<PAGE>
As filed with the Securities and Exchange Commission on April 29, 1996
Registration No. 33-79108
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM S-6
Post-Effective Amendment No. 3 to
Registration Statement Under
THE SECURITIES ACT OF 1933
----------------------
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
(Exact name of trust)
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
(Name of depositor)
JOHN HANCOCK PLACE
BOSTON, MASSACHUSETTS 02117
(Complete address of depositor's principal executive offices)
--------------------
FRANCIS C. CLEARY, JR., ESQ.
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
JOHN HANCOCK PLACE, BOSTON, 02117
(Name and complete address of agent for service)
--------------------
Copy to:
GARY O. COHEN, ESQ.
Freedman, Levy, Kroll & Simonds
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036
--------------------
It is proposed that this filing become effective(check appropriate box)
/ /immediately upon filing pursuant to paragraph (b) of Rule 485
--
/X/on May 1, 1996 pursuant to paragraph (b) of Rule 485
--
/ /60 days after filing pursuant to paragraph (a)(1) of Rule 485
--
/ /on (date) pursuant to paragraph (a)(1) of Rule 485
--
If appropriate check the following box
/ /this post-effective amendment designates a new effective date for a
--
previously filed amendment
Pursuant to the provisions of Rule 24f-2, Registrant has registered an
indefinite amount of the securities being offered and filed its Notice for
fiscal year 1995 pursuant to Rule 24f-2 on February 22, 1996.
FCC0008)
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CROSS-REFERENCE TABLE
Form N-8B-2 Item Caption in Prospectus
- ---------------- ---------------------
1, 2 Cover, The Account and The Series
Funds, JHVLICO and John Hancock
3 Inapplicable
4 Cover, Distribution of Policies
5,6 The Account and The Series Funds,
State Regulation
7, 8, 9 Inapplicable
10(a),(b),(c),(d),(e) Policy Provisions
and Benefits
10(f) Voting Privileges
10(g),(h) Changes that JHVLICO
Can Make
10(i) Appendix--Other Policy
Provisions, The Account and
The Series Funds
11, 12 Summary, The Account and The Series
Funds, Distribution of Policies
13 Summary, Charges and Expenses,
Appendix--Illustration of Death
Benefits, Surrender Values
and Accumulated Premiums
14, 15 Summary, Distribution of
Policies, Premiums
16 The Account and The Series Funds
17 Summary, Policy
Provisions and Benefits
18 The Account and The Series Funds,
Tax Considerations
19 Reports
20 Changes that JHVLICO
Can Make
21 Policy Provisions and Benefits
22 Policy Provisions and Benefits
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23 Distribution of Policies
24 Not Applicable
25 JHVLICO and John Hancock
26 Not Applicable
27,28,29,30 JHVLICO and John Hancock, Board
of Directors and Executive
Officers of JHVLICO
31,32,33,34 Not Applicable
35 JHVLICO and John Hancock
37 Not Applicable
38,39,40,41(a) Distribution of Policies,
JHVLICO and John Hancock,
Charges and Expenses
42, 43 Not Applicable
44 The Account and The Series Funds,
Policy Provisions,
Appendix--Illustration of Death
Benefits, Surrender Values
and Accumulated Premiums
45 Not Applicable
46 The Account and The Series Funds,
Policy Provisions,
Appendix--Illustration of Death
Benefits, Surrender Values
and Accumulated Values
47, 48, 49, 50 Not Applicable
51 Policy Provisions and Benefits,
Appendix--Other Policy
Provisions
52 The Account and The Series Funds,
Changes that JHVLICO
Can Make
53,54,55 Not Applicable
56,57,58 Not Applicable
59 Financial Statements
RAK0243.DOC V COLI
<PAGE>
John Hancock Variable Life
Insurance Company
(JHVLICO)
[JOHN HANCOCK VARIABLE MASTER
PLAN PLUS LOGO APPEARS HERE]
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
LIFE AND ANNUITY SERVICES P.O. BOX 111 BOSTON, MASSACHUSETTS 02117
TELEPHONE 1-800-REAL LIFE (1-800-732-5543) FAX 617-572-5410
PROSPECTUS MAY 1, 1996
The flexible premium variable life policy ("Policy") described in this
Prospectus can be funded, at the discretion of the Owner, by any of the
variable subaccounts of John Hancock Variable Life Account S (the "Account"),
by a fixed subaccount (the "Fixed Account"), or by any combination of the
Fixed Account and the variable subaccounts (collectively, the "Subaccounts").
The assets of each variable Subaccount will be invested in a corresponding
investment portfolio ("Portfolio") of John Hancock Variable Series Trust I, a
mutual fund advised by John Hancock Mutual Life Insurance Company ("John
Hancock") or of M Fund, Inc., a mutual fund advised by M Financial Investment
Advisers, Inc. (collectively the "Funds"). The assets of the Fixed Account
will be invested in the general account of John Hancock Variable Life
Insurance Company ("JHVLICO").
The Prospectuses for the Funds, which are attached to this Prospectus,
describe the investment objectives, policies and risks of investing in the
Portfolios of the Funds: Growth and Income (formerly Stock), Large Cap Growth
(formerly Select Stock), Sovereign Bond (formerly Bond), Money Market,
Managed, Real Estate Equity, International Equities (formerly International),
Short-Term U.S. Government, Special Opportunities, Small Cap Growth, Small Cap
Value, Mid Cap Growth, Mid Cap Value, International Balanced, International
Opportunities, Large Cap Value, Strategic Bond and Equity Index and in the
Portfolios of M Funds, Inc.: Edinburgh Overseas Equity, Turner Core Growth and
Frontier Capital Appreciation. Other variable Subaccounts and Portfolios may
be added in the future.
Replacing existing insurance with a Policy described in this Prospectus may
not be to your advantage.
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
IT IS NOT VALID UNLESS ATTACHED TO CURRENT PROSPECTUSES FOR THE FUNDS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SUMMARY................................................................... 1
JHVLICO and JOHN HANCOCK.................................................. 6
THE ACCOUNT AND THE SERIES FUNDS.......................................... 7
The Account............................................................. 7
The Series Funds........................................................ 7
THE FIXED ACCOUNT......................................................... 10
POLICY PROVISIONS AND BENEFITS............................................ 10
Requirements for Issuance of Policy..................................... 10
Premiums................................................................ 11
Account Value and Surrender Value....................................... 13
Death Benefits.......................................................... 14
Transfers Among Subaccounts............................................. 16
Loan Provisions and Indebtedness........................................ 17
Default................................................................. 18
Exchange Privilege...................................................... 18
CHARGES AND EXPENSES...................................................... 19
Charges Deducted from Premiums.......................................... 19
Sales Charge............................................................ 19
Reduced Charges for Eligible Groups..................................... 20
Charges Deducted from Account Value or Assets........................... 20
Guarantee of Certain Charges............................................ 22
DISTRIBUTION OF POLICIES.................................................. 22
TAX CONSIDERATIONS........................................................ 23
Policy Proceeds......................................................... 23
Charge for JHVLICO's Taxes.............................................. 24
Corporate and H.R. 10 Plans............................................. 24
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS OF JHVLICO...................... 25
REPORTS................................................................... 25
VOTING PRIVILEGES......................................................... 26
CHANGES THAT JHVLICO CAN MAKE............................................. 26
STATE REGULATION.......................................................... 27
LEGAL MATTERS............................................................. 27
REGISTRATION STATEMENT.................................................... 27
EXPERTS................................................................... 27
FINANCIAL STATEMENTS...................................................... 27
APPENDIX--OTHER POLICY PROVISIONS......................................... A-1
Settlement Provisions................................................... A-1
Additional Insurance Benefits........................................... A-1
General Provisions...................................................... A-1
APPENDIX--ILLUSTRATION OF DEATH BENEFITS, SURRENDER VALUES AND ACCUMULATED
PREMIUMS................................................................. A-3
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS.
<PAGE>
INDEX OF DEFINED WORDS AND PHRASES
Below are listed certain words and phrases used in this Prospectus, together
with identification of the page on which each is defined or explained:
<TABLE>
<CAPTION>
Page
<S> <C>
Account.............................................................. 7
Account Value........................................................ 1
Additional Sum Insured............................................... 15
Age.................................................................. A-2
Basic Sum Insured.................................................... 1
DAC Tax.............................................................. 19
Death Benefit........................................................ 14
Fixed Account........................................................ 10
Funds......................................................... Front Cover
Grace Period......................................................... 18
Guaranteed Minimum Death Benefit..................................... 14
Guaranteed Minimum Death Benefit Premium............................. 11
Home Office.......................................................... 6
Indebtedness......................................................... 17
Investment Rule...................................................... 12
Loan Account......................................................... 17
Minimum First Premium................................................ 11
Optional Extra Death Benefit......................................... 14
Planned Premium...................................................... 11
Policy Anniversary................................................... A-2
Portfolio..................................................... Front Cover
Subaccount.................................................... Front Cover
Sum Insured.......................................................... 5
Surrender Value...................................................... 13
Target Premium....................................................... 19
Valuation Date....................................................... 10
Valuation Period..................................................... 10
Variable Subaccounts................................................. 2
7-Pay Limit.......................................................... 12
</TABLE>
<PAGE>
SUMMARY
WHAT IS THE VARIABLE LIFE POLICY BEING OFFERED?
John Hancock Variable Life Insurance Company ("JHVLICO") issues variable
life insurance policies. The Policies described in this Prospectus provide
life insurance coverage when the insured dies. The Policies also provide for
premium flexibility. JHVLICO issues other variable life insurance policies.
These other policies are offered by means of other Prospectuses.
As explained below, the death benefit and Surrender Value under the Policy
may increase or decrease daily. The Policies differ from ordinary fixed-
benefit life insurance in the way they work. However, the Policies are like
fixed-benefit life insurance in providing lifetime protection against economic
loss resulting from the death of the insured. The Policies are primarily
insurance and not investments.
The Policies work generally as follows: the Policy owner (the "Owner")
periodically gives JHVLICO a premium payment. JHVLICO takes from each premium
an amount for processing expenses, taxes, and sales expenses. JHVLICO then
places the rest of the premium into the Subaccounts as directed by the Owner.
The assets allocated to each variable Subaccount are invested in shares of the
corresponding Portfolio of the Funds. The currently available Portfolios are
identified on the cover of this Prospectus. The assets allocated to the Fixed
Account are invested in the general account of JHVLICO. During the year,
JHVLICO takes charges from each Subaccount and credits or charges each
Subaccount with its respective investment performance. The insurance charge,
which is deducted from the invested assets attributable to each Policy
("Account Value"), varies monthly with the then attained age of the insured
and with the amount of insurance provided at the start of each month.
The Policy provides for payment of death benefit proceeds when the insured
dies. The death benefit proceeds will equal the death benefit, plus any
additional benefit included by rider and then due, minus any Indebtedness. The
death benefit under Option A equals the Sum Insured less any withdrawals that
the Owner has made. The death benefit under Option B equals the Sum Insured
plus the Policy Account Value on the date of death of the insured. The death
benefit under Option M equals the Sum Insured, less any withdrawals by the
Owner, plus any optional Extra Death Benefit. The Policy also increases the
death benefit if necessary to ensure that the Policy will continue to qualify
as life insurance under the Federal tax laws.
Within limits prescribed by JHVLICO, the Owner may also elect whether to
purchase the coverage as part of the "Basic Sum Insured" or as an "Additional
Sum Insured". The Basic Sum Insured will not lapse during the first ten Policy
years, so long as (1) specified Guaranteed Minimum Death Benefit Premiums have
been paid, and (2) the Additional Sum Insured is not scheduled to exceed the
Basic Sum Insured at any time. The Owner may elect for this Guaranteed Minimum
Death Benefit feature to extend beyond ten years. The Additional Sum Insured
is subject to lapse, but has certain cost and other advantages.
The initial Account Value is the amount of the premium that JHVLICO credits
to the Policy, after deduction of the initial charges. The Account Value
increases or decreases daily depending on the investment experience of the
Subaccounts to which the amounts are allocated at the direction of the Owner.
JHVLICO does not guarantee a minimum amount of Account Value. Therefore, the
Owner bears the investment risk for that portion of the Account Value
allocated to the variable Subaccounts. The Owner may surrender a Policy at any
time while the insured is living. The Surrender Value is the Account Value
less any Indebtedness plus any sales charge refund. The Owner may also make
partial withdrawals from a Policy, subject to certain restrictions and an
administrative charge.
1
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If the Owner surrenders in the early Policy years, the amount of Surrender
Value would be low (as compared with other investments without sales charges)
and, consequently, the insurance protection provided prior to surrender would
be costly.
The minimum Sum Insured that may be bought at issue is $100,000. All persons
insured must meet specified age limits and certain health and other criteria
called "underwriting standards." The smoking status of the insured is
generally reflected in the insurance charges made. Policies issued under
certain circumstances will not directly reflect the sex of the insured in
either the premium rates or the charges and values under the Policy.
WHAT IS THE AMOUNT OF THE PREMIUMS?
Premiums are flexible, and the Owner may choose the amount and frequency of
premium payments, so long as each premium payment is at least $100 and meets
certain other requirements.
The minimum amount of premium required at the time of Policy issue is
determined by JHVLICO based on the characteristics of the insured, the
Policy's Sum Insured at issue, and the Policy options selected by the Owner.
Unless the Guaranteed Minimum Death Benefit is in effect, if the Policy
Account Value at the beginning of any Policy month is insufficient to pay the
monthly Policy charges then due, JHVLICO will estimate the amount of
additional premiums necessary to keep the Policy in force for three months.
The Owner will have a 61 day grace period to pay at least that amount or the
Policy will lapse.
At the time of Policy issue, the Owner may designate the amount and
frequency of Planned Premium payments. The Owner may pay premiums other than
the Planned Premium payments, subject to certain limitations.
The Policy has a Guaranteed Minimum Death Benefit provision which guarantees
that the Basic Sum Insured will not lapse during the first ten Policy years if
(1) prescribed amounts of premiums have been paid, based on the
characteristics of the insured and the amount of the Basic Sum Insured at
issue and (2) any Additional Sum Insured is not scheduled to exceed the Basic
Sum Insured at any time. The Owner may at the time of application for the
Policy elect that this feature be extended beyond the first ten Policy years
at an additional charge.
WHAT IS JOHN HANCOCK VARIABLE LIFE ACCOUNT S?
The Account is a separate investment account of JHVLICO, operated as a unit
investment trust, which supports benefits payable under the Policies. There
are currently twelve variable Subaccounts within the Account. Each is invested
in a corresponding Portfolio of John Hancock Variable Series Trust I or of M
Fund, Inc., each of which is a "series" type of mutual fund. The Portfolios of
the Funds which are currently available are Growth and Income, Large Cap
Growth, Sovereign Bond, Money Market, Managed, Real Estate Equity,
International Equities, Short-Term U.S. Government, Special Opportunities,
Small Cap Growth, Small Cap Value, Mid Cap Growth, Mid Cap Value,
International Balanced, International Opportunities, Large Cap Value,
Strategic Bond, Equity Index, Edinburgh Overseas Equity, Turner Core Growth
and Frontier Capital Appreciation.
John Hancock receives a fee from John Hancock Variable Series Trust I for
providing investment management services with respect to the Growth and
Income, Sovereign Bond and Money Market Portfolios at an annual rate of .25%
of the average daily net assets; with respect to the Large Cap Growth and
Managed Portfolios, at an annual rate of .40% of the first $500 million of the
average daily net assets and at lesser percentages for amounts above $500
million; with respect to the Short-Term U.S. Government Portfolio, at an
2
<PAGE>
annual rate of .50% of the first $250 million of the average daily net assets
and at lesser percentages for amounts above $250 million; with respect to the
Real Estate Equity Portfolio, at an annual rate of .60% of the first $300
million of the average daily net assets and at lesser percentages for amounts
above $300 million; with respect to the International Equities Portfolio, at
an annual rate of .60% of the first $250 million of the average daily net
assets and at lesser percentages for amounts above $250 million; with respect
to the Special Opportunities Portfolio, at an annual rate of .75% of the first
$250 million of the average daily net assets and at lesser percentages for
amounts above $250 million; with respect to the Equity Index Portfolio at an
annual rate of 0.25% of the average daily net assets; with respect to the
Large Cap Value and Small Cap Growth Portfolios at an annual rate of 0.75% of
the average daily net assets; with respect to the Mid Cap Growth Portfolio at
an annual rate of 0.85% for the first $100,000,000 of average daily net assets
and at lesser percentages for amounts above $100,000,000; with respect to the
Mid Cap Value Portfolio at an annual rate of 0.80% of the first $250,000,000
of average daily net assets and at lesser percentages for amounts above
$250,000,000; with respect to the Small Cap Value Portfolio at an annual rate
of 0.80% of the first $100,000,000 of average daily net assets and at lesser
percentages for amounts above $100,000,000; with respect to the Strategic Bond
Portfolio at an annual rate of 0.75% of the first $25,000,000 of average daily
net assets and at lesser percentages for amounts above $25,000,000; with
respect to the International Opportunities Portfolio at an annual rate of 1%
of the first $20,000,000 of average daily net assets and at lesser percentages
for amounts above $20,000,000; and for the International Balanced Portfolio at
an annual rate of 0.85% of the first $100,000,000 of average daily net assets
and at a lesser percentage for amounts above $100,000,000.
M Financial Investment Advisers, Inc., receives a fee from M Fund, Inc. for
providing investment management services with respect to the International
Equity Portfolio at an annual rate of 1.05% of the first $10 million of the
average daily net assets and at an annual rate of .90% of the next $15 million
of the average daily net assets and at lesser percentages for amounts above
$25 million; with respect to the Core Growth Portfolio at an annual rate of
.45% of the average daily net assets; and with respect to the Capital
Appreciation Portfolio at an annual rate of .90% of the average daily net
assets.
For a full description of the Funds, see the Prospectuses for the Funds
attached to this Prospectus.
WHAT ARE THE CHARGES MADE BY JHVLICO?
State Premium Tax Charge and Federal DAC Tax Charge. Charges deducted from
each premium payment, currently 2.35% for state premium taxes and 1.25% as a
Federal deferred acquisition cost or "DAC Tax" charge.
Sales Charge. A charge deducted from each premium payment in the amount of
9% of premiums paid in each of the first ten Policy years up to the "target
premium". No charge is deducted from premiums paid during the first 10 years
in excess of that target. The current sales charge in subsequent years
generally is 3% of premiums paid up to the target premium in each of years 11
through 20, and 0% thereafter. The current sales charge for premiums paid
during any Policy year in excess of one target premium after the tenth policy
year is zero. Subject to maximums set forth in the Policy, certain of these
charges may be increased.
Issue Charge. A charge deducted monthly from Account Value at the rate of
$12.50 per month for the first 3 Policy years, plus an amount set forth in the
Policy that varies by age per $1,000 of the Basic Sum Insured at issue for the
first 10 Policy years. For example, this additional monthly amount for a 45
year old is 17c per $1000 of Basic Sum Insured.
Administrative Charge. A charge deducted monthly from Account Value in an
amount equal to no more than $4 per Policy and 6c per $1,000 of the Basic Sum
Insured at issue (currently $2.50; plus 2c per $1,000 of the Basic Sum Insured
at issue.)
3
<PAGE>
Insurance Charge. A charge based upon the amount for which JHVLICO is at
risk, considering the attained age and risk classification of the insured and
JHVLICO's then current monthly insurance rates (never to exceed rates set
forth in the Policy) deducted monthly from Account Value.
Guaranteed Minimum Death Benefit Charge. If the Guaranteed Minimum Death
Benefit option is elected beyond the first 10 Policy years, a maximum charge,
starting at the beginning of the eleventh Policy year not to exceed 2c
(currently 1c) per $1,000 of the Basic Sum Insured at issue, is deducted
monthly from Account Value.
Charge for Mortality and Expense Risks. A charge made daily at a maximum
effective annual rate of .40% of the assets of the Account. The current charge
is .20%.
Charge for Extra Mortality Risks. An additional charge, depending upon the
age of the insured and the degree of additional mortality risk, required if
the insured does not qualify for the standard underwriting class. This
additional charge is deducted monthly from Account Value.
Charge for Optional Rider Benefits. An additional charge required if the
Owner elects to purchase optional insurance benefits by rider. This additional
charge is deducted monthly from Account Value.
Charge for Partial Withdrawal. A charge of $20 made against Account Value at
the time of withdrawal.
See "Charges and Expenses" for a full description of the charges under the
Policy.
IS THERE A CHARGE AGAINST THE ACCOUNT FOR FEDERAL INCOME TAX?
Currently no charge is made against any Subaccount for Federal income taxes;
but if JHVLICO incurs, or expects to incur, income taxes attributable to any
Subaccount or this class of Policies in future years, it reserves the right to
make a charge. JHVLICO expects that it will continue to be taxed as a life
insurance company. See "Charge for JHVLICO's Taxes".
WHAT IS THE RELATIONSHIP BETWEEN THE PREMIUM AND THE AMOUNT ALLOCATED TO THE
SUBACCOUNTS?
The initial net premium is allocated by JHVLICO from its general account to
the Money Market Subaccount on the date of issue of the Policy. The initial
net premium is the gross Minimum First Premium, plus any additional amount of
premium that has been paid prior to the date of issue, less the charges
deducted for sales expenses, state premium taxes and the Federal DAC Tax
charge. These charges also apply to subsequent premium payments. Twenty days
after the date of issue, the amount in the Money Market Subaccount is
reallocated among the Subaccounts in accordance with the Owner's election. Net
premiums derived from payments received after this reallocation date are
allocated, generally on the date of receipt, to one or more of the Subaccounts
as elected by the Owner.
