policyholder dividends are
provided as paid or accrued.
Cash and Temporary Cash Investments: Cash includes currency on hand and demand
deposits with financial institutions. Temporary cash investments are short-term,
highly liquid investments both readily convertible to known amounts of cash and
so near maturity that there is insignificant risk of changes in value because of
changes in interest rates.
Valuation of Assets: General account investments are carried at amounts
determined on the following bases:
Bond and stock values are carried as prescribed by the NAIC; bonds generally
at amortized amounts or cost, preferred stocks generally at cost and common
stocks at 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 $1,057.3 million and $533.8 million
were sold in 1999 and 1998, respectively, and an additional $125.3 million of
real estate is expected to be sold in 2000. Net gains on the properties sold
amounted to $140.8 million and $64.3 million in 1999 and 1998, respectively.
Those properties to be sold subsequent to December 31, 1999 are carried at the
lower of depreciated cost at the date a determination to sell was made or fair
value. Accumulated depreciation amounted to $254.4 million and $370.0 million
at December 31, 1999 and 1998, 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
48
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
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. In connection
with the Company's plans to dispose of certain real estate holdings, during
1998, an additional contribution was recorded that resulted in the AVR exceeding
the prescribed maximum reserve level by $48.0 million and $111.3 million at
December 31, 1999 and 1998, respectively. 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.
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, 1999, the IMR, net of 1999 amortization of $51.4 million, amounted to $261.7
million that is included in other policy obligations. The corresponding 1998
amounts were $34.9 million and $261.6 million, respectively.
Property and Equipment: Data processing equipment, which amounted to $29.2
million in 1999 and $31.4 million in 1998 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 $19.7 million in 1999 and $20.1 million
in 1998.
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.
49
<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 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.
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, 1999. 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 from 2 1/2% to 6%, and using principally the net
level premium method for policies issued prior to 1978 and a modified
preliminary term method for policies issued in 1979 and later. Annuity and
supplementary contracts with life contingency reserves are based principally on
modifications of the 1937 Standard Annuity Table, the Group Annuity Mortality
Tables for 1951, 1971 and 1983, the 1971 Individual Annuity Mortality Table and
the a-1983 Individual Annuity Mortality Table, with interest rates generally
ranging from 2% to 8 3/4%.
50
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
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.
The statement value and fair value for investment-type insurance contracts are
as follows:
December 31, 1999 December 31, 1998
-------------------- ---------------------
Statement Fair Statement Fair
Value Value Value Value
--------- --------- --------- ---------
(in millions)
Guaranteed investment contracts... $13,111.6 $12,617.2 $12,666.9 $12,599.7
Fixed rate deferred and immediate
annuities........................ 4,685.7 4,656.9 4,375.0 4,412.2
Supplementary contracts without
life contingencies............... 55.7 55.7 42.7 44.7
--------- --------- --------- ---------
$17,853.0 $17,329.8 $17,084.6 $17,056.6
========= ========= ========= =========
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 Internal Revenue Service sets the DER 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 $115.0 million in 1999 and $74.9
million in 1998.
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. No such refinements were made during 1999 or 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.
51
<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 knowledge of an insurance insolvency.
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 and any
payment of interest on and principal of the notes may be made only with the
prior approval of the Commissioner of Insurance of the Commonwealth of
Massachusetts. Surplus notes are reported as part of policyholders' contingency
reserves rather than liabilities. Interest of $33.2 million was paid on the
notes during 1999 and 1998.
NOTE 3--BORROWED MONEY
At December 31, 1999, the Company had two syndicated lines of credit with a
group of banks totaling $1.0 billion, $500.0 million of which expire on July 29,
2000 and $500.0 million of which expire on June 30, 2001. The banks will commit,
when requested, to loan funds at prevailing interest rates as determined in
accordance within each line of credit agreement. Under the terms of the
agreements, the Company is required to maintain certain minimum levels of net
worth and comply with certain other covenants, which were met at December 31,
1999. At December 31, 1999, the Company had no outstanding borrowings under
either agreement.
Interest paid on borrowed money was $7.9 million and $6.6 million during 1999
and 1998, respectively.
NOTE 4--NET INVESTMENT INCOME
Investment income has been reduced by the following amounts:
1999 1998
------- ------
(In millions)
Investment expenses.......................... $277.1 $317.5
Interest expense............................. 41.4 44.3
Depreciation on real estate and other
invested assets............................ 22.9 41.6
Real estate and other investment taxes....... 41.8 60.1
------ ------
$383.2 $463.5
====== ======
NOTE 5--NET CAPITAL GAINS (LOSSES) AND OTHER ADJUSTMENTS
Net realized capital gains consist of the following items:
1999 1998
-------- -------
(In millions)
Net gains from asset sales and foreclosures... $ 260.3 $ 303.3
Capital gains tax............................. (179.8) (171.7)
Net capital gains transferred to the IMR...... (51.5) (130.9)
------- -------
Net Realized Capital Gains.................. $ 29.0 $ 0.7
======= =======
52
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 5--NET CAPITAL GAINS (LOSSES) AND OTHER ADJUSTMENTS--CONTINUED
Net unrealized capital losses and other adjustments consist of the following
items:
1999 1998
-------- --------
(In millions)
Net losses from changes in security values and
book value adjustments........................ $(193.7) $ (90.6)
Decrease (increase) in asset valuation
reserve....................................... 46.7 (123.9)
------- -------
Net Unrealized Capital Losses and Other
Adjustments................................... $(147.0) (214.5)
======= =======
NOTE 6--INVESTMENTS
The statement value and fair value of bonds are shown below:
<TABLE>
<CAPTION>
Gross Gross
Statement Unrealized Unrealized
December 31, 1999 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.................... $ 162.3 $ 0.4 $ 2.5 $ 160.2
Obligations of states and political
subdivisions............................................ 111.3 6.6 4.4 113.5
Debt securities issued by foreign governments............ 510.0 56.4 7.0 559.4
Corporate securities..................................... 20,460.3 587.1 970.8 20,076.6
Mortgage-backed securities............................... 4,944.2 22.1 167.7 4,798.6
--------- -------- -------- ---------
Total bonds............................................ $26,188.1 $ 672.6 $1,152.4 $25,708.3
========= ======== ======== =========
<CAPTION>
December 31, 1998
-----------------
<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>
The statement value and fair value of bonds at December 31, 1999, 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........................... $ 1,515.9 $ 1,513.2
Due after one year through five years............. 5,876.1 5,871.2
Due after five years through ten years............ 6,801.3 6,684.9
Due after ten years............................... 7,050.6 6,840.4
--------- ---------
21,243.9 20,909.7
Mortgage-backed securities........................ 4,944.2 4,798.6
--------- ---------
$26,188.1 $25,708.3
========= =========
</TABLE>
53
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 6--INVESTMENTS--CONTINUED
Gross gains of $99.1 million in 1999 and $126.4 million in 1998 and gross losses
of $94.4 million in 1999 and $62.3 million in 1998 were realized from the sale
of bonds.
At December 31, 1999, bonds with an admitted asset value of $26.6 million were
on deposit with state insurance departments to satisfy regulatory requirements.
The cost of common stocks was $345.3 million and $258.4 million at December 31,
1999 and 1998, respectively. At December 31, 1999, gross unrealized appreciation
on common stocks totaled $177.7 million, and gross unrealized depreciation
totaled $64.6 million. The fair value of preferred stock totaled $926.7 million
at December 31, 1999 and $832.4 million at December 31, 1998.
The Company participates in a security-lending program for the purpose of
enhancing income on securities held. At December 31, 1999 and 1998, $277.7
million and $421.5 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 $19.3 million, bonds with
amortized cost of $54.4 million and real estate with depreciated cost of $9.9
million were non-income as of December 31, 1999.
Restructured commercial mortgage loans aggregated $120.3 million and $230.5
million as of December 31, 1999 and 1998, 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:
Year ended December 31
-----------------------
1999 1998
----------- ----------
(In millions)
Expected................................. $10.8 $22.5
Actual................................... 6.9 11.6
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, 1999, 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.
54
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 6--INVESTMENTS--CONTINUED
Statement Geographic Statement
Property Type Value Concentration Value
------------- ------------- ------------- ---------------
(In millions) (In millions)
Apartments........... $1,809.1 East North Central.... $1,039.8
Hotels............... 404.0 East South Central.... 289.7
Industrial........... 816.8 Middle Atlantic....... 1,657.5
Office buildings..... 2,309.1 Mountain.............. 326.7
Retail............... 1,619.4 New England........... 836.1
1-4 Family........... 3.4 Pacific............... 2,025.0
Agricultural......... 1,803.6 South Atlantic........ 1,823.5
Other................ 400.5 West North Central.... 362.7
West South Central.... 701.9
Other................. 103.0
-------- --------
$9,165.9 $9,165.9
======== ========
At December 31, 1999, the fair values of the commercial and agricultural
mortgage loan portfolios were $7.2 billion and $1.8 billion, respectively. The
corresponding amounts as of December 31, 1998 were approximately $7.3 billion
and $1.3 billion, respectively.
The maximum and minimum lending rates for mortgage loans during 1999 were 14.24%
and 6.84% for agricultural loans, 9.0% and 6.50% for other properties, and 10.0%
and 7.125% 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 1999 were
$673.5 million, $42.8 million, and $153.1 million, respectively. The
corresponding amounts in 1998 were $784.0 million, $310.0 million, and $7.7
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 1999 were $1,018.3
million, $488.5 million and $823.7 million, respectively. The corresponding
amounts in 1998 were $873.9 million, $772.5 million and $712.2 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 $463.9 million, $449.0 million, and $231.7 million, respectively, at
December 31, 1999. The corresponding amounts in 1998 were $458.2 million, $481.2
million, and $238.6 million, respectively.
55
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 7--REINSURANCE--CONTINUED
Amounts recoverable on paid claims and funds withheld from reinsurers were as
follows:
December 31
------------------
1999 1998
-------- -------
(In millions)
Reinsurance recoverables................. $ 27.5 $18.6
Funds withheld from reinsurers........... 227.3 49.5
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 $245.7 million at December 31, 1999 and $251.1
million at December 31, 1998.
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 1999 issues of flexible premium variable life
insurance and scheduled premium variable life insurance policies. In connection
with this agreement, the Company transferred $44.5 million and $4.9 million of
cash to Variable Life in 1999 and 1998, respectively, for tax, commission, and
expense allowances to Variable Life, which decreased the Company's net gain from
operations by $20.6 million and $22.2 million in 1999 and 1998, respectively.
Variable Life also has a modified coinsurance agreement with the Company to
reinsure 50% of Variable Life's 1995 inforce block and 50% of 1996 and all
future issue years of certain retail annuity contracts. In connection with this
agreement, the Company made a net cash payment of $40.0 million and $12.7
million in 1999 and 1998, respectively, for surrender benefits, taxes, reserve
increase, commission expense allowances and premiums. This agreement decreased
the Company's net gain from operations by $26.9 million and $8.4 million in 1999
and 1998, 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 1999 and 1998 for all policies that are not reinsured under any other
indemnity agreement. In connection with the agreement, the Company received $0.8
million and $1.0 million in 1999 and 1998, respectively, for mortality claims
from Variable Life. This agreement increased the Company's net gain from
operations in both 1999 and 1998 by $0.5 million.
John Hancock Reassurance Company of Bermuda (JHReCo, a wholly-owned affiliate)
has a modified coinsurance agreement with the Company to reinsure 50% of the
Company's 1997 through 1999 issues of retail long-term care insurance policies.
In connection with this agreement, the Company transferred $22.6 million and
$1.9 million of cash to JHReCo in 1999 and 1998, respectively, for tax,
commission, and expense allowances to JHReCo. This agreement increased the
Company's net gain from operations by $17.4 million and $11.7 million in 1999
and 1998, respectively.
JHReCo has a modified coinsurance agreement with the Company to reinsure 30% of
the Company's issues prior to January 1, 1997 and 50% of the Company's 1997
through 1999 issues of group long-term care insurance policies. In connection
with this agreement, the Company transferred $49.9 million and $38.0 million of
cash to JHReCo in 1999 and 1998, respectively, for tax, commission, and expense
allowances to JHReCo. This agreement increased the Company's net gain from
operations by $3.6 million and $3.9 million in 1999 and 1998, respectively.
JHReCo also has a modified coinsurance agreement with the Company to reinsure
50% of one of the Company's single premium annuity contracts sold in 1999.
Premiums, benefits, and reserves ceded to JHReCo in 1999 were
56
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 7--REINSURANCE--CONTINUED
$169.4 million, $15.6 million and $166.1 million, respectively. This agreement
increased the Company's net gain from operations by $12.6 million in 1999.
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 were transferred to UNICARE in connection
with the sale. The insurance business sold was transferred to UNICARE through a
100% 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 remains
liable to its policyholders to the extent that UNICARE does not meet its
contractual obligations under the coinsurance agreement.
Through the Company's group health insurance operations, the Company entered
into a number of reinsurance arrangements in respect of personal accident
insurance and the occupational accident component of workers compensation
insurance, a portion of which was originated through a pool managed by Unicover
Managers, Inc. Under these arrangements, the Company both assumed risks as a
reinsurer, and also passed 95% of these risks on to other companies. This
business had originally been reinsured by a number of different companies, and
has become the subject of widespread disputes. The disputes concern the
placement of the business with reinsurers and recovery of the reinsurance. The
Company is engaged in disputes, including a number of legal proceedings, in
respect of this business. The risk to the Company is that other companies that
reinsured the business from the Company may seek to avoid their reinsurance
obligations. However, the Company believes that it has a reasonable legal
position in this matter. During the fourth quarter of 1999 and early 2000, the
Company received additional information about its exposure to losses under the
various reinsurance programs. As a result of this additional information and in
connection with global settlement discussions initiated in late 1999 with other
parties involved in the reinsurance programs, during the fourth quarter the
Company recognized a charge to policyholders' contingency reserves for
uncollectible reinsurance of $186.1 million, aftertax, as its best estimate of
its remaining loss exposure. The Company believes that any exposure to loss from
this issue, in addition to amounts already provided for as of December 31, 1999,
would not be material.
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, controls, 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
57
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 7--REINSURANCE--CONTINUED
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, 1999 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 pension benefits to substantially all employees and general
agency personnel. These benefits are provided through both qualified defined
benefit and defined contribution pension plans. In addition, through
nonqualified plans, the Company provided supplemental pension benefits to
employees with salaries and/ or pension benefits in excess of the qualified plan
limits imposed by federal tax law. 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 $97.6 million in 1999 and $92.6
million in 1998. Plan assets consist principally of listed equity securities,
corporate obligations and U.S. government securities.
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. Because the qualified defined benefit plans are overfunded, no amounts
were contributed to these plans in 1999 or 1998. The funding policy for
nonqualified defined benefit plans is to contribute the amount of the benefit
payments made during the year. The projected benefit obligation and accumulated
benefit obligation for the non-qualified defined benefit pension plans, which
are underfunded, for which accumulated benefit obligations are in excess of plan
assets were $257.4 million and $239.3 million, respectively, at December 31,
1999 and $221.3 million and $194.8 million, respectively, at December 31, 1998.
Non-qualified plan assets, at fair value, were $1.0 million and $1.2 million at
December 31, 1999 and 1998, respectively.
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 pre-tax 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 $8.5 million and $8.1 million in
1999 and 1998, 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.
58
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 8--BENEFITS PLANS AND OTHER POSTRETIREMENT BENEFIT PLANS--CONTINUED
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.
The Company's policy is to fund postretirement benefits in amounts at or below
the annual tax qualified limits. As of December 31, 1999 and 1998, plan assets
related to non-union employees were comprised of an irrevocable health insurance
contract to provide future health benefits to retirees. Plan assets related to
union employees were comprised of approximately 70% equity securities and 30%
fixed income investments.
The changes in benefit obligation and plan assets are summarized as follows:
Year ended December 31
---------------------------------------------
Pension Benefits Other Benefits
----------------------- -------------------
1999 1998 1999 1998
----------- ----------- -------- ---------
(In millions)
Change in benefit obligation:
Benefit obligation at beginning
of year....................... $1,808.4 $1,704.0 $ 366.9 $ 381.0
Service cost................... 33.8 32.8 6.6 6.8
Interest cost.................. 119.0 115.5 23.9 24.4
Actuarial loss/(gain).......... 30.7 55.5 (0.3) (16.8)
Amendments..................... 19.9 0.0 0.0 0.0
Benefits paid.................. (106.5) (99.4) (29.0) (28.5)
-------- -------- ------- -------
Benefit obligation at end of
year.......................... 1,905.3 1,808.4 368.1 366.9
-------- -------- ------- -------
Change in plan assets:
Fair value of plan assets at
beginning of year............. 2,202.2 1,995.5 215.2 172.7
Actual return on plan assets... 277.7 296.1 17.7 39.9
Employer contribution.......... 10.9 10.0 0.0 2.6
Benefits paid.................. (106.5) (99.4) 0.0 0.0
-------- -------- ------- -------
Fair value of plan assets at
end of year................... 2,384.3 2,202.2 232.9 215.2
-------- -------- ------- -------
Funded status.................. 479.0 393.8 (135.2) (151.7)
Unrecognized actuarial loss.... (349.7) (292.0) (155.7) (163.0)
Unrecognized prior service cost 39.1 23.1 16.0 17.8
Unrecognized net transition
(asset) obligation............ (11.8) (23.9) 273.3 294.3
-------- -------- ------- -------
Net amount recognized.......... $ 156.6 $ 101.0 $ (1.6) $ (2.6)
-------- -------- ------- -------
59
<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 assumptions used in accounting for the benefit plans were as follows:
Year ended December 31
------------------------------------------
Pension Benefits Other Benefits
----------------------- ---------------
1999 1998 1999 1998
----------- ---------- ------- ------
Discount rate................... 7.00% 6.75% 7.00% 6.75%
Expected return on plan assets.. 8.50% 8.50% 8.50% 8.50%
Rate of compensation increase... 4.77% 4.56% 4.77% 4.00%
For measurement purposes, a 5.50 percent annual rate of increase in the per
capita cost of covered health care benefits was assumed for 2000. The rate was
assumed to decrease gradually to 5.25 percent in 2001 and remain at that level
thereafter.
Net periodic benefit (credit) cost includes the following components:
Year ended December 31
-------------------------------------------
Pension Benefits Other Benefits
----------------------- -----------------
1999 1998 1999 1998
----------- ----------- ------- --------
(In millions)
Service cost.................... $ 33.8 $ 32.8 $ 6.6 $ 6.8
Interest cost................... 119.0 115.5 23.9 24.4
Expected return on plan assets.. (182.9) (165.6) (18.2) (39.9)
Amortization of transition
(assets) obligation............ (12.1) (11.6) 21.0 20.9
Amortization of prior service
cost........................... 3.9 6.5 1.8 1.9
Recognized actuarial (gain) loss (6.3) (2.6) (7.1) 19.0
------- ------- ------ ------
Net periodic benefit (credit)
cost........................ $ (44.6) $ (25.0) $ 28.0 $ 33.1
======= ======= ====== ======
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:
1-Percentage Point 1-Percentage Point
Increase Decrease
------------------ --------------------
(In millions)
Effect on total of service and
interest costs................. $ 2.9 $ (2.6)
Effect on postretirement benefit
obligations.................... 29.0 (26.1)
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
service entities.
Total assets of unconsolidated majority-owned affiliates amounted to $16.0
billion at December 31, 1999 and $13.8 billion at December 31, 1998; total
liabilities amounted to $14.5 billion at December 31, 1999 and $12.5 billion at
December 31, 1998; and total net income was $99.5 million in 1999 and $148.5
million in 1998.
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).
60
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 9--AFFILIATES--CONTINUED
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 $129.0 million and $62.2 million in 1999 and
1998, respectively, from unconsolidated affiliates.
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>
Assets (Liabilities)
Number of Contracts/ ------------------------------------------
Notional Amounts 1999 1998
--------------------- --------------------- -------------------
Carrying Fair Carrying Fair
1999 1998 Value Value Value Value
---------- --------- ---------- --------- -------- ---------
(In millions)
<S> <C> <C> <C> <C> <C> <C>
Futures contracts to sell securities.............. $18,805 $11,286 $31.5 $ 31.5 $(3.1) $ (3.1)
Futures contracts to acquire securities........... 4,006 1,464 (0.9) (0.9) (0.3) (0.3)
Interest rate swap agreements..................... 9,194.0 7,684.0 -- (27.2) -- (159.1)
Interest rate cap agreements...................... 115.0 115.0 0.2 0.2 0.4 0.4
Interest rate floor agreements.................... 125.0 125.0 0.1 0.1 0.7 0.7
Interest rate swaption agreements................. 30.0 0.0 (3.6) (3.6) -- 0.0
Currency rate swap agreements..................... 5,797.0 2,881.5 -- (44.8) -- 16.2
Equity collar agreements.......................... -- -- 53.0 53.0 28.6 28.6
</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 2000.
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 2000 to 2029. The interest rate cap
agreements expire in 2000 to 2008. Interest rate floor agreements expire in
2003. Interest rate swaption agreements expire in 2025. The currency rate swap
agreements expire in 2000 to 2021. The equity collar agreements expire in 2003.
The Company's exposure to credit risk is the risk of loss from 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
61
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 10--FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK--CONTINUED
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.
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 $24.3 million in 1999 and $26.2 million in 1998.
Future minimum rental commitments under noncancellable operating leases for
office space and furniture and equipment are as follows:
December 31, 1999
-------------------
(In millions)
2000......................................... $19.1
2001......................................... 15.9
2002......................................... 12.8
2003......................................... 8.9
2004......................................... 5.3
Thereafter................................... 7.0
-----
Total minimum payments....................... $69.0
=====
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:
December 31, 1999 Percent
----------------- ----------
(In millions)
Subject to discretionary withdrawal (with
adjustment):
With market value adjustment................. $ 1,126.3 2.8%
At book value less surrender charge.......... 2,845.0 7.1
--------- -----
Total with adjustment........................ 3,971.3 9.9
Subject to discretionary withdrawal (without
adjustment) at book
value...................................... 1,535.8 3.8
Subject to discretionary withdrawal--separate
accounts................................... 14,287.3 35.4
Not subject to discretionary withdrawal:
General account.............................. 19,320.6 48.0
Separate accounts............................ 1,175.7 2.9
--------- -----
Total annuity reserves, deposit fund liabilities
and separate accounts--before reinsurance..... 40,290.7 100.0%
=====
Less reinsurance ceded......................... (0.1)
---------
Net annuity reserves, deposit fund liabilities
and separate accounts......................... $40,290.6
=========
62
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--Continued
NOTE 12--POLICY RESERVES, POLICYHOLDERS' AND BENEFICIARIES' FUNDS AND
OBLIGATIONS RELATED TO SEPARATE ACCOUNTS--Continued
Any liquidation costs associated with the $14.3 billion of separate accounts
subject to discretionary withdrawal are sustained by the separate account
contractholders and not by the general account.
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 $706.7 million, $6.0 million, $281.1 million and $194.6 million,
respectively, at December 31, 1999. 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 $1.2 billion at December 31, 1999. The majority
of these commitments expire in 2000.
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, 1999, the aggregate
outstanding principal balance of all the remaining pools of loans from 1991,
1993, and 1996 was $493.4 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
1999 and 1998 amounted to $3.4 million and $4.6 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, 1999, the
aggregate outstanding principal balance of the pools of loans was $365.2
million. There were no mortgage loans buy-backs in 1999 and 1998.
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, 1999 were $380.6 million for short-term borrowings
and $163.0 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
63
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--Continued
NOTE 13--COMMITMENTS AND CONTINGENCIES--Continued
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, 1999. 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.
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 reserve held in connection with the
settlement to provide relief to class members and for legal and administrative
costs associated with the settlement amounted to $322.8 million and $283.8
million at December 31, 1999 and 1998, respectively. Costs incurred related to
the settlement were $91.1 million and $150.0 million in 1999 and 1998,
respectively, which were charged directly to policyholders' contingency
reserves. The estimated reserve is based on a number of factors, including the
estimated number of claims, the expected type of relief to be sought by class
members (general relief or alternative dispute resolution), the estimated cost
per claim and the estimated costs to administer the claims.
During 1999, the Company transferred $194.9 million of reserves related to the
settlement to Variable Life representing Variable Life's share of the
settlement. The Company also contributed $194.9 million of capital to Variable
Life during 1999. If Variable Life's share of the settlement increases, the
Company will contribute additional capital to Variable Life so that Variable
Life's total stockholder's equity would not be impacted.
During 1996, management determined that it was probable that a settlement would
occur and that a minimum loss amount could be reasonably estimated. Accordingly,
the Company recorded its best estimate based on the information available at the
time. The terms of the settlement agreement were negotiated throughout 1997 and
approved by the court on December 31, 1997. In accordance with the terms of the
settlement agreement, the Company contacted class members during 1998 to
determine the actual type of relief to be sought by class members. The majority
of the responses from class members were received by the fourth quarter of 1998.
The type of relief sought by class members differed from the Company's previous
estimates, primarily due to additional outreach activities by regulatory
authorities during 1998 encouraging class members to consider alternative
dispute resolution relief. In 1999, the Company updated its estimate of the cost
of claims subject to alternative dispute resolution relief and revised its
reserve estimate accordingly.
Given the uncertainties associated with estimating the reserve, it is reasonably
possible that the final cost of the settlement could differ materially from the
amounts presently provided for by the Company. The Company will continue to
update its estimate of the final cost of the settlement as the claims are
processed and more specific information is developed, particularly as the actual
cost of the claims subject to alternative dispute resolution becomes available.
However, based on information available at this time, and the uncertainties
associated with the final claim processing and alternative dispute resolution,
the range of any additional costs related to the settlement cannot be reasonably
estimated.
64
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--Continued
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
----------------------------------------------
1999 1998
-------------------- -----------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
--------- ---------- ---------- ----------
(In millions)
<S> <C> <C> <C> <C>
Assets
Bonds--Note 6...................................................... $26,188.1 $25,708.3 $23,353.0 $24,839.3
Preferred stocks--Note 6........................................... 926.6 926.7 844.7 832.4
Common stocks--Note 6.............................................. 458.4 458.4 269.3 269.3
Mortgage loans on real estate--Note 6.............................. 9,165.9 9,009.5 8,223.7 8,619.7
Policy loans--Note 1............................................... 1,577.8 1,577.8 1,573.8 1,573.8
Cash and cash equivalents--Note 1.................................. 1,160.6 1,160.6 1,348.9 1,348.9
Liabilities
Guaranteed investment contracts--Note 1............................ 13,111.6 12,617.2 12,666.9 12,599.7
Fixed rate deferred and immediate annuities--Note 1................ 4,685.7 4,656.9 4,375.0 4,412.2
Supplementary contracts without life contingencies--Note 1......... 55.7 55.7 42.7 44.7
Derivatives assets (liabilities) relating to: --Note 10
Futures contracts.................................................. 30.6 30.6 (3.4) (3.4)
Interest rate swaps................................................ -- (27.2) -- (159.1)
Currency rate swaps................................................ -- (44.8) -- 16.2
Interest rate caps................................................. 0.2 0.2 0.4 0.4
Interest rate floors............................................... 0.1 0.1 0.7 0.7
Equity collar agreements........................................... 53.0 53.0 28.6 28.6
Commitments--Note 13................................................. -- 1,195.0 -- 1,114.2
</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.
NOTE 15--SUBSEQUENT EVENTS
Reorganization and Initial Public Offering
Pursuant to a Plan of Reorganization approved by the policyholders and the
Commonwealth of Massachusetts Division of Insurance, effective February 1, 2000,
the Company converted from a mutual life insurance company to a stock life
insurance company (i.e., demutualized) and became a wholly owned subsidiary of
John Hancock Financial Services, Inc., which is a holding company. All
policyholder membership interests in the Company were extinguished on that date
and eligible policyholders of the Company received, in the aggregate,
approximately 212.8 million shares of common stock, $1,438.7 million of cash and
$43.7 million policy credits as compensation. In connection with the
reorganization, the Company changed its name to John Hancock Life Insurance
Company.
In addition, on February 1, 2000, John Hancock Financial Services, Inc.
completed its initial public offering and 102 million shares of common stock
were issued at an initial public offering price of $17 per share. Net proceeds
from the offering were $1,657.7 million, of which $105.7 million was retained by
John Hancock Financial Services, Inc. and $1,552.0 million was contributed to
the Company.
65
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--Continued
NOTE 15--SUBSEQUENT EVENTS--Continued
Establishment of the Closed Block
Under the Plan of Reorganization, effective February 1, 2000, the Company
created a closed block for the benefit of policies included therein. The
policies included in the closed block are individual and joint traditional whole
life insurance policies of the Company that are paying or are expected to pay
dividends, and individual term life insurance policies that were in force on
February 1, 2000. The purpose of the closed block is to protect the policy
dividend expectations of these policies after the demutualization. Unless the
Commonwealth of Massachusetts Commissioner of Insurance and, in certain
circumstances, the New York Superintendent of Insurance consents to an earlier
termination, the closed block will continue in effect until the date none of
such policies is in force.
Acquisition of Long-Term Care Business
On January 3, 2000, the Company signed an agreement to purchase the individual
long-term care insurance business of Fortis, Inc. ("Fortis"). The business to be
acquired had earned premiums of approximately $124.4 million in 1999 and
included approximately 97,000 policies in force as of December 31, 1999. During
1999 the Company's individual long-term care earned premium was $177.3 million
and approximately 164,000 individual long-term care policies were in force.
NOTE 16--IMPACT OF YEAR 2000 (UNAUDITED)
By late 1999, the Company completed its Year 2000 readiness plan to address
issues that could result from computer programs being written using two digits
to define the applicable year rather than four to define the applicable year and
century. As a result the Company prepared for the transition to the Year 2000
and did not experience any significant Year 2000 problems with respect to its
mission critical information technology ("IT") or non-IT systems, applications
or infrastructure. During the date rollover to the year 2000, the Company
implemented and monitored its millennium rollover plan and conducted business as
usual on Monday, January 3, 2000.
Since January 3, 2000, the Company's information systems, including its mission
critical systems, which in the event of a Year 2000 failure would have the
greatest impact on its operations, have functioned properly. In addition, the
Company has not experienced any significant Year 2000 issues related to
interactions with its material business partners. The Company has experienced no
disruption in its ability to process claims, update customer accounts, process
financial transactions, report accurate data to management and no business
interruptions due to Year 2000 issues. While the Company continues to monitor
its systems, and those of its material business partners closely to ensure that
no unexpected Year 2000 issues develop, the Company has no reason to expect any
such issues.
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, 1999, the Company has incurred and expensed approximately
$20.8 million in related payroll costs for internal IT personnel on the project.
The estimated remaining IT personnel costs of the project are approximately $1.0
million. Through December 31, 1999, the Company incurred and expensed
approximately $47.0 million in external costs for the project. The estimated
remaining external cost of the project is approximately $2.0 million. The total
costs of the Year 2000 project, based on management's best estimates, include
approximately $21.7 million in internal IT personnel, $14.6 million in the
external modification of software, $18.3 million for external solution
providers, $9.1 million in replacement costs of non-compliant IT systems and
$6.9 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 $70 to $72.5 million. The Company's total Year 2000 project
costs include the estimated impact of external solution providers based on
presently available information.
66
<PAGE>
UNAUDITED FINANCIAL STATEMENTS
FOR
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
FIRST QUARTER 2000
67
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENT OF ASSETS AND LIABILITIES (Unaudited)
March 31, 2000
<TABLE>
<CAPTION>
International
Large Cap Sovereign Equity Small Cap
Growth Bond Index Growth
Subaccount Subaccount Subaccount Subaccount
----------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
Assets
Cash................................................................. $ -- $ -- $ -- $ --
Investments in shares of portfolios of John Hancock Variable Series
Trust I, at value................................................... 47,884,809 72,367,249 7,430,517 6,868,139
Investments in shares of portfolios of M Fund Inc., at value......... -- -- -- --
Policy loans and accrued interest receivable........................ 2,881,867 10,323,501 386,100 --
Receivable from:
John Hancock Variable Series Trust I................................ 15,529 430,192 12,364 --
M Fund Inc.......................................................... -- -- -- --
----------- ----------- ---------- -----------
Total assets......................................................... 50,782,205 83,120,942 7,828,981 6,868,139
Liabilities
Payable to John Hancock Mutual Life Insurance Company................ -- -- -- --
Asset charges payable................................................ 796 1,292 122 109
----------- ----------- ---------- -----------
Total liabilities.................................................... 796 1,292 122 109
----------- ----------- ---------- -----------
Net assets........................................................... $50,781,408 $83,119,650 $7,828,859 $ 6,868,030
=========== =========== ========== ===========
<CAPTION>
International Mid Cap Large Cap Money
Balanced Growth Value Market
Subaccount Subaccount Subaccount Subaccount
------------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Assets
Cash................................................................. $ -- $ -- $ -- $ (1,285)
Investments in shares of portfolios of John Hancock Variable Series
Trust I, at value................................................... 158,423 16,802,095 9,335,096 18,838,258
Investments in shares of portfolios of M Fund Inc., at value......... -- -- -- --
Policy loans and accrued interest receivable......................... -- -- -- 2,179,525
Receivable from:
John Hancock Variable Series Trust I................................ 393 -- 18,307 8,791
M Fund Inc.......................................................... -- -- -- --
--------- ----------- ---------- -----------
Total assets......................................................... 158,816 16,802,095 9,353,403 21,025,289
Liabilities
Payable to John Hancock Mutual Life Insurance Company................ -- -- -- --
Asset charges payable................................................ 3 267 153 998
--------- ----------- ---------- -----------
Total liabilities.................................................... 3 267 153 998
--------- ----------- ---------- -----------
Net assets........................................................... $ 158,813 $16,801,828 $9,353,250 $21,024,291
========= =========== ========== ===========
</TABLE>
See accompanying notes.
68
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENT OF ASSETS AND LIABILITIES (Unaudited) (continued)
March 31, 2000
<TABLE>
<CAPTION>
Mid Cap Small/Mid Real Estate Growth &
Value Cap Growth Equity Income
Subaccount Subaccount Subaccount Subaccount
----------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Assets
Cash................................................................. $ -- $ -- $ -- $ --
Investments in shares of portfolios of John Hancock Variable Series
Trust I, at value................................................... 4,922,228 5,405,216 3,759,336 311,940,456
Investments in shares of portfolios of M Fund Inc., at value......... -- -- -- 0
Policy loans and accrued interest receivable........................ -- -- 240,022 32,758,289
Receivable from:
John Hancock Variable Series Trust I................................ -- -- 34,861 293,221
M Fund Inc.......................................................... -- -- -- --
----------- ---------- ---------- ------------
Total assets......................................................... 4,922,228 5,405,216 4,034,222 344,991,966
Liabilities
Payable to John Hancock Mutual Life Insurance Company................ -- -- -- --
Asset charges payable................................................ 79 86 64 5,297
----------- ---------- ---------- ------------
Total liabilities.................................................... 79 86 64 5,297
----------- ---------- ---------- ------------
Net assets........................................................... $ 4,922,149 $5,405,130 $4,034,158 $344,986,669
=========== ========== ========== ============
</TABLE>
<TABLE>
<CAPTION>
Short-Term Small Cap International
Managed Bond Value Opportunities
Subaccount Subaccount Subaccount Subaccount
------------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
Assets
Cash................................................................. $ (685) $ -- $ -- $ --
Investments in shares of portfolios of John Hancock Variable Series
Trust I, at value................................................... 105,442,736 239,981 3,352,754 8,133,294
Investments in shares of portfolios of M Fund Inc., at value......... 0 0 0 0
Policy loans and accrued interest receivable........................ 13,011,771 -- -- --
Receivable from:
John Hancock Variable Series Trust I................................ 260,094 1,255 4,033 --
M Fund Inc.......................................................... -- -- -- --
------------ --------- ----------- -----------
Total assets......................................................... 118,713,916 241,236 3,356,787 8,133,294
Liabilities
Payable to John Hancock Mutual Life Insurance Company................ -- -- -- --
Asset charges payable................................................ 1,839 4 54 133
------------ --------- ----------- -----------
Total liabilities.................................................... 1,839 4 54 133
------------ --------- ----------- -----------
Net assets........................................................... $118,712,077 $ 241,232 $ 3,356,733 $ 8,133,161
============ ========= =========== ===========
</TABLE>
See accompanying notes.
69
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) (CONTINUED)
MARCH 31, 2000
<TABLE>
<CAPTION>
BRANDES
EQUITY GLOBAL TURNER INTERNATIONAL
INDEX BOND CORE GROWTH EQUITY
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
ASSETS
Cash.................................................... $ -- $ -- $ -- $ --
Investments in shares of portfolios of John
Hancock Variable Series Trust I, at value.............. 17,313,806 800,153 344,698 709,047
Investments in shares of portfolios of M
Fund Inc., at value.................................... 0 0 -- --
Policy loans and accrued interest receivable............ -- -- -- --
Receivable from:
John Hancock Variable Series Trust I................... 15,411 2,994 -- --
M Fund Inc............................................. -- -- -- --
----------- ----------- ---------- --------------
Total assets............................................ 17,329,217 803,147 344,698 709,047
LIABILITIES
Payable to John Hancock Mutual Life Insurance Company... -- -- -- --
Asset charges payable................................... 282 13 5 11
----------- ----------- ---------- --------------
Total liabilities....................................... 282 13 5 11
----------- ----------- ---------- --------------
Net assets.............................................. $17,328,935 $ 803,134 $ 344,694 $ 709,036
=========== =========== ========== ==============
</TABLE>
<TABLE>
<CAPTION>
FRONTIER CAPITAL EMERGING GLOBAL
APPRECIATION MARKETS EQUITY EQUITY BOND INDEX
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------------- -------------- ---------- ------------
<S> <C> <C> <C> <C>
ASSETS
Cash.................................................... $ -- $ -- $ -- $ --
Investments in shares of portfolios of John
Hancock Variable Series Trust I, at value.............. 652,467 1,002,691 222,631 75,111
Investments in shares of portfolios of M
Fund Inc., at value.................................... -- -- -- --
Policy loans and accrued interest receivable............ -- -- -- --
Receivable from:
John Hancock Variable Series Trust I................... -- -- -- 409
M Fund Inc............................................. -- -- -- --
---------------- -------------- ---------- ------------
Total assets............................................ 652,467 1,002,691 222,631 75,520
LIABILITIES
Payable to John Hancock Mutual Life Insurance Company... -- -- -- --
Asset charges payable................................... 10 17 4 1
---------------- -------------- ---------- ------------
Total liabilities....................................... 10 17 4 1
---------------- -------------- ---------- ------------
Net assets.............................................. $ 652,457 $ 1,002,674 $ 222,627 $ 75,519
================ ============== ========== ============
</TABLE>
See accompanying notes.
70
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENT OF ASSETS AND LIABILITIES (Unaudited) (continued)
March 31, 2000
<TABLE>
<CAPTION>
SmalL/Mid Cap High Yield Enhanced U.S.
CORE Bond Equity
Subaccount Subaccount Subaccount
------------- ---------- ---------------
<S> <C> <C> <C>
Assets
Cash....................................................................... $ -- $ -- $ --
Investments in shares of portfolios of John Hancock Variable Series
Trust I, at value......................................................... 151,853 98,021 20,673
Investments in shares of portfolios of M Fund Inc., at value............... -- -- --
Policy loans and accrued interest receivable............................... -- -- --
Receivable from:
John Hancock Variable Series Trust I...................................... -- 675 --
M Fund Inc................................................................ -- -- --
-------- ------- -------
Total assets............................................................... 151,853 98,696 20,673
Liabilities
Payable to John Hancock Mutual Life Insurance Company...................... -- -- --
Asset charges payable...................................................... 2 2 1
-------- ------- -------
Total liabilities.......................................................... 2 2 1
-------- ------- -------
Net assets................................................................. $151,851 $98,694 $20,673
======== ======= =======
</TABLE>
71
See accompanying notes
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF OPERATIONS (UNAUDITED)
YEARS AND PERIODS ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
LARGE CAP GROWTH SUBACCOUNT SOVEREIGN BOND SUBACCOUNT
---------------------------------- --------------------------------------
2000 1999 1998 2000 1999 1998
---------- ---------- ---------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I... $ 35,004 $6,381,711 $2,836,032 $ 964,076 $ 5,184,234 $5,266,576
M Fund Inc............................. -- -- -- -- -- --
Interest income on policy loans........ 49,804 161,454 128,186 188,119 750,673 727,807
---------- ---------- ---------- ---------- ----------- ----------
Total investment income................. 84,808 6,543,165 2,964,218 1,152,195 5,934,907 5,994,383
Expenses:
Mortality and expense risks............ 66,579 213,770 143,859 116,907 452,925 415,570
---------- ---------- ---------- ---------- ----------- ----------
Net investment income................... 18,229 6,329,395 2,820,359 1,035,288 5,481,982 5,578,813
Net realized and unrealized gain
(loss) on investments:
Net realized gain (loss)............... 331,582 1,146,308 433,509 (367,297) (388,883) (142,628)
Net unrealized appreciation
(depreciation) during the period...... 2,976,234 320,087 4,558,660 636,719 (5,439,148) (102,600)
---------- ---------- ---------- ---------- ----------- ----------
Net realized and unrealized gain
(loss) on investments.................. 3,307,816 1,466,395 4,992,169 269,422 (5,828,031) (245,228)
---------- ---------- ---------- ---------- ----------- ----------
Net increase (decrease) in net
assets resulting from operations....... $3,326,045 $7,795,790 $7,812,528 $1,304,710 $ (346,049) $5,333,585
========== ========== ========== ========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY INDEX
SUBACCOUNT SMALL CAP GROWTH SUBACCOUNT
--------------------------------- --------------------------------------
2000 1999 1998 2000 1999 1998
---------- ---------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I... $ 17,223 $ 212,869 $ 743,339 $ -- $ 543,433 $ --
M Fund Inc............................. -- -- -- -- -- --
Interest income on policy loans........ 6,520 20,538 17,802 -- -- --
---------- ---------- ---------- ---------- ----------- ----------
Total investment income................. 23,743 233,407 761,141 -- 543,433 --
Expenses:
Mortality and expense risks............ 10,492 32,838 26,542 8,796 15,809 8,233
---------- ---------- ---------- ---------- ----------- ----------
Net investment income................... 13,251 200,569 734,599 (8,796) 527,624 (8,233)
Net realized and unrealized gain
(loss) on investments:
Net realized gain...................... 29,784 62,140 52,891 3,248 48,210 21,741
Net unrealized appreciation
(depreciation) during the period...... (36,779) 1,295,768 13,239 651,201 1,125,829 204,674
---------- ---------- --------- ---------- ----------- ----------
Net realized and unrealized gain
(loss) on investments.................. (6,995) 1,357,908 66,130 654,449 1,174,415 226,415
---------- ---------- --------- ---------- ----------- ----------
Net increase in net assets resulting
from operations....................... $ 6,256 $1,558,477 $ 800,729 $ 645,653 $ 1,701,663 $ 218,182
========== ========== ========= ========== =========== ==========
</TABLE>
See accompanying notes.
72
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF OPERATIONS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
INTERNATIONAL BALANCED SUBACCOUNT MID CAP GROWTH SUBACCOUNT
---------------------------------- ------------------------------------
2000 1999 1998 2000 1999 1998
----------- ---------- --------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I... $ 1,127 $ 17,211 $ 12,240 $ -- $1,373,009 $ 130,303
M Fund Inc............................. -- -- -- -- -- --
Interest income on policy loans........ -- -- -- -- -- --
---------- --------- --------- ---------- ---------- ----------
Total investment income................. 1,127 17,211 12,240 -- 1,373,009 130,303
Expenses:
Mortality and expense risks............ 268 1,267 826 25,962 34,834 5,242
---------- --------- --------- ---------- ---------- ----------
Net investment income (loss)............ 859 15,944 11,414 (25,962) 1,338,175 125,061
Net realized and unrealized gain
(loss) on investments:
Net realized gain (loss)............... (1,703) 1,061 1,050 874,318 420,826 26,192
Net unrealized appreciation
(depreciation) during the period...... (5,870) (8,559) 12,294 (649,885) 4,283,452 193,946
---------- --------- --------- ---------- ---------- ----------
Net realized and unrealized gain
(loss) on investments.................. (7,573) (7,498) 13,344 224,433 4,704,278 220,138
---------- --------- --------- ---------- ---------- ----------
Net increase (decrease) in net assets
resulting from operations............. $ (6,714) $ 8,446 $ 24,758 $ 198,471 $6,042,453 $ 345,199
========== ========= ========= ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
LARGE CAP VALUE SUBACCOUNT MONEY MARKET SUBACCOUNT
--------------------------------- -----------------------------------
2000 1999 1998 2000 1999 1998
----------- ---------- -------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I... $ 53,189 $ 511,132 $185,232 $ 259,668 $1,134,371 $2,249,510
M Fund Inc............................. -- -- -- -- -- --
Interest income on policy loans........ -- -- -- 39,531 155,491 154,162
---------- --------- -------- --------- ---------- ----------
Total investment income................. 53,189 511,132 185,232 299,199 1,289,862 2,403,672
Expenses:
Mortality and expense risks............ 13,268 36,983 15,356 29,820 146,758 263,735
---------- --------- -------- --------- ---------- ----------
Net investment income (loss)............ 39,921 474,149 169,876 269,379 1,143,104 2,139,937
Net realized and unrealized gain
(loss) on investments:
Net realized gain (loss)............... (90,136) 123,242 68,953 -- -- --
Net unrealized appreciation
(depreciation) during the period...... (245,175) (499,454) 64,132 -- -- --
---------- --------- -------- --------- ---------- ----------
Net realized and unrealized gain
(loss) on investments.................. (335,311) (376,212) 133,085 -- -- --
---------- --------- -------- --------- ---------- ----------
Net increase (decrease) in net assets
resulting from operations............. $ (295,390) $ 97,937 $302,961 $ 269,379 $1,143,104 $2,139,937
========== ========= ======== ========= ========== ==========
</TABLE>
See accompanying notes.
73
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF OPERATIONS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
MID CAP VALUE SUBACCOUNT SMALL/MID CAP GROWTH SUBACCOUNT
----------------------------------- ---------------------------------------------
2000 1999 1998 2000 1999 1998
-------- --------- ------------ ------------ -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I....... $ -- $ 30,563 $ 53,920 $ -- $ 840,786 $ 93,281
M Fund Inc. ............................... -- -- -- -- -- --
Interest income on policy loans............ -- -- -- -- -- --
-------- --------- ------------ ------------ -------------- -------------
Total investment income..................... -- 30,563 53,920 -- 840,786 93,281
Expenses:
Mortality and expense risks................ 6,927 28,106 34,857 7,903 30,491 26,942
-------- --------- ------------ ------------ -------------- -------------
Net investment income (loss)................ (6,927) 2,457 19,063 (7,903) 810,295 66,339
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss)................... (41,101) (547,518) 74,634 (138,462) 16,952 33,249
Net unrealized appreciation (depreciation)
during the period......................... 422,026 657,486 (944,401) 485,947 (590,295) 126,465
-------- --------- ------------ ------------ -------------- -------------
Net realized and unrealized gain (loss) on
investments................................ 380,925 109,968 (869,767) 347,485 (573,343) 159,714
-------- --------- ------------ ------------ -------------- -------------
Net increase (decrease) in net assets
resulting from operations.................. $373,998 $ 112,425 $ (850,704) $ 339,582 $ 236,952 $ 226,053
======== ========= ============ ============ ============== =============
</TABLE>
<TABLE>
<CAPTION>
REAL ESTATE EQUITY SUBACCOUNT GROWTH & INCOME SUBACCOUNT
----------------------------------- ---------------------------------------
2000 1999 1998 2000 1999 1998
--------- --------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I....... $ 79,133 $ 262,930 $ 343,976 $ 754,111 $35,057,066 $26,306,209
M Fund Inc. ............................... -- -- -- -- -- --
Interest income on policy loans............ 4,618 17,361 17,260 588,028 2,279,107 1,996,131
--------- --------- ----------- ----------- ----------- -----------
Total investment income..................... 83,751 280,291 361,236 1,342,139 37,336,173 28,302,340
Expenses:
Mortality and expense risks................ 5,766 24,900 33,890 462,018 1,779,482 1,466,469
--------- --------- ----------- ----------- ----------- -----------
Net investment income 77,985 255,391 327,346 880,121 35,556,691 26,835,871
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss)................... (56,481) (168,994) 158,205 1,425,819 5,502,422 3,223,935
Net unrealized appreciation (depreciation)
during the period. 95,421 (220,380) (1,546,717) 3,226,658 2,405,417 32,918,552
--------- --------- ----------- ----------- ----------- -----------
Net realized and unrealized gain (loss) on
investments............................... 38,940 (389,374) (1,388,512) 4,652,477 7,907,839 36,142,487
--------- --------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations .................. $ 116,925 $(133,983) $(1,061,166) $ 5,532,598 $43,464,530 $62,978,358
========= ========= =========== =========== =========== ===========
</TABLE>
See accompanying notes.
74
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF OPERATIONS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
MANAGED SUBACCOUNT SHORT-TERM BOND SUBACCOUNT
------------------------------------- -------------------------------
2000 1999 1998 2000 1999 1998
---------- ----------- ----------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I........ $ 817,245 $ 9,998,433 $ 9,347,788 $ 3,842 $ 15,539 $ 27,350
M Fund Inc. ................................ -- -- -- -- -- --
Interest income on policy loans............. 236,141 953,686 854,487 -- -- --
---------- ----------- ----------- ------- --------- --------
Total investment income...................... 1,053,387 10,952,119 10,202,275 3,842 15,539 27,350
Expenses:
Mortality and expense risks................. 163,479 649,802 577,276 360 1,497 2,680
---------- ----------- ----------- ------- --------- --------
Net investment income (loss)................. 889,907 10,302,317 9,624,999 3,482 14,042 24,670
Net realized and unrealized gain (loss)
on investments:
Net realized gain (loss).................... 313,202 996,546 791,245 (1,072) (8,638) 265
Net unrealized appreciation (depreciation)
during the period.......................... 638,748 (2,108,530) 6,629,458 117 (2,442) (4,247)
---------- ----------- ----------- ------- --------- --------
Net realized and unrealized gain (loss)
on investments............................. 951,950 (1,111,984) 7,420,703 (955) (11,080) (3,982)
---------- ----------- ----------- ------- --------- --------
Net increase (decrease) in net assets
resulting from operations.................. $1,841,857 $ 9,190,333 $17,045,702 $ 2,527 $ 2,962 $ 20,688
========== =========== =========== ======= ========= ========
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL OPPORTUNITIES
SMALL CAP VALUE SUBACCOUNT SUBACCOUNT
--------------------------------- -------------------------------
2000 1999 1998 2000 1999 1998
--------- --------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I...... $ 15,741 $ 79,585 $ 12,675 $ -- $241,151 $ 33,443
M Fund Inc. .............................. -- -- -- -- -- --
Interest income on policy loans........... -- -- -- -- -- --
--------- --------- --------- --------- -------- --------
Total investment income..................... 15,741 79,585 12,675 -- 241,151 33,443
Expenses:
Mortality and expense risks............... 4,955 17,680 11,853 11,099 17,937 21,581
--------- --------- --------- --------- -------- --------
Net investment income (loss)................ 10,786 61,905 822 (11,099) 223,214 11,862
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss).................... (54,620) (33,134) 29,257 22,577 155,412 33,474
appreciation (depreciation) during the
period.................................... 31,818 (148,401) (105,331) 149,567 387,412 272,314
--------- --------- --------- --------- -------- --------
Net realized and unrealized gain (loss) on
investments............................... (22,802) (181,535) (76,074) 172,144 542,824 305,788
--------- --------- --------- --------- -------- --------
Net increase (decrease) in net assets
resulting from operations................. $ (12,016) $(119,630) $ (75,252) $ 161,045 $766,038 $317,650
========= ========= ========= ========= ======== ========
</TABLE>
See accompanying notes.
75
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF OPERATIONS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
EQUITY INDEX SUBACCOUNT GLOBAL BOND SUBACCOUNT
-------------------------------- -----------------------------
2000 1999 1998 2000 1999 1998
-------- ---------- ---------- -------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I..................... $ 49,090 $ 593,325 $ 185,267 $ 3,209 $ 37,862 $19,628
M Fund Inc............................................... -- -- -- -- -- --
Interest income on policy loans.......................... -- -- -- -- -- --
-------- ---------- ---------- ------- --------- -------
Total investment income................................... 49,090 593,325 185,267 3,209 37,862 19,628
Expenses:
Mortality and expense risks.............................. 24,252 63,950 27,141 1,227 4,084 1,979
-------- ---------- ---------- -------- --------- -------
Net investment income..................................... 24,838 529,375 158,126 1,982 33,778 17,649
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss)................................. 110,558 271,978 443,879 (8,414) (151) 3,991
Net unrealized appreciation (depreciation) during the
period.................................................. 240,624 1,282,937 585,673 20,874 (52,953) 4,308
-------- ---------- ---------- -------- --------- -------
Net realized and unrealized gain (loss) on investments.... 351,182 1,554,915 1,029,552 12,460 (53,104) 8,299
-------- ---------- ---------- -------- --------- -------
Net increase (decrease) in net assets resulting from
operations............................................... $376,020 $2,084,290 $1,187,678 $ 14,442 $ (19,326) $25,948
======== ========== ========== ======== ========= =======
</TABLE>
<TABLE>
<CAPTION>
BRANDES INTERNATIONAL EQUITY
TURNER CORE GROWTH SUBACCOUNT SUBACCOUNT
-------------------------------- ------------------------------
2000 1999 1998 2000 1999 1998
-------- ---------- ---------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I..................... $ -- $ -- $ -- $ -- $ -- $ --
M Fund Inc............................................... -- $ 19,328 2,231 -- $ 16,354 14,444
Interest income on policy loans.......................... -- -- -- -- -- --
-------- ---------- ---------- -------- --------- -------
Total investment income................................... -- 19,328 2,231 -- 16,354 14,444
Expenses:
Mortality and expense risks.............................. 468 1,139 565 862 2,166 1,158
-------- ---------- ---------- -------- --------- -------
Net investment income..................................... (468) 18,189 1,666 (862) 14,188 13,286
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss)................................. 6,241 26,736 2,780 1,188 11,526 600
Net unrealized appreciation (depreciation) during the
period.................................................. 25,712 23,628 22,686 (14,134) 122,734 8,581
-------- ---------- ---------- -------- --------- -------
Net realized and unrealized gain (loss) on investments ... 31,953 50,364 25,466 (12,946) 134,260 9,181
-------- ---------- ---------- -------- --------- -------
Net increase (decrease) in net assets resulting from
operations............................................... $ 31,485 $ 68,553 $ 27,132 $(13,808) $148,448 $22,467
======== ========== ========== ======== ========= =======
</TABLE>
See accompanying notes.
