<PAGE>
As filed with the Securities and Exchange Commission on April __, 1997
Registration No. 333-15075
____________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM S-6
Pre-Effective Amendment
No. 1 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)
-----------------
SANDRA M. DADALT, ESQ.
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
JOHN HANCOCK PLACE, BOSTON, 02117
(Name and complete address of agent for service)
-----------------
Copy to:
THOMAS C. LAUERMAN, ESQ.
Freedman, Levy, Kroll & Simonds
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036
-----------------
Approximate date of proposed public offering: as soon as practicable after the
effective date of this Registration Statement.
An indefinite amount of the Registrant's securities has been registered pursuant
to a declaration under Rule 24f-2, under the Investment Company Act of 1940, set
out in a previously filed Form S-6 Registration Statement of Registrant and
Registrant's Depositor (File No. 33-64366). Registrant filed its Rule 24f-2
Notice for the December 31, 1996 fiscal year on February 26, 1997.
Title and amount of securities being registered: interests under flexible
premium variable life policies.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
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
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
<PAGE>
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 Provisionsand Benefits
Appendix--Illustration of Death
Benefits, Surrender Values
and Accumulated Premiums
45 Not Applicable
46 The Account and The Series Funds,
Policy Provisions and Benefits,
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
<PAGE>
John Hancock Variable Life
[LOGO OF JOHN HANCOCK APPEARS HERE] Insurance Company
(JHVLICO)
JOHN HANCOCK VARIABLE LIFE ACCOUNTS
JOHN HANCOCK PLACE
BOSTON, MASSACHUSETTS 02117
SERVICING OFFICE:
ONE JOHN HANCOCK WAY
SUITE 1000
BOSTON, MASSACHUSETTS 02217
TELEPHONE 1-800-REAL LIFE (1-800-732-5543)
FAX 617-572-5410
PROSPECTUS APRIL , 1997
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
"series" type mutual fund advised by John Hancock Mutual Life Insurance
Company ("John Hancock") or of M Fund, Inc., a "series" type 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 & Income, Large Cap Growth, Sovereign Bond,
Money Market, Managed, Real Estate Equity, International Equities, Short-Term
U.S. Government, Special Opportunities, Small Cap Growth, Small Cap Value, Mid
Cap Growth, Mid Cap Value, International Balanced, International
Opportunities, Large Cap Value, Strategic Bond and Equity Index and in the
Portfolios of M Funds, Inc.: Edinburgh Overseas Equity, Turner Core Growth,
Frontier Capital Appreciation,and Enhanced U.S. Equity. (The Enhanced U.S.
Equity Portfolio is not currently available to Owners, but is expected to be
made available later in 1997.) 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.................................................. 7
THE ACCOUNT AND THE SERIES FUNDS.......................................... 7
The Account............................................................. 7
The Series Funds........................................................ 7
THE FIXED ACCOUNT......................................................... 10
POLICY PROVISIONS AND BENEFITS............................................ 11
Requirements for Issuance of Policy..................................... 11
Premiums................................................................ 11
Account Value and Surrender Value....................................... 14
Death Benefits.......................................................... 15
Transfers Among Subaccounts............................................. 17
Loan Provisions and Indebtedness........................................ 18
Default................................................................. 19
Exchange Privilege...................................................... 20
CHARGES AND EXPENSES...................................................... 20
Charges Deducted from Premiums.......................................... 20
Sales Charge............................................................ 20
Reduced Charges for Eligible Groups..................................... 21
Charges Deducted from Account Value or Assets........................... 21
Guarantee of Certain Charges............................................ 23
DISTRIBUTION OF POLICIES.................................................. 24
TAX CONSIDERATIONS........................................................ 25
Policy Proceeds......................................................... 25
Charge for JHVLICO's Taxes.............................................. 26
Corporate and H.R. 10 Plans............................................. 26
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS OF JHVLICO...................... 27
REPORTS................................................................... 27
VOTING PRIVILEGES......................................................... 28
CHANGES THAT JHVLICO CAN MAKE............................................. 28
STATE REGULATION.......................................................... 29
LEGAL MATTERS............................................................. 29
REGISTRATION STATEMENT.................................................... 29
EXPERTS................................................................... 29
FINANCIAL STATEMENTS...................................................... 29
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..................................... 15
Guaranteed Minimum Death Benefit Premium............................. 11
Indebtedness......................................................... 17
Investment Rule...................................................... 12
Loan Assets.......................................................... 17
Minimum First Premium................................................ 18
Optional Extra Death Benefit......................................... 14
Planned Premium...................................................... 11
Policy Anniversary................................................... A-2
Portfolio..................................................... Front Cover
Servicing Office..................................................... 6
Subaccount.................................................... Front Cover
Surrender Value...................................................... 13
Target Premium....................................................... 20
Total Sum Insured.................................................... 15
Valuation Date....................................................... 10
Valuation Period..................................................... 10
Variable Subaccounts................................................. 2
7-Pay Limit.......................................................... 12
</TABLE>
<PAGE>
SUMMARY
WHAT IS THE VARIABLE LIFE POLICY BEING OFFERED?