HOW ARE AMOUNTS ALLOCATED TO EACH SUBACCOUNT?
At issue and subsequently thereafter, the Owner will provide us with the
rule ("Investment Rule") we will follow to invest net premiums or other
amounts in any of the Subaccounts. The Owner may change the Investment Rule
under which JHVLICO will allocate amounts to Subaccounts. See "Premiums--
Billing, Allocation of Premium Payments (Investment Rule)".
4
<PAGE>
WHAT COMMISSIONS ARE PAID TO AGENTS?
The Policies are sold through agents who are licensed by state authorities
to sell JHVLICO's insurance policies. Commissions payable to agents are
described under "Distribution of Policies". Sales expenses in any year are not
equal to the deduction for sales expenses in that year. Rather, total sales
expenses under the Policies are intended to be recovered over the lifetimes of
the insureds covered by the Policies.
WHAT IS THE DEATH BENEFIT?
The death benefit proceeds will equal the death benefit of the Policy, plus
any additional rider benefits included and then due, minus any Indebtedness.
The death benefit payable depends on the Policy's Sum Insured (the Sum Insured
is the Basic Sum Insured plus the amount of any Additional Sum Insured) and
the death benefit option selected by the Owner at the time the Policy is
issued, as follows:
OPTION A: The death benefit equals the Policy's current Sum Insured less
any withdrawals of Account Value that the Owner has made.
OPTION B: The death benefit is the Policy's current Sum Insured plus the
Policy Account Value on the date of death of the insured, and varies in
amount based on investment results.
OPTION M: The death benefit equals the Policy's current Sum Insured less
any withdrawals of Account Value that the Owner has made plus any Optional
Extra Death Benefit.
The death benefit of the Policy under Options A, B, or M will be increased
if necessary to ensure that the Policy will continue to qualify as life
insurance under the Federal tax law. See "Death Benefits" and "Tax
Considerations".
Under the Guaranteed Minimum Death Benefit provision, the Policy is
guaranteed not to lapse during the first 10 Policy years, provided the amount
of premiums paid, accumulated at 4% interest, minus any withdrawals, also
accumulated at 4% interest, is at least equal to the Guaranteed Minimum Death
Benefit Premiums, accumulated at 4% interest. For an additional charge, the
Owner may elect this benefit to continue beyond the tenth Policy year.
However, the Guaranteed Minimum Death Benefit will not apply to any Policy if
the Additional Sum Insured is scheduled to exceed the Basic Sum Insured at any
time.
HOW DOES THE ACCOUNT VALUE OF A POLICY VARY IN RELATION TO THE SUBACCOUNTS'
INVESTMENT EXPERIENCE?
In general, the Account Value for any day equals the Account Value for the
previous day, increased by any net premium placed in the Subaccounts for the
Policy, decreased by any charges made against the Account Value, and increased
or decreased by the investment experience of the Subaccounts. No minimum
Account Value for the Policy is guaranteed.
WHAT IS THE LOAN PROVISION AND HOW DOES A LOAN AFFECT THE DEATH BENEFIT,
ACCOUNT VALUE AND SURRENDER VALUE?
The Owner may obtain a Policy loan in the maximum amount of 90% of the
Account Value. Interest charged on any loan will accrue daily at an annual
rate determined by JHVLICO at the start of each Policy year. This interest
rate will not exceed the greater of (1) the "Published Monthly Average" (see
"Loan Provision and Indebtedness") for the calendar month ending two months
before the calendar month of the Policy anniversary or (2) 5%. In
jurisdictions where a fixed loan rate is applicable, JHVLICO will charge
interest at an effective annual rate of 4.5% in the first 20 Policy years and
4.25% thereafter, accrued daily. A loan plus accrued interest
5
<PAGE>
("Indebtedness") may be repaid at the discretion of the Owner in whole or in
part in accordance with the terms of the Policy.
While a loan is outstanding, the rate of interest credited to the Account
Value because of the loan will usually be different than the net investment
experience of the Subaccounts. Therefore, the Account Value, the Surrender
Value and any death benefit above the current Sum Insured are permanently
affected by any loan.
IS THERE A SHORT-TERM CANCELLATION RIGHT?
The Owner may surrender a Policy by delivering or mailing it within 45 days
after the date Part A of the application has been completed, or within at
least 10 days after receipt of the Policy by the Owner, or within 10 days
after mailing by JHVLICO of a Notice of Withdrawal Right, whichever is latest,
to JHVLICO's Home Office, or to the agent or agency office through which it
was delivered. Coverage under the Policy will be cancelled immediately as of
the date of such mailing or delivery. Any premium paid on it will be refunded.
If required by state law, the refund will equal the Account Value at the end
of the Valuation Period in which the Policy is received plus all charges or
deductions made against premiums plus an amount reflecting charges against the
Subaccounts and the investment management fee of the Funds.
WHAT INVESTMENT TRANSFERS ARE ALLOWED AN OWNER?
The Owner may transfer the Account Value among the variable Subaccounts or
into the Fixed Account at any time. Transfers out of the Fixed Account,
however, are subject to restrictions.
ARE THE BENEFITS UNDER A POLICY SUBJECT TO FEDERAL INCOME TAX?
The benefits under Policies described in this Prospectus are expected to
receive the same tax treatment under the Internal Revenue Code of 1986 as
benefits under traditional fixed-benefit life insurance policies. Thus, death
benefits payable under the Policies will not be included in the beneficiary's
gross income. Also, the Owner is not taxed on interest and gains under the
Policy unless and until values are actually received through withdrawal,
surrender, or other distributions.
Under Federal tax law, distributions from Policies on which premiums greater
than a "7-pay" premium limit (as defined in the law) have been paid, will be
subject to special taxation. See "Premiums--7-Pay Premium Limit" and "Policy
Proceeds" for a discussion of how the "7-pay" premium limit may be exceeded
under a Policy. A distribution on such a Policy (called a "modified
endowment") will be taxed to the extent there is any income (gain) to the
Owner and an additional penalty tax may be imposed on the taxable amount.
JHVLICO AND JOHN HANCOCK
JHVLICO, a stock life insurance company chartered in 1979 under
Massachusetts law, is authorized to transact a life insurance and annuity
business in Massachusetts and all other states, except New York. JHVLICO began
selling variable life insurance policies in 1980.
JHVLICO is a wholly-owned subsidiary of John Hancock, a company chartered in
Massachusetts in 1862. Its Home Office is at John Hancock Place, Boston,
Massachusetts 02117. John Hancock's assets are over $45 billion and it has
invested over $380 million in JHVLICO in connection with JHVLICO's
organization and operations. It is anticipated that John Hancock will from
time to time make additional capital contributions to JHVLICO to enable it to
meet its reserve requirements and expenses in connection with its business,
and John
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Hancock is committed to make additional capital contributions if necessary to
ensure that JHVLICO maintains a positive net worth.
THE ACCOUNT AND THE SERIES FUNDS
THE ACCOUNT
The Account, a separate account established under Massachusetts law, meets
the definition of "separate account" under the Federal securities laws and is
registered as a unit investment trust under the Investment Company Act of 1940
("1940 Act").
The Account's assets are the property of JHVLICO. Each Policy provides that
the portion of the Account's assets equal to the reserves and other
liabilities under the Policy shall not be chargeable with liabilities arising
out of any other business JHVLICO may conduct. In addition to the assets
attributable to variable life policies, the Account's assets include assets
derived from charges made by JHVLICO. From time to time these additional
assets may be transferred in cash by JHVLICO to its general account. Before
making any such transfer, JHVLICO will consider any possible adverse impact
the transfer might have on any Subaccount. Additional premiums are charged for
Policies where the insured is classified as a substandard risk and a portion
of these premiums is allocated to the Account.
The Account is registered with the Securities and Exchange Commission (the
"Commission") under the 1940 Act. Such registration does not involve
supervision by the Commission of the management or policies of the Account,
JHVLICO or John Hancock.
The assets in each variable Subaccount are invested in corresponding
Portfolios of the Funds, but the assets of one variable Subaccount are not
necessarily legally insulated from liabilities associated with another
variable Subaccount. New variable Subaccounts may be added or existing
variable Subaccounts may be deleted as new Portfolios are added to or deleted
from the Funds and made available to Owners.
THE SERIES FUNDS
Each Fund is a "series" type of mutual fund registered with the Commission
under the 1940 Act as an open-end diversified management investment company.
Each Fund serves as the investment medium for the Account and other unit
investment trust separate accounts established for other variable life
insurance policies and variable annuity contracts. (See the attached Fund
Prospectuses for a description of a need to monitor for possible conflicts and
other consequences.) A very brief summary of the investment objectives of each
Portfolio is set forth below.
Growth and Income (formerly Stock) Portfolio. The investment objective of
this Portfolio is to achieve intermediate and long-term growth of capital,
with income as a secondary consideration. This objective will be pursued by
investments principally in common stocks (and in securities convertible into
or with rights to purchase common stocks) of companies believed by management
to offer growth potential over both the intermediate and long-term.
Large Cap Growth (formerly Select Stock) Portfolio. The investment objective
of this Portfolio is to achieve above-average capital appreciation through the
ownership of common stocks of companies believed by management to offer above-
average capital appreciation opportunities. Current income is not an objective
of the Portfolio.
Sovereign Bond (formerly Bond) Portfolio. The investment objective of this
Portfolio is to provide as high a level of long-term total rate of return as
is consistent with prudent investment risk, through investment in a
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diversified portfolio of freely marketable debt securities. Total rate of
return consists of current income, including interest and discount accruals,
and capital appreciation.
Money Market Portfolio. The investment objective of this Portfolio is to
provide maximum current income consistent with capital preservation and
liquidity. It seeks to achieve this objective by investing in a managed
portfolio of high quality money market instruments.
Managed Portfolio: to achieve maximum long-term total return consistent with
prudent investment risk. Investments will be made in common stocks,
convertibles and other fixed income securities and in money market
instruments.
Real Estate Equity Portfolio: to provide above-average income and long-term
growth of capital by investment principally in equity securities of companies
in the real estate and related industries.
International Equities (formerly International) Portfolio: to achieve long-
term growth of capital by investing primarily in foreign equity securities.
Special Opportunities Portfolio: to achieve long-term capital appreciation
by emphasizing investments in equity securities of issuers in various economic
sectors.
Short-Term U.S. Government Portfolio: to provide a high level of current
income consistent with the maintenance of principal, through investment in a
portfolio of short-term U.S. Treasury securities and U.S. Government agency
securities.
Equity Index Portfolio: to provide investment results that correspond to the
total return of the U.S. market as represented by the S&P 500 utilizing common
stocks that are publicly traded in the United States.
Large Cap Value Portfolio: to provide substantial dividend income, as well
as long-term capital appreciation, through investments in the common stocks of
established companies believed to offer favorable prospects for increasing
dividends and capital appreciation.
Mid Cap Growth Portfolio: to provide long-term growth of capital through a
non-diversified portfolio investing largely in common stocks of mid-sized
companies.
Mid Cap Value Portfolio: to provide long-term growth of capital primarily
through investment in the common stocks of medium capitalization companies
believed by management to sell at a discount to their intrinsic value.
Small Cap Growth Portfolio: to provide long-term growth of capital through a
diversified portfolio investing primarily in common stocks of small
capitalization emerging growth companies.
Small Cap Value Portfolio: to provide long-term growth of capital by
investing in a well diversified portfolio of equity securities of small
capitalization companies exhibiting value characteristics.
Strategic Bond Portfolio: to provide a high total return consistent with
moderate risk of capital and maintenance of liquidity, from a portfolio of
domestic and international fixed income securities.
International Opportunities Portfolio: to provide capital appreciation
through investments in common stocks of primarily well-established, non-United
States companies.
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International Balanced Portfolio: to maximize total U.S. dollar return,
consisting of capital appreciation and current income, through investment in
non-U.S. equity and fixed income securities.
John Hancock acts as the investment manager for the above Portfolios, and
John Hancock's indirectly owned subsidiary, Independence Investment
Associates, Inc., with its principal place of business at 53 State Street,
Boston, Massachusetts, provides sub-investment advice with respect to the
Growth and Income, Large Cap Stock, Equity Index, Managed, Real Estate Equity
and Short-Term U.S. Government Portfolios. Another indirectly owned
subsidiary, John Hancock Advisers, Inc., located at 101 Huntington Avenue,
Boston, Massachusetts, and its subsidiary, John Hancock Advisers
International, Limited, located at 34 Dover Street, London, England, provide
sub-investment advice with respect to the International Equities Portfolio,
and John Hancock Advisers, Inc. does likewise with respect to the Sovereign
Bond, Small Cap Growth and Special Opportunities Portfolios.
T. Rowe Price Associates, Inc., located at 100 East Pratt St., Baltimore, MD
21202, provides sub-investment advice with respect to the Large Cap Value
Portfolio and, together with its subsidiary, Rowe Price-Fleming International,
Inc., also located at 100 East Pratt St., Baltimore, MD 21202, provides sub-
investment advice with respect to the International Opportunities Portfolio.
Invesco Management and Research located at 101 Federal Street, Boston, MA
02110, is the sub-investment adviser to the Small Cap Value Portfolio. Janus,
with its principal place of business at 100 Filmore Street, Denver, CO 80206,
is the sub-investment adviser to the Mid Cap Growth Portfolio. Neuberger and
Berman Investment Management of 605 Third Avenue, New York, NY 10158, provides
sub-investment advice to the Mid Cap Value Portfolio. J.P. Morgan Investment
Management Inc., located at 522 Fifth Avenue, New York, NY 10036, provides
investment advice with respect to the Strategic Bond Portfolio and Brinson
Partners, Inc., of 209 S. LaSalle Street, Chicago, IL 60604, does likewise
with respect to the International Balanced Portfolio.
Edinburgh Overseas Equity Portfolio. Its investment objective is long-term
capital appreciation with reasonable investment risk through active management
and investment in common stock and common stock equivalents of foreign
issuers. Current income, if any, is incidental.
Turner Core Growth Portfolio. The investment objective of this Portfolio is
to seek long-term capital appreciation through a diversified portfolio of
common stocks that show strong earnings potential with reasonable market
prices.
Frontier Capital Appreciation Portfolio. This Portfolio seeks maximum
capital appreciation through investment in common stock of companies of all
sizes, with emphasis on stocks of small- to-medium-capitalization companies.
Importance is placed on growth and price appreciation, rather than income.
M Financial Investment Advisers, Inc., acts as the investment manager for
the three Portfolios described above. Edinburgh Fund Managers PLC, North
America provides sub-investment advice to the Edinburgh Overseas Equity
Portfolio; Turner Investment Partners, Inc. provides sub-investment advice to
the Turner Core Growth Portfolio; and Frontier Capital Management Company,
Inc., provides sub-investment advice to the Frontier Capital Appreciation
Portfolio.
JHVLICO will purchase and redeem Fund shares for the Account at their net
asset value without any sales or redemption charges. Shares of the Fund
represent an interest in one of the Portfolios which corresponds to a variable
Subaccount of the Account. Any dividend or capital gains distributions
received by the Account will be reinvested in Fund shares at their net asset
value as of the dates paid.
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On each Valuation Date, shares of each Portfolio are purchased or redeemed
by JHVLICO for each variable Subaccount based on, among other things, the
amount of net premiums allocated to the variable Subaccount, distributions
reinvested, transfers to, from and among variable Subaccounts, all to be
effected as of that date. Such purchases and redemptions are effected at the
net asset value per Fund share for each Portfolio determined on that same
Valuation Date. A Valuation Date is any date on which JHVLICO is open for
business, the New York Stock Exchange is open for trading and on which the
Fund values its shares. A Valuation Period is that period of time from the
beginning of the day following a Valuation Date to the end of the next
following Valuation Date.
A full description of each Fund, its investment objectives, policies and
restrictions, its charges, expenses and all other aspects of its operation is
contained in the attached Prospectuses and the statement of additional
information referred to therein, which should be read together with this
Prospectus.
THE FIXED ACCOUNT
An Owner may allocate premiums to the Fixed Account or transfer all or a
part of the Account Value under a Policy to the Fixed Account. The amount so
allocated or transferred will become a part of JHVLICO's general account
assets. JHVLICO's general account consists of assets owned by JHVLICO other
than those in the Account and in other separate accounts that have been or may
be established by JHVLICO. Subject to applicable law, JHVLICO has sole
discretion over the investment of assets of the general account, and Owners do
not share in the investment experience of those assets. Instead, JHVLICO
guarantees that the Account Value allocated to the Fixed Account will accrue
interest daily at an effective annual rate of at least 4% without regard to
the actual investment experience of the general account. Transfers from the
Fixed Account are subject to certain limitations. See "Transfers Among
Subaccounts".
The Account Value in the Fixed Account is equal to the portion of the net
premiums allocated to it, plus any amounts transferred to it and interest
credited to it, minus any charges deducted from it or partial withdrawals or
amounts transferred from it. JHVLICO guarantees that interest credited to the
Account Value in the Fixed Account will not be less than an effective annual
rate of 4%. JHVLICO may, in its sole discretion, credit higher rates although
it is not obligated to do so. The Owner assumes the risk that interest
credited will not exceed 4% per year. Upon request and in the annual
statement, JHVLICO will inform Owners of the then-applicable rates. The rate
of interest declared with respect to any amount in the Fixed Account may
depend on when that amount was first allocated to the Fixed Account.
Because of exemptive and exclusionary provisions, interests in JHVLICO's
general account have not been registered under the Securities Act of 1933 and
the general account has not been registered as an investment company under the
1940 Act. Accordingly, neither the general account nor any interests therein
are subject to the provisions of these Acts, and JHVLICO has been advised that
the staff of the Securities and Exchange Commission has not reviewed the
disclosure in this Prospectus relating to the Fixed Account. Disclosure
regarding the Fixed Account may, however, be subject to certain generally-
applicable provisions of the Federal securities laws relating to accuracy and
completeness of statements made in prospectuses.
POLICY PROVISIONS AND BENEFITS
REQUIREMENTS FOR ISSUANCE OF POLICY
The Policy is generally available with a minimum Sum Insured at issue of
$100,000 and a minimum Basic Sum Insured of $50,000. At the time of issue, the
insured must be age 20 through 85. All persons insured must
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meet certain health and other criteria called "underwriting standards". The
smoking status of the insured is reflected in the insurance charges made.
Policies issued in certain jurisdictions or in connection with certain
employee benefit plans will not directly reflect the sex of the insured in
either the premium rates or the charges or values under the Policy.
Accordingly, the illustrations set forth in this Prospectus may differ for
such Policies. Amounts of coverage that JHVLICO will accept under the Policies
may be limited by JHVLICO's underwriting and reinsurance procedures as in
effect from time to time.
PREMIUMS
Payment Flexibility. Premiums are flexible. The Owner may choose the amount
and frequency of premium payments, so long as each premium payment is at least
$100 and meets the other requirements described below.
Minimum First Premium. The amount of premium required at the time of issue
is determined by JHVLICO, and depends on the age, sex, smoking status, and
underwriting class of the insured at issue, the Policy's Sum Insured at issue,
and any additional benefits selected. The Minimum First Premium must be
received by JHVLICO at its Home Office before the Policy is in full force and
effect. See "Death Benefits". There is no grace period for the payment of the
Minimum First Premium.
Minimum Premiums. If the Policy's Surrender Value at the beginning of any
Policy month is insufficient to pay the monthly Policy charges then due,
JHVLICO will notify the Owner and the Policy will enter a grace period, unless
the Guaranteed Minimum Death Benefit is in effect. If premiums sufficient to
pay at least three months' estimated charges are not paid by the end of the
grace period, the Policy will lapse. See "Default".
Planned Premium Schedule. At the time of issue, the Owner may designate a
Planned Premium schedule for the amount and frequency of premium payments.
JHVLICO will send billing statements for the amount chosen at the frequency
chosen. The Owner may change the Planned Premium after issue. The Owner may
also pay a premium in excess of the Planned Premium, subject to the
limitations described below. At the time of Policy issuance, JHVLICO will
determine whether the Planned Premium schedule will exceed the 7-Pay limit
discussed below. If so, JHVLICO will not issue the Policy unless the Owner
signs a form acknowledging that fact.
Other Premium Limitations. Federal tax law requires a minimum death benefit
in relation to Account Value. See "Death Benefits--Definition of Life
Insurance". The death benefit of the Policy will be increased if necessary to
ensure that the Policy will continue to satisfy this requirement. Also, as
described under "Death Benefits--Optional Extra Death Benefit Feature," the
Optional Extra Death Benefit feature may result in a death benefit under
Option M that is higher than the Sum Insured. If the payment of a given
premium will cause the Policy Account Value to increase to such an extent that
an increase in death benefit is necessary to satisfy federal tax law
requirements, or pursuant to the Optional Extra Death Benefit, JHVLICO has the
right to not accept the excess portion of that premium payment, or to require
evidence of insurability before that portion is accepted. In no event,
however, will JHVLICO refuse to accept any premium necessary to maintain the
Guaranteed Minimum Death Benefit in effect under a Policy.
Whether or not the Guaranteed Minimum Death Benefit is in effect, JHVLICO
also reserves the right to limit premium payments above the amount of the
cumulative Guaranteed Minimum Death Benefit premiums. JHVLICO will not,
however, refuse to accept any premium payment that is required to keep the
Policy from lapsing.