76
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF OPERATIONS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
GLOBAL MARKETS
FRONTIER CAPITAL APPRECIATION EQUITY
SUBACCOUNT SUBACCOUNT
-------------------------------- -----------------------------
2000 1999 1998 2000 1999 1998
-------- ---------- ---------- -------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I..................... $ -- $ -- $ -- $ -- $ 15,636 $ --
M Fund Inc............................................... -- 13,028 12,832 -- -- --
Interest income on policy loans.......................... -- -- -- -- -- --
-------- ---------- ---------- -------- --------- -------
Total investment income .................................. -- 13,028 12,832 -- 15,636 --
Expenses:
Mortality and expense risks ............................. 817 4,257 13,446 1,069 466 --
-------- ---------- ---------- -------- --------- ------
Net investment income .................................... (817) 8,771 (614) (1,069) 15,170
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) ................................ 1,328 (59,550) 23,061 21,863 1,838
Net unrealized appreciation (depreciation) during the
period ................................................. 89,905 89,369 (840) 6,439 92,713 --
-------- ---------- ---------- -------- --------- -------
Net realized and unrealized gain (loss) on investments ... 91,233 29,819 22,221 28,302 94,551 --
-------- ---------- ---------- -------- --------- -------
Net increase (decrease) in net assets resulting from
operations .............................................. $ 90,416 $ 38,590 $ 21,607 $ 27,233 $ 109,721 $ --
======== ========== ========== ======== ========= =======
</TABLE>
<TABLE>
<CAPTION>
GLOBAL EQUITY BOND INDEX
SUBACCOUNT SUBACCOUNT
-------------------------------- -----------------------------
2000 1999 1998 2000 1999 1998
-------- ---------- ---------- -------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I .................... $ -- $ 816 $ -- $ 1,342 $ 2,971 $ --
M Fund Inc .............................................. -- -- -- -- -- --
Interest income on policy loans ......................... -- -- -- -- -- --
-------- -------- ------- ------- -------- -------
Total investment income .................................. -- 816 -- 1,342 2,971 --
Expenses:
Mortality and expense risks ............................. 254 378 -- 110 270 --
-------- -------- ------- ------- -------- -------
Net investment income .................................... (254) 438 -- 1,232 2,701 --
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) ................................ 801 196 -- (97) (1,613) --
Net unrealized appreciation (depreciation) during the
period ................................................. 6,451 20,203 -- 636 (1,753) --
-------- -------- ------- ------- -------- -------
Net realized and unrealized gain (loss) on investments ... 7,252 20,399 -- 539 (3,366) --
-------- -------- ------- ------- -------- -------
Net increase (decrease) in net assets resulting from
operations .............................................. $ 6,998 $ 20,837 $ -- $ 1,771 $ (665) $ --
======== ======== ======= ======= ======== =======
</TABLE>
---------
* From May 1, 1998 (commencement of operations).
** From May 1, 1999 (commencement of operations).
See accompanying notes.
77
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF OPERATIONS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
SMALL/MID CAP CORE HIGH YIELD BOND
SUBACCOUNT SUBACCOUNT
------------------------ --------------------------
2000 1999 1998 2000 1999 1998
------ ------- ------ -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I............ $ 10 $ 2,971 $ -- $ 2,054 $ 3,011 $ --
M Fund Inc...................................... -- -- -- -- -- --
Interest income on policy loans................. -- -- -- -- -- --
------ ------- ------ -------- ------- ------
Total investment income.......................... 10 6,699 -- 2,054 3,011 --
Expenses:
Mortality and expense risks..................... 149 335 -- 134 220 --
------ ------- ------ -------- ------- ------
Net investment income............................ 139 6,364 -- 1,920 2,791 --
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss)........................ 134 1,093 -- (278) (396) --
Net unrealized appreciation (depreciation)
during the period............................... 1,709 4,719 -- (4,859) (1,172) --
------ ------- ------ -------- ------- ------
Net realized and unrealized gain (loss) on
investments..................................... 1,843 5,812 -- (5,137) (1,568) --
------ ------- ------ ------- ------- ------
Net increase (decrease) in net assets
resulting from operations....................... $1,704 $12,176 $ -- $ (3,217) $ 1,223 $ --
====== ======= ====== ======== ======= ======
</TABLE>
<TABLE>
<CAPTION>
ENHANCED U.S.
EQUITY SUBACCOUNT
----------------------
2000 1999 1998
----- ------ -----
<S> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I..................................... $ -- $ -- $ --
M Fund Inc............................................................... -- 1,435 --
Interest income on policy loans.......................................... -- -- --
----- ------ -----
Total investment income................................................... -- 1,435 --
Expenses:
Mortality and expense risks.............................................. 29 61 --
----- ------ -----
Net investment income (loss).............................................. (29) 1,374 --
Net realized and unrealized gain (loss) on investments:
Net realized gain........................................................ 276 11 --
Net unrealized appreciation during the period............................ 101 1,285 --
----- ------ -----
Net realized and unrealized gain on investments........................... 377 1,296 --
----- ------ -----
Net increase in net assets resulting from operations...................... $ 348 $2,670 $ --
===== ====== =====
</TABLE>
---------
* From May 1, 1998 (commencement of operations).
** From May 1, 1999 (commencement of operations).
See accompanying notes.
78
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
YEARS AND PERIODS ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
LARGE CAP GROWTH SUBACCOUNT SOVEREIGN BOND SUBACCOUNT
---------------------------------------- ----------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income...................... $ 18,230 $ 6,329,395 $ 2,820,359 $ 1,035,289 $ 5,481,982 $ 5,578,813
Net realized gain (loss)................... 331,582 1,146,308 433,509 (367,297) (388,883) (142,628)
Net unrealized appreciation (depreciation)
during the period......................... 2,976,234 320,087 4,558,660 636,719 (5,439,148) (102,600)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations.................. 3,326,046 7,795,790 7,812,528 1,304,711 (346,049) 5,333,585
From policyholder transactions:
Net premiums from policyholders............ 5,859,645 10,950,682 6,922,934 4,481,558 11,668,600 10,038,753
Net benefits to policyholders.............. (2,722,620) (5,776,293) (3,869,320) (3,620,100) (7,543,864) (7,974,328)
Net increase in policy loans............... 289,900 -- -- 63,900 -- --
----------- ----------- ----------- ----------- ----------- -----------
Net increase in net assets resulting from
policyholder transactions.................. 3,426,925 5,174,389 3,053,614 925,358 4,124,736 2,064,425
----------- ----------- ----------- ----------- ----------- -----------
Net increase in net assets.................. 6,752,971 12,970,179 10,866,142 2,230,069 3,778,687 7,398,010
Net assets at beginning of period........... $44,028,437 31,058,258 20,192,116 $80,889,582 77,110,895 69,712,885
----------- ----------- ----------- ----------- ----------- -----------
Net assets at end of period................. $50,781,408 $44,028,437 $31,058,258 $83,119,651 $80,889,582 $77,110,895
=========== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY INDEX
SUBACCOUNT SMALL CAP GROWTH SUBACCOUNT
-------------------------------------- -------------------------------------
2000 1999 1998 2000 1999 1998
----------- ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss).............. $13,252 $ 200,569 $ 734,599 $ (8,796) $ 527,624 $ (8,233)
Net realized gain......................... 29,784 62,140 52,891 3,248 48,210 21,741
Net unrealized appreciation (depreciation)
during the period........................ (36,779) 1,295,768 13,239 651,201 1,125,829 204,674
---------- ----------- ----------- ---------- ---------- ----------
Net increase in net assets resulting from
operations................................ 6,257 1,558,477 800,729 645,653 1,701,663 218,182
From policyholder transactions:
Net premiums from policyholders........... 1,029,865 1,634,643 1,489,281 1,949,600 1,398,160 891,480
Net benefits to policyholders............. (442,743) (1,119,500) (1,347,312) (239,156) (390,180) (269,586)
Net increase in policy loans.............. 54,486 -- -- -- -- --
---------- ----------- ----------- ---------- ---------- ----------
Net increase in net assets resulting from
policyholder transactions................. 641,608 515,143 141,969 1,710,444 1,007,980 621,894
---------- ----------- ----------- ---------- ---------- ----------
Net increase in net assets................. 647,865 2,073,620 942,698 2,356,096 2,709,643 840,076
Net assets at beginning of period.......... $5,107,374 5,107,374 4,164,676 $4,511,934 1,802,291 962,215
---------- ----------- ----------- ---------- ---------- ----------
Net assets at end of period................ $7,828,859 $ 7,180,994 $ 4,164,676 $6,868,030 $4,511,934 $1,802,291
========== =========== =========== ========== ========== ==========
</TABLE>
See accompanying notes.
79
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
INTERNATIONAL BALANCED SUBACCOUNT MID CAP GROWTH SUBACCOUNT
------------------------------------ -------------------------------------------
2000 1999 1998 2000 1999 1998
---------- ----------- ------------ ------------ ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss)................ $ 859 $ 15,944 $ 11,414 $ (25,962) $ 1,338,175 $ 125,061
Net realized gain (loss).................... (1,703) 1,061 1,050 874,318 420,826 26,192
Net unrealized appreciation (depreciation)
during the period.......................... (5,870) (8,559) 12,294 (649,885) 4,283,452 193,946
--------- ---------- ----------- ----------- ------------ ------------
Net increase (decrease) in net assets
resulting from operations................... (6,714) 8,446 24,758 198,471 6,042,453 345,199
From policyholder transactions:
Net premiums from policyholders............. 19,174 115,573 150,466 5,214,988 7,041,199 772,359
Net benefits to policyholders............... (54,015) (133,983) (50,204) (2,221,205) (947,660) (211,806)
Net increase in policy loans................ -- -- -- -- -- --
--------- ---------- ----------- ----------- ------------ ------------
Net increase (decrease) in net assets
resulting from policyholder transactions.... (34,841) (18,410) 100,262 2,993,783 6,093,539 560,553
--------- ---------- ----------- ----------- ------------ ------------
Net increase (decrease) in net assets........ (41,555) (9,964) 125,020 3,192,254 12,135,992 905,752
Net assets at beginning of period............ $ 200,368 210,332 85,312 $13,609,574 1,473,582 567,830
--------- ---------- ----------- ----------- ------------ ------------
Net assets at end of period.................. $ 158,813 $ 200,368 $ 210,332 $16,801,828 $ 13,609,574 $ 1,473,582
========= ========== =========== =========== ============ ============
</TABLE>
<TABLE>
<CAPTION>
LARGE CAP VALUE SUBACCOUNT MONEY MARKET SUBACCOUNT
-------------------------------------- -------------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ----------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income..................... $ 39,921 $ 474,149 $ 169,876 $ 269,379 $ 1,143,104 $ 2,139,937
Net realized gain (loss).................. (90,136) 123,242 68,953 -- -- --
Net unrealized appreciation (depreciation)
during the period........................ (245,175) (499,454) 64,132 -- -- --
----------- ----------- ---------- ----------- ------------- ------------
Net increase (decrease) in net assets
resulting from operations................. (295,390) 97,937 302,961 269,379 1,143,104 2,139,937
From policyholder transactions:
Net premiums from policyholders........... 2,389,260 5,449,922 2,321,440 2,404,134 16,733,655 55,692,824
Net benefits to policyholders............. (1,003,407) (1,059,147) (528,449) (2,177,192) (46,642,184) (22,850,788)
Net increase in policy loans.............. -- -- -- 24,864 -- (198,682)
----------- ----------- ---------- ----------- ------------- ------------
Net increase (decrease) in net assets
resulting from policyholder transactions.. 1,385,853 4,390,775 1,792,991 251,806 (29,908,529) 32,643,354
----------- ----------- ---------- ----------- ------------- ------------
Net increase (decrease) in net assets...... 1,090,463 4,488,712 2,095,952 521,185 (28,765,425) 34,783,291
Net assets at beginning of period.......... $ 8,262,787 3,774,075 1,678,123 $20,503,106 49,268,531 14,485,240
----------- ----------- ---------- ----------- ------------- ------------
Net assets at end of period................ $ 9,353,250 $ 8,262,787 $3,774,075 $21,024,290 $ 20,503,106 $ 49,268,531
=========== =========== ========== =========== ============= ============
</TABLE>
See accompanying notes.
80
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
MID CAP VALUE SUBACCOUNT SMALL/MID CAP GROWTH SUBACCOUNT
-------------------------------------- -----------------------------------------
2000 1999 1998 2000 1999 1998
----------- ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss)............ $ (6,927) $ 2,457 $ 19,063 $ (7,903) $ 810,295 $ 66,339
Net realized gain (loss)................ (41,101) (547,518) 74,634 (138,462) 16,952 33,249
Net unrealized appreciation
(depreciation) during the period....... 422,026 657,486 (944,401) 485,947 (590,295) 126,465
---------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations............... 373,998 112,425 (850,704) 339,582 236,952 226,053
From policyholder transactions:
Net premiums from policyholders......... 299,060 2,086,192 5,639,732 353,544 1,533,102 1,812,713
Net benefits to policyholders........... (452,541) (3,546,814) (775,357) (774,040) (1,200,248) (1,214,489)
Net increase in policy loans............ -- -- -- -- -- --
---------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from policyholder transactions (153,481) (1,460,622) 4,864,375 (420,497) 332,854 598,224
---------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets.... 220,517 (1,348,197) 4,013,671 (80,914) 569,806 824,277
Net assets at beginning of period........ 4,701,632 6,049,829 2,036,158 5,486,044 4,916,238 4,091,961
---------- ----------- ----------- ----------- ----------- -----------
Net assets at end of period.............. $4,922,149 $ 4,701,632 $ 6,049,829 $ 5,405,130 $ 5,486,044 $ 4,916,238
========== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
REAL ESTATE EQUITY SUBACCOUNT GROWTH & INCOME SUBACCOUNT
---------------------------------------- ---------------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ------------ -------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income................... $ 77,984 $ 255,391 $ 327,346 $ 880,121 $ 35,556,691 $ 26,835,871
Net realized gain (loss)................ (56,481) (168,994) 158,205 1,425,819 5,502,422 3,223,935
Net unrealized appreciation
(depreciation) during the period....... 95,421 (220,380) (1,546,717) 3,226,658 2,405,417 32,918,552
----------- ----------- ----------- ------------- ------------ ------------
Net increase (decrease) in net assets.... 5,532,598 43,464,530 62,978,358
resulting from operations............... 116,924 (133,983) (1,061,166)
From policyholder transactions:
Net premiums from policyholders......... 179,951 968,627 3,382,263 9,232,088 34,593,082 35,108,834
Net benefits to policyholders........... (299,820) (2,335,552) (1,663,696) (10,377,163) (34,650,911) (29,649,984)
Net increase in policy loans............ 7,003 -- (1,103) 99,049 -- 3,672,137
----------- ----------- ----------- ------------- ------------ ------------
Net increase (decrease) in net assets
resulting from policyholder transactions (112,866) (1,366,925) 1,717,464 (1,046,026) (57,829) 9,130,987
----------- ----------- ----------- ------------- ------------ ------------
Net increase (decrease) in net assets.... 4,058 (1,500,908) 656,298 4,486,572 43,406,701 72,109,345
Net assets at beginning of period........ 4,030,100 5,531,008 4,874,710 340,500,097 297,093,396 224,984,051
----------- ----------- ----------- ------------- ------------ ------------
Net assets at end of period.............. $ 4,034,158 $ 4,030,100 $ 5,531,008 $ 344,986,669 $340,500,097 $297,093,396
=========== =========== =========== ============= ============ ============
</TABLE>
See accompanying notes.
81
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
Managed Subaccount Short-term Bond Subaccount
------------------------------------------ -----------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ------------ ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income................... $ 889,906 $ 10,302,317 $ 9,624,999 $ 3,482 $ 14,042 $ 24,670
Net realized gain (loss)................ 313,202 996,546 791,245 (1,072) (8,638) 265
Net unrealized appreciation
(depreciation) during the period...... 638,748 (2,108,530) 6,629,458 117 (2,442) (4,247)
------------ ------------ ------------ ------------ ---------- ----------
Net increase in net assets resulting from 2,527 2,962 20,688
operations.............................. 1,841,856 9,190,333 17,045,702
From policyholder transactions:
Net premiums from policyholders......... 2,717,887 13,430,282 13,116,210 30,879 109,732 420,697
Net benefits to policyholders........... (4,995,864) (14,305,859) (14,539,301) (31,087) (370,270) (71,999)
Net increase in policy loans............ 18,779 -- 1,134,137 -- -- --
------------ ------------ ------------ ------------ ---------- ----------
Net increase (decrease) in net assets
resulting from policyholder
transactions............................ (2,259,198) (875,577) (288,954) (208) (260,538) 348,698
------------ ------------ ------------ ------------ ---------- ----------
Net increase (decrease) in net assets...... (417,342) 8,314,756 16,756,748 2,319 (257,576) 369,386
Net assets at beginning of period.......... 119,129,419 110,814,663 94,057,915 238,913 496,489 127,103
------------ ------------ ------------ ------------ ---------- ----------
Net assets at end of period................ $ 8,712,077 $119,129,419 $110,814,663 $ 241,232 $ 238,913 $ 496,489
============ ============ ============ ============ ========== ==========
<CAPTION>
Small Cap Value Subaccount International Opportunities Subaccount
------------------------------------------- --------------------------------------
2000 1999 1998 2000 1999 1998
---------- ---------- ---------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss)............ $ 10,786 $ 61,905 $ 822 $ (11,099) $ 223,214 $ 11,862
Net realized gain (loss)................ (54,620) (33,134) 29,257 22,577 155,412 33,474
Net unrealized appreciation
(depreciation) during the period...... 31,818 (148,401) (105,331) 149,567 387,412 272,314
------------ ------------ ------------ ------------ ---------- ----------
Net increase (decrease) in net assets
resulting from operations............... (12,016) (119,630) (75,252) 161,045 766,038 317,650
From policyholder transactions:
Net premiums from policyholders......... 109,194 1,483,922 1,644,666 4,426,626 2,354,681 3,814,201
Net benefits to policyholders........... (207,837) (447,402) (270,585) (83,453) (3,673,500) (339,134)
Net increase in policy loans............ -- -- -- -- -- --
------------ ------------ ------------ ------------ ---------- ----------
Net increase (decrease) in net assets
resulting from policyholder
transactions............................ (98,643) 1,036,520 1,374,081 4,343,173 (1,318,819) 3,475,067
------------ ------------ ------------ ------------ ---------- ----------
Net increase (decrease) in net assets...... (110,659) 916,890 1,298,829 4,504,218 (552,781) 3,792,717
Net assets at beginning of period.......... 3,467,392 2,550,502 1,251,673 3,628,943 4,181,724 389,007
------------ ------------ ------------ ------------ ---------- ----------
Net assets at end of period................ $ 3,356,733 $ 3,467,392 $ 2,550,502 $ 8,133,161 $3,628,943 $4,181,724
============ ============ ============ ============ ========== ==========
</TABLE>
See accompanying notes.
82
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
Equity Index Subaccount Global Bond Subaccount
------------------------------------------ ---------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ------------ ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income................... $ 24,838 $ 529,375 $ 158,126 $ 1,982 $ 33,778 $ 17,649
Net realized gain (loss)................ 110,558 271,978 443,879 (8,414) (151) 3,991
Net unrealized appreciation
(depreciation) during the period...... 240,624 1,282,937 585,673 20,874 (52,953) 4,308
----------- ------------ ------------ ------------ ---------- ----------
Net increase (decrease) in net assets
resulting from operations............... 376,020 2,084,290 1,187,678 14,442 (19,326) 25,948
From policyholder transactions:
Net premiums from policyholders......... 3,636,358 6,697,385 4,822,053 32,150 696,619 381,025
Net benefits to policyholders........... (1,089,522) (1,623,429) (885,493) (73,176) (317,999) (83,865)
Net increase in policy loans............ -- -- -- -- -- --
----------- ------------ ------------ ------------ ---------- ----------
Net increase (decrease) in net assets
resulting from policyholder
transactions............................ 2,546,836 5,073,956 3,936,560 (41,026) 378,620 297,159
----------- ------------ ------------ ------------ ---------- ----------
Net increase (decrease) in net
assets.................................. 2,922,856 7,158,246 5,124,238 (26,584) 359,294 323,107
Net assets at beginning of period.......... $14,406,079 7,247,833 2,123,595 $ 829,718 470,424 147,317
----------- ------------ ------------ ------------ ---------- ----------
Net assets at end of period................ $ 7,328,935 $ 14,406,079 $ 7,247,833 $ 803,134 $ 829,718 $ 470,424
=========== ============ ============ ============ ========== ==========
<CAPTION>
Turner Core Growth Subaccount Brandes International Equity Subaccount
--------------------------------------- ----------------------------------------
2000 1999 1998 2000 1999 1998
---------- ---------- ---------- ------------- -------- ----------
<S>........................................ <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss)............ $ (468) $ 18,189 $ 1,666 (862) $ 14,188 $ 13,286
Net realized gain....................... 6,241 26,736 2,780 1,188 11,526 600
Net unrealized appreciation
(depreciation) during the period......... 25,712 23,628 22,686 (14,134) 122,734 8,581
---------- ------------ ------------ ------------ ---------- ----------
Net increase (decrease) in net assets
resulting from operations............... 31,485 68,553 27,132 (13,808) 148,448 22,467
From policyholder transactions:
Net premiums from policyholders......... 69,137 109,802 39,070 188,196 152,629 141,892
Net benefits to policyholders........... (13,735) (45,555) (9,835) 9,146 (31,332) (34,941)
Net increase in policy loans............ -- -- -- -- -- --
----------- ------------ ------------ ------------ ---------- ----------
Net increase in net assets resulting
from policyholder transactions.......... 55,402 64,247 29,235 197,342 121,297 106,951
----------- ------------ ------------ ------------ ---------- ----------
Net increase in net assets................. 86,887 132,800 56,367 183,534 269,745 129,418
Net assets at beginning of period.......... $ 257,807 125,007 68,640 $ 525,502 255,757 126,339
----------- ------------ ------------ ------------ ---------- ----------
Net assets at end of period................ $ 344,694 $ 257,807 $ 125,007 $ 709,036 $ 525,502 $ 255,757
=========== ============ ============ ============ ========== ==========
</TABLE>
See accompanying notes.
83
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED MARCH 31
<TABLE>
<CAPTION>
FRONTIER CAPITAL APPRECIATION EMERGING MARKETS EQUITY
SUBACCOUNT SUBACCOUNT
----------------------------------- ------------------------
2000 1999 1998 2000 1999
-------- ----------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income (loss)................................... $ (817) $ 8,771 $ (614) $ (1,069) $ 15,170
Net realized gain (loss)....................................... 1,328 (59,550) 23,061 21,863 1,838
Net unrealized appreciation (depreciation) during the
period........................................................ 89,905 89,369 (840) 6,439 92,713
-------- ----------- ---------- ---------- --------
Net increase in net assets resulting from operations............. 90,416 38,590 21,607 27,233 109,721
From policyholder transactions:
Net premiums from policyholders................................ 108,533 103,675 2,465,299 629,596 336,277
Net benefits to policyholders.................................. (475) (2,221,410) (227,386) (91,967) (8,915)
Net increase in policy loans................................... -- -- -- -- --
-------- ----------- ---------- ---------- --------
Net increase (decrease) in net assets resulting from policyholder
transactions................................................... 108,058 (2,117,735) 2,237,913 537,629 327,362
-------- ----------- ---------- ---------- --------
Net increase (decrease) in net assets............................ 198,474 (2,079,145) 2,259,520 564,862 437,083
Net assets at beginning of period................................ $453,983 $ 2,533,128 $ 273,608 $ 437,812 $ 729
-------- ----------- ---------- ---------- --------
Net assets at end of period...................................... $652,457 $ 453,983 $2,533,128 $1,002,674 $437,812
======== =========== ========== ========== ========
</TABLE>
<TABLE>
<CAPTION>
SMALL/MID CAP
GLOBAL EQUITY BOND INDEX CORE
SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------- ------------------ --------------------
2000 1999 2000 1999 2000 1999
-------- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income (loss)................................... $ (254) $ 438 $ 1,232 $ 2,701 $ (140) $ 6,364
Net realized gain (loss)....................................... 801 196 (97) (1,613) 134 1,093
Net unrealized appreciation (depreciation) during the
period........................................................ 6,451 20,203 636 (1,753) 1,709 4,719
-------- -------- ------- -------- -------- --------
Net increase (decrease) in net assets resulting from
operations..................................................... 6,998 20,837 1,771 (665) 1,703 12,176
From policyholder transactions:
Net premiums from policyholders................................ 121,807 125,955 2,848 80,921 73,094 44,493
Net benefits to policyholders.................................. (53,893) (15,572) (3,307) (20,596) (311) (12,003)
Net increase in policy loans................................... -- -- -- -- -- --
-------- -------- ------- -------- -------- --------
Net increase (decrease) in net assets resulting from policyholder
transactions................................................... 67,914 110,383 (461) 60,325 72,783 32,490
-------- -------- ------- -------- -------- --------
Net increase in net assets....................................... 74,912 131,220 1,310 59,660 74,486 44,666
Net assets at beginning of period................................ $147,715 $ 16,495 $74,209 $ 14,549 $ 77,365 $ 32,699
-------- -------- ------- -------- -------- --------
Net assets at end of period...................................... $222,627 $147,715 $75,519 $ 74,209 $151,851 $ 77,365
======== ======== ======= ======== ======== ========
</TABLE>
See accompanying notes.
84
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED MARCH 31
<TABLE>
<CAPTION>
HIGH YIELD ENHANCED
BOND U.S. EQUITY
SUBACCOUNT SUBACCOUNT
------------------ ------------------
2000 1999 2000 1999
-------- ------- ------- --------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income (loss)......................................... $ 1,920 $ 2,791 $ (29) $ 1,374
Net realized gain (loss)............................................. (278) (396) 276 11
Net unrealized appreciation (depreciation) during the period......... (4,859) (1,172) 101 1,285
-------- ------- ------- -------
Net increase (decrease) in net assets resulting from operations....... (3,217) 1,223 348 2,670
From policyholder transactions:
Net premiums from policyholders...................................... 80,978 69,375 10,189 15,505
Net benefits to policyholders........................................ (55,118) -- (8,040) --
Net increase in policy loans......................................... -- -- -- --
-------- ------- ------- -------
Net increase in net assets resulting from policyholder transactions... 25,860 69,375 2,149 15,505
-------- ------- ------- -------
Net increase in net assets............................................ 22,643 70,598 2,497 18,175
Net assets at beginning of period..................................... $ 76,051 $ 5,453 $18,175 $ --
-------- ------- ------- -------
Net assets at end of period........................................... $ 98,694 $76,051 $20,672 $18,175
======== ======= ======= =======
</TABLE>
_________
From May 1, 1998 (commencement of operations).
See accompanying notes.
85
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1999
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-
seven 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-seven Portfolios of
the Fund and M Fund which are currently available are the Large Cap Growth,
Sovereign Bond, International Equity Index, Small Cap Growth, International
Balanced, Mid Cap Growth, Large Cap Value, Money Market, Mid Cap Value,
Small/Mid Cap Growth (formerly, Diversified Mid Cap Growth), Real Estate Equity,
Growth & Income, Managed, Short-Term Bond, Small Cap Value, International
Opportunities, Equity Index, Global Bond (formerly, Strategic Bond), Turner Core
Growth, Brandes International Equity, Frontier Capital Appreciation, Emerging
Markets Equity, Global Equity, Bond Index, Small/Mid Cap CORE, High Yield Bond
and Enhanced U.S. Equity 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.
86
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (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.
87
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (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 March 31, 2000 were as follows:
<TABLE>
<CAPTION>
PORTFOLIO SHARES OWNED COST VALUE
--------- ------------ ------------ --------------
<S> <C> <C> <C>
Large Cap Growth . . . 1,633,552 $ 37,288,256 $ 50,781,408
Sovereign Bond . . . . 7,902,734 77,657,389 83,119,650
International Equity
Index . . . . . . . . 379,277 6,309,196 7,828,858
Small Cap Growth . . . 311,882 4,799,905 6,868,030
International Balanced 16,337 163,971 158,814
Mid Cap Growth . . . . 559,598 12,906,023 16,801,827
Large Cap Value . . . . 715,920 9,930,771 9,353,251
Money Market . . . . . 1,883,826 18,838,259 21,024,291
Mid Cap Value . . . . . 355,336 4,627,498 4,922,149
Small/Mid Cap Growth . 359,627 5,472,409 5,405,130
Real Estate Equity . . 324,077 4,583,675 4,034,158
Growth & Income . . . . 15,352,576 242,582,888 344,986,670
Managed . . . . . . . . 6,759,393 95,017,092 118,712,077
Short-Term Bond . . . . 24,785 246,700 241,232
Small Cap Value . . . . 308,973 3,584,770 3,356,732
International
Opportunities . . . . 536,545 7,328,983 8,133,161
Equity Index . . . . . 830,294 15,051,579 17,328,934
Global Bond . . . . . . 80,235 826,656 803,134
Turner Core Growth . . 13,608 265,402 344,693
Brandes International
Equity . . . . . . . . 47,270 594,396 709,036
Frontier Capital
Appreciation . . . . . 25,799 440,247 652,456
Emerging Markets
Equity . . . . . . . . 76,281 903,587 1,002,674
Global Equity . . . . . 17,655 196,278 222,627
Bond Index . . . . . . 8,003 76,376 75,519
Small/Mid Cap CORE . . 14,377 143,537 151,851
High Yield Bond . . . . 11,514 104,070 98,694
Enhanced U.S. Equity . 982 9,099 20,672
</TABLE>
88
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (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
2000, were as follows:
<TABLE>
<CAPTION>
PORTFOLIO PURCHASES SALES
--------- ---------- -----------
<S> <C> <C>
Large Cap Growth . . . . . . . . . . . $3,853,906 $ 737,730
Sovereign Bond . . . . . . . . . . . . 4,093,503 2,636,307
International Equity Index . . . . . . 730,780 174,525
Small Cap Growth . . . . . . . . . . . 1,707,603 5,446
International Balanced . . . . . . . . 16,417 50,789
Mid Cap Growth . . . . . . . . . . . . 4,611,653 1,643,566
Large Cap Value . . . . . . . . . . . 2,325,879 918,257
Money Market . . . . . . . . . . . . . 1,904,934 1,417,847
Mid Cap Value . . . . . . . . . . . . 209,163 369,492
Small/Mid Cap Growth . . . . . . . . . 212,104 640,417
Real Estate Equity . . . . . . . . . . 125,568 205,190
Growth & Income . . . . . . . . . . . 3,934,928 4,518,333
Managed . . . . . . . . . . . . . . . 1,305,732 2,993,499
Short-Term Bond . . . . . . . . . . . 25,840 23,816
Small Cap Value . . . . . . . . . . . 86,690 178,525
International Opportunities . . . . . 4,436,279 104,072
Equity Index . . . . . . . . . . . . . 3,270,015 713,472
Global Bond . . . . . . . . . . . . . 57,637 99,662
Turner Core Growth . . . . . . . . . . 68,401 13,462
Brandes International Equity . . . . . 200,576 4,084
Frontier Capital Appreciation . . . . 110,984 3,733
Emerging Markets Equity . . . . . . . 603,977 67,401
Global Equity . . . . . . . . . . . . 71,989 4,326
Bond Index . . . . . . . . . . . . . . 3,617 3,255
Small/Mid Cap CORE . . . . . . . . . . 73,551 905
High Yield Bond . . . . . . . . . . . 30,846 3,740
Enhanced U.S. Equity . . . . . . . . . -- 8,067
</TABLE>
89
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
5. NET ASSETS
Accumulation shares attributable to net assets of policyholders and
accumulation share values for each subaccount at March 31, 2000 were as follows:
<TABLE>
<CAPTION>
VLI CLASS #1 MVL CLASS #3 FLEX CLASS #4
-------------------------- -------------------------- ---------------------------
ACCUMULATION ACCUMULATION ACCUMULATION ACCUMULATION ACCUMULATION ACCUMULATION
PORTFOLIO SHARES SHARE VALUES SHARES SHARE VALUES SHARES SHARE VALUES
--------- ------------ ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Large Cap Growth -- -- 34,583 $85.40 329,328 $85.40
Sovereign Bond -- -- 14,534 24.06 1,306,891 24.06
International Equity Index -- -- 14,424 27.50 149,444 27.50
Small Cap Growth -- -- 49,177 24.96 194,052 24.96
International Balanced -- -- 5,799 12.89 3,533 12.89
Mid Cap Growth -- -- 104,808 36.51 301,510 36.51
Large Cap Value -- -- 52,445 15.69 488,310 15.69
Money Market -- -- 61,717 18.33 535,463 18.33
Mid Cap Value -- -- 47,386 15.22 229,580 15.22
Small/Mid Cap Growth -- -- 23,537 21.17 218,694 21.17
Real Estate Equity -- -- 8,416 22.83 106,638 22.83
Growth & Income -- -- 109,065 69.25 1,908,532 69.25
Managed -- -- 44,971 40.30 1,175,913 40.30
Short-Term Bond -- -- 2,093 13.12 13,560 13.12
Small Cap Value -- -- 30,955 12.28 214,842 12.28
International Opportunities -- -- 16,490 16.50 452,700 16.50
Equity Index -- -- 183,383 23.56 459,297 23.56
Global Bond -- -- 14,099 12.38 39,977 12.38
Turner Core Growth -- -- 2,814 29.04 9,049 29.04
Brandes International Equity -- -- 8,079 16.55 23,235 16.55
Frontier Capital Appreciation -- -- 1,176 25.24 19,395 25.24
Emerging Markets Equity -- -- 8,868 13.69 54,726 13.69
Global Equity -- -- 7,055 12.69 2,350 12.69
Bond Index -- -- 4,203 10.59 2,681 10.59
Small/Mid Cap CORE -- -- 1,763 11.57 383 11.57
High Yield Bond -- -- 6,458 9.76 580 9.76
Enhanced U.S. Equity -- -- 1,557 13.28 -- 13.28
</TABLE>
90
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
FLEX II CLASS #5 VEP CLASS #7 VEP CLASS #8
-------------------------- -------------------------- ---------------------------
ACCUMULATION ACCUMULATION ACCUMULATION ACCUMULATION ACCUMULATION ACCUMULATION
PORTFOLIO SHARES SHARE VALUES SHARES SHARE VALUES SHARES SHARE VALUES
--------- ------------ ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Large Cap Growth 19,489 $85.40 12,989 $ 36.64 13,461 $ 36.75
Sovereign Bond 8,610 24.06 6,766 14.01 5,802 14.05
International Equity Index 8,227 27.50 12,120 17.49 6,404 17.55
Small Cap Growth 24,735 24.96 5,579 24.93 1,643 24.98
International Balanced 2,859 12.89 132 12.87 0 12.90
Mid Cap Growth 30,222 36.51 11,755 36.47 11,939 36.54
Large Cap Value 35,338 15.69 10,347 15.68 9,512 15.71
Money Market 7,906 18.33 7,536 13.2464 7,414 13.29
Mid Cap Value 22,518 15.22 23,069 15.21 754 15.24
Small/Mid Cap Growth 6,004 21.17 2,703 21.14 4,334 21.20
Real Estate Equity 6,206 22.83 487 14.85 -- 14.89
Growth & Income -- -- 65,422 31.41 23,206 31.51
Managed 24,560 40.30 12,863 21.22 9,853 21.29
Short-Term Bond 1,719 13.12 892 13.10 -- 13.14
Small Cap Value 18,920 12.28 7,017 12.27 1,581 12.29
International Opportunities 9,975 16.50 8,101 16.48 5,782 16.51
Equity Index 57,154 23.56 24,275 23.54 11,362 23.58
Global Bond 6,387 12.38 4,387 12.37 -- 12.39
Turner Core Growth -- 29.04 -- 31.21 -- 31.28
Brandes International Equity 563 16.55 751 16.32 10,360 16.35
Frontier Capital Appreciation 294 25.24 234 27.20 4,361 27.26
Emerging Markets Equity 3,883 13.69 5,834 13.69 -- 13.70
Global Equity 155 12.69 3,334 12.68 -- 12.6927
Bond Index 162 10.59 83 10.59 -- 10.5957
Small/Mid Cap CORE 79 11.57 10,910 11.56 -- 11.57
High Yield Bond 1,371 9.76 1,702 9.76 -- 9.7676
Enhanced U.S. Equity -- 13.28 -- 17.51 -- 17.54
</TABLE>
91
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
VEP CLASS #9
--------------------------
ACCUMULATION ACCUMULATION
PORTFOLIO SHARES SHARE VALUES
--------- ------------ --------------
<S> <C> <C>
Large Cap Growth 1,570 $ 36.87
Sovereign Bond -- 14.10
International Equity Index -- 17.60
Small Cap Growth -- 25.03
International Balanced -- 12.93
Mid Cap Growth -- 36.61
Large Cap Value -- 15.74
Money Market -- 13.33
Mid Cap Value -- 15.27
Small/Mid Cap Growth -- 21.26
Real Estate Equity -- 14.9418
Growth & Income 2,475 31.60
Managed -- 21.3523
Short-Term Bond -- 13.18
Small Cap Value -- 12.32
International Opportunities -- 16.54
Equity Index -- 23.63
Global Bond -- 12.41
Turner Core Growth -- 31.33
Brandes International Equity -- 16.39
Frontier Capital Appreciation -- 27.31
Emerging Markets Equity -- 13.711
Global Equity 4,649 12.70
Bond Index -- 11
Small/Mid Cap CORE -- 11.58
High Yield Bond -- 9.78
Enhanced U.S. Equity -- 17.5629
</TABLE>
92
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Policyholders of
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,
Small Cap Growth, International Balanced, Mid Cap Growth, Large Cap Value, Money
Market, Mid Cap Value, Small/Mid Cap Growth (formerly, Diversified Mid Cap
Growth), Real Estate Equity, Growth & Income, Managed, Short-Term Bond, Small
Cap Value, International Opportunities, Equity Index, Global Bond (formerly,
Strategic Bond), Turner Core Growth, Brandes International Equity, Frontier
Capital Appreciation, Emerging Markets Equity, Global Equity, Bond Index,
Small/Mid Cap CORE, High-Yield Bond and Enhanced U.S. Equity Subaccounts) as of
December 31, 1999, and the related statements of operations and changes in net
assets for each of the periods indicated therein. These financial statements are
the responsibility of the Account's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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, 1999, the results of their operations and changes in their net
assets for each of the periods indicated, in conformity with accounting
principles generally accepted in the United States.
ERNST & YOUNG LLP
Boston, Massachusetts
February 11, 2000
93
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<CAPTION>
LARGE CAP SOVEREIGN INTERNATIONAL SMALL CAP INTERNATIONAL
GROWTH BOND EQUITY INDEX GROWTH BALANCED
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ----------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash........................................................ $ 4,878 $ 8,824 $ 777 $ 493 $ 23
Investments in shares of portfolios of John
Hancock Variable Series Trust I, at value................. 41,460,815 70,640,632 6,854,257 4,511,934 200,368
Investments in shares of portfolios of M Fund Inc.,
at value.................................................. -- -- -- -- --
Policy loans and accrued interest receivable................ 2,567,621 10,248,950 326,736 -- --
Receivable from:
John Hancock Variable Series Trust I...................... 12,029 21,016 3,262 2,588 3
M Fund Inc................................................ -- -- -- -- --
----------- ----------- ----------- ---------- ----------
Total assets................................................ 44,045,343 80,919,422 7,185,032 4,515,015 200,394
LIABILITIES
Payable to John Hancock Mutual Life Insurance Company....... 11,330 19,753 3,148 2,515 --
Asset charges payable....................................... 5,576 10,087 890 566 26
----------- ----------- ----------- ---------- ----------
Total liabilities........................................... 16,906 29,840 4,038 3,081 26
----------- ----------- ----------- ---------- ----------
Net assets.................................................. $44,028,437 $80,889,582 $ 7,180,994 $4,511,934 $ 200,368
=========== =========== =========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
MID CAP LARGE CAP MONEY MID CAP SMALL/MID CAP
GROWTH VALUE MARKET VALUE GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash........................................................ $ 1,515 $ 941 $ 11 $ 532 $ 612
Investments in shares of portfolios of John Hancock
Variable Series Trust I, at value......................... 13,609,575 8,262,786 18,351,172 4,701,632 5,486,044
Investments in shares of portfolios of M Fund Inc.,
at value.................................................. -- -- -- -- --
Policy loans and accrued interest receivable................ -- -- 2,153,219 -- --
Receivable from:
John Hancock Variable Series Trust I...................... 5,644 1,207 7,868 2,755 2,116
M Fund Inc................................................ -- -- -- -- --
----------- ----------- ----------- ---------- ----------
Total assets................................................ 13,616,734 8,264,934 20,512,270 4,704,919 5,488,772
LIABILITIES
Payable to John Hancock Mutual Life Insurance Company....... 5,423 1,072 7,543 2,678 2,026
Asset charges payable....................................... 1,737 1,075 1,621 609 702
----------- ----------- ----------- ---------- ----------
Total liabilities........................................... 7,160 2,147 9,164 3,287 2,728
----------- ----------- ----------- ---------- ----------
Net assets.................................................. $13,609,574 $ 8,262,787 $20,503,106 $4,701,632 $5,486,044
=========== =========== =========== ========== ==========
</TABLE>
See accompanying notes.
94
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
REAL ESTATE GROWTH & SHORT-TERM SMALL CAP
EQUITY INCOME MANAGED BOND VALUE
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash........................................................ $ 444 $ 36,737 $ 12,274 $ 27 $ 387
Investments in shares of portfolios of John Hancock
Variable Series Trust I, at value......................... 3,800,017 307,871,384 106,178,553 238,913 3,467,391
Investments in shares of portfolios of M Fund Inc.,
at value.................................................. -- -- -- -- --
Policy loans and accrued interest receivable................ 230,080 32,628,714 12,951,552 -- --
Receivable from:
John Hancock Variable Series Trust I...................... 1,091 56,249 48,999 64 103
M Fund Inc................................................ -- -- -- -- --
---------- ------------ ------------ -------- ----------
Total assets................................................ 4,031,632 340,593,084 119,191,378 239,004 3,467,881
LIABILITIES
Payable to John Hancock Mutual Life Insurance Company....... 1,027 50,987 47,141 60 46
Asset charges payable....................................... 505 42,000 14,818 31 443
---------- ------------ ------------ -------- ----------
Total liabilities........................................... 1,532 92,987 61,959 91 489
---------- ------------ ------------ -------- ----------
Net assets.................................................. $4,030,100 $340,500,097 $119,129,419 $238,913 $3,467,392
========== ============ ============ ======== ==========
</TABLE>
<TABLE>
<CAPTION>
BRANDES
INTERNATIONAL EQUITY GLOBAL TURNER INTERNATIONAL
OPPORTUNITIES INDEX BOND CORE GROWTH EQUITY
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------- ---------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash........................................................ $ 406 $ 1,634 $ 87 $ 29 $ 59
Investments in shares of portfolios of John Hancock
Variable Series Trust I, at value......................... 3,628,943 14,406,079 829,719 -- --
Investments in shares of portfolios of M Fund Inc.,
at value.................................................. -- -- -- 257,807 525,501
Policy loans and accrued interest receivable................ -- -- -- -- --
Receivable from:
John Hancock Variable Series Trust I...................... 1,276 7,201 28 -- --
M Fund Inc................................................ -- -- -- 4 9
---------- ----------- -------- -------- --------
Total assets................................................ 3,630,625 14,414,914 829,834 257,840 525,569
LIABILITIES
Payable to John Hancock Mutual Life Insurance Company....... 1,217 6,965 15 -- --
Asset charges payable....................................... 465 1,870 101 33 67
---------- ----------- -------- -------- --------
Total liabilities........................................... 1,682 8,835 116 33 67
---------- ----------- -------- -------- --------
Net assets.................................................. $3,628,943 $14,406,079 $829,718 $257,807 $525,502
========== =========== ======== ======== ========
</TABLE>
See accompanying notes.
95
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
FRONTIER CAPITAL EMERGING
APPRECIATION MARKETS EQUITY GLOBAL EQUITY BOND INDEX
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------------- --------------- ------------- ------------
<S> <C> <C> <C> <C>
ASSETS
Cash.............................................................. $ 50 $ 48 $ 16 $ 8
Investments in shares of portfolios of John Hancock Variable
Series Trust I, at value......................................... -- 437,812 147,715 74,210
Investments in shares of portfolios of M Fund Inc., at value..... 453,983 -- -- --
Policy loans and accrued interest receivable...................... -- -- -- --
Receivable from:..................................................
John Hancock Variable Series Trust I............................. -- 1,808 2 1
M Fund Inc....................................................... 7 -- -- --
-------- -------- -------- -------
Total assets...................................................... 454,040 439,668 147,733 74,219
LIABILITIES
Payable to John Hancock Mutual Life Insurance Company............. -- 1,801 -- --
Asset charges payable............................................. 57 55 18 10
-------- -------- -------- -------
Total liabilities................................................. 57 1,856 18 10
-------- -------- -------- -------
Net assets........................................................ $453,983 $437,812 $147,715 $74,209
======== ======== ======== =======
</TABLE>
<TABLE>
<CAPTION>
SMALL/MID CAP HIGH YIELD ENHANCED U.S.
CORE BOND EQUITY
SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------- ---------- ---------------
<S> <C> <C> <C>
ASSETS
Cash............................................................................... $ 9 $ 9 $ 2
Investments in shares of portfolios of John Hancock Variable Series
Trust I, at value................................................................. 77,365 76,051 --
Investments in shares of portfolios of M Fund Inc., at value....................... -- -- 18,175
Policy loans and accrued interest receivable....................................... -- -- --
Receivable from:...................................................................
John Hancock Variable Series Trust I.............................................. 1 1 --
M Fund Inc........................................................................ -- -- --
------- ------- -------
Total assets....................................................................... 77,375 76,061 18,177
LIABILITIES
Payable to John Hancock Mutual Life Insurance Company.............................. -- -- --
Asset charges payable.............................................................. 10 10 2
------- ------- -------
Total liabilities.................................................................. 10 10 2
------- ------- -------
Net assets......................................................................... $77,365 $76,051 $18,175
======= ======= =======
</TABLE>
See accompanying notes.
96
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENT OF OPERATIONS
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
LARGE CAP GROWTH SUBACCOUNT SOVEREIGN BOND SUBACCOUNT
---------------------------------- --------------------------------------
1999 1998 1997 1999 1998 1997
---------- ---------- ---------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I................ $6,381,711 $2,836,032 $1,686,429 $ 5,184,234 $5,266,576 $4,454,173
M Fund Inc.......................................... -- -- -- -- -- --
Interest income on policy loans...................... 161,454 128,186 103,747 750,673 727,807 696,074
---------- ---------- ---------- ----------- ---------- ----------
Total investment income.............................. 6,543,165 2,964,218 1,790,176 5,934,907 5,994,383 5,150,247
Expenses:
Mortality and expense risks......................... 213,770 143,859 99,710 452,925 415,570 370,612
---------- ---------- ---------- ----------- ---------- ----------
Net investment income................................ 6,329,395 2,820,359 1,690,466 5,481,982 5,578,813 4,779,635
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss)............................ 1,146,308 433,509 292,430 (388,883) (142,628) (230,607)
Net unrealized appreciation (depreciation) during
the period......................................... 320,087 4,558,660 2,142,494 (5,439,148) (102,600) 1,277,686
---------- ---------- ---------- ----------- ---------- ----------
Net realized and unrealized gain (loss) on
investments......................................... 1,466,395 4,992,169 2,434,924 (5,828,031) (245,228) 1,047,079
---------- ---------- ---------- ----------- ---------- ----------
Net increase (decrease) in net assets resulting from
operations.......................................... $7,795,790 $7,812,528 $4,125,390 $ (346,049) $5,333,585 $5,826,714
========== ========== ========== =========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY INDEX SUBACCOUNT SMALL CAP GROWTH SUBACCOUNT
-------------------------------------- ---------------------------------
1999 1998 1997 1999 1998 1997
------------ ---------- ------------ ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I................ $ 212,869 $743,339 $ 195,240 $ 543,433 $ -- $ 436
M Fund Inc.......................................... -- -- -- -- -- --
Interest income on policy loans...................... 20,538 17,802 15,746 -- -- --
---------- -------- --------- ---------- -------- -------
Total investment income.............................. 233,407 761,141 210,986 543,433 -- 436
Expenses:
Mortality and expense risks......................... 32,838 26,542 24,261 15,809 8,233 4,231
---------- -------- --------- ---------- -------- -------
Net investment income (loss)......................... 200,569 734,599 186,725 527,624 (8,233) (3,795)
Net realized and unrealized gain (loss) on
investments:
Net realized gain................................... 62,140 52,891 50,829 48,210 21,741 6,475
Net unrealized appreciation (depreciation)
during the period................................... 1,295,768 13,239 (463,778) 1,125,829 204,674 92,108
---------- -------- --------- ---------- -------- -------
Net realized and unrealized gain (loss) on
investments......................................... 1,357,908 66,130 (412,949) 1,174,039 226,415 98,583
---------- -------- --------- ---------- -------- -------
Net increase (decrease) in net assets resulting from
operations.......................................... $1,558,477 $800,729 $(226,224) $1,701,663 $218,182 $94,788
========== ======== ========= ========== ======== =======
</TABLE>
See accompanying notes.
97
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENT OF OPERATIONS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
INTERNATIONAL BALANCED SUBACCOUNT MID CAP GROWTH SUBACCOUNT
---------------------------------- ---------------------------------
1999 1998 1997 1999 1998 1997
---------- --------- ----------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I.................. $ 17,211 $ 12,240 $ 3,972 $1,373,009 $ 130,303 --
M Fund Inc............................................ -- -- -- -- -- --
Interest income on policy loans........................ -- -- -- -- -- --
-------- -------- --------- ---------- ---------- --------
Total investment income................................ 17,211 12,240 3,972 1,373,009 130,303 --
Expenses:
Mortality and expense risks........................... 1,267 826 392 34,834 5,242 2,164
-------- -------- --------- ---------- ---------- --------
Net investment income (loss)........................... 15,944 11,414 3,580 1,338,175 125,061 (2,164)
Net realized and unrealized gain (loss) on investments:
Net realized gain..................................... 1,061 1,050 429 420,826 26,192 5,866
Net unrealized appreciation (depreciation)
during the period.................................... (8,559) 12,294 (4,312) 4,283,452 193,946 66,874
-------- -------- --------- ---------- ---------- --------
Net realized and unrealized gain (loss)
on investments........................................ (7,498) 13,344 (3,883) 4,704,278 220,138 72,740
-------- -------- --------- ---------- ---------- --------
Net increase (decrease) in net assets resulting from
operations............................................ $ 8,446 $ 24,758 $ (303) $6,042,453 $ 345,199 $ 70,576
======== ======== ========= ========== ========== ========
</TABLE>
<TABLE>
<CAPTION>
LARGE CAP VALUE SUBACCOUNT MONEY MARKET SUBACCOUNT
------------------------------ ---------------------------------
1999 1998 1997 1999 1998 1997
---------- -------- -------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I..................... $ 511,132 $185,232 $ 57,265 $1,134,371 $2,249,510 $641,356
M Fund Inc............................................... -- -- -- -- -- --
Interest income on policy loans........................... -- -- -- 155,491 154,162 148,802
--------- -------- -------- ---------- ---------- --------
Total investment income................................... 511,132 185,232 57,265 1,289,862 2,403,672 790,158
Expenses:
Mortality and expense risks.............................. 36,983 15,356 3,303 146,758 263,735 81,437
--------- -------- -------- ---------- ---------- --------
Net investment income..................................... 474,149 169,876 53,962 1,143,104 2,139,937 708,721
Net realized and unrealized gain (loss) on investments:
Net realized gain........................................ 123,242 68,953 17,858 -- -- --
Net unrealized appreciation (depreciation)
during the period....................................... (499,454) 64,132 80,036 -- -- --
--------- -------- -------- ---------- ---------- --------
Net realized and unrealized gain (loss) on investments.... (376,212) 133,085 97,894 -- -- --
--------- -------- -------- ---------- ---------- --------
Net increase in net assets resulting from operations...... $ 97,937 $302,961 $151,856 $1,143,104 $2,139,937 $708,721
========= ======== ======== ========== ========== ========
</TABLE>
See accompanying notes.