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: A premium payment is periodically
made to JHVLICO. 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 of the Policy (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 Total Sum Insured less any withdrawals
that the Owner has made. The death benefit under Option B equals the Total Sum
Insured plus the Policy Account Value on the date of death of the insured. The
death benefit under Option M equals the Total 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 specified Guaranteed Minimum Death Benefit Premiums have
been paid. 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 Total Sum Insured equals
the sum of the Basic Sum Insured plus the amount of any Additional Sum
Insured.
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. 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. At issue, the Owner may elect to purchase an Enhanced Cash Value
Rider which will provide a benefit payable in addition to the Surrender Value
if the Policy is surrendered in the first nine Policy years. The Owner may
also make partial withdrawals from a Policy, subject to certain restrictions
and an administrative charge.
1
<PAGE>
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 Total Sum Insured that may be bought at issue is $500,000. 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 Basic 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
prescribed amounts of premiums have been paid, based on the characteristics of
the insured and the amount of the Basic Sum Insured at issue. 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. The
Account is subdivided into a number of variable Subaccounts, each of which
corresponds to one of the Portfolios of the Funds. The assets of each variable
Subaccount are invested in the corresponding Portfolio of the Funds. The
Portfolios of the Funds which are currently available are Growth & 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,
Frontier Capital Appreciation, and Enhanced U.S. Equity.
John Hancock receives a fee from John Hancock Variable Series Trust I for
providing investment management services to each of its Portfolios. John
Hancock also receives a fee for certain non-advisory Fund expenses. The
following chart shows the fees received in 1996 as a percentage of each
Portfolio's average daily net assets.
2
<PAGE>
<TABLE>
<CAPTION>
Other Total Fund Other Fund
Investment Fund Operating Expenses Absent
Portfolio Management Fee Expenses Expenses Reimbursement*
--------- -------------- -------- ---------- ---------------
<S> <C> <C> <C> <C>
Managed................. 0.34% 0.03% 0.37% N/A
Growth & Income......... 0.25% 0.03% 0.28% N/A
Equity Index............ 0.20% 0.25% 0.45% 1.61%
Large Cap Value......... 0.75% 0.25% 1.00% 1.89%
Large Cap Growth........ 0.40% 0.05% 0.45% N/A
Mid Cap Value........... 0.80% 0.25% 1.05% 2.15%
Mid Cap Growth.......... 0.85% 0.25% 1.10% 2.34%
Special Opportunities... 0.75% 0.12% 0.87% N/A
Real Estate Equity...... 0.60% 0.11% 0.72% N/A
Small Cap Value......... 0.80% 0.25% 1.05% 2.06%
Small Cap Growth........ 0.75% 0.25% 1.00% 1.55%
International Balanced.. 0.85% 0.25% 1.10% 1.44%
International Equities.. 0.60% 0.18% 0.78% N/A
International Opportuni-
ties................... 1.00% 0.25% 1.25% 2.76%
Short-Term U.S. Govern-
ment................... 0.30% 0.06% 0.36% 0.79%
Sovereign Bond.......... 0.25% 0.06% 0.31% N/A
Strategic Bond.......... 0.75% 0.25% 1.00% 1.57%
Money Market............ 0.25% 0.07% 0.32% N/A
</TABLE>
- - --------
* John Hancock reimburses a Portfolio when the Portfolio's Other Expenses
exceed 0.25% of the Portfolio's average daily net assets.
M Financial Investment Advisers, Inc., ("M Financial") receives a fee from M
Fund, Inc., for providing investment management services to each of its
Portfolios. M Financial also receives a fee for certain non-advisory Fund
expenses. The following chart shows the fees received in 1996 as a percentage
of each Portfolio's average daily net assets.
<TABLE>
<CAPTION>
Other Total Fund Other Fund
Investment Fund Operating Expenses Absent
Portfolio Management Fee Expenses Expenses Reimbursement*
--------- -------------- -------- ---------- ---------------
<S> <C> <C> <C> <C>
Edinburgh Overseas Equity... 1.05% 0.25% 1.30% 6.29%
Turner Core Growth**........ 0.45% 0.25% 0.70% 8.06%
Frontier Capital Apprecia-
tion**..................... 0.90% 0.25% 1.15% 7.29%
Enhanced U.S. Equity........ 0.55% 0.25% 0.80% 11.90%
</TABLE>
- - --------
* M Financial reimburses a Portfolio when the Portfolio's Other Expenses
exceed 0.25% of the Portfolio's average daily net assets.