Guaranteed Minimum Death Benefit Premiums. A Guaranteed Minimum Death
Benefit feature may apply during the first ten Policy years and, if the Owner
has elected, thereafter. See "Death Benefits". The Guaranteed
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Minimum Death Benefit Premiums required to maintain this benefit in force
depend on the issue age, sex, smoking status, and underwriting class of the
insured at issue and the Basic Sum Insured at issue. This premium is 50% of
the target premium (discussed under "Sales Charge"). To keep the Guaranteed
Minimum Death Benefit in effect, the amount of actual premiums paid,
accumulated at 4% interest, minus any withdrawals, also accumulated at 4%
interest, must at the beginning of each Policy month be at least equal to the
Guaranteed Minimum Death Benefit Premiums due to date accumulated at 4%
interest. If this test is not satisfied at the beginning of any Policy month,
JHVLICO will notify the Owner of the shortfall and the amount of the shortfall
must be paid within a period which ends at the start of the third Policy month
that begins after the date of default. This notice will be mailed to the
Owner's last-known address at least 31 days prior to the end of the grace
period. If JHVLICO does not receive payment for the amount of the deficiency
by the end of the grace period, the Guaranteed Minimum Death Benefit feature
will lapse unless and until restored as described under "Default--
Reinstatement". The Guaranteed Minimum Death Benefit will not apply if the
Additional Sum Insured is scheduled to exceed the Basic Sum Insured at any
time.
Billing, Allocation of Premium Payments (Investment Rule). The Owner may at
any time elect to be billed by JHVLICO for an amount of premium other than the
Guaranteed Minimum Death Benefit Premium. The Owner may also elect to be
billed for premiums on an annual, semi-annual, quarterly or monthly basis. All
premiums are payable at JHVLICO's Home Office.
Any premium payment will be processed by JHVLICO as of the end of the
Valuation Period in which it is received, unless one of the three exceptions
noted below is applicable. Each premium payment will be reduced by the state
premium tax charge, any applicable sales charge, and the Federal DAC Tax
charge. See "Charges and Expenses". The remainder is the net premium.
The Owner at the time of application must elect an Investment Rule which
will allocate net premiums and any credits to any of the ten Subaccounts. The
Owner must select allocation percentages in whole numbers, and the total
allocated must equal 100%. The Owner may thereafter change the Investment Rule
prospectively at any time. The change will be effective as to any net premiums
and credits applied after receipt at JHVLICO's Home Office of notice
satisfactory to JHVLICO. Notwithstanding the Investment Rule, all net premiums
credited to Account Value as of a date prior to the end of the Valuation
Period that includes the 20th day following the date of issue will
automatically be allocated to the Money Market Subaccount. At the end of that
Valuation Period, the Policy's Account Value will be reallocated automatically
among the Subaccounts in accordance with the Investment Rule chosen by the
Owner.
There are three exceptions to the normal practice of processing a premium
payment as of the end of the Valuation Period in which it is received:
(1) A payment received prior to a Policy's date of issue will be
processed as if received on the Valuation Date immediately
preceding the date of issue.
(2) If the Minimum First Premium is not received prior to the date of
issue, each payment received thereafter will be processed as if
received on the Valuation Date immediately preceding the date of
issue until all of the Minimum First Premium is received.
(3) That portion of any premium that we delay accepting as described
under "Other Premium Limitations" above, or "7-Pay Premium Limit"
below, will be processed as of the end of the Valuation Period in
which we accept that amount.
7-Pay Premium Limit. Federal tax law modifies the tax treatment of certain
Policy distributions such as loans, surrenders, partial surrenders, and
withdrawals. The application of this modified treatment to any Owner
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depends upon whether premiums have been paid at any time during the first 7
Policy years that exceed a "7-pay" premium limit as defined in the law. The
"7-pay" premium is greater than the Guaranteed Minimum Death Benefit Premium .
The 7-pay limit is the total of net level premiums that would have been
payable at any time for the Policy to be fully paid-up after the payment of 7
level annual premiums. If the total premiums paid exceed the 7-pay limit, the
Policy will be treated as a "modified endowment", which means that the Owner
will be subject to tax to the extent of any income (gain) on any distributions
made from the Policy. A material change in the Policy will result in a new 7-
pay limit and test period. A reduction in the Policy's benefits within the 7-
year period following issuance of, or a material change in, the Policy may
also result in the application of the modified endowment treatment. See
"Policy Proceeds" under "Tax Considerations". If JHVLICO receives any premium
payment that will cause a Policy to become a modified endowment, the excess
portion of that premium payment will not be accepted unless the Owner signs an
acknowledgment of that fact. When it identifies such an excess premium,
JHVLICO sends the Owner immediate notice and refunds the excess premium if it
has not received notice of the acknowledgment by the time the premium payment
has had a reasonable time to clear the banking system, but in no case longer
than two weeks.
ACCOUNT VALUE AND SURRENDER VALUE
Amount of Account Value. The Account Value increases or decreases depending
upon a number of factors, such as the applicable Subaccount's investment
experience, the proportion of the Account Value invested in each Subaccount
and the interest credited to any Loan Account established upon the making of a
Policy loan. In general the Account Value for any day equals the Account Value
for the previous day, decreased by charges against the Account Value,
increased or decreased by the investment experience of the Subaccounts and
increased by net premiums received. No minimum amount of Account Value is
guaranteed.
A Policy loan will not affect the total amount of Account Value at the time
the loan is made but will result in a different rate of return being credited
to the Loan Account portion of the Account Value.
Amount of Surrender Value. The Surrender Value will be the Account Value
less any Indebtedness. If a Policy is surrendered at any time during the first
3 Policy years, any sales charge deducted within 365 days prior to the date
JHVLICO receives the surrender request will be refunded to the Owner.
When Policy May Be Surrendered. A Policy may be surrendered for its
Surrender Value at any time while the insured is living and the Policy is not
in a grace period. Surrender takes effect and the Surrender Value is
determined as of the end of the Valuation Period in which occurs the later of
receipt at JHVLICO's Home Office of a signed request or the surrendered
Policy.
Partial Withdrawal of Surrender Value. The Owner may request withdrawal of
part of the Surrender Value in accordance with JHVLICO's rules then in effect.
Any withdrawal must be at least $1,000 and is subject to an administrative
charge of $20.
An Owner may request a partial withdrawal of Surrender Value at any time
while the insured is living, provided that the Policy is not in a grace
period. This privilege, which reduces the Account Value by the amount of the
withdrawal and the associated charge, may not be used to reduce the Account
Value below the amount JHVLICO estimates will be required to pay three months'
charges under the Policy as they fall due. The withdrawal will be effective as
of the end of the Valuation Period in which JHVLICO receives written notice
satisfactory to it at its Home Office.
A withdrawal will reduce any Option A or M Sum Insured by the amount
withdrawn. JHVLICO reserves the right to refuse any withdrawal request that
would cause the Policy's Sum Insured to fall below $100,000.
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An amount equal to the Account Value withdrawn will be removed from each
Subaccount in the same proportion as the Account Value is then allocated among
the Subaccounts. A withdrawal is not a loan and, once made, cannot be repaid.
A surrender or withdrawal may have significant tax consequences. See "Tax
Considerations".
DEATH BENEFITS
The death benefit proceeds are payable when the insured dies while the
Policy is in effect. The death benefit proceeds will equal the death benefit
of the Policy, plus any additional rider benefits then due, minus any
Indebtedness. If the insured dies during a grace period, JHVLICO will also
deduct any overdue monthly deductions.
The death benefit payable depends on the current Sum Insured and the death
benefit option selected by the Owner at the time the Policy is issued, as
follows:
OPTION A: The death benefit equals the current Sum Insured, subject to
any increases described below under "Definition of Life Insurance", and
reduced by the amount of any partial withdrawals that have been made over
the life of the Policy.
OPTION B: The death benefit is the current Sum Insured, plus the Policy
Account Value at the end of the Valuation Period in which the insured dies.
This death benefit is a varying amount and fluctuates with the amount of
the Account Value. This death benefit is also subject to any increase
described below under "Definition of Life Insurance".
OPTION M: The death benefit is the current Sum Insured, subject to any
increases described below under "Optional Extra Death Benefit Feature" and
"Definition of Life Insurance" and reduced by the amount of any partial
withdrawals that have been made over the life of the Policy.
The Sum Insured is the Basic Sum Insured, plus the amount of any Additional
Sum Insured (discussed below).
Owners who prefer to have favorable investment experience reflected in
increased insurance coverage should choose Option B or M. As between the two,
the anticipated increase in insurance coverage is likely to occur later under
Option M. Owners who prefer to have insurance coverage that generally does not
vary in amount and lower cost of insurance charges should choose Option A.
Optional Extra Death Benefit Feature. Pursuant to this feature the death
benefit under Option M will be no less than the amount of the Policy Account
Value, plus any refund of sales charges, multiplied by a factor specified in
the Policy. The factor is based on the insured's age. The optional Extra Death
Benefit feature may result in an Option M death benefit that is higher than
the minimum death benefit required under Federal tax law, as described below
under "Definition of Life Insurance." Although there is no special charge for
the optional Extra Death Benefit, the monthly cost of insurance deductions
will be based on the amount of death benefit then in effect, including any
additional death benefit pursuant to this option. An election of this option
must be made at the time of application for the Policy.
Definition of Life Insurance. Federal tax law requires a minimum death
benefit in relation to cash value for a Policy to qualify as life insurance.
The death benefit of a Policy will be increased if necessary to ensure that
the Policy will continue to qualify as life insurance. The higher death
benefit amount will be equal to the Policy Account Value on the date of death
of the insured, plus any refund of sales charges, times a percentage based on
the insured's age at the beginning of the Policy year of the insured's death.
This percentage, which declines with age, is set out in the Policy. The
monthly deductions for the cost of insurance will be based on the
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amount of death benefit then in effect, including any additional death benefit
required to satisfy the definition of life insurance.
Guaranteed Minimum Death Benefit. During the first 10 Policy years (and
thereafter if the Owner elects) the Basic Sum Insured is guaranteed not to
lapse, provided that (1) the amount of premiums paid through each Policy
anniversary, accumulated at 4% interest, minus any withdrawals, also
accumulated at 4% interest, is at least equal to the Guaranteed Minimum Death
Benefit Premiums accumulated at 4% interest and (2) any Additional Sum Insured
under a Policy is not scheduled to exceed the Basic Sum Insured at any time.
At any time when this feature is not in force, the death benefit of the Policy
is not guaranteed. The election to extend the Guaranteed Minimum Death Benefit
beyond ten Policy years must be made at the time of Policy issuance. The Owner
may revoke the election at any time. JHVLICO imposes a charge after the tenth
Policy year if the Owner elects to extend this Benefit.
Additional Sum Insured. The Owner may apply for an amount of Additional Sum
Insured under the Policy, pursuant to which an additional amount of death
benefit will be paid upon the death of the insured under the Policy.
Purchasers of a Policy should consider various factors in determining whether
to elect coverage in the form of Basic Sum Insured or in the form of
Additional Sum Insured.
The Basic Sum Insured generally cannot be increased or decreased after
issue, whereas the amount of Additional Sum Insured can be decreased, or, upon
application and submission of evidence of insurability, increased subsequent
to Policy issuance. JHVLICO may refuse to accept any request to reduce the
Additional Sum Insured (a) that would cause the Policy's current Sum Insured
to fall below $100,000 or (b) if immediately following the reduction, the
Policy's current death benefit would reflect an increase necessary for the
Policy to continue to qualify as life insurance (see "Death Benefits--
Definition of Life Insurance") or an increase pursuant to the optional Extra
Death Benefit feature. Any increase or decrease in Additional Sum Insured will
become effective at the beginning of the first Policy month after JHVLICO
receives in good order at its Home Office all information necessary to process
the change, and, in the case of an increase in coverage, approves the change.
Any decision by the Owner to modify the amount of Additional Sum Insured
coverage after issue can have significant tax consequences. See "Tax
Considerations--Policy Proceeds".
Also, the Owner may elect among several forms of Additional Sum Insured
coverage at the time the Owner applies for 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 years plus the Planned
Premium for the current year, subject to certain limits; or a combination of
those forms of coverage.
The amount of target premium under a Policy is not affected by the amount of
the Additional Sum Insured. Accordingly, the amount of sales charge paid by
the Owner and the amount of compensation paid to the selling insurance agent
may be less if coverage is included as Additional Sum Insured, rather than as
Basic Sum Insured.
The amount of any Additional Sum Insured is not included in any Guaranteed
Minimum Death Benefit. Therefore, if the Policy's Account 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.
The Additional Sum Insured at issue is limited to 400% of the Basic Sum
Insured. Generally, an Owner 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. On the other hand, for Owners that wish to take
advantage of the
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Guaranteed Mimimum Death Benefit, the proportion of the Policy's Sum Insured
that is guaranteed can be increased by taking out more coverage as Basic Sum
Insured at the time of Policy issue. The Guaranteed Minimum Death Benefit does
not apply to either the Basic Sum Insured or any Additional Sum Insured if the
Additional Sum Insured is scheduled to exceed the Basic Sum Insured at any
time. In such a case, it could be to the Owner's advantage either to increase
the amount of coverage applied for as Basic Sum Insured in order that the
Guaranteed Minimum Death Benefit will be available or, if such guarantee is
not of value to the Owner, to maximize the proportion of the Additional Sum
Insured.
Temporary Coverage Prior to Policy Delivery. If a specified amount of
premium is paid with the application for a Policy, temporary term coverage may
be available prior to the time that coverage under the Policy takes effect.
Temporary term coverage is subject to the terms and conditions described in
the application for a Policy.
TRANSFERS AMONG SUBACCOUNTS
The Owner may reallocate the amounts held for the Policy in the Subaccounts
with no charge at any time, except as noted below. The Owner may either (1)
use percentages (in whole numbers) to be transferred among Subaccounts or (2)
designate the dollar amount of funds to be transferred among Subaccounts. The
reallocation must be such that the total in the Subaccounts after reallocation
equals 100% of Account Value. Transfers out of a variable Subaccount will be
effective at the end of the Valuation Period in which JHVLICO receives at its
Home Office notice satisfactory to JHVLICO.
Transfers out of the Fixed Account to the variable Subaccounts are permitted
only once each Policy year and only during the 31-day period beginning on the
Policy anniversary. Transfers out of the Fixed Account may be requested from
60 days before to 30 days after the Policy anniversary. If received on or
before the Policy anniversary, requests for transfer out of the Fixed Account
will be processed on the Policy anniversary (or the next Valuation Date if the
Policy anniversary does not occur on a Valuation Date); if received after the
Policy anniversary, they will be processed at the end of the Valuation Period
in which JHVLICO receives the request at its Home Office. (JHVLICO reserves
the right to defer such Fixed Account transfers for six months.) If an Owner
requests a transfer out of the Fixed Account 61 days or more prior to the
Policy anniversary, that portion of the reallocation will not be processed and
the Owner's confirmation statement will not reflect a transfer out of the
Fixed Account as to such request. Transfers among variable Subaccounts and
transfers into the Fixed Account may be requested at any time. A maximum of
20% of Fixed Account assets or, if greater, $500 may be transferred out of the
Fixed Account in any Policy year. Currently, there is no minimum amount limit
on transfers out of the Fixed Account, but JHVLICO reserves the right to
impose such a limit in the future.
No transfers may be made while the Policy is in a grace period.
Telephone Transfers and Policy Loans. Once a written authorization is
completed by the Owner, the Owner may request a transfer or policy loan by
telephoning 1-800-732-5543. During periods of heavy telephone usage,
implementing a telephone transfer or policy loan may be difficult. If an Owner
is unable to reach JHVLICO via the above number, the Owner should send a
written request via fax to 1-800-621-0448. (Any requests via fax are
considered telephone requests and are bound by the conditions in the Owner's
signed telephone authorization form.) Any fax request should include the
Owner's name, daytime telephone number, Policy number and, in the case of
transfers, the names of the subaccounts from which and to which money will be
transferred. The right to discontinue telephone transactions at any time
without notice to Owners is specifically reserved.
An Owner who authorizes telephone transactions will be liable for any loss,
expense or cost arising out of any unauthorized or fraudulent telephone
instructions which JHVLICO reasonably believes to be genuine, unless
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such loss, expense or cost is the result of JHVLICO's mistake or negligence.
JHVLICO employs procedures which provide adequate safeguards against the
execution of unauthorized transactions, and which are reasonably designed to
confirm that instructions received by telephone are genuine. These procedures
include requiring personal identification, tape recording calls, and providing
written confirmation to the Owner. If JHVLICO does not employ reasonable
procedures to confirm that instructions communicated by telephone are genuine,
it may be liable for any loss due to unauthorized or fraudulent instructions.
LOAN PROVISIONS AND INDEBTEDNESS
Loan Provisions. Loans may be made at any time a Loan Value is available,
the insured is alive and the Policy is not in a grace period. The Owner may
borrow money, assigning the Policy as the only security for the loan, by
completion of a form satisfactory to JHVLICO or, if the telephone transaction
authorization form has been completed by telephone. The Loan Value will be 90%
of the Account Value. Interest charged on any loan will accrue and compound
daily at an annual rate determined by JHVLICO at the start of each Policy
Year. This interest rate will not exceed the greater of (1) the "Published
Monthly Average" (defined below) for the calendar month ending 2 months before
the calendar month of the Policy anniversary or (2) 5%. In jurisdictions where
a fixed loan rate is applicable, JHVLICO will charge interest at an effective
annual rate of 4.5% in the first 20 Policy years, and 4.25% thereafter,
accrued daily. The "Published Monthly Average" means Moody's Corporate Bond
Yield Average-Monthly Average Corporates, as published by Moody's Investors
Service, Inc., or if the average is no longer published, a substantially
similar average established by the insurance regulator where the Policy is
issued.
The amount of any outstanding loan plus accrued interest is called the
"Indebtedness". The amount of the loan available will be the Loan Value less
any existing Indebtedness. A loan will not be permitted unless it is at least
$1,000. A loan may be repaid in full or in part at any time before the
insured's death and while the Policy is not in a grace period. When a loan is
made, an amount equal to the loan proceeds will be transferred out of the
Account and the Fixed Account, as applicable. This amount is allocated to the
Loan Account, a portion of JHVLICO's general account. Each Subaccount will be
reduced in the same proportion as the Account Value is then allocated among
the Subaccounts. Upon each loan repayment, the same proportionate amount of
the entire loan as was borrowed from the Fixed Account will be repaid to the
Fixed Account. The remainder of the loan repayment will be allocated to the
appropriate Subaccounts as stipulated in the current Investment Rule. For
example, if the entire loan outstanding is $3000 of which $1000 was borrowed
from the Fixed Account, then upon a repayment of $1500, $500 would be
allocated to the Fixed Account and the remaining $1000 would be allocated to
the appropriate Subaccounts as stipulated in the current Investment Rule. If
an Owner wishes any payment to constitute a loan repayment (rather than a
premium payment), the Owner must so specify.
Effect of Loan and Indebtedness. While the Indebtedness is outstanding, that
portion of the Account Value that is in the Loan Account is credited with
interest at a rate that is .5% less than the loan interest rate for the first
20 Policy years and, thereafter, .25% less than the loan interest rate. This
rate will usually be different than the net return for the Subaccounts. Since
the Loan Account and the remaining portion of the Account Value will generally
have different rates of investment return, any death benefit above the Sum
Insured, the Account Value, and the Surrender Value are permanently affected
by any Indebtedness, whether or not repaid in whole or in part. The amount of
any Indebtedness is subtracted from the amount otherwise payable when the
Policy proceeds become payable.
Whenever the Indebtedness equals or exceeds 90% of the Account Value, the
Policy terminates 31 days after notice has been mailed by JHVLICO to the Owner
and any assignee of record at their last known addresses, unless a repayment
of the excess Indebtedness is made within that period.
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Tax Considerations. If the Policy is a modified endowment at the time a loan
is made, that loan may have significant tax consequences. See "Tax
Considerations".
DEFAULT
Premium Grace Period, Default and Lapse. Unless the Guaranteed Minimum Death
Benefit is in force, at the beginning of each Policy month JHVLICO determines
whether the Account Value, net of any Indebtedness, is sufficient to pay all
monthly charges then due under the Policy. If not, the Policy is in default
and JHVLICO will notify the Owner of the amount estimated to be necessary to
pay three months' deductions, and a grace period will be in effect until 61
days after the date the notice was mailed. If JHVLICO does not receive payment
of at least this amount by the end of the grace period, the Policy will lapse,
and any remaining amount owed to the Owner as of the date of lapse will be
paid to the Owner.
If the Guaranteed Minimum Death Benefit is in effect and the Policy provides
for an Additional Sum Insured, the grace period and lapse procedures set forth
in the preceding paragraph will apply only to the Additional Sum Insured.
Lapse of the Additional Sum Insured can have significant tax consequences. See
"Tax Considerations--Policy Proceeds". If the Guaranteed Minimum Death Benefit
has been in effect and lapses at the end of a grace period (as described in
"Premiums--Guaranteed Minimum Death Benefit Premiums"), the usual default,
grace period and lapse procedures described in the preceding paragraph will be
applied commencing with the first day of the first Policy month following the
lapse of the Guaranteed Minimum Death Benefit.
The insurance under the Policy continues in full force during any grace
period but, if the insured dies during the grace period, the amount in default
is deducted from the death benefit otherwise payable.
Written notice will be furnished to the Owner at his or her last known
address, at least 31 days prior to the end of any grace period, specifying the
minimum amount which must be paid to continue the Policy in force on a premium
paying basis after the end of the grace period.