98
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENT OF OPERATIONS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
MID CAP VALUE SUBACCOUNT SMALL/MID CAP GROWTH SUBACCOUNT
---------------------------------- ---------------------------------------
1999 1998 1997 1999 1998 1997
---------- ------------ -------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I............... $ 30,563 $ 53,920 $150,951 $ 840,786 $ 93,281 $ 407,765
M Fund Inc......................................... -- -- -- -- -- --
Interest income on policy loans..................... -- -- -- -- -- --
--------- ----------- -------- ----------- ----------- -----------
Total investment income............................. 30,563 53,920 150,951 840,786 93,281 407,765
Expenses:
Mortality and expense risks........................ 28,106 34,857 7,632 30,491 26,942 22,030
--------- ----------- -------- ----------- ----------- -----------
Net investment income............................... 2,457 19,063 143,319 810,295 66,339 385,735
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss)........................... (547,518) 74,634 10,646 16,952 33,249 276,956
Net unrealized appreciation (depreciation)
during the period................................. 657,486 (944,401) 145,409 (590,295) 126,465 (477,912)
--------- ----------- -------- ----------- ----------- -----------
Net realized and unrealized gain (loss) on
investments........................................ 109,968 (869,767) 156,055 (573,343) 159,714 (200,956)
--------- ----------- -------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting from
operations......................................... $ 112,425 $ (850,704) $299,374 $ 236,952 $ 226,953 $ 184,779
========= =========== ======== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
REAL ESTATE EQUITY SUBACCOUNT GROWTH & INCOME SUBACCOUNT
---------------------------------- --------------------------------------
1999 1998 1997 1999 1998 1997
---------- ------------ -------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I.............. $ 262,930 $ 343,976 $330,296 $35,057,066 $26,306,209 $25,377,474
M Fund Inc........................................ -- -- -- -- -- --
Interest income on policy loans.................... 17,361 17,260 15,261 2,279,107 1,996,131 1,728,054
--------- ----------- -------- ----------- ----------- -----------
Total investment income............................ 280,291 361,236 345,557 37,336,173 28,302,340 27,105,528
Expenses:
Mortality and expense risks....................... 24,900 33,890 25,420 1,779,482 1,466,469 1,136,268
--------- ----------- -------- ----------- ----------- -----------
Net investment income.............................. 255,391 327,346 320,137 35,556,691 26,835,871 25,969,260
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss).......................... (168,994) 158,205 181,015 5,502,422 3,223,935 1,982,518
Net unrealized appreciation (depreciation)
during the period................................ (220,380) (1,546,717) 165,392 2,405,417 32,918,552 18,247,212
--------- ----------- -------- ----------- ----------- -----------
Net realized and unrealized gain (loss) on
investments...................................... (389,374) (1,388,512) 346,407 7,907,839 36,142,487 20,229,730
--------- ----------- -------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting
from operations................................... $(133,983) $(1,061,166) $666,544 $43,464,530 $62,978,358 $46,198,990
========= =========== ======== =========== =========== ===========
</TABLE>
See accompanying notes.
99
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENT OF OPERATIONS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
MANAGED SUBACCOUNT SHORT-TERM BOND SUBACCOUNT
---------------------------------------- ----------------------------------------
1999 1998 1997 1999 1998 1997
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I.......... $ 9,998,433 $ 9,347,788 $ 7,891,222 $ 15,539 $ 27,350 $ 1,036,747
M Fund Inc.................................... -- -- -- -- --
Interest income on policy loans................ 953,686 854,487 768,231 -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Total investment income........................ 10,952,119 10,202,275 8,659,453 15,539 27,350 1,036,747
Expenses:
Mortality and expense risks................... 649,802 577,276 497,030 1,497 2,680 121,572
------------ ------------ ------------ ------------ ------------ ------------
Net investment income.......................... 10,302,317 9,624,999 8,162,423 14,042 24,670 915,175
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss)...................... 996,546 791,245 437,661 (8,638) 265 (27,616)
Net unrealized appreciation (depreciation)
during the period............................ (2,108,530) 6,629,458 4,941,061 (2,442) (4,247) 226,435
------------ ------------ ------------ ------------ ------------ ------------
Net realized and unrealized gain (loss) on
investments................................... (1,111,984) 7,420,703 5,378,722 (11,080) (3,982) 198,819
------------ ------------ ------------ ------------ ------------ ------------
Net increase in net assets resulting from
operations.................................... $ 9,190,333 $ 17,045,702 $ 13,541,145 $ 2,962 $ 20,688 $ 1,113,994
============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
SMALL CAP VALUE SUBACCOUNT INTERNATIONAL OPPORTUNITIES SUBACCOUNT
---------------------------------------- ----------------------------------------
1999 1998 1997 1999 1998 1997
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I......... $ 79,585 $ 12,675 $ 95,844 $ 241,151 $ 33,443 $ 5,284
M Fund Inc................................... -- -- -- -- -- --
Interest income on policy loans............... -- -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Total investment income....................... 79,585 12,675 95,844 241,151 33,443 5,284
Expenses:
Mortality and expense risks................. 17,680 11,853 3,270 17,937 21,581 1,697
------------ ------------ ------------ ------------ ------------ ------------
Net investment income......................... 61,905 822 92,574 223,214 11,862 3,587
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss)..................... (33,134) 29,257 19,812 155,412 33,474 3,191
Net unrealized appreciation
(depreciation) during the period............ (148,401) (105,331) (12,804) 387,412 272,314 (12,223)
------------ ------------ ------------ ------------ ------------ ------------
Net realized and unrealized gain (loss)
on investments............................... (181,535) (76,074) 7,008 542,824 305,788 (9,032)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations..................... $ (119,630) $ (75,252) $ 99,582 $ 766,038 $ 317,650 $ (5,445)
============ =========== ============ ============ ============ ============
</TABLE>
See accompanying notes.
100
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENT OF OPERATIONS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
EQUITY INDEX SUBACCOUNT GLOBAL BOND SUBACCOUNT
---------------------------------------- ----------------------------------------
1999 1998 1997 1999 1998 1997
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I......... $ 593,325 $ 185,267 $ 54,601 $ 37,862 $ 19,628 $ 9,400
M Fund Inc.................................... -- -- -- -- --
Interest income on policy loans................ -- -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Total investment income........................ 593,325 185,267 54,601 37,862 19,628 9,400
Expenses:
Mortality and expense risks................... 63,950 27,141 5,346 4,084 1,979 658
------------ ------------ ------------ ------------ ------------ ------------
Net investment income.......................... 529,375 158,126 49,255 33,778 17,649 8,742
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss)...................... 271,978 443,879 14,525 (151) 3,991 348
Net unrealized appreciation (depreciation)
during the period............................ 1,282,937 585,673 146,714 (52,953) 4,308 1,260
------------ ------------ ------------ ------------ ------------ ------------
Net realized and unrealized gain (loss) on
investments................................... 1,554,915 1,029,552 161,239 (53,104) 8,299 1,608
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations..................... $ 2,084,290 $ 1,187,678 $ 210,494 $ (19,326) $ 25,948 $ 10,350
============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
TURNER CORE GROWTH SUBACCOUNT BRANDES INTERNATIONAL EQUITY SUBACCOUNT
---------------------------------------- ----------------------------------------
1999 1998 1997 1999 1998 1997
------------ ------------ ------------ ------------ ------------ ------------
<S>............................................ <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I.......... $ -- $ -- $ -- $ -- $ -- $ --
M Fund Inc.................................... 19,328 2,231 6,373 16,354 14,444 1,796
Interest income on policy loans................ -- -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Total investment income........................ 19,328 2,231 6,373 16,354 14,444 1,796
Expenses:
Mortality and expense risks................... 1,139 565 301 2,166 1,158 684
------------ ------------ ------------ ------------ ------------ ------------
Net investment income.......................... 18,189 1,666 6,072 14,188 13,286 1,112
Net realized and unrealized gain (loss) on
investments:
Net realized gain............................. 26,736 2,780 839 11,526 600 888
Net unrealized appreciation (depreciation)
during the period............................ 23,628 22,686 6,487 122,734 8,581 (1,473)
------------ ------------ ------------ ------------ ------------ ------------
Net realized and unrealized gain (loss) on
investments................................... 50,364 25,466 7,326 134,260 9,181 (585)
------------ ------------ ------------ ------------ ------------ ------------
Net increase in net assets resulting from
operations.................................... $ 68,553 $ 27,132 $ 13,398 $ 148,448 $ 22,467 $ 527
============ ============ ============ ============ ============ ============
</TABLE>
See accompanying notes.
101
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENT OF OPERATIONS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
FRONTIER CAPITAL APPRECIATION EMERGING MARKETS EQUITY GLOBAL EQUITY
SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------------------ ------------------------ ----------------
1999 1998 1997 1999 1998* 1999 1998*
-------- ------- ------- ---------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I............. $ -- $ -- $ -- $ 15,636 $ 1 $ 816 $ 117
M Fund Inc....................................... 13,028 12,832 6,463 -- -- -- --
Interest income on policy loans.................... -- -- -- -- -- -- --
-------- ------- ------- ---------- -------- ------- -------
Total investment income............................ 13,028 12,832 6,463 15,636 1 816 117
Expenses:
Mortality and expense risks...................... 4,257 13,446 1,409 466 0 378 60
-------- ------- ------- ---------- -------- ------- -------
Net investment income (loss)....................... 8,771 (614) 5,054 15,170 1 438 57
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss)......................... (59,550) 23,061 8,970 1,838 (1) 196 (16)
Net unrealized appreciation (depreciation) during
the period..................................... 89,369 (840) 32,469 92,713 (48) 20,203 (303)
-------- ------- ------- ---------- -------- ------- -------
Net realized and unrealized gain (loss) on
investments...................................... 29,819 22,221 41,439 94,551 (49) 20,399 (319)
-------- ------- ------- ---------- -------- ------- -------
Net increase (decrease) in net assets resulting from
operations....................................... $ 38,590 $21,607 $46,493 $109,721 $ (48) $20,837 $ (262)
======== ======= ======= ========== ======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
ENHANCED
BOND INDEX SMALL/MID CAP CORE HIGH YIELD BOND U.S. EQUITY
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
-------------------- -------------------- ------------------ -----------
1999 1998* 1999 1998* 1999 1998* 1999**
----------- ------ ----------- ------- -------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I............. $ 2,971 $ 296 $ 6,699 $ -- $ 3,011 $ 50 $ --
M Fund Inc....................................... -- -- -- -- -- -- 1,435
Interest income on policy loans.................... -- -- -- -- -- -- --
----------- ------ ----------- ------- -------- ------- -----------
Total investment income............................ 2,971 296 6,699 -- 3,011 50 1,435
Expenses:
Mortality and expense risks....................... 270 11 335 48 220 2 61
----------- ------ ----------- ------- -------- ------- -----------
Net investment income (loss)....................... 2,701 285 6,364 (48) 2,791 48 1,374
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss).......................... (1,613) (26) 1,093 (1,957) (396) (108) 11
Net unrealized appreciation (depreciation) during
the period....................................... (1,753) (147) 4,719 1,888 (1,172) (19) 1,285
----------- ------ ----------- ------- -------- ------- -----------
Net realized and unrealized gain (loss) on
investments....................................... (3,366) (173) 5,812 (69) (1,568) (127) 1,296
----------- ------ ----------- ------- -------- ------- -----------
Net increase (decrease) in net assets resulting from
operations........................................ $ (665) $ 112 $ 12,176 $ (117) $ 1,223 $ (79) $ 2,670
=========== ====== =========== ======= ======== ======= ===========
</TABLE>
---------
* From May 1, 1998 (commencement of operations).
** From May 1, 1999 (commencement of operations).
See accompanying notes.
102
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF CHANGES IN NET ASSETS
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
LARGE CAP GROWTH SUBACCOUNT SOVEREIGN BOND SUBACCOUNT
--------------------------------------- --------------------------------------
1999 1998 1997 1999 1998 1997
------------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income............................ $ 6,329,395 $ 2,820,359 $ 1,690,466 $ 5,481,982 $ 5,578,813 $ 4,779,635
Net realized gain (loss)......................... 1,146,308 433,509 292,430 (388,883) (142,628) (230,607)
Net unrealized appreciation (depreciation) during
the period..................................... 320,087 4,558,660 2,142,494 (5,439,148) (102,600) 1,277,686
----------- ----------- ----------- ----------- ----------- ------------
Net increase (decrease) in net assets resulting from
operations....................................... 7,795,790 7,812,528 4,125,390 (346,049) 5,333,585 5,826,714
From policyholder transactions:
Net premiums from policyholders.................. 10,950,682 6,922,934 5,387,401 11,668,600 10,038,753 10,001,325
Net benefits to policyholders.................... (5,776,293) (3,869,320) (3,401,593) (7,543,864) (7,974,428) (8,051,538)
Net increase in policy loans..................... -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ------------
Net increase in net assets resulting from
policyholder transactions........................ 5,174,389 3,053,614 1,985,808 4,124,736 2,064,425 1,949,787
----------- ----------- ----------- ----------- ----------- ------------
Net increase in net assets......................... 12,970,179 10,866,142 6,111,198 3,778,687 7,398,010 7,776,501
Net assets at beginning of period.................. 31,058,258 20,192,116 14,080,918 77,110,895 69,712,885 61,936,384
----------- ----------- ----------- ----------- ----------- ------------
Net assets at end of period........................ $44,028,437 $31,058,258 $20,192,116 $80,889,582 $77,110,895 $69,712,885
=========== =========== =========== =========== =========== ============
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY INDEX SUBACCOUNT SMALL CAP GROWTH SUBACCOUNT
------------------------------------- -------------------------------------
1999 1998 1997 1999 1998 1997
----------- ---------- ---------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income (loss)..................... $ 200,569 $ 734,599 $ 186,725 $ 527,624 $ (8,233) $ (3,795)
Net realized gain................................ 62,140 52,891 50,829 48,210 21,741 6,475
Net unrealized appreciation (depreciation) during
the period..................................... 1,295,768 13,239 (463,778) 1,125,829 204,674 92,108
----------- ---------- ---------- ----------- ----------- ---------
Net increase (decrease) in net assets resulting from
operations....................................... 1,558,477 800,729 (226,224) 1,701,663 218,182 94,788
From policyholder transactions:
Net premiums from policyholders.................. 1,634,643 1,489,281 1,504,962 1,398,160 891,480 809,492
Net benefits to policyholders.................... (1,119,500) (269,586) (199,118) (390,180) -- --
Net increase in policy loans..................... -- -- -- -- -- --
----------- ---------- ---------- ----------- ----------- ---------
Net increase in net assets resulting from
policyholder transactions........................ 515,143 141,969 427,597 1,007,980 621,894 610,374
----------- ---------- ---------- ----------- ----------- ---------
Net increase in net assets......................... 2,073,620 942,698 201,373 2,709,643 840,076 705,162
Net assets at beginning of period.................. 5,107,374 4,164,676 3,963,303 1,802,291 962,215 257,053
----------- ---------- ---------- ----------- ----------- ---------
Net assets at end of period........................ $ 7,180,994 $5,107,374 $4,164,676 $ 4,511,934 $1,802,291 $ 962,215
=========== ========== ========== =========== =========== =========
</TABLE>
See accompanying notes.
103
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
INTERNATIONAL BALANCED SUBACCOUNT MID CAP GROWTH SUBACCOUNT
------------------------------------- ------------------------------------------
1999 1998 1997 1999 1998 1997
----------- ---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss)................. $ 15,944 $ 11,414 $ 3,580 $ 1,338,175 $ 125,061 $ (2,164)
Net realized gain............................ 1,061 1,050 429 420,826 26,192 5,866
Net unrealized appreciation (depreciation)
during the period........................... (8,559) 12,294 (4,312) 4,283,452 193,946 66,874
----------- ---------- ---------- ------------ ----------- -----------
Net increase (decrease)in net assets resulting
from operations.............................. 8,446 24,758 (303) 6,042,453 345,199 70,576
From policyholder transactions:
Net premiums from policyholders.............. 115,573 150,466 62,380 7,041,199 772,359 457,341
Net benefits to policyholders................ (133,983) (50,214) (9,531) (947,660) (211,806) (125,239)
Net increase in policy loans................. -- -- -- -- -- --
----------- ---------- ---------- ------------ ----------- -----------
Net increase (decrease) in net assets
resulting from policyholder transactions..... (18,410) 100,262 52,849 6,093,539 560,553 332,102
----------- ---------- ---------- ------------ ----------- -----------
Net increase (decrease) in net assets......... (9,964) 125,020 52,546 12,135,992 905,752 402,678
Net assets at beginning of period............. 210,332 85,312 32,766 1,473,582 567,830 165,152
----------- ---------- ---------- ------------ ----------- -----------
Net assets at end of period................... $ 200,368 $ 210,332 $ 85,312 $ 13,609,574 $ 1,473,582 $ 567,830
=========== ========== ========== ============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
LARGE CAP VALUE SUBACCOUNT MONEY MARKET SUBACCOUNT
------------------------------------- ------------------------------------------
1999 1998 1997 1999 1998 1997
----------- ---------- ---------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income........................ $ 474,149 $ 169,876 $ 53,962 $ 1,143,104 $ 2,139,937 $ 708,721
Net realized gain............................ 123,242 68,953 17,858 -- -- --
Net unrealized appreciation (depreciation)
during the period........................... (499,454) 64,132 80,036 -- -- --
----------- ---------- ---------- ------------ ------------ -----------
Net increase in net assets resulting from
operations................................... 97,937 302,961 151,856 1,143,104 2,139,937 708,721
From policyholder transactions:
Net premiums from policyholders.............. 5,449,922 2,321,440 1,506,756 16,733,655 55,692,824 11,210,536
Net benefits to policyholders................ (1,059,147) (528,449) (85,021) (46,642,184) (22,850,788) (9,620,370)
Net increase (decrease) in policy loans...... -- -- -- -- (198,682) 103,247
----------- ---------- ---------- ------------ ------------ -----------
Net increase (decrease) in net assets
resulting from policyholder transactions..... 4,390,775 1,792,991 1,421,735 (29,908,529) 32,643,354 1,693,413
----------- ---------- ---------- ------------ ------------ -----------
Net increase (decrease) in net assets......... 4,488,712 2,095,952 1,573,591 (28,765,425) 34,783,291 2,402,134
Net assets at beginning of period............. 3,774,075 1,678,123 104,532 49,268,531 14,485,240 12,083,106
----------- ---------- ---------- ------------ ------------ -----------
Net assets at end of period................... $ 8,262,787 $3,774,075 $1,678,123 $ 20,503,106 $ 49,268,531 $14,485,240
=========== ========== ========== ============ ============ ===========
</TABLE>
See accompanying notes.
104
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
MIDCAP VALUE SUBACCOUNT SMALL/MID CAP GROWTH SUBACCOUNT
------------------------------------- -----------------------------------------
1999 1998 1997 1999 1998 1997
----------- ----------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income....................... $ 2,457 $ 19,063 $ 143,31 $ 810,295 $ 66,339 $ 385,735
Net realized gain (loss).................... (547,518) 74,634 10,646 16,952 33,249 276,956
Net unrealized appreciation (depreciation)
during the period.......................... 657,486 (944,401) 145,409 (590,295) 126,465 (477,912)
----------- ----------- ----------- ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations.................... 112,425 (850,704) 299,374 236,952 226,053 184,779
From policyholder transactions:
Net premiums from policyholders............. 2,086,192 5,639,732 1,620,752 1,533,102 1,812,713 2,554,133
Net benefits to policyholders............... (3,546,814) (775,357) (112,395) (1,200,248) (1,214,489) 1,628,677)
Net increase in policy loans................ -- -- -- -- -- --
----------- ----------- ----------- ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from policyholder transactions.... 1,460,622) 4,864,375 1,508,357 332,854 598,224 925,456
----------- ----------- ----------- ------------ ------------ ------------
Net increase (decrease) in net assets........ (1,348,197) 4,013,671 1,807,731 569,806 824,277 1,110,235
Net assets at beginning of period............ 6,049,829 2,036,158 228,427 4,916,238 4,091,961 2,981,726
----------- ----------- ----------- ------------ ------------ ------------
Net assets at end of period.................. $ 4,701,632 $ 6,049,829 $ 2,036,158 $ 5,486,044 $ 4,916,238 $ 4,091,961
=========== =========== =========== ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
REAL ESTATE EQUITY SUBACCOUNT GROWTH & INCOME SUBACCOUNT
------------------------------------- ------------------------------------------
1999 1998 1997 1999 1998 1997
----------- ----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income....................... $ 255,391 $ 327,346 $ 320,137 $ 35,556,691 $ 26,835,871 $ 25,969,260
Net realized gain (loss).................... (168,994) 158,205 181,015 5,502,422 3,223,935 1,982,518
Net unrealized appreciation (depreciation)
during the period.......................... (220,380) (1,546,717) 165,392 2,405,417 32,918,552 18,247,212
----------- ----------- ----------- ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations.................... (133,983) (1,061,166) 666,544 43,464,530 62,978,358 46,198,990
From policyholder transactions:
Net premiums from policyholders............. 968,627 3,382,263 1,748,132 34,593,082 35,108,834 30,351,780
Net benefits to policyholders............... (2,335,552) (1,663,696) (1,218,783) (34,650,911) (29,649,984) (24,619,851)
Net increase (decrease) in policy loans..... -- (1,103) 34,311 -- 3,672,137 3,346,307
----------- ----------- ----------- ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from policyholder transactions... (1,366,925) 1,717,464 563,660 (57,829) 9,130,987 9,078,236
----------- ----------- ----------- ------------ ------------ ------------
Net increase (decrease) in net assets........ (1,500,908) 656,298 1,230,204 43,406,701 72,109,345 55,277,226
Net assets at beginning of period............ 5,531,008 4,874,710 3,644,506 297,093,396 224,984,051 169,706,825
----------- ----------- ----------- ------------ ------------ ------------
Net assets at end of period.................. $ 4,030,100 $ 5,531,008 $ 4,874,710 $340,500,097 $297,093,396 $224,984,051
=========== =========== =========== ============ ============ ============
</TABLE>
See accompanying notes.
105
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
MANAGED SUBACCOUNT SHORT-TERM BOND SUBACCOUNT
------------------------------------------ ------------------------------------
1999 1998 1997 1999 1998 1997
------------ ------------ ------------ ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income ........................ $ 10,302,317 $ 9,624,999 $ 8,162,423 $ 14,042 $ 24,670 $ 915,175
Net realized gain (loss) ..................... 996,546 791,245 437,661 (8,638) 265 (27,616)
Net unrealized appreciation (depreciation)
during the period ........................... (2,108,530) 6,629,458 4,941,061 (2,442) (4,247) 226,435
------------ ------------ ------------ --------- ---------- -----------
Net increase in net assets resulting from
operations ................................... 9,190,333 17,045,702 13,541,145 2,962 20,688 1,113,994
From policyholder transactions:
Net premiums from policyholders .............. 13,430,282 13,116,210 13,194,907 109,732 420,697 116,602
Net benefits to policyholders ................ (14,305,859) (14,539,301) (14,539,295) (370,270) (71,999) (26,168,835)
Net increase in policy loans ................. -- 1,134,137 1,257,640 -- -- --
------------ ------------ ------------ --------- ---------- ------------
Net increase (decrease) in net assets
resulting from policyholder transactions ..... (875,577) (288,954) (86,748) (260,538) 348,698 (26,052,233)
------------ ------------ ------------ --------- ---------- ------------
Net increase (decrease) in net assets ......... 8,314,756 16,756,748 13,454,397 (257,576) 369,386 (24,938,239)
Net assets at beginning of period ............. 110,814,663 94,057,915 80,603,518 496,489 127,103 25,065,342
------------ ------------ ------------ --------- ---------- ------------
Net assets at end of period ................... $119,129,419 $110,814,663 $ 94,057,915 $ 238,913 $ 496,489 $ 127,103
============ ============ ============ ========= ========== ============
</TABLE>
<TABLE>
<CAPTION>
SMALL CAP VALUE SUBACCOUNT INTERNATIONAL OPPORTUNITIES SUBACCOUNT
------------------------------------- ---------------------------------------
1999 1998 1997 1999 1998 1997
----------- ----------- ----------- ------------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income .......................... $ 61,905 $ 822 $ 92,574 $ 223,214 $ 11,862 $ 3,587
Net realized gain (loss) ....................... (33,134) 29,257 19,812 155,412 33,474 3,191
Net unrealized appreciation (depreciation)
during the period ............................. (148,401) (105,331) (12,804) 387,412 272,314 (12,223)
---------- ---------- ---------- ----------- ---------- --------
Net increase (decrease) in net assets resulting
from operations ................................ (119,630) (75,252) 99,582 766,038 317,650 (5,445)
From policyholder transactions:
Net premiums from policyholders ................ 1,483,922 1,644,666 1,224,547 2,354,681 3,814,201 295,915
Net benefits to policyholders .................. (447,402) (270,585) (137,364) (3,673,500) (339,134) (46,736)
Net increase in policy loans ................... -- -- -- -- -- --
---------- ---------- ---------- ----------- ---------- --------
Net increase (decrease) in net assets resulting
from policyholder transactions ................. 1,036,520 1,374,081 1,087,183 (1,318,819) 3,475,067 249,179
---------- ---------- ---------- ----------- ---------- --------
Net increase (decrease) in net assets ........... 916,890 1,298,829 1,186,765 (552,781) 3,792,717 243,734
Net assets at beginning of period ............... 2,550,502 1,251,673 64,908 4,181,724 389,007 145,273
---------- ---------- ---------- ----------- ---------- --------
Net assets at end of period ..................... $3,467,392 $2,550,502 $1,251,673 $ 3,628,943 $4,181,724 $389,007
========== ========== ========== =========== ========== ========
</TABLE>
See accompanying notes.
106
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
EQUITY INDEX SUBACCOUNT GLOBAL BOND SUBACCOUNT
-------------------------------------- -------------------------------
1999 1998 1997 1999 1998 1997
------------ ----------- ----------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income ................................ $ 529,375 $ 158,126 $ 49,255 $ 33,778 $ 17,649 $ 8,742
Net realized gain (loss) ............................. 271,978 443,879 14,525 (151) 3,991 348
Net unrealized appreciation (depreciation) during the
period .............................................. 1,282,937 585,673 146,714 (52,953) 4,308 1,260
----------- ---------- ---------- --------- -------- --------
Net increase (decrease) in net assets resulting from
operations .......................................... 2,084,290 1,187,678 210,494 (19,326) 25,948 10,350
From policyholder transactions:
Net premiums from policyholders ...................... 6,697,385 4,822,053 1,827,052 696,619 381,024 161,548
Net benefits to policyholders ........................ (1,623,429) (885,493) (149,826) (317,999) (83,865) (37,799)
Net increase in policy loans ......................... -- -- -- -- -- --
----------- ---------- ---------- --------- -------- --------
Net increase in net assets resulting from policyholder
transactions ......................................... 5,073,956 3,936,560 1,677,226 378,620 297,159 123,749
----------- ---------- ---------- --------- -------- --------
Net increase in net assets ............................ 7,158,246 5,124,238 1,887,720 359,294 323,107 134,099
Net assets at beginning of period ..................... 7,247,833 2,123,595 235,875 470,424 147,317 13,218
----------- ---------- ---------- --------- -------- --------
Net assets at end of period ........................... $14,406,079 $7,247,833 $2,123,595 $ 829,718 $470,424 $147,317
=========== ========== ========== ========= ======== ========
</TABLE>
<TABLE>
<CAPTION>
TURNER CORE GROWTH SUBACCOUNT BRANDES INTERNATIONAL EQUITY SUBACCOUNT
------------------------------ ----------------------------------------
1999 1998 1997 1999 1998 1997
--------- --------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income ................................ $ 18,189 $ 1,666 $ 6,072 $ 14,188 $ 13,286 $ 1,112
Net realized gain (loss) ............................. 26,736 2,780 839 11,526 600 888
Net unrealized appreciation (depreciation) during the
period .............................................. 23,628 22,686 6,487 122,734 8,581 (1,473)
-------- -------- ------- -------- -------- --------
Net increase (decrease) in net assets resulting from
operations .......................................... 68,553 27,132 13,398 148,448 22,467 527
From policyholder transactions:
Net premiums from policyholders ...................... 109,802 39,070 33,658 152,629 141,892 82,259
Net benefits to policyholders ........................ (45,555) (9,835) (7,208) (31,332) (34,941) (45,350)
Net increase in policy loans ......................... -- -- -- -- -- --
-------- -------- ------- -------- -------- --------
Net increase in net assets resulting from policyholder
transactions ......................................... 64,247 29,235 26,450 121,297 106,951 36,909
-------- -------- ------- -------- -------- --------
Net increase in net assets ............................ 132,800 56,367 39,848 269,745 129,418 37,436
Net assets at beginning of period ..................... 125,007 68,640 28,792 255,757 126,339 88,903
-------- -------- ------- -------- -------- --------
Net assets at end of period ........................... $257,807 $125,007 $68,640 $525,502 $255,757 $126,339
======== ======== ======= ======== ======== ========
</TABLE>
See accompanying notes.
107
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
FRONTIER CAPITAL APPRECIATION EMERGING MARKETS EQUITY
SUBACCOUNT SUBACCOUNT
---------------------------------- ----------------------
1999 1998 1997 1999 1998*
-------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss)..................... $ 8,771 $ (614) $ 5,054 $ 15,170 $ 1
Net realized gain (loss)......................... (59,550) 23,061 8,970 1,838 (1)
Net unrealized appreciation
(depreciation) during the period................ 89,369 (840) 32,469 92,713 (48)
----------- ---------- -------- ----------- -------
Net increase (decrease) in net assets............. 109,721 (48)
resulting from operations........................ 38,590 21,607 46,493
From policyholder transactions:
Net premiums from policyholders.................. 103,675 2,465,299 138,553 336,277 784
Net benefits to policyholders.................... (2,221,410) (227,386) (70,647) (8,915) (7)
Net increase in policy loans..................... -- -- -- -- --
----------- ---------- -------- ----------- -------
Net increase (decrease) in net assets
resulting from policyholder transactions......... (2,117,735) 2,237,913 67,906 327,362 777
----------- ---------- -------- ----------- -------
Net increase (decrease) in net assets............. (2,079,145) 2,259,520 114,399 437,083 729
Net assets at beginning of period................. 2,533,128 273,608 159,209 729 0
----------- ---------- -------- ----------- -------
Net assets at end of period....................... $ 453,983 $2,533,128 $273,608 $ 437,812 $ 729
=========== ========== ======== =========== =======
<CAPTION>
GLOBAL EQUITY
SUBACCOUNT
---------------------
1999 1998*
-------- --------
<S> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss)....................... $ 438 $ 57
Net realized gain (loss)........................... 196 (16)
Net unrealized appreciation
(depreciation) during the period.................. 20,203 (303)
--------- -------
Net increase (decrease) in net assets............... 20,837 (262)
resulting from operations
From policyholder transactions:
Net premiums from policyholders.................... 125,955 17,519
Net benefits to policyholders...................... (15,572) (762)
Net increase in policy loans....................... -- --
--------- -------
Net increase (decrease) in net assets
resulting from policyholder transactions........... 110,383 16,757
--------- -------
Net increase (decrease) in net assets............... 131,220 16,495
Net assets at beginning of period................... 16,495 0
--------- -------
Net assets at end of period......................... $ 147,715 $16,495
========= =======
</TABLE>
<TABLE>
<CAPTION>
BOND INDEX SMALL/MID CAP CORE HIGH YIELD BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT
--------------------- -------------------- -------------------
1999 1998* 1999 1998* 1999 1998*
-------- -------- -------- -------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss)................... $ 2,701 $ 285 $ 6,364 $ (48) $ 2,791 $ 48
Net realized gain (loss)....................... (1,613) (26) 1,093 (1,957) (396) (108)
Net unrealized appreciation
(depreciation) during the period.............. (1,753) (147) 4,719 1,888 (1,172) (19)
---------- ------ --------- -------- -------- ---------
Net increase (decrease) in net assets
resulting from operations..................... (665) 112 12,176 (117) 1,223 (79)
From policyholder transactions:
Net premiums from policyholders................ 80,921 16,730 44,493 52,673 69,375 108,274
Net benefits to policyholders.................. (20,596) (2,293) (12,003) (19,857) -- (102,742)
Net increase in policy loans................... -- -- -- -- -- --
---------- ------ --------- -------- -------- ---------
Net increase in net assets resulting from
policyholder transactions...................... 60,325 14,437 32,490 32,816 69,375 5,532
---------- ------ --------- -------- -------- ---------
Net increase in net assets...................... 59,660 14,549 44,666 32,699 70,598 5,453
Net assets at beginning of period............... 14,549 0 32,699 0 5,453 0
---------- ------ --------- -------- -------- ---------
Net assets at end of period..................... $ 74,209 $14,549 $ 77,365 $ 32,699 $ 76,051 $ 5,453
========== ======= ========= ======== ======== =========
<CAPTION>
ENHANCED
U.S. EQUITY
SUBACCOUNT
-----------
1999
-----------
<S> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss)................... $ 1,374
Net realized gain (loss)....................... 11
Net unrealized appreciation
(depreciation) during the period.............. 1,285
-------
Net increase (decrease) in net assets
resulting from operations..................... 2,670
From policyholder transactions:
Net premiums from policyholders................ 15,505
Net benefits to policyholders.................. --
Net increase in policy loans................... --
-------
Net increase in net assets resulting from
policyholder transactions...................... 15,505
-------
Net increase in net assets...................... 18,175
Net assets at beginning of period............... 0
-------
Net assets at end of period..................... $18,175
=======
</TABLE>
_________
* From May 1, 1998 (commencement of operations).
See accompanying notes.
108
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
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-seven 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-seven Portfolios
of the Fund and M Fund which are currently available are the Large Cap Growth,
Sovereign Bond, International Equity Index, Small Cap Growth, International
Balanced, Mid Cap Growth, Large Cap Value, Money Market, Mid Cap Value,
Small/Mid Cap Growth (formerly, Diversified Mid Cap Growth), Real Estate Equity,
Growth & Income, Managed, Short-Term Bond, Small Cap Value, International
Opportunities, Equity Index, Global Bond (formerly, Strategic Bond), Turner Core
Growth, Brandes International Equity, Frontier Capital Appreciation, Emerging
Markets Equity, Global Equity, Bond Index, Small/Mid Cap CORE, High Yield Bond
and Enhanced U.S. Equity 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.
109
<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.
110
<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, 1999 were as follows:
<TABLE>
<CAPTION>
PORTFOLIO SHARES OWNED COST VALUE
--------- ------------ ------------ --------------
<S> <C> <C> <C>
Large Cap Growth............. 1,516,913 $ 33,840,498 $ 41,460,815
Sovereign Bond............... 7,742,962 76,567,490 70,640,632
International Equity Index... 348,907 5,723,159 6,854,257
Small Cap Growth............. 236,036 3,094,500 4,511,934
International Balanced....... 18,717 200,046 200,368
Mid Cap Growth............... 465,615 9,063,619 13,609,575
Large Cap Value.............. 612,481 8,613,285 8,262,786
Money Market................. 1,835,117 18,351,172 18,351,172
Mid Cap Value................ 367,982 4,828,927 4,701,632
Small/Mid Cap Growth......... 390,884 6,039,184 5,486,044
Real Estate Equity........... 331,185 4,719,779 3,800,017
Growth & Income.............. 15,384,863 241,740,472 307,871,384
Managed...................... 6,873,184 96,391,658 106,178,553
Short-Term Bond.............. 24,575 245,749 238,913
Small Cap Value.............. 317,611 3,731,225 3,467,391
International Opportunities.. 239,181 2,974,200 3,628,943
Equity Index................. 704,179 12,384,477 14,406,079
Global Bond.................. 84,502 877,096 829,719
Turner Core Growth........... 11,243 204,222 257,807
Brandes International
Equity...................... 33,860 396,716 525,501
Frontier Capital
Appreciation................ 21,495 331,669 453,983
Emerging Markets Equity...... 35,704 345,147 437,812
Global Equity................ 12,173 127,815 147,715
Bond Index................... 7,964 76,110 74,210
Small/Mid Cap CORE........... 7,882 70,758 77,365
High Yield Bond.............. 8,463 77,242 76,051
Enhanced U.S. Equity......... 867 16,890 18,175
</TABLE>
111
<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 1999,
were as follows:
<TABLE>
<CAPTION>
PORTFOLIO PURCHASES SALES
--------- ----------- -------------
<S> <C> <C>
Large Cap Growth..................... $13,422,273 $ 2,517,136
Sovereign Bond....................... 13,709,441 4,426,503
International Equity Index........... 1,206,222 553,307
Small Cap Growth..................... 1,705,289 169,682
International Balanced............... 102,061 104,527
Mid Cap Growth....................... 8,451,704 1,019,989
Large Cap Value...................... 6,131,213 1,266,291
Money Market......................... 17,249,777 46,141,311
Mid Cap Value........................ 1,774,841 3,233,006
Small/Mid Cap Growth................. 1,914,302 771,153
Real Estate Equity................... 859,997 1,976,566
Growth & Income...................... 47,518,686 15,480,980
Managed.............................. 14,747,572 6,118,076
Short-Term Bond...................... 116,133 362,629
Small Cap Value...................... 1,396,171 297,748
International Opportunities.......... 2,979,658 4,075,263
Equity Index......................... 7,159,058 1,555,726
Global Bond.......................... 695,939 283,540
Turner Core Growth................... 142,622 60,186
Brandes International Equity......... 181,255 45,768
Frontier Capital Appreciation........ 91,263 2,200,227
Emerging Markets Equity.............. 351,448 8,915
Global Equity........................ 113,648 2,828
Bond Index........................... 86,949 23,921
Small/Mid Cap CORE................... 58,717 19,864
High Yield Bond...................... 85,583 13,417
Enhanced U.S. Equity................. 17,418 539
</TABLE>
112
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
NOTES TO FINANCIAL STATEMENTS--(continued)
5. Net Assets
Accumulation shares attributable to net assets of policyholders and
accumulation share values for each portfolio at December 31, 1999 were as
follows:
<TABLE>
<CAPTION>
VLI Class #1 MVL Class #3 Flex Class #4
---------------------------- ---------------------------- -----------------------------
Accumulation Accumulation Accumulation Accumulation Accumulation Accumulation
Portfolio Shares Shares Values Shares Shares Values Shares Shares Values
--------- ------------ -------------- ------------ -------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Large Cap Growth........................ -- -- 30,422 $79.68 303,522 $79.68
Sovereign Bond.......................... -- -- 13,276 23.69 1,236,413 23.69
International Equity Index.............. -- -- 12,251 27.55 147,364 27.55
Small Cap Growth........................ -- -- 38,152 21.70 144,335 21.70
International Balanced.................. -- -- 6,210 13.29 3,652 13.29
Mid Cap Growth.......................... -- -- 95,740 35.59 245,163 35.59
Large Cap Value......................... -- -- 50,345 16.17 406,006 16.17
Money Market............................ -- -- 31,966 18.10 535,048 18.10
Mid Cap Value........................... -- -- 54,325 14.06 234,907 14.06
Small/Mid Cap Growth.................... -- -- 23,443 18.80 240,110 19.80
Real Estate Equity...................... -- -- 8,437 22.14 111,094 22.14
Growth & Income......................... -- -- 102,216 68.13 1,902,118 68.13
Managed................................. -- -- 45,437 39.65 1,203,335 39.65
Short-Term Bond......................... -- -- 2,066 12.99 14,631 12.99
Small Cap Value......................... -- -- 29,974 12.32 222,258 12.32
International Opportunities ............ -- -- 14,160 16.54 183,229 16.54
Equity Index............................ -- -- 173,452 23.08 367,259 23.08
Global Bond............................. -- -- 16,532 12.16 39,548 12.16
Turner Core Growth...................... -- -- 1,897 26.33 7,888 26.33
Brandes International Equity............ -- -- 5,884 17.14 20,691 17.14
Frontier Capital Appreciation........... -- -- 1,074 21.11 18,559 21.11
Emerging Markets Equity................. -- -- 2,490 12.77 25,395 12.77
Global Equity........................... -- -- 3,549 12.23 264 12.23
Bond Index.............................. -- -- 4,208 10.34 2,651 10.34
Small/Mid Cap CORE...................... -- -- 794 10.76 201 10.76
High Yield Bond......................... -- -- 4,951 10.10 551 10.10
Enhanced U.S. Equity.................... -- 1,372 13.25 -- 13.25
</TABLE>
113
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
NOTES TO FINANCIAL STATEMENTS--(continued)
<TABLE>
<CAPTION>
Flex II Class #5 VEP Class #7 VEP Class #8
----------------------------- ---------------------------- -----------------------------
Accumulation Accumulation Accumulation Accumulation Accumulation Accumulation
Portfolio Shares Shares Values Shares Shares Values Shares Shares values
--------- ------------ -------------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Large Cap Growth.................... 18,120 $79.68 11,630 $34.19 14,305 $34.28
Sovereign Bond...................... 7,625 23.69 6,071 13.80 5,831 13.84
International Equity Index.......... 7,387 27.55 8,217 17.52 2,077 17.58
Small Cap Growth.................... 19,575 21.70 5,119 21.68 778 21.71
International Balanced.............. 2,567 13.29 2,650 13.28 -- 13.30
Mid Cap Growth...................... 25,572 35.60 8,683 35.56 7,218 35.62
Large Cap Value..................... 32,808 16.17 8,456 16.15 10,743 16.18
Money Market........................ 8,023 18.10 13,653 13.08 10,717 13.12
Mid Cap Value....................... 21,416 14.06 19,817 14.05 3,847 14.08
Small/Mid Cap Growth................ 5,669 19.80 3,944 19.77 3,887 19.83
Real Estate Equity.................. 5,693 22.14 1,424 14.40 -- 14.44
Growth & Income..................... 54,684 68.13 57,852 30.90 23,997 31.00
Managed............................. 23,610 39.65 11,858 20.88 9,588 20.94
Short-Term Bond..................... 1,526 12.99 52 12.97 -- 13.00
Small Cap Value..................... 18,339 12.32 7,072 12.30 3,899 12.33
International Opportunities......... 9,070 16.54 7,208 16.52 5,805 16.55
Equity Index........................ 50,932 23.08 22,543 23.06 7,757 23.10
Global Bond......................... 5,693 12.16 3,685 12.15 2,757 12.17
Turner Core Growth.................. -- -- -- -- -- --
Brandes International Equity........ -- -- 581 16.91 3,546 16.94
Frontier Capital Appreciation....... -- -- 185 22.75 1,528 22.80
Emerging Markets Equity............. 2,886 12.77 3,505 12.77 -- --
Global Equity....................... 147 12.23 3,346 12.22 -- --
Bond Index.......................... 177 10.34 140 10.34 -- --
Small/Mid Cap CORE.................. 57 10.76 6,139 10.76 -- --
High Yield Bond..................... 1,033 10.10 997 10.10 -- --
Enhanced U.S. Equity................ -- -- -- -- -- --
</TABLE>
114
<PAGE>
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV
NOTES TO FINANCIAL STATEMENTS--(continued)
<TABLE>
<CAPTION>
VEP Class #9
----------------------------
Accumulation Accumulation
Portfolio Shares Shares Values
--------- ------------ --------------
<S> <C> <C>
Large Cap Growth.................. 3,240 $34.39
Sovereign Bond.................... -- --
International Equity Index........ -- --
Small Cap Growth.................. -- --
International Balanced............ -- --
Mid Cap Growth.................... -- --
Large Cap Value................... 2,782 16.21
Money Market...................... -- --
Mid Cap Value..................... -- --
Small/Mid Cap Growth.............. -- --
Real Estate Equity................ -- --
Growth & Income................... 3,934 31.09
Managed........................... -- --
Short-Term Bond................... -- --
Small Cap Value................... -- --
International Opportunities....... -- --
Equity Index...................... 2,213 23.14
Global Bond....................... -- --
Turner Core Growth................ -- --
Brandes International Equity...... -- --
Frontier Capital Appreciation..... -- --
Emerging Markets Equity........... -- --
Global Equity..................... 4,771 12.24
Bond Index........................ -- --
Small/Mid Cap CORE................ -- --
High Yield Bond................... -- --
Enhanced U.S. Equity.............. -- --
</TABLE>
115
<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
<S> <C>
Account................................................... 28
account value............................................. 9
Additional Sum Insured.................................... 16
annual processing date.................................... 17
attained age.............................................. 10
Basic Sum Insured......................................... 16
beneficiary............................................... 39
business day.............................................. 28
changing Option A or B.................................... 18
changing the Total Sum Insured............................ 17
charges................................................... 9
Code...................................................... 35
cost of insurance rates................................... 10
date of issue............................................. 29
death benefit............................................. 5
deductions................................................ 9
dollar cost averaging..................................... 14
expenses of the Trusts.................................... 11
fixed investment option................................... 28
full surrender............................................ 14
fund...................................................... 2
grace period.............................................. 7
guaranteed minimum death benefit.......................... 7
Guaranteed Minimum Death Benefit Premium.................. 8
insurance charge.......................................... 10
insured person............................................ 5
investment options........................................ 1
John Hancock.............................................. 28
lapse..................................................... 7
loan...................................................... 15
loan interest............................................. 15
maximum premiums.......................................... 6
Minimum Initial Premium................................... 29
minimum insurance amount.................................. 17
minimum premiums.......................................... 6
modified endowment contract............................... 36
monthly deduction date.................................... 30
mortality and expense risk charge......................... 10
Option A; Option B........................................ 16
optional extra death benefit feature...................... 16
owner..................................................... 5
partial withdrawal........................................ 14
partial withdrawal charge................................. 11
payment options........................................... 18
Planned Premium........................................... 7
policy anniversary........................................ 29
policy split option....................................... 17
policy year............................................... 29
premium; premium payment.................................. 5
prospectus................................................ 3
receive; receipt.......................................... 21
reinstate; reinstatement.................................. 7
sales charges............................................. 9
SEC....................................................... 2
Separate Account UV....................................... 28
Servicing Office.......................................... 2
special loan account...................................... 15
subaccount................................................ 28
surrender................................................. 14
surrender value........................................... 14
Target Premium............................................ 9
tax considerations........................................ 35
telephone transfers....................................... 21
Total Sum Insured......................................... 16
transfers of account value................................ 14
Trusts.................................................... 2
variable investment options............................... 1
we; us.................................................... 28
withdrawal................................................ 14
withdrawal charges........................................ 11
you; your................................................. 5
</TABLE>
116
<PAGE>
PROSPECTUS DATED JUNE 30, 2000
--------------------------------------------------------------------------------
VARIABLE ESTATE PROTECTION
--------------------------------------------------------------------------------
a flexible premium variable life survivorship insurance policy
issued by
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY ("JHVLICO")
The policy provides an investment option with fixed rates of return
declared by JHVLICO and the following variable investment options:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
VARIABLE INVESTMENT OPTION MANAGED BY
-------------------------- ----------
<S> <C>
Managed...................................................... Independence Investment Associates, Inc.
Growth & Income.............................................. Independence Investment Associates, Inc.
Fidelity VIP Contrafund(R)................................... Fidelity Management and Research Company
Equity Index................................................. State Street Global Advisors
Large Cap Value.............................................. T. Rowe Price Associates, Inc.
American Leaders Large Cap Value............................. Federated Investment Management Company
Large Cap Growth............................................. Independence Investment Associates, Inc.
Large Cap Aggressive Growth.................................. Alliance Capital Management L.P.
Fidelity VIP Growth.......................................... Fidelity Management and Research Company
AIM V.I. Value............................................... A I M Advisors, Inc.
Janus Aspen Global Technology................................ Janus Capital Corporation
Mid Cap Value................................................ Neuberger Berman, LLC
Fundamental Mid Cap Growth................................... OppenheimerFunds, Inc.
Mid Cap Growth............................................... Janus Capital Corporation
Real Estate Equity........................................... Independence Investment Associates, Inc. and Morgan
Stanley Dean Witter Investment Management, Inc.
Small/Mid Cap CORE........................................... Goldman Sachs Asset Management
Small/Mid Cap Growth......................................... Wellington Management Company, LLP
Small Cap Value.............................................. INVESCO Management & Research, Inc.
Small Cap Growth............................................. John Hancock Advisers, Inc.
MFS New Discovery............................................ MFS Investment Management(R)
Global Balanced.............................................. Brinson Partners, Inc.
Janus Aspen Worldwide Growth................................. Janus Capital Corporation
Templeton International Securities........................... Templeton Investment Counsel, Inc.
International Equity Index................................... Independence International Associates, Inc.
International Opportunities.................................. Rowe Price-Fleming International, Inc.
Emerging Markets Equity...................................... Morgan Stanley Dean Witter Investment Management, Inc.
Short-Term Bond.............................................. Independence Investment Associates, Inc.
Bond Index................................................... Mellon Bond Associates, LLP
Active Bond.................................................. John Hancock Advisers, Inc.
Core Bond.................................................... Federated Investment Management Company
Global Bond.................................................. J.P. Morgan Investment Management, Inc.
High Yield Bond.............................................. Wellington Management Company, LLP
Money Market................................................. John Hancock Life Insurance Company
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
The variable investment options shown on page 1 are those available as of
the date of this prospectus. We may add, modify or delete variable investment
options in the future.
When you select one or more of these variable investment options, we invest
your money in the corresponding investment option(s) of one or more of the
following: the John Hancock Variable Series Trust I, the AIM Variable Insurance
Funds, Inc., the Templeton Variable Products Series Fund, Fidelity's Variable
Insurance Products Fund and Variable Insurance Products Fund II, the Janus Aspen
Series (Service Shares Class), and the MFS Variable Insurance Trust (together,
"the Trusts"). In this prospectus, the investment options of the Trusts are
referred to as "funds". In the prospectuses for the Trusts, the investment
options may be referred to as "funds", "portfolios" or "series".
Each Trust is a so-called "series" type mutual fund registered with the
Securities and Exchange Commission ("SEC"). The investment results of each
variable investment option you select will depend on those of the corresponding
fund of one of the Trusts. Each of the funds is separately managed and has its
own investment objective and strategies. Attached at the end of this prospectus
is a prospectus for each Trust. The Trust prospectuses contain detailed
information about each available fund. Be sure to read those prospectuses
before selecting any of the variable investment options shown on page 1.
* * * * * * * * * * * *
Please note that the 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.
* * * * * * * * * * * *
JHVLICO LIFE SERVICING OFFICE
-----------------------------
EXPRESS DELIVERY U.S. MAIL
---------------- ---------
529 Main Street (X-4) P.O. Box 111
Charlestown, MA 02129 Boston, MA 02117
Phone: 1-800-732-5543
Fax: 1-617-886-3048
2
<PAGE>
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 22.
. Behind the illustrations is a section called "Additional Information"
that gives more details about the policy. It generally does not
---
repeat information that is in the Basic Information section. A table
of contents for the Additional Information section appears on page 27.
. Behind the Additional Information section are the financial statements
for JHVLICO and Separate Account S. These start on page 41.
. Finally, there is an Alphabetical Index of Key Words and Phrases at
the back of the prospectus on page 123.
After the Alphabetical Index of Key Words and Phrases, this prospectus ends and
the prospectuses for the Trusts begin.
**********
3
<PAGE>
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:
<TABLE>
<CAPTION>
Question Beginning on page
-------- -----------------
<S> <C>
.What is the policy?........................................................ 5
.Who owns the policy?....................................................... 5
.How can I invest money in the policy?...................................... 5
.Is there a minimum amount I must invest?................................... 7
.How will the value of my investment in the policy change over time?........ 8
.What charges will JHVLICO deduct from my investment in the policy?......... 9
.What charges will the Trusts deduct from my investment in the policy?...... 11
.What other charges could JHVLICO impose in the future?..................... 13
.How can I change my policy's investment allocations?....................... 13
.How can I access my investment in the policy?.............................. 14
.How much will JHVLICO pay when the last insured person dies?............... 16
.How can I change my policy's insurance coverage?........................... 17
.Can I cancel my policy after it's issued?.................................. 18
.Can I choose the form in which JHVLICO pays out policy proceeds?........... 18
.To what extent can JHVLICO vary the terms and conditions of its policies
in particular cases?..................................................... 19
.How will my policy be treated for income tax purposes?..................... 19
.How do I communicate with JHVLICO?......................................... 20
</TABLE>
4
<PAGE>
WHAT IS THE POLICY?
This is a so-called "survivorship" policy that provides coverage on two
insured persons. The policy's primary purpose is to provide lifetime protection
against economic loss due to the death of the last surviving 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 upon the death of the
last surviving insured person (we call this the "death benefit") may be
similarly affected.
While either of the insured persons is alive, you will have a number of
options under the policy. Here are some major ones:
. Determine when and how much you invest in the various investment
options
. Borrow or withdraw amounts you have in the investment options
. Change the beneficiary who will receive the death benefit
. Change the amount of insurance
. Turn in (i.e., "surrender") the policy for the full amount of its
surrender value
. Choose the form in which we will pay out the death benefit or other
proceeds
Most of these options are subject to limits that are explained later in this
prospectus.