** Figures do not reflect interest expense, which is 0.08% for the Turner Core
Growth Portfolio and 0.05% for the Frontier Capital Appreciation Portfolio.
For a full description of the Funds, see the Prospectuses for the Funds
attached to this Prospectus.
WHAT ARE THE CHARGES MADE BY JHVLICO?
Premium Processing Charge. A 1.25% charge deducted from each premium
payment.
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.
3
<PAGE>
Sales Charge. A charge deducted from each premium payment in the amount of
30% of premiums paid in the first Policy year up to the "target premium" and
3.5% of premiums paid during the first Policy year in excess of that target.
The sales charge in subsequent Policy years on premiums up to the target
premium is 10% of such premiums in each of years 2 through 10; and 4% of such
premiums thereafter. The sales charge for premiums paid in excess of the
target premium is 3.5% of such excess premiums paid in all Policy years. These
sales charges are guaranteed not to increase above these amounts.
Issue Charge. A charge deducted monthly from Account Value for the first 10
Policy years in an amount set forth in the Policy per $1,000 of the Basic Sum
Insured at issue. Such amount varies by age at issue. For example, this
additional monthly amount for a 45 year old is 10c per $1,000 of Basic Sum
Insured at issue. This charge is guaranteed not to exceed $200 per month and
will be at least $5 per month.
Administrative Charge. A charge deducted monthly from Account Value
currently in an amount equal to $5 for all Policy years. This charge is
guaranteed not to exceed $10 per month.
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 3c per
$1,000 (currently 1c per $1,000) of the Basic Sum Insured at issue, deducted
monthly from Account Value.
Charge for Mortality and Expense Risks. A charge deducted daily from the
variable Subaccounts at a maximum effective annual rate of .60% of the assets
of each variable Subaccount. The current charge is .35%.
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 Enhanced Cash Value Rider. A charge equal to 2% of the
premium payment will be deducted from each premium payment received in the
first Policy year up to the annual target premium. This charge is assessed in
the first Policy year only.
Charge for Other Optional Rider Benefits. An additional charge required if
the Owner elects to purchase any optional insurance benefits by rider (other
than the Enhanced Cash Value Rider). Any such additional charge is deducted
monthly from Account Value.
Charge for Partial Withdrawal. A charge of $20 deducted from 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".
4
<PAGE>
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 premium
processing charge, and less the charges deducted for sales expenses, state
premium taxes and the Federal DAC Tax. 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)".
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 Total Sum Insured (the Total
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 Total Sum Insured
less any withdrawals of Account Value that the Owner has made.
OPTION B: The death benefit is the Policy's current Total 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 Total 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. The
Guaranteed Minimum Death Benefit feature applies only to the Basic Sum Insured
and not to any amount of Additional Sum Insured.
5
<PAGE>
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 by any
partial withdrawal, 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 Loan Value will be equal to (a) minus (b) minus (c) where: (a) is the
Account Value, (b) is twelve times the sum of all monthly charges deducted
from the Account Value for the Policy month in which the loan is obtained, and
(c) is (a) above minus (b) above multiplied by .75% in Policy years 1-20 and
.25% thereafter. Interest charged on any loan will accrue and compound daily
at an effective annual rate of 4.75% in the first 20 Policy years and 4.25%
thereafter. A loan plus accrued interest ("Indebtedness") may be repaid at the
discretion of the Owner in whole or in part in accordance with the terms of
the Policy. The Owner may obtain a Policy loan in the maximum amount of the
Loan Value less any existing Indebtedness.
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 Total Sum Insured are
permanently affected by any loan.
IS THERE A SHORT-TERM CANCELLATION RIGHT?
The Owner may surrender a Policy, for any reason, by delivering or mailing
it, within 10 days after receipt of the Policy by the Owner, to JHVLICO's
Servicing 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
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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 approximately $59 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 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 the corresponding
Portfolio 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
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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 & Income 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 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 Portfolio. The investment objective of this Portfolio is to
achieve above-average capital appreciation through the ownership of common
stocks (and securities convertible into or with rights to purchase common
stocks) of companies believed to offer above-average capital appreciation
opportunities. Current income is not an objective of the Portfolio.
Sovereign 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 primarily in a diversified
portfolio of freely marketable debt securities. Total rate of return consists
of current income, including interest and discount accruals, and capital
appreciation.