Reinstatement. A lapsed Policy (or a lapsed Additional Sum Insured, if the
Basic Sum Insured remains in force or is reinstated) or the Guaranteed Minimum
Death Benefit may be reinstated in accordance with the Policy's terms.
Evidence of insurability satisfactory to JHVLICO will be required (except as
to a request to restore the Guaranteed Minimum Death Benefit within 1 year
after the beginning of its grace period) and payment of the required premium
and charges. The request must be received at JHVLICO's Home Office within 1
year after the beginning of the grace period (or 5 years if the request
relates only to the Guaranteed Minimum Death Benefit). JHVLICO reserves the
right to refuse Guaranteed Minimum Death Benefit restorations after the first
restoration. A reinstatement of the Basic Sum Insured or the Additional Sum
Insured may be deemed as a material change for Federal income tax purposes.
See "Premiums--7-Pay Premium Limit" and "Tax Considerations".
EXCHANGE PRIVILEGE
The Owner may transfer the entire Account Value under the Policy to the
Fixed Account at any time, creating a non-variable policy. The exchange will
be effective at the end of the Valuation Period in which JHVLICO receives at
its Home Office notice of the transfer satisfactory to JHVLICO.
----------------
The foregoing description of Policy provisions is qualified by reference to
the specimen Policy which has been filed as an exhibit to the Registration
Statement.
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CHARGES AND EXPENSES
CHARGES DEDUCTED FROM PREMIUMS
In addition to the sales charge (see "Sales Charge" below), the following
charges are deducted from premiums:
State Premium Tax Charge. A charge currently equal to 2.35% of each premium
payment will be deducted from each premium payment. Premium taxes vary from
state to state, ranging from zero to 4% currently. A charge of 2.35% is made,
regardless of the premium tax imposed by any state. The 2.35% rate is the
average rate currently expected to be paid on premiums received in all states
over the lifetimes of the insureds covered by the Policies. JHVLICO will not
increase this charge under outstanding Policies, but reserves the right to
change this charge for Policies not yet issued in order to correspond with
changes in the state premium tax levels.
Federal DAC Tax Charge. A charge currently equal to 1.25% of each premium
payment will be deducted from each premium payment to cover the estimated cost
to JHVLICO of the Federal income tax treatment of the Policies' deferred
acquisition costs--commonly referred to as the "DAC Tax". JHVLICO has
determined that this charge is reasonable in relation to JHVLICO's increased
Federal income tax burden under the Internal Revenue Code resulting from the
receipt of premiums. JHVLICO will not increase this charge under outstanding
Policies, but reserves the right, subject to any required regulatory approval,
to change this charge for Policies not yet issued in order to correspond with
changes in the Federal income tax treatment of the Policies' deferred
acquisition costs.
SALES CHARGE
A charge is made to compensate JHVLICO for the cost of selling the Policy.
This cost includes agents' commissions, commission overrides, advertising, and
the printing of Prospectuses and sales literature. The amount of the charge in
any Policy year cannot be specifically related to sales expenses for that
year. JHVLICO expects to recover its total sales expenses over the period the
Policies are in effect. To the extent that sales charges are insufficient to
cover total sales expenses, the sales expenses may be recovered from other
sources, including gains from the charge for mortality and expense risks and
other gains with respect to the Policies, or from JHVLICO's general assets.
See "Distribution of Policies".
The current sales charge in each of the first ten Policy years is equal to
9% of the premiums paid up to one "target premium". There is no sales charge
on premiums in excess of the target premium. The target premium is established
at issue and is the amount of the 7-Pay premium limit for the Basic Sum
Insured at the maximum guaranteed cost of insurance rates and a net interest
rate of 4%. See "Premiums--7-Pay Premium Limit". Target premiums will vary
based on the issue age, sex, smoking status and underwriting class of the
insured.
The current sales charge for premiums paid up to one target premium in each
subsequent Policy year is 3% in years 11 through 20, and zero thereafter. The
current sales charge for premiums paid in excess of the target premium after
the tenth Policy year is zero. Payment of premiums in excess of the target
premium may cause the Policy to become a modified endowment, resulting in
adverse tax consequences to the Owner upon receipt of any Policy
distributions. See "Premiums--7-Pay Premium Limit".
The guaranteed maximum sales charges under the Policy are no higher than the
current sales charges, except that the guaranteed maximum sales charge for
premiums paid up to one target premium is 5% in Policy years 11 through 20 and
3% after Policy year 20 and for premiums paid in excess of one target premium
is 3%. Because the Policies were first offered in 1994, sales charges at the
lower current rates are not yet applicable under any outstanding Policy.
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An Owner may structure the timing and amount of premium payments to minimize
the sales charges deducted from premium payments, 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 the
Owner's total sales charges over time. For example, an Owner, paying ten
target premiums of $10,000 each, would pay total sales charges of $9,000 if he
paid $10,000 in each of the first ten Policy years, but only $4,500 if he paid
$20,000 (i.e., two times the target premium amount) in every other Policy year
up to the ninth Policy year. However, delaying the payment of target premiums
to later Policy years could increase the risk that the Guaranteed Minimum
Death Benefit will lapse and that 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. See "Default".
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 the Owner upon receipt of Policy distributions.
See "Premiums--7-Pay Premium Limit".
REDUCED CHARGES FOR ELIGIBLE GROUPS
The sales charge and issue charge (described below) otherwise applicable may
be reduced with respect to Policies issued to a class of associated
individuals or to a trustee, employer or similar entity where JHVLICO
anticipates that the sales to the members of the class will result in lower
than normal sales or administrative expenses. The charge for mortality and
expense risks (described below) otherwise applicable may be reduced with
respect to Policies issued to a trustee, employer or similar entity where
JHVLICO anticipates that, because of the nature of the group on whose behalf
the Policies are purchased, there will be a lower than normal risk of the
mortality and expense charge not being sufficient to cover actual mortality
and expense costs. These reductions will be made in accordance with JHVLICO's
rules in effect at the time of the application for a Policy. The factors
considered by JHVLICO in determining the eligibility of a particular group for
reduced charges, and the level of the reduction, are as follows: the nature of
the association and its organizational framework; the method by which sales
will be made to the members of the class; the facility with which premiums
will be collected from the associated individuals and the association's
capabilities with respect to administrative tasks; the anticipated persistency
of the policies; the size of the class of associated individuals and the
number of years it has been in existence; the aggregate amount of premiums to
be paid by or for the class of associated individuals; and any other such
circumstances which justify a reduction in sales or administrative charges or
mortality and expense risk charges. Any reduction will be reasonable and will
apply uniformly to all prospective Policy purchasers in the class and will not
be unfairly discriminatory to the interests of any Policy Owner.
CHARGES DEDUCTED FROM ACCOUNT VALUE OR ASSETS
The following charges are deducted from Account Value or assets:
Issue Charge. JHVLICO will deduct an issue charge from Account Value, at the
rate of $12.50 per month for the first 3 Policy years, plus an amount set
forth in the Policy that varies by age per $1,000 of the Basic Sum Insured at
issue for the first 10 Policy years. For example, this additional monthly
amount for a 45 year old is 17c per $1000 of Basic Sum Insured.
The issue charge is to compensate JHVLICO for expenses incurred in
connection with the issuance of the Policy, other than sales expenses. Such
expenses include medical examinations, insurance underwriting costs and costs
incurred in processing applications and establishing permanent Policy records.
Administrative charge. JHVLICO will deduct from the Account Value a monthly
charge not to exceed $4 per Policy and 6c per $1000 of the Basic Sum Insured
at issue. The current monthly charge is $2.50 per Policy plus 2c per $1000 of
Basic Sum Insured at issue.
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<PAGE>
This charge is to compensate JHVLICO for administrative expenses, including
recordkeeping, processing death claims and surrenders, making Policy changes,
reporting and other communications to Owners and other similar expense and
overhead costs.
Insurance Charge. The insurance charge deducted monthly from Account Value
is based on the attained age of the insured and the amount at risk. The amount
at risk is the difference between the current death benefit and the Account
Value (after reflecting all charges against Account Value). The amount of the
insurance charge is determined by multiplying JHVLICO's then current monthly
rate for insurance by the amount at risk.
Current monthly rates for insurance are based on the sex, age, smoking
status and underwriting class of the insureds and the length of time the
Policy has been in effect. JHVLICO will review these rates at least every 5
years, and may change these rates from time to time based on JHVLICO's
expectations of future experience. However, these rates will never be more
than the guaranteed maximum rates based on the 1980 Commissioners' Standard
Ordinary Mortality Tables, as set forth in the Policy.
Lower current insurance rates are offered at most ages for insureds who
qualify for the standard underwriting class and whose applications are fully
underwritten, i.e. subject to evidence of insurability on the part of the
insured, a process which may involve a medical examination. On the other hand,
higher current insurance rates are generally applicable if the Policies are
issued on a guaranteed issue basis, where evidence of insurability is not
required.
Policies issued to trustees, employers and similar entities are often issued
on a guaranteed issue basis. Because only limited underwriting information is
obtained in this alternative underwriting procedure, Policies in this class
may present additional mortality expense to JHVLICO relative to Policies which
are fully underwritten. This additional insurance risk is generally reflected
in higher insurance rates, nevertheless guaranteed not to exceed the 1980
Commissioners' Standard Ordinary Mortality Tables.
Guaranteed Minimum Death Benefit Charge. If the Guaranteed Minimum Death
Benefit option is elected for a period beyond the first 10 Policy years,
JHVLICO deducts a charge from Account Value beginning in the eleventh Policy
year. The maximum monthly charge is 2c per $1000 of the Basic Sum Insured at
issue and the current monthly charge is 1c per $1,000 of the Basic Sum Insured
at issue. If the Guaranteed Minimum Death Benefit lapses due to failure to pay
sufficient premiums, the charge will be discontinued.
Charge for Mortality and Expense Risks. A daily charge is made for mortality
and expense risks assumed by JHVLICO at a maximum effective annual rate of
.40% of the value of the Account's assets attributable to the Policies. The
current charge is at an effective annual rate of .20%. This charge begins when
amounts under a Policy are first allocated to the Account. The mortality risk
assumed is that insureds may live for a shorter period of time than estimated
and, therefore, a greater amount of death benefit than expected will be
payable in relation to the amount of premiums received. The expense risk
assumed is that expenses incurred in issuing and administering the Policies
will be greater than estimated. JHVLICO will realize a gain from this charge
to the extent it is not needed to provide for benefits and expenses under the
Policies.
Charges for Extra Mortality Risks. An insured who does not qualify for the
standard underwriting class must pay an additional charge because of the extra
mortality risk. The level of the charge depends upon the age of the insured
and the degree of extra mortality risk. This additional charge is deducted
monthly from Account Value.
Charges for Optional Rider Benefits. An additional charge must be paid if
the Owner elects to purchase an optional insurance benefit by Policy rider.
This additional charge is deducted monthly from Account Value.
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<PAGE>
Charges for Taxes. Currently no charge is made against Account Value for
JHVLICO's Federal income taxes but if JHVLICO incurs, or expects to incur,
income taxes attributable to the Account or this class of Policies in future
years, it reserves the right to make a charge, and any charge would affect
what the Subaccounts earn. Charges for other taxes, if any, attributable to
the Subaccounts may also be made.
Charge for Partial Withdrawal. JHVLICO will deduct a charge in the amount of
$20 on a partial withdrawal of Surrender Value, as described under "Account
Value and Surrender Value". The charge will be deducted from Account Value.
The charge is to compensate JHVLICO for the administrative expenses of
effecting the withdrawal.
Fund Investment Management Fee. The Account purchases shares of the Funds at
net asset value, a value which reflects the deduction from the assets of each
Fund of its investment management fee, which is described briefly in the
Summary of this Prospectus, and of certain non-advisory operating expenses.
For a full description of these deductions, see the attached Prospectuses for
the Funds.
The monthly deductions from Account Value described above are deducted on
the date of issue and on the first day of each Policy month thereafter. These
deductions are made from the Subaccounts in proportion to the amount of
Account Value in each. For each month that JHVLICO is unable to deduct any
charge because there is insufficient Account Value, the uncollected charges
will accumulate and be deducted when and if sufficient Account Value is
available.
GUARANTEE OF CERTAIN CHARGES
The state premium tax charge, the Federal DAC Tax charge, the issue charge
and the charge for partial withdrawals are guaranteed not to increase over the
life of the Policy. The administrative charge, the Guaranteed Minimum Death
Benefit charge, the sales charge, the mortality and expense risk charge, and
the insurance charge are guaranteed not to exceed the maximums set forth in
the Policy.
DISTRIBUTION OF POLICIES
Applications are solicited by agents who are licensed by state insurance
authorities to sell JHVLICO's Policies and who are also registered
representatives ("representatives") of John Hancock or other broker-dealer
firms, as discussed below. John Hancock performs insurance underwriting,
determines whether to accept or reject the application for a Policy and each
insured's risk classification and, pursuant to a sales agreement among John
Hancock, JHVLICO, and the Account, acts as the principal underwriter of the
Policies. The sales agreement will remain in effect until terminated upon
sixty days' written notice by any party. JHVLICO will make the appropriate
refund if a Policy ultimately is not issued or is returned under the short-
term cancellation provision. Officers and employees of John Hancock and
JHVLICO are covered by a blanket bond by a commercial carrier in the amount of
$25 million.
John Hancock's representatives are compensated for sales of the Policies on
a commission and service fee basis by John Hancock, and JHVLICO reimburses
John Hancock for such compensation and for other direct and indirect expenses
(including agency expense allowances, general agent, district manager and
supervisor's compensation, agent's training allowances, deferred compensation
and insurance benefits of agents, general agents, district managers and
supervisors, agency office clerical expenses and advertising) actually
incurred in connection with the marketing and sale of the Policies.
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The maximum commission payable to a John Hancock representative for selling
a Policy is 14% of the target premium paid in each of the first 10 Policy
years, and 3% of the target premium paid in each year thereafter. The maximum
commission on any premium paid in any Policy year in excess of the target
premium is 2%.
Representatives with less than four years of service with John Hancock and
those compensated on salary plus bonus or level commission programs may be
paid on a different basis. Representatives who meet certain productivity and
persistency standards with respect to the sale of policies issued by JHVLICO
and John Hancock will be eligible for additional compensation.
John Hancock is registered with the Commission under the Securities Exchange
Act of 1934 as a broker-dealer and is a member of the National Association of
Securities Dealers, Inc. John Hancock is not a member of the Securities
Investor Protection Corporation because it is exempt from membership in that
organization. The Policies are also sold through other registered broker-
dealers that have entered into selling agreements with John Hancock 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 John
Hancock's representatives. In addition, their qualified registered
representatives may be reimbursed by the broker-dealers under expense
reimbursement allowance programs in any year for approved voucherable expenses
incurred. John Hancock will compensate the broker-dealers as provided in the
selling agreements, and JHVLICO will reimburse John Hancock for such amounts
and for certain other direct expenses in connection with marketing the
Policies through other broker-dealers.
John Hancock serves as principal underwriter for other separate accounts
registered under the 1940 Act: John Hancock Variable Annuity Accounts U, I and
V, John Hancock Mutual Variable Life Insurance Account UV and John Hancock
Variable Life Accounts U and V. John Hancock is also the principal investment
manager and principal underwriter for John Hancock Variable Series Trust I.
TAX CONSIDERATIONS
The below description of Federal income tax consequences is only a brief
summary and is not intended as tax advice. For further information consult a
qualified tax advisor. Federal, state and local tax laws can change from time
to time and, as a result, the tax consequences to the Owner and beneficiary
may be altered.
POLICY PROCEEDS
Although the Policy contains provisions not found in fixed benefit life
insurance policies, JHVLICO believes the Policy will receive the same Federal
income and estate tax treatment. Section 7702 of the Internal Revenue Code
("Code") defines life insurance for Federal tax purposes. See "Death
Benefits--Definition of Life Insurance". If certain standards are met at issue
and over the life of the Policy, the Policy will come within that definition.
JHVLICO will monitor compliance with these standards. Furthermore, JHVLICO
reserves the right to make any changes in the Policy necessary to ensure the
Policy is within the definition of life insurance.
If the Policy complies with the definition of life insurance, JHVLICO
believes the death benefit under the Policy will be excludable from the
beneficiary's gross income under Section 101 of the Code. In addition,
increases in Account Value as a result of interest or investment experience
will not be subject to Federal income tax unless and until values are actually
received through withdrawal, surrender or other distributions.
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<PAGE>
A surrender, lapse or partial withdrawal may have tax consequences. For
example, the Owner will be taxed on a surrender to the extent that the Account
Value exceeds the premiums paid under the Policy, ignoring premiums paid for
riders. But under certain circumstances within the first 15 Policy years, the
Owner may be taxed on a withdrawal of Policy values even if total withdrawals
do not exceed total premiums paid.
JHVLICO also believes that, except as noted below, loans received under the
Policy will be treated as indebtedness of an Owner and that no part of any
loan will constitute income to the Owner. However, the amount of any loan
outstanding will be taxed to the Owner if a Policy lapses.
Distributions under Policies on which premiums greater than the "7-pay"
limit (see "Premiums--7-Pay Premium Limit") have been paid will be treated as
distributions from a "modified endowment," which are subject to special
taxation based on Federal tax law. The Owner of such a Policy will be taxed on
distributions such as loans, surrenders and partial withdrawals to the extent
of any income (gain) to the Owner (income-first basis). The distributions
affected will be those made on or after, and within the two year period prior
to, the time the Policy becomes a modified endowment. Additionally, a 10%
penalty tax may be imposed on affected income distributed before the Owner
attains age 59 1/2.
Furthermore, any time there is a "material change" in a Policy (such as the
addition of certain other Policy benefits after issue, or reinstatement of a
lapsed Policy), the Policy will be subject to a new "7-pay" test, with the
possibility of a tax on distributions if it were subsequently to become a
modified endowment. Moreover, if benefits under a Policy are reduced (such as
a reduction in the Sum Insured or death benefit or the reduction or
cancellation of certain rider benefits, or Policy termination) during the 7
years in which the 7-pay test is being applied, the 7-pay limit will be
recalculated based on the reduced benefits. If the premiums paid to date are
greater than the recalculated 7-pay limit, the Policy will become a modified
endowment.
All modified endowments issued by the same insurer (or affiliates) to the
Owner during any calendar year generally will be treated as one contract for
the purpose of applying the modified endowment rules. Your tax advisor should
be consulted if you have questions regarding the possible impact of the 7-pay
limit on your Policy.
Federal estate and state and local estate, inheritance and other tax
consequences of ownership or receipt of Policy proceeds depend on the
circumstances of each Owner or beneficiary.
CHARGE FOR JHVLICO'S TAXES
Except for the DAC Tax charge, JHVLICO currently makes no charge for Federal
income taxes that may be attributable to this class of Policies. If JHVLICO
incurs, or expects to incur, income taxes attributable to this class of
Policies or any Subaccount in the future, it reserves the right to make a
charge for those taxes.
Under current laws, JHVLICO may incur state and local taxes (in addition to
premium taxes) in several states. At present, these taxes are not significant.
If there is a material change in applicable state or local tax laws, charges
for such taxes may be made.
CORPORATE AND H.R. 10 PLANS
The Policy may be acquired in connection with the funding of retirement
plans satisfying the qualification requirements of Section 401 of the Code. If
so, the Code provisions relating to such plans and life insurance benefits
thereunder should be carefully scrutinized.
24
<PAGE>
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS OF JHVLICO
The Directors and Executive Officers of JHVLICO and their principal
occupations during the past five years are as follows:
<TABLE>
<CAPTION>
Directors--Officers Principal Occupations
------------------- ---------------------
<S> <C>
David F. D'Alessandro Chairman of the Board and Chief Executive
Officer of JHVLICO; Senior Executive Vice
President and Director, John Hancock Mutual
Life Insurance Company.
Henry D. Shaw Vice Chairman of the Board and President of
JHVLICO; Senior Vice President, John
Hancock Mutual Life Insurance Company.
Thomas J. Lee Director of JHVLICO; Vice President, John
Hancock Mutual Life Insurance Company.
Michele G. Van Leer Director of JHVLICO; Vice President, John
Hancock Mutual Life Insurance Company.
Francis C. Cleary, Jr. Director and Counsel, JHVLICO; Vice
President and Counsel, John Hancock Mutual
Life Insurance Company.
Joseph A. Tomlinson Director and Vice President, JHVLICO; Vice
President, John Hancock Mutual Life
Insurance Company.
Robert R. Reitano Director of JHVLICO; Vice President, John
Hancock Mutual Life Insurance Company.
Robert S. Paster Director and Actuary, JHVLICO; Second Vice
President, John Hancock Mutual Life
Insurance Company.
Barbara L. Luddy Director of JHVLICO; Second Vice President,
John Hancock Mutual Life Insurance Company.
Daniel L. Ouellette Vice President, Marketing, JHVLICO; Vice
President, John Hancock Mutual Life
Insurance Company.
Patrick F. Smith Controller of JHVLICO; Assistant
Controller, John Hancock Mutual Life
Insurance Company.
</TABLE>
The business address of all Directors and officers of JHVLICO is John
Hancock Place, Boston, Massachusetts 02117.
REPORTS
At least once each Policy year a statement will be sent to the Owner setting
forth the amount of the death benefit, Basic Sum Insured, Additional Sum
Insured, Account Value, the portion of the Account Value in each Subaccount,
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) as of the last day of such year. Moreover,
confirmations will be furnished to Owners of premium payments, transfers among
Subaccounts, Policy loans, partial withdrawals and certain other Policy
transactions.