WHO OWNS THE POLICY?
That's up to the person who applies for the policy. The owner of the policy
is the person who can exercise most of the rights under the policy, such as the
right to choose the investment options or the right to surrender the policy. In
many cases, the person buying the policy is also the person who will be the
owner. However, the application for a policy can name another person or entity
(such as a trust) as owner. Whenever we've used the term "you" in this
prospectus, we've assumed that the reader is the person who has whatever right
or privilege is being discussed. There may be tax consequences if the owner and
the insured person are different, so you should discuss this issue with your tax
adviser.
HOW CAN I INVEST MONEY IN THE POLICY?
Premium Payments
We call the investments you make in the policy "premiums" or "premium
payments". The amount we require as your first premium depends upon the
-----
specifics of your policy and the insured person. Except as noted below, you can
make any other premium payments you wish at any time. That's why the policy is
called a "flexible premium" policy.
5
<PAGE>
Minimum premium payment
Each premium payment must be at least $100.
Maximum premium payments
Federal tax law limits the amount of premium payments you can make relative
to the amount of your policy's insurance coverage. We will not knowingly accept
any amount by which a premium payment exceeds the maximum. If you exceed certain
other limits, the law may impose a penalty on amounts you take out of your
policy. We'll monitor your premium payments and let you know if you're about to
exceed this limit. More discussion of these tax law requirements begins on page
34. Also, we may refuse to accept any amount of an additional premium if:
. that amount of premium would increase our insurance risk exposure,
and
. the insured persons don't provide us with adequate evidence that they
continue to meet our requirements for issuing insurance.
In no event, however, will we refuse to accept any premium necessary to prevent
the policy or the guaranteed minimum death benefit feature from terminating. We
reserve the right to limit premium payments above the amount of cumulative
Guaranteed Minimum Death Benefit Premiums (whether or not the guaranteed minimum
death benefit feature described on page 7 is in effect).
Ways to pay premiums
If you pay premiums by check or money order, they must be drawn on a U.S.
bank in U.S. dollars and made payable to "John Hancock Variable Life Insurance
Company." Premiums after the first must be sent to the JHVLICO Life Servicing
Office at the appropriate address shown on page 2 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
-------
. if we agree to it, through a salary deduction plan with your employer.
You can obtain information on these other methods of premium payment by
contacting your JHVLICO representative or by contacting the JHVLICO Life
Servicing Office.
6
<PAGE>
IS THERE A MINIMUM AMOUNT I MUST INVEST?
Planned Premiums
The Policy Specifications page of your policy will show the "Planned
Premium" for the policy. You choose this amount in the policy application. The
premium reminder notice we send you is based on this amount. You will also
choose how often to pay premiums-- annually, semi-annually, quarterly or
monthly. The date on which such a payment is "due" is referred to in the policy
as a "modal processing date." However, payment of Planned Premiums is not
necessarily required. You need only invest enough to keep the policy in force
(see "Lapse and reinstatement" and "Guaranteed minimum death benefit feature"
below).
Lapse and reinstatement
Either your entire policy or the Additional Sum Insured portion of your
Total Sum Insured can terminate (i.e., "lapse") for failure to pay charges due
under the policy. If the guaranteed minimum death benefit feature is in effect,
only the Additional Sum Insured, if any, can lapse. If the guaranteed minimum
death benefit feature is not in effect, the entire policy can lapse. In either
---
case, if the policy's surrender value is not sufficient to pay the charges on a
monthly deduction date, we will notify you of how much you will need to pay to
keep any Additional Sum Insured or the policy in force. You will have a 61 day
"grace period" to make that payment. If you don't pay at least the required
amount by the end of the grace period, the Additional Sum Insured or your policy
will lapse. If your policy lapses, all coverage under the policy will cease.
Even if the policy or the Additional Sum Insured terminates in this way, you can
still reactivate (i.e., "reinstate") it within 1 year from the beginning of the
grace period. You will have to provide evidence that the surviving insured
persons still meet our requirements for issuing coverage. You will also have to
pay a minimum amount of premium and be subject to the other terms and conditions
applicable to reinstatements, as specified in the policy. If the guaranteed
minimum death benefit is not in effect and the last surviving insured person
dies during the grace period, we will deduct any unpaid monthly charges from the
death benefit. During such a grace period, you cannot make a partial withdrawal
or policy loan.
Guaranteed minimum death benefit feature
This feature is available only if the insured persons meet certain
underwriting requirements and only if you've elected death benefit Option B (see
"How much will JHVLICO pay when the last insured person dies?" on page 16). The
feature guarantees that your Basic Sum Insured will not lapse during the first
10 policy years, regardless of adverse investment performance, if both of the
following are true:
. any Additional Sum Insured under the policy is not scheduled to exceed
the Basic Sum Insured at any time (see "How much will JHVLICO pay when
the last insured person dies?" on page 16), and
. on each monthly deduction date during that 10 year period the amount
of cumulative premiums you have paid accumulated at 4% (less all
withdrawals from the policy accumulated at 4%) equals or exceeds the
sum of all
7
<PAGE>
Guaranteed Minimum Death Benefit Premiums due to date accumulated at
4%.
The Guaranteed Minimum Death Benefit Premium (or "GMDB Premium") is defined
in the policy and one-twelfth of it is "due" on each monthly deduction date. On
the application for the policy, you may elect for this feature to extend beyond
the tenth policy year. If you so elect, we will impose a special charge for this
feature after the tenth policy year. You may revoke the election at any time.
No GMDB Premium will ever be greater than the so-called "guideline premium"
for the policy as defined in Section 7702 of the Internal Revenue Code. Also,
the GMDB Premiums may change in the event of any change in the Additional Sum
Insured of the policy or any change in the death benefit option (see "How much
will JHVLICO pay when the last insured person dies?" on page 16).
If the guaranteed minimum death benefit test is not satisfied on any
monthly deduction date, we will notify you immediately and tell you how much you
will need to pay to keep the feature in effect. You will have 61 days after
default to make that payment. If you don't pay at least the required amount by
the end of that period, the feature will lapse. The feature may be reinstated in
accordance with the terms of the policy within 5 years after the monthly
deduction date on which default occurred. If it is reinstated more than 1 year
after such monthly deduction date, we will require evidence that the surviving
insured persons still meet our requirements for issuing coverage. We may refuse
to reinstate the feature more than once during the life of the policy.
The guaranteed minimum death benefit feature applies only to the Basic Sum
Insured. It does not apply to any amount of Additional Sum Insured (see "How
---
much will JHVLICO pay when the last insured person dies?" on page 16).
If there are monthly charges that remain unpaid because of this feature, we
will deduct such charges when there is sufficient surrender value to pay them.
HOW WILL THE VALUE OF MY INVESTMENT IN THE POLICY CHANGE OVER TIME?
From each premium payment you make, we deduct the charges described under
"Deductions from premium payments" below. We invest the rest in the investment
options you've elected. Special investment rules apply to premiums processed
prior to the 20th day after your policy becomes effective. (See "Commencement of
investment performance" beginning on page 31.)
Over time, the amount you've invested in any variable investment option
will increase or decrease the same as if you had invested the same amount
directly in the corresponding fund of the Trust and had reinvested all fund
dividends and distributions in additional fund shares; except that we will
deduct certain additional charges which will reduce your account value. We
describe these charges under "What charges will JHVLICO deduct from my
investment in the policy?" below.
8
<PAGE>
The amount you've invested in the fixed investment option will earn
interest at a rate we declare from time to time. We guarantee that this rate
will be at least 4%. If you want to know what the current declared rate is, just
call or write to us. The current declared rate will also appear in the annual
statement we will send you. Amounts you invest in the fixed investment option
will not be subject to the mortality and expense risk charge described on page
---
10. Otherwise, the charges applicable to the fixed investment option are the
same as those applicable to the variable investment options.
At any time, the "account value" of your policy is equal to:
. the amount you invested,
. plus or minus the investment experience of the investment options
you've chosen,
. minus all charges we deduct, and
. minus all withdrawals you have made.
If you take a loan on the policy, however, your account value will be computed
somewhat differently. This is discussed beginning on page 15.
WHAT CHARGES WILL JHVLICO DEDUCT FROM MY INVESTMENT IN THE POLICY?
Deductions from premium payments
. Premium tax charge - A charge to cover state premium taxes we currently expect
------------------
to pay, on average. This charge is currently 2.35% of each premium.
. DAC tax charge - A charge to cover the increased Federal income tax burden
--------------
that we currently expect will result from receipt of premiums. This charge is
currently 1.25% of each premium.
. Premium processing charge - A charge to help defray our administrative costs.
-------------------------
This charge is 1.25% of each premium. For policies with a Total Sum Insured of
$5 million or more, this charge will be reduced to as low as .50%.
. Sales charge - A charge to help defray our sales costs. The charge for
------------
premiums paid in the first policy year is 30% of premiums paid up to the
Target Premium, and 3.5% of premiums paid in excess of the Target Premium. The
charge for premiums paid after the first policy year up to the Target Premium
is 15% in policy years 2 through 5, 10% in policy years 6 through 10, up to 4%
(currently 3%) in policy years 11 through 20, and up to 3% (currently 0%)
thereafter. The charge for premiums paid after the first policy year in excess
of the Target Premium is 3.5% in policy years 2 through 10, 3% in policy years
11 through 20, and up to 3% (currently 0%) thereafter. If the younger of the
insured persons is age 71 or older when the policy is issued, there will be no
sales charges deducted from premiums paid after the eleventh policy year.
Because policies of this type were first offered in 1993, the foregoing waiver
and the lower current rates after policy year 10 are not yet applicable to any
policy. The "Target Premium" is
9
<PAGE>
determined at the time the policy is issued and will appear in the "Policy
Specifications" section of the policy.
. Optional benefits charge - A charge imposed for certain optional insurance
------------------------
benefits added to the policy by means of a rider.
Deductions from account value
. Issue charge - A monthly charge to help defray our administrative costs. This
------------
charge has two parts: (1) a flat dollar amount of $55.55 deducted only during
the first five policy years, and (2) a charge of 2c per $1,000 of Total Sum
Insured at issue that is deducted only during the first three policy years.
The second part of this monthly charge is guaranteed not to exceed $200.
. Administrative charge - A monthly charge to help defray our administrative
---------------------
costs. This charge also has two parts: (1) a flat dollar charge of up to $10
(currently $7.50), and (2) a charge of 3c per $1,000 of Total Sum Insured at
issue (currently 1c per $1,000 of Total Sum Insured at issue). However, for
policies with a Total Sum Insured at issue of $5 million or more, the first
part of this charge is currently zero.
. Insurance charge - A monthly charge for the cost of insurance. To determine
----------------
the charge, we multiply the amount of insurance for which we are at risk by a
cost of insurance rate. The rate is derived from an actuarial table. The table
in your policy will show the maximum cost of insurance rates. The cost of
-------
insurance rates that we currently apply are generally less than the maximum
rates. We will review the cost of insurance rates at least every 5 years and
may change them from time to time. However, those rates will never be more
than the maximum rates shown in the policy. The table of rates we use will
depend on the insurance risk characteristics and (usually) gender of each of
the insured persons, the Total Sum Insured and the length of time the policy
has been in effect. Regardless of the table used, cost of insurance rates
generally increase each year that you own your policy, as each insured
person's attained age increases. (An insured person's "attained age" on any
date is his or her age on the birthday nearest that date.) The insurance
charge is not affected by the death of the first insured person to die.
. Extra mortality charge - A monthly charge specified in your policy for
----------------------
additional mortality risk if either of the insured persons is subject to
certain types of special insurance risk.
. M &E charge - A daily charge for mortality and expense risks we assume. This
-----------
charge is deducted from the variable investment options. It does not apply to
the fixed investment option. We guarantee that this charge will never exceed
an effective annual rate of .90%. The effective annual rate will vary
depending upon the Total Sum Insured at issue. The current charge levels are
as follows: .625% for a Total Sum Insured of at least $500,000 but less than
$5 million, .575% for a Total Sum Insured of at least $5 million but less than
$15 million, and .525% for a Total Sum Insured of $15 million or more.
10
<PAGE>
. Guaranteed minimum death benefit charge - A monthly charge beginning in the
---------------------------------------
eleventh policy year if the guaranteed minimum death benefit feature is
elected to extend beyond the first ten policy years. This charge is currently
1(cent) per $1,000 of Basic Sum Insured at issue and is guaranteed not to
exceed 3(cent) per $1,000 of Basic Sum Insured at issue. Because policies of
this type were first offered in 1993, this charge is not yet applicable to any
policy at the current rate.
. Policy split option rider charge - A monthly charge if this rider is elected
--------------------------------
at the time of application for the policy. The charge is 3(cent) per $1,000 of
current Total Sum Insured.
. Optional benefits charge - Monthly charges for certain other optional
------------------------
insurance benefits added to the policy by means of a rider. We currently offer
a number of such optional riders, such as the accidental death benefit rider.
. Partial withdrawal charge - A charge for each partial withdrawal of account
-------------------------
value to compensate us for the administrative expenses of processing the
withdrawal. The charge is equal to the lesser of $20 or 2% of the withdrawal
amount.
WHAT CHARGES WILL THE TRUST DEDUCT FROM MY INVESTMENT IN THE POLICY?
The Trusts must pay investment management fees and other operating
expenses. These fees and expenses are different for each fund 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 following figures for the funds are based on historical fund expenses,
as a percentage (rounded to two decimal places) of each fund's average daily net
assets for 1999, except as indicated in the Notes appearing at the end of this
table. Expenses of the funds are not fixed or specified under the terms of the
policy, and those expenses may vary from year to year.
<TABLE>
<CAPTION>
Investment Distribution and Other Operating Total Fund Other Operating
Management Service Expenses With Operating Expenses Absent
Fund Name Fee (12b-1) Fees Reimbursement Expenses Reimbursement
--------- ---------- ---------------- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
JOHN HANCOCK VARIABLE SERIES TRUST I
(NOTE 1):
Managed................................. 0.32% N/A 0.03% 0.35% 0.03%
Growth & Income......................... 0.25% N/A 0.03% 0.28% 0.03%
Equity Index............................ 0.14% N/A 0.00% 0.14% 0.08%
Large Cap Value......................... 0.74% N/A 0.10% 0.84% 0.11%
American Leaders Large Cap Value........ 0.80% N/A 0.10% 0.90% N/A
Large Cap Growth........................ 0.36% N/A 0.03% 0.39% 0.03%
Large Cap Aggressive Growth............. 0.98% N/A 0.10% 1.08% 0.19%
Mid Cap Value........................... 0.80% N/A 0.10% 0.90% 0.12%
Mid Cap Growth.......................... 0.82% N/A 0.10% 0.92% 0.11%
Fundamental Mid Cap Growth.............. 0.85% N/A 0.10% 0.95% 0.24%
Real Estate Equity...................... 0.60% N/A 0.10% 0.70% 0.10%
Small/Mid Cap CORE...................... 0.80% N/A 0.10% 0.90% 0.66%
Small/Mid Cap Growth.................... 0.75% N/A 0.10% 0.85% 0.10%
Small Cap Value......................... 0.80% N/A 0.10% 0.90% 0.16%
Small Cap Growth........................ 0.75% N/A 0.10% 0.85% 0.14%
Global Balanced *....................... 0.85% N/A 0.10% 0.95% 0.46%
International Equity Index.............. 0.16% N/A 0.10% 0.26% 0.22%
International Opportunities............. 0.87% N/A 0.10% 0.97% 0.29%
Emerging Markets Equity................. 1.27% N/A 0.10% 1.37% 2.17%
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Investment Distribution and Other Operating Total Fund Other Operating
Management Service Expenses With Operating Expenses Absent
Fund Name Fee (12b-1) Fees Reimbursement Expenses Reimbursement
--------- ---------- ---------------- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Short-Term Bond......................... 0.30% N/A 0.10% 0.40% 0.13%
Bond Index.............................. 0.15% N/A 0.10% 0.25% 0.20%
Active Bond *........................... 0.25% N/A 0.03% 0.28% 0.03%
Core Bond............................... 0.70% N/A 0.10% 0.80% N/A
Global Bond............................. 0.69% N/A 0.10% 0.79% 0.15%
High Yield Bond......................... 0.65% N/A 0.10% 0.75% 0.39%
Money Market............................ 0.25% N/A 0.06% 0.31% 0.06%
AIM VARIABLE INSURANCE FUNDS, INC.:
AIM V.I. Value.......................... 0.61% N/A 0.15% 0.76% 0.15%
VARIABLE INSURANCE PRODUCTS FUND -
SERVICE CLASS (NOTE 2):
Fidelity VIP Growth..................... 0.58% 0.10% 0.07% 0.75% 0.09%
VARIABLE INSURANCE PRODUCTS FUND II -
SERVICE CLASS (NOTE 2):
Fidelity VIP Contrafund(R).............. 0.58% 0.10% 0.07% 0.75% 0.10%
FRANKLIN TEMPLETON VARIABLE INSURANCE
PRODUCTS TRUST - CLASS 2
SHARES (NOTE 3):
Templeton International Securities...... 0.69% 0.25% 0.19% 1.13% 0.19%
JANUS ASPEN SERIES - SERVICE SHARES
CLASS (NOTE 4):
Janus Aspen Global Technology........... 0.65% 0.25% 0.13% 1.03% 0.13%
Janus Aspen Worldwide Growth............ 0.65% 0.25% 0.05% 0.95% 0.05%
MFS VARIABLE INSURANCE TRUST
(NOTE 5):
MFS New Discovery....................... 0.90% N/A 0.17% 1.07% 1.59%
</TABLE>
NOTES TO FUND EXPENSE TABLE
(1) John Hancock Variable Series Trust I funds' percentages reflect management
fees and other fund expenses based on the allocation methodology and
expense reimbursement policy adopted April 23, 1999. Under the policy,
John Hancock Life Insurance Company voluntarily reimburses a fund when the
fund's "other fund expenses" exceed 0.10% of the fund's average daily net
assets (0.00% for Equity Index). The percentages for the American Leaders
Large Cap Value Fund and the Core Bond Fund are estimates because the
funds were not in operation prior to the date of this prospectus.
* Global Balanced was formerly "International Balanced" and Active Bond was
formerly "Sovereign Bond".
(2) A portion of the brokerage commissions that certain of the Fidelity VIP
funds pay was used to reduce fund expenses. In addition, through
arrangements with certain funds' custodian, credits realized as a result
of uninvested cash balances were used to reduce a portion of each
applicable fund's expenses. Without these reductions, the operating
expenses of the funds would have been higher, as shown in the last column
of this table.
(3) On February 8, 2000, shareholders of each fund approved a merger and
reorganization that combined the Templeton International Equity Fund with
the Templeton International Securities Fund, effective May 1, 2000.
Shareholders of the Templeton International Securities Fund had approved
new
12
<PAGE>
management fees, which apply to the combined funds effective May 1, 2000.
The table shows restated total expenses for the fund based on the new fees
and the assets, as of December 31, 1999, of the Templeton International
Securities Fund. However, if the table reflected both the new fees and the
combined assets of the Templeton International Equity Fund and the
Templeton International Securities Fund, the estimated expenses for the
two funds combined after May 1, 2000 would be: Management Fees 0.65%,
Distribution and Service Fees 0.25%, Other Expenses 0.20%, and Total Fund
Operating Expenses 1.10%.
(4) The percentages for the new Service Shares Class of the Janus Aspen Global
Technology Fund and the Janus Aspen Worldwide Growth Fund are estimates
because the Service Shares Class was not in operation in 1999. All such
estimates have been made without regard to the effect of any expense
offset arrangements.
(5) MFS Variable Insurance Trust funds have an expense offset arrangement
which reduces each fund's custodian fee based upon the amount of cash
maintained by the fund with its custodian and dividend disbursing agent.
Each fund may enter into other such arrangements and directed brokerage
arrangements, which would also have the effect of reducing the fund's
expenses. Expenses do not take into account these expense reductions, and
are therefore higher than the actual expenses of the fund. MFS Investment
Management(R) (also doing business as Massachusetts Financial Services
Company) has contractually agreed to bear expense for the New Discovery
Fund, subject to reimbursement by the fund, such that such fund's "other
fund expenses" shall not exceed 0.15% of the average daily net assets of
the fund during the current fiscal year.
WHAT OTHER CHARGES COULD JHVLICO IMPOSE IN THE FUTURE?
Except for the DAC tax charge, we currently make no charge for our Federal
income taxes. However, if we incur, or expect to incur, additional income taxes
attributable to any subaccount of the Account or this class of policies in
future years, we reserve the right to make a charge for such taxes. Any such
charge would reduce what you earn on any affected investment options. However,
we expect that no such charge will be necessary.
We also reserve the right to increase the premium tax charge and the DAC
tax charge in order to correspond, respectively, with changes in the state
premium tax levels and with changes in the Federal income tax treatment of the
deferred acquisition costs for this type of policy.
Under current laws, we may incur state and local taxes (in addition to
premium taxes) in several states. At present, these taxes are not significant.
If there is a material change in applicable state or local tax laws, we may make
charges for such taxes.
HOW CAN I CHANGE MY POLICY'S INVESTMENT ALLOCATIONS?
Future premium payments
At any time, you may change the investment options in which future premium
payments will be invested. You make the original allocation in the application
for the policy. The percentages you select must be in whole numbers and must
total 100%.
13
<PAGE>
Transfers of existing account value
You may also transfer your existing account value from one investment
option to another. To do so, you must tell us how much to transfer, either as a
whole number percentage or as a specific dollar amount.
Under our current rules, you can make transfers out of any variable
investment option anytime you wish. However, transfers out of the fixed
investment option are currently subject to the following restrictions:
. You can only make such a transfer once a year and only during the 31 day
period following your policy anniversary.
. We must receive the request for such a transfer during the period beginning
60 days prior to the policy anniversary and ending 30 days after it.
. The most you can transfer at any one time is the greater of $500 or 20% of
the assets in your fixed investment option.
We reserve the right to impose a minimum amount limit on transfers out of
the fixed investment option. We also reserve the right to impose limits on the
number and frequency of transfers out of the variable investment options.
Dollar cost averaging
This is a program of automatic monthly transfers out of the Money Market
investment option into one or more of the other variable investment options. You
choose the investment options and the dollar amount and timing of the transfers.
The program is designed to reduce the risks that result from market
fluctuations. It does this by spreading out the allocation of your money to
investment options over a longer period of time. This allows you to reduce the
risk of investing most of your money at a time when market prices are high.
Obviously, the success of this strategy depends on market trends and is not
guaranteed.
HOW CAN I ACCESS MY INVESTMENT IN THE POLICY?
Full surrender
You may surrender your policy in full at any time. If you do, we will pay
you the account value less any policy loans plus, if surrender occurs in the
second policy year, a refund of a certain portion of sales charges equal to 5%
of premiums paid in the second policy year up to the Target premium. This is
called your "surrender value." You must return your policy when you request a
full surrender.
Partial withdrawals
You may make a partial withdrawal of your surrender value at any time. Each
partial withdrawal must be at least $1,000. There is a charge (usually $20) for
each partial withdrawal. We will automatically reduce the account value of your
policy by the amount of the withdrawal and the related charge. Each investment
option will be reduced in the same proportion as the account value is then
allocated among them. We will not permit a partial withdrawal if it would
14
<PAGE>
cause your account value to fall below 3 months' worth of monthly charges (see
"Deductions from account value" on page 10). We also reserve the right to refuse
any partial withdrawal that would cause the policy's Total Sum Insured to fall
below $500,000. Any partial withdrawal (other than a Terminated ASI Withdrawal
Amount, as described below) will reduce your death benefit under any of the
death benefit options (see "How much will JHVLICO pay when the last insured
person dies?" on page 16 and under the guaranteed death benefit feature (see
page 7). Under Option A, such a partial withdrawal will reduce the Total Sum
Insured. Under Option B, such a partial withdrawal will reduce your account
value. Under the guaranteed death benefit feature, such a partial withdrawal
will reduce the Basic Sum Insured. A "Terminated ASI Withdrawal Amount" is any
partial withdrawal made while there is an Additional Sum Insured under the
policy that later lapses as described on page 7. The total of all Terminated ASI
Withdrawal Amounts cannot exceed the Additional Sum Insured in effect
immediately before the Additional Sum Insured lapses.
Policy loans
You may borrow from your policy at any time by completing a form
satisfactory to us or, if the telephone transaction authorization form has been
completed, by telephone. However, you can't borrow from your policy during a
"grace period" (see "Lapse and reinstatement" on page 7). The maximum amount you
can borrow is 90% of your surrender value.
The minimum amount of each loan is $1,000. The interest charged on any loan
is an effective annual rate of 5% in the first 20 policy years and 4.5%
thereafter. Accrued interest will be added to the loan daily and will bear
interest at the same rate as the original loan amount. The amount of the loan is
deducted from the investment options in the same proportion as the account value
is then allocated among them and is placed in a special loan account. This
special loan account will earn interest at an effective annual rate of 4.0%.
However, if we determine that a loan will be treated as a taxable distribution
because of the differential between the loan interest rate and the rate being
credited on the special loan account, we reserve the right to decrease the rate
credited on the special loan account to a rate that would, in our reasonable
judgement, result in the transaction being treated as a loan under Federal tax
law.
You can repay all or part of a loan at any time. Each repayment will be
allocated among the investment options as follows:
. The same proportionate part of the loan as was borrowed from the fixed
investment option will be repaid to the fixed investment option.
. The remainder of the repayment will be allocated among the investment
options in the same way a new premium payment would be allocated.
If you want a payment to be used as a loan repayment, you must include
instructions to that effect. Otherwise, all payments will be assumed to be
premium payments.
15
<PAGE>
HOW MUCH WILL JHVLICO PAY WHEN THE LAST 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 persons. This is called
the "Total Sum Insured." Total Sum Insured is composed of the Basic Sum Insured
and any Additional Sum Insured you elect. The only limitation on how much
Additional Sum Insured you can have is that it cannot exceed 400% of the Basic
Sum Insured. There are a number of factors you should consider in determining
whether to elect coverage in the form of Basic Sum Insured or in the form of
Additional Sum Insured. These factors are discussed under "Basic Sum Insured vs.
Additional Sum Insured" on page 30.
When the last of the two insured persons dies, we will pay the death
benefit minus any outstanding loans. There are two ways of calculating the death
benefit. You choose which one you want in the application. The two death benefit
options are:
. Option A - The death benefit will equal the greater of (1) the Total
Sum Insured plus any optional extra death benefit, if elected (as
described below), or (2) the minimum insurance amount (as described
below).
. Option B - The death benefit will equal the greater of (1) the Total
Sum Insured plus your policy's account value on the date of death of
the last surviving insured person, or (2) the minimum insurance
amount.
For the same premium payments, the death benefit under Option B will tend
to be higher than the death benefit under Option A. On the other hand, the
monthly insurance charge will be higher under Option B to compensate us for the
additional insurance risk. Because of that, the account value will tend to be
higher under Option A than under Option B for the same premium payments.
Optional extra death benefit feature
If you elect the Option A death benefit, you may also elect this optional
extra death benefit feature. The optional extra death benefit is determined on
each annual processing date as follows:
. First, we multiply your account value by a factor specified in the
policy. The factor is based on the age of the younger insured person.
. We will then subtract your Total Sum Insured.
Any excess is the optional extra death benefit for the remainder of that
policy year. This feature may result in the Option A death benefit being higher
than the minimum insurance amount. Although there is no special charge for this
feature, your monthly insurance charge will be based on that higher death
benefit amount. Election of this feature must be made in the application for the
policy. You may revoke that election at any time, but there may be adverse tax
consequences if you do. An "annual processing date" is the first business day of
a policy year.
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<PAGE>
The minimum insurance amount
In order for a policy to qualify as life insurance under Federal tax law,
there has to be a minimum amount of insurance in relation to account value. For
policies of this type, we will apply the "cash value accumulation test" as
described in Federal tax law. Under the cash value accumulation test, we compute
the minimum insurance amount on each monthly deduction date by multiplying the
account value on that date by the death benefit factor applicable on that date.
The death benefit factors are derived by applying the cash value accumulation
test. The death benefit factor decreases for each year the policy remains in
effect. A table showing the factor for each policy year will appear in the
policy.
Policy split option
At the time of policy issue, you may elect a rider that will permit the
Total Sum Insured to be evenly split into two separate policies, one for each
insured person, but only if the insured persons get divorced or certain Federal
tax law changes occur. The rider may be cancelled at any time, but it will
automatically terminate on the date of death of the first insured person to die
or on the policy anniversary nearest the older insured person's 80th birthday,
whichever is earlier. A policy split could have adverse tax consequences, so
check with your tax adviser before electing this rider.
HOW CAN I CHANGE MY POLICY'S INSURANCE COVERAGE?
Increase in coverage
The Basic Sum Insured generally cannot be increased after policy issue.
After the first policy year, you may request an increase in the Additional Sum
Insured. However, you will have to provide us with evidence that the surviving
insured persons still meet our requirements for issuing insurance coverage. As
to when an approved increase would take effect, see "Effective date of other
policy transactions" on page 32.
Decrease in coverage
The Basic Sum Insured generally cannot be decreased after policy issue.
After the first policy year, you may request a reduction in the Additional Sum
Insured at any time, but only if:
. the remaining Total Sum Insured will be at least $500,000, and
. the remaining Total Sum Insured will at least equal the minimum
required by the tax laws to maintain the policy's life insurance
status.
We may refuse any decrease in Additional Sum Insured if it would cause the
death benefit to reflect an increase pursuant to the optional extra death
benefit feature. As to when an approved decrease would take effect, see
"Effective date of other policy transactions" on page 32.
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<PAGE>
Change of death benefit option
Changes of death benefit option are not permitted under our current
administrative rules. We expect to be able to allow a change from Option B to
Option A in the near future, but that is not guaranteed.
Tax consequences
Please read "Tax considerations" starting on page 34 to learn about
possible tax consequences of changing your insurance coverage under the policy.
CAN I CANCEL MY POLICY AFTER IT'S ISSUED?
You have the right to cancel your policy within the latest of the following
periods:
. 10 days after you receive it (this period may be longer in some
states);
. 10 days after mailing by JHVLICO of the Notice of Withdrawal Right;
or
. 45 days after the date Part A of the application has been completed.
This is often referred to as the "free look" period. To cancel your policy,
simply deliver or mail the policy to JHVLICO at one of the addresses shown on
page 2, or to the JHVLICO representative who delivered the policy to you.
In most states, you will receive a refund of any premiums you've paid. In
some states, the refund will be your account value on the date of cancellation
plus all charges deducted by JHVLICO or the Trust prior to that date. The date
of cancellation will be the date of such mailing or delivery.
CAN I CHOOSE THE FORM IN WHICH JHVLICO PAYS OUT POLICY PROCEEDS?
Choosing a payment option
You may choose to receive proceeds from the policy as a single sum. This
includes proceeds that become payable because of death or full surrender.
Alternatively, you can elect to have proceeds of $1,000 or more applied to any
of a number of other payment options, including the following:
. Option 1 - Proceeds left with us to accumulate with interest
. Option 2A - Equal monthly payments of a specified amount until all
proceeds are paid out
. Option 2B - Equal monthly payments for a specified period of time
. Option 3 - Equal monthly payments for life, but with payments
guaranteed for a specific number of years
18
<PAGE>
. Option 4 - Equal monthly payments for life with no refund
. Option 5 - Equal monthly payments for life with a refund if all of
the proceeds haven't been paid out
You cannot choose an option if the monthly payments under the option would
be less than $50. We will issue a supplementary agreement when the proceeds are
applied to any alternative payment option. That agreement will spell out the
terms of the option in full. We will credit interest on each of the above
options. For Options 1 and 2A, the interest will be at least an effective annual
rate of 3 1/2%.
Changing a payment option
You can change the payment option at any time before the proceeds are
payable. If you haven't made a choice, the payee of the proceeds has a
prescribed period in which he or she can make that choice.
Tax impact
There may be tax consequences to you or your beneficiary depending upon
which payment option is chosen. You should consult with a qualified tax adviser
before making that choice.
TO WHAT EXTENT CAN JHVLICO VARY THE TERMS AND CONDITIONS OF ITS POLICIES IN
PARTICULAR CASES?
Listed below are some variations we can make in the terms of our policies.
Any variation will be made only in accordance with uniform rules that we apply
fairly to all of our customers.
State law insurance requirements
Insurance laws and regulations apply to JHVLICO in every state in which its
policies are sold. As a result, various terms and conditions of your insurance
coverage may vary from the terms and conditions described in this prospectus,
depending upon where you reside. These variations will be reflected in your
policy or in endorsements attached to your policy.
Variations in expenses or risks
We may vary the charges and other terms of our policies where special
circumstances result in sales or administrative expenses, mortality risks or
other risks that are different from those normally associated with the policies.
These include the type of variations discussed under "Reduced charges for
eligible classes" on page 34. No variation in any charge will exceed any maximum
stated in this prospectus with respect to that charge.
HOW WILL MY POLICY BE TREATED FOR INCOME TAX PURPOSES?
Generally, death benefits paid under policies such as yours are not subject
to income tax. Earnings on your account value are not subject to income tax as
long as we don't pay them out to you. If we do pay out any amount of your
account value upon surrender or partial withdrawal,
19
<PAGE>
all or part of that distribution should generally be treated as a return of the
premiums you've paid and should not be subject to income tax. Amounts you borrow
are generally not taxable to you.
However, some of the tax rules change if your policy is found to be a
"modified endowment contract." This can happen if you've paid more than a
certain amount of premiums that is prescribed by the tax laws. Additional taxes
and penalties may be payable for policy distributions of any kind.
For further information about the tax consequences of owning a policy,
please read "Tax considerations" beginning on page 34.
HOW DO I COMMUNICATE WITH JHVLICO?
General Rules
You should mail or express all checks and money orders for premium payments
and loan repayments to the JHVLICO Life Servicing Office at the appropriate
address shown on page 2.
Certain requests must be made in writing and be signed and dated by you.
They include the following:
. loans, surrenders or partial withdrawals
. transfers of account value among investment options
. change of allocation among investment options for new premium
payments
. change of death benefit option
. increase or decrease in Total Sum Insured
. change of beneficiary
. election of payment option for policy proceeds
. tax withholding elections
. election of telephone transaction privilege
You should mail or express these requests to the JHVLICO Life Servicing Office
at the appropriate address shown on page 2. You should also send notice of an
insured person's death and related documentation to the JHVLICO Life Servicing
Office. We don't consider that we've "received" any communication until such
time as it has arrived at the proper place and in the proper and complete form.
We have special forms that should be used for a number of the requests
mentioned above. You can obtain these forms from the JHVLICO Life Servicing
Office or your JHVLICO
20
<PAGE>
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 persons or entities that use programmed or 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.
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<PAGE>
ILLUSTRATION OF DEATH BENEFITS, ACCOUNT VALUES, SURRENDER VALUES AND
ACCUMULATED PREMIUMS
The following tables illustrate the changes in death benefit, account value
and surrender value of the policy under certain hypothetical circumstances that
we assume solely for this purpose. Each table separately illustrates the
operation of a policy for specified issue ages, premium payment schedule and
Total Sum Insured. The amounts shown are for the end of each policy year and
assume that all of the account value is invested in funds that achieve
investment returns at constant annual rates of 0%, 6% and 12% (i.e., before any
fees or expenses deducted from Trust assets). After the deduction of average
fees and expenses at the Trust level (as described below) the corresponding net
annual rates of return would be -.77%, 5.18% and 11.14%. Investment return
reflects investment income and all realized and unrealized capital gains and
losses. The tables assume annual Planned Premiums that are paid at the beginning
of each policy year for a male insured person who is 55 years old and a
preferred underwriting risk when the policy is issued and for a female insured
person who is 50 years old and a preferred underwriting risk when the policy is
issued.
Tables are provided for each of the two death benefit options. The tables
headed "Current Charges" assume that the current rates for all charges deducted
by JHVLICO will apply in each year illustrated. The tables headed "Maximum
Charges" are the same, except that the maximum permitted rates for all years are
used for all charges. The tables do not reflect any charge that we reserve the
right to make but are not currently making. The tables assume that the
guaranteed minimum death benefit has not been elected beyond the tenth policy
year and that no Additional Sum Insured or optional rider benefits have been
elected.
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 .66%, and (2) an assumed average asset charge for all
other Trust operating expenses equivalent to an effective annual rate of .11%.
These rates are the arithmetic average for all funds of the Trust. In other
words, they are based on the hypothetical assumption that policy account values
are allocated equally among the variable investment options. The actual rates
associated with any policy will vary depending upon the actual allocation of
policy values among the investment options. The charge shown above for all other
Trust operating expenses reflects reimbursements to certain funds as described
in the footnotes to the table beginning on page 11. We currently expect those
reimbursement arrangements to continue indefinitely, but that is not guaranteed.
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 Planned Premiums were
invested to earn interest, after taxes, at 5% compounded annually. This is not a
policy value. It is included for comparison purposes only.
Because your circumstances will no doubt differ from those in the
illustrations that follow, values under your policy will differ, in most cases
substantially. Upon request, we will furnish you with a comparable illustration
reflecting your proposed insured persons' issue ages, sex and underwriting risk
classification, and the Total Sum Insured and annual Planned Premium amount
requested.
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<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE SURVIVORSHIP
$500,000 TOTAL SUM INSURED
MALE, ISSUE AGE 55, PREFERRED UNDERWRITING CLASS
FEMALE, ISSUE AGE 50, PREFERRED UNDERWRITING CLASS
OPTION A DEATH BENEFIT
NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH POLICY YEAR
PLANNED PREMIUM: $8,156*
USING CURRENT CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
------------------------------ -------------------------------
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at ------------------------------ -------------------------------
Year 5% annual interest 0% 6% 12% 0% 6% 12%
------- ------------------ -------- -------- ---------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 8,564 $500,000 $500,000 $ 500,000 $ 4,295 $ 4,579 $ 4,863
2 17,556 500,000 500,000 500,000 10,130 11,037 11,978
3 26,998 500,000 500,000 500,000 15,074 16,954 18,977
4 36,912 500,000 500,000 500,000 20,469 23,687 27,283
5 47,322 500,000 500,000 500,000 25,787 30,723 36,455
6 58,252 500,000 500,000 500,000 32,092 39,183 47,734
7 69,728 500,000 500,000 500,000 38,304 48,023 60,188
8 81,779 500,000 500,000 500,000 44,423 57,255 73,934
9 94,432 500,000 500,000 500,000 50,446 66,896 89,107
10 107,717 500,000 500,000 500,000 56,372 76,960 105,851
11 121,667 500,000 500,000 500,000 62,845 88,147 125,047
12 136,314 500,000 500,000 500,000 69,201 99,815 146,225
13 151,694 500,000 500,000 500,000 75,436 111,982 169,590
14 167,843 500,000 500,000 500,000 81,539 124,660 195,364
15 184,799 500,000 500,000 500,000 87,501 137,863 223,797
16 202,603 500,000 500,000 500,000 93,307 151,604 255,165
17 221,297 500,000 500,000 538,886 98,940 165,895 289,744
18 240,926 500,000 500,000 590,546 104,380 180,746 327,832
19 261,536 500,000 500,000 645,649 109,603 196,168 369,763
20 283,177 500,000 500,000 704,522 114,576 212,171 415,896
25 408,735 500,000 500,000 1,072,595 135,791 303,048 726,339
30 568,983 500,000 546,346 1,613,005 144,130 412,603 1,218,149
35 773,504 500,000 659,284 2,421,163 127,120 540,278 1,984,122
</TABLE>
* The illustrations assume that Planned Premiums equal to the Target Premium are
paid at the start of each Policy Year. The Death Benefit and Surrender Value
will differ if premiums are paid in different amounts or frequencies, if
policy loans are taken, or if Additional Sum Insured, Guaranteed Minimum Death
Benefit after the tenth Policy Year, or optional rider benefits are elected.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY THE OWNER. THE
DEATH BENEFIT AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT RETURN AVERAGE 0%, 6%, OR 12% OVER
A PERIOD OF YEARS, BUT ALSO FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
23
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE SURVIVORSHIP
$500,000 TOTAL SUM INSURED
MALE, ISSUE AGE 55, PREFERRED UNDERWRITING CLASS
FEMALE, ISSUE AGE 50, PREFERRED UNDERWRITING CLASS
OPTION B DEATH BENEFIT
NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH POLICY YEAR
PLANNED PREMIUM: $8,156*
USING CURRENT CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
------------------------------ -------------------------------
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at ------------------------------ -------------------------------
Year 5% annual interest 0% 6% 12% 0% 6% 12%
------- ------------------ -------- -------- ---------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 8,564 $504,294 $504,579 $ 504,863 $ 4,294 $ 4,579 $ 4,863
2 17,556 509,721 510,629 511,569 10,129 11,036 11,977
3 26,998 515,072 516,952 518,975 15,072 16,952 18,975
4 36,912 520,466 523,683 527,279 20,466 23,683 27,279
5 47,322 525,782 530,717 536,447 25,782 30,717 36,447
6 58,252 532,084 539,174 547,722 32,084 39,174 47,722
7 69,728 538,293 548,008 560,169 38,293 48,008 60,169
8 81,779 544,407 557,234 573,906 44,407 57,234 73,906
9 94,432 550,424 566,865 589,064 50,424 66,865 89,064
10 107,717 556,341 576,915 605,786 56,341 76,915 105,786
11 121,667 562,804 588,086 624,955 62,804 88,086 124,955
12 136,314 569,147 599,730 646,093 69,147 99,730 146,093
13 151,694 575,360 611,859 669,393 75,360 111,859 169,393
14 167,843 581,430 624,480 695,066 81,430 124,480 195,066
15 184,799 587,344 637,598 723,342 87,344 137,598 223,342
16 202,603 593,082 651,214 754,471 93,082 151,214 254,471
17 221,297 598,621 665,322 788,723 98,621 165,322 288,723
18 240,926 603,929 679,912 826,387 103,929 179,912 326,387
19 261,536 608,972 694,965 867,780 108,972 194,965 367,780
20 283,177 613,704 710,451 913,238 113,704 210,451 413,238
25 408,735 632,169 794,475 1,217,464 132,169 294,475 717,464
30 568,983 632,781 880,391 1,695,715 132,781 380,391 1,195,715
35 773,504 599,160 948,493 2,436,768 99,160 448,493 1,936,768
</TABLE>
* The illustrations assume that Planned Premiums equal to the Target Premium are
paid at the start of each Policy Year. The Death Benefit and Surrender Value
will differ if premiums are paid in different amounts or frequencies, if
policy loans are taken, or if Additional Sum Insured, Guaranteed Minimum Death
Benefit after the tenth Policy Year, or optional rider benefits are elected.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY THE OWNER. THE
DEATH BENEFIT AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT RETURN AVERAGE 0%, 6%, OR 12% OVER
A PERIOD OF YEARS, BUT ALSO FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
24
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE SURVIVORSHIP
$500,000 TOTAL SUM INSURED
MALE, ISSUE AGE 55, PREFERRED UNDERWRITING CLASS
FEMALE, ISSUE AGE 50, PREFERRED UNDERWRITING CLASS
OPTION A DEATH BENEFIT
NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH POLICY YEAR
PLANNED PREMIUM: $8,156*
USING MAXIMUM CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
------------------------------ ------------------------------
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at ------------------------------ ------------------------------
Year 5% annual interest 0% 6% 12% 0% 6% 12%
------ ------------------ -------- -------- ---------- ------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 8,564 $500,000 $500,000 $ 500,000 $ 4,133 $ 4,411 $ 4,690
2 17,556 500,000 500,000 500,000 9,771 10,655 11,572
3 26,998 500,000 500,000 500,000 14,462 16,284 18,248
4 36,912 500,000 500,000 500,000 19,540 22,643 26,119
5 47,322 500,000 500,000 500,000 24,467 29,204 34,719
6 58,252 500,000 500,000 500,000 30,295 37,071 45,264
7 69,728 500,000 500,000 500,000 35,933 45,178 56,786
8 81,779 500,000 500,000 500,000 41,366 53,520 69,370
9 94,432 500,000 500,000 500,000 46,582 62,090 83,114
10 107,717 500,000 500,000 500,000 51,559 70,881 98,120
11 121,667 500,000 500,000 500,000 56,759 80,387 115,042
12 136,314 500,000 500,000 500,000 61,664 90,106 133,522
13 151,694 500,000 500,000 500,000 66,238 100,013 153,703
14 167,843 500,000 500,000 500,000 70,436 110,077 175,745
15 184,799 500,000 500,000 500,000 74,204 120,260 199,827
16 202,603 500,000 500,000 500,000 77,484 130,523 226,165
17 221,297 500,000 500,000 500,000 80,182 140,799 254,991
18 240,926 500,000 500,000 516,152 82,273 151,082 286,533
19 261,536 500,000 500,000 560,081 83,654 161,307 320,758
20 283,177 500,000 500,000 606,150 84,228 171,419 357,825
25 408,735 500,000 500,000 874,630 69,967 217,880 592,281
30 568,983 ** 500,000 1,221,713 ** 244,483 922,644
35 773,504 ** 500,000 1,674,875 ** 218,081 1,372,545
</TABLE>
* The illustrations assume that Planned Premiums equal to the Target Premium
are paid at the start of each Policy Year. The Death Benefit and Surrender
Value will differ if premiums are paid in different amounts or frequencies,
if policy loans are taken, or if Additional Sum Insured, Guaranteed Minimum
Death Benefit after the tenth Policy Year, or optional rider benefits are
elected.
** Policy lapses unless additional premium payments are made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY THE OWNER. THE
DEATH BENEFIT AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT RETURN AVERAGE 0%, 6%, OR 12% OVER
A PERIOD OF YEARS, BUT ALSO FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
25
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE SURVIVORSHIP
$500,000 TOTAL SUM INSURED
MALE, ISSUE AGE 55, PREFERRED UNDERWRITING CLASS
FEMALE, ISSUE AGE 50, PREFERRED UNDERWRITING CLASS
OPTION B DEATH BENEFIT
NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH POLICY YEAR
PLANNED PREMIUM: $8,156*
USING MAXIMUM CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
------------------------------ ------------------------------
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at ------------------------------ ------------------------------
Year 5% annual interest 0% 6% 12% 0% 6% 12%
------ ------------------ -------- -------- ---------- ------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 8,564 $504,133 $504,411 $ 504,690 $ 4,133 $ 4,411 $ 4,690
2 17,556 509,362 510,246 511,163 9,770 10,653 11,571
3 26,998 514,458 516,279 518,243 14,458 16,279 18,243
4 36,912 519,529 522,631 526,104 19,529 22,631 26,104
5 47,322 524,445 529,177 534,687 24,445 29,177 34,687
6 58,252 530,254 537,019 545,199 30,254 37,019 45,199
7 69,728 535,861 545,085 556,665 35,861 45,085 56,665
8 81,779 541,249 553,362 569,160 41,249 53,362 69,160
9 94,432 546,400 561,838 582,764 46,400 61,838 82,764
10 107,717 551,289 570,491 597,560 51,289 70,491 97,560
11 121,667 556,367 579,804 614,172 56,367 79,804 114,172
12 136,314 561,109 589,252 632,200 61,109 89,252 132,200
13 151,694 565,471 598,788 651,735 65,471 98,788 151,735
14 167,843 569,391 608,349 672,859 69,391 108,349 172,859
15 184,799 572,802 617,857 695,652 72,802 117,857 195,652
16 202,603 575,630 627,223 720,196 75,630 127,223 220,196
17 221,297 577,758 636,313 746,534 77,758 136,313 246,534
18 240,926 579,152 645,068 774,800 79,152 145,068 274,800
19 261,536 579,687 653,331 805,043 79,687 153,331 305,043
20 283,177 579,250 660,950 837,328 79,250 160,950 337,328
25 408,735 557,110 681,970 1,030,465 57,110 181,970 530,465
30 568,983 ** 641,302 1,267,441 ** 141,302 767,441
35 773,504 ** ** 1,519,453 ** ** 1,019,453
</TABLE>
* The illustrations assume that Planned Premiums equal to the Target Premium
are paid at the start of each Policy Year. The Death Benefit and Surrender
Value will differ if premiums are paid in different amounts or frequencies,
if policy loans are taken, or if Additional Sum Insured, Guaranteed Minimum
Death Benefit after the tenth Policy Year, or optional rider benefits are
elected.
** Policy lapses unless additional premium payments are made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY THE OWNER. THE
DEATH BENEFIT AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT RETURN AVERAGE 0%, 6%, OR 12% OVER
A PERIOD OF YEARS, BUT ALSO FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR 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 4 through 21.
<TABLE>
<CAPTION>
CONTENTS OF THIS SECTION BEGINNING ON PAGE
------------------------ -----------------
<S> <C>
Description of JHVLICO.................................... 28
How we support the policy and investment options 28
Procedures for issuance of a policy....................... 29
Basic Sum Insured vs. Additional Sum Insured 30
Commencement of investment performance.................... 31
How we process certain policy transactions................ 31
Effects of policy loans................................... 33
Additional information about how certain policy charges 33
work......................................................
How we market the policies................................ 34
Tax considerations........................................ 34
Reports that you will receive............................. 36
Voting privileges that you will have...................... 36
Changes that JHVLICO can make as to your policy 37
Adjustments we make to death benefits..................... 38
When we pay policy proceeds............................... 38
Other details about exercising rights and paying benefits 38
Legal matters............................................. 39
Registration statement filed with the SEC................. 39
Accounting and actuarial experts.......................... 39
Financial statements of JHVLICO and the Account 39
List of Directors and Executive Officers of JHVLICO 40
</TABLE>
27
<PAGE>
DESCRIPTION OF JHVLICO
We are JHVLICO, a stock life insurance company chartered in 1979 under
Massachusetts law. We are authorized to transact a life insurance and annuity
business in all states other than New York and in the District of Columbia. We
began selling variable life insurance policies in 1980.
We are regulated and supervised by the Massachusetts Commissioner of
Insurance, who periodically examines our affairs. We also are subject to the
applicable insurance laws and regulations of all jurisdictions in which we are
authorized to do business. We are required to submit annual statements of our
operations, including financial statements, to the insurance departments of the
various jurisdictions in which we do business for purposes of determining
solvency and compliance with local insurance laws and regulations. The
regulation to which we are subject, however, does not provide a guarantee as to
such matters.
We are a wholly-owned subsidiary of John Hancock Life Insurance Company ("John
Hancock"), a Massachusetts stock life insurance company. On February 1, 2000,
John Hancock Mutual Life Insurance Company (which was chartered in Massachusetts
in 1862) converted to a stock company by "demutualizing" and changed its name to
John Hancock Life Insurance Company. As part of the demutualization process,
John Hancock became a subsidiary of John Hancock Financial Services, Inc., a
newly formed publicly-traded corporation. John Hancock's home office is at John
Hancock Place, Boston, Massachusetts 02117. As of December 31, 1999, John
Hancock's assets were approximately $71 billion and it had invested
approximately $575 million in JHVLICO in connection with JHVLICO's organization
and operation. It is anticipated that John Hancock will from time to time make
additional capital contributions to JHVLICO to enable us to meet our reserve
requirements and expenses in connection with our business. John Hancock is
committed to make additional capital contributions if necessary to ensure that
we maintain a positive net worth.
HOW WE SUPPORT THE POLICY AND INVESTMENT OPTIONS
Separate Account S
The variable investment options shown on page 1 are in fact subaccounts of
Separate Account S (the "Account"), a separate account established by us under
Massachusetts law. The Account meets the definition of "separate account" under
the Federal securities laws and is registered as a unit investment trust under
the Investment Company Act of 1940 ("1940 Act"). Such registration does not
involve supervision by the SEC of the management of the Account or JHVLICO.
The Account's assets are the property of JHVLICO. Each policy provides that
amounts we hold in the Account pursuant to the policies cannot be reached by any
other persons who may have claims against us.
The assets in each subaccount are invested in the corresponding fund of one of
the Trusts. New subaccounts may be added as new funds are added to the Trusts
and made available to policy owners. Existing subaccounts may be deleted if
existing funds are deleted from the Trusts.
We will purchase and redeem Trust shares for the Account at their net asset
value without any sales or redemption charges. Shares of a 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
28
<PAGE>
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).
Our general account
Our obligations under the policy's fixed investment option are backed by our
general account assets. Our general account consists of assets owned by us other
than those in the Account and in other separate accounts that we may establish.
Subject to applicable law, we have sole discretion over the investment of assets
of the general account and policy owners do not share in the investment
experience of, or have any preferential claim on, those assets. Instead, we
guarantee that the account value allocated to the fixed investment option will
accrue interest daily at an effective annual rate of at least 4% without regard
to the actual investment experience of the general account.
Because of exemptive and exclusionary provisions, interests in our fixed
investment option have not been registered under the Securities Act of 1933 and
our general account has not been registered as an investment company under the
1940 Act. Accordingly, neither the general account nor any interests therein are
subject to the provisions of these acts, and we have been advised that the staff
of the SEC has not reviewed the disclosure in this prospectus relating to the
fixed investment option. Disclosure regarding the fixed investment option may,
however, be subject to certain generally-applicable provisions of the Federal
securities laws relating to accuracy and completeness of statements made in
prospectuses.
PROCEDURES FOR ISSUANCE OF A POLICY
Generally, the policy is available with a minimum Total Sum Insured at issue
of $500,000 and a minimum Basic Sum Insured at issue of $250,000. At the time of
issue, each insured person must have an attained age of at least 20 and no more
than 80. All insured persons must meet certain health and other insurance risk
criteria called "underwriting standards".