Money Market Portfolio. 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: The investment objective of this Portfolio is to achieve
maximum long-term total return consistent with prudent investment risk.
Investments will be made in common stocks, convertibles and other equity
investments, in bonds and other fixed income securities and in money market
instruments.
Real Estate Equity Portfolio: The investment objective of this Portfolio is
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 Portfolio: The investment objective of this Portfolio
is to achieve long-term growth of capital by investing primarily in foreign
equity securities.
Special Opportunities Portfolio: The investment objective of this Portfolio
is to achieve long-term capital appreciation by emphasizing investments in
equity securities of issuers in various economic sectors.
Short-Term U.S. Government Portfolio: The investment objective of this
Portfolio is 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: The investment objective of this Portfolio is 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.
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Large Cap Value Portfolio: The investment objective of this Portfolio is 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: The investment objective of this Portfolio is to
provide long-term growth of capital through a non-diversified portfolio
investing largely in common stocks of medium capitalization companies.
Mid Cap Value Portfolio: The investment objective of this Portfolio is to
provide long-term growth of capital primarily through investment in the common
stocks of medium capitalization companies believed to sell at a discount to
their intrinsic value.
Small Cap Growth Portfolio: The investment objective of this Portfolio is 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: The investment objective of this Portfolio is 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: The investment objective of this Portfolio is 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: The investment objective of this
Portfolio is to provide capital appreciation through investment in common
stocks of primarily well-established, non-United States companies.
International Balanced Portfolio: The investment objective of this Portfolio
is 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, MA 02109, provides sub-investment advice with respect to the Growth &
Income, Large Cap Stock, 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, MA 02199, 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 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.
State Street Bank & Trust, N.A., at Two International Place, Boston, MA
02110, is the sub-investment adviser to the Equity Index Portfolio. INVESCO
Management & Research located at 101 Federal Street, Boston, MA 02110, is the
sub-investment adviser to the Small Cap Value Portfolio. Janus Capital
Corporation, with its
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principal place of business at 100 Filmore Street, Denver, CO 80206, is the
sub-investment adviser to the Mid Cap Growth Portfolio. Neuberger & Berman,
LLC 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 sub-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. The investment objective of this
Portfolio 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. The investment objective of this
Portfolio is to 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.
Enhanced U.S. Equity Portfolio. The investment objective of this Portfolio
is to provide above market total return through investment in common stock of
companies perceived to provide a return higher than that of the S&P 500 at
approximately the same level of investment risk as the S&P 500.
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; Frontier Capital Management Company, Inc.,
provides sub-investment advice to the Frontier Capital Appreciation Portfolio;
and Franklin Portfolio Associates Trust provides sub-investment advice to the
Enhanced U.S. Equity 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.
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 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.
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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 Total Sum Insured at issue
of $500,000 and a minimum Basic Sum Insured of $100,000. At the time of issue,
the insured must be age 20 through 85. All persons insured must meet certain
health and other criteria called "underwriting standards". The smoking status
of the insured is reflected in the insurance charges made. 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.
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. The
illustrations set forth in this Prospectus are sex distinct and, therefore, do
not reflect the "unisex" rates, charges or values that would apply to such
Policies.
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.
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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 Basic Sum Insured at
issue, and any additional benefits selected. The Minimum First Premium must be
received by JHVLICO at its Servicing Office in order for the Policy to be 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's standard procedures prohibit issuance of 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 Total 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 either to satisfy federal tax law
requirements or because of the way the Optional Extra Death Benefit feature
operates, 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 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. If there is no Additional Sum insured at
issue, the Guaranteed Minimum Death Benefit Premium will be equal to the
Policy's target premium (discussed under "Sales Charge"). If there is an
Additional Sum Insured at issue, such Premium will be equal to the greater of
(i) the target premium for the Policy and (ii) 50% of what the target premium
would have been if the Additional Sum Insured at issue had been purchased as
the Basic Sum Insured. 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 on each Policy anniversary
be at least equal to the Guaranteed Minimum Death Benefit Premiums due to date
accumulated at 4% interest. If this test is not satisfied on any Policy
anniversary, a 61-day grace period will commence as of that anniversary and
JHVLICO will notify the Owner of the shortfall. This notice will be mailed to
the Owner's last-known address
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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".
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 Servicing 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 premium
processing charge, 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 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 Servicing Office of notice
satisfactory to JHVLICO. Notwithstanding the Investment Rule, any net premium
(or portion thereof) 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 (or of the premium's date of receipt, if later), 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 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
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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,
increased by net premiums received, and decreased by any partial withdrawal.
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.
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 Servicing 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 Servicing Office.