25
<PAGE>
Owners will be sent semiannually a report containing the financial
statements of the Funds, including a list of securities held in each
Portfolio.
VOTING PRIVILEGES
All of the assets in the variable Subaccounts of the Account are invested in
shares of the corresponding Portfolios of the Funds. JHVLICO will vote the
shares of each of the Portfolios of the Funds which are deemed attributable to
policies at regular and special meetings of the Funds' shareholders in
accordance with instructions received from owners of such policies. Shares of
the Funds held in the Account which are not attributable to policies and
shares for which instructions from owners are not received will be represented
by JHVLICO at the meeting and will be voted for and against each matter in the
same proportions as the votes based upon the instructions received from the
owners of all policies funded through the Account's corresponding variable
Subaccounts.
The number of Fund shares held in each variable Subaccount deemed
attributable to each Owner is determined by dividing the amount of a Policy's
Account Value held in the variable Subaccount by the net asset value of one
share in the corresponding Fund Portfolio in which the assets of that variable
Subaccount are invested. Fractional votes will be counted. The number of
shares as to which the Owner may give instructions will be determined as of
the record date for the Funds' meetings.
Owners of Policies may give instructions regarding the election of the Board
of Trustees of each Fund, ratification of the selection of independent
auditors, approval of Fund investment advisory agreements and other matters
requiring a vote under the 1940 Act. Owners will be furnished information and
forms by JHVLICO in order that voting instructions may be given.
JHVLICO may, when required by state insurance regulatory authorities,
disregard voting instructions if the instructions require that the shares be
voted so as to change the investment objectives of the Portfolios or to
approve or disapprove an investment advisory or underwriting contract for the
Funds. JHVLICO also may disregard voting instructions in favor of changes
initiated by an Owner or Fund's Board of Trustees in the investment policy,
investment adviser or principal underwriter of the Fund, if JHVLICO (i)
reasonably disapproves of such changes and (ii) in the case of a change of
investment policy or investment adviser, makes a good-faith determination that
the proposed change is contrary to state law or prohibited by state regulatory
authorities or that the change would be inconsistent with a variable
Subaccount's investment objectives or would result in the purchase of
securities which vary from the general quality and nature of investments and
investment techniques utilized by other separate accounts of JHVLICO or of an
affiliated life insurance company, which separate accounts have investment
objectives similar to those of the variable Subaccount. In the event JHVLICO
does disregard voting instructions, a summary of that action and the reasons
for such action will be included in the next semi-annual report to Owners.
CHANGES THAT JHVLICO CAN MAKE
The voting privileges described in this Prospectus are afforded based on
JHVLICO's understanding of applicable Federal securities law requirements. To
the extent that applicable law, regulations or interpretations change to
eliminate or restrict the need for such voting privileges, JHVLICO reserves
the right to proceed in accordance with any such revised requirements. JHVLICO
also reserves the right, subject to compliance with applicable law, including
approval of Owners if so required, (1) to transfer assets determined by
JHVLICO to be
26
<PAGE>
associated with the class of policies to which the Policies belong from the
Account to another separate account or variable Subaccount by withdrawing the
same percentage of each investment in the Account with appropriate adjustments
to avoid odd lots and fractions, (2) to operate the Account as a "management-
type investment company" under the 1940 Act, or in any other form permitted by
law, the investment adviser of which would be JHVLICO, an affiliate or John
Hancock, (3) to deregister the Account under the 1940 Act, (4) to substitute
for the Portfolio shares held by a Subaccount any other investment permitted
by law, and (5) to take any action necessary to comply with or obtain any
exemptions from the 1940 Act. JHVLICO would notify Owners of any of the
foregoing changes and, to the extent legally required, obtain approval of
Owners and any regulatory body prior thereto. Such notice and approval,
however, may not be legally required in all cases.
STATE REGULATION
JHVLICO is subject to regulation and supervision by the Massachusetts
Commissioner of Insurance who periodically examines its affairs. It also is
subject to the applicable insurance laws and regulations of all jurisdictions
in which it is authorized to do business.
JHVLICO is required to submit annual statements of its operations, including
financial statements, to the insurance departments of the various
jurisdictions in which it does business for purposes of determining solvency
and compliance with local insurance laws and regulations.
LEGAL MATTERS
Legal matters in connection with the Policies described in this Prospectus
have been passed on by Francis C. Cleary, Jr., Counsel for JHVLICO. Messrs.
Freedman, Levy, Kroll & Simonds, Washington, D.C., have advised JHVLICO on
certain Federal securities law matters in connection with the Policies.
REGISTRATION STATEMENT
This Prospectus omits certain information contained in the Registration
Statement which has been filed with the Commission. More details may be
obtained from the Securities and Exchange Commission upon payment of the
prescribed fee.
EXPERTS
The financial statements of the Account and JHVLICO 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 Philip
G. Johnson, F.S.A., an Actuary of JHVLICO.
FINANCIAL STATEMENTS
The financial statements of JHVLICO included herein should be distinguished
from the financial statements of the Account and should be considered only as
bearing upon the ability of JHVLICO to meet its obligations under the
Policies.
27
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Real Short-Term
Select Money Estate Special U.S.
Stock Bond International Market Equity Opportunities Stock Government Managed
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
---------- ---------- ------------- ---------- ---------- ------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Investment in
shares of
portfolios of
John Hancock
Variable Series
Trust I, at
value.......... $7,064,890 $1,388,285 $2,554,818 $4,626,512 $570,782 $1,670,060 $ 8,919,796 $2,209,047 $3,809,723
Receivable from
John Hancock
Variable Series
Trust I........ 39,836 1,076 2,172 612,373 12,369 81 1,291,449 9,631 93,566
---------- ---------- ---------- ---------- -------- ---------- ----------- ---------- ----------
Total assets.... 7,104,726 1,389,361 2,556,990 5,238,885 583,151 1,670,141 10,211,245 2,218,678 3,903,289
Liabilities
Payable to John
Hancock
Variable Life
Insurance
Company........ 39,567 1,011 2,051 612,185 12,340 -- 1,291,107 9,585 93,412
Asset charges
payable........ 269 65 121 188 29 81 342 46 154
---------- ---------- ---------- ---------- -------- ---------- ----------- ---------- ----------
Total liabili-
ties........... 39,836 1,076 2,172 612,373 12,369 81 1,291,449 9,631 93,566
---------- ---------- ---------- ---------- -------- ---------- ----------- ---------- ----------
Net assets...... $7,064,890 $1,388,285 $2,554,818 $4,626,512 $570,782 $1,670,060 $ 8,919,796 $2,209,047 $3,809,723
========== ========== ========== ========== ======== ========== =========== ========== ==========
</TABLE>
See accompanying notes.
28
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF OPERATIONS
FOR THE YEARS AND PERIODS ENDED DECEMBER 31
<TABLE>
<CAPTION>
Select Stock Bond International
Subaccount Subaccount Subaccount Money Market Subaccount
------------------------ ----------------------- --------------------------- ---------------------------
1995 1994 1993* 1995 1994 1993* 1995 1994 1993* 1995 1994 1993*
-------- -------- ----- -------- ------- ----- ---------- -------- ----- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment
income:
Distributions
received from
the portfolios
of
John Hancock
Variable Series
Trust I........ $509,637 $ 39,711 $ 541 $ 66,972 $ 7,083 -- $ 19,501 $ 11,324 -- $ 119,746 $ 39,245 --
-------- -------- ----- -------- ------- --- ---------- -------- --- --------- -------- ----
Total investment
income.......... 509,637 39,711 541 66,972 7,083 -- 19,501 11,324 -- 119,746 39,245 --
Expenses:
Mortality and
expense risks.. 17,330 2,688 4 4,148 509 -- 10,434 2,129 -- 12,117 5,184 --
-------- -------- ----- -------- ------- --- ---------- -------- --- --------- -------- ----
Net investment
income.......... 492,307 37,023 537 62,824 6,574 -- 9,067 9,195 -- 107,629 34,061 --
Net realized and
unrealized gain
(loss) on
investments:
Net realized
gains
(losses)....... 126,908 (37,955) -- 21,718 (2,259) -- (25,931) 5,934 -- -- -- --
Net unrealized
appreciation
(depreciation)
during the
year........... 180,251 (24,086) (447) 34,574 (3,839) -- 153,715 (46,936) -- -- -- --
-------- -------- ----- -------- ------- --- ---------- -------- --- --------- -------- ----
Net realized and
unrealized gain
(loss) on
investments..... 307,159 (62,041) (447) 56,292 (6,098) -- 127,784 (41,002) -- -- -- --
-------- -------- ----- -------- ------- --- ---------- -------- --- --------- -------- ----
Net increase
(decrease) in
net assets
resulting from
operations...... $799,466 $(25,018) $ 90 $119,116 $ 476 -- $1,368,511 $(31,807) -- $ 107,629 $ 34,061 --
======== ======== ===== ======== ======= === ========== ======== === ========= ======== ====
</TABLE>
* From December 14, 1993 (commencement of operations)
See accompanying notes.
29
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31
<TABLE>
<CAPTION>
Short-Term
Real Special U.S.
Estate Equity Opportunities Government Managed
Subaccount Subaccount Stock Subaccount Subaccount Subaccount
----------------------- --------------- -------------------------- --------------- ------------------------
1995 1994 1993* 1995 1994** 1995 1994 1993* 1995 1994*** 1995 1994 1993*
------- -------- ----- -------- ------ ---------- -------- ----- ------- ------- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment in-
come:
Distributions
received from
the portfolios
of John Hancock
Variable Series
Trust I........ $32,578 $ 10,909 -- $ 40,159 $1,493 $ 669,643 $ 70,819 -- $64,502 $ 331 $316,774 $ 12,985 --
------- -------- --- -------- ------ ---------- -------- --- ------- ----- -------- -------- ---
Total investment
income.......... 32,578 10,909 -- 40,159 1,493 669,643 70,819 -- 64,502 331 316,774 12,985 --
Expenses:
Mortality and
expense risks.. 2,766 689 -- 4,949 607 23,428 3,073 -- 2,917 25 10,978 1,318 --
------- -------- --- -------- ------ ---------- -------- --- ------- ----- -------- -------- ---
Net investment
income.......... 29,812 10,220 -- 35,210 886 646,215 67,746 -- 61,585 306 305,796 11,667 --
Net realized and
unrealized gain
(loss) on
investments:
Net realized
gains
(losses)....... 613 (10,840) -- 28,812 (117) 170,322 (1,272) -- 8,251 (1) 179,131 (4,727) --
Net unrealized
appreciation
(depreciation)
during the
year........... 25,077 9,936 -- 185,349 3,155 322,628 (67,362) -- 22,112 (325) 51,662 (8,296) --
------- -------- --- -------- ------ ---------- -------- --- ------- ----- -------- -------- ---
Net realized and
unrealized gain
(loss) on
investments..... 25,690 (904) -- 214,161 3,038 492,950 (68,634) -- 30,363 (326) 230,753 (13,023) --
------- -------- --- -------- ------ ---------- -------- --- ------- ----- -------- -------- ---
Net increase
(decrease) in
net assets
resulting from
operations...... $55,502 $ 9,316 -- $249,371 $3,924 $1,139,165 $ (888) -- $91,948 $ (20) $536,549 $ (1,336) --
======= ======== === ======== ====== ========== ======== === ======= ===== ======== ======== ===
</TABLE>
* From December 14, 1993 (commencement of operations)
** From May 6, 1994 (commencement of operations)
*** From May 1, 1994 (commencement of operations)
See accompanying notes.
30
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS AND PERIODS ENDED DECEMBER 31
<TABLE>
<CAPTION>
Select Stock Bond International
Subaccount Subaccount Subaccount
--------------------------------- --------------------------- ------------------------------
1995 1994 1993* 1995 1994 1993* 1995 1994 1993*
----------- ----------- ------- ---------- -------- ----- ----------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Increase in net
assets from
operations:
Net investment
income......... $ 492,307 $ 37,023 $ 537 $ 62,824 $ 6,574 -- $ 9,067 $ 9,195 --
Net realized
gains
(losses)....... 126,908 (37,955) -- 21,718 (2,259) -- (25,931) 5,934 --
Net unrealized
appreciation
(depreciation)
during the
year........... 180,251 (24,086) (447) 34,574 (3,839) -- 153,715 (46,936) --
----------- ----------- ------- ---------- -------- --- ----------- ---------- ---
Net increase
(decrease) in
net assets
resulting from
operations...... 799,466 (25,018) 90 119,116 476 -- 136,851 (31,807) --
From policyholder
transactions:
Net premiums
from
policyholders.. 8,115,186 2,165,201 12,650 1,370,188 279,171 -- 2,620,265 1,223,410 --
Net benefits to
policyholders.. (2,752,131) (1,250,017) (537) (318,068) (62,598) -- (1,194,625) (199,276) --
----------- ----------- ------- ---------- -------- --- ----------- ---------- ---
Net increase in
net assets from
policyholder
transactions.... 5,363,055 915,184 12,113 1,052,120 216,573 -- 1,425,640 1,024,134 --
----------- ----------- ------- ---------- -------- --- ----------- ---------- ---
Net increase in
net assets...... 6,162,521 890,166 12,203 1,171,236 217,049 -- 1,562,491 992,327 --
Net assets at
beginning of
period.......... 902,369 12,203 -- 217,049 -- -- 992,327 -- --
----------- ----------- ------- ---------- -------- --- ----------- ---------- ---
Net assets at end
of period....... $ 7,064,890 $ 902,369 $12,203 $1,388,285 $217,049 -- $ 2,554,818 $ 992,327 --
=========== =========== ======= ========== ======== === =========== ========== ===
<CAPTION>
Money Market
Subaccount
--------------------------------
1995 1994 1993*
------------- ------------ -----
<S> <C> <C> <C>
Increase in net
assets from
operations:
Net investment
income......... $ 107,629 $ 34,061 --
Net realized
gains
(losses)....... -- -- --
Net unrealized
appreciation
(depreciation)
during the
year........... -- -- --
------------- ------------ -----
Net increase
(decrease) in
net assets
resulting from
operations...... 107,629 34,061 --
From policyholder
transactions:
Net premiums
from
policyholders.. 19,983,940 7,344,361 --
Net benefits to
policyholders.. (17,720,190) (5,123,289) --
------------- ------------ -----
Net increase in
net assets from
policyholder
transactions.... 2,263,750 2,221,072 --
------------- ------------ -----
Net increase in
net assets...... 2,371,379 2,255,133 --
Net assets at
beginning of
period.......... 2,255,133 -- --
------------- ------------ -----
Net assets at end
of period....... $ 4,626,512 $ 2,255,133 --
============= ============ =====
</TABLE>
* From December 14, 1993 (commencement of operations)
See accompanying notes.
31
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEAR AND PERIODS ENDED DECEMBER 31
<TABLE>
<CAPTION>
Real Estate Equity Special Opportunities Short-Term U.S.
Subaccount Subaccount Stock Subaccount Government Subaccount
------------------------- ------------------------------------------------------ --------------------------
1995 1994 1993* 1995 1994** 1995 1994 1993* 1995 1994***
-------- --------- ----- ----------- ---------------------- ---------- ----- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Increase in net
assets from
operations:
Net investment
income......... $ 29,812 $ 10,220 -- $ 35,210 $ 886 $ 646,215 $ 67,746 -- $ 61,585 $ 306
Net realized
gains
(losses)....... 613 (10,840) -- 28,812 (117) 170,322 (1,272) -- 8,251 (1)
Net unrealized
appreciation
(depreciation)
during the
year........... 25,077 9,936 -- 185,349 3,155 322,628 (67,362) -- 22,112 (325)
-------- --------- --- ----------- --------- ----------- ---------- --- ------------ ---------
Net increase
(decrease) in
net assets
resulting from
operations...... 55,502 9,316 -- 249,371 3,924 1,139,165 (888) -- 91,948 (20)
From policyholder
transactions:
Net premiums
from
policyholders.. 466,306 525,631 -- 1,639,491 333,168 8,168,426 1,606,781 -- 2,439,840 41,816
Net benefits to
policyholders.. 370,910 (115,063) -- (551,692) (4,202) (1,740,418) (253,270) -- (364,204) (333)
-------- --------- --- ----------- --------- ----------- ---------- --- ------------ ---------
Net increase in
net assets from
policyholder
transactions.... 95,396 410,568 -- 1,087,799 328,966 6,428,008 1,353,511 -- 2,075,636 41,483
-------- --------- --- ----------- --------- ----------- ---------- --- ------------ ---------
Net increase in
net assets...... 150,898 419,884 -- 1,337,170 332,890 7,567,173 1,352,623 -- 2,167,584 41,463
Net assets at
beginning of
period.......... 419,884 -- -- 332,890 -- 1,352,623 -- -- 41,463 --
-------- --------- --- ----------- --------- ----------- ---------- --- ------------ ---------
Net assets at end
of period....... $570,782 $ 419,884 -- $ 1,670,060 $ 332,890 $ 8,919,796 $1,352,623 -- $ 2,209,047 $ 41,463
======== ========= === =========== ========= =========== ========== === ============ =========
<CAPTION>
Managed Subaccount
-----------------------------
1995 1994 1993*
------------ ---------- -----
<S> <C> <C> <C>
Increase in net
assets from
operations:
Net investment
income......... $ 305,796 $ 11,667 --
Net realized
gains
(losses)....... 179,131 (4,727) --
Net unrealized
appreciation
(depreciation)
during the
year........... 51,622 (8,296) --
------------ ---------- -----
Net increase
(decrease) in
net assets
resulting from
operations...... 536,549 (1,356) --
From policyholder
transactions:
Net premiums
from
policyholders.. 5,502,408 859,794 --
Net benefits to
policyholders.. (2,875,967) (211,705) --
------------ ---------- -----
Net increase in
net assets from
policyholder
transactions.... 2,626,441 648,089 --
------------ ---------- -----
Net increase in
net assets...... 3,162,990 646,733 --
Net assets at
beginning of
period.......... 646,733 -- --
------------ ---------- -----
Net assets at end
of period....... $ 3,809,723 $ 646,733 --
============ ========== =====
</TABLE>
*From December 14, 1993 (commencement of operations)
**From May 6, 1994 (commencement of operations)
***From May 1, 1994 (commencement of operations)
See accompanying notes.
32
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
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 created on November 12, 1993. The Account commenced operations
on December 14, 1993 from the receipt of policy premiums. 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 nine
subaccounts. The assets of each subaccount are invested exclusively in shares
of a corresponding portfolio of John Hancock Variable Series Trust I (the
Fund). New subaccounts may be added as new portfolios are added to the Fund,
or as other investment options are developed, and made available to
policyowners. The nine portfolios of the Fund which are currently available
are Select Stock, Bond, International, Money Market, Real Estate Equity,
Special Opportunities, Stock, Short-Term U.S. Government and Managed. Each
portfolio has a different investment objective.
The net assets of the Account may not be less than the amount required under
state insurance law to provide for death benefits (without regard to the
minimum death benefit guarantee) and other policy benefits. Additional assets
are held in 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
VALUATION OF INVESTMENTS
Investment in shares of the Fund are valued at the reported net asset values
of the respective portfolios. Investment transactions are recorded on the
trade date. Dividend income is recognized on the ex-dividend date. Realized
gains and losses on sales of fund shares are determined on the basis of
identified cost.
FEDERAL INCOME TAXES
The operations of the Account are included in the federal income tax return of
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.
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.
33
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
NOTES TO FINANCIAL STATEMENTS--CONTINUED
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, 1995, 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.
4. DETAILS OF INVESTMENTS
The details of the shares owned and cost and value of investments in the
portfolios of the Fund at December 31, 1995 were as follows:
<TABLE>
<CAPTION>
Shares
Portfolio Owned Cost Value
- --------- ------ ---- -----
<S> <C> <C> <C>
Select Stock..................................... 406,768 $6,909,172 $7,064,890
Bond............................................. 137,078 1,357,549 1,388,285
International.................................... 163,670 2,448,039 2,554,818
Money Market..................................... 462,652 4,626,511 4,626,512
Real Estate Equity............................... 48,801 535,768 570,782
Special Opportunities............................ 126,668 1,481,556 1,670,060
Stock............................................ 639,815 8,664,521 8,919,796
Short-Term U.S. Government....................... 215,888 2,187,261 2,209,047
Managed.......................................... 277,537 3,766,357 3,809,723
</TABLE>
Purchases, including reinvestment of dividend distributions and proceeds from
sales of shares in the portfolios of the Fund during 1995, were as follows:
<TABLE>
<CAPTION>
Portfolio Purchases Sales
- --------- --------- -----
<S> <C> <C>
Select Stock........................................... $ 7,299,567 $ 1,444,204
Bond................................................... 1,480,183 365,240
International.......................................... 2,211,508 776,801
Money Market........................................... 12,660,558 10,289,180
Real Estate Equity..................................... 451,518 326,311
Special Opportunities.................................. 1,350,626 227,618
Stock.................................................. 8,733,659 1,659,437
Short-Term U.S. Government............................. 2,584,350 447,128
Managed................................................ 5,369,428 2,437,190
</TABLE>
34
<PAGE>
REPORTS OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Policyholders
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
Select Stock, Bond, International, Money Market, Real Estate Equity, Special
Opportunities, Stock, Short-Term U.S. Government, and Managed Subaccounts) as
of December 31, 1995, and the related statements of operations and statements
of changes in net assets for the periods indicated therein. These financial
statements are the responsibility of the Account's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of each of the respective
subaccounts constituting John Hancock Variable Life Account S at December 31,
1995, and the results of their operations and the changes in their net assets
for each of the periods indicated, in conformity with generally accepted
accounting principles.