Policies issued in Montana or in connection with certain employee plans will
not directly reflect the sex of the insured persons in either the premium rates
or the charges or values under the policy. The illustrations set forth in this
prospectus are sex-distinct and, therefore, may not reflect the rates, charges,
or values that would apply to such policies.
Minimum Initial Premium
The Minimum Initial Premium must be received by us at our Life Servicing
Office in order for the policy to be in full force and effect. There is no grace
period for the payment of the Minimum Initial Premium. The Minimum Initial
Premium is determined by us based on the characteristics of each of the insured
persons, the Total Sum Insured at issue, and the policy options you have
selected.
Commencement of insurance coverage
After you apply for a policy, it can sometimes take up to several weeks for us
to gather and evaluate all the information we need to decide whether to issue a
policy to you and, if so, what the insured persons' rate classes should be.
After we approve an application for a policy and assign an appropriate insurance
rate class, we will prepare the policy for delivery. We will not pay a death
benefit under a policy unless the policy is in effect when the last surviving
insured person dies (except for the circumstances described under "Temporary
insurance coverage prior to policy delivery" on page 30).
The policy will take effect only if all of the following conditions are
satisfied:
. The policy is delivered to and received by the applicant.
29
<PAGE>
. The Minimum Initial Premium is received by us.
. Each insured person is living and still meets our health criteria for
issuing insurance.
If all of the above conditions are satisfied, the policy will take effect on
the date shown in the policy as the "date of issue." That is the date on which
we begin to deduct monthly charges. Policy months, policy years and policy
anniversaries are all measured from the date of issue.
Backdating
In order to preserve a younger age at issue for one or both of the insured
persons, we can designate a date of issue that is up to 60 days earlier than the
date that would otherwise apply. This is referred to as "backdating" and is
allowed under state insurance laws. Backdating can also be used in certain
corporate-owned life insurance cases involving multiple policies to retain a
common monthly deduction date.
The conditions for coverage described above under "Commencement of insurance
coverage" must still be satisfied, but in a backdating situation the policy
always takes effect retroactively. Backdating results in a lower insurance
charge (because of an insured person's younger age at issue), but monthly
charges begin earlier than would otherwise be the case. Those monthly charges
will be deducted as soon as we receive premiums sufficient to pay them.
Temporary coverage prior to policy delivery
If a specified amount of premium is paid with the application for a policy and
other conditions are met, we will provide temporary survivorship term life
insurance coverage on the insured persons for a period prior to the time
coverage under the policy takes effect. Such temporary term coverage will be
subject to the terms and conditions described in the application for the policy,
including limits on amount and duration of coverage.
Monthly deduction dates
Each charge that we deduct monthly is assessed against your account value or
the subaccounts at the close of business on the date of issue and at the close
of the first business day in each subsequent policy month.
BASIC SUM INSURED VS. ADDITIONAL SUM INSURED
As noted earlier in this prospectus, you should consider a number of factors
in determining whether to elect coverage in the form of Basic Sum Insured or in
the form of Additional Sum Insured.
The amount of sales charge deducted from premiums and from account value and
the amount of compensation paid to the selling insurance agent will be less if
coverage is included as Additional Sum Insured, rather than as Basic Sum
Insured. On the other hand, the amount of any Additional Sum Insured is not
included in the guaranteed minimum death benefit feature. Therefore, if the
policy's surrender value is insufficient to pay the monthly charges as they fall
due (including the charges for the Additional Sum Insured), the Additional Sum
Insured coverage will lapse, even if the Basic Sum Insured stays in effect
pursuant to the guaranteed minimum death benefit feature.
Generally, you will incur lower sales charges and have more flexible coverage
with respect to the Additional Sum Insured than with respect to the Basic Sum
Insured. If this is your priority, you may wish to maximize the proportion of
the Additional Sum Insured. However, if your priority is to take advantage of
the guaranteed minimum death benefit feature, the proportion of the Policy's
Total Sum Insured that is guaranteed can be increased by taking out more
coverage as Basic Sum Insured at the time of policy issuance. As stated earlier
in this prospectus, the guaranteed minimum death benefit feature does not apply
if the Additional Sum Insured is scheduled to exceed the Basic Sum Insured at
any time. If such was the case, you would presumably
30
<PAGE>
wish to maximize the proportion of the Additional Sum Insured.
If you want to purchase Additional Sum Insured, you may select from among
several forms of it: a level amount of coverage; an amount of coverage that
increases on each policy anniversary up to a prescribed limit; an amount of
coverage that increases on each policy anniversary to the amount of premiums
paid during prior policy years plus the Planned Premium for the current policy
year, subject to certain limits; or a combination of those forms of coverage.
Any decision you make to modify the amount of Additional Sum Insured coverage
after issue can have significant tax consequences (see "Tax Considerations"
beginning on page 34).
COMMENCEMENT OF INVESTMENT PERFORMANCE
Any premium payment processed prior to the twentieth day after the date of
issue will automatically be allocated to the Money Market investment option. On
the later of the date such payment is received or the twentieth day following
the date of issue, the portion of the Money Market investment option
attributable to such payment will be reallocated automatically among the
investment options you have chosen.
All other premium payments will be allocated among the investment options you
have chosen as soon as they are processed.
HOW WE PROCESS CERTAIN POLICY TRANSACTIONS
Premium payments
We will process any premium payment as of the day we receive it, unless one of
the following exceptions applies:
(1) We will process a payment received prior to a policy's date of issue as if
received on the date of issue.
(2) If the Minimum Initial Premium is not received prior to the date of issue,
we will process each premium payment received thereafter as if received on the
business day immediately preceding the date of issue until all of the Minimum
Initial Premium is received.
(3) We will process the portion of any premium payment for which we require
evidence of an insured person's continued insurability only after we have
received such evidence and found it satisfactory to us.
(4) If we receive any premium payment that we think will cause a policy to
become a modified endowment or will cause a policy to lose its status as life
insurance under the tax laws, we will not accept the excess portion of that
premium payment and will immediately notify the owner. We will refund the excess
premium when the premium payment check has had time to clear the banking system
(but in no case more than two weeks after receipt), except in the following
circumstances:
. The tax problem resolves itself prior to the date the refund is to be
made; or
. The tax problem relates to modified endowment status and we receive a
signed acknowledgment from the owner prior to the refund date instructing
us to process the premium notwithstanding the tax issues involved.
In the above cases, we will treat the excess premium as having been received on
the date the tax problem resolves itself or the date we receive the signed
acknowledgment. We will then process it accordingly.
(5) If a premium payment is received or is otherwise scheduled to be processed
(as specified above) on a date that is not a business day, the premium payment
will be processed on the business day next following that date.
31
<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 account value. Transfers
out of a variable investment option will be effective at the end of the business
day in which we receive at our Life Servicing Office notice satisfactory to us.
If received on or before the policy anniversary, requests for transfer out of
the fixed investment option will be processed on the policy anniversary (or the
next business day if the policy anniversary does not occur on a business day).
If received after the policy anniversary, such a request will be processed at
the end of the business day in which we receive the request at our Life
Servicing Office. If you request a transfer out of the fixed investment option
61 days or more prior to the policy anniversary, we will not process that
portion of the reallocation, and your confirmation statement will not reflect a
transfer out of the fixed investment option as to such request. Currently, there
is no minimum amount limit on transfers into the fixed investment option, but we
reserve the right to impose such a limit in the future. We have the right to
defer transfers of amounts out of the fixed investment option for up to six
months.
Dollar cost averaging
Scheduled transfers under this option may be made from the Money Market
investment option to not more than nine other variable investment options.
However, the amount transferred to any one investment option must be at least
$100.
Once we receive the election in form satisfactory to us at our Life Servicing
Office, transfers will begin on the second monthly deduction date following its
receipt. If you have any questions with respect to this provision, call
1-800-732-5543.
Once elected, the scheduled monthly transfer option will remain in effect for
so long as you have at least $2,500 of your account value in the Money Market
investment option, or until we receive written notice from you of cancellation
of the option or notice of the death of the last surviving insured person. We
reserve the right to modify, terminate or suspend the dollar cost averaging
program at any time.
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
The following transactions take effect on the policy anniversary on or next
following the date we approve the request:
. Total Sum Insured decreases
. Additional Sum Insured increases
. Change of death benefit option from Option B to Option A, when and if
permitted by our administrative rules (see "Change of death benefit
option" on page 18)
Reinstatements of lapsed policies take effect on the monthly deduction date on
or next following the date we approve the request for reinstatement.
32
<PAGE>
We process loans, surrenders, partial withdrawals and loan repayments as of
the day we receive such request or repayment.
EFFECTS OF POLICY LOANS
The account value, the surrender value, and any death benefit above the Total
Sum Insured are permanently affected by any loan, whether or not it is repaid in
whole or in part. This is because the amount of the loan is deducted from the
investment options and placed in a special loan account. The investment options
and the special loan account will generally have different rates of investment
return.
The amount of the outstanding loan (which includes accrued and unpaid
interest) is subtracted from the amount otherwise payable when the policy
proceeds become payable.
Whenever the outstanding loan exceeds 90% of your account value, 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 sales charges help to compensate us for the cost of selling our policies.
(See "What charges will JHVLICO deduct from my investment in the policy?" in the
Basic Information section of this prospectus.) The amount of the charges in any
policy year does not specifically correspond to sales expenses for that year. We
expect to recover our total sales expenses over the life of the policies. To the
extent that the sales charges do not cover total sales expenses, the sales
expenses may be recovered from other sources, including gains from the charge
for mortality and expense risks and other gains with respect to the policies, or
from our general assets. (See "How we market the policies" on page 34.)
Effect of premium payment pattern
You may structure the timing and amount of premium payments to minimize the
sales charges, although doing so involves certain risks. Paying less than one
Target Premium in the first policy year or paying more than one Target Premium
in any policy year could reduce your total sales charges over time. For example,
if the Target Premium was $10,000 and you paid a premium of $10,000 in each of
the first ten policy years, you would pay total sales charges of $14,000. If you
paid $20,000 (i.e., two times the Target Premium amount) in every other policy
year up to the ninth policy year, you would pay total sales charges of only
$9,750. However, delaying the payment of Target Premiums to later policy years
could increase the risk that the guaranteed minimum death benefit feature will
lapse and the account value will be insufficient to pay monthly policy charges
as they come due. As a result, the policy or any Additional Sum Insured may
lapse and eventually terminate. Conversely, accelerating the payment of Target
Premiums to earlier policy years could cause aggregate premiums paid to exceed
the policy's 7-pay premium limit and, as a result, cause the policy to become a
modified endowment, with adverse tax consequences to you upon receipt of policy
distributions. (See "Tax consequences" beginning on page 34.)
Monthly charges
We deduct the monthly charges described in the Basic Information section from
your policy's investment options in proportion to the amount of account value
you have in each. For each month that we cannot deduct any charge because of
insufficient account value, the uncollected charges will accumulate and be
deducted when and if sufficient account value becomes available.
The insurance under the policy continues in full force during any grace period
but, if the last surviving
33
<PAGE>
insured person dies during the policy grace period, the amount of unpaid monthly
charges is deducted from the death benefit otherwise payable.
Reduced charges for eligible classes
The charges otherwise applicable (including the M&E charge) may be reduced
with respect to policies issued to a class of associated individuals or to a
trustee, employer or similar entity where we anticipate that the sales to the
members of the class will result in lower than normal sales or administrative
expenses, lower taxes or lower risks to us. We will make these reductions in
accordance with our rules in effect at the time of the application for a policy.
The factors we consider in determining the eligibility of a particular group for
reduced charges, and the level of the reduction, are as follows: the nature of
the association and its organizational framework; the method by which sales will
be made to the members of the class; the facility with which premiums will be
collected from the associated individuals and the association's capabilities
with respect to administrative tasks; the anticipated lapse and surrender rates
of the policies; the size of the class of associated individuals and the number
of years it has been in existence; the aggregate amount of premiums paid; and
any other such circumstances which result in a reduction in sales or
administrative expenses, lower taxes or lower risks. Any reduction in charges
will be reasonable and will apply uniformly to all prospective policy purchasers
in the class and will not unfairly discriminate against any owner.
HOW WE MARKET THE POLICIES
John Hancock Funds, Inc. ("JHFI"), an indirect wholly-owned subsidiary of John
Hancock located at 101 Huntington Avenue, Boston, MA 02199, 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. JHFI acts as principal
underwriter and principal distributor of the policies sold through the use of
this prospectus. JHFI also serves as principal underwriter for John Hancock
Variable Annuity Accounts H and JF, John Hancock Mutual Variable Life Insurance
Account UV, John Hancock Variable Life Account U and Investors Partner Life
Insurance Account L, all of which are registered under the 1940 Act.
The policies may be purchased through broker-dealers and certain financial
institutions who have entered into selling agreements with JHFI and JHVLICO, and
whose representatives are authorized by applicable law to sell variable life
insurance policies.Gross first year commissions plus any expense allowance
payments paid to such broker-dealers and financial institutions is not expected
to exceed 80% of premiums paid up to the Target Premium plus 3% of any excess
premium payments. Gross renewal commissions (i.e., after the first year) are not
expected to exceed 3% of total premiums paid in policy years 2 through 5 plus
0.15% of account value less loans in policy years 2 and thereafter. In some
situations where the broker dealer provides some or all of the marketing
services required, we may pay an additional gross first year commission of up to
20% of premiums paid up to the Target Premium. In such instances, we may also
pay an additional gross renewal commission. The additional gross renewal
commission would not be expected to exceed 0.10% of account value less loans in
policy years 2 and thereafter.
We reimburse JHFI for direct and indirect expenses actually incurred in
connection with the marketing and sale of the policies.
The offering of the policies is intended to be continuous, but neither JHVLICO
nor JHFI 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
34
<PAGE>
and interpretations can change from time to time. As a result, the tax
consequences to you and the beneficiary may be altered, in some cases
retroactively.
Policy proceeds
We believe the policy will receive the same federal income and estate tax
treatment as fixed benefit life insurance policies. Section 7702 of the Internal
Revenue Code (the "Code") defines life insurance for federal tax purposes. If
certain standards are met at issue and over the life of the policy, the policy
will satisfy that definition. We will monitor compliance with these standards.
If the policy complies with the definition of life insurance, we believe the
death benefit under the policy will be excludable from the beneficiary's gross
income under the Code. In addition, increases in account value as a result of
interest or investment experience will not be subject to federal income tax
unless and until values are actually received through distributions.
Distributions for tax purposes can include amounts received upon surrender or
partial withdrawals. You may also be deemed to have received a distribution for
tax purposes if you assign all or part of your policy rights or change your
policy's ownership.
In general, the owner will be taxed on the amount of distributions that exceed
the premiums paid under the policy. But under certain circumstances within the
first 15 policy years, the owner may be taxed on a distribution even if total
withdrawals do not exceed total premiums paid. Any taxable distribution will be
ordinary income to the owner (rather than capital gains).
We also believe that, except as noted below, loans received under the policy
will be treated as indebtedness of an owner and that no part of any loan will
constitute income to the owner. However, the amount of any outstanding loan that
was not previously considered income (as discussed below) will be treated as if
it had been distributed to the owner if the policy terminates for any reason.
It is possible that, despite our monitoring, a policy might fail to qualify as
life insurance under Section 7702 of the Code. This could happen, for example,
if we inadvertently failed to return to you any premium payments that were in
excess of permitted amounts, or if the Trust failed to meet certain investment
diversification or other requirements of the Code. If this were to occur, you
would be subject to income tax on the income and gains under the policy for the
period of the disqualification and for subsequent periods.
In the past, the United States Treasury Department has stated that it
anticipated issuing guidelines prescribing circumstances in which the ability of
a policy owner to direct his or her investment to particular funds may cause the
policy owner, rather than the insurance company, to be treated as the owner of
the shares of those funds. In that case, any income and gains attributable to
those shares would be included in your current gross income for federal income
tax purposes. Under current law, however, we believe that we, and not the owner
of a policy, would be considered the owner of the fund's shares for tax
purposes.
Tax consequences of ownership or receipt of policy proceeds under federal,
state and local estate, inheritance, gift and other tax laws depend on the
circumstances of each owner or beneficiary.
Because there may be unfavorable tax consequences (including recognition of
taxable income and the loss of income tax-free treatment for any death benefit
payable to the beneficiary), you should consult a qualified tax adviser prior to
changing the policy's ownership or making any assignment of ownership interests.
7-pay premium limit
At the time of policy issuance, we will determine whether the Planned Premium
schedule will exceed
35
<PAGE>
the 7-pay limit discussed below. If so, our standard procedures prohibit
issuance of the policy unless you sign a form acknowledging that fact.
The 7-pay limit is the total of net level premiums that would have been
payable at any time for a comparable fixed policy to be fully "paid-up" after
the payment of 7 equal annual premiums. "Paid-up" means that no further premiums
would be required to continue the coverage in force until maturity, based on
certain prescribed assumptions. If the total premiums paid at any time during
the first 7 policy years exceed the 7-pay limit, the policy will be treated as a
"modified endowment", which can have adverse tax consequences.
The owner will be taxed on distributions and loans from a "modified endowment"
to the extent of any income (gain) to the owner (on an income-first basis). The
distributions and loans affected will be those made on or after, and within the
two year period prior to, the time the policy becomes a modified endowment.
Additionally, a 10% penalty tax may be imposed on taxable portions of such
distributions or loans that are made before the owner attains age 59 1/2.
Furthermore, any time there is a "material change" in a policy (such as an
increase in Additional Sum Insured, the addition of certain other policy
benefits after issue, a change in death benefit option, or reinstatement of a
lapsed policy), the policy will have a new 7-pay limit as if it were a
newly-issued policy. If a prescribed portion of the policy's then account value,
plus all other premiums paid within 7 years after the material change, at any
time exceed the new 7-pay limit, the policy will become a modified endowment.
Moreover, if benefits under a policy are reduced (such as a reduction in the
Total Sum Insured or death benefit or the reduction or cancellation of certain
rider benefits) during the 7 years in which a 7-pay test is being applied, the
7-pay limit will be recalculated based on the reduced benefits. If the premiums
paid to date are greater than the recalculated 7-pay limit, the policy will
become a modified endowment.
All modified endowments issued by the same insurer (or its affiliates) to the
owner during any calendar year generally will be treated as one contract for the
purpose of applying the modified endowment rules. A policy received in exchange
for a modified endowment will itself also be a modified endowment. You should
consult your tax advisor if you have questions regarding the possible impact of
the 7-pay limit on your policy.
Corporate and H.R. 10 plans
The policy may be acquired in connection with the funding of retirement plans
satisfying the qualification requirements of Section 401 of the Code. If so, the
Code provisions relating to such plans and life insurance benefits thereunder
should be carefully scrutinized. We are not responsible for compliance with the
terms of any such plan or with the requirements of applicable provisions of the
Code.
REPORTS THAT YOU WILL RECEIVE
At least annually, we will send you a statement setting forth the following
information as of the end of the most recent reporting period: the amount of the
death benefit, the Basic Sum Insured and the Additional Sum Insured, the account
value, the portion of the account value in each investment option, the surrender
value, premiums received and charges deducted from premiums since the last
report, and any outstanding policy loan (and interest charged for the preceding
policy year). Moreover, you also will receive confirmations of premium payments,
transfers among investment options, policy loans, partial withdrawals 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
36
<PAGE>
funds of the Trust. We will vote the shares of each of the funds of the Trust
which are deemed attributable to variable life insurance policies at regular and
special meetings of the Trust's shareholders in accordance with instructions
received from owners of such policies. Shares of the Trust held in the Account
which are not attributable to such policies, as well as shares for which
instructions from owners are not received, will be represented by us at the
meeting. We will vote such shares for and against each matter in the same
proportions as the votes based upon the instructions received from the owners of
such policies.
We determine the number of a fund's shares held in a subaccount attributable
to each owner by dividing the amount of a policy's account value held in the
subaccount by the net asset value of one share in the fund. Fractional votes
will be counted. We determine the number of shares as to which the owner may
give instructions as of the record date for the Trust's meeting. Owners of
policies may give instructions regarding the election of the Board of Trustees
of the Trust, ratification of the selection of independent auditors, approval of
Trust investment advisory agreements and other matters requiring a shareholder
vote. We will furnish owners with information and forms to enable owners to give
voting instructions.
However, we may, in certain limited circumstances permitted by the SEC's
rules, disregard voting instructions. If we do disregard voting instructions,
you will receive a summary of that action and the reasons for it in the next
semi-annual report to owners.
CHANGES THAT JHVLICO CAN MAKE AS TO YOUR POLICY
Changes relating to the Trust or the Account
The voting privileges described in this prospectus reflect our understanding
of applicable Federal securities law requirements. To the extent that applicable
law, regulations or interpretations change to eliminate or restrict the need for
such voting privileges, we reserve the right to proceed in accordance with any
such revised requirements. We also reserve the right, subject to compliance with
applicable law, including approval of owners if so required, (1) to transfer
assets determined by JHVLICO to be associated with the class of policies to
which your policy belongs from the Account to another separate account or
subaccount, (2) to operate the Account as a "management-type investment company"
under the 1940 Act, or in any other form permitted by law, the investment
adviser of which would be JHVLICO, John Hancock or an affiliate of either, (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
37
<PAGE>
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 either 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 either insured person, we will
adjust the amount of any death benefit as described in the policy.
WHEN WE PAY POLICY PROCEEDS
General
We will pay any death benefit, withdrawal, surrender value or loan within 7
days after we receive the last required form or request (and, with respect to
the death benefit, any other documentation that may be required). If we don't
have information about the desired manner of payment within 7 days after the
date we receive notification of the death of the last surviving insured person,
we will pay the proceeds as a single sum, normally within 7 days thereafter.
Delay to challenge coverage
We may challenge the validity of your insurance policy based on any material
misstatements made to us in the application for the policy. We cannot make such
a challenge, however, beyond certain time limits that are specified in the
policy.
Delay for check clearance
We reserve the right to defer payment of that portion of your account value
that is attributable to a premium payment made by check for a reasonable period
of time (not to exceed 15 days) to allow the check to clear the banking system.
Delay of separate account proceeds
We reserve the right to defer payment of any death benefit, loan or other
distribution that is derived from a variable investment option if (a) the New
York Stock Exchange is closed (other than customary weekend and holiday
closings) or trading on the New York Stock Exchange is restricted; (b) an
emergency exists, as a result of which disposal of securities is not reasonably
practicable or it is not reasonably practicable to fairly determine the account
value; or (c) the SEC by order permits the delay for the protection of owners.
Transfers and allocations of account value among the investment options may also
be postponed under these circumstances. If we need to defer calculation of
separate account values for any of the foregoing reasons, all delayed
transactions will be processed at the next values that we do compute.
OTHER DETAILS ABOUT EXERCISING RIGHTS AND PAYING BENEFITS
Joint ownership
If more than one person owns a policy, all owners must join in most requests
to exercise rights under the policy.
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.
38
<PAGE>
Your beneficiary
You name your beneficiary when you apply for the policy. The beneficiary is
entitled to the proceeds we pay following the death of the last surviving
insured person. You may change the beneficiary during that 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 last surviving insured person dies, we will pay
the insurance proceeds to the owner or the owner's estate.
LEGAL MATTERS
The legal validity of the policies described in this prospectus has been
passed on by Ronald J. Bocage, Vice President and Counsel for JHVLICO. Messrs.
Freedman, Levy, Kroll & Simonds, Washington, D.C., have advised us on certain
Federal securities law matters in connection with the policies.
REGISTRATION STATEMENT FILED WITH THE SEC
This prospectus omits certain information contained in the Registration
Statement which has been filed with the SEC. More details may be obtained from
the SEC upon payment of the prescribed fee.
ACCOUNTING AND ACTUARIAL EXPERTS
Certain of the financial statements of JHVLICO and the Account included in
this prospectus have been audited by Ernst & Young LLP, independent auditors,
for the periods indicated in their reports thereon which appear elsewhere herein
and have been included in reliance on their reports given on their authority as
experts in accounting and auditing. Actuarial matters included in this
prospectus have been examined by Todd G. Engelsen, F.S.A., an Actuary of JHVLICO
and Second Vice President of John Hancock.
FINANCIAL STATEMENTS OF JHVLICO AND THE ACCOUNT
The financial statements of JHVLICO included herein should be distinguished
from the financial statements of the Account and should be considered only as
bearing upon the ability of JHVLICO to meet its obligations under the policies.
In addition to those financial statements of JHVLICO and the Account included
herein that have been audited by Ernst & Young LLP, this prospectus also
contains unaudited financial statements of both JHVLICO and the Account for a
period subsequent to the audited financial statements.
39
<PAGE>
LIST OF DIRECTORS AND EXECUTIVE OFFICERS OF JHVLICO
The Directors and Executive Officers of JHVLICO and their principal
occupations during the past five years are as follows:
<TABLE>
<CAPTION>
Directors and Executive Officers Principal Occupations
-------------------------------- ---------------------
<S> <C>
David F. D'Alessandro........... Chairman of the Board and Chief Executive
Officer of JHVLICO; President, Chief Operations
Officer and Chief Executive Officer-Elect, John
Hancock Life Insurance Company.
Michele G. Van Leer............. Vice Chairman of the Board and President of
JHVLICO; Senior Vice President, John Hancock
Life Insurance Company.
Ronald J. Bocage................ Director, Vice President and Counsel of JHVLICO;
Vice President and Counsel, John Hancock Life
Insurance Company.
Bruce M. Jones.................. Director and Vice President of JHVLICO; Vice
President, John Hancock Life Insurance Company.
Thomas J. Lee................... Director and Vice President of JHVLICO; Vice
President, John Hancock Life Insurance Company.
Barbara L. Luddy................ Director, Vice President and Actuary of JHVLICO;
Senior Vice President, John Hancock Life
Insurance Company.
Robert S. Paster................ Director and Vice President of JHVLICO; Vice
President, John Hancock Life Insurance Company.
Robert R. Reitano............... Director and Vice President of JHVLICO; Vice
President, John Hancock Life Insurance Company.
Paul Strong..................... Director and Vice President of JHVLICO; Vice
President, John Hancock Life Insurance Company.
Daniel L. Ouellette............. Vice President, Marketing, of JHVLICO; Senior
Vice President, John Hancock Life Insurance
Company.
Edward P. Dowd.................. Vice President, Investments, of JHVLICO; Senior
Vice President, John Hancock Life Insurance
Company
Roger G. Nastou................. Vice President, Investments, of JHVLICO; Vice
President, John Hancock Life Insurance Company
Todd G. Engelsen................ Vice President and Illustration Actuary of
JHVLICO; Second Vice President, John Hancock
Life Insurance Company
Julie H. Indge.................. Treasurer of JHVLICO; Financial Officer, John
Hancock Life Insurance Company
Patrick F. Smith................ Controller of JHVLICO; Senior Associate
Controller, John Hancock Life Insurance Company.
Peter H. Scavongelli............ Secretary of JHVLICO; State Compliance Officer,
John Hancock Life Insurance Company
</TABLE>
The business address of all Directors and officers of JHVLICO is John Hancock
Place, Boston, Massachusetts 02117.
40
<PAGE>
UNAUDITED FINANCIAL STATEMENTS
FOR
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
FIRST QUARTER 2000
41
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
(Unaudited)
March 31 December 31
2000 1999
---------- ------------
(In millions)
<S> <C> <C>
Assets
Bonds.............................................. $ 1,276.6 $ 1,216.3
Preferred stocks................................. 35.6 35.9
Common stocks.................................... 1.7 3.2
Investment in affiliates......................... 81.3 80.7
Mortgage loans on real estate...................... 429.0 433.1
Real estate........................................ 24.8 25.0
Policy loans....................................... 181.8 172.1
Cash Items:
Cash in banks.................................... (3.3) 27.2
Temporary cash investments....................... 309.4 222.9
--------- ---------
306.1 250.1
Premiums due and deferred.......................... 23.1 29.9
Investment income due and accrued.................. 35.7 33.2
Other general account assets....................... 52.3 65.3
Assets held in separate accounts................... 8,597.7 8,268.2
--------- ---------
TOTAL ASSETS....................................... $11,045.7 $10,613.0
========= =========
Obligations and Stockholder's Equity
OBLIGATIONS
Policy reserves.................................. $ 1,945.6 $ 1,866.6
Federal income and other taxes payable........... 73.6 67.3
Other general account obligations................ 232.1 219.0
Transfers from separate account, net............. (225.7) (221.6)
Asset valuation reserve.......................... 18.8 23.1
Obligations related to separate accounts......... 8,590.9 8,261.6
--------- ---------
TOTAL OBLIGATIONS.................................. 10,635.3 10,216.0
Stockholder's Equity
Common Stock, $50 par value; authorized 50,000
shares; issued and outstanding 50,000 shares... 2.5 2.5
Paid-in capital.................................. 572.4 572.4
Unassigned deficit............................... (164.5) (177.9)
--------- ---------
TOTAL STOCKHOLDER'S EQUITY......................... 410.4 397.0
--------- ---------
TOTAL OBLIGATIONS AND STOCKHOLDER'S EQUITY......... $11,045.7 $10,613.0
========= =========
</TABLE>
See condensed notes to the financial statements (unaudited).
42
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND UNASSIGNED DEFICIT
<TABLE>
<CAPTION>
(Unaudited)
Three months ended
March 31
-------------------
2000 1999
--------- --------
(In millions)
<S> <C> <C>
Income
Premiums............................................. $ 231.3 $223.6
Net investment income................................ 39.6 32.5
Other, net........................................... 132.4 145.3
------- ------
403.3 401.4
Benefits and Expenses
Payments to policyholders and beneficiaries.......... 89.2 80.3
Additions to reserves to provide for future payments
to policyholders and
beneficiaries...................................... 216.3 238.2
Expenses of providing service to policyholders and
obtaining new insurance............................ 73.5 75.7
State and miscellaneous taxes........................ 7.6 2.8
------- ------
386.6 397.0
------- ------
GAIN FROM OPERATIONS BEFORE FEDERAL INCOME TAXES
AND NET REALIZED CAPITAL GAINS (LOSSES).......... 16.7 4.4
Federal income taxes................................... 4.7 1.0
------- ------
GAIN FROM OPERATIONS BEFORE NET REALIZED CAPITAL
GAINS (LOSSES)................................... 12.0 3.4
Net realized capital gains (losses).................... 0.4 (1.5)
------- ------
NET INCOME........................................ 12.4 1.9
Unassigned deficit at beginning of period.............. (177.9) (49.2)
Net unrealized capital gains (losses) and other
adjustments........................................... 1.1 0.3
Other reserves and adjustments......................... (0.1) (4.2)
------- ------
UNASSIGNED DEFICIT AT END OF PERIOD.................... $(164.5) $(51.2)
======= ======
</TABLE>
See condensed notes to the financial statements (unaudited).
43
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(Unaudited)
Three months ended
March 31
--------------------
2000 1999
-------- --------
(In millions)
<S> <C> <C>
Cash Flows from Operating Activities:
Insurance premiums...................................... $ 241.4 $ 225.3
Net investment income................................... 37.2 29.9
Benefits to policyholders and beneficiaries............. (79.6) (70.8)
Dividends paid to policyholders......................... (6.4) (6.1)
Insurance expenses and taxes............................ (91.9) (107.8)
Net transfers to separate accounts...................... (141.4) (182.0)
Other, net.............................................. 134.4 175.7
------- -------
NET CASH PROVIDED FROM OPERATIONS.................... 93.7 64.2
------- -------
Cash Flows used in Investing Activities:
Bond purchases.......................................... (157.5) (71.3)
Bond sales.............................................. 73.5 8.7
Bond maturities and scheduled redemptions............... 18.9 18.8
Bond prepayments........................................ 2.6 3.2
Stock purchases......................................... (0.4) (0.2)
Proceeds from stock sales............................... 1.2 1.5
Real estate purchases................................... (0.1) (0.9)
Real estate sales....................................... 0.0 10.4
Other invested assets purchases......................... (0.1) 0.0
Proceeds from the sale of other invested assets......... 0.0 0.0
Mortgage loans issued................................... (4.3) (23.4)
Mortgage loan repayments................................ 8.4 5.2
Other, net.............................................. 20.1 (2.8)
------- -------
NET CASH USED IN INVESTING ACTIVITIES................ (37.7) (50.8)
------- -------
Cash Flows From Financing Activities:
Net increase (decrease) in short-term note payable...... (0.0) (32.3)
------- -------
NET CASH PROVIDED FROM FINANCING ACTIVITIES.......... (0.0) (32.3)
------- -------
INCREASE (DECREASE) IN CASH AND TEMPORARY CASH INVESTMENTS 56.0 (18.9)
Cash and temporary cash investments at beginning of year.. 250.1 19.9
------- -------
CASH AND TEMPORARY CASH INVESTMENTS AT THE END OF PERIOD.. $ 306.1 $ 1.0
======= =======
</TABLE>
See condensed notes to the financial statements (unaudited).
44
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
Common Paid-in Unassigned
Stock Capital Deficit Total
------ ------- ---------- ---------
(In millions)
<S> <C> <C> <C> <C>
For the three months ended March 31, 1999 (unaudited)
Balance at January 1, 1999............................. $2.5 $377.5 $ (49.2) $330.8
1999 Transactions:
Capital contribution.................................
Net gain............................................. 1.9 1.9
Net unrealized capital gains and other adjustments... 0.3 0.3
Other reserves and adjustments....................... (4.2) (4.2)
---- ------ ------- ------
Balance at March 31, 1999.............................. $2.5 $377.5 $ (51.2) $328.8
==== ====== ======= ======
For the three months ended March 31, 2000 (unaudited)
Balance at January 1, 2000............................. $2.5 $572.4 $(177.9) $397.0
2000 Transactions:
Capital contribution.................................
Net gain............................................. 12.4 12.4
Net unrealized capital gains and other adjustments... 1.1 1.1
Provision for Litigation Reserve.....................
Other reserves and adjustments....................... (0.1) (0.1)
---- ------ ------- ------
Balance at March 31, 2000 ............................. $2.5 $572.4 $(164.5) $410.4
==== ====== ======= ======
</TABLE>
See condensed notes to the financial statements (unaudited).
45
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1--BASIS OF PRESENTATION
The accompanying unaudited interim financial statements have been prepared on
the basis of accounting practices prescribed or permitted by the Commonwealth of
Massachusetts Division of Insurance and in conformity with the practices of the
National Association of Insurance Commissioners, which practices differ from
generally accepted accounting principles (GAAP). Pursuant to Financial
Accounting Standard Board Interpretation 40, "Applicability of General Accepted
Accounting Principles to Mutual Life Insurance and Other Enterprises" (FIN 40),
as amended which was effective for 1996 financial statements, financial
statements based on statutory accounting practices can no longer be described as
prepared in conformity with GAAP.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three months period ended March 31, 2000 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2000.
46
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Directors and Policyholders
John Hancock Variable Life Insurance Company
We have audited the accompanying statutory-basis statements of financial
position of John Hancock Variable Life Insurance Company as of December 31, 1999
and 1998, and the related statutory-basis statements of operations and
unassigned deficit and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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 accounting principles generally accepted in the United
States. The variances between such practices and accounting principles generally
accepted in the United States 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 accounting principles generally accepted in the
United States, the financial position of John Hancock Variable Life Insurance
Company at December 31, 1999 and 1998, or the results of its operations or its
cash flows for the years then ended.
However, in our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of John Hancock
Variable Life Insurance Company at December 31, 1999 and 1998, 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
March 10, 2000
47
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1999 1998
---------- ---------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Bonds--Note 6........................................ $ 1,216.3 $1,185.8
Preferred stocks..................................... 35.9 36.5
Common stocks........................................ 3.2 3.1
Investment in affiliates............................. 80.7 81.7
Mortgage loans on real estate--Note 6................ 433.1 388.1
Real estate.......................................... 25.0 41.0
Policy loans......................................... 172.1 137.7
Cash items:
Cash in banks..................................... 27.2 11.4
Temporary cash investments........................ 222.9 8.5
--------- --------
250.1 19.9
Premiums due and deferred............................ 29.9 32.7
Investment income due and accrued.................... 33.2 29.8
Other general account assets......................... 65.3 47.5
Assets held in separate accounts..................... 8,268.2 6,595.2
--------- --------
Total assets............................... $10,613.0 $8,599.0
========= ========
OBLIGATIONS AND STOCKHOLDER'S EQUITY
Obligations
Policy reserves.................................... $ 1,866.6 $1,652.0
Federal income and other taxes payable--Note 1..... 67.3 44.3
Other general account obligations.................. 219.0 150.9
Transfers from separate accounts, net.............. (221.6) (190.3)
Asset valuation reserve--Note 1.................... 23.1 21.9
Obligations related to separate accounts........... 8,261.6 6,589.4
--------- --------
Total obligations.................................... 10,216.0 8,268.2
Stockholder's equity
Common Stock, $50 par value; authorized 50,000
shares; issued and outstanding 50,000 shares..... 2.5 2.5
Paid-in capital.................................... 572.4 377.5
Unassigned deficit--Note 10........................ (177.9) (49.2)
--------- --------
Total stockholder's equity......................... 397.0 330.8
--------- --------
Total obligations and stockholder's equity. $10,613.0 $8,599.0
========= ========
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
48
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF OPERATIONS AND UNASSIGNED DEFICIT
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998
---------- ----------
(IN MILLIONS)
<S> <C> <C>
INCOME
Premiums......................................................... $ 950.8 $1,272.3
Net investment income--Note 3.................................... 136.0 122.8
Other, net....................................................... 605.4 618.1
---------- --------
1,692.2 2,013.2
BENEFITS AND EXPENSES
Payments to policyholders and beneficiaries...................... 349.9 301.4
Additions to reserves to provide for future payments to
policyholders and beneficiaries............................... 888.8 1,360.2
Expenses of providing service to policyholders and
obtaining new insurance--Note 5............................... 314.4 274.2
State and miscellaneous taxes.................................... 20.5 28.1
---------- --------
1,573.6 1,963.9
---------- --------
Gain from operations before federal income taxes and net
realized capital losses....................................... 118.6 49.3
Federal income taxes--Note 1..................................... 42.9 33.1
---------- --------
Gain from operations before net realized capital losses......... 75.7 16.2
Net realized capital losses--Note 4.............................. (1.7) (0.6)
---------- --------
Net income............................................. 74.0 15.6
Unassigned deficit at beginning of year.......................... (49.2) (58.3)
Net unrealized capital losses and other adjustments--Note 4...... (3.8) (6.0)
Other reserves and adjustments--Note 10.......................... (198.9) (0.5)
---------- --------
Unassigned deficit at end of year...................... $ (177.9) $ (49.2)
========== ========
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
49
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1999 1998
------- --------
(In millions)
<S> <C> <C>
Cash flows from operating activities:
Insurance premiums................................................. $ 958.5 $1,275.3
Net investment income.............................................. 134.2 118.2
Benefits to policyholders and beneficiaries........................ (321.6) (275.5)
Dividends paid to policyholders....................................... (25.6) (22.3)
Insurance expenses and taxes.......................................... (344.8) (296.9)
Net transfers to separate accounts.................................... (705.3) (874.4)
Other, net......................................................... 540.6 551.3
------- --------
Net cash provided from operations.............................. 236.0 475.7
------- --------
Cash flows used in investing activities:
Bond purchases..................................................... (240.7) (618.8)
Bond sales......................................................... 108.3 340.7
Bond maturities and scheduled redemptions.......................... 78.4 111.8
Bond prepayments................................................... 18.7 76.5
Stock purchases.................................................... (3.9) (23.4)
Proceeds from stock sales.......................................... 3.6 1.9
Real estate purchases.............................................. (2.2) (4.2)
Real estate sales.................................................. 17.8 2.1
Other invested assets purchases.................................... (4.5) 0.0
Mortgage loans issued.............................................. (70.7) (145.5)
Mortgage loan repayments........................................... 25.3 33.2
Other, net......................................................... (68.9) (435.2)
------- --------
Net cash used in investing activities.......................... (138.8) (660.9)
------- --------
Cash flows from financing activities:
Capital contribution............................................... 194.9
Net (decrease) increase in short-term note payable................. (61.9) 61.9
------- --------
Net cash provided from financing activities.................... 133.0 61.9
------- --------
Increase (decrease) in cash and temporary cash investments..... 230.2 (123.3)
Cash and temporary cash investments at beginning of year............. 19.9 143.2
------- --------
Cash and temporary cash investments at end of year............. 250.1 $ 19.9
======= ========
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
50
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES
John Hancock Variable Life Insurance Company (the Company) is a wholly-
owned subsidiary of John Hancock Life Insurance Company (formerly John Hancock
Mutual Life Insurance Company) (John Hancock). The Company, domiciled in the
Commonwealth of Massachusetts, principally writes variable and universal life
insurance policies. Those policies primarily are marketed through John Hancock's
sales organization, Signator Insurance Agency, which includes a career agency
system composed of Company-supported independent general agencies and a direct
brokerage system that markets directly to external independent brokers. Policies
also are sold through various unaffiliated securities broker-dealers and certain
other financial institutions. Currently, the Company writes business in all
states except New York.
The preparation of financial statements requires management to make
estimates and assumptions that affect amounts reported in the financial
statements and accompanying notes. Such estimates and assumptions could change
in the future as more information becomes known, which could impact the amounts
reported and disclosed herein.
Basis of Presentation
The financial statements have been prepared using accounting practices
prescribed or permitted by the Commonwealth of Massachusetts Division of
Insurance and in conformity with the practices of the National Association of
Insurance Commissioners (NAIC), which practices differ from generally accepted
accounting principles (GAAP).
The significant differences from GAAP include: (1) policy acquisition costs
are charged to expense as incurred rather than deferred and amortized in
relation to future estimated gross profits; (2) policy reserves are based on
statutory mortality, morbidity, and interest requirements without consideration
of withdrawals and Company experience; (3) certain assets designated as
"nonadmitted assets" are excluded from the balance sheet by direct charges to
surplus; (4) reinsurance recoverables are netted against reserves and claim
liabilities rather than reflected as an asset; (5) bonds held as available for
sale are recorded at amortized cost or market value as determined by the NAIC
rather than at fair value; (6) an Asset Valuation Reserve and Interest
Maintenance Reserve as prescribed by the NAIC are not calculated under GAAP.
Under GAAP, realized capital gains and losses are reported in the income
statement on a pretax basis as incurred and investment valuation allowances are
provided when there has been a decline in value deemed other than temporary; (7)
investments in affiliates are carried at their net equity value with changes in
value being recorded directly to unassigned deficit rather than consolidated in
the financial statements; (8) no provision is made for the deferred income tax
effects of temporary differences between book and tax basis reporting; and (9)
certain items, including modifications to required policy reserves resulting
from changes in actuarial assumptions, are recorded directly to unassigned
deficit rather than being reflected in income. The effects of the foregoing
variances from GAAP have not been determined but are presumed to be material.
The significant accounting practices of the Company are as follows:
Pending Statutory Standards
During March 1998, the NAIC adopted codified statutory accounting
principles ("Codification") effective January 1, 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 Commonwealth of
Massachusetts must adopt Codification as the prescribed basis of accounting on
which domestic insurers must report their statutory-basis results to the
Division
51
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
of Insurance. At this time, it is anticipated that the Commonwealth of
Massachusetts will adopt Codification effective January 1, 2001. The impact of
any such changes on the Company's unassigned deficit is not expected to be
material.
Revenues and Expenses
Premium revenues are recognized over the premium-paying period of the
policies whereas expenses, including the acquisition costs of new business, are
charged to operations as incurred and policyholder dividends are provided as
paid or accrued.
Cash and Temporary Cash Investments
Cash includes currency on hand and demand deposits with financial
institutions. Temporary cash investments are short-term, highly-liquid
investments both readily convertible to known amounts of cash and so near
maturity that there is insignificant risk of changes in value because of changes
in interest rates.
Valuation of Assets
General account investments are carried at amounts determined on the
following bases:
Bond and stock values are carried as prescribed by the NAIC; bonds
generally at amortized amounts or cost, preferred stocks generally at cost and
common stocks at fair value. The discount or premium on bonds is amortized using
the interest method.
Investments in affiliates are included on the statutory equity method.
Loan-backed bonds and structured securities are valued at amortized cost
using the interest method including anticipated prepayments. Prepayment
assumptions are obtained from broker dealer surveys or internal estimates and
are based on the current interest rate and economic environment. The
retrospective adjustment method is used to value all such securities except for
interest-only securities, which are valued using the prospective method.
The net interest effect of interest rate and currency rate swap
transactions is recorded as an adjustment of interest income as incurred. The
initial cost of interest rate cap agreements is amortized to net investment
income over the life of the related agreement. Gains and losses on financial
futures contracts used as hedges against interest rate fluctuations are deferred
and recognized in income over the period being hedged.
Mortgage loans are carried at outstanding principal balance or amortized
cost.
Investment real estate is carried at depreciated cost, less encumbrances.
Depreciation on investment real estate is recorded on a straight-line basis.
Accumulated depreciation amounted to $1.9 million in 1999 and $3.0 million in
1998.
Real estate acquired in satisfaction of debt and real estate held for sale
are carried at the lower of cost or fair value.
Policy loans are carried at outstanding principal balance, not in excess of
policy cash surrender value.
52
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
Asset Valuation and Interest Maintenance Reserves
The Asset Valuation Reserve (AVR) is computed in accordance with the
prescribed NAIC formula and represents a provision for possible fluctuations in
the value of bonds, equity securities, mortgage loans, real estate and other
invested assets. Changes to the AVR are charged or credited directly to the
unassigned deficit.
The Company also records the NAIC prescribed Interest Maintenance Reserve
(IMR) that represents that portion of the after tax net accumulated unamortized
realized capital gains and losses on sales of fixed income securities,
principally bonds and mortgage loans, attributable to changes in the general
level of interest rates. Such gains and losses are deferred and amortized into
income over the remaining expected lives of the investments sold. At December
31, 1999, the IMR, net of 1999 amortization of $2.3 million, amounted to $7.4
million, which is included in policy reserves. The corresponding 1998 amounts
were $2.4 million and $10.7 million, respectively.
Goodwill
The excess of cost over the statutory book value of the net assets of life
insurance business acquired was $8.9 million and $11.4 million at December 31,
1999 and 1998, respectively, and generally is amortized over a ten-year period
using a straight-line method.
Separate Accounts
Separate account assets and liabilities reported in the accompanying
statements of financial position represent funds that are separately
administered, principally for variable life insurance policies, and for which
the contractholder, rather than the Company, generally bears the investment
risk. Separate account obligations are intended to be satisfied from separate
account assets and not from assets of the general account. Separate accounts
generally are reported at fair value. The operations of the separate accounts
are not included in the statement of operations; however, income earned on
amounts initially invested by the Company in the formation of new separate
accounts is included in other income.
Fair Value Disclosure of Financial Instruments
Statement of Financial Accounting Standards (SFAS) No. 107, "Disclosure
about Fair Value of Financial Instruments," requires disclosure of fair value
information about certain financial instruments, whether or not recognized in
the statement of financial position, for which it is practicable to estimate the
value. In situations where quoted market prices are not available, fair values
are based on estimates using present value or other valuation techniques. SFAS
No. 107 excludes certain financial instruments and all nonfinancial instruments
from its disclosure requirements. Therefore, the aggregate fair value amounts
presented do not represent the underlying value of the Company. See Note 11.
The methods and assumptions utilized by the Company in estimating its fair
value disclosures for financial instruments are as follows:
The carrying amounts reported in the statement of financial position for
cash and temporary cash investments approximate their fair values.
Fair values for public bonds are obtained from an independent pricing
service. Fair values for private placement securities and publicly traded bonds
not provided by the independent pricing service are estimated by the
53
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
Company by discounting expected future cash flows using current market rates
applicable to the yield, credit quality and maturity of the investments.
The fair values for common and preferred stocks, other than its subsidiary
investments, which are carried at equity values, are based on quoted market
prices.
Fair values for futures contracts are based on quoted market prices. Fair
values for interest rate swap, cap agreements, and currency swap agreements are
based on current settlement values. The current settlement values are based on
brokerage quotes that utilize pricing models or formulas using current
assumptions.
The fair value for mortgage loan 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 engaged into qualitative categories for purposes of the fair value
calculations.
The carrying amount in the statement of financial position for policy loans
approximates their fair value.
The fair value for outstanding commitments to purchase long-term bonds and
issue real estate mortgages is estimated using a discounted cash flow method
incorporating adjustments for the difference in the level of interest rates
between the dates the commitments were made and December 31, 1999.
Capital Gains and Losses
Realized capital gains and losses are determined using the specific
identification method. Realized capital gains and losses, net of taxes and
amounts transferred to the IMR, are included in net gain or loss. Unrealized
gains and losses, which consist of market value and book value adjustments, are
shown as adjustments to the unassigned deficit.
Policy Reserves
Life reserves are developed by actuarial methods and are determined based
on published tables using statutorily specified interest rates and valuation
methods that will provide, in the aggregate, reserves that are greater than or
equal to the minimum or guaranteed policy cash values or the amounts required by
the Commonwealth of Massachusetts Division of Insurance. Reserves for variable
life insurance policies are maintained principally on the modified preliminary
term method using the 1958 and 1980 Commissioner's Standard Ordinary (CSO)
mortality tables, with an assumed interest rate of 4% for policies issued prior
to May 1, 1983 and 41/2% for policies issued on or thereafter. Reserves for
single premium policies are determined by the net single premium method using
the 1958 CSO mortality table, with an assumed interest rate of 4%. Reserves for
universal life policies issued prior to 1985 are equal to the gross account
value which at all times exceeds minimum statutory requirements. Reserves for
universal life policies issued from 1985 through 1988 are maintained at the
greater of the Commissioner's Reserve Valuation Method (CRVM) using the 1958 CSO
mortality table, with 41/2% interest or the cash surrender value. Reserves for
universal life policies issued after 1988 and for flexible variable policies are
maintained using the greater of the cash surrender value or the CRVM method with
the 1980 CSO mortality table and 51/2% interest for policies issued from 1988
through 1992; 5% interest for policies issued in 1993 and 1994; and 41/2%
interest for policies issued in 1995 through 1999.
Federal Income Taxes
Federal income taxes are reported in the financial statements based on
amounts determined to be payable as a result of operations within the current
accounting period. The operations of the Company are consolidated with John
Hancock in filing a consolidated federal income tax return basis for the
affiliated group. The federal income
54
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
taxes of the Company are allocated on a separate return basis with certain
adjustments. The Company made federal income tax payments of $10.6 million in
1999 and $38.2 million in 1998.
Income before taxes differs from taxable income principally due to tax-
exempt investment income, the limitation placed on the tax deductibility of
policyholder dividends, accelerated depreciation, differences in policy reserves
for tax return and financial statement purposes, capitalization of policy
acquisition expenses for tax purposes and other adjustments prescribed by the
Internal Revenue Code.
Amounts for disputed tax issues relating to the prior years are charged or
credited directly to policyholders' contingency reserve.
Adjustments to Policy Reserves
From time to time, the Company finds it appropriate to modify certain
required policy reserves because of changes in actuarial assumptions. Reserve
modifications resulting from such determinations are recorded directly to
stockholder's equity. No such refinements were made during 1999 or 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.
2. Acquisition
On June 23, 1993, the Company acquired all of the outstanding shares of
stock of Colonial Penn Annuity and Life Insurance Company (CPAL) from Colonial
Penn Life Insurance Company for an aggregate purchase price of approximately
$42.5 million. At the date of acquisition, assets of CPAL were approximately
$648.5 million, consisting principally of cash and temporary cash investments
and liabilities were approximately $635.2 million, consisting principally of
reserves related to a block of interest sensitive single-premium whole life
insurance business assumed by CPAL from Charter National Life Insurance Company
(Charter). The purchase price includes contingent payments of up to
approximately $7.3 million payable between 1994 and 1998 based on the actual
lapse experience of the business in force on June 23, 1993. The Company made the
final contingent payment to CPAL of $1.5 million during 1998.
55
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
On June 24, 1993, the Company contributed $24.6 million in additional
capital to CPAL. CPAL was renamed John Hancock Life Insurance Company of America
(JHLICOA) on July 7, 1993. JHLICOA was subsequently renamed Investors Partner
Life Insurance Company (IPL) on March 5, 1998. IPL manages the business assumed
from Charter and began marketing term life and variable universal life products
through brokers in 1999. Summarized financial information for IPL for 1999 and
1998 is as follows:
1999 1998
------- ------
(In millions)
Total assets........................... 570.7 587.8
Total liabilities...................... 498.9 517.5
Total revenue.......................... 35.6 38.8
Net income............................. 3.5 3.8
3. Net Investment Income
Investment income has been reduced by the following amounts:
1999 1998
------ ------
(In millions)
Investment expenses . . . . . . . . . . . . $ 9.5 $ 8.3
Interest expense. . . . . . . . . . . . . . 1.7 2.4
Depreciation expense. . . . . . . . . . . . 0.6 0.8
Investment taxes. . . . . . . . . . . . . . 0.3 0.7
------ ------
$ 12.1 $ 12.2
====== ======
56
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
4. Net Capital Gains (Losses) And Other Adjustments
Net realized capital gains (losses) consist of the following items:
1999 1998
------ ------
(In millions)
Net gains from asset sales............................ $ (2.8) $ 7.6
Capital gains tax..................................... 0.2 (2.9)
Net capital gains transferred to IMR.................. 0.9 (5.3)
------ ------
Net realized capital losses........................... $ (1.7) $ (0.6)
====== ======
Net unrealized capital gains (losses) and other adjustments consist of the
following items:
1999 1998
------ ------
(In millions)
Net losses from changes in security values and book
value adjustments................................ $ (2.6) $ (2.7)
Increase in asset valuation reserve................... (1.2) (3.3)
------ ------
Net unrealized capital losses and other adjustments... $ (3.8) $ (6.0)
====== ======
57
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS-- (continued)
5. Transactions with Parent
The Company's Parent provides the Company with personnel, property and
facilities in carrying out certain of its corporate functions. The Parent
annually determines a fee for these services and facilities based on a number of
criteria which were revised in 1999 and 1998 to reflect continuing changes in
the Company's operations. The amount of the service fee charged to the Company
was $188.3 million and $157.5 million in 1999 and 1998, respectively, which has
been included in insurance and investment expenses. The Parent has guaranteed
that, if necessary, it will make additional capital contributions to prevent the
Company's stockholder's equity from declining below $1.0 million.