A withdrawal will reduce any Option A or Option M Total Sum Insured by the
amount withdrawn. JHVLICO reserves the right to refuse any withdrawal request
that would cause the Policy's Total Sum Insured to fall below $500,000.
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".
Optional Enhanced Cash Value Rider. The Owner may elect an Enhanced Cash
Value Rider to be attached to the Policy. This rider allows for the Owner to
receive an Enhanced Cash Value benefit (in addition to the Surrender Value) if
the Policy is surrendered within the first nine policy years. The Enhanced
Cash Value benefit is set forth in the specification pages of the Policy.
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There is a charge for the rider equal to 2% of premium paid in the first
Policy year up to the annual target premium. This charge is assessed in the
first Policy year only.
The Enhanced Cash Value benefit is included in the Account Value when
calculating the death benefit and insurance charges associated with the
Policy. The amount available for Withdrawal and the Loan Value of the policy
is based on the Surrender Value, and neither will in any way be increased due
to the Enhanced Cash Value Rider.
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 Total 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 Total Sum Insured, plus
any increases in the death benefit described below under "Definition of
Life Insurance", and minus the amount of any partial withdrawals that have
been made over the life of the Policy.
OPTION B: The death benefit is the current Total 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 Total Sum Insured, plus any
increases in the death benefit described below under "Optional Extra Death
Benefit Feature" and "Definition of Life Insurance" and minus the amount of
any partial withdrawals that have been made over the life of the Policy.
The Total 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 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 feature, 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 the Policy will be increased if necessary to ensure that
the Policy will continue to qualify as life insurance. One of two tests under
current Federal tax law can be used
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<PAGE>
to determine if a policy complies with the definition of life insurance in
Section 7702 of the Code. The test which will apply to the Policy is chosen in
the application for the Policy.
The "guideline premium and cash value corridor" test limits the amount of
premiums payable under a policy to a certain amount for an insured of a
particular age and sex. The test also applies a prescribed "Corridor Factor"
to determine a minimum ratio of death benefit to Account Value. A complete
list of Corridor Factors is set forth in the Policy under the heading of
Required Additional Death Benefit Factors. The "guideline premium and cash
value corridor" test can be used with Option A and Option B policies.
The "cash value accumulation test" also limits the amount of premiums
payable under a policy to a prescribed amount, using a minimum ratio of death
benefit to a policy's Account Value, employing a standard "net single premium"
computed in compliance with the Code. If the Account Value under a policy is
at any time greater than the net single premium at the insured's age and sex
for the proposed death benefit, the death benefit will be increased
automatically by multiplying the Account Value by a "Death Benefit Factor"
computed in compliance with the Code. A complete list of Death Benefit Factors
is set forth in the Policy under the heading of Required Additional Death
Benefit Factors. The "cash value accumulation test" can be used with Option A,
Option B and Option M policies.
If the Account Value is reduced (e.g. by withdrawals, charges, or adverse
investment performance) at a time when a minimum death benefit under Section
7702 is in effect, such minimum death benefit will also be reduced.
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 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. 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 Total Sum
Insured to fall below $500,000 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 Servicing 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".
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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 Policy years plus the
Planned Premium for the current Policy 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 Guaranteed Minimum 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.
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
Servicing 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 Servicing Office. (JHVLICO
reserves the right to defer such Fixed Account transfers for up to 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.
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No transfers among Subaccounts 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 or sending a written request via fax to 1-800-621-
0448. 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. If the fax request option becomes unavailable, another
means of telecommunication will be substituted.
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 such
loss, expense or cost is the result of JHVLICO's mistake or negligence.
JHVLICO employs procedures which provide safeguards against the execution of
unauthorized transactions, and which are reasonably designed to confirm that
instructions received by telephone are genuine. These procedures include
requiring personal identification, tape recording calls, and providing written
confirmation to the Owner. If 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
equal to (a) minus (b) minus (c) where: (a) is the Account Value, (b) is
twelve times the sum of all monthly charges deducted from the Account Value
for the Policy month in which the loan is obtained; and (c) is (a) above minus
(b) above multiplied by .75% in Policy years 1-20 and .25% thereafter.
Interest charged on any loan will accrue and compound daily at an effective
annual rate of 4.75% in the first 20 Policy years and 4.25% thereafter.
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 a
portion of JHVLICO's general account called "Loan Assets". 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 then 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 then 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 Loan Assets is credited with interest
at a rate that is .75% less than the loan interest rate for the first 20
Policy years and .25% less than the loan interest rate for all Policy years
thereafter. The rate credited to Loan Assets will usually be different than
the net return for the Subaccounts. Since the Loan Assets and the remaining
portion of the Account Value will generally have different rates of investment
return, the Account Value, the
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Surrender Value, and any death benefit above the Total Sum Insured are all
permanently affected by any Indebtedness, whether or not it is repaid in whole
or in part. The amount of any Indebtedness is subtracted from the amount
otherwise payable when the Policy proceeds become payable.