Ernst & Young LLP
Boston, Massachusetts
February 9, 1996
----------------
Board of Directors
John Hancock Variable Life Insurance Company
We have audited the accompanying statements of financial position of John
Hancock Variable Life Insurance Company as of December 31, 1995 and 1994, and
the related statements of operations and unassigned deficit and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
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, 1995 and 1994, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles for a stock life insurance company
wholly-owned by a mutual life insurance company and with reporting practices
prescribed or permitted by the Commonwealth of Massachusetts Division of
Insurance.
Ernst & Young LLP
Boston, Massachusetts
February 7, 1996
35
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
December 31
------------------
1995 1994
---- ----
(In millions)
<S> <C> <C>
Assets
Bonds--Note 7.............................................. $ 552.8 $ 458.3
Preferred stocks........................................... 5.0 5.3
Common stocks.............................................. 1.7 1.9
Investment in affiliates................................... 65.3 59.9
Mortgage loans on real estate--Note 7...................... 146.7 148.5
Real estate................................................ 36.4 27.8
Policy loans............................................... 61.8 47.3
Cash items:
Cash in banks............................................ 11.6 29.3
Temporary cash investments............................... 65.0 46.7
-------- --------
76.6 76.0
Premiums due and deferred.................................. 39.6 43.9
Investment income due and accrued.......................... 18.6 14.7
Other general account assets............................... 20.8 22.3
Assets held in separate accounts........................... 2,421.0 1,721.0
-------- --------
TOTAL ASSETS............................................... $3,446.3 $2,626.9
======== ========
Obligations and Stockholder's Equity
OBLIGATIONS:
Policy reserves.......................................... $ 671.1 $ 638.6
Federal income and other taxes payable--Note 1........... 14.2 17.3
Other accrued expenses................................... 79.9 22.8
Asset valuation reserve--Note 1.......................... 15.4 12.6
Obligations related to separate accounts................. 2,417.0 1,717.7
-------- --------
TOTAL OBLIGATIONS.......................................... 3,197.6 2,409.0
Stockholder's Equity--Notes 2 and 6
Common Stock, $50 par value; authorized 50,000 shares;
issued and outstanding 50,000 shares--1995; 20,000
shares--1994............................................ 2.5 25.0
Paid-in capital.......................................... 377.5 355.0
Unassigned deficit....................................... (131.3) (162.1)
-------- --------
TOTAL STOCKHOLDER'S EQUITY................................. 248.7 217.9
-------- --------
TOTAL OBLIGATIONS AND STOCKHOLDER'S EQUITY................. $3,446.3 $2,626.9
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
36
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND UNASSIGNED DEFICIT
<TABLE>
<CAPTION>
Year Ended December 31
------------------------
1995 1994
---- ----
(In millions)
<S> <C> <C> <C>
Income
Premiums....................................... $ 570.9 $ 430.5
Net investment income--Note 4.................. 62.1 57.6
Other, net..................................... 85.7 95.5
----------- -----------
718.7 583.6
Benefits and Expenses
Payments to policyholders and beneficiaries.... 213.4 187.5
Additions to reserves to provide for future
payments to policyholders and beneficiaries... 282.4 185.3
Expenses of providing service to policyholders
and obtaining new insurance--Note 6........... 150.7 168.9
Cost of restructuring.......................... 0.0 3.0
State and miscellaneous taxes.................. 12.7 11.3
----------- -----------
659.2 556.0
----------- -----------
GAIN FROM OPERATIONS BEFORE FEDERAL INCOME
TAXES AND NET REALIZED CAPITAL GAINS........ 59.5 27.6
Federal income taxes--Note 1..................... 28.4 15.0
----------- -----------
GAIN FROM OPERATIONS BEFORE NET REALIZED
CAPITAL GAINS............................... 31.1 12.6
Net realized capital gains--Note 5............... 0.5 0.4
----------- -----------
NET INCOME................................... 31.6 13.0
Unassigned deficit at beginning of year.......... (162.1) (177.2)
Net unrealized capital losses and other adjust-
ments--Note 5................................... (3.0) (1.5)
Valuation reserve changes--Note 1................ 0.0 2.7
Change in separate account surplus............... 0.7 0.0
Other reserves and adjustments................... 1.5 0.9
----------- -----------
UNASSIGNED DEFICIT AT END OF YEAR............ $(131.3) $(162.1)
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
37
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31
-----------------------
1995 1994
---- ----
(In millions)
<S> <C> <C>
Cash flows from operating activities:
Insurance premiums................................. $ 574.0 $ 436.4
Net investment income.............................. 59.2 57.9
Benefits to policyholders and beneficiaries........ (198.3) (175.3)
Dividends paid to policyholders.................... (13.2) (11.9)
Insurance expenses and taxes....................... (161.5) (180.6)
Net transfers to separate accounts................. (257.4) (146.6)
Other, net......................................... 40.6 72.8
----------- -----------
NET CASH PROVIDED FROM OPERATIONS.............. 43.4 52.7
----------- -----------
Cash flows used in investing activities:
Bond purchases..................................... (172.5) (94.1)
Bond sales......................................... 18.9 23.1
Bond maturities and scheduled redemptions.......... 36.0 22.3
Bond prepayments................................... 20.6 24.7
Stock purchases.................................... (1.7) (1.5)
Proceeds from stock sales.......................... 1.4 1.2
Real estate purchases.............................. (16.2) (18.4)
Real estate sales.................................. 9.3 22.1
Other invested assets purchases.................... (0.4) (0.9)
Proceeds from the sale of other invested assets.... 0.3 1.3
Mortgage loans issued.............................. (19.8) (37.9)
Mortgage loan repayments........................... 21.1 35.2
Other, net......................................... 60.2 22.9
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES.......... (42.8) 0.0
----------- -----------
INCREASE IN CASH AND TEMPORARY CASH INVESTMENTS...... 0.6 52.7
Cash and temporary cash investments at beginning of
year................................................ 76.0 23.3
----------- -----------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF YEAR... $ 76.6 $ 76.0
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
38
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES
John Hancock Variable Life Insurance Company (the Company) is a wholly-owned
subsidiary of John Hancock Mutual Life Insurance Company (John Hancock). The
Company principally writes variable and universal life insurance policies.
Those policies primarily are marketed through John Hancock's sales
organization, which includes a career agency system composed of company owned,
unionized branch offices and independent general agencies. Policies also are
sold through various unaffiliated securities broker-dealers and certain other
financial institutions. Currently, the Company writes business in all states
except New York.
The preparation of the financial statements of insurance companies requires
management to make estimates and assumptions that affect amounts reported in
the financial statements and accompanying notes. Such estimates and
assumptions could change in the future as more information becomes known,
which could impact the amounts reported and disclosed herein.
The significant accounting practices of the Company are as follows:
Basis of Presentation: The financial statements have been prepared on the
basis of accounting practices prescribed or permitted by the Commonwealth of
Massachusetts Division of Insurance and in conformity with the practices of
the National Association of Insurance Commissioners which are currently
considered generally accepted accounting principles for a stock life insurance
company wholly-owned by a mutual life insurance company. However, in April
1993, the Financial Accounting Standard Board (FASB) issued Interpretation 40,
"Applicability of Generally Accepted Accounting Principles to Mutual Life
Insurance and Other Enterprises" (Interpretation). The Interpretation, as
amended, is effective for 1996 annual financial statements and thereafter, and
no longer will allow statutory-basis financial statements to be described as
being prepared in conformity with generally accepted accounting principles
(GAAP). Upon the effective date of the Interpretation, in order for their
financial statements to be described as being prepared in conformity with
GAAP, mutual life insurance companies will be required to adopt all applicable
authoritative GAAP pronouncements in any general-purpose financial statements
that they may issue. The Company has not quantified the effects of the
application of the Interpretation on its financial statements.
The Company has not yet determined whether for general purposes it will
continue to issue statutory-basis financial statements or statements adopting
all applicable authoritative GAAP pronouncements. If the Company decides that
its general-purpose financial statements will be prepared in accordance with
GAAP rather than statutory accounting practices, the financial statements
included herein would have to be restated to reflect all applicable
authoritative GAAP pronouncements, including Statement of Financial Accounting
Standards (SFAS) Nos. 60, 97, and 113.
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.
39
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
Valuation of Assets: General account investments are carried at amounts
determined on the following bases:
Bonds and stock values are carried as prescribed by the National
Association of Insurance Commissioners (NAIC): bonds generally at amortized
amounts or cost, preferred stocks generally at cost and common stocks at
market. The discount or premium on bonds is amortized using the interest
method.
Investments in affiliates are included on the statutory equity method.
Goodwill is amortized on a straight line basis over a ten year period.
Mortgage loans are carried at outstanding principal balance or amortized
cost.
Investment real estate is carried at depreciated cost, less encumbrances.
Depreciation on investment real estate is recorded on a straight line
basis.
Real estate acquired in satisfaction of debt and held for sale is carried
at the lower of cost or market as of the date of foreclosure.
Policy loans are carried at outstanding principal balance, not in excess of
policy cash surrender value.
Asset Valuation and Interest Maintenance Reserves: The Asset Valuation Reserve
(AVR) is computed in accordance with the prescribed NAIC formula and
represents a provision for possible fluctuations in the value of bonds, equity
securities, mortgage loans, real estate and other invested assets. Changes to
the AVR are charged or credited directly to the unassigned deficit.
The Company also records the NAIC prescribed Interest Maintenance Reserve
(IMR) that represents that portion of the after tax net accumulated
unamortized realized capital gains and losses on sales of fixed income
securities, principally bonds and mortgage loans attributable to changes in
the general level of interest rates. Such gains and losses are deferred and
amortized into income over the remaining expected lives of the investments
sold. At December 31, 1995, the IMR, net of 1995 amortization of $1.2 million,
amounted to $6.9 million, which is included in policy reserves. The
corresponding 1994 amounts were $1.1 million and $7.1 million, respectively.
Separate Accounts: Separate account assets (unit investment trusts valued at
market) and separate account obligations (principally policyholder account
values) are included as separate captions in the statements of financial
position. The change in separate account surplus is recognized through direct
charges or credits to unassigned deficit.
Fair Values of Financial Instruments: Statement of Financial Accounting
Standards (SFAS) No. 107, "Disclosure about Fair Value of Financial
Instruments," requires disclosure of fair value information about financial
instruments, whether or not recognized in the statement of financial position,
for which it is practicable to estimate the value. In situations where quoted
market prices are not available, fair values are based on estimates using
present value or other valuation techniques. SFAS No. 107 excludes certain
financial instruments and all nonfinancial instruments from its disclosure
requirements. Therefore, the aggregate fair value amounts presented do not
represent the underlying value of the Company.
40
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
The methods and assumptions utilized by the Company in estimating its fair
value disclosures for financial instruments are as follows:
The carrying amounts reported in the statement of financial position for
cash and temporary cash investments approximate their fair values.
Fair values for public bonds are obtained from an independent pricing
service. Fair values for private placement securities and publicly traded
bonds not provided by the independent pricing service are estimated by the
Company by discounting expected future cash flows using current market
rates applicable to the yield, credit quality and maturity of the
investments. The fair values for common and preferred stocks, other than
its subsidiary investments, which are carried at equity values, are based
on quoted market prices.
The fair value for mortgage loans is estimated using discounted cash flow
analyses using interest rates adjusted to reflect the credit
characteristics of the loans. Mortgage loans with similar characteristics
and credit risks are aggregated into qualitative categories for purposes of
the fair value calculations.
The carrying amount in the statement of financial position for policy loans
approximates their fair value.
The fair value for outstanding commitments to purchase long-term bonds is
estimated using a discounted cash flow method incorporating adjustments for
the difference in the level of interest rates between the dates the
commitments were made and December 31, 1995. The fair value for commitments
to purchase real estate approximates the amount of the initial commitment.
Capital Gains and Losses: 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: Reserves for variable life insurance policies are maintained
principally on the modified preliminary term method using the 1958 and 1980
Commissioner's Standard Ordinary (CSO) mortality tables, with an assumed
interest rate of 4% for policies issued prior to May 1, 1983 and 4 1/2% for
policies issued on or thereafter. Reserves for single premium policies are
determined by the net single premium method using the 1958 CSO mortality
table, with an assumed interest rate of 4%. Reserves for universal life
policies issued prior to 1985 are equal to the gross account value which at
all times exceeds minimum statutory requirements. Reserves for universal life
policies issued from 1985 through 1988 are maintained at the greater of the
Commissioner's Reserve Valuation Method (CRVM) using the 1958 CSO mortality
table, with 4 1/2% interest or the cash surrender value. Reserves for
universal life policies issued after 1988 and for flexible variable policies
are maintained using the greater of the cash surrender value or the CRVM
method with the 1980 CSO mortality table and 5 1/2% interest for policies
issued from 1988 through 1992; 5% interest for policies issued in 1993 and
1994; and 4 1/2% interest for policies issued in 1995.
Federal Income Taxes: Federal income taxes are provided in the financial
statements based on amounts determined to be payable as a result of operations
within the current accounting period. The operations of the Company are
consolidated with John Hancock, its Parent, in filing a consolidated federal
income tax return for the affiliated group. The federal income taxes of the
Company are allocated on a separate return basis with certain
41
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
adjustments. The Company made payments of $32.2 million in 1995 and received
tax benefits of $7.0 million in 1994.
Income before taxes differs from taxable income principally due to tax-exempt
investment income, the limitation placed on the tax deductibility of
policyholder dividends, accelerated depreciation, differences in policy
reserves for tax return and financial statement purposes, capitalization of
policy acquisition expenses for tax purposes and other adjustments prescribed
by the Internal Revenue Code.
No provision is generally recognized for timing differences that may exist
between financial reporting and taxable income or loss.
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 or increased benefits. Reserve modifications resulting
from such determinations are recorded directly to the unassigned deficit.
During 1994, the Company refined certain actuarial assumptions inherent in the
calculation of preconversion yearly renewable term and gross premium
deficiency reserves, resulting in a $2.7 million decrease in the unassigned
deficit at December 31, 1994.
Reinsurance: Premiums, commissions, expense reimbursements, benefits and
reserves related to reinsured business are accounted for on bases consistent
with those used in accounting for the original policies issued and the terms
of the reinsurance contracts. Premiums ceded to other companies have been
reported as a reduction of premium income. Amounts applicable to reinsurance
ceded for future policy benefits, unearned premium reserves and claim
liabilities have been reported as reductions of these items.
Reclassifications: Certain 1994 amounts have been reclassified to permit
comparison with the corresponding 1995 amounts.
NOTE 2--CAPITALIZATION
In prior years, the Company received capital contributions from John Hancock,
with a portion of the contributed capital being credited to common stock,
although no additional shares were issued. This practice, which is acceptable
to statutory authorities, has the effect of stating the carrying value of
issued shares of common stock at amounts other than $50 per share par value
with the offset reflected in paid-in capital.
At December 31, 1994, the Company had 50,000 shares authorized with 20,000
shares issued and outstanding. On February 16, 1995, the Company issued the
remaining 30,000 shares to John Hancock and transferred $22.5 million from
common stock to paid-in capital. The par value per share is $50.
NOTE 3--ACQUISITION
On June 23, 1993, the Company acquired all of the outstanding shares of stock
of Colonial Penn Annuity and Life Insurance Company (CPAL) from Colonial Penn
Life Insurance Company for an aggregate purchase price of approximately $42.5
million. At the date of acquisition, assets of CPAL were approximately $648.5
million,
42
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 3--ACQUISITION--CONTINUED
consisting principally of cash and temporary cash investments and liabilities
were approximately $635.2 million, consisting principally of reserves related
to a block of interest sensitive single-premium whole life insurance business
assumed by CPAL from Charter National Life Insurance Company (Charter). The
purchase price includes contingent payments of up to approximately $7.3
million payable between 1994 and 1998 based on the actual lapse experience of
the business in force on June 23, 1993. The Company made contingent payments
to CPAL of $1.5 million during 1995 and 1994. Unamortized goodwill at December
31, 1995 was $17.1 million and is being amortized over ten years on a
straight-line basis.
On June 24, 1993, the Company contributed $24.6 million in additional capital
to CPAL. CPAL was renamed John Hancock Life Insurance Company of America
(JHLICOA) on July 7, 1993. JHLICOA manages the business assumed from Charter
and does not currently issue new business.
NOTE 4--NET INVESTMENT INCOME
Investment income has been reduced by the following amounts:
<TABLE>
<CAPTION>
1995 1994
------ ------
(In millions)
<S> <C> <C>
Investment expenses............................................ $ 5.1 $ 3.4
Interest expense............................................... 0.0 0.2
Depreciation expense........................................... 1.0 0.6
Investment taxes............................................... 0.5 0.2
------ ------
$ 6.6 $ 4.4
====== ======
NOTE 5--NET CAPITAL GAINS (LOSSES) AND OTHER ADJUSTMENTS
Net realized capital gains consist of the following items:
<CAPTION>
1995 1994
------ ------
(In millions)
<S> <C> <C>
Gains (losses) from asset sales................................ $ 4.0 $ (1.6)
Capital gains (tax) credit..................................... (2.5) 2.5
Net capital gains transferred to IMR........................... (1.0) (0.5)
------ ------
Net Realized Capital Gains................................... $ 0.5 $ 0.4
====== ======
Net unrealized capital losses and other adjustments consist of the following
items:
<CAPTION>
1995 1994
------ ------
(In millions)
<S> <C> <C>
Gains (losses) from changes in security values and book value
adjustments................................................... $ (0.2) $ 0.7
Increase in asset valuation reserve............................ (2.8) (2.2)
------ ------
Net Unrealized Capital Losses and Other Adjustments.......... $ (3.0) $ (1.5)
====== ======
</TABLE>
43
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 6--TRANSACTIONS WITH PARENT
The Company's Parent provides the Company with personnel, property and
facilities in carrying out certain of its corporate functions. The Parent
annually determines a fee for these services and facilities based on a number
of criteria which were revised in 1995 and 1994 to reflect continuing changes
in the Company's operations. The amount of the service fee charged to the
Company was $97.9 million and $117.0 million in 1995 and 1994, respectively,
which has been included in insurance and investment expenses. The Parent has
guaranteed that, if necessary, it will make additional capital contributions
to prevent the Company's stockholder's equity from declining below $1.0
million.
The service fee charged to the Company by the Parent includes $1.8 million and
$6.0 million in 1995 and 1994, respectively, representing the portion of the
provision for retiree benefit plans determined under the accrual method,
including a provision for the 1993 transition liability which is being
amortized over twenty years, that was allocated to the Company.
Effective January 1, 1994, the Company entered into a modified coinsurance
agreement with John Hancock to reinsure 50% of 1994 issues of flexible premium
variable life insurance and scheduled premium variable life insurance
policies. In connection with this agreement, John Hancock transferred $32.7
million and $29.5 million of cash for tax, commission, and expense allowances
to the Company, which increased the Company's net gain from operations by
$20.3 million and $26.9 million in 1995 and 1994, respectively.
NOTE 7--INVESTMENTS
The statement value and fair value of bonds are shown below:
<TABLE>
<CAPTION>
Gross Gross
Statement Unrealized Unrealized Fair
Year Ended December 31, 1995 Value Gains Losses Value
---------------------------- --------- ---------- ---------- ------
(In millions)
<S> <C> <C> <C> <C>
U.S. treasury securities and obligations
of U.S. government corporations and
agencies................................. $ 89.0 $ 0.5 $ 0.0 $ 89.5
Obligations of states and political subdi-
visions.................................. 11.4 1.1 0.0 12.5
Debt securities issued by foreign govern-
ments.................................... 1.3 0.2 0.0 1.5
Corporate securities...................... 445.6 44.1 1.6 488.1
Mortgage-backed securities................ 5.5 0.3 0.1 5.7
------ ----- ----- ------
Totals.................................. $552.8 $46.2 $ 1.7 $597.3
====== ===== ===== ======
<CAPTION>
Gross Gross
Statement Unrealized Unrealized Fair
Year Ended December 31, 1994 Value Gains Losses Value
---------------------------- --------- ---------- ---------- ------
(In millions)
<S> <C> <C> <C> <C>
U.S. treasury securities and obligations
of U.S. government corporations and
agencies................................. $ 10.4 $ 0.0 $ 0.5 $ 9.9
Obligations of states and political subdi-
visions.................................. 11.6 0.2 0.1 11.7
Debt securities issued by foreign govern-
ments.................................... 1.3 0.0 0.0 1.3
Corporate securities...................... 431.9 10.5 9.9 432.5
Mortgage-backed securities................ 3.1 0.1 0.1 3.1
------ ----- ----- ------
Totals.................................. $458.3 $10.8 $10.6 $458.5
====== ===== ===== ======
</TABLE>
44
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 7--INVESTMENTS--CONTINUED
The statement value and fair value of bonds at December 31, 1995, by
contractual maturity, are shown below. Maturities will differ from contractual
maturities because eligible borrowers may exercise their right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Statement Fair
Value Value
--------- ------
(In millions)
<S> <C> <C>
Due in one year or less....................................... $ 18.7 $ 19.8
Due after one year through five years......................... 266.8 278.6
Due after five years through ten years........................ 153.1 167.4
Due after ten years........................................... 108.7 125.8
------ ------
547.3 591.6
Mortgage-backed securities.................................... 5.5 5.7
------ ------
$552.8 $597.3
====== ======
</TABLE>
Proceeds from sales of bonds during 1995 and 1994 were $18.9 million and $23.1
million, respectively. Gross gains of $0.2 million in 1995 and $0.0 million in
1994 and gross losses of $0.1 million in 1995 and $0.1 million in 1994 were
realized on these transactions.