The service fee charged to the Company by the Parent includes $0.2 million
and $0.7 million in 1999 and 1998, respectively, representing the portion of the
provision for retiree benefit plans determined under the accrual method,
including a provision for the 1993 transition liability which is being amortized
over twenty years, that was allocated to the Company.
The Company has a modified coinsurance agreement with John Hancock to
reinsure 50% of 1994 through 1999 issues of flexible premium variable life
insurance and scheduled premium variable life insurance policies. In connection
with this agreement, John Hancock transferred $44.5 million and $4.9 million of
cash for tax, commission, and expense allowances to the Company, which increased
the Company's net gain from operations by $20.6 million and $22.2 million in
1999 and 1998, respectively.
Effective January 1, 1996, the Company entered into a modified coinsurance
agreement with John Hancock to reinsure 50% of the 1995 inforce block and 50% of
1996 and all future issue years of certain variable annuity contracts
(Independence Preferred, Declaration, Independence 2000, MarketPlace, and
Revolution). In connection with this agreement, the Company received a net cash
payment of $40.0 million and $12.7 million in 1999 and 1998, respectively, for
surrender benefits, tax, reserve increase, commission, expense allowances and
premium, This agreement increased the Company's net gain from operations by
$26.9 million and $8.4 million in 1999 and 1998, respectively.
Effective January 1, 1997, the Company entered into a stop-loss agreement
with John Hancock to reinsure mortality claims in excess of 110% of expected
mortality claims in 1999 and 1998 for all policies that are not reinsured under
any other indemnity agreement. In connection with the agreement, John Hancock
received $0.8 million and 1.0 million in 1999 and 1998, respectively, for
mortality claims to the Company. This agreement decreased the Company's net gain
from operations in both 1999 and 1998 by $0.5 million.
At December 31, 1998 the Company had outstanding a short-term note of $61.9
million payable to an affiliate at a variable rate of interest. The note was
part of a revolving line of credit and was repaid in 1999. Interest paid in 1999
and 1998 was $1.7 million and $2.9 million, respectively. The note is included
in other general account obligations at December 31, 1998.
58
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS-- (continued)
6. Investments
The statement value and fair value of bonds are shown below:
<TABLE>
<CAPTION>
Gross Unrealized Gross Unrealized
Statement Value Gains Losses Fair Value
--------------- ---------------- ---------------- ----------
(In millions)
<S> <C> <C> <C> <C>
December 31, 1999
U.S. Treasury securities and obligations of U.S.
government corporations and agencies................... $ 5.9 $ 0.0 $ 0.1 $ 5.8
Obligations of states and political subdivisions......... 2.2 0.1 0.1 2.2
Debit securities issued by foreign governments........... 13.9 0.8 0.1 14.6
Corporate securities..................................... 964.9 13.0 59.4 918.5
Mortgage-backed securities............................... 229.4 0.5 7.8 222.1
------------ -------- ------- ---------
Total bonds.............................................. $ 1,216.3 $ 14.4 $ 67.5 $ 1,163.2
============ ======== ======= =========
December 31, 1998
U.S. Treasury securities and obligations of U.S.
government corporations and agencies................... $ 5.1 $ 0.1 $ 0.0 $ 5.2
Obligations of states and political subdivisions......... 3.2 0.3 0.0 3.5
Corporate securities..................................... 925.2 50.4 15.0 960.6
Mortgage-backed securities............................... 252.3 10.0 0.1 262.2
------------ -------- ------- ---------
Total bonds.............................................. $ 1,185.8 $ 60.8 $ 15.1 $ 1,231.5
============ ======== ======= =========
</TABLE>
59
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS-- (continued)
The statement value and fair value of bonds at December 31, 1999, 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................................................................ $ 58.5 $ 58.2
Due after one year through five years.................................................. 286.8 282.0
Due after five years through ten years................................................. 425.4 405.6
Due after ten years.................................................................... 216.2 195.3
--------- ---------
986.9 941.1
Mortgage-backed securities............................................................. 229.4 222.1
--------- ---------
$ 1,216.3 $ 1,163.2
========= =========
</TABLE>
Gross gains of $0.3 million in 1999 and $3.4 million in 1998 and gross
losses of $4.0 million in 1999 and $0.7 million in 1998 were realized from the
sale of bonds.
At December 31, 1999, bonds with an admitted asset value of $9.1 million
were on deposit with state insurance departments to satisfy regulatory
requirements.
The cost of common stocks was $3.1 million and $2.1 million at December 31,
1999 and 1998, respectively. At December 31, 1999, gross unrealized appreciation
on common stocks totaled $1.2 million, and gross unrealized depreciation totaled
$1.1 million. The fair value of preferred stock totaled $35.9 million at
December 31, 1999 and $36.5 million at December 31, 1998.
Bonds with amortized cost of $0.4 million were non-income producing for the
twelve months ended December 31, 1999.
At December 31, 1999, 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.
60
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS-- (continued)
<TABLE>
<CAPTION>
Statement Geographic Statement
Property Type Value Concentration Value
(In millions) (In millions)
<S> <C> <C> <C>
Apartments.......................................... $112.1 East North Central $ 71.3
Hotels.............................................. 11.3 East South Central 7.4
Industrial.......................................... 66.0 Middle Atlantic 28.5
Office buildings.................................... 86.4 Mountain 21.0
Retail.............................................. 25.5 New England 37.5
Agricultural........................................ 99.6 Pacific 111.1
Other............................................... 32.2 South Atlantic 87.6
West North Central 16.6
West South Central 48.6
Other 3.5
------ ------
$433.1 $433.1
====== ======
</TABLE>
At December 31, 1999, the fair values of the commercial and agricultural
mortgage loans portfolios were $323.5 million and $98.2 million, respectively.
The corresponding amounts as of December 31, 1998 were approximately $331.3
million and $70.0 million, respectively.
The maximum and minimum lending rates for mortgage loans during 1999 were
14.24% and 6.84% for agricultural loans, 7.45% and 7.00% for other properties.
Generally, the maximum percentage of any loan to the value of security at the
time of the loan, exclusive of insured, guaranteed or purchase money mortgages,
is 75%. For city mortgages, fire insurance is carried on all commercial and
residential properties at least equal to the excess of the loan over the maximum
loan which would be permitted by law on the land without the building, except as
permitted by regulations of the Federal Housing Commission on loans fully
insured under the provisions of the National Housing Act. For agricultural
mortgage loans, fire insurance is not normally required on land based loans
except in those instances where a building is critical to the farming operation.
Fire insurance is required on all agri-business facilities in an aggregate
amount equal to the loan balance.
61
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(continued)
7. Reinsurance
The Company cedes business to reinsurers to share risks under variable
life, universal life and flexible variable life insurance policies for the
purpose of reducing exposure to large losses. Premiums, benefits and reserves
ceded to reinsurers in 1999 were $594.9 million, $132.8 million, and $13.6
million, respectively. The corresponding amounts in 1998 were $590.2 million,
$63.2 million, and $8.2 million, 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 reinsurer.
Neither the Company, nor any of its related parties, control, either
directly or indirectly, any external reinsurers with which the Company conducts
business. No policies issued by the Company have been reinsured with a foreign
company which is controlled, either directly or indirectly, by a party not
primarily engaged in the business of insurance.
The Company has not entered into any reinsurance agreement 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, 1999 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.
8. Financial Instruments with Off-Balance-Sheet Risk
The notional amounts, carrying values and estimated fail values of the
Company's derivative instruments were as follows at December 31:
<TABLE>
<CAPTION>
Number of Contracts/ Assets (Liabilities)
----------------------------------------------------
Notional Amounts 1999 1998
Carrying Carrying
1999 1998 Value Fair Value Value Fair Value
------ ----- --------- ---------- -------- -----------
(In millions)
<S> <C> <C> <C> <C> <C> <C>
Futures contracts to sell securities 362.0 947.0 $ 0.6 $ 0.6 $(0.5) $ (0.5)
Interest rate swap agreements $965.0 $365.0 -- 11.5 -- (17.7)
Interest rate cap agreements 239.4 89.4 5.6 5.6 3.1 3.1
Currency rate swap agreements 15.8 15.8 -- (1.6) -- (3.3)
</TABLE>
62
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(continued)
The Company uses futures contracts, interest rate swap, cap agreements, and
currency rate swap agreements for other than trading purposes to hedge and
manage its exposure to changes in interest rate levels, foreign exchange rate
fluctuations and to manage duration mismatch of assets and liabilities.
The futures contracts expire in 2000. The interest rate swap agreements
expire in 2000 to 2011. The interest rate cap agreements expire in 2006 to 2008.
The currency rate swap agreements expire in 2006 to 2009.
The Company's exposure to credit risk is the risk of loss from a
counterparty failing to perform to the terms of the contract. The Company
continually monitors its position and the credit ratings of the counterparties
to these derivative instruments. To limit exposure associated with counterparty
nonperformance on interest rate and currency swap agreements, the Company enters
into master netting agreements with its counterparties. The Company believes the
risk of incurring losses due to nonperformance by its counterparties is remote
and that such losses, if any, would be immaterial. Futures contracts trade on
organized exchanges and, therefore, have minimal credit risk.
9. Policy Reserves Policyholders' and Beneficiaries' Funds and Obligations
Related to Separate Accounts
The Company' annuity reserves and deposit fund liabilities that are subject
to discretionary withdrawal, with and without adjustment, are summarized as
follows.
<TABLE>
<CAPTION>
December 31, 1999 Percent
----------------- -------
(In millions)
<S> <C> <C>
Subject to discretionary withdrawal (with adjustment)
With market value adjustment........................................... $ 3.8 0.1%
At book value less surrender charge 40.5 1.5
At market value........................................................ 2,326.6 87.1
-------- ------
Total with adjustment............................................... 2,370.9 88.7
Subject to discretionary withdrawal
at book value (without adjustment).................................. 287.1 10.7
Not subject to discretionary withdrawal-- general account.............. 15.4 0.6
-------- ------
Total annuity reserves and deposit liabilities......................... $2,673.4 100.0%
======== ======
</TABLE>
63
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(continued)
10. Commitments and Contingencies
The Company has extended commitments to purchase long-term bonds and issue
real estate mortgages totaling $15.4 million and $3.5 million, respectively, at
December 31, 1999. The Company monitors the creditworthiness of borrowers under
long-term bonds commitments and requires collateral as deemed necessary. If
funded, loans related to real estate mortgages would be fully collateralized by
the related properties. The estimated fair value of the commitments described
above is $19.4 million at December 31, 1999. The majority of these commitments
expire in 2000.
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, 1999. 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.
During 1997, John Hancock 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, John Hancock
specifically denied any wrongdoing. During 1999, the Company recorded a $194.9
million reserve, through a direct charge to its unassigned deficit, representing
the Company's share of the settlement and John Hancock contributed $194.9
million of capital to the Company. The reserve held at December 31, 1999
amounted to $136.5 million and is based on a number of factors, including the
estimated number of claims, the expected type of relief to be sought by class
members (general relief or alternative dispute resolution), the estimated cost
per claim and the estimated costs to administer the claims.
Given the uncertainties associated with estimating the reserve, it is
reasonably possible that the final cost of the settlement could differ
materially from the amounts presently provided for by the Company. John Hancock
and the Company will continue to update their estimate of the final cost of the
settlement as claims are processed and more specific information is developed,
particularly as the actual cost of the claims subject to alternative dispute
resolution becomes available. However, based on information available at this
time, and the uncertainties associated with the final claim processing and
alternative dispute resolution, the range of any additional costs related to the
settlement cannot be reasonably estimated. If the Company's share of the
settlement increases, John Hancock will contribute additional capital to the
Company so that the Company's total stockholder's equity would not be impacted.
64
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(continued)
11. 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,
1999 1998
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- -------- -------- --------
(In millions)
<S> <C> <C> <C> <C>
Assets
Bonds-- Note 6 $1,216.3 $1,163.2 $1,185.8 $1,231.5
Preferred stocks--Note 6 35.9 35.9 36.5 36.5
Common stocks--Note 6 3.2 3.2 3.1 3.1
Mortgage loans on real estate--Note 6 433.1 421.7 388.1 401.3
Policy loans--Note 1 172.1 172.1 137.7 137.7
Cash items--Note 1 250.1 250.1 19.9 19.9
Derivatives assets (liabilities) relating
to: --Note 8
Futures contracts 0.6 0.6 (0.5) (0.5)
Interest rate swaps -- 11.5 -- (17.7)
Currency rate swaps -- (1.6) -- (3.3)
Interest rate caps 5.6 5.6 3.1 3.1
Liabilities
Commitments--Note 10 -- 19.4 -- 32.1
</TABLE>
The carrying amounts in the table are included in the statutory-basis
statements of financial position. The method and assumptions utilized by the
Company in estimating its fair value disclosures are described in Note 1.
12. SUBSEQUENT EVENTS
REORGANIZATION AND INITIAL PUBLIC OFFERING
Pursuant to a Plan of Reorganization approved by the policyholders of John
Hancock and the Commonwealth of Massachusetts Division of Insurance, effective
February 1, 2000, John Hancock converted from a mutual life insurance company to
a stock life insurance company (i.e., demutualized) and became a wholly owned
subsidiary of John Hancock Financial Services, Inc., which is a holding company.
In connection with the reorganization, John Hancock changed its name to John
Hancock Life Insurance Company. In addition, on February 1, 2000, John Hancock
Financial Services, Inc. completed its initial public offering and 102 million
shares of common stock were issued at an initial public offering price of $17
per share.
65
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENT--(continued)
13. IMPACT OF YEAR 2000 (UNAUDITED)
The Company participated in the Year 2000 remediation project of its
parent, John Hancock. By late 1999, John Hancock and the Company completed their
Year 2000 readiness plan to address issues that could result from computer
programs written using two digits to define the applicable year rather than four
to define the applicable year and century. As a result, John Hancock and the
Company were prepared for the transition to the Year 2000 and did not experience
any significant Year 2000 problems with respect to mission critical information
technology ("IT") or non-IT systems, applications or infrastructure. During the
date rollover to the year 2000, John Hancock and the Company implemented and
monitored their millennium rollover plan and conducted business as usual on
Monday, January 3, 2000.
Since January 3, 2000, the information systems, including mission critical
systems, which in the event of a Year 2000 failure would have the greatest
impact on operations, have functioned properly. In addition, neither John
Hancock nor the Company have experienced any significant Year 2000 issues
related to interactions with material business partners. No disruptions have
occurred which impact John Hancock or the Company's ability to process claims,
update customer accounts, process financial transactions, or report accurate
data to management and no business interruptions due to Year 2000 issues have
been experienced. While John Hancock and the Company continue to monitor their
systems, and those of material business partners, closely to ensure that no
unexpected Year 2000 issues develop, neither John Hancock nor the Company have
reason to expect any such issues.
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, 1999, John Hancock has incurred and
expensed approximately $20.8 million in related payroll costs for internal IT
personnel on the project. The estimated remaining IT personnel costs of the
project are approximately $1.0 million. Through December 31, 1999, John Hancock
has incurred and expensed approximately $47.0 million in external costs for the
project. John Hancock's estimated remaining external cost of the project is
approximately $2.0 million. The total costs of the Year 2000 project to John
Hancock, based on management's best estimates, include approximately $21.7
million in internal IT personnel, $14.6 million in the external modification of
software, $18.3 million for external solution providers, $9.1 million in
replacement costs of non-compliant IT systems and $6.9 million in oversight,
test facilities and other expenses. Accordingly, the estimated range of total
costs of the Year 2000 project to John Hancock, internal and external, is
approximately $70 to $72.5 million. John Hancock's total Year 2000 project costs
include the estimated impact of external solution providers based on presently
available information.
66
<PAGE>
UNAUDITED FINANCIAL STATEMENTS
FOR
JOHN HANCOCK VARIABLE LIFE ACCOUNTS
FIRST QUARTER 2000
67
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENT OF ASSETS AND LIABILITIES (Unaudited)
March 31, 2000
<TABLE>
<CAPTION>
International
Large Cap Sovereign Equity Small Cap
Growth Bond Index Growth
Subaccount Subaccount Subaccount Subaccount
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Assets
Cash......................................................................... $ -- $ -- $ -- $ --
Investments in shares of portfolios of John Hancock Variable Series Trust I,
at value................................................................... 138,526,150 34,068,646 35,829,658 39,276,504
Investments in shares of portfolios of M Fund Inc., at value................. -- -- -- --
Receivable from:
John Hancock Variable Series Trust I....................................... 44,917 202,525 59,623 --
M Fund Inc................................................................. -- -- -- --
------------ ----------- ----------- -----------
Total assets................................................................. 138,571,067 34,271,171 35,889,281 39,276,504
Liabilities
Payable to:
John Hancock Variable Life Insurance Company............................... -- -- -- --
M Fund Inc................................................................. -- -- -- --
Asset charges payable........................................................ 1,390 284 378 437
------------ ----------- ----------- -----------
Total liabilities............................................................ 1,390 284 378 437
------------ ----------- ----------- -----------
Net assets................................................................... $138,569,677 $34,270,887 $35,888,903 $39,276,067
============ =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
International Mid Cap Large Cap Money
Balanced Growth Value Market
Subaccount Subaccount Subaccount Subaccount
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Assets
Cash......................................................................... $ -- -- -- --
Investments in shares of portfolios of John Hancock Variable Series Trust
I, at value.................................................................. 4,253,445 76,843,249 30,278,966 69,664,696
Investments in shares of portfolios of M Fund Inc., at value................. -- -- -- --
Receivable from:
John Hancock Variable Series Trust I....................................... 10,559 -- 59,377 32,506
M Fund Inc................................................................. -- -- -- --
------------ ----------- ----------- -----------
Total assets................................................................. 4,264,004 76,843,249 30,338,343 69,697,202
Liabilities
Payable to:
John Hancock Variable Life Insurance Company............................... -- -- -- --
M Fund Inc................................................................. -- -- -- --
Asset charges payable........................................................ 43 798 295 2,517
------------ ----------- ----------- -----------
Total liabilities............................................................ 43 798 295 2,517
------------ ----------- ----------- -----------
Net assets................................................................... $ 4,263,961 $76,842,451 $30,338,048 $69,694,685
============ =========== =========== ===========
</TABLE>
See accompany notes.
68
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENT OF ASSETS AND LIABILITIES (Unaudited) (continued)
March 31, 2000
<TABLE>
<CAPTION>
Mid Cap Small/Mid Cap Real Estate Growth &
Value Growth Equity Income
Subaccount Subaccount Subaccount Subaccount
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
Assets
Cash......................................................................... $ -- $ -- $ -- $ --
Investments in shares of portfolios of John Hancock Variable Series
Trust I, at value.......................................................... 21,554,510 9,607,284 10,188,124 212,753,886
Investments in shares of portfolios of M Fund Inc., at value................. -- -- -- --
Receivable from:
John Hancock Variable Series Trust I....................................... -- -- 94,477 199,984
M Fund Inc................................................................. -- -- -- --
------------ ----------- ----------- ------------
Total assets................................................................. 21,554,510 9,607,284 10,282,601 212,953,870
Liabilities
Payable to:
John Hancock Variable Life Insurance Company............................... --
M Fund Inc................................................................. -- -- -- --
Asset charges payable........................................................ 240 109 98 2,577
------------ ----------- ----------- ------------
Total liabilities............................................................ 240 109 98 2,577
------------ ----------- ----------- ------------
Net assets................................................................... $ 21,554,270 $ 9,607,175 $ 10,282,503 $212,951,293
============ =========== ============ ============
<CAPTION>
Short-Term Small Cap International
Managed Bond Value Opportunities
Subaccount Subaccount Subaccount Subaccount
------------ ----------- ----------- -------------
<S> <C> <C> <C> <C>
Assets
Cash...................................................................... $ -- $ -- $ -- $ --
Investments in shares of portfolios of John Hancock Variable Series
Trust I, at value....................................................... 128,065,080 14,256,150 21,734,702 37,871,091
Investments in shares of portfolios of M Fund Inc., at value.............. -- -- -- --
Receivable from:
John Hancock Variable Series Trust I.................................... 315,897 74,555 26,141 --
M Fund Inc.............................................................. -- -- -- --
------------ ----------- ----------- ------------
Total assets.............................................................. 128,380,977 14,330,705 21,760,843 37,871,091
Liabilities
Payable to:
John Hancock Variable Life Insurance Company............................
M Fund Inc.............................................................. -- -- -- --
Asset charges payable..................................................... 1,930 114 249 419
------------ ----------- ----------- ------------
Total liabilities......................................................... 1,930 114 249 419
------------ ----------- ----------- ------------
Net assets................................................................ $128,379,047 $14,330,591 $21,760,594 $ 37,870,672
============ =========== =========== ============
</TABLE>
See accompanying notes.
69
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENT OF ASSETS AND LIABILITIES (Unaudited) (continued)
March 31, 2000
<TABLE>
<CAPTION>
Turner Brandes
Equity Global Core International
Index Bond Growth Equity
Subaccount Subaccount Subaccount Subaccount
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Assets
Cash......................................................................... $ -- $ -- $ -- $ --
Investments in shares of portfolios of John Hancock Variable Series Trust
I, at value................................................................ 166,904,694 6,665,704 26,408,892 20,618,593
Investments in shares of portfolios of M Fund Inc., at value................. -- -- -- --
Receivable from:
John Hancock Variable Series Trust I....................................... 148,551 24,942 -- --
M Fund Inc................................................................. -- -- -- --
------------ ----------- ---------- -----------
Total assets................................................................. 167,053,245 6,690,646 26,408,892 20,618,593
Liabilities
Payable to:
John Hancock Variable Life Insurance Company............................... -- -- -- --
M Fund Inc................................................................. -- -- -- --
Asset charges payable........................................................ 1,756 84 252 177
Total liabilities............................................................ 1,756 84 252 177
------------ ----------- ----------- -----------
Net assets................................................................... $167,051,489 $ 6,690,562 $26,408,640 $20,618,416
============ =========== =========== ===========
<CAPTION>
Frontier Emerging
Capital Enhanced Markets Global
Appreciation U.S. Equity Equity Equity
Subaccount Subaccount Subaccount Subaccount
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Assets
Cash......................................................................... $ -- $ -- $ -- $ --
Investments in shares of portfolios of John Hancock Variable Series Trust
I, at value................................................................ 25,267,062 7,638,154 6,551,090 1,455,275
Investments in shares of portfolios of M Fund Inc., at value................. -- -- -- --
Receivable from:
John Hancock Variable Series Trust I....................................... -- -- -- --
M Fund Inc................................................................. -- -- -- --
Total assets................................................................. 25,267,062 7,638,154 6,551,090 1,455,275
Liabilities
Payable to:
John Hancock Variable Life Insurance Company............................... -- -- -- --
M Fund Inc................................................................. -- -- -- --
Asset charges payable........................................................ 225 71 85 21
------------ ----------- ----------- -----------
Total liabilities............................................................ 225 71 85 21
------------ ----------- ----------- -----------
Net assets................................................................... $ 25,266,837 $ 7,638,083 $ 6,551,005 $ 1,455,254
============ =========== =========== ===========
</TABLE>
See accompanying notes.
70
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENT OF ASSETS AND LIABILITIES (Unaudited) (continued)
March 31, 2000
<TABLE>
<CAPTION> High
Bond Small/Mid Yield
Index Cap CORE Bond
Subaccount Subaccount Subaccount
---------- ---------- ----------
<S> <C> <C> <C>
Assets
Cash........................................................................................ $ -- $ -- $ --
Investments in shares of portfolios of John Hancock Variable Series Trust I, at value....... 5,742,766 941,401 3,455,998
Investments in shares of portfolios of M Fund Inc., at value................................ -- -- --
Receivable from:
John Hancock Variable Series Trust I...................................................... 31,284 -- 23,811
M Fund Inc................................................................................ -- -- --
---------- --------- ----------
Total assets................................................................................ 5,774,050 941,401 3,479,809
Liabilities
Payable to:
John Hancock Variable Life Insurance Company.............................................. -- -- --
M Fund Inc................................................................................ -- -- --
Asset charges payable....................................................................... 73 11 40
---------- --------- ----------
Total liabilities........................................................................... 73 11 40
---------- --------- ----------
Net assets.................................................................................. $5,773,977 $ 941,390 $3,479,769
========== ========= ==========
</TABLE>
See accompanying notes.
71
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF OPERATIONS (Unaudited)
Years and periods ended March 31,
<TABLE>
<CAPTION>
Large Cap Growth Subaccount Sovereign Bond Subaccount
------------------------------------ -----------------------------------
2000 1999 1998 2000 1999 1998
---------- ----------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I................ $ 100,009 $17,558,034 $ 6,312,073 $ 450,283 $ 2,851,613 $2,190,901
M Fund Inc.......................................... -- -- -- -- -- --
---------- ----------- ----------- ---------- ----------- ----------
Total investment income............................... 100,009 17,558,034 6,312,073 450,283 2,851,613 2,190,901
Expenses:
Mortality and expense risks......................... 109,487 324,595 168,652 27,938 126,407 93,556
---------- ----------- ----------- ---------- ----------- ----------
Net investment income (loss).......................... (9,478) 17,233,439 6,143,421 422,345 2,725,206 2,097,345
Net realized and unrealized gain (loss) on
investments:
Net realized gains (losses)......................... 1,487,863 5,003,007 1,750,881 (796,838) (1,391,910) 185,230
Net unrealized appreciation (depreciation)
during the period................................. 8,093,756 (2,053,672) 8,041,022 921,253 (1,837,190) (378,058)
---------- ----------- ----------- ---------- ----------- ----------
Net realized and unrealized gain (loss) on
investments......................................... 9,581,619 2,949,335 9,791,903 124,415 (3,229,100) (192,828)
---------- ----------- ----------- ---------- ----------- ----------
Net increase (decrease) in net assets resulting
from operations..................................... $9,572,141 $20,182,774 $15,935,324 $ 546,760 $ (503,894) $1,904,517
========== =========== =========== ========== =========== ==========
<CAPTION>
International Equity Index Subaccount Small Cap Growth Subaccount
------------------------------------- -----------------------------------
2000 1999 1998 2000 1999 1998
---------- ----------- ------------ ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I................ $ 83,362 $ 936,475 $ 1,930,710 $ -- $ 3,697,955 $ --
---------- ----------- ----------- ---------- ----------- ----------
M Fund Inc.......................................... -- -- -- -- -- --
Total investment income............................... 83,362 936,475 1,930,710 -- 3,697,955 --
Expenses:
Mortality and expense risks......................... 32,246 81,058 45,651 39,242 60,221 22,593
---------- ----------- ------------ ---------- ----------- ----------
Net investment income (loss).......................... 51,116 855,417 1,885,059 (39,242) 3,637,734 (22,593)
Net realized and unrealized gain (loss) on
investments:
Net realized gains.................................. 703,499 753,750 152,030 2,556,750 2,548,944 58,729
Net unrealized appreciation (depreciation)
during the period................................. (708,302) 4,871,167 78,480 2,295,972 3,920,455 1,070,805
---------- ----------- ------------ ---------- ----------- ----------
Net realized and unrealized gain (loss) on
investments......................................... (4,803) 5,624,917 230,510 4,852,722 6,469,399 1,129,534
---------- ----------- ------------ ---------- ----------- ----------
Net increase in net assets resulting from
operations.......................................... $ 46,313 $ 6,480,334 $ 2,115,569 $4,813,480 $10,107,133 $1,106,941
========== =========== ============ ========== =========== ==========
</TABLE>
See accompanying notes.
72
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF OPERATIONS (Unaudited) (continued)
Years and periods ended March 31,
<TABLE>
<CAPTION>
International Balanced Subaccount Mid Cap Growth Subaccount
------------------------------------- -----------------------------------
2000 1999 1998 2000 1999 1998
---------- ----------- ------------ ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I................ $ 27,773 $ 372,766 $ 185,760 $ -- $ 6,491,783 $1,114,374
M Fund Inc.......................................... -- -- -- -- -- --
---------- ----------- ------------ ---------- ----------- ----------
Total investment income............................... 27,773 372,766 185,760 -- 6,491,783 1,114,374
Expenses:
Mortality and expense risks......................... 3,846 13,792 9,687 76,226 102,248 26,123
---------- ----------- ------------ ---------- ----------- ----------
Net investment income (loss).......................... 23,927 358,974 176,073 (76,226) 6,389,535 1,088,251
Net realized and unrealized gain (loss) on
investments:
Net realized gains (losses)......................... (39,660) 15,640 24,206 1,185,070 5,188,018 599,619
Net unrealized appreciation (depreciation)
during the period................................. (121,758) (173,912) 147,461 (706,164) 15,078,681 1,184,263
---------- ----------- ------------ ---------- ----------- ----------
Net realized and unrealized gain (loss)
on investments...................................... (161,418) (158,272) 171,667 478,906 20,266,699 1,783,882
---------- ----------- ------------ ---------- ----------- ----------
Net increase (decrease) in net assets resulting from
operations.......................................... $ (137,491) $ 200,702 $ 347,740 $ 402,680 $26,656,234 $2,872,133
========== =========== ============ ========== =========== ==========
<CAPTION>
Large Cap Value Subaccount Money Market Subaccount
------------------------------------- -----------------------------------
2000 1999 1998 2000 1999 1998
---------- ----------- ------------ ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I................ $ 168,440 $ 1,809,072 $ 797,874 $ 943,328 $ 3,279,928 $1,854,829
M Fund Inc.......................................... -- -- -- -- --
---------- ----------- ------------ ---------- ----------- ----------
Total investment income............................... 168,440 1,809,072 797,874 943,328 3,279,928 1,854,829
Expenses:
Mortality and expense risks......................... 23,961 88,877 41,415 74,486 291,398 167,813
---------- ----------- ------------ ---------- ----------- ----------
Net investment income................................. 144,479 1,720,195 756,459 868,842 2,988,530 1,687,016
Net realized and unrealized gain (loss) on
investments:
Net realized gains (losses)......................... (117,101) 705,454 330,827 -- -- --
Net unrealized appreciation (depreciation)
during the period................................. (612,964) (2,181,112) 145,355 -- -- --
---------- ----------- ------------ ---------- ----------- ----------
Net realized and unrealized gain (loss)
on investments...................................... (730,065) (1,475,658) 476,182 -- -- --
---------- ----------- ------------ ---------- ----------- ----------
Net increase (decrease) in net assets resulting from
operations.......................................... $ (585,586) $ 244,537 $ 1,232,641 $ 868,842 $ 2,988,530 $1,687,016
========== =========== ============ ========== =========== ==========
</TABLE>
See accompanying notes.
73
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF OPERATIONS (Unaudited) (continued)
Years and periods ended March 31,
<TABLE>
<CAPTION>
Mid Cap Value Subaccount Small/Mid Cap Growth Subaccount
---------------------------------- -------------------------------------
2000 1999 1998 2000 1999 1998
----------- ----------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I................... $ -- $ 110,190 $ 120,469 $ -- $ 1,421,656 $ 142,469
M Fund Inc............................................. -- -- -- -- -- --
Total investment income................................ -- 110,190 120,469 -- 1,421,656 142,469
Expenses:
Mortality and expense risks............................ 19,514 68,611 45,020 9,470 32,995 34,432
----------- ---------- ----------- ---------- ------------ -----------
Net investment income.................................. (19,514) 41,579 75,449 (9,470) 1,388,661 108,037
Net realized and unrealized gain (loss) on
investments:
Net realized gains (losses).......................... 402,063 (860,332) (538,516) (289,736) 13,375 232,246
Net unrealized appreciation (depreciation)
during the period.................................. 1,245,582 1,757,919 (830,390) 892,135 (1,001,208) 236,333
----------- ---------- ----------- ---------- ------------ -----------
Net realized and unrealized gain (loss) on
investments.......................................... 1,647,645 897,587 (1,368,906) 602,399 (987,833) 468,579
----------- ---------- ----------- ---------- ------------ -----------
Net increase in net assets resulting from
operations........................................... $ 1,628,131 $ 939,166 $(1,293,457) $ 592,929 $ 400,828 $ 576,616
=========== ========== =========== ========== ============ ===========
</TABLE>
<TABLE>
<CAPTION>
Real Estate Equity Subaccount Growth & Income Subaccount
---------------------------------- -------------------------------------
2000 1999 1998 2000 1999 1998
---------- ---------- ---------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I................. $ 205,861 $ 544,845 $ 305,783 $ 512,693 $ 23,565,679 $ 9,266,175
M Fund Inc........................................... -- -- -- -- -- --
---------- ---------- ----------- ----------- ------------- ------------
Total investment income................................ 205,861 544,845 305,783 512,693 23,565,679 9,266,175
Expenses:
Mortality and expense risks.......................... 8,329 29,468 22,716 222,841 715,377 290,361
---------- ---------- ----------- ----------- ------------- ------------
Net investment income.................................. 197,532 515,377 283,067 289,852 22,850,302 8,975,814
Net realized and unrealized gain (loss) on
investments:
Net realized gains (losses).......................... (213,163) (735,504) (454,979) 563,798 6,207,253 2,061,212
Net unrealized appreciation (depreciation)
during the period.................................. 349,789 80,925 (698,676) 2,749,417 (5,814,839) 7,759,307
---------- ---------- ----------- ----------- ------------- ------------
Net realized and unrealized gain (loss) on
investments.......................................... 136,626 (654,579) (1,153,655) 3,313,215 392,416 9,820,519
---------- ---------- ----------- ----------- ------------- ------------
Net increase (decrease) in net assets resulting
from operations...................................... $ 334,158 $ (139,202) $ (870,588) $ 3,603,067 $ 23,242,716 $ 18,796,333
========== ========== =========== =========== ============= ============
</TABLE>
See accompanying notes.
74
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF OPERATIONS (Unaudited) (continued)
Years and periods ended March 31,
<TABLE>
<CAPTION>
Managed Subaccount Short-Term Bond Subaccount
----------------------------------- ----------------------------------
2000 1999 1998 2000 1999 1998
---------- ----------- --------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I...................... $ 979,108 $11,251,980 $ 3,606,186 $ 213,418 $ 957,614 $ 977,164
M Fund Inc................................................ -- -- -- -- -- --
Total investment income................................... 979,108 11,251,980 3,606,186 213,418 957,614 977,164
Expenses:
Mortality and expense risks............................. 168,685 495,544 121,905 9,907 50,128 50,947
---------- ----------- ----------- --------- --------- ----------
Net investment income..................................... 810,423 10,756,436 3,484,281 203,511 907,486 926,217
Net realized and unrealized gain (loss) on
investments:
Net realized gains (losses)............................. (51,990) 2,233,258 278,186 (112,846) (441,667) 24,740
Net unrealized appreciation (depreciation)
during the period..................................... 1,363,763 (6,419,069) 1,791,231 68,551 (85,754) (136,999)
---------- ----------- ----------- --------- --------- ----------
Net realized and unrealized gain (loss) on
investments............................................. 1,311,773 (4,185,811) 2,069,417 (44,295) (527,421) (112,259)
---------- ----------- ----------- --------- --------- ----------
Net increase in net assets resulting from
operations.............................................. $2,122,196 $ 6,570,625 $ 5,553,698 $ 159,216 $ 380,065 $ 813,958
========== =========== ============ ========= ========= ==========
</TABLE>
<TABLE>
<CAPTION>
International Opportunities
Small Cap Value Subaccount Subaccount
---------------------------------- -----------------------------------
2000 1999 1998 2000 1999 1998
---------- --------- ----------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I.................... $ 93,270 $ 409,324 $ 47,350 $ -- $ 2,096,195 $ 103,399
M Fund Inc.............................................. -- -- -- -- -- --
--------- ---------- --------- ----------- ----------- ----------
Total investment income................................... 93,270 409,324 47,350 -- 2,096,195 103,399
Expenses:
Mortality and expense risks............................. 20,424 64,613 33,335 34,751 90,191 50,003
--------- ---------- --------- ----------- ----------- ----------
Net investment income (loss).............................. 72,486 344,711 14,015 (34,751) 2,006,004 53,396
Net realized and unrealized gain (loss) on
investments:
Net realized gains (losses)............................... 54,419 (979,002) (9,919) 1,363,359 1,907,809 191,495
Net unrealized appreciation (depreciation)
during the period....................................... (47,196) 325,684 (523,693) (1,275,014) 3,818,953 1,108,416
--------- ---------- --------- ----------- ----------- ----------
Net realized and unrealized gain (loss) on
investments............................................. 7,223 (653,318) (533,612) 88,345 5,726,762 1,299,911
--------- ---------- --------- ----------- ----------- ----------
Net increase (decrease) in net assets resulting from
operations.............................................. $ 79,709 $ (308,607) $(519,597) $ 53,594 $ 7,732,766 $1,353,307
========= ========== ========= =========== =========== ==========
See accompanying notes.
</TABLE>
75
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF OPERATIONS (Unaudited) (continued)
Years and periods ended March 31,
<TABLE>
<CAPTION>
Equity Index Subaccount Global Bond Subaccount
------------------------------------- --------------------------------
2000 1999 1998 2000 1999 1998
----------- ----------- ----------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I................. $ 459,796 $ 5,839,023 $ 1,337,750 $ 26,843 $ 460,088 $ 303,545
M Fund Inc........................................... -- -- -- -- --
Total investment income................................ 459,796 5,839,023 1,337,750 26,843 460,088 303,545
----------- ----------- ----------- --------- ---------- ---------
Expenses:
Mortality and expense risks.......................... 144,695 335,573 126,021 8,730 35,321 19,894
----------- ----------- ----------- --------- ---------- ---------
Net investment income.................................. 315,101 5,503,450 1,211,729 18,113 424,767 283,651
Net realized and unrealized gain (loss) on
investments:
Net realized gains (losses).......................... 1,407,391 7,681,081 691,270 240,729) (204,675) 81,659
Net unrealized appreciation (depreciation) during
the period......................................... 2,436,887 4,678,509 6,098,919 363,167 (433,526) 43,608
----------- ----------- ----------- --------- ---------- ---------
Net realized and unrealized gain (loss)
on investments..................................... 3,844,278 12,359,590 6,790,189 122,438 (638,201) 125,267
----------- ----------- ----------- --------- ---------- ---------
Net increase (decrease) in net assets resulting from
operations......................................... $ 4,159,379 $17,863,040 $ 8,001,918 $ 140,551 $ (213,434) $ 408,918
=========== =========== =========== ========= ========== =========
</TABLE>
<TABLE>
<CAPTION>
Brandes International
Turner Cove Growth Subaccount Equity Subaccount
------------------------------------- ---------------------------------
2000 1999 1998 2000 1999 1998
----------- ----------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I................. $ -- $ 1,349,358 $ -- $ -- $ 549,978 $ --
M Fund Inc........................................... -- -- 84,940 -- -- 358,080
----------- ----------- ----------- --------- ----------- ---------
Total investment income................................ -- 1,349,358 84,940 -- 549,978 358,080
Expenses:
Mortality and expense risks.......................... 22,143 33,920 7,737 14,102 34,297 14,434
----------- ----------- ----------- --------- ----------- ---------
Net investment income.................................. (22,143) 1,315,438 77,203 (14,102) 515,681 343,646
Net realized and unrealized gain (loss) on
investments:
Net realized gains................................... 868,800 1,038,462 156,278 52,962 507,727 89,337
Net unrealized appreciation (depreciation) during
the period......................................... 1,770,438 1,626,646 562,620 (506,321) 3,486,097 91,915
----------- ----------- ----------- --------- ----------- ---------
Net realized and unrealized gain (loss)
on investments..................................... 2,639,238 2,665,108 718,898 (453,359) 3,993,824 181,252
----------- ----------- ----------- --------- ----------- ---------
Net increase (decrease) in net assets resulting from
operations......................................... $ 2,617,095 $ 3,980,546 $ 796,101 (467,461) $ 4,509,505 $ 524,898
=========== =========== =========== ========= =========== =========
</TABLE>
See accompanying notes.
76
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF OPERATIONS (Unaudited) (continued)
Years and periods ended March 31,
<TABLE>
<CAPTION>
Frontier Capital Appreciation Enhanced U.S. Equity
Subaccount Subaccount
------------------------------------- --------------------------------
2000 1999 1998 2000 1999 1998
----------- ----------- ----------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I................. $ -- $ 487,465 $ -- $ -- $ 532,067 $ --
M Fund Inc........................................... -- -- 34,738 -- -- 72,302
----------- ----------- ----------- --------- ---------- ---------
Total investment income................................ -- 487,465 34,738 -- 532,067 72,302
Expenses:
Mortality and expense risks.......................... 17,350 37,471 24,841 5,830 13,930 4,069
----------- ----------- ----------- --------- ---------- ---------
Net investment income.................................. (17,350) 449,994 9,897 5,830 518,137 68,233
Net realized and unrealized gain (loss) on
investments:
Net realized gains (losses).......................... 466,929 624,068 (445,752) 55,792 264,436 87,723
Net unrealized appreciation (depreciation) during
the period......................................... 2,840,905 3,431,408 432,064 31,920 151,562 89,677
----------- ----------- ----------- --------- ---------- ---------
Net realized and unrealized gain (loss)
on investments..................................... 3,307,834 4,055,476 (13,688) 87,712 415,998 177,400
----------- ----------- ----------- --------- ---------- ---------
Net increase (decrease) in net assets resulting from
operations......................................... $ 3,290,484 $ 4,505,470 $ (3,791) $ 81,882 $ 934,135 $ 245,633
=========== =========== =========== ========= ========== =========
</TABLE>
<TABLE>
<CAPTION>
Emerging
Markets Equity Global Equity
Subaccount Subaccount
------------------------------------- ---------------------------------
2000 1999 1998 2000 1999 1998
----------- ----------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I................. $ -- $ 137,724 $ 522 $ -- $ 6,063 $ 491
M Fund Inc........................................... -- -- -- -- -- --
----------- ----------- ----------- --------- ----------- ---------
Total investment income................................ -- 137,724 522 -- 6,063 491
Expenses:
Mortality and expense risks.......................... 6,661 5,465 387 1,101 1,859 339
----------- ----------- ----------- --------- ----------- ---------
Net investment income.................................. (6,661) 132,259 135 (1,101) 4,204 152
Net realized and unrealized gain (loss) on
investments:
Net realized gains................................... 841,365 663,998 (45,975) 27,715 82,873 (21,835)
Net unrealized appreciation (depreciation) during
the period......................................... (423,198) 432,248 2,289 2,640 47,295 4,812
----------- ----------- ----------- --------- ----------- ---------
Net realized and unrealized gain (loss)
on investments..................................... 418,167 1,096,246 (43,686) 30,355 130,168 (17,023)
----------- ----------- ----------- --------- ----------- ---------
Net increase (decrease) in net assets resulting from
operations......................................... $ 411,506 $ 1,228,505 $ (43,551) $ 29,254 $ 134,372 $ (16,871)
=========== =========== =========== ========= =========== =========
</TABLE>
__________
*From May 1, 1998 (commencement of operations).
See accompanying notes.
77
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF OPERATIONS (Unaudited) (continued)
Years and periods ended March 31,
<TABLE>
<CAPTION>
Small/Mid
Bond Index Cap CORE
Subaccount Subaccount
----------------------------------- ----------------------------------
2000 1999 1998* 2000 1999 1998*
---------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I................... $ 98,655 $ 140,772 $ 23,842 $ 124 $ 54,784 $ --
M Fund Inc............................................. -- -- -- -- -- --
Total investment income.................................. 98,655 140,772 23,842 124 54,784 --
Expenses:
Mortality and expense risks............................ 6,322 10,636 937 1,222 2,073 535
Net investment income (loss)............................. 92,333 130,136 22,905 (1,098) 52,711 (535)
Net realized and unrealized gain (loss) on investments:
Net realized gains (losses)............................ (5,117) (104,174) 1,002 106,765 65,733 (25,196)
Net unrealized appreciation (depreciation) during
the period........................................... 48,121 (78,192) (10,217) (19,659) (10,735) 18,718
Net realized and unrealized gain (loss) on investments... 43,004 (182,366) (9,215) 87,106 54,998 (6,478)
Net increase (decrease) in net assets resulting
from operations........................................ $ 135,337 $ (52,230) $ 13,690 $ 86,008 $ 107,709 $ (7,013)
</TABLE>
<TABLE>
<CAPTION>
High Yield
Bond
Subaccount
----------------------------------
2000 1999 1998*
---------- ---------- ----------
<S> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I..................................................... $ 85,793 $ 352,641 $ 88,721
M Fund Inc............................................................................... -- -- --
---------- ---------- ----------
Total investment income.................................................................... 85,793 352,641 88,721
Expenses:
Mortality and expense risks.............................................................. 3,851 12,206 1,962
---------- ---------- ----------
Net investment income...................................................................... 81,942 340,435 86,759
Net realized and unrealized gain (loss) on investments:
Net realized gains (losses).............................................................. (16,585) 42,365 64,824
Net unrealized appreciation (depreciation) during the period............................. (189,115) (139,659) 149,416
---------- ---------- ----------
Net realized and unrealized gain (loss) on investments..................................... (205,700) (97,294) 214,240
---------- ---------- ----------
Net increase (decrease) in net assets resulting from operations............................ $ (123,758) $ 243,141 $ 300,999
========== ========== ==========
</TABLE>
_____________
*From May 1, 1999 (commencement of operations).
See accompanying notes.
78
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF OPERATIONS (Unaudited) (continued)
Years and periods ended March 31,
<TABLE>
<CAPTION>
Large Cap Growth Subaccount Sovereign Bond Subaccount
---------------------------------------- ----------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss)............... $ (9,478) $ 17,233,439 $ 6,143,421 $ 422,895 $ 2,725,206 $ 2,097,345
Net realized gains (losses)................ 1,487,863 5,003,007 1,750,881 (796,838) (1,391,910) 185,230
Net unrealized appreciation
(depreciation) during the
period................................... 8,093,756 (2,053,672) 8,041,022 921,253 (1,837,190) (378,058)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations.................. 9,572,141 20,182,774 15,935,324 547,310 (503,894) 1,904,517
From policyholder transactions:
Net premiums from
policyholders............................ 26,306,668 75,667,981 29,859,648 11,781,689 74,595,720 38,567,292
Net benefits to policyholders.............. (12,830,683) (45,347,424) (13,281,028) (16,379,586) (68,312,320) (27,391,317)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from policyholder
transactions............................... 13,475,985 30,320,557 16,578,620 (4,597,897) 6,283,400 11,175,975
Net increase (decrease) in net assets........ 23,048,126 50,503,331 32,513,944 (4,050,587) 5,779,506 13,080,492
Net assets at beginning of period............ 115,521,551 65,018,220 32,504,276 38,321,474 32,541,967 19,461,475
------------ ------------ ------------ ------------ ------------ ------------
Net assets at end of period.................. $138,569,677 $115,521,551 $ 65,018,220 $ 34,270,887 $ 38,321,473 $ 32,541,967
============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
International Equity Index Subaccount Small Cap Growth Subaccount
---------------------------------------- ---------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss)............... $ 51,116 $ 855,417 $ 1,885,059 $ (39,242) $ 3,637,734 $ (22,593)
Net realized gains......................... 703,499 753,750 152,030 2,556,750 2,548,944 58,729
Net unrealized appreciation
(depreciation) during the
period................................... (708,302) 4,871,167 78,480 2,295,972 3,920,455 1,070,805
------------ ------------ ------------ ------------ ------------ -----------
Net increase in net assets resulting
from operations............................ 46,313 6,480,334 2,115,569 4,813,480 10,107,133 1,106,941
From policyholder transactions:
Net premiums from
policyholders............................ 13,045,026 53,332,374 10,034,119 30,086,736 52,637,861 12,088,047
Net benefits to policyholders.............. (10,401,110) (39,209,664) (8,344,107) (26,646,977) (40,800,272) (6,621,834)
------------ ------------ ------------ ------------ ------------ -----------
Net increase in net assets resulting
from policyholder transactions............. 2,643,916 14,122,710 1,690,012 3,493,759 11,837,589 5,466,213
------------ ------------ ------------ ------------ ------------ -----------
Net increase (decrease) in net assets........ 2,690,229 20,603,044 3,805,581 8,253,239 21,944,722 6,573,154
Net assets at beginning of period............ 33,198,674 12,595,630 8,790,049 31,022,828 9,078,106 2,504,952
------------ ------------ ------------ ------------ ------------ -----------
Net assets at end of period.................. $ 35,888,903 $ 33,198,674 $ 12,595,630 $ 39,276,067 $ 31,022,828 $ 9,078,106
============ ============ ============ ============ ============ ===========
</TABLE>
79
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF CHANGES IN NET ASSETS (Unaudited) (continued)
Years and periods ended March 31,
<TABLE>
<CAPTION>
International Balanced Subaccount Mid Cap Growth Subaccount
---------------------------------------- ------------------------------------------
2000 1999 1998 2000 1999 1998
----------- ------------ ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss)............ $ 23,927 $ 358,974 $ 176,073 $ (76,226) $ 6,389,535 $ 1,088,251
Net realized gains (losses)............. (39,660) 15,640 24,206 1,185,070 5,188,018 599,619
Net unrealized appreciation
(depreciation) during the period...... (121,758) (173,912) 147,461 (706,164) 15,078,681 1,184,263
----------- ------------ ------------- ------------- ------------- ------------
Net increase (decrease) in net assets
resulting from operations.............. (137,491) 200,702 347,740 402,680 26,656,234 2,872,133
From policyholder transactions:
Net premiums from policyholders........ 845,554 6,295,052 3,163,316 26,745,210 65,183,285 11,323,614
Net benefits to policyholders.......... (1,035,960) (5,007,225) (1,882,974) (13,805,055) (41,018,347) (5,132,055)
----------- ------------ ------------- ------------- ------------- ------------
Net increase (decrease) in net assets
resulting from policyholder
transactions........................... (190,406) 1,287,827 1,280,342 12,940,155 24,164,938 6,191,559
----------- ------------ ------------- ------------- ------------- ------------
Net increase (decrease) in net assets... (327,897) 1,488,529 1,628,082 13,342,835 50,821,172 9,063,692
Net assets at beginning of period....... 4,591,858 3,103,327 1,475,245 63,499,616 12,678,444 3,614,752
----------- ------------ ------------- ------------- ------------- ------------
Net assets at end of period............. $ 4,263,961 $ 4,591,856 $ 3,103,327 $ 76,842,451 $ 63,499,616 $ 12,678,444
=========== ============ ============= ============= ============= ============
</TABLE>
<TABLE>
<CAPTION>
LARGE CAP VALUE SUBACCOUNT MONEY MARKET SUBACCOUNT
----------------------------------------- ---------------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------- ------------ -------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income.................. $ 144,479 $ 1,720,195 $ 756,459 $ 868,842 $ 2,988,530 $ 1,687,016
Net realized gains (losses)............ (117,101) 705,454 330,827 -- -- --
Net unrealized appreciation
(depreciation) during the period...... (612,964) (2,181,112) 145,355 -- -- --
------------ ------------- ------------ -------------- ------------- --------------
Net increase (decrease) in net assets
resulting from operations.............. (585,586) 244,537 1,232,641 868,842 2,988,530 1,687,016
From policyholder transactions:
Net premiums from policyholders........ 9,161,994 37,432,039 15,144,316 217,361,930 890,376,545 340,377,358
Net benefits to policyholders.......... (5,345,277) (27,199,179) (4,937,583) (209,542,856) (918,869,964) (269,723,839)
------------ ------------- ------------ -------------- ------------- --------------
Net increase (decrease) in net assets
resulting from policyholder
transactions........................... 3,816,717 10,232,860 10,206,733 7,819,074 (28,493,419) 70,653,519
------------ ------------- ------------ -------------- ------------- --------------
Net increase (decrease) in net assets... 3,231,131 10,477,397 11,439,374 8,687,916 (25,504,889) 72,340,535
Net assets at beginning of period....... 27,106,917 16,629,520 5,190,146 61,006,769 86,511,658 14,171,123
------------ ------------- ------------ -------------- ------------- --------------
Net assets at end of period............. $ 30,338,048 $ 27,106,917 $ 16,629,520 $ 69,694,685 $ 61,006,769 $ 86,511,658
============ ============= ============ ============== ============= ==============
</TABLE>
See accompanying notes.