Whenever the Indebtedness equals or exceeds the 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 address specifying the minimum
amount which must be paid to keep the Policy inforce beyond that period,
unless a repayment of at least the amount specified in the notice is made
within that period.
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 Servicing 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".
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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 Servicing 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.
CHARGES AND EXPENSES
CHARGES DEDUCTED FROM PREMIUMS
In addition to the sales charge (see "Sales Charge" below), the following
charges are deducted from premiums:
Premium Processing Charge. 1.25% of each premium payment will be deducted
from each premium payment for collection and Policy processing costs.
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. 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".
Charge for Optional Enhanced Cash Value Rider. A charge equal to 2% of the
premium payment will be deducted from each premium payment received in the
first Policy year up to the annual target premium. This charge is assessed in
the first Policy year only.
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 sales charge in the first Policy year is equal to 30% of premiums paid
up to one "target premium" and 3.5% of all premiums in excess of the target
premium in that year. The target premium is established at issue and is the
amount of the level premium that would be necessary to support a whole life
insurance policy in the amount of the Basic Sum Insured at the maximum
guaranteed cost of insurance rates, assuming deductions or
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charges for the other policy expenses at the maximum level guaranteed under
the Policy and a net interest rate of 5%. Target premiums will vary based on
the issue age, sex, smoking status and underwriting class of the insured.
The sales charge for premiums paid up to one target premium in subsequent
Policy years is 10% in years 2 through 10 and 4% thereafter. The sales charge
for premiums paid in excess of the target premium is 3.5% in all Policy years.
These sales charges are guaranteed.
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 $12,000 if
he paid $10,000 in each of the first ten Policy years, but would pay total
sales charges of only $8,750 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. 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. Each month for the first 10 Policy years, JHVLICO will deduct
from Account Value an issue charge as set forth in the Policy per $1,000 of
Basic Sum Insured at issue. The charge varies by age at
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issue. For example, this additional monthly amount for a 45 year old is 10c
per $1,000 of Basic Sum Insured at issue. This charge is guaranteed not to
exceed $200 per month and will be at least $5 per month.
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 Account Value a monthly
charge not to exceed $10 for all Policy years. The current monthly charge is
$5.
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 at risk
would also be affected if the Owner purchases the Enhanced Cash Value Rider.
See "Optional Enhanced Cash Value Rider" in the Section entitled "Account
Value and Surrender 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. There is no charge for any
Guaranteed Minimum Death Benefit during the first 10 Policy years. 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 3c 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.
Because the Policies were first offered only in 1997, no Guaranteed Minimum
Death Benefit charge is yet applicable to any Policy at the current rate.
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Charge for Mortality and Expense Risks. A daily charge is deducted from the
variable Subaccounts for mortality and expense risks assumed by JHVLICO at a
maximum effective annual rate of .60% of the value of the assets of each
variable Subaccount attributable to the Policy. The current charge is at an
effective annual rate of .35%. 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 Other Optional Rider Benefits. An additional charge must be paid
if the Owner elects to purchase any optional insurance benefit by Policy rider
(other than the Enhanced Cash Value Rider). Any such additional charge is
deducted monthly from Account Value.
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 and Other Fund Expenses. 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 fees and
certain non-advisory Fund operating expenses, which are described in the
Summary of this Prospectus. 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 premium processing charge, 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.
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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 Distributors, Inc.
("Distributors"), an indirect wholly-owned subsidiary of John Hancock located
at 197 Clarendon Street, Boston, MA 02117, or other broker-dealer firms, as
discussed below. John Hancock performs insurance underwriting and determines
whether to accept or reject the application for a Policy and each insured's
risk classification. Pursuant to a sales agreement among John Hancock,
Distributors, JHVLICO, and the Account, effective May 1, 1997, Distributors
will act as the principal underwriter of the Policies. (Until May 1, 1997,
John Hancock Mutual Life Insurance Company, a registered broker-dealer and
member of the National Association of Securities Dealers, Inc., acts as
principal underwriter.) 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.
Distributors' representatives are compensated for sales of the Policies on a
commission and service fee basis by Distributors, and JHVLICO reimburses
Distributors for such compensation and for other direct and indirect expenses
(including agency expense allowances, general agent, district manager and
supervisor's compensation, agent's training allowances, deferred compensation
and insurance benefits of agents, general agents, district managers and
supervisors, agency office clerical expenses and advertising) actually
incurred in connection with the marketing and sale of the Policies.