The cost of common stocks was $0.1 million and $1.4 million at December 31,
1995 and 1994, respectively. Gross unrealized appreciation on common stocks
totaled $1.7 million, and gross unrealized depreciation totaled $0.1 million
at December 31, 1995. The fair value of preferred stock totaled $5.2 million
at December 31, 1995 and $5.0 million at December 31, 1994.
Mortgage loans with outstanding principal balances of $1.1 million and bonds
with amortized cost of $4.0 million were nonincome producing for the twelve
months ended December 31, 1995.
At December 31, 1995, the mortgage loan portfolio was diversified by
geographic region and specific collateral property type as displayed below.
The Company controls credit risk through credit approvals, limits and
monitoring procedures.
<TABLE>
<CAPTION>
Statement
Property Type Value
------------- -------------
(In millions)
<S> <C>
Apartments.............. $ 52.1
Hotels.................. 4.5
Industrial.............. 25.4
Office buildings........ 12.6
Retail.................. 20.3
Agricultural............ 19.8
Other................... 12.0
------
$146.7
======
</TABLE>
<TABLE>
<CAPTION>
Geographic Statement
Concentration Value
------------- -------------
(In millions)
<S> <C>
East North Central...... $ 30.1
East South Central...... 1.9
Middle Atlantic......... 10.5
Mountain................ 11.8
New England............. 19.8
Pacific................. 41.6
South Atlantic.......... 31.0
------
$146.7
======
</TABLE>
45
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 7--INVESTMENTS--CONTINUED
At December 31, 1995, the fair values of the commercial and agricultural
mortgage loans portfolios were $132.1 million and $22.2 million, respectively.
The corresponding amounts as of December 31, 1994 were approximately $118.8
million and $27.3 million, respectively.
NOTE 8--REINSURANCE
The Company cedes business to reinsurers to share risks under variable life,
universal life and flexible variable life insurance policies for the purpose
of reducing exposure to large losses. Premiums, benefits and reserves ceded to
reinsurers in 1995 were $72.4 million, $8.7 million, and $12.1 million,
respectively. The corresponding amounts in 1994 were $67.5 million, $12.3
million, and $16.3 million, respectively.
To the extent that an assuming reinsurance company is unable to meet its
obligations under a reinsurance agreement, the Company remains liable as the
direct insurer on all risks reinsured.
NOTE 9--POLICYHOLDERS' RESERVES AND BENEFICIARIES' FUND
The Company's annuity reserves and deposit fund liabilities that are subject
to discretionary withdrawal (with adjustment), subject to discretionary
withdrawal (without adjustment), and not subject to discretionary withdrawal
provisions are summarized as follows:
<TABLE>
<CAPTION>
December 31, 1995 Percent
----------------- -------
(In millions)
<S> <C> <C>
Subject to discretionary withdrawal (with adjust-
ment):
With market value adjustment....................... $ 0.0 0.0%
At book value less surrender charge................ 115.4 99.1
------ -----
Total with adjustment.............................. 115.4 99.1
Subject to discretionary withdrawal (without ad-
justment) at book value........................... 1.0 0.9
Not subject to discretionary withdrawal.............. 0.0 0.0
------ -----
Total annuity reserves and deposit liabilities....... $116.4 100.0%
====== =====
</TABLE>
NOTE 10--COMMITMENTS AND CONTINGENCIES
The Company has extended commitments to purchase long-term bonds and issue
real estate mortgages totaling $16.6 million and $5.4 million, respectively,
at December 31, 1995. The Company monitors the creditworthiness of borrowers
under long-term bond commitments and requires collateral as deemed necessary.
If funded, loans related to real estate mortgages would be fully
collateralized by the related properties. The fair value of the commitments
described above is $23.8 million at December 31, 1995. The majority of these
commitments expire in 1996.
In the normal course of its business operations, the Company is involved in
litigation from time to time with claimants, beneficiaries and others, and a
number of litigation matters were pending as of December 31, 1995. It is the
opinion of management, after consultation with counsel, that the ultimate
liability with respect to these claims, if any, will not materially affect the
financial position of the Company.
46
<PAGE>
APPENDIX--OTHER POLICY PROVISIONS
SETTLEMENT PROVISIONS
In place of a single payment, an amount of $1,000 or more payable under the
Policy as a benefit or as the Surrender Value, if any, may be left with
JHVLICO under the terms of a supplementary agreement. The agreement will be
issued when the proceeds are applied through the election of any one of the
options below.
The following options are subject to the restrictions and limitations stated
in the Policy.
Option 1--Interest Income at the declared rate but not less than 3 1/2% a
year on proceeds held on deposit.
Option 2A--Income of a Specified Amount, with payments each year totaling
at least 1/12th of the proceeds, until the proceeds, with interest credited
at the declared rate but not less than 3 1/2% a year on unpaid balances,
are fully paid.
Option 2B--Income for a Fixed Period, with each payment as declared.
Option 3--Life Income with Payments for a Guaranteed Period.
Option 4--Life Income without Refund at the death of the Payee of any
part of the proceeds applied. Only one payment is made if the Payee dies
before the second payment is due.
Option 5--Life Income with Cash Refund at the death of the Payee of the
amount, if any, equal to the proceeds applied less the sum of all income
payments made.
No election of an option may provide for income payments of less than $50.
Other options may be arranged with JHVLICO's approval including optional
methods of settlement available from John Hancock.
ADDITIONAL INSURANCE BENEFITS
On payment of an additional premium or charge and subject to certain age and
insurance underwriting requirements, certain additional provisions, such as an
Accidental Death Benefit, which are subject to the restrictions and
limitations set forth therein, may be included in a Policy by rider.
GENERAL PROVISIONS
BENEFICIARY. The Beneficiary will be as shown in the application for the
Policy, unless thereafter changed by the Owner in accordance with the terms of
the Policy. If the insured dies and there is no surviving Beneficiary, the
Owner will be the Beneficiary, but if the insured was the Owner, the Owner's
estate will be the Beneficiary.
OWNER AND ASSIGNMENT. The Owner's interest in the Policy may be assigned
without the consent of any revocable Beneficiary. JHVLICO will not be on
notice of any assignment unless it is in writing and until a duplicate of the
original assignment has been filed at JHVLICO's Home Office. JHVLICO assumes
no responsibility for the validity or sufficiency of any assignment.
MISSTATEMENT OF AGE OR SEX. If the age or sex of the insured has been
misstated, JHVLICO will adjust the benefits payable to reflect the correct age
or sex.
A-1
<PAGE>
SUICIDE. If the insured commits suicide within 2 years (except where state
law requires a shorter period) from the date of issue shown in the Policy,
JHVLICO will pay in place of all other benefits an amount equal to the premium
paid less any Indebtedness on the date of death and any withdrawals. If the
suicide is within 2 years (except where state law requires a shorter period)
from the date of any Policy change that increases the death benefit, the death
benefit will be limited as set forth in the Policy.
AGE AND POLICY ANNIVERSARIES. For purpose of the Policy, an insured's "age"
is his or her age on his or her nearest birthday. Policy months and Policy
years are calculated from the date of issue.
AVIATION ACTIVITY EXCLUSION. If the insured dies in an aviation accident
while a crew member on other than a commercial aircraft and the Policy
provides at the request of the Owner for a limited benefit in such situation,
JHVLICO will pay in place of all other benefits an amount equal to the greater
of the premium paid or the Surrender Value, less any Indebtedness.
INCONTESTABILITY. The Policy shall be incontestable other than for
nonpayment of premiums after it has been in force during the lifetime of an
insured for 2 years from its issue date. If, however, evidence of insurability
is required with respect to any increase in death benefit, such increase shall
be incontestable after the increase has been in force for 2 years from the
increase date.
DEFERRAL OF DETERMINATIONS AND PAYMENTS. Payment of any death, surrender,
partial withdrawal or loan proceeds will ordinarily be made within seven days
after receipt at JHVLICO's Home Office of all documents required for any such
payment. Approximately two-thirds of the claims for death proceeds which are
made within two years after the date of issue of the Policy will be
investigated to determine whether the claim should be contested and payment of
these claims will therefore be delayed.
JHVLICO may defer any transaction requiring a determination of Account Value
in any variable Subaccount for any period during which: (1) the disposal or
valuation of the Account's assets is not reasonably practicable because the
New York Stock Exchange is closed or conditions are such that, under the
Commission's rules and regulations, trading is restricted or an emergency is
deemed to exist or (2) the Commission by order permits postponement of such
actions for the protection of Owners.
The foregoing description of Policy provisions is qualified by reference to
the specimen Policy which has been filed as an exhibit to the Registration
Statement.
A-2
<PAGE>
APPENDIX--ILLUSTRATION OF DEATH BENEFITS,
SURRENDER VALUES AND ACCUMULATED PREMIUMS
The following tables illustrate the changes in death benefit and Surrender
Value of the Policy, disregarding any Policy loans. Each table separately
illustrates the operation of a Policy for an identified issue age, Planned
Premium schedule and Sum Insured and shows how the death benefit and Surrender
Value may vary over an extended period of time assuming hypothetical rates of
investment return (i.e., investment income and capital gains and losses,
realized or unrealized) equivalent to constant gross annual rates of 0%, 6%
and 12%. The Account Values during the first three Policy years would be
slightly less than the Surrender Values shown, due to the refund of sales
charges. See "Account Value and Surrender Value". The tables are based on
given annual Planned Premiums paid at the beginning of each Policy year and
will assist in a comparison of the death benefit and Surrender Value figures
set forth in the tables with those under other variable life insurance
policies which may be issued by JHVLICO or other companies. Tables are
provided for Options A, B and M. The death benefit and Surrender Value for a
Policy would be different from those shown if premiums are paid in different
amounts or at different times or if the actual gross rates of investment
return average 0%, 6% or 12% over a period of years, but nevertheless
fluctuate above or below the average for individual Policy years, or if the
Policy were issued under circumstances in which no distinctions are made based
on the gender of the insured.
The amounts shown for the death benefit and Surrender Value are as of the
end of each Policy year. The first three tables headed "Using Current Charges"
assume that the current rates for insurance, sales, risk, and expense charges
will apply in each year illustrated. The three tables headed "Using Maximum
Charges" assume that the maximum (guaranteed) insurance, sales, risk, and
expense charges will be made in each year illustrated. The amounts shown in
all tables reflect an average asset charge for the daily investment advisory
expense charges to the Portfolios of the Funds (equivalent to an effective
annual rate of .63%) and an assumed average asset charge for the annual
nonadvisory operating expenses of each Portfolio of the Funds (equivalent to
an effective annual rate of .20%). For a description of expenses charged to
the Portfolios, see the attached Prospectuses for the Funds. The charges for
the daily investment management fee and the annual non-advisory operating
expenses are based on the hypothetical assumption that Policy values are
allocated equally among the variable Subaccounts. The actual Portfolio charges
and expenses associated with any Policy will vary depending upon the actual
allocation of Policy values among Subaccounts.
The tables reflect that no charge is currently made to the Account for
Federal income taxes. However, JHVLICO reserves the right to make such a
charge in the future and any charge would require higher rates of investment
return in order to produce the same Policy values. All of the tables do,
however, reflect the imposition of a Federal DAC Tax charge in the amount of
1.25% of all premiums paid and a premium tax charge in the amount of 2.35% of
all premiums paid.
The tables assume that the Guaranteed Minimum Death Benefit has not been
elected beyond the tenth Policy year, that no Additional Sum Insured or
optional rider benefits have been elected, and that the application for the
Policy has been fully underwritten.
The second column of each table shows the amount to which the total premiums
paid to the end of a Policy year would accumulate if an amount equal to those
premiums were invested to earn interest, after taxes, at 5% compounded
annually.
JHVLICO will furnish upon request a comparable illustration reflecting the
proposed insured's age, sex, underwriting risk classification and the Sum
Insured at issue and Planned Premium amount requested, and assuming annual
Planned Premiums.
A-3
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE
$100,000 SUM INSURED
MALE, ISSUE AGE 45, FULLY UNDERWRITTEN NONSMOKER UNDERWRITING CLASS
OPTION A DEATH BENEFIT
NO GUARANTEED MINIMUM DEATH BENEFIT OPTION AFTER TENTH POLICY YEAR
PLANNED PREMIUM: $5,267 FOR SEVEN YEARS*
USING CURRENT CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
------------------------------------------------------------------------------------------
Planned Premiums Assuming hypothetical gross annual return of Assuming hypothetical gross annual return of
End of accumulated at ------------------------------------------------------------------------------------------
Policy Year 5% annual interest 0% 6% 12% 0% 6% 12%
- ----------- ------------------ -------------- -------------- ----------------------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 5,530 $ 100,000 $100,000 $100,000 $ 4,397 $ 4,651 $ 4,904
2 11,337 100,000 100,000 100,000 8,253 9,005 9,788
3 17,434 100,000 100,000 100,000 12,040 13,546 15,177
4 23,836 100,000 100,000 100,000 15,449 17,978 20,826
5 30,559 100,000 100,000 100,000 19,282 23,121 27,616
6 37,617 100,000 100,000 100,000 23,071 28,518 35,154
7 45,028 100,000 100,000 110,422 26,827 34,195 43,511
8 47,280 100,000 100,000 117,214 25,973 35,314 47,650
9 49,644 100,000 100,000 124,526 25,108 36,480 52,210
10 52,126 100,000 100,000 132,396 24,227 37,690 57,230
11 54,732 100,000 100,000 141,385 23,542 39,167 62,983
12 57,469 100,000 100,000 150,985 22,809 40,681 69,288
13 60,342 100,000 100,000 161,307 22,050 42,257 76,225
14 63,359 100,000 100,000 172,447 21,278 43,908 83,875
15 66,527 100,000 100,000 184,440 20,481 45,631 92,298
16 69,853 100,000 100,000 197,315 19,633 47,413 101,547
17 73,346 100,000 100,000 211,129 18,722 49,254 111,690
18 77,013 100,000 100,000 225,953 17,742 51,156 122,814
19 80,864 100,000 100,000 241,881 16,686 53,124 135,008
20 84,907 100,000 100,000 259,015 15,543 55,160 148,373
25 108,366 100,000 102,836 366,212 7,945 66,444 236,617
30 138,305 ** 110,763 520,910 ** 79,440 373,599
35 176,516 ** 120,777 749,920 ** 94,246 585,189
</TABLE>
- --------
* The illustrations assume that Planned Premiums equal to the Target Premium
are paid at the start of each of the first seven Policy Years. 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.
A-4
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE
$100,000 SUM INSURED
MALE, ISSUE AGE 45, FULLY UNDERWRITTEN NONSMOKER UNDERWRITING CLASS
OPTION A DEATH BENEFIT
NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH POLICY YEAR
PLANNED PREMIUM: $5,267 FOR SEVEN YEARS*
USING MAXIMUM CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
------------------------------------------------------------------------------------------
Planned Premiums Assuming hypothetical gross annual return of Assuming hypothetical gross annual return of
End of accumulated at ------------------------------------------------------------------------------------------
Policy Year 5% annual interest 0% 6% 12% 0% 6% 12%
- ----------- ------------------ -------------- -------------- ----------------------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 5,530 $ 100,000 $ 100,000 $ 100,000 $ 4,235 $ 4,483 $ 4,731
2 11,337 100,000 100,000 100,000 7,937 8,668 9,430
3 17,434 100,000 100,000 100,000 11,581 13,040 14,620
4 23,836 100,000 100,000 100,000 14,844 17,289 20,043
5 30,559 100,000 100,000 100,000 18,523 22,227 26,567
6 37,617 100,000 100,000 100,000 22,144 27,393 33,790
7 45,028 100,000 100,000 106,033 25,706 32,798 41,781
8 47,280 100,000 100,000 111,892 24,635 33,607 45,486
9 49,644 100,000 100,000 118,140 23,526 34,420 49,533
10 52,126 100,000 100,000 124,800 22,374 35,232 53,947
11 54,732 100,000 100,000 132,384 21,374 36,250 58,974
12 57,469 100,000 100,000 140,448 20,314 37,271 64,452
13 60,342 100,000 100,000 149,026 19,189 38,294 70,422
14 63,359 100,000 100,000 158,155 17,991 39,317 76,923
15 66,527 100,000 100,000 167,855 16,708 40,333 83,999
16 69,853 100,000 100,000 178,169 15,327 41,338 91,693
17 73,346 100,000 100,000 189,131 13,833 42,324 100,053
18 77,013 100,000 100,000 200,772 12,207 43,283 109,127
19 80,864 100,000 100,000 213,134 10,423 44,203 118,963
20 84,907 100,000 100,000 226,262 8,455 45,073 129,611
25 108,366 ** 100,000 305,338 ** 48,247 197,285
30 138,305 ** 100,000 412,019 ** 47,314 295,502
35 176,516 ** 100,000 556,196 ** 34,904 434,019
</TABLE>
- --------
* The illustrations assume that Planned Premiums equal to the Target Premium
are paid at the start of each of the first seven Policy Years. 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.
A-5
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE
$100,000 SUM INSURED
MALE, ISSUE AGE 45, FULLY UNDERWRITTEN NONSMOKER UNDERWRITING CLASS
OPTION B DEATH BENEFIT
NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH POLICY YEAR
PLANNED PREMIUM: $5,267 FOR SEVEN YEARS*
USING CURRENT CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
------------------------------------------------------------------------------------------
Planned Premiums Assuming hypothetical gross annual return of Assuming hypothetical gross annual return of
End of accumulated at ------------------------------------------------------------------------------------------
Policy Year 5% annual interest 0% 6% 12% 0% 6% 12%
- ----------- ------------------ -------------- -------------- ----------------------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 5,530 $103,913 $104,166 $104,419 $ 4,387 $ 4,640 $ 4,893
2 11,337 107,746 108,495 109,275 8,220 8,969 9,749
3 17,434 111,496 112,991 114,610 11,970 13,465 15,084
4 23,836 115,323 117,828 120,648 15,323 17,828 20,648
5 30,559 119,082 122,873 127,311 19,082 22,873 27,311
6 37,617 122,777 128,140 134,670 22,777 28,140 34,670
7 45,028 126,420 133,650 142,812 26,420 33,650 42,812
8 47,280 125,455 134,586 146,718 25,455 34,586 46,718
9 49,644 124,478 135,546 151,026 24,478 35,546 51,026
10 52,126 123,482 136,524 155,770 23,482 36,524 55,770
11 54,732 122,684 137,744 161,230 22,684 37,744 61,230
12 57,469 121,827 138,953 167,209 21,827 38,953 67,209
13 60,342 120,942 140,184 173,798 20,942 40,184 73,798
14 63,359 120,045 141,454 181,079 20,045 41,454 81,079
15 66,527 119,121 142,748 189,112 19,121 42,748 89,112
16 69,853 118,140 144,038 197,946 18,140 44,038 97,946
17 73,346 117,089 145,309 207,653 17,089 45,309 107,653
18 77,013 115,962 146,552 218,321 15,962 46,552 118,321
19 80,864 114,753 147,759 232,983 14,753 47,759 130,042
20 84,907 113,454 148,920 249,472 13,454 48,920 142,907
25 108,366 105,094 153,349 352,699 5,094 53,349 227,886
30 138,305 ** 153,125 501,672 ** 53,125 359,802
35 176,516 ** 144,219 722,209 ** 44,219 563,565
</TABLE>
- --------
* The illustrations assume that Planned Premiums equal to the Target Premium
are paid at the start of each of the first seven Policy Years. 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.
A-6
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE
$100,000 SUM INSURED MALE,
ISSUE AGE 45, FULLY UNDERWRITTEN NONSMOKER UNDERWRITING CLASS
OPTION B DEATH BENEFIT
NO GUARANTEED MINIMUM DEATH BENEFIT OPTION AFTER TENTH POLICY YEAR
PLANNED PREMIUM: $5,267 FOR SEVEN YEARS*
USING MAXIMUM CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
------------------------------------------------------------------------------------------
Planned Premiums Assuming hypothetical gross annual return of Assuming hypothetical gross annual return of
End of accumulated at ------------------------------------------------------------------------------------------
Policy Year 5% annual interest 0% 6% 12% 0% 6% 12%
- ----------- ------------------ -------------- -------------- ----------------------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 5,530 $103,747 $103,994 $104,241 $ 4,221 $ 4,468 $ 4,716
2 11,337 107,421 108,148 108,905 7,895 8,622 9,379
3 17,434 111,021 112,468 114,034 11,495 12,942 14,508
4 23,836 114,696 117,112 119,834 14,696 17,112 19,834
5 30,559 118,290 121,939 126,212 18,290 21,939 26,212
6 37,617 121,804 126,955 133,230 21,804 26,955 33,230
7 45,028 125,231 132,162 140,947 25,231 32,162 40,947
8 47,280 124,018 132,742 144,337 24,018 32,742 44,337
9 49,644 122,764 133,290 148,028 22,764 33,290 48,028
10 52,126 121,458 133,795 152,040 21,458 33,795 52,040
11 54,732 120,299 134,459 156,618 20,299 34,459 56,618
12 57,469 119,073 135,070 161,595 19,073 35,070 61,595
13 60,342 117,777 135,622 167,011 17,777 35,622 67,011
14 63,359 116,403 136,104 172,903 16,403 36,104 72,903
15 66,527 114,941 136,499 179,309 14,941 36,499 79,309
16 69,853 113,380 136,793 186,272 13,380 36,793 86,272
17 73,346 111,708 136,966 193,836 11,708 36,966 93,836
18 77,013 109,907 136,993 202,046 9,907 36,993 102,046
19 80,864 107,959 136,847 210,948 7,959 36,847 110,948
20 84,907 105,843 136,495 220,591 5,843 36,495 120,591
25 108,366 ** 130,572 282,202 ** 30,572 182,202
30 138,305 ** 113,224 380,028 ** 13,224 272,558
35 176,516 ** ** 512,938 ** ** 400,264
</TABLE>
- --------
* The illustrations assume that Planned Premiums equal to the Target Premium
are paid at the start of each of the first seven Policy Years. 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.