80
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF CHANGES IN NET ASSETS (Unaudited) (continued)
Years and periods ended March 31,
<TABLE>
<CAPTION>
Mid Cap Value Subaccount Small/Mid Cap Growth Subaccount
----------------------------------------- -----------------------------------------
2000 1999 1998 2000 1999 1998
------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss)............... $ (19,514) $ 41,579 $ 75,449 $ (9,470) $ 1,388,661 $ 108,037
Net realized gains (losses)................ 402,063 (860,332) (538,516) (289,736) 13,375 232,246
Net unrealized appreciation
(depreciation) during
the period................................. 1,245,582 1,757,919 (830,390) 892,135 (1,001,208) 236,333
------------- ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations.................. 1,628,131 939,166 (1,293,457) 592,929 400,828 576,616
From policyholder transactions:
Net premiums from policyholders............ 6,813,614 32,024,751 18,837,112 1,722,182 11,809,133 4,563,154
Net benefits to policyholders.............. (6,026,008) (29,579,995) (7,855,945) (2,633,767) (9,775,543) (6,481,542)
------------- ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from policyholder
transactions............................... 787,606 2,444,756 10,981,167 (911,585) 2,033,590 (1,918,388)
------------- ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets...... 2,415,737 3,383,922 9,687,710 (318,656) 2,434,418 (1,341,772)
Net assets at beginning of period.......... 19,138,533 15,754,611 6,066,901 9,925,831 7,491,413 8,833,185
------------- ------------ ------------ ------------ ------------ ------------
Net assets at end of period................ $ 21,554,270 $ 19,138,533 $ 15,754,611 $ 9,607,175 $ 9,925,831 $ 7,491,413
============= ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Real Estate Equity Subaccount Growth & Income Subaccount
----------------------------------------- --------------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ------------ ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income..................... $ 197,532 $ 515,377 $ 283,067 $ 289,852 $ 22,850,302 $ 8,975,814
Net realized gains (losses)............... (213,163) (735,504) (454,979) 563,798 6,207,253 2,061,212
Net unrealized appreciation
(depreciation) during
the period................................ 349,789 80,925 (698,676) 2,749,417 (5,814,839) 7,759,307
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations................. 334,158 (139,202) (870,588) 3,603,067 23,242,716 18,796,333
From policyholder transactions:
Net premiums from policyholders........... 5,164,186 22,699,314 6,964,604 20,391,023 196,639,863 60,975,616
Net benefits to policyholders............. (4,454,487) (18,093,640) (5,513,221) (20,568,695) (106,763,955) (31,360,866)
------------ ------------ ------------ ------------ ------------ ------------
Net increase in net assets resulting from
policyholder transactions................. 709,699 4,605,674 1,451,383 (177,672) 89,875,908 29,614,750
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets..... 1,043,857 4,466,472 580,795 3,425,395 113,118,624 48,411,083
Net assets at beginning of period......... 9,238,646 4,772,174 4,191,379 209,525,898 96,407,275 47,996,192
------------ ------------ ------------ ------------ ------------ ------------
Net assets at end of period............... $ 10,282,503 $ 9,238,646 $ 4,772,174 $212,951,293 $209,525,899 $ 96,407,275
============ ============ ============ ============ ============ ============
See accompanying notes.
</TABLE>
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED MARCH 31,
<TABLE>
<CAPTION>
MANAGED SUBACCOUNT SHORT-TERM BOND SUBACCOUNT
---------------------------------------- ------------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income.......................... $ 810,423 $ 10,756,436 $ 3,484,281 $ 203,511 $ 907,486 $ 926,217
Net realized gains (losses).................... (51,990) 2,233,258 278,186 (112,846) (441,667) 24,740
Net unrealized appreciation (depreciation)
during the period........................... 1,363,763 (6,419,069) 1,791,231 68,551 (85,754) (136,999)
------------ ------------ ----------- ------------- ------------ ------------
Net increase in net assets resulting from
operations.................................... 2,122,196 6,570,625 5,553,698 159,216 380,065 813,958
From policyholder transactions:
Net premiums from policyholders............... 5,409,063 113,292,872 21,019,273 7,974,976 41,259,110 27,490,588
Net benefits to policyholders................. (4,863,022) (34,219,380) (8,281,600) (5,532,589) (49,156,693) (21,534,195)
------------ ------------ ----------- ------------- ------------ ------------
Net increase (decrease) in net assets
resulting from policyholder transactions...... 546,041 79,073,492 12,737,673 2,442,387 (7,897,583) 5,956,393
------------ ------------ ----------- ------------- ------------ ------------
Net increase (decrease) in net assets.......... 2,668,237 85,644,117 18,291,371 2,601,603 (7,517,518) 6,770,351
Net assets at beginning of period.............. 125,710,810 40,066,692 21,775,321 11,728,988 19,246,506 12,476,155
------------ ------------ ----------- ------------- ------------ ------------
Net assets at end of period.................... $128,379,047 $125,710,809 $40,066,692 $ 14,330,591 $ 11,728,988 $ 19,246,506
============ ============ =========== ============= ============ ============
</TABLE>
<TABLE>
<CAPTION>
SMALL CAP VALUE SUBACCOUNT INTERNATIONAL OPERATIONS SUBACCOUNT
--------------------------------------- ------------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ----------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income......................... $ 72,846 $ 344,711 $ 14,015 $ (34,751) $ 2,006,004 $ 53,396
Net realized gains (losses)................... 54,419 (979,002) (9,919) 1,363,359 1,907,809 191,495
Net unrealized appreciation (depreciation)
during the period........................... (47,196) 325,684 (523,693) (1,275,014) 3,818,953 1,108,416
------------ ------------ ----------- ------------ ------------- ------------
Net increase in net assets resulting from
operations................................... 80,069 (308,607) (519,597) 53,594 7,732,766 1,353,307
From policyholder transactions:
Net premiums from policyholders............... 6,820,059 39,172,672 11,420,833 19,896,505 43,216,216 23,844,756
Net benefits to policyholders................. (3,922,931) (30,591,417) (4,363,378) (13,614,477) (38,372,463) (12,275,087)
------------ ------------ ----------- ------------ ------------- ------------
Net increase (decrease) in net assets
resulting from policyholder transactions...... 2,897,128 8,581,255 7,057,455 6,282,028 4,843,753 11,569,669
------------ ------------ ----------- ------------ ------------- ------------
Net increase (decrease) in net assets.......... 2,977,197 8,272,648 6,537,858 6,335,622 12,576,519 12,922,976
Net assets at beginning of period.............. 18,783,397 10,510,748 3,972,890 31,535,050 18,958,530 6,035,554
------------ ------------ ----------- ------------ ------------- ------------
Net assets at end of period.................... $ 21,760,594 $ 18,783,396 $10,510,748 $ 37,870,672 $ 31,535,049 $ 18,958,530
============ ============ =========== ============ ============= ============
</TABLE>
See accompanying notes.
82
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED MARCH 31,
<TABLE>
<CAPTION>
EQUITY INDEX SUBACCOUNT GLOBAL BOND SUBACCOUNT
------------------------------------------ ---------------------------------------
2000 1999 1998 2000 1999 1998
------------- ------------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income.......................... $ 315,101 $ 5,503,450 $ 1,211,729 $ 18,113 $ 424,767 $ 283,651
Net realized gains (losses).................... 1,407,391 7,681,081 691,270 (240,729) (204,675) 81,659
Net unrealized appreciation
(depreciation) during the period............. 2,436,887 4,678,509 6,098,919 363,167 (433,526) 43,608
------------- ------------- ------------ ----------- ------------ -----------
Net increase (decrease) in net assets
resulting from operations...................... 4,159,379 17,863,040 8,001,918 140,551 (213,434) 408,918
From policyholder transactions:
Net premiums from policyholders................ 30,486,120 225,994,914 60,690,933 2,169,780 11,387,398 9,258,713
Net benefits to policyholders.................. (17,507,140) (147,909,470) (31,166,123) (4,458,286) (10,615,019) (3,008,341)
------------- ------------- ------------ ----------- ------------ -----------
Net increase (decrease) in net assets
resulting from policyholder transactions....... 12,978,980 78,085,444 29,524,810 (2,288,506) 772,379 6,250,372
------------- ------------- ------------ ----------- ------------ -----------
Net increase (decrease) in net assets........... 17,138,359 95,948,484 37,526,728 (2,147,955) 558,945 6,659,290
Net assets at beginning of period............... 149,913,130 53,964,647 16,437,919 8,838,517 8,279,571 1,620,281
------------- ------------- ------------ ----------- ------------ -----------
Net assets at end of period..................... $ 167,051,489 $ 49,913,131 $ 53,964,647 $ 6,690,562 $ 8,838,516 $ 8,279,571
============= ============= ============ =========== ============ ===========
</TABLE>
<TABLE>
<CAPTION>
TURNER CORE GROWTH SUBACCOUNT BRANDES INTERNATIONAL EQUITY SUBACCOUNT
-------------------------------------- ----------------------------------------
2000 1999 1998 2000 1999 1998
---------- ----------- ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss)................... (22,143) $ 1,315,438 $ 77,203 $ (14,102) $ 515,681 $ 343,646
Net realized gains............................. 868,800 1,038,462 156,278 52,962 507,727 89,337
Net unrealized appreciation (depreciation)
during the period............................ 1,770,438 1,626,646 562,620 (506,321) 3,486,097 91,915
------------ ----------- ----------- ----------- ------------ -------------
Net increase (decrease) in net assets
resulting from operations...................... 2,617,095 3,980,546 796,101 (467,461) 4,509,505 524,898
From policyholder transactions:
Net premiums from policyholders................ 7,163,231 23,098,524 4,779,974 5,406,790 12,134,533 5,520,633
Net benefits to policyholders.................. (6,042,692) (9,308,254) (1,690,860) (1,736,210) (5,569,496) (2,041,375)
------------ ----------- ----------- ----------- ----------- -------------
Net increase in net assets resulting from
policyholder transactions...................... 1,120,539 13,790,270 3,089,114 3,670,580 6,565,037 3,479,258
------------ ----------- ----------- ----------- ----------- -------------
Net increase in net assets...................... 3,737,634 17,770,816 3,885,215 3,203,119 11,074,542 4,004,156
Net assets at beginning of period............... 22,671,006 4,900,189 1,014,974 17,415,297 6,340,754 2,336,598
------------ ----------- ----------- ----------- ----------- -------------
Net assets at end of period..................... $ 26,408,640 $22,671,005 $ 4,900,189 $20,618,416 $17,415,296 $ 6,340,754
============ =========== =========== =========== =========== =============
</TABLE>
See accompanying notes.
83
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED MARCH 31,
<TABLE>
<CAPTION>
FRONTIER CAPITAL APPRECIATION SUBACCOUNT ENHANCED U.S.EQUITY SUBACCOUNT
---------------------------------------- -------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss)..................... $ (17,350) $ 449,994 $ 9,897 $ (5,830) $ 518,137 $ 68,233
Net realized gains (losses)...................... 466,929 624,068 (445,752) 55,792 264,436 87,723
Net unrealized appreciation during
the period................................... 2,840,905 3,431,408 432,064 31,920 151,562 89,677
------------ ------------ ------------ ----------- ----------- -----------
Net increase (decrease) in net assets resulting
from operations................................ 3,290,484 4,505,470 (3,791) 81,882 934,135 245,633
From policyholder transactions:
Net premiums from policyholders................ 8,319,565 25,135,447 13,982,031 3,512,323 6,480,741 3,031,309
Net benefits to policyholders.................. (3,328,234) (22,331,613) (9,695,520) (2,694,336) (3,151,279) (1,299,530)
------------ ------------ ------------ ----------- ----------- -----------
Net increase in net assets resulting from
policyholder transactions...................... 4,991,331 2,803,834 4,286,511 817,987 3,329,462 1,731,779
------------ ------------ ------------ ----------- ----------- -----------
Net increase in net assets....................... 8,281,815 7,309,304 4,282,720 899,869 4,263,597 1,977,412
Net assets at beginning of period................ 16,985,022 9,675,718 5,392,998 6,738,214 2,474,617 497,205
------------ ------------ ------------ ----------- ----------- -----------
Net assets at end of period...................... $ 25,266,837 $ 16,985,022 $ 9,675,718 $ 7,638,083 $ 6,738,214 $ 2,474,617
============ ============ ============ =========== =========== ===========
<CAPTION>
GLOBAL EQUITY
EMERGING MARKETS EQUITY SUBACCOUNT SUBACCOUNT
--------------------------------------- -------------------------------------
2000 1999 1998* 2000 1999 1998*
------------ ----------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss)................... $ (6,661) $ 132,259 $ 135 $ (1,101) $ 4,204 $ 152
Net realized gains (losses).................... 841,365 663,998 (45,975) 27,715 82,873 (21,835)
Net unrealized appreciation (depreciation)
during the period............................ (423,198) 432,248 2,289 2,640 47,295 4,812
------------ ----------- ---------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting
from operations................................ 411,506 1,228,505 (43,551) 29,254 134,372 (16,871)
From policyholder transactions:
Net premiums from policyholders................ 18,848,748 18,579,194 2,434,226 1,111,909 3,151,983 2,372,034
Net benefits to policyholders.................. (16,434,122) (16,271,324) (2,203,670) (522,788) (2,613,505) (2,191,135)
------------ ----------- ---------- ----------- ----------- -----------
Net increase in net assets resulting from
policyholder transactions...................... 2,414,626 2,307,870 230,556 589,121 538,478 180,899
------------ ----------- ---------- ----------- ----------- -----------
Net increase in net assets....................... 2,826,132 3,536,375 187,005 618,375 672,850 164,028
Net assets at beginning of period................ 3,724,873 187,005 0 836,879 164,028 0
------------ ----------- ---------- ----------- ----------- -----------
Net assets at end of period...................... $ 6,551,005 $ 3,723,380 $ 187,005 $ 1,455,254 $ 836,878 $ 164,028
============ =========== ========== =========== =========== ===========
</TABLE>
_____________
*From May 1, 1998 (commencement of operations).
See accompanying notes.
84
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED MARCH 31,
<TABLE>
<CAPTION>
BOND INDEX
SUBACCOUNT SMALL/MID CAP CORE SUBACCOUNT
------------------------------------ --------------------------------
2000 1999 1998* 2000 1999 1998*
----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income (loss).......................... $ 92,333 $ 130,136 $ 22,905 $ (1,098) $ 52,711 $ (535)
Net realized gains (losses)........................... (5,117) (104,174) 1,002 106,765 65,733 (25,196)
Net unrealized appreciation (depreciation)
during the period................................... 48,121 (78,192) (10,217) (19,659) (10,735) 18,718
----------- ----------- ---------- ---------- ---------- ----------
Net increase (decrease) in net assets resulting from
operations............................................ 135,337 (52,230) 13,690 86,008 107,709 (7,013)
From policyholder transactions:
Net premiums from policyholders....................... 1,414,394 6,471,518 1,176,234 6,028,335 5,817,483 1,089,030
Net benefits to policyholders......................... (901,805) (2,358,694) (124,467) (5,789,766) (5,611,532) (778,864)
----------- ----------- ---------- ---------- ---------- ----------
Net increase in net assets resulting from
policyholder transactions............................. 512,589 4,112,824 1,051,767 238,569 205,951 310,166
----------- ----------- ---------- ---------- ---------- ----------
Net increase in net assets.............................. 647,926 4,060,594 1,065,457 324,577 313,660 303,153
Net assets at beginning of period....................... 5,126,051 1,065,457 0 616,813 303,153 0
----------- ----------- ---------- ---------- ---------- ----------
Net assets at end of period............................. $ 5,773,977 $ 5,126,051 $1,065,457 $ 941,390 $ 616,813 $ 303,153
=========== =========== ========== ========== ========== ==========
<CAPTION>
HIGH YIELD BOND
SUBACCOUNT
-------------------------------------------------
2000 1999 1998*
------------ ------------- -----------
<S> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income.............................................. $ 81,942 $ 340,435 $ 86,759
Net realized gains (losses)........................................ (16,585) 42,365 64,824
Net unrealized appreciation (depreciation) during the period....... (189,115) (139,659) 149,416
------------ ------------- -----------
Net increase (decrease) in net assets resulting from operations...... (123,758) 243,141 300,999
From policyholder transactions:
Net premiums from policyholders.................................... 1,581,720 19,870,990 6,683,673
Net benefits to policyholders...................................... (2,251,407) (20,368,501) (2,457,088)
------------ ------------- -----------
Net increase (decrease) in net assets resulting from
policyholder transactions........................................ (669,687) (497,511) 4,226,585
------------ ------------- -----------
Net increase (decrease) in net assets................................ (793,445) (254,370) 4,527,584
Net assets at beginning of period.................................... 4,273,214 4,527,584 0
------------ ------------- -----------
Net assets at end of period.......................................... $ 3,479,769 $ 4,273,214 $ 4,527,584
============ ============= ===========
</TABLE>
________________
*From May 1, 1998 (commencement of operations).
See accompanying notes.
85
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
NOTES TO FINANCIAL STATEMENTS (Unaudited)
March 31, 2000
1. Organization
John Hancock Variable Life Account S (the Account) is a separate investment
account of John Hancock Variable Life Insurance Company (JHVLICO), a wholly-
owned subsidiary of John Hancock Mutual Life Insurance Company (John Hancock).
The Account was formed to fund variable life insurance policies (Policies)
issued by JHVLICO. The Account is operated as a unit investment trust registered
under the Investment Company Act of 1940, as amended, and currently consists of
twenty-seven 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-seven Portfolios
of the Fund and M Fund which are currently available are the Large Cap Growth,
Sovereign Bond, International Equity Index, Small Cap Growth, International
Balanced, Mid Cap Growth, Large Cap Value, Money Market, Mid Cap Value,
Small/Mid Cap Growth (formerly, Diversified Mid Cap Growth), Real Estate Equity,
Growth & Income, Managed, Short-Term Bond, Small Cap Value, International
Opportunities, Equity Index, Global Bond (formerly, Strategic Bond), Turner Core
Growth, Brandes International Equity, Frontier Capital Appreciation, Enhanced
U.S. Equity, 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 JHVLICO's general account to cover the contingency that the
guaranteed minimum death benefit might exceed the death benefit which would have
been payable in the absence of such guarantee.
The assets of the Account are the property of JHVLICO. The portion of the
Account's assets applicable to the policies may not be charged with liabilities
arising out of any other business JHVLICO may conduct.
2. Significant Accounting Policies
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Valuation of Investments
Investment in shares of the Fund and of M Fund are valued at the reported
net asset values of the respective Portfolios. Investment transactions are
recorded on the trade date. Dividend income is recognized on the ex-dividend
date. Realized gains and losses on sales of 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 JHVLICO, which is taxed as a life insurance company under the Internal
Revenue Code. JHVLICO has the right to charge the Account any federal income
taxes, or provision for federal income taxes, attributable to the operations of
the Account or to the policies funded in the Account. Currently, JHVLICO does
not make a charge for income or other taxes. Charges for state and local taxes,
if any, attributable to the Account may also be made.
86
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Expenses
JHVLICO 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. In addition, a monthly charge at varying levels for the
cost of insurance is deducted from the net assets of the Account.
JHVLICO makes certain deductions for administrative expenses and state
premium taxes from premium payments before amounts are transferred to the
Account.
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. At March 31, 2000, there were no outstanding policy loans.
3. Transaction with Affiliates
John Hancock acts as the distributor, principal underwriter and investment
advisor for the Fund.
Certain officers of the Account are officers and directors of JHVLICO, the
Fund or John Hancock.
87
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
NOTES TO FINANCIAL STATEMENTS (Unaudited) (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 March 31, 2000 were as follows:
<TABLE>
<CAPTION>
Portfolio Shares Owned Cost Value
<S> <C> <C> <C>
Large Cap Growth................... 4,725,708 $129,759,928 $138,569,677
Sovereign Bond..................... 3,720,404 54,957,680 34,270,887
International Equity Index......... 1,828,860 42,194,387 35,888,903
Small Cap Growth................... 1,783,544 44,638,874 39,276,067
International Balanced............. 411,770 5,792,382 4,263,961
Mid Cap Growth..................... 2,559,283 61,055,048 76,842,451
Large Cap Value.................... 2,322,131 36,125,073 30,338,048
Money Market....................... 6,966,470 137,421,592 69,694,685
Mid Cap Value...................... 1,556,021 25,731,991 21,554,270
Small/Mid Cap Growth............... 639,205 13,859,500 9,607,175
Real Estate Equity................. 878,277 15,150,096 10,282,503
Growth & Income.................... 10,470,973 216,940,978 212,951,293
Managed............................ 8,209,595 135,063,985 128,379,047
Short-Term Bond.................... 1,472,374 22,331,767 14,330,591
Small Cap Value.................... 2,002,962 25,350,551 21,760,594
International Opportunities........ 2,498,318 47,315,632 37,870,672
Equity Index....................... 8,004,018 158,931,331 167,051,489
Global Bond........................ 668,397 14,205,761 6,690,562
Turner Core Growth................. 1,042,593 29,103,994 26,408,640
Brandes International Equity....... 1,374,582 17,355,048 20,618,416
Frontier Capital Appreciation...... 999,103 21,184,263 25,266,837
Enhanced U.S. Equity............... 362,858 8,235,003 7,638,083
Emerging Markets Equity............ 498,382 18,281,972 6,551,005
Global Equity...................... 115,407 2,131,686 1,455,254
Bond Index......................... 611,908 6,074,464 5,773,977
Small/Mid Cap CORE................. 89,127 2,920,766 941,390
High Yield Bond.................... 405,962 6,265,268 3,479,769
</TABLE>
88
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Purchases, including reinvestment of dividend distributions, and proceeds
from sales of shares in the Portfolios of the Fund and of M Fund during 1999
were as follows:
<TABLE>
<CAPTION>
Portfolio Purchases Sales
--------- --------- -----
<S> <C> <C>
Large Cap Growth............................. $ 62,265,535 $ 14,711,539
Sovereign Bond............................... 38,288,617 29,280,010
International Equity Index................... 32,519,440 17,541,313
Small Cap Growth............................. 27,757,302 12,281,978
International Balanced....................... 3,415,587 1,768,784
Mid Cap Growth............................... 45,338,211 14,783,738
Large Cap Value.............................. 22,257,609 10,304,554
Money Market................................. 304,141,849 329,646,739
Mid Cap Value................................ 15,413,952 12,927,617
Small/Mid Cap Growth......................... 8,759,614 5,337,363
Real Estate Equity........................... 13,375,520 8,254,469
Growth & Income.............................. 144,949,345 32,223,136
Managed...................................... 111,633,323 21,803,394
Short-Term Bond.............................. 17,352,671 24,342,768
Small Cap Value.............................. 16,062,747 7,136,780
International Opportunities.................. 24,767,973 17,918,215
Equity Index................................. 124,086,502 40,497,607
Global Bond.................................. 10,322,531 9,125,384
Turner Core Growth........................... 20,980,047 5,874,338
Brandes International Equity................. 10,664,333 3,583,615
Frontier Capital Appreciation................ 13,387,462 10,133,633
Enhanced U.S. Equity......................... 5,925,334 2,077,734
Emerging Markets Equity...................... 9,682,573 7,242,444
Global Equity................................ 2,167,637 1,624,954
Bond Index................................... 5,900,997 1,658,038
Small/Mid Cap CORE........................... 3,312,578 3,053,916
High Yield Bond.............................. 11,898,171 12,055,248
</TABLE>
89
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
5. Net Assets
Accumulation shares attributable to net assets of policyholders and
accumulation share values for each portfolio at March 31, 2000 were as follows:
<TABLE>
<CAPTION>
VEP Class # 1 VEP Class #2 VEP Class #3
--------------------------- --------------------------- ---------------------------
Accumulation Accumulation Accumulation Accumulation Accumulation Accumulation
Portfolio Shares Share Values Shares Share Values Shares Share Values
--------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Large Cap Growth 501,219 36.64 452,200 36.75 211,942 36.87
Sovereign Bond 225,529 14.01 160,910 14.05 34,047 14.10
International Equity Index 241,826 17.49 177,419 17.55 5,314 17.60
Small Cap Growth 187,881 24.93 186,116 24.98 34,022 25.03
International Balanced 18,384 12.87 25,851 12.90 15,065 12.93
Mid Cap Growth 244,467 36.47 184,426 36.54 60,720 36.61
Large Cap Value 195,113 15.68 139,786 15.71 24,929 15.74
Money Market 587,473 13.25 1,124,720 13.29 419,434 13.33
Mid Cap Value 120,750 15.21 49,381 15.24 3,276 15.27
Small/Mid Cap Growth 88,999 21.14 89,441 21.20 0 21.26
Real Estate Equity 95,604 14.85 55,305 14.89 19,250 14.94
Growth & Income 996,212 31.41 591,014 31.51 179,428 31.60
Managed 550,878 21.22 284,687 21.29 39,917 21.35
Short-Term Bond 84,327 13.10 94,761 13.14 9,722 13.18
Small Cap Value 117,863 12.27 89,562 12.29 22,744 12.32
International Opportunities 140,734 16.48 191,629 16.51 6,658 16.54
Equity Index 546,625 23.54 605,346 23.58 211,658 23.63
Global Bond 55,879 12.37 48,921 12.39 18,599 12.41
Turner Core Growth 31,801 31.21 15,389 31.28 0 31.34
Brandes International Equity 22,721 16.32 33,499 16.35 0 16.39
Frontier Capital Appreciation 26,137 27.20 13,250 27.26 0 27.31
Enhanced U.S. Equity 4,387 17.51 0 17.54 0 17.56
Emerging Markets Equity 61,060 13.69 160,303 13.70 13,962 13.71
Global Equity 27,243 12.68 27,262 12.69 2,252 12.70
Bond Index 100,226 10.59 99,922 10.60 63,929 10.60
Small/Mid Cap CORE 18,057 11.56 12,509 11.57 4,270 11.58
High Yield Bond 45,997 9.76 41,613 9.77 2,141 9.78
</TABLE>
90
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
<TABLE>
<CAPTION>
V Coli Class #4 V Coli Class #5 V Coli Class #6
--------------------------- --------------------------- ---------------------------
Accumulation Accumulation Accumulation Accumulation Accumulation Accumulation
Portfolio Shares Share Values Shares Share Values Shares Share Values
--------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Large Cap Growth 624,782 36.96 302,096 37.00 273,725 37.04
Sovereign Bond 14,891 14.89 610,911 14.91 449,306 14.92
International Equity Index 39,735 16.23 160,610 16.25 232,734 16.27
Small Cap Growth 66,214 25.38 39,775 25.39 46,461 25.42
International Balanced 40,176 13.10 10,196 13.11 54,443 13.12
Mid Cap Growth 151,297 37.12 135,265 37.15 63,453 37.17
Large Cap Value 168,223 15.96 160,487 15.97 419,835 15.98
Money Market 173,689 13.19 290,988 13.20 159,826 13.22
Mid Cap Value 81,017 15.48 17,842 15.49 240,521 15.50
Small/Mid Cap Growth 25,267 21.17 378 21.19 29,661 21.21
Real Estate Equity 57,478 15.40 5,284 15.42 199,999 15.43
Growth & Income 581,341 31.39 528,494 31.42 25,701 31.45
Managed 144,003 22.01 118,971 22.04 128,144 22.06
Short-Term Bond 185,563 13.36 424,715 13.38 0 0
Small Cap Value 32,369 12.49 50,061 12.50 278,886 12.50
International Opportunities 219,385 16.77 180,790 16.78 104,577 16.79
Equity Index 336,797 23.96 64,760 23.98 558,737 23.99
Global Bond 49,441 12.59 5,046 12.60 0 12.61
Turner Core Growth 9,891 31.81 20,258 31.83 0 31.86
Brandes International Equity 107,998 16.63 108,224 16.65 39,650 16.66
Frontier Capital Appreciation 90,714 27.72 67,224 27.74 0 27.77
Enhanced U.S. Equity 18,732 17.74 6,871 17.74 0 17.67
Emerging Markets Equity 0 13.81 39,505 13.81 0 13.81
Global Equity 0 12.80 0 12.80 0 12.80
Bond Index 2,500 10.68 19,774 10.68 0 10.68
Small/Mid Cap CORE 0 11.67 0 11.67 0 11.67
High Yield Bond 1,565 9.98 0 0.98 8,654 9.85
</TABLE>
91
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
<TABLE>
<CAPTION>
Medallion Executive VLI Class #7 MVEP Class #8 MVUL Class #9
-------------------------------- --------------------------- ---------------------------
Accumulation Accumulation Accumulation Accumulation Accumulation Accumulation
Portfolio Shares Share Values Shares Share Values Shares Share Values
--------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Large Cap Growth 112,264 85.40 799,241 26.61 346,876 23.70
Sovereign Bond 56,595 24.06 302,433 12.64 338,834 11.90
International Equity Index 146,837 27.50 777,766 15.04 220,189 15.52
Small Cap Growth 181,468 24.96 309,201 25.20 209,297 28.33
International Balanced 58,124 12.89 42,203 13.01 36,194 12.47
Mid Cap Growth 181,012 36.51 411,691 36.87 120,647 40.88
Large Cap Value 340,696 15.69 144,765 15.85 120,405 13.55
Money Market 351,729 18.33 681,051 12.10 410,096 11.58
Mid Cap Value 484,280 15.22 236,146 15.38 58,151 12.99
Small/Mid Cap Growth 5,968 21.17 263,530 13.51 34,027 13.75
Real Estate Equity 42,675 22.83 146,961 12.66 42,185 9.75
Growth & Income 833,145 69.25 1,328,327 22.26 456,665 19.45
Managed 2,310,154 40.30 226,876 17.09 120,259 15.63
Short-Term Bond 90,405 13.12 44,158 12.06 95,975 11.56
Small Cap Value 619,523 12.28 321,868 12.40 92,320 11.77
International Opportunities 631,815 16.50 248,891 16.65 454,435 15.94
Equity Index 602,588 23.56 1,254,544 23.79 666,253 20.30
Global Bond 167,161 12.38 61,755 12.50 64,901 11.80
Turner Core Growth 0 29.04 211,545 28.32 69,350 27.22
Brandes International Equity 0 16.55 542,598 15.97 59,761 17.06
Frontier Capital Appreciation 0 25.24 453,530 23.01 87,539 22.27
Enhanced U.S. Equity 0 13.28 149,272 17.65 163,219 17.65
Emerging Markets Equity 43,842 13.69 79,087 13.76 40,699 13.76
Global Equity 25,141 12.69 24,262 12.75 852 12.75
Bond Index 27,803 10.59 19,951 10.64 180 10.64
Small/Mid Cap CORE 174 11.57 18,128 11.62 706 11.62
High Yield Bond 21,279 9.76 86,249 9.81 83,050 9.81
</TABLE>
92
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
<TABLE>
<CAPTION>
MVUL 98 Class #10 MVEP 98 Class #11 MEVL II Class #12
--------------------------- --------------------------- ---------------------------
Accumulation Accumulation Accumulation Accumulation Accumulation Accumulation
Portfolio Shares Share Values Shares Share Values Shares Share Values
--------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Large Cap Growth 257,292 23.70 225,326 26.61 4,496 87.48
Sovereign Bond 132,915 11.90 121,516 12.64 0 28.75
International Equity Index 50,283 15.52 94,430 15.04 1,229 29.08
Small Cap Growth 178,252 28.33 75,478 25.20 0 25.55
International Balanced 24,342 12.47 5,498 13.01 0 13.19
Mid Cap Growth 325,412 40.88 155,427 36.87 4,597 37.36
Large Cap Value 82,162 13.55 148,074 15.85 0 16.07
Money Market 913,953 11.58 249,610 12.10 0 13.26
Mid Cap Value 70,658 12.99 63,590 15.38 0 15.59
Small/Mid Cap Growth 15,647 13.75 21,186 13.51 0 0
Real Estate Equity 15,207 9.84 23,604 12.66 0 23.94
Growth & Income 1,057,563 19.45 214,058 22.26 2,544 82.96
Managed 82,529 15.63 51,746 17.09 2,049 47.71
Short-Term Bond 34,938 11.56 32,271 12.06 5,208 13.60
Small Cap Value 33,605 11.77 107,429 12.40 0 12.57
International Opportunities 55,230 15.94 65,769 16.65 0 16.88
Equity Index 2,032,606 20.30 537,822 23.79 9,694 24.12
Global Bond 42,596 11.80 29,112 12.50 0 12.67
Turner Core Growth 345,860 27.22 235,445 28.32 0 32.04
Brandes International Equity 123,322 17.06 228,923 15.97 0 16.75
Frontier Capital Appreciation 240,310 22.27 91,600 23.01 0 26.83
Enhanced U.S. Equity 51,190 17.65 38,188 17.65 0 17.82
Emerging Markets Equity 24,399 13.76 14,489 13.76 0 13.85
Global Equity 5,262 12.75 2,275 12.75 0 12.83
Bond Index 140,959 10.64 68,555 10.64 0 10.71
Small/Mid Cap CORE 12,671 11.62 14,654 11.62 0 11.70
High Yield Bond 18,929 9.81 45,739 9.81 0 9.88
</TABLE>
93
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
<TABLE>
<CAPTION>
VEP Class #13
---------------------------
Accumulation Accumulation
Portfolio Shares Share Values
--------- ------------ ------------
<S> <C> <C>
Large Cap Growth 502 87.48
Sovereign Bond 0 28.75
International Equity Index 879 29.08
Small Cap Growth 588 25.55
International Balanced 0 13.19
Mid Cap Growth 877 37.36
Large Cap Value 13 16.07
Money Market 7,184 13.26
Mid Cap Value 0 15.59
Small/Mid Cap Growth 0 21.94
Real Estate Equity 0 23.94
Growth & Income 307 82.96
Managed 372 47.71
Short-Term Bond 0 13.60
Small Cap Value 0 12.57
International Opportunities 1,226 16.88
Equity Index 1,481 24.12
Global Bond 0 12.67
Turner Core Growth 0 32.04
Brandes International Equity 0 16.75
Frontier Capital Appreciation 0 26.83
Enhanced U.S. Equity 0 17.82
Emerging Markets Equity 717 13.85
Global Equity 0 12.83
Bond Index 0 10.71
Small/Mid Cap CORE 0 11.70
High Yield Bond 0 9.88
</TABLE>
94
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Policyholders of
John Hancock Variable Life Account S
of John Hancock Variable Life Insurance Company
We have audited the accompanying statement of assets and liabilities of
John Hancock Variable Life Account S (the Account) (comprising, respectively,
the Large Cap Growth, Sovereign Bond, International Equity Index, Small Cap
Growth, International Balanced, Mid Cap Growth, Large Cap Value, Money Market,
Mid Cap Value, Small/Mid Cap Growth (formerly, Diversified Mid Cap Growth), Real
Estate Equity, Growth & Income, Managed, Short-Term Bond, Small Cap Value,
International Opportunities, Equity Index, Global Bond (formerly, Strategic
Bond), Turner Core Growth, Brandes International Equity, Frontier Capital
Appreciation, Enhanced U.S. Equity, Emerging Markets Equity, Global Equity, Bond
Index, Small/Mid Cap CORE and High Yield Bond Subaccounts) as of December 31,
1999, and the related statements of operations and changes in net assets for
each of the periods indicated therein. These financial statements are the
responsibility of the Account's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of each of the respective
subaccounts constituting John Hancock Variable Life Account S at December 31,
1999, the results of their operations and the changes in their net assets for
each of the periods indicated, in conformity with accounting principles
generally accepted in the United States.
ERNST & YOUNG LLP
Boston, Massachusetts
February 11, 2000
95
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<CAPTION>
International
Large Cap Sovereign Equity Small Cap
Growth Bond Index Growth
Subaccount Subaccount Subaccount Subaccount
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Assets
Cash......................................................................... $ 8,016 $ 2,380 $ 2,435 $ 2,357
Investments in shares of portfolios of John Hancock Variable Series Trust I,
at value................................................................... 115,521,551 38,321,474 33,198,674 31,022,828
Investments in shares of portfolios of M Fund Inc., at value................. -- -- -- --
Receivable from:
John Hancock Variable Series Trust I....................................... 21,617 12,536 419 208,513
M Fund Inc................................................................. -- -- -- --
------------ ----------- ----------- -----------
Total assets................................................................. 115,551,184 38,336,390 33,201,528 31,233,698
Liabilities
Payable to:
John Hancock Variable Life Insurance Company............................... 20,467 12,194 75 208,172
M Fund Inc................................................................. -- -- -- --
Asset charges payable........................................................ 9,166 2,723 2,779 2,698
------------ ----------- ----------- -----------
Total liabilities............................................................ 29,633 14,917 2,854 210,870
------------ ----------- ----------- -----------
Net assets................................................................... $115,521,551 $38,321,473 $33,198,674 $31,022,828
============ =========== =========== ===========
<CAPTION>
International Mid Cap Large Cap Money
Balanced Growth Value Market
Subaccount Subaccount Subaccount Subaccount
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Assets
Cash......................................................................... $ 304 $ 4,698 $ 1,803 $ 3,061
Investments in shares of portfolios of John Hancock Variable Series Trust I,
at value................................................................... 4,591,857 63,499,616 27,106,918 61,006,769
Investments in shares of portfolios of M Fund Inc., at value................. -- -- -- --
Receivable from:
John Hancock Variable Series Trust I....................................... 52 27,659 12,738 1,396,082
M Fund Inc................................................................. -- -- -- --
------------ ----------- ----------- -----------
Total assets................................................................. 4,592,213 63,531,973 27,121,459 62,405,912
Liabilities
Payable to:
John Hancock Variable Life Insurance Company............................... 9 26,980 12,479 1,395,329
M Fund Inc................................................................. -- -- -- --
Asset charges payable........................................................ 348 5,377 2,063 3,814
------------ ----------- ----------- -----------
Total liabilities............................................................ 357 32,357 14,542 1,399,143
------------ ----------- ----------- -----------
Net assets................................................................... $ 4,591,856 $63,499,616 $27,106,917 $61,006,769
============ =========== =========== ===========
</TABLE>
See accompanying notes.
96
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENT OF ASSETS AND LIABILITIES (continued)
December 31, 1999
[CAPTION]
<TABLE>
Mid Cap Small/Mid Cap Real Estate Growth &
Value Growth Equity Income
Subaccount Subaccount Subaccount Subaccount
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Assets
Cash.......................................................................... $ 1,422 $ 701 $ 611 $ 17,877
Investments in shares of portfolios of John Hancock Variable Series Trust I,
at value.................................................................... 19,138,533 9,925,831 9,238,646 209,525,898
Investments in shares of portfolios of M Fund Inc., at value.................. -- -- -- --
Receivable from:
John Hancock Variable Series Trust I........................................ 38,609 580,155 88 330,982
M Fund Inc.................................................................. -- -- -- --
----------- ----------- ----------- ------------
Total assets.................................................................. 19,178,564 10,506,687 9,239,345 209,874,757
Liabilities
Payable to:
John Hancock Variable Life Insurance Company................................ 38,404 580,049 -- 328,424
M Fund Inc.................................................................. -- -- -- --
Asset charges payable......................................................... 1,627 807 699 20,434
----------- ----------- ----------- ------------
Total liabilities............................................................. 40,031 580,856 699 348,858
----------- ----------- ----------- ------------
Net assets.................................................................... $19,138,533 $ 9,925,831 $ 9,238,646 $209,525,899
=========== =========== =========== ============
<CAPTION>
Short-Term Small Cap International
Managed Bond Value Opportunities
Subaccount Subaccount Subaccount Subaccount
------------ ----------- ----------- -------------
<S> <C> <C> <C> <C>
Assets
Cash.......................................................................... $ 13,307 $ 731 $ 1,430 $ 2,454
Investments in shares of portfolios of John Hancock Variable Series Trust I,
at value.................................................................... 125,710,809 11,728,988 18,783,397 31,535,050
Investments in shares of portfolios of M Fund Inc., at value.................. -- -- -- --
Receivable from:
John Hancock Variable Series Trust I........................................ 34,311 215 189,514 1,308
M Fund Inc.................................................................. -- -- -- --
------------ ----------- ----------- -----------
Total assets.................................................................. 125,758,427 11,729,934 18,974,341 31,538,812
Liabilities
Payable to:
John Hancock Variable Life Insurance Company................................ 32,402 114 189,306 955
M Fund Inc.................................................................. -- -- -- --
Asset charges payable......................................................... 15,216 832 1,639 2,808
------------ ----------- ----------- -----------
Total liabilities............................................................. 47,618 946 190,945 3,763
------------ ----------- ----------- -----------
Net assets.................................................................... $125,710,809 $11,728,988 $18,783,396 $31,535,049
============ =========== =========== ===========
</TABLE>
See accompanying notes.
97
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENT OF ASSETS AND LIABILITIES (continued)
December 31, 1999
<TABLE>
<CAPTION>
Turner Brandes
Equity Global Core International
Index Bond Growth Equity
Subaccount Subaccount Subaccount Subaccount
------------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
Assets
Cash............................................................... $ 10,574 $ 734 $ 1,535 $ 1,016
Investments in shares of portfolios of John Hancock Variable
Series Trust I, at value........................................ 149,913,130 8,838,516 -- --
Investments in shares of portfolios of M Fund Inc., at value....... -- -- 22,671,006 17,415,296
Receivable from:
John Hancock Variable Series Trust I............................ 126,680 766,077 222 271
M Fund Inc...................................................... -- -- -- --
------------- ---------- ----------- ------------
Total assets....................................................... 150,050,384 9,605,327 22,672,763 17,416,583
Liabilities
Payable to:
John Hancock Variable Life Insurance Company.................... 125,115 765,972 -- 122
M Fund Inc...................................................... -- -- -- --
Asset charges payable.............................................. 12,138 839 1,758 1,165
------------- ---------- ----------- ------------
Total liabilities.................................................. 137,253 766,811 1,758 1,287
------------- ---------- ----------- ------------
Net assets......................................................... $ 149,913,131 $8,838,516 $22,671,005 $ 17,415,296
============= ========== =========== ============
<CAPTION>
Frontier Emerging
Capital Enhanced Markets Global
Appreciation U.S. Equity Equity Equity
Subaccount Subaccount Subaccount Subaccount
------------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Assets
Cash............................................................... $ 1,031 $ 437 $ 370 $ 71
Investments in shares of portfolios of John Hancock Variable
Series Trust I, at value........................................ -- -- 3,723,380 836,878
Investments in shares of portfolios of M Fund Inc., at value....... 16,985,022 6,738,214 -- --
Receivable from:
John Hancock Variable Series Trust I............................ 771 63 254 24
M Fund Inc...................................................... -- -- -- --
------------- ---------- ----------- ------------
Total assets....................................................... 16,986,824 6,738,714 3,724,004 836,973
Liabilities
Payable to:
John Hancock Variable Life Insurance Company.................... 620 -- 204 13
M Fund Inc...................................................... -- -- -- --
Asset charges payable.............................................. 1,182 500 420 82
------------- ---------- ----------- ------------
Total liabilities.................................................. 1,802 500 624 95
------------- ---------- ----------- ------------
Net assets......................................................... $ 16,985,022 $6,738,214 $ 3,723,380 $ 836,878
============= ========== =========== ============
</TABLE>
See accompanying notes.
98
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENT OF ASSETS AND LIABILITIES (continued)
December 31, 1999
<TABLE>
<CAPTION>
Bond Small/Mid Cap Yield High
Index CORE Bond
Subaccount Subaccount Subaccount
------------ -------------- -------------
<S> <C> <C> <C>
Assets
Cash....................................................................... $ 374 $ 56 $ 310
Investments in shares of portfolios of John Hancock Variable
Series Trust I, at value.................................................. 5,126,051 616,813 4,273,214
Investments in shares of portfolios of M Fund Inc., at value............... -- -- --
Receivable from:
John Hancock Variable Series Trust I...................................... 87 7 906,251
M Fund Inc................................................................ -- -- --
------------ -------------- -------------
Total assets............................................................... 5,126,512 616,876 5,179,775
Liabilities
Payable to:
John Hancock Variable Life Insurance Company.............................. 20 -- 906,193
M Fund Inc................................................................ -- -- --
Asset charges payable...................................................... 441 63 368
------------ -------------- -------------
Total liabilities.......................................................... 461 63 906,561
------------ -------------- -------------
Net assets................................................................. $ 5,126,051 $ 616,813 $ 4,273,214
============ ============== =============
</TABLE>
See accompanying notes.
99
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENT OF OPERATIONS
Years and periods ended December 31,
<TABLE>
<CAPTION>
Large Cap Growth Subaccount Sovereign Bond Subaccount
----------------------------------- ---------------------------------
1999 1998 1997 1999 1998 1997
----------- ----------- ----------- ------------ ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I Fund Inc.......... $17,558,034 $ 6,312,073 $ 2,884,498 $2, 851,613 $2,190,901 $855,742
M Fund Inc.............................................. -- -- -- -- -- --
----------- ----------- ----------- ----------- ---------- --------
Total investment income.................................... 17,558,034 6,312,073 2,884,498 2,851,613 2,190,901 --
Expenses:
Mortality and expense risks............................. 324,595 168,652 91,256 126,407 93,556 39,184
----------- ----------- ----------- ----------- ---------- --------
Net investment income...................................... 17,233,439 6,143,421 2,793,242 2,725,206 2,097,345 816,588
Net realized and unrealized gain (loss) on investments:
Net realized gains (losses)............................. 5,003,007 1,750,881 619,721 (1,391,910) 185,230 80,538
Net unrealized appreciation (depreciation) during the
period................................................ (2,053,672) 8,041,022 2,301,920 (1,837,190) (378,058) 63,687
----------- ----------- ----------- ----------- ---------- --------
Net realized and unrealized gain (loss) on investments..... 2,949,335 9,791,903 2,921,641 (3,229,100) (192,828) 144,225
----------- ----------- ----------- ----------- ---------- --------
Net increase (decrease) in net assets resulting from
operations.............................................. $20,182,774 $15,935,324 $ 5,714,883 $ (503,894) $1,904,517 $960,783
=========== =========== =========== =========== ========== ========
<CAPTION>
International Equity Index Subaccount Small Cap Growth Subaccount
------------------------------------- -------------------------------
1999 1998 1997 1999 1998 1997
----------- ------------ ------------ ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I.................... $ 936,475 $ 1,930,710 $ 422,913 $ 3,697,955 $ -- $ 473
M Fund Inc.............................................. -- -- -- -- -- --
----------- ----------- ----------- ----------- ---------- --------
Total investment income.................................... 936,475 1,930,710 422,913 3,697,955 -- 473
Expenses:
Mortality and expense risks............................. 81,058 45,651 33,893 60,221 22,593 6,547
----------- ----------- ----------- ----------- ---------- --------
Net investment income (loss)............................... 855,417 1,885,059 389,020 3,637,734 (22,593) (6,074)
Net realized and unrealized gain (loss) on investments:
Net realized gains...................................... 753,750 152,030 244,810 2,548,944 58,729 21,707
Net unrealized appreciation (depreciation) during the
period............................................... 4,871,167 78,480 (1,219,540) 3,920,455 1,070,805 126,699
----------- ----------- ----------- ----------- ---------- --------
Net realized and unrealized gain (loss) on investments..... 5,624,917 230,510 (974,730) 6,469,399 1,129,534 148,406
----------- ----------- ----------- ----------- ---------- --------
Net increase (decrease) in net assets resulting from
operations............................................ $ 6,480,334 $ 2,115,569 $ (585,710) $10,107,133 $1,106,941 $142,332
----------- ----------- ----------- ----------- ---------- --------
</TABLE>
See accompanying notes.
100
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENT OF OPERATIONS (continued)
Years and periods ended December 31,
<TABLE>
<CAPTION>
International Mid Cap
Balanced Growth
Subaccount Subaccount
1999 1998 1997 1999 1998 1997
---------- ------ ------ ------ ------ -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I...................... $ 372,766 $185,760 $ 61,249 $ 6,491,783 $1,114,374 $ --
M Fund Inc................................................ -- -- -- -- -- --
Total investment income................................... 372,766 185,760 61,249 6,491,783 1,114,374 --
Expenses:
Mortality and expense risks............................... 13,792 9,687 4,443 102,248 26,123 8,287
--------- -------- -------- ----------- ---------- ---------
Net investment income (loss).............................. 358,974 176,073 56,806 6,389,535 1,088,251 (8,287)
Net realized and unrealized gain (loss) on investments:
Net realized gains...................................... 15,640 24,206 8,667 5,188,018 599,619 1,235
Net unrealized appreciation (depreciation) during the
period.................................................... (173,912) 147,461 (67,714) 15,078,681 1,184,263 486,186
--------- -------- -------- ----------- ---------- ---------
Net realized and unrealized gain (loss) on investments.... (158,272) 171,667 (59,047) 20,266,699 1,783,882 487,421
--------- -------- -------- ----------- ---------- ---------
Net increase (decrease) in net assets resulting from
operations.............................................. $200,702 $347,740 $ (2,241) $26,656,234 $2,872,133 $479,134
========= ======== ======== =========== ========== =========
<CAPTION>
Large Cap Value Subaccount Money Market Subaccount
----------------------------------- -------------------------------
1999 1998 1997 1999 1998 1997
------------- --------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I.................... $ 1,809,072 $ 797,874 $194,199 $3,279,928 $1,854,829 $758,434
M Fund Inc.............................................. -- -- -- -- -- --
----------- ---------- --------- ---------- ---------- --------
Total investment income................................... 1,809,072 797,874 194,199 3,279,928 1,854,829 758,434
Expenses:
Mortality and expense risks............................. 88,877 41,415 11,163 291,398 167,813 66,882
----------- ---------- --------- ---------- ---------- --------
Net investment income..................................... 1,720,195 756,459 183,036 2,988,530 1,687,016 691,552
Net realized and unrealized gain (loss) on investments:
Net realized gains...................................... 705,454 330,827 164,821 -- -- --
Net unrealized appreciation (depreciation) during the
period.................................................. (2,181,112) 145,355 279,449 -- -- --
----------- ---------- --------- ---------- ---------- --------
Net realized and unrealized gain (loss) on investments.... (1,475,658) 476,182 444,270 -- -- --
----------- ---------- --------- ---------- ---------- --------
Net increase in net assets resulting from operations...... $ 244,537 $1,232,641 $627,306 $2,988,530 $1,687,016 $691,552
=========== ========== ========= ========== ========== ========
</TABLE>
See accompanying notes.
101
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENT OF OPERATIONS (continued)
Years and periods ended December 31,
<TABLE>
<CAPTION>
Mid Cap Small/Mid Cap
Value Growth
Subaccount Subaccount
1999 1998 1997 1999 1998 1997
----------- ----------- ---------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I..................... $ 110,190 $ 120,469 $1,421,656 $ 142,469 $878,600
M Fund Inc............................................... -- -- -- -- -- --
Total investment income.................................. 110,190 120,469 446,081 1,421,656 142,469 878,600
Expenses:
Mortality and expense risks.............................. 68,611 45,020 11,421 32,995 34,432 35,934
---------- ----------- ---------- ----------- -------- ---------
Net investment income.................................... 41,579 75,449 434,660 1,388,661 108,037 842,666
Net realized and unrealized gain (loss) on investments:
Net realized gains (losses)............................ (860,332) (538,516) 101,787 13,375 232,246 297,666
Net unrealized appreciation (depreciation) during the
period............................................... 1,757,919 (830,390) (39,717) (1,001,208) 236,333 (730,748)
---------- ----------- ---------- ----------- -------- ---------
Net realized and unrealized gain (loss) on investments... 897,587 (1,368,906) 62,070 (987,833) 468,579 (433,082)
---------- ----------- ---------- ----------- -------- ---------
Net increase (decrease) in net assets resulting from
operations............................................... $ 939,166 $(1,293,457) $ 496,730 $ 400,828 $576,616 $ 409,584
========== =========== ========== =========== ======== =========
<CAPTION>
Real Estate Equity Subaccount Growth & Income Subaccount
--------------------------------- -----------------------------------
1999 1998 1997 1999 1998 1997
--------- ----------- -------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I................... $ 544,845 $ 305,783 $246,677 $23,565,679 $ 9,266,175 $5,917,063
M Fund Inc............................................. -- -- -- -- -- --
--------- ----------- -------- ----------- ----------- ----------
Total investment income.................................. 544,845 305,783 246,677 23,565,679 9,266,175 5,917,063
Expenses:
Mortality and expense risks............................ 29,468 22,716 13,879 715,377 290,361 169,135
--------- ----------- -------- ----------- ----------- ----------
Net investment income.................................... 515,377 283,067 232,798 22,850,302 8,975,814 5,747,928
Net realized and unrealized gain (loss) on investments:
Net realized gains (losses)............................ (735,504) (454,979) 252,095 6,207,253 2,061,212 2,390,414
Net unrealized appreciation (depreciation) during the
period............................................... 80,925 (698,676) (13,488) (5,814,839) 7,759,307 435,778
--------- ----------- -------- ----------- ----------- ----------
Net realized and unrealized gain (loss) on investments... (654,579) (1,153,655) 238,607 392,414 9,820,519 2,826,192
--------- ----------- -------- ----------- ----------- ----------
Net increase (decrease) in net assets resulting from
operations............................................. $(139,202) $ (870,588) $471,405 $23,242,716 $18,796,333 $8,574,120
========= =========== ======== =========== =========== ==========
</TABLE>
See accompanying notes.