The maximum commission payable to a Distributors representative for selling
a Policy is 65% of the target premium paid in the first Policy year, 10% of
the target premium paid in Policy years 2 through 10, and 3% of the target
premium paid in each year thereafter. The maximum commission payable on any
premium paid in any Policy year in excess of the target premium is 3%.
In addition, Distributors' representatives may earn "credits" toward
qualification for attendance at certain business meetings sponsored by John
Hancock.
Representatives with less than four years of service with Distributors 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.
Distributors 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., and is a member of the Securities Investor
Protection Corporation. The Policies are also sold through other registered
broker-dealers that have entered into selling agreements with Distributors 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
Distributors' 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. Distributors will compensate the broker-dealers as provided in the
selling agreements, and JHVLICO will reimburse Distributors for such amounts
and for certain other direct expenses in connection with marketing the
Policies through other broker-dealers.
Distributors 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. Distributors is also the principal underwriter
for John Hancock Variable Series Trust I.
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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.
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 an
increase in Additional Sum Insured, the addition of certain other Policy
benefits after issue, or reinstatement of a lapsed Policy), the Policy will be
subject to a new "7-pay" test, with the possibility of a tax on distributions
if it were subsequently to become a modified endowment. Moreover, if benefits
under a Policy are reduced (such as a reduction in the Total 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.
25
<PAGE>
Federal estate and state and local estate, inheritance and other tax
consequences of ownership or receipt of Policy proceeds depend on the
circumstances of each Owner or beneficiary.
CHARGE FOR 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.
26
<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.
Ronald J. Bocage Director, Vice President 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, JHVLICO; Second Vice President,
John Hancock Mutual Life Insurance Company.
Barbara L. Luddy Director and Acutary 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.
27
<PAGE>
Moreover, confirmations will be furnished to Owners of premium payments,
transfers among Subaccounts, Policy loans, partial withdrawals and certain
other Policy transactions.
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
qualifying variable life insurance policies and variable annuity contracts at
regular and special meetings of the Funds' shareholders in accordance with
instructions received from owners of such policies or contracts. Shares of the
Funds held in the Account which are not attributable to such policies or
contracts 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 such policies and contracts.
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 a 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
28
<PAGE>
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 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 Ronald J. Bocage, Vice President and 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 Deborah
A. Poppel, 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.
29
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Large Cap Sovereign International Small Cap International Mid Cap Large Cap Money Mid Cap
Growth Bond Equities Growth Balanced Growth Value Market Value
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
----------- ---------- ------------- ---------- ------------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Investments in
shares of
portfolios of
John Hancock
Variable Series
Trust I, at
value........... $16,915,393 $5,185,747 $5,731,199 $497,525 $152,295 $838,323 $762,356 $10,038,857 $336,316
Investments in
shares of
portfolios of M
Fund Inc., at
value........... -- -- -- -- -- -- -- -- --
Receivable from:
John Hancock
Variable Series
Trust I........ 20,003 26,025 11,820 8 2 31,811 10 336,601 6
M Fund Inc. -... -- -- -- -- -- -- -- -- --
----------- ---------- ---------- -------- -------- -------- -------- ----------- --------
Total assets..... 16,935,396 5,211,772 5,743,019 497,533 152,297 870,134 762,366 10,375,458 336,322
Liabilities
Payable to John
Hancock Variable
Series Trust I.. 19,803 25,968 11,736 -- -- 31,800 -- 336,451 --
Asset charges
payable......... 200 57 84 8 2 11 10 150 6
----------- ---------- ---------- -------- -------- -------- -------- ----------- --------
Total
liabilities..... 20,003 26,025 11,820 8 2 31,811 10 336,601 6
----------- ---------- ---------- -------- -------- -------- -------- ----------- --------
Net assets....... $16,915,393 $5,185,747 $5,731,199 $497,525 $152,295 $838,323 $762,356 $10,038,857 $336,316
=========== ========== ========== ======== ======== ======== ======== =========== ========
<CAPTION>
Special Real Estate
Opportunities Equity
Subaccount Subaccount
------------- -----------
<S> <C> <C>
Assets
Investments in
shares of
portfolios of
John Hancock
Variable Series
Trust I, at
value........... $6,187,188 $1,279,523
Investments in
shares of
portfolios of M
Fund Inc., at
value........... -- --
Receivable from:
John Hancock
Variable Series
Trust I........ 10,295 4,560
M Fund Inc. -... -- --
------------- -----------
Total assets..... 6,197,483 1,284,083
Liabilities
Payable to John
Hancock Variable
Series Trust I.. 10,196 4,540
Asset charges
payable......... 99 20
------------- -----------
Total
liabilities..... 10,295 4,560
------------- -----------
Net assets....... $6,187,188 $1,279,523
============= ===========
</TABLE>
- - ------
See accompanying notes.