A-7
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE
$100,000 SUM INSURED
MALE, ISSUE AGE 45, FULLY UNDERWRITTEN NONSMOKER UNDERWRITING CLASS
OPTION M DEATH BENEFIT
NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH POLICY YEAR
PLANNED PREMIUM: $5,267 FOR SEVEN YEARS*
USING CURRENT CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
--------------------------------------------------------------------------------------------
Planned Premiums Assuming hypothetical gross annual return of Assuming hypothetical gross annual return of
End of accumulated at --------------------------------------------------------------------------------------------
Policy Year 5% annual interest 0% 6% 12% 0% 6% 12%
- ----------- ------------------ --------------- --------------- ----------------------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 5,530 $ 100,000 $ 100,000 1 00,000 $ 4,397 $ 4,651 $ 4,904
2 11,337 100,000 100,000 100,000 8,253 9,005 9,788
3 17,434 100,000 100,000 100,000 12,040 13,546 15,177
4 23,836 100,543 116,711 134,903 15,438 17,920 20,713
5 30,559 134,785 160,854 191,326 19,124 22,823 27,146
6 37,617 151,451 185,891 227,713 22,688 27,848 34,113
7 45,028 165,378 208,807 263,602 26,153 33,021 41,686
8 47,280 150,200 201,486 269,233 25,067 33,626 44,932
9 49,644 136,458 194,597 275,314 24,024 34,260 48,471
10 52,126 123,977 188,061 281,782 23,017 34,914 52,314
11 54,732 113,750 183,057 289,963 22,258 35,819 56,738
12 57,469 104,272 178,045 298,159 21,494 36,700 61,460
13 60,342 100,000 173,279 306,789 20,740 37,607 66,583
14 63,359 100,000 168,846 316,063 19,974 38,564 72,189
15 66,527 100,000 164,648 325,866 19,181 39,556 78,288
16 69,853 100,000 160,537 335,945 18,337 40,549 84,854
17 73,346 100,000 156,496 346,270 17,429 41,534 91,900
18 77,013 100,000 152,528 356,850 16,451 42,511 99,456
19 80,864 100,000 148,644 367,717 15,395 43,478 107,557
20 84,907 100,000 144,864 378,932 14,251 44,437 116,237
25 108,366 100,000 127,068 439,410 6,620 48,880 169,030
30 138,305 ** 110,745 506,344 ** 52,453 239,826
35 176,516 ** 100,000 586,791 ** 55,211 335,156
</TABLE>
- --------
* The illustrations assume that Planned Premiums equal to the Target Premium
are paid at the start of each of the first seven Policy Years. 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.
A-8
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE
$100,000 SUM INSURED
MALE, ISSUE AGE 45, FULLY UNDERWRITTEN NONSMOKER UNDERWRITING CLASS
OPTION M DEATH BENEFIT
NO GUARANTEED MINIMUM DEATH BENEFIT OPTION AFTER TENTH POLICY YEAR
PLANNED PREMIUM: $5,267 FOR SEVEN YEARS*
USING MAXIMUM CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
-----------------------------------------------------------------------------------------
Planned Premiums Assuming hypothetical gross annual return of Assuming hypothetical gross annual return of
End of accumulated at -----------------------------------------------------------------------------------------
Policy Year 5% annual interest 0% 6% 12% 0% 6% 12%
- ----------- ------------------ -------------- -------------- ----------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 5,530 $ 100,000 $ 100,000 $ 100,000 $ 4,235 $ 4,483 $ 4,731
2 11,337 100,000 100,000 100,000 7,937 8,668 9,430
3 17,434 100,000 100,000 100,000 11,581 13,040 14,620
4 23,836 100,000 112,266 129,802 14,842 17,238 19,930
5 30,559 129,465 154,497 183,728 18,369 21,921 26,068
6 37,617 145,185 178,096 218,018 21,750 26,680 32,660
7 45,028 157,970 199,228 251,220 24,981 31,506 39,728
8 47,280 141,688 189,993 253,728 23,646 31,708 42,344
9 49,644 126,926 181,112 256,264 22,346 31,886 45,117
10 52,126 113,538 172,548 258,783 21,079 32,034 48,044
11 54,732 102,432 165,357 262,378 20,043 32,356 51,340
12 57,469 100,000 158,374 265,901 18,988 32,646 54,810
13 60,342 100,000 151,617 269,380 17,867 32,906 58,464
14 63,359 100,000 145,081 272,806 16,671 33,136 62,309
15 66,527 100,000 138,746 276,140 15,389 33,333 66,342
16 69,853 100,000 132,602 279,363 14,008 33,493 70,562
17 73,346 100,000 126,652 282,473 12,512 33,613 74,968
18 77,013 100,000 120,876 285,424 10,881 33,689 79,550
19 80,864 100,000 115,261 288,173 9,091 33,714 84,291
20 84,907 100,000 109,807 290,709 7,114 33,683 89,175
25 108,366 ** 100,000 300,421 ** 31,757 115,564
30 138,305 ** 100,000 303,829 ** 21,426 143,906
35 176,516 ** ** 300,669 ** ** 171,732
</TABLE>
- --------
* The illustrations assume that Planned Premiums equal to the Target Premium
are paid at the start of each of the first seven Policy Years. 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.
A-9
<PAGE>
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that Section.
UNDERTAKING REGARDING INDEMNIFICATION
Pursuant to Section X of JHVLICO's Bylaws and Section 67 of the
Massachusetts Business Corporation Law, JHVLICO indemnifies each director,
former director, officer, and former officer, and his heirs and legal
representatives from liability incurred or imposed in connection with any legal
action in which he may be involved by reason of any alleged act or omission as
an officer or a director of JHVLICO.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following Papers and Documents:
The facing sheet.
Cross-Reference Table.
The prospectus consisting of 57 pages.
The undertaking regarding indemnification.
The undertaking to file reports.
<PAGE>
The signatures.
The following exhibits:
I.A. (1) JHVLICO Board Resolution establishing the separate account included in
Post-Effective Amendment No. 2 to this Form S-6 Registration Statement
filed January 11, 1996.
(2) Not Applicable
(3) (a) Distribution Agreement and Amendment included in Post-Effective
Amendment No. 2 to this Form S-6 Registration Statement filed
January 11, 1996.
(b) Specimen Variable Contracts Selling Agreement between John Hancock
Mutual Life Insurance Company and selling broker-dealers included
in Post-Effective Amendment No. 2 to this Form S-6 Registration
Statement filed January 11, 1996.
(c) Schedule of sales commissions included in Exhibit I.A.(3) (a)
above.
(4) Not Applicable
(5) Form of flexible premium variable life insurance policy, included in
the initial filing of this Form S-6 Registration Statement (File No.
33-79108), filed May 18, 1994.
(6) (a) JHVLICO Certificate of Incorporation included in Post-Effective
Amendment No. 2 to this Form S-6 Registration Statement filed
January 11, 1996.
(b) JHVLICO By-laws included in Post-Effective Amendment No. 2 to
this Form S-6 Registration Statement filed January 11, 1996.
(7) Not Applicable.
(8) Not Applicable.
(9) Not Applicable.
(10) Forms of applications for Policy, included in the initial filing of
this Form S-6 Registration Statement (File No. 33-79108), filed May
18, 1994.
<PAGE>
2. Included as Exhibit 1.A(5) above.
3. Opinion and consent of counsel as to securities being registered, included
in Pre-Effective Amendment No. 1 to this Form S-6 Registration Statement
(File No. 33-79108), filed October 10, 1994.
4. Not Applicable
5. Not Applicable
6. Opinion and consent of actuary.
7. Consent of independent auditors.
8. Memorandum describing JHVLICO's issuance, transfer and redemption procedures
for the flexible policy pursuant to Rule 6e-3(T)(b)(12)(iii), included in
the initial filing of this Form S-6 Registration Statement, filed May 18,
1994.
9. Powers of attorney for Cleary, Tomlinson, D'Alessandro, Shaw, Luddy, Lee,
Reitano, Van Leer and Paster, included in Post-Effective Amendment No. 1 to
this Form S-6 Registration Statement, filed April 1995.
10. Representations, Description and Undertaking pursuant to Rule
6e-3(T)(b)(13)(iii)(F) under the Investment Company Act of 1940, included
in Pre-Effective Amendment No. 1 to this Form S-6 Registration Statement,
filed October 10, 1994.
11. Exemptive Relief Relied Upon, included in Pre-Effective Amendment No. 1 to
this Form S-6 Registration Statement, filed October 10, 1994.
12. Opinion of Counsel as to eligibility of this Post-Effective Amendment
for filing pursuant to Rule 485(b).
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the John
Hancock Variable Life Insurance Company has duly caused this amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunder
duly authorized, and its seal to be hereunto fixed and attested, all in the City
of Boston and Commonwealth of Massachusetts on the 17th day of April, 1996.
JOHN HANCOCK VARIABLE LIFE
INSURANCE COMPANY
[SEAL APPEARS HERE]
By HENRY D. SHAW
-------------
Henry D. Shaw
President
Attest: FRANCIS C. CLEARY, JR.
----------------------
Francis C. Cleary, Jr.
Counsel
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment to the Registration Statement has been signed below by the
following persons in the capacities with John Hancock Variable Life Insurance
Company and on the dates indicated.
Signatures Title Date
- ---------- ----- ----
ROBERT REITANO
- -------------------------
Robert R. Reitano Director April 17, 1996
(Principal Financial Officer)
FRANCIS C. CLEARY, JR.
- -------------------------
Francis C. Cleary, Jr Director April 17, 1996
PATRICK F. SMITH
- -------------------------
Patrick F. Smith Controller
(Princpal Accounting Officer) April 17, 1996
HENRY D. SHAW
- -------------------------
Henry D. Shaw Vice Chairman of the Board
for himself and as and President(Acting Principal
Attorney-in-Fact Executive Officer) April 17, 1996
For: David F. D'Alessandro Chairman of the Board
Robert S. Paster Director
Thomas J. Lee Director
Michele G. Van Leer Director
Joseph A. Tomlinson Director
Barbara L. Luddy Director
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, John Hancock Variable Life Account S, certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this Post-
Effective Amendment to the Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, and its seal to be hereunto fixed
and attested, all in the City of Boston and Commonwealth of Massachusetts on the
17th day of April, 1996.
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
(Registrant)
By John Hancock Mutual Life Insurance Company
(Depositor)
[SEAL APPEARS HERE]
By HENRY D. SHAW
-------------
Henry D. Shaw
President
Attest FRANCIS C. CLEARY, JR.
----------------------
Francis C. Cleary, Jr.
Counsel
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> SELECT STOCK.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 6,909,172
<INVESTMENTS-AT-VALUE> 7,064,890
<RECEIVABLES> 39,836
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 7,104,726
<PAYABLE-FOR-SECURITIES> 39,567
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 269
<TOTAL-LIABILITIES> 39,836
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 406,768
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 126,908
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 7,064,890
<DIVIDEND-INCOME> 92,364
<INTEREST-INCOME> 0
<OTHER-INCOME> 417,223
<EXPENSES-NET> 17,330
<NET-INVESTMENT-INCOME> 492,308
<REALIZED-GAINS-CURRENT> 126,908
<APPREC-INCREASE-CURRENT> 180,251
<NET-CHANGE-FROM-OPS> 799,467
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7,299,567
<NUMBER-OF-SHARES-REDEEMED> 1,444,204
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 6,162,521
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 926,902
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 17,330
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> BOND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 1,357,549
<INVESTMENTS-AT-VALUE> 1,388,285
<RECEIVABLES> 1,076
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,389,361
<PAYABLE-FOR-SECURITIES> 1,011
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 65
<TOTAL-LIABILITIES> 1,076
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 137,078
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 21,718
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,388,285
<DIVIDEND-INCOME> 54,549
<INTEREST-INCOME> 0
<OTHER-INCOME> 12,423
<EXPENSES-NET> 4,148
<NET-INVESTMENT-INCOME> 62,824
<REALIZED-GAINS-CURRENT> 21,718
<APPREC-INCREASE-CURRENT> 34,574
<NET-CHANGE-FROM-OPS> 119,116
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,480,183
<NUMBER-OF-SHARES-REDEEMED> 365,240
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,171,236
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 220,888
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,148
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> INTERNATIONAL
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 2,448,039
<INVESTMENTS-AT-VALUE> 2,554,818
<RECEIVABLES> 2,172
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,556,990
<PAYABLE-FOR-SECURITIES> 2,051
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 121
<TOTAL-LIABILITIES> 2,172
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 463,670
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (25,931)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,554,818
<DIVIDEND-INCOME> 19,256
<INTEREST-INCOME> 0
<OTHER-INCOME> 246
<EXPENSES-NET> 10,434
<NET-INVESTMENT-INCOME> 9,067
<REALIZED-GAINS-CURRENT> (25,931)
<APPREC-INCREASE-CURRENT> 153,715
<NET-CHANGE-FROM-OPS> 136,851
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,211,508
<NUMBER-OF-SHARES-REDEEMED> 776,801
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,562,491
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,039,263
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10,434
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> MONEY MARKET
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 4,626,512
<INVESTMENTS-AT-VALUE> 4,626,512
<RECEIVABLES> 612,373
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5,238,885
<PAYABLE-FOR-SECURITIES> 612,185
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 188
<TOTAL-LIABILITIES> 612,373
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 462,652
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 4,626,512
<DIVIDEND-INCOME> 119,746
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 12,117
<NET-INVESTMENT-INCOME> 107,629
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 107,629
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 12,860,558
<NUMBER-OF-SHARES-REDEEMED> 10,289,180
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2,371,379
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 2,255,133
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 12,117
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> REAL ESTATE EQUITY
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 535,769
<INVESTMENTS-AT-VALUE> 570,782
<RECEIVABLES> 12,369
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 583,151
<PAYABLE-FOR-SECURITIES> 12,340
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 29
<TOTAL-LIABILITIES> 12,369
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 48,801
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 613
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 570,782
<DIVIDEND-INCOME> 32,578
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 2,766
<NET-INVESTMENT-INCOME> 29,812
<REALIZED-GAINS-CURRENT> 613
<APPREC-INCREASE-CURRENT> 25,077
<NET-CHANGE-FROM-OPS> 55,502
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 451,518
<NUMBER-OF-SHARES-REDEEMED> 326,311
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 150,898
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 409,948
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,766
<AVERAGE-NET-ASSETS> 0
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> STOCK
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
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<TOTAL-LIABILITIES> 1,291,449
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<SHARES-COMMON-STOCK> 639,815
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
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<ACCUMULATED-NET-GAINS> 170,322
<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 8,919,796
<DIVIDEND-INCOME> 118,733
<INTEREST-INCOME> 0
<OTHER-INCOME> 550,909
<EXPENSES-NET> 23,428
<NET-INVESTMENT-INCOME> 646,215
<REALIZED-GAINS-CURRENT> 170,322
<APPREC-INCREASE-CURRENT> 322,628
<NET-CHANGE-FROM-OPS> 1,139,165
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,733,659
<NUMBER-OF-SHARES-REDEEMED> 1,659,437
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 8,784,534
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,419,985
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<GROSS-EXPENSE> 23,428
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<PER-SHARE-NAV-BEGIN> 0
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> SHORT-TERM U.S. GOVERNMENT
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 2,187,260
<INVESTMENTS-AT-VALUE> 2,209,047
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<SHARES-COMMON-PRIOR> 0
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<OVERDISTRIBUTION-GAINS> 0
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<NET-INVESTMENT-INCOME> 61,585
<REALIZED-GAINS-CURRENT> 8,251
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<NET-CHANGE-FROM-OPS> 91,948
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<NUMBER-OF-SHARES-SOLD> 2,584,350
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<SHARES-REINVESTED> 0
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<GROSS-EXPENSE> 2,917
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 8
<NAME> MANAGED
<S> <C>
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 3,766,357
<INVESTMENTS-AT-VALUE> 3,809,723
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<SHARES-COMMON-PRIOR> 0
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<OVERDISTRIBUTION-GAINS> 0
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<EXPENSES-NET> 10,978
<NET-INVESTMENT-INCOME> 305,796
<REALIZED-GAINS-CURRENT> 179,089
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<ACCUMULATED-NII-PRIOR> 0
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<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 9
<NAME> SPECIAL OPPORTUNITIES
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 1,481,556
<INVESTMENTS-AT-VALUE> 1,670,060
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<PAGE>
Exhibit 6
April 5, 1996
Board of Directors
John Hancock Mutual Life Insurance Company
Subject: Actuarial Opinion
Gentlemen:
This opinion is furnished in connection with the filing of this Post-Effective
Amendment to the Registration Statement on Form S-6 (File Number 33-79108) by
John Hancock Variable Life lnsurance Company (JHVLICO) under the Securities Act
of 1933, as amended, with respect to the flexible premium variable life
insurance Policy under which amounts will be allocated by JHVLICO to one or more
of the subaccounts of John Hancock Variable Life Account S ("Account"). The
flexible premium policy is described in the prospectus included in the amended
Registration Statement.
The policy form was prepared under my direction, and I am familiar with the
amended Registration Statement and exhibits thereto. In my opinion:
1. The "sales load", as defined in paragraph (c) (4) of Rule 6e-3(T) under the
lnvestment Company Act of 1 940, will not exceed 9% of the "payments" (as
defined in the first sentence of paragraph (c) (7) of the Rule) equal to the
sum of the guideline annual premiums (as defined in paragraph (c) (8) of the
Rule) that would be paid during the period equal to the lesser of 20 years or
the anticipated life expectancy of the insured named in the policy based on
the 1980 Commissioners Standard Ordinary Smoker/Nonsmoker Mortality Tables.
The sales load on payments made in excess of such sum will not exceed 9%.
2. Except to the extent that exemptive relief is applicable, the proportionate
amount of sales load deducted from any payment during the policy will not
exceed the proportionate amount deducted from any prior payment during the
policy period, unless an increase is caused by a reduction in the annual cost
of insurance.
<PAGE>
-2-
3. The illustration of death benefit, surrender value, and accumulated premiums
shown in the appendix of the flexible premium prospectus included in the
amended Registration Statement, based on the assumptions stated in the
illustrations, are consistent with the provisions of the policy. Such
assumptions, including the current cost of insurance rates and other charges,
are reasonable. The policy has not been designed so as to make the
relationship between premiums and benefits, as shown in the illustrations,
appear disproportionately more favorable to a prospective purchaser of a
policy for a male age 45, nonsmoker risk class, than to a prospective
purchaser of a policy for a male at other ages or in another risk
classification or for a female nor, have the particular examples set forth in
the illustrations been selected for the purpose of making this relationship
appear more favorable.
4. The charge for federal taxes that is imposed under the policy is reasonable
in relation to JHVLlCO's increased tax burden under Section 848 of the
lnternal Revenue Code of 1986, resulting from JHVLlCO's receipt of such
premiums. The cost to JHVLICO of capital used to satisfy its increased tax
burden under Section 848 is, in essence, JHVLlCO's targeted rate of return.
The targeted rate of return is reasonable and the factors taken into account
by JHVLICO in determining such targeted rate of return are appropriate
factors to consider.
I hereby consent to the filing of this opinion as an exhibit to the amended
Registration Statement and to the use of my name under the heading "Experts" in
the prospectus to actuarial matters.
/s/Philip G. Johnson, FSA
Senior Associate Actuary
<PAGE>
EXHIBIT 7
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Prospectus and to the use of our reports dated February 9 1996, with respect to
the financial statements of John Hancock Variable Life Account S and dated
February 7, 1996 with respect to the financial statements of John Hancock
Variable Life Insurance Company, included in this Post-Effective Amendment No. 3
to the Registration Statement (Form S-6, No. 33-79108).
/s/Ernst & Young LLP
ERNST & YOUNG LLP
Boston, Massachusetts
April 22, 1996
<PAGE>
EXHIBIT 12
April 5, 1996
United States Securities
and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Gentlemen:
This opinion is being furnished with respect to the filing of this post-
effective amendment of the Registrant's Registration Statement with the
Securities and Exchange Commission as required by Rule 485 under the Securities
Act of 1933.
We have acted as counsel to Registrant for the purpose of preparing this
post-effective amendment which is being filed pursuant to paragraph (b) of Rule
485 and hereby represent to the Commission that in our opinion this post-
effective amendment does not contain disclosures which would render it
ineligible to become effective pursuant to paragraph (b).
We hereby consent to the filing of this opinion with and as a part of this
post-effective amendment to Registrant's Registration Statement with the
Commission.
Very truly yours,
/s/ Francis C. Cleary Jr.
------------------------
Francis C. Cleary, Jr.
Vice President and Counsel