102
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENT OF OPERATIONS (continued)
Years and periods ended December 31,
<TABLE>
<CAPTION>
Short-Term
Managed Bond
Subaccount Subaccount
------------------------------------- -------------------------------------
1999 1998 1997 1999 1998 1997
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I............... $11,251,980 $ 3,606,186 $ 1,879,954 $ 957,614 $ 977,164 $ 415,542
M Fund Inc......................................... -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total investment income............................. 11,251,980 3,606,186 1,879,954 957,614 977,164 415,542
Expenses:
Mortality and expense risks........................ 495,544 121,905 65,383 50,128 50,947 20,551
----------- ----------- ----------- ----------- ----------- -----------
Net investment income............................... 10,756,436 3,484,281 1,814,571 907,486 926,217 394,991
Net realized and unrealized gain (loss) on
investments:
Net realized gains (losses)........................ 2,233,258 278,186 171,318 (441,667) 24,740 35,294
Net unrealized appreciation (depreciation)
during the period................................. (6,419,069) 1,791,231 715,231 (85,754) (136,999) (25,976)
----------- ----------- ----------- ----------- ----------- -----------
Net realized and unrealized gain (loss) on
investments........................................ (4,185,811) 2,069,417 886,549 (527,421) (112,259) 9,318
----------- ----------- ----------- ----------- ----------- -----------
Net increase in net assets resulting from
operations......................................... $ 6,570,625 $ 5,553,698 $ 2,701,120 $ 380,065 $ 813,958 $ 404,309
=========== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
International Opportunities
Small Cap Value Subaccount Subaccount
------------------------------------- -------------------------------------
1999 1998 1997 1999 1998 1997
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I............... $ 409,324 $ 47,350 $ 299,278 $ 2,096,195 $ 103,399 $ 69,078
M Fund Inc......................................... -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total investment income............................. 409,324 47,350 299,278 2,096,195 103,399 69,078
Expenses:
Mortality and expense risks........................ 64,613 33,335 8,494 90,191 50,003 13,177
----------- ----------- ----------- ----------- ----------- -----------
Net investment income............................... 344,711 14,015 290,784 2,006,004 53,396 55,901
Net realized and unrealized gain (loss) on
investments:
Net realized gains (losses)........................ (979,002) (9,919) 75,149 1,907,809 191,495 80,782
Net unrealized appreciation (depreciation)
during the period................................. 325,684 (523,693) (18,626) 3,818,953 1,108,416 (260,664)
----------- ----------- ----------- ----------- ----------- -----------
Net realized and unrealized gain (loss) on
investments........................................ (653,318) (533,612) 56,523 5,726,762 1,299,911 (179,882)
----------- ----------- ----------- ----------- ----------- -----------
Net increase in net assets resulting from
operations......................................... $ (308,607) $ (519,597) $ 347,307 $ 7,732,766 $ 1,353,307 $ (123,981)
=========== =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes.
103
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENT OF OPERATIONS (continued)
Years and periods ended December 31,
<TABLE>
<CAPTION>
Equity Index Global Bond
Subaccount Subaccount
------------------------------------- ---------------------------------
1999 1998 1997 1999 1998 1997
------------- ----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I................... $ 5,839,023 $ 1,337,750 $ 409,920 $ 460,088 $ 303,545 74,850
M Fund Inc............................................. -- -- -- -- -- --
------------- ----------- ---------- --------- --------- --------
Total investment income.................................. 5,839,023 1,337,750 409,920 460,088 303,545 74,850
Expenses:
Mortality and expense risks............................ 335,573 126,021 31,223 35,321 19,894 3,820
------------- ----------- ---------- --------- --------- --------
Net investment income.................................... 5,503,450 1,211,729 378,697 424,767 283,651 71,030
Net realized and unrealized gain (loss) on investments:
Net realized gains (losses)............................ 7,681,081 691,270 901,978 (204,675) 81,659 8,335
Net unrealized appreciation (depreciation) during the
period............................................... 4,678,509 6,098,919 392,256 (433,526) 43,608 (11,727)
------------- ----------- ---------- --------- --------- --------
Net realized and unrealized gain (loss) on investments... 12,359,590 6,790,189 1,294,234 (638,201) 125,267 (3,392)
------------- ----------- ---------- --------- --------- --------
Net increase (decrease) in net assets resulting from
operations............................................. $ 17,863,040 $ 8,001,918 $1,672,931 $(213,434) $ 408,918 $ 67,638
============= =========== ========== ========= ========= ========
</TABLE>
<TABLE>
<CAPTION>
Brandes International
Turner Core Growth Subaccount Equity Subaccount
------------------------------------- ---------------------------------
1999 1998 1997 1999 1998 1997
------------- ----------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series
Trust I.............................................. $ 1,349,358 $ -- $ -- $ 549,978 $ -- $ --
M Fund Inc............................................. -- 84,940 91,360 -- 358,080 32,677
------------- ---------- --------- ---------- --------- --------
Total investment income.................................. 1,349,358 84,940 91,360 549,978 358,080 32,677
Expenses:
Mortality and expense risks............................ 33,920 7,737 4,071 34,297 14,434 7,502
------------- ---------- --------- ---------- --------- --------
Net investment income.................................... 1,315,438 77,203 87,289 515,681 343,646 25,175
Net realized and unrealized gain (loss) on investments:
Net realized gains..................................... 1,038,462 156,278 76,711 507,727 89,337 12,541
Net unrealized appreciation (depreciation) during the
period............................................... 1,626,646 562,620 32,626 3,486,097 91,915 (26,022)
------------- ---------- --------- ---------- --------- --------
Net realized and unrealized gain (loss) on investments... 2,665,108 718,898 109,337 3,993,824 181,252 (13,481)
------------- ---------- --------- ---------- --------- --------
Net increase in net assets resulting from operations..... $ 3,980,546 $ 796,101 $ 196,626 $4,509,505 $ 524,898 $ 11,694
============= ========== ========= ========== ========= =========
</TABLE>
See accompanying notes.
104
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENT OF OPERATIONS (continued)
Years and periods ended December 31,
<TABLE>
<CAPTION>
Frontier Capital Appreciation
Subaccount Enhanced U.S. Equity Subaccount
----------------------------------- -----------------------------------------
1999 1998 1997 1999 1998 1997*
----------- ----------- ---------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I........... $ 487,465 $ -- $ -- $ 532,067 $ -- $ --
M Fund Inc..................................... -- 34,738 128,190 -- 72,302 15,335
----------- ----------- --------- ----------- ----------- -----------
Total investment income........................... 487,465 34,738 128,190 532,067 72,302 15,335
Expenses:
Mortality and expense risks.................... 37,471 24,841 10,040 13,930 4,069 478
----------- ----------- --------- ----------- ----------- -----------
Net investment income............................. 449,994 9,897 118,150 518,137 68,233 14,857
Net realized and unrealized gain (loss) on
investments:
Net realized gains (losses).................... 624,068 (445,752) 614,358 264,436 87,723 4,177
Net unrealized appreciation
(depreciation) during the period............... 3,431,408 432,064 (368,570) 151,562 89,677 6,844
----------- ----------- --------- ----------- ----------- -----------
Net realized and unrealized gain (loss) on
investments...................................... 4,055,476 (13,688) 245,788 415,998 177,400 11,021
----------- ----------- --------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting
from operations.................................. $ 4,505,470 $ (3,791) $ 363,938 $ 934,135 $ 245,633 $ 25,878
=========== =========== ========= =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Emerging
Markets Equity Global Equity Bond Index
Subaccount Subaccount Subaccount
------------------------- ----------------------- -----------------------
1999 1998** 1999 1998** 1999 1998**
----------- ----------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I............ $ 137,724 $ 522 $ 6,063 $ 491 $ 140,772 $ 23,842
M Fund Inc...................................... -- -- -- -- -- --
----------- ----------- ---------- ----------- ---------- ----------
Total investment income........................... 137,724 522 6,063 491 140,772 23,842
Expenses:
Mortality and expense risks..................... 5,465 387 1,859 339 10,636 937
----------- ----------- ---------- ----------- ---------- ----------
Net investment income........................... 132,259 135 4,204 152 130,136 22,905
Net realized and unrealized gain (loss) on
investments:
Net realized gains (losses)..................... 663,998 (45,975) 82,873 (21,835) (104,174) 1,002
Net unrealized appreciation
(depreciation) during the period.............. 432,248 2,289 47,295 4,812 (78,192) (10,217)
----------- ----------- ---------- ----------- ---------- ----------
Net realized and unrealized gain (loss) on
investments.................................... 1,096,246 (43,686) 130,168 (17,023) (182,366) (9,215)
----------- ----------- ---------- ----------- ---------- ----------
Net increase (decrease) in net assets resulting
from operations................................ $ 1,228,505 $ (43,551) $ 134,372 $ (16,871) $ (52,230) $ 13,690
=========== =========== ========== =========== ========== ==========
</TABLE>
________________________
* From July 1, 1997 (commencement of operations).
** From May 1, 1998 (commencement of operations).
105
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENT OF OPERATIONS (continued)
Years and periods ended December 31,
<TABLE>
<CAPTION>
Small/Mid High Yield
Cap CORE Bond
Subaccount Subaccount
1999 1998** 1999 1998**
<S> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I.................................... $ 54,784 $ -- $ 352,641 $ 88,721
M Fund Inc.............................................................. -- -- -- --
Total investment income................................................. 54,784 -- 352,641 88,721
Expenses:
Mortality and expense risks.......................................... 2,073 535 12,206 1,962
-------- -------- --------- --------
Net investment income (loss)............................................ 52,711 (535) 340,435 86,759
Net realized and unrealized gain (loss) on investments:
Net realized gains (losses).......................................... 65,733 (25,196) 42,365 64,824
Net unrealized appreciation (depreciation) during the period......... (10,735) 18,718 (139,659) 149,416
-------- -------- --------- --------
Net realized and unrealized gain (loss) on investments.................. 54,998 (6,478) (97,294) 214,240
-------- -------- --------- --------
Net increase (decrease) in net assets resulting from operations......... $107,709 $ (7,013) $ 243,141 $300,999
======== ======== ========= ========
</TABLE>
_____________
** From May 1, 1998 (commencement of operations).
See accompanying notes.
106
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF CHANGES IN NET ASSETS
Years and periods ended December 31,
<TABLE>
<CAPTION>
Large Cap Growth Sovereign Bond
Subaccount Subaccount
--------------------------------------- -------------------------------------
1999 1998 1997 1999 1998 1997
------------ ------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income............................ $ 17,233,439 $ 6,143,421 $ 2,793,242 $ 2,097,345 $ 816,558 $ 2,725,206
Net realized gains (losses)...................... 5,003,007 1,750,881 619,721 (1,391,910) 185,230 80,538
Net unrealized appreciation (depreciation)
during the period.............................. (2,053,672) 8,041,022 2,301,920 (1,837,190) (378,058) 63,687
------------ ------------ ----------- ------------ ----------- ------------
Net increase (decrease) in net assets resulting
from operations.................................. 20,182,774 15,935,324 5,714,883 (503,894) 1,904,517 960,783
From policyholder transactions:
Net premiums from policyholders.................. 75,667,981 29,859,648 74,595,720 38,567,292 21,324,560 20,264,849
Net benefits to policyholders.................... (45,347,424) (13,281,028) (68,312,320) (8,009,615)(10,390,849) (27,391,317)
------------ ------------ ----------- ------------ ----------- ------------
Net increase in net assets resulting from
policyholder transactions........................ 30,320,557 16,578,620 9,874,000 6,283,400 11,175,975 13,314,945
------------ ------------ ----------- ------------ ----------- ------------
Net increase in net assets......................... 50,503,331 32,513,944 15,588,883 5,779,506 13,080,492 14,275,728
Net assets at beginning of period.................. 65,018,220 32,504,276 16,915,393 32,541,967 19,461,475 5,185,747
------------ ------------ ----------- ------------ ----------- ------------
Net assets at end of period........................ $115,521,551 $ 65,018,220 $32,504,276 $ 38,321,473 $32,541,967 $ 19,461,475
============ ============ =========== ============ =========== ============
</TABLE>
<TABLE>
<CAPTION>
International Equity Small Cap
Index Subaccount Growth Subaccount
-------------------------------------- --------------------------------------
1999 1998 1997 1999 1998 1997
------------ ------------ ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income (loss)..................... $ 855,417 $ 1,885,059 $ 389,020 $ (22,593) $ (6,074) $ 3,637,734
Net realized gains............................... 753,750 152,030 244,810 2,548,944 58,729 21,707
Net unrealized appreciation (depreciation)
during the period.............................. 4,871,167 78,480 (1,219,540) 3,920,455 1,070,805 126,699
------------ ------------ ----------- ------------ ----------- -----------
Net increase (decrease) in net assets resulting
from operations.................................. 6,480,334 2,115,569 (585,710) 10,107,133 1,106,941 142,332
From policyholder transactions:
Net premiums from policyholders.................. 53,332,374 10,034,119 8,150,400 52,637,861 12,088,047 2,870,481
Net benefits to policyholders.................... (39,209,664) (8,344,107) (4,505,840) (40,800,272) (6,621,834) (1,005,386)
------------ ------------ ----------- ------------ ----------- -----------
Net increase in net assets resulting from
policyholder transactions........................ 14,122,710 1,690,012 3,644,560 11,837,589 5,466,213 1,865,095
------------ ------------ ----------- ------------ ----------- -----------
Net increase in net assets......................... 20,603,044 3,805,581 3,058,850 21,944,722 6,573,154 2,007,427
Net assets at beginning of period.................. 12,595,630 8,790,049 5,731,199 9,078,106 2,504,952 497,525
------------ ------------ ----------- ------------ ----------- -----------
Net assets at end of period........................ $ 33,198,674 $ 12,595,630 $ 8,790,049 $ 9,078,106 $ 2,504,952 $31,022,828
============ ============ =========== ============ =========== ===========
</TABLE>
107
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
INTERNATIONAL BALANCED SUBACCOUNT MID CAP GROWTH SUBACCOUNT
------------------------------------ --------------------------------------
1999 1998 1997 1999 1998 1997
----------- ----------- ---------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income (loss)..................... $ 358,974 $ 176,073 $ 56,806 $ 1,088,251 $ (8,287) $ 6,389,535)
Net realized gains............................... 15,640 24,206 8,667 5,188,018 599,619 1,235
Net unrealized appreciation (depreciation)
during the period............................... (173,912) 147,461 (67,714) 15,078,681 1,184,263 486,186
----------- ----------- ---------- ------------ ----------- -----------
Net increase (decrease) in net assets resulting
from operations................................... 200,702 347,740 (2,241) 26,656,234 2,872,133 479,134
From policyholder transactions:
Net premiums from policyholders.................. 6,295,052 3,163,316 1,608,069 65,183,285 11,323,614 3,212,754
Net benefits to policyholders.................... (5,007,225) (1,882,974) (282,878) (41,018,347) (5,132,055) (915,459)
----------- ----------- ---------- ------------ ----------- -----------
Net increase in net assets resulting from
policyholder transactions........................ 1,287,827 1,280,342 1,325,191 24,164,938 6,191,559 2,297,295
----------- ----------- ---------- ------------ ----------- -----------
Net increase in net assets......................... 1,488,529 1,628,082 1,322,950 50,821,172 9,063,692 2,776,429
Net assets at beginning of period.................. 3,103,327 1,475,245 152,295 12,678,444 3,614,752 838,323
----------- ----------- ---------- ------------ ----------- -----------
Net assets at end of period........................ $ 4,591,856 $ 3,103,327 $1,475,245 $ 63,499,616 $12,678,444 $ 3,614,752
=========== =========== ========== ============ =========== ===========
<CAPTION>
LARGE CAP VALUE SUBACCOUNT MONEY MARKET SUBACCOUNT
------------------------------------- -----------------------------------------
1999 1998 1997 1999 1998 1997
------------ ----------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income........................... $ 1,720,195 $ 756,459 $ 183,036 $ 2,988,530 $ 1,687,016 $ 691,552
Net realized gains.............................. 705,454 330,827 164,821 -- -- --
Net unrealized appreciation (depreciation)
during the period............................. (2,181,112) 145,355 279,449 -- -- --
------------ ----------- ----------- ------------- ------------- -------------
Net increase in net assets resulting from
operations...................................... 244,537 1,232,641 627,306 2,988,530 1,687,016 691,552
From policyholder transactions:
Net premiums from policyholders................. 37,432,039 15,144,316 5,421,062 890,376,545 340,377,358 103,737,470
Net benefits to policyholders................... (27,199,179) (4,937,583) (1,620,578) (918,869,964) (269,723,839) (100,296,756)
------------ ----------- ----------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from policyholder transactions.................. 10,232,860 10,206,733 3,800,484 (28,493,419) 70,653,519 3,440,714
------------ ----------- ----------- ------------- ------------- -------------
Net increase (decrease) in net assets............. 10,477,397 11,439,374 4,427,790 (25,504,889) 72,340,535 4,132,266
Net assets at beginning of period................. 16,629,520 5,190,146 762,356 86,511,658 14,171,123 10,038,857
------------ ----------- ----------- ------------- ------------- -------------
Net assets at end of period....................... $ 27,106,917 $16,629,520 $ 5,190,146 $ 61,006,769 $ 86,511,658 $ 14,171,123
============ =========== =========== ============= ============= =============
</TABLE>
See accompanying notes.
108
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF CHANGES IN NET ASSETS (continued)
Years and periods ended December 31,
<TABLE>
<CAPTION>
Small/Mid Cap
Mid Cap Value Growth
Subaccount Subaccount
------------------------------------- ------------------------------------
1999 1998 1997 1999 1998 1997
------------ ----------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase in net assets from operations:
Net investment income................................. $ 41,579 $ 75,449 $1,388,661 $ 108,037 $ 842,666 $ 434,660
Net realized gains (losses)........................... (860,332) (538,516) 101,787 13,375 232,246 297,666
Net unrealized appreciation (depreciation) during the
period.............................................. 1,757,919 (830,390) (39,717) (1,001,208) 236,333 (730,748)
Net increase (decrease) in net assets resulting from
operations.......................................... 939,166 (1,293,457) 496,730 400,828 576,616 409,584
From policyholder transactions:
Net premiums from policyholders....................... 32,024,751 18,837,112 6,323,061 11,809,133 4,563,154 8,511,081
Net benefits to policyholders......................... (29,579,995) (7,855,945) (1,089,206) (9,775,543) (6,481,542) (6,274,668)
------------ ----------- ---------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting from
policyholder transactions........................... 2,444,756 10,981,167 5,233,855 2,033,590 (1,918,388) 2,236,413
------------ ----------- ---------- ----------- ----------- -----------
Net increase (decrease) in net assets................. 3,383,922 9,687,710 5,730,585 2,434,418 (1,341,772) 2,645,997
Net assets at beginning of period..................... 15,754,611 6,066,901 336,316 7,491,413 8,833,185 6,187,188
------------ ----------- ---------- ----------- ----------- -----------
Net assets at end of period........................... $ 19,138,533 $15,754,611 $6,066,901 $ 9,925,831 $ 7,491,413 $ 8,833,185
============ =========== ========== =========== =========== ===========
<CAPTION>
Real Estate Equity Subaccount Growth & Income Subaccount
------------------------------------- ---------------------------------------
1999 1998 1997 1999 1998 1997
------------ ----------- ----------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Increase in net assets from operations:
Net investment income............................. $ 515,377 $ 283,067 $ 232,798 $ 22,850,302 $ 8,975,814 $ 5,747,928
Net realized gains (losses)....................... (735,504) (454,979) 252,095 6,207,253 2,061,212 2,390,414
Net unrealized appreciation (depreciation) during
the period....................................... 80,925 (698,676) (13,488) (5,814,839) 7,759,307 435,778
------------ ----------- ----------- ------------- ------------ ------------
Net increase (decrease) in net assets resulting
from operations.................................... (139,202) (870,588) 471,405 23,242,716 18,796,333 8,574,120
From policyholder transactions:
Net premiums from policyholders................... 22,699,314 6,964,604 4,833,914 196,639,863 60,975,616 35,535,599
Net benefits to policyholders..................... (18,093,640) (5,513,221) (2,393,463) (106,763,955) (31,360,866) (21,776,809)
------------ ----------- ----------- ------------- ------------ ------------
Net increase in net assets resulting from
policyholder transactions.......................... 4,605,674 1,451,383 2,440,451 89,875,908 29,614,750 13,758,790
------------ ----------- ----------- ------------- ------------ ------------
Net increase in net assets.......................... 4,466,472 580,795 2,911,856 113,118,624 48,411,083 22,332,910
Net assets at beginning of period................... 4,772,174 4,191,379 1,279,523 96,407,275 47,996,192 25,663,282
------------ ----------- ----------- ------------- ------------ ------------
Net assets at end of period......................... $ 9,238,646 $ 4,772,174 $ 4,191,379 $ 209,525,899 $ 96,407,275 $ 47,996,192
============ =========== =========== ============ ============ ============
</TABLE>
See accompanying notes.
109
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF CHANGES IN NET ASSETS (continued)
Years and periods ended December 31,
<TABLE>
<CAPTION>
Short-Term Bond
Managed Subaccount Subaccount
------------------------------------ -------------------------------------
1999 1998 1997 1999 1998 1997
------------ ----------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income................................. $ 10,756,436 $ 3,484,281 $ 1,814,571 $ 907,486 $ 926,217 $ 394,991
Net realized gains (losses)........................... 2,233,258 278,186 171,318 (441,667) 24,740 35,294
Net unrealized appreciation (depreciation) during the
period.............................................. (6,419,069) 1,791,231 715,231 (85,754) (136,999) (25,976)
Net increase in net assets resulting from operations.. 6,570,625 5,553,698 2,701,120 380,065 813,958 404,309
From policyholder transactions:
Net premiums from policyholders....................... 113,292,872 21,019,273 16,914,475 41,259,110 27,490,588 12,911,228
Net benefits to policyholders......................... (34,219,380) (8,281,600) (9,357,535) (49,156,693) (21,534,195) (4,234,624)
------------ ----------- ----------- ------------ ------------ -----------
Net increase (decrease) in net assets resulting from
policyholder transactions........................... 79,073,492 12,737,673 7,556,940 (7,897,583) 5,956,393 8,676,604
------------ ----------- ----------- ------------ ------------ -----------
Net increase (decrease) in net assets................. 85,644,117 18,291,371 10,258,060 (7,517,518) 6,770,351 9,080,913
Net assets at beginning of period..................... 40,066,692 21,775,321 11,517,261 19,246,506 12,476,155 3,395,242
------------ ----------- ----------- ------------ ------------ -----------
Net assets at end of period........................... $125,710,809 $40,066,692 $21,775,321 $ 11,728,988 $ 19,246,506 $12,476,155
============ =========== =========== ============ ============ ===========
<CAPTION>
International
Small Cap Value Subaccount Opportunities Subaccount
------------------------------------ ------------------------------------
1999 1998 1997 1999 1998 1997
------------ ----------- ---------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income................................ $ 344,711 $ 14,015 $ 290,784 $ 2,006,004 $ 53,396 $ 55,901
Net realized gains (losses).......................... (979,002) (9,919) 75,149 1,907,809 191,495 80,782
Net unrealized appreciation (depreciation) during the
period.............................................. 325,684 (523,693) (18,626) 3,818,953 1,108,416 (260,664)
------------ ----------- ---------- ------------ ------------ ---------
Net increase (decrease) in net assets resulting from
operations.......................................... (308,607) (519,597) 347,307 7,732,766 1,353,307 (123,981)
From policyholder transactions:
Net premiums from policyholders...................... 39,172,672 11,420,833 4,182,527 43,216,216 23,844,756 8,906,153
Net benefits to policyholders........................ (30,591,417) (4,363,378) (897,951) (38,372,463) (12,275,087)(3,655,731)
------------ ----------- ---------- ------------ ------------ ----------
Net increase in net assets resulting from policyholder
transactions........................................ 8,581,255 7,057,455 3,284,576 4,843,753 11,569,669 5,250,422
------------ ----------- ---------- ------------ ------------ ----------
Net increase in net assets............................. 8,272,648 6,537,858 3,631,883 12,576,519 12,922,976 5,126,441
Net assets at beginning of period...................... 10,510,748 3,972,890 341,007 18,958,530 6,035,554 909,113
------------ ----------- ---------- ------------ ------------ ----------
Net assets at end of period............................ $ 18,783,396 $10,510,748 $3,972,890 $ 31,535,049 $ 18,958,530 $6,035,554
============ =========== ========== ============ ============ ==========
</TABLE>
See accompanying notes.
110
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF CHANGES IN NET ASSETS (continued)
Years and periods ended December 31,
<TABLE>
<CAPTION>
Equity Index Subaccount Global Bond subaccount
---------------------------------------- ------------------------------------
1999 1998 1997 1999 1998 1997
------------- ------------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net
assets from operations:
Net investment income...................... $ 5,503,450 $ 1,211,729 $ 378,697 $ 424,767 $ 283,651 $ 71,030
Net realized gains (losses)................ 7,681,081 691,270 901,978 (204,675) 81,659 8,335
Net unrealized appreciation
(depreciation) during
the period................................. 4,678,509 6,098,919 392,256 (433,526) 43,608 (11,727)
------------- ------------- ------------ ------------ ----------- -----------
Net increase (decrease) in net
assets resulting from
operations................................. 17,863,040 8,001,918 1,672,931 (213,434) 408,918 67,638
From policyholder transactions:
Net premiums from policyholders............ 225,994,914 60,690,933 23,412,687 11,387,398 9,258,713 1,828,179
Net benefits to policyholders.............. (147,909,470) (31,166,123) (9,622,006) (10,615,019) (3,008,341) (534,164)
------------- ------------- ------------ ------------ ----------- -----------
Net increase in net assets resulting
from policyholder
transactions............................... 78,085,444 29,524,810 13,790,681 772,379 6,250,372 1,294,015
------------- ------------- ------------ ------------ ----------- -----------
Net increase in net assets................... 95,948,484 37,526,728 15,463,612 558,945 6,659,290 1,361,653
Net assets at beginning of period............ 53,964,647 16,437,919 974,307 8,279,571 1,620,281 258,628
------------- ------------- ------------ ------------ ----------- -----------
Net assets at end of period.................. $ 149,913,131 $ 53,964,647 $ 16,437,919 $ 8,838,516 $ 8,279,571 $ 1,620,281
============= ============= ============ ============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Brandes International
Turner Core Growth Subaccount Equity Subaccount
------------------------------------- ------------------------------------
1999 1998 1997 1999 1998 1997
------------ ----------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net
assets from operations:
Net investment income...................... $ 1,315,438 $ 77,203 $ 87,289 $ 515,681 $ 343,646 $ 25,175
Net realized gains......................... 1,038,462 156,278 76,711 507,727 89,337 12,541
Net unrealized appreciation
(depreciation) during
the period................................ 1,626,646 562,620 32,626 3,486,097 91,915 (26,022)
------------ ------------ ----------- ------------ ----------- -----------
Net increase (decrease) in net
assets resulting from
operations................................. 3,980,546 796,101 196,626 4,509,505 524,898 11,694
From policyholder transactions:
Net premiums from policyholders............ 23,098,524 4,779,974 743,622 12,134,533 5,520,633 2,484,010
Net benefits to policyholders.............. (9,308,254) (1,690,860) (580,027) (5,569,496) (2,041,375) (1,088,249)
------------ ------------ ----------- ------------ ----------- -----------
Net increase in net assets resulting
from policyholder
transactions............................... 13,790,270 3,089,114 163,595 6,565,037 3,479,258 1,395,761
------------ ------------ ----------- ------------ ----------- -----------
Net increase in net assets................... 17,770,816 3,885,215 360,221 11,074,542 4,004,156 1,407,455
Net assets at beginning of period............ 4,900,189 1,014,974 654,753 6,340,754 2,336,598 929,143
------------ ------------ ----------- ------------ ----------- -----------
Net assets at end of period.................. $ 22,671,005 $ 4,900,189 $ 1,014,974 $ 17,415,296 $ 6,340,754 $ 2,336,598
============ ============ =========== ============ =========== ===========
</TABLE>
See accompanying notes.
111
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF CHANGES IN NET
ASSETS (continued)
Years and periods ended December 31,
<TABLE>
<CAPTION>
Frontier Capital Appreciation Enhanced U.S.
Subaccount Equity Subaccount
------------------------------------- ----------------------------------
1999 1998 1997 1999 1998 1997*
------------- ----------- ----------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net
assets from operations:
Net investment income...................... $ 449,994 $ 9,897 $ 118,150 $ 518,137 $ 68,233 $ 14,857
Net realized gains (losses)................ 624,068 (445,752) 614,358 264,436 87,723 4,177
Net unrealized appreciation
(depreciation) during the
period................................... 3,431,408 432,064 (368,570) 151,562 89,677 6,844
Net increase (decrease) in net assets
resulting from
operations................................. 4,505,470 (3,791) 363,938 934,135 245,633 25,878
From policyholder transactions:
Net premiums from policyholders............ 25,135,447 13,982,031 10,030,418 6,480,741 3,031,309 475,503
Net benefits to policyholders.............. (22,331,613) (9,695,520) (5,969,436) (3,151,279) (1,299,530) (4,176)
------------- ----------- ----------- ------------ ----------- ---------
Net increase in net assets resulting
from policyholder transactions............... 2,803,834 4,286,511 4,060,982 3,329,462 1,731,779 471,327
------------- ----------- ----------- ------------ ----------- ---------
Net increase in net assets................... 7,309,304 4,282,720 4,424,920 4,263,597 1,977,412 497,205
Net assets at beginning of period............ 9,675,718 5,392,998 968,078 2,474,617 497,205 0
------------- ----------- ----------- ------------ ----------- ---------
Net assets at end of period.................. $ 16,985,022 $ 9,675,718 $ 5,392,998 $ 6,738,214 $ 2,474,617 $ 497,205
============= =========== =========== ============ =========== =========
</TABLE>
<TABLE>
<CAPTION>
Emerging Markets Global Equity Bond Index
Equity Subaccount Subaccount Subaccount
-------------------------- ----------------------- -------------------------
1999 1998** 1999 1998** 1999 1998**
------------ ------------ ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net
assets from operations:
Net investment income..................... $ 132,259 $ 135 $ 4,204 $ 152 $ 130,136 $ 22,905
Net realized gains (losses)............... 663,998 (45,975) 82,873 (21,835) (104,174) 1,002
Net unrealized appreciation
(depreciation) during the
period.................................. 432,248 2,289 47,295 4,812 (78,192) (10,217)
------------ ------------ ----------- ----------- ------------- -----------
Net increase (decrease) in net
assets resulting from operations............. 1,228,505 (43,551) 134,372 (16,871) (52,230) 13,690
From policyholder transactions:
Net premiums from policyholders........... 18,579,194 2,434,226 3,151,983 2,372,034 6,471,518 1,176,234
Net benefits to policyholders............. (16,271,324) (2,203,670) (2,613,505) (2,191,135) (2,358,694) (124,467)
------------ ------------ ----------- ----------- ------------- -----------
Net increase in net assets resulting
from policyholder transactions............... 2,307,870 230,556 538,478 180,899 4,112,824 1,051,767
------------ ------------ ----------- ----------- ------------- -----------
Net increase in net assets................ 3,536,375 187,005 672,850 164,028 4,060,594 1,065,457
Net assets at beginning of period......... 187,005 0 164,028 0 1,065,457 0
------------ ------------ ----------- ----------- ------------- -----------
Net assets at end of period............... $ 3,723,380 $ 187,005 $ 836,878 $ 164,028 $ 5,126,051 $ 1,065,457
============ ============ =========== =========== ============= ===========
</TABLE>
_____________
* From July 1, 1997 (commencement of operations).
** From May 1, 1998 (commencement of operations).
See accompanying notes.
112
<PAGE>
<TABLE>
<CAPTION>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF CHANGES IN NET ASSETS (continued)
Years and periods ended December 31,
Small/Mid Cap CORE High Yield Bond
Subaccount Subaccount
-------------------- --------------------------
1999 1998** 1999 1998**
--------- ---------- ------------ -------------
<S> <C> <C> <C> <C>
Increase (decrease) in net
assets from operations:
Net investment income (loss)................. $ 52,711 $ (535) $ 340,435 $ 86,759
Net realized gains (losses).................. 65,733 (25,196) 42,365 64,824
Net unrealized appreciation
(depreciation) during the period............. (10,735) 18,718 (139,659) 149,416
Net increase (decrease) in net
assets resulting from operations............. 107,709 (7,013) 243,141 300,999
From policyholder transactions:
Net premiums from policyholders.............. 5,817,483 1,089,030 19,870,990 6,683,673
Net benefits to policyholders................ (5,611,532) (778,864) (20,368,501) (2,457,088)
Net increase (decrease) in net assets
resulting from policyholder transactions..... 205,951 310,166 (497,511) 4,226,585
---------- ---------- ------------- -------------
Net increase (decrease) in net assets........ 313,660 303,153 (254,370) 4,527,584
Net assets at beginning of period............ 303,153 0 4,527,584 0
---------- ---------- ------------- -------------
Net assets at end of period.................. $ 616,813 $ 303,153 $ 4,273,214 $ 4,527,584
========== ========== ============= =============
</TABLE>
---------------
** From May 1, 1998 (commencement of operations).
See accompanying notes.
113
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
1. Organization
John Hancock Variable Life Account S (the Account) is a separate investment
account of John Hancock Variable Life Insurance Company (JHVLICO), a wholly-
owned subsidiary of John Hancock Mutual Life Insurance Company (John Hancock).
The Account was formed to fund variable life insurance policies (Policies)
issued by JHVLICO. The Account is operated as a unit investment trust registered
under the Investment Company Act of 1940, as amended, and currently consists of
twenty-seven 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-seven Portfolios
of the Fund and M Fund which are currently available are the Large Cap Growth,
Sovereign Bond, International Equity Index, Small Cap Growth, International
Balanced, Mid Cap Growth, Large Cap Value, Money Market, Mid Cap Value,
Small/Mid Cap Growth (formerly, Diversified Mid Cap Growth), Real Estate Equity,
Growth & Income, Managed, Short-Term Bond, Small Cap Value, International
Opportunities, Equity Index, Global Bond (formerly, Strategic Bond), Turner Core
Growth, Brandes International Equity, Frontier Capital Appreciation, Enhanced
U.S. Equity, 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 JHVLICO's general account to cover the contingency that the
guaranteed minimum death benefit might exceed the death benefit which would have
been payable in the absence of such guarantee.
The assets of the Account are the property of JHVLICO. The portion of the
Account's assets applicable to the policies may not be charged with liabilities
arising out of any other business JHVLICO may conduct.
2. Significant Accounting Policies
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Valuation of Investments
Investment in shares of the Fund and of M Fund are valued at the reported
net asset values of the respective Portfolios. Investment transactions are
recorded on the trade date. Dividend income is recognized on the ex-dividend
date. Realized gains and losses on sales of 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 JHVLICO, which is taxed as a life insurance company under the Internal
Revenue Code. JHVLICO has the right to charge the Account any federal income
taxes, or provision for federal income taxes, attributable to the operations of
the Account or to the policies funded in the Account. Currently, JHVLICO does
not make a charge for income or other taxes. Charges for state and local taxes,
if any, attributable to the Account may also be made.
114
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
NOTES TO FINANCIAL STATEMENTS-- (continued)
Expenses
JHVLICO assumes mortality and expense risks of the variable life insurance
policies for which asset charges are deducted at various rates ranging from .50%
to .625%, depending on the type of policy, of net assets (excluding policy
loans) of the Account. In addition, a monthly charge at varying levels for the
cost of insurance is deducted from the net assets of the Account.
JHVLICO makes certain deductions for administrative expenses and state
premium taxes from premium payments before amounts are transferred to the
Account.
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. At December 31, 1999, there were no outstanding policy loans.
3. Transaction with Affiliates
John Hancock acts as the distributor, principal underwriter and investment
advisor for the Fund.
Certain officers of the Account are officers and directors of JHVLICO, the
Fund or John Hancock.
115
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
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, 1999 were as follows:
<TABLE>
<CAPTION>
Portfolio Shares Owned Cost Value
--------- ------------ ---- -----
<S> <C> <C> <C>
Large Cap Growth................... 4,226,550 $108,181,136 $115,521,551
Sovereign Bond..................... 4,200,440 40,512,273 38,321,473
International Equity Index......... 1,689,937 29,224,059 33,198,674
Small Cap Growth................... 1,622,919 25,907,535 31,022,828
International Balanced............. 428,930 4,680,715 4,591,856
Mid Cap Growth..................... 2,172,468 46,744,046 63,499,616
Large Cap Value.................... 2,009,306 28,839,671 27,106,917
Money Market....................... 6,100,677 61,006,768 61,006,769
Mid Cap Value...................... 1,497,913 18,236,811 19,138,533
Small/Mid Cap Growth............... 707,222 10,888,164 9,925,831
Real Estate Equity................. 805,182 9,643,804 9,238,646
Growth & Income.................... 10,470,370 207,387,033 209,525,899
Managed............................ 8,137,552 130,087,567 125,710,809
Short-Term Bond.................... 1,206,452 11,963,663 11,728,988
Small Cap Value.................... 1,720,546 18,985,985 18,783,396
International Opportunities........ 2,078,452 26,831,679 31,535,049
Equity Index....................... 7,327,855 138,687,664 149,913,131
Global Bond........................ 900,154 9,240,752 8,838,516
Turner Core Growth................. 988,705 20,433,059 22,671,005
Brandes International Equity....... 1,122,129 13,875,593 17,415,296
Frontier Capital Appreciation...... 804,225 13,485,020 16,985,022
Enhanced U.S. Equity............... 321,327 6,490,133 6,738,214
Emerging Markets Equity............ 303,646 3,288,843 3,723,380
Global Equity...................... 68,965 784,773 836,878
Bond Index......................... 550,115 5,214,459 5,126,051
Small/Mid Cap CORE................. 62,841 608,830 616,813
High Yield Bond.................... 475,514 4,263,457 4,273,214
</TABLE>
116
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
NOTES TO FINANCIAL STATEMENTS--(continued)
Purchases, including reinvestment of dividend distributions, and proceeds
from sales of shares in the Portfolios of the Fund and of M Fund during 1999
were as follows:
<TABLE>
<CAPTION>
Portfolio Purchases Sales
--------- --------- -----
<S> <C> <C>
Large Cap Growth.............................. $ 62,265,535 $ 14,711,539
Sovereign Bond................................ 38,288,617 29,280,010
International Equity Index.................... 32,519,440 17,541,313
Small Cap Growth.............................. 27,757,302 12,281,978
International Balanced........................ 3,415,587 1,768,784
Mid Cap Growth................................ 45,338,211 14,783,738
Large Cap Value............................... 22,257,609 10,304,554
Money Market.................................. 304,141,849 29,646,739
Mid Cap Value................................. 15,413,952 12,927,617
Small/Mid Cap Growth.......................... 8,759,614 5,337,363
Real Estate Equity............................ 13,375,520 8,254,469
Growth & Income............................... 144,949,345 32,223,136
Managed....................................... 111,633,323 21,803,394
Short-Term Bond............................... 17,352,671 24,342,768
Small Cap Value............................... 16,062,747 7,136,780
International Opportunities................... 24,767,973 17,918,215
Equity Index.................................. 124,086,502 40,497,607
Global Bond................................... 10,322,531 9,125,384
Turner Core Growth............................ 20,980,047 5,874,338
Brandes International Equity.................. 10,664,333 3,583,615
Frontier Capital Appreciation................. 13,387,462 10,133,633
Enhanced U.S. Equity.......................... 5,925,334 2,077,734
Emerging Markets Equity....................... 9,682,573 7,242,444
Global Equity................................. 2,167,637 1,624,954
Bond Index.................................... 5,900,997 1,658,038
Small/Mid Cap CORE............................ 3,312,578 3,053,916
High Yield Bond............................... 11,898,171 12,055,248
</TABLE>
117
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
NOTES TO FINANCIAL STATEMENTS--(continued)
5. Net Assets
Accumulation shares attributable to net assets of policyholders and
accumulation share values for each subaccount at December 31, 1999 were as
follows:
<TABLE>
<CAPTION>
VEP Class #1 VEP Class #2 VEP Class #3
--------------------------- --------------------------- ---------------------------
Accumulation Accumulation Accumulation Accumulation Accumulation Accumulation
Portfolio Shares Share Values Shares Share Values Shares Share Values
--------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Large Cap Growth....................... 432,627 $34.19 442,008 $34.29 156,934 $34.39
Sovereign Bond......................... 226,496 13.80 170,995 13.84 28,389 13.88
International Equity Index............. 205,346 17.52 163,712 17.58 4,631 17.63
Small Cap Growth....................... 151,029 21.68 131,551 21.71 42,832 21.76
International Balanced................. 21,487 13.28 25,817 13.30 12,453 13.33
Mid Cap Growth......................... 202,405 35.56 145,034 35.62 45,513 35.69
Large Cap Value........................ 191,629 16.15 140,376 16.18 4,476 16.21
Money Market........................... 613,611 13.08 1,102,161 13.12 347,735 13.15
Mid Cap Value.......................... 106,938 14.05 45,955 14.08 2,990 14.10
Small/Mid Cap Growth................... 83,852 19.77 90,674 19.83 41,701 19.88
Real Estate Equity..................... 94,768 14.40 68,355 14.44 2,732 14.49
Growth & Income........................ 945,411 30.90 579,234 31.00 212,540 31.09
Managed................................ 554,374 20.88 279,936 20.94 23,988 21.00
Short-Term Bond........................ 94,078 12.97 84,892 13.00 7,712 13.04
Small Cap Value........................ 114,641 12.30 82,461 12.33 55,278 12.35
International Opportunities............ 115,902 16.52 159,219 16.55 2,521 16.58
Equity Index........................... 442,683 23.06 565,394 23.10 189,577 23.14
Global Bond............................ 55,090 12.15 48,036 12.17 16,751 12.19
Turner Core Growth..................... 31,697 28.29 15,337 28.36 -- --
Brandes International Equity........... 18,319 16.91 33,342 16.94 -- --
Frontier Capital Appreciation.......... 20,409 22.75 13,182 22.80 -- --
Enhanced U.S. Equity................... 3,102 17.47 -- 17.50 -- --
Emerging Markets Equity................ 31,332 12.77 114,481 12.78 4,803 12.79
Global Equity.......................... 11,223 12.22 15,873 12.23 777 12.24
Bond Index............................. 99,617 10.34 99,264 10.34 64,039 10.35
Small/Mid Cap CORE..................... 12,833 10.76 3,271 10.77 4,416 10.78
High Yield Bond........................ 51,021 10.09 40,169 10.10 -- --
</TABLE>
118
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
NOTES TO FINANCIAL STATEMENTS--(continued)
<TABLE>
<CAPTION>
V Coli Class #4 V Coli Class #5 V Coli Class #6
--------------------------- --------------------------- ---------------------------
Accumulation Accumulation Accumulation Accumulation Accumulation Accumulation
Portfolio Shares Share Values Shares Share Values Shares Share Values
--------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Large Cap Growth....................... 646,018 $34.50 282,553 $34.49 252,596 $34.52
Sovereign Bond......................... 17,426 14.64 538,047 14.66 335,449 14.67
International Equity Index............. 63,956 16.24 130,903 16.26 235,165 16.28
Small Cap Growth....................... 90,088 22.04 39,929 22.05 38,804 22.07
International Balanced................. 68,220 13.50 6,065 13.51 54,964 13.52
Mid Cap Growth......................... 146,264 36.15 124,116 36.18 5,992 36.19
Large Cap Value........................ 151,753 16.42 133,066 16.43 416,273 16.44
Money Market........................... 218,714 13.01 5,906 13.02 136,140 13.04
Mid Cap Value.......................... 69,726 14.29 24,485 14.30 281,375 14.30
Small/Mid Cap Growth................... 27,983 19.77 958 19.79 42,902 19.81
Real Estate Equity..................... 58,475 14.92 4,323 14.93 203,728 14.95
Growth & Income........................ 641,268 30.84 447,326 30.87 16,723 30.91
Managed................................ 162,478 21.64 83,071 21.66 150,514 21.68
Short-Term Bond........................ 99,163 13.21 351,710 13.22 -- --
Small Cap Value........................ 32,245 12.51 49,419 12.52 281,896 12.53
International Opportunities............ 203,225 16.80 157,727 16.80 74,340 16.81
Equity Index........................... 324,024 23.44 37,253 23.46 533,298 23.47
Global Bond............................ 54,500 12.35 9,809 12.36 -- --
Turner Core Growth..................... 7,772 28.80 12,496 28.83 -- --
Brandes International Equity........... 104,626 17.21 81,372 17.23 42,458 17.25
Frontier Capital Appreciation.......... 74,553 23.16 62,806 23.18 -- --
Enhanced U.S. Equity................... 13,962 17.68 1 17.68 -- --
Emerging Markets Equity................ -- -- 24,692 12.87 -- --
Global Equity.......................... -- -- -- 12.32 -- --
Bond Index............................. 2,519 10.42 10,132 10.42 -- --
Small/Mid Cap CORE..................... -- -- -- 10.84 -- --
High Yield Bond........................ 1,998 10.18 310 10.18 85,180 10.18
</TABLE>
119
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
NOTES TO FINANCIAL STATEMENTS--(continued)
<TABLE>
<CAPTION>
Medallion Executive VLI Class #7 MVEP Class #8 MVUL Class #9
-------------------------------- --------------------------- ---------------------------
Accumulation Accumulation Accumulation Accumulation Accumulation Accumulation
Portfolio Shares Share Values Shares Share Values Shares Share Values
--------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Large Cap Growth................... 92,840 $79.68 781,223 $24.82 213,207 $22.10
Sovereign Bond..................... 57,389 23.69 765,173 12.44 500,049 11.71
International Equity Index......... 113,572 27.55 780,218 15.05 200,089 15.54
Small Cap Growth................... 193,672 21.70 298,417 21.90 197,401 24.61
International Balanced............. 52,288 13.29 41,158 13.41 36,634 12.85
Mid Cap Growth..................... 168,579 35.59 383,762 35.92 103,210 39.83
Large Cap Value.................... 269,931 16.17 125,284 16.31 115,052 13.95
Money Market....................... 280,073 18.10 339,940 11.94 435,648 11.42
Mid Cap Value...................... 412,439 14.06 242,213 14.19 70,954 12.00
Small/Mid Cap Growth............... 3,416 19.80 257,950 12.63 33,652 12.85
Real Estate Equity................. 39,901 22.14 116,040 12.27 38,147 9.54
Growth & Income.................... 828,857 68.13 1,383,220 21.88 552,475 19.13
Managed............................ 2,321,332 39.65 236,592 16.81 102,294 15.37
Short-Term Bond.................... 63,598 12.99 63,326 11.93 95,428 11.43
Small Cap Value.................... 473,526 12.32 281,097 12.43 87,362 11.80
International Opportunities........ 559,454 16.54 227,841 16.68 335,763 15.97
Equity Index....................... 477,728 23.08 1,251,427 23.29 598,377 19.87
Global Bond........................ 146,786 12.16 62,185 12.27 258,673 11.58
Turner Core Growth................. -- -- 229,705 25.66 76,087 24.67
Brandes International
Equity........................... -- -- 495,542 16.53 58,572 17.67
Frontier Capital
Appreciation..................... -- -- 405,890 19.23 119,967 18.62
Enhanced U.S. Equity............... -- -- 145,784 17.59 139,459 17.59
Emerging Markets Equity............ 45,954 12.77 18,062 12.82 40,257 12.82
Global Equity...................... 2,967 12.23 4,588 12.28 29,228 12.28
Bond Index......................... 18,855 10.34 12,439 10.38 185 10.38
Small/Mid Cap CORE................. -- -- 16,742 10.81 477 10.81
High Yield Bond.................... 34,470 10.10 82,547 10.14 72,026 10.14
</TABLE>
120
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
NOTES TO FINANCIAL STATEMENTS--(continued)
<TABLE>
<CAPTION>
MVUL 98 Class #10 MVEP 98 Class #11 MEVL II Class #12
--------------------------- --------------------------- ---------------------------
Accumulation Accumulation Accumulation Accumulation Accumulation Accumulation
Portfolio Shares Share Values Shares Share Values Shares Share Values
--------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Large Cap Growth....................... 221,057 $22.10 133,186 $24.82 -- --
Sovereign Bond......................... 122,492 11.71 96,742 12.44 -- --
International Equity Index............. 40,197 15.54 68,833 15.05 -- --
Small Cap Growth....................... 158,068 24.61 34,357 21.90 -- --
International Balanced................. 22,819 12.85 3,040 13.41 -- --
Mid Cap Growth......................... 291,628 39.83 111,636 35.92 -- --
Large Cap Value........................ 66,485 13.95 73,993 16.31 -- --
Money Market........................... 575,670 11.42 718,107 11.94 -- --
Mid Cap Value.......................... 62,352 11.99 52,021 14.19 -- --
Small/Mid Cap Growth................... 15,710 12.85 20,460 12.63 -- --
Real Estate Equity..................... 10,691 9.54 7,405 12.27 -- --
Growth & Income........................ 1,047,922 19.13 196,321 21.88 -- --
Managed................................ 55,779 15.37 43,618 16.81 -- --
Short-Term Bond........................ 26,887 11.43 31,697 11.93 -- --
Small Cap Value........................ 22,247 11.80 40,374 12.43 -- --
International Opportunities............ 39,238 15.97 35,379 16.68 -- --
Equity Index........................... 1,960,860 19.87 440,030 23.29 -- --
Global Bond............................ 35,346 11.58 51,458 12.27 -- --
Turner Core Growth..................... 377,311 24.67 142,883 25.66 -- --
Brandes International Equity........... 82,135 17.67 116,504 16.53 -- --
Frontier Capital Appreciation.......... 90,807 18.62 69,320 20.00 -- --
Enhanced U.S. Equity................... 48,887 17.59 30,852 17.59 -- --
Emerging Markets Equity................ 7,584 12.82 3,832 12.82 -- --
Global Equity.......................... 1,070 12.28 2,561 12.28 -- --
Bond Index............................. 137,733 10.38 46,924 10.38 -- --
Small/Mid Cap CORE..................... 10,536 10.81 8,881 10.81 -- --
High Yield Bond........................ 15,036 10.14 38,875 10.14 -- --
</TABLE>
121
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
NOTES TO FINANCIAL STATEMENTS--(continued)
<TABLE>
<CAPTION>
VEP Class #13
---------------------------
Accumulation Accumulation
Portfolio Shares Share Values
--------- ------------ ------------
<S> <C> <C>
Large Cap Growth...................... -- --
Sovereign Bond........................ -- --
International Equity Index............ -- --
Small Cap Growth...................... -- --
International Balanced................ -- --
Mid Cap Growth........................ -- --
Large Cap Value....................... -- --
Money Market.......................... -- --
Mid Cap Value......................... -- --
Small/Mid Cap Growth.................. -- --
Real Estate Equity.................... -- --
Growth & Income....................... -- --
Managed............................... -- --
Short-Term Bond....................... -- --
Small Cap Value....................... -- --
International Opportunities........... -- --
Equity Index.......................... -- --
Global Bond........................... -- --
Turner Core Growth.................... -- --
Brandes International Equity.......... -- --
Frontier Capital Appreciation......... -- --
Enhanced U.S. Equity.................. -- --
Emerging Markets Equity............... -- --
Global Equity......................... -- --
Bond Index............................ -- --
Small/Mid Cap CORE.................... -- --
High Yield Bond....................... -- --
</TABLE>
122
<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
<S> <C>
Account................................................................... 28
Account value............................................................. 9
Additional Sum Insurance.................................................. 16
Annual processing date.................................................... 29
Attained age.............................................................. 10
Basic Sum Insured......................................................... 16
Beneficiary............................................................... 39
business day.............................................................. 29
changing Option A or B.................................................... 18
changing the Total Sum Insured............................................ 17
charges................................................................... 9
Code...................................................................... 35
cost of insurance rates................................................... 10
date of issue............................................................. 30
death benefit............................................................. 5
deductions................................................................ 9
dollar cost averaging..................................................... 14
expenses of the Trusts.................................................... 11
fixed investment option................................................... 29
full surrender............................................................ 14
fund...................................................................... 2
grace period.............................................................. 7
guaranteed minimum death benefit.......................................... 7
Guaranteed Minimum Death Benefit Premium.................................. 8
insurance charge.......................................................... 10
insured person............................................................ 5
investment options........................................................ 1
JHVLICO................................................................... 28
lapse..................................................................... 7
loan...................................................................... 15
loan interest............................................................. 15
maximum premiums.......................................................... 6
Minimum Initial Premium................................................... 29
minimum insurance amount.................................................. 17
minimum premiums.......................................................... 6
modified endowment contract............................................... 36
monthly deduction date.................................................... 30
morality and expense risk charge.......................................... 10
Option A; Option B........................................................ 16
optional benefits......................................................... 16
optional extra death benefit feature...................................... 16
owner..................................................................... 5
partial withdrawal........................................................ 14
partial withdrawal charge................................................. 11
payment options........................................................... 18
Planned Premium........................................................... 7
policy anniversary........................................................ 30
policy split option....................................................... 17
policy year............................................................... 30
premium; premium payment.................................................. 5
prospectus................................................................ 3
receive; receipt.......................................................... 20
reinstate; reinstatement.................................................. 7
sales charges............................................................. 9
SEC....................................................................... 2
Separate Account S........................................................ 28
Servicing Office.......................................................... 2
special loan account...................................................... 15
subaccount................................................................ 28
surrender................................................................. 14
surrender value........................................................... 14
Target Premium............................................................ 9
tax considerations........................................................ 34
telephone transfers....................................................... 21
Total Sum Insured......................................................... 16
transfers of account value................................................ 14
Trusts.................................................................... 2
variable investment options............................................... 1
we; us.................................................................... 28
withdrawal................................................................ 14
withdrawal charges........................................................ 11
you; your................................................................. 5
</TABLE>
123