30
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENT OF ASSETS AND LIABILITIES--CONTINUED
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Short-Term Turner Edinburgh
Growth & U.S. Small Cap International Strategic Core International
Income Managed Government Value Opportunities Equity Index Bond Growth Equity
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
----------- ----------- ---------- ---------- ------------- ------------ ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Investments in
shares of
portfolios of
John Hancock
Variable Series
Trust I, at
value........... $25,663,282 $11,517,261 $3,395,242 $341,007 $909,113 $974,307 $258,628 $ -- $ --
Investments in
shares of
portfolios of M
Fund Inc., at
value........... -- -- -- -- -- -- -- 654,753 929,143
Receivable from:
John Hancock
Variable Series
Trust I........ 195,552 4,549 25,689 5 32,559 21,534 19,681 -- --
M Fund Inc. .... -- -- -- -- -- -- -- 9 11,706
----------- ----------- ---------- -------- -------- -------- -------- -------- --------
Total assets..... 25,858,834 11,521,810 3,420,931 341,012 941,672 995,841 278,309 654,762 940,849
Liabilities
Payable to John
Hancock Variable
Series Trust I.. 195,180 4,408 25,661 -- 32,547 21,519 19,677 -- 11,692
Asset charges
payable......... 372 141 28 5 12 15 4 9 14
----------- ----------- ---------- -------- -------- -------- -------- -------- --------
Total
liabilities..... 195,552 4,549 25,689 5 32,559 21,534 19,681 9 11,706
----------- ----------- ---------- -------- -------- -------- -------- -------- --------
Net assets....... $25,663,282 $11,517,261 $3,395,242 $341,007 $909,113 $974,307 $258,628 $654,753 $929,143
=========== =========== ========== ======== ======== ======== ======== ======== ========
<CAPTION>
Frontier
Capital
Appreciation
Subaccount
------------
<S> <C>
Assets
Investments in
shares of
portfolios of
John Hancock
Variable Series
Trust I, at
value........... $ --
Investments in
shares of
portfolios of M
Fund Inc., at
value........... 968,078
Receivable from:
John Hancock
Variable Series
Trust I........ --
M Fund Inc. .... 23,405
------------
Total assets..... 991,483
Liabilities
Payable to John
Hancock Variable
Series Trust I.. 23,391
Asset charges
payable......... 14
------------
Total
liabilities..... 23,405
------------
Net assets....... $968,078
============
</TABLE>
- - ------
See accompanying notes.
31
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Small Cap
Growth
Large Cap Growth Subaccount Sovereign Bond Subaccount International Equities Subaccount Subaccount
------------------------------ ----------------------------- ------------------------------------ ----------
1996 1995 1994 1996 1995 1994 1996 1995 1994 1996*
----------- -------- -------- --------- --------- -------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment
income:
Distribution
received from:
John Hancock
Variable Series
Trust.......... $ 2,452,382 $509,637 $ 39,711 $ 242,881 $ 66,972 $ 7,083 $ 52,188 $ 19,501 $ 11,324 $ 512
M Fund, Inc..... -- -- -- -- -- -- -- -- -- --
----------- -------- -------- --------- --------- -------- ----------- ----------- ----------- --------
Total investment
income.......... 2,452,382 509,637 39,711 242,881 66,972 7,083 52,188 19,501 11,324 512
Expenses:
Mortality and
expense risks.. 49,880 17,330 2,688 14,129 4,148 509 23,132 10,434 2,129 1,547
----------- -------- -------- --------- --------- -------- ----------- ----------- ----------- --------
Net investment
income (loss)... 2,402,502 492,307 37,023 228,752 62,824 6,574 29,056 9,067 9,195 (1,035)
Net realized and
unrealized gain
(loss) on
investments:
Net realized
gains (losses). 444,487 126,908 (37,955) 5,746 21,718 (2,259) 165,730 (25,931) 5,934 (40,018)
Net unrealized
appreciation
(depreciation)
during the
year........... (1,104,574) 180,251 (24,086) (69,973) 34,574 (3,839) 137,729 153,715 (46,936) (2,665)
----------- -------- -------- --------- --------- -------- ----------- ----------- ----------- --------
Net realized and
unrealized gain
(loss) on
investments..... (660,087) 307,159 (62,041) (64,227) 56,292 (6,098) 303,459 127,784 (41,002) (42,683)
----------- -------- -------- --------- --------- -------- ----------- ----------- ----------- --------
Net increase
(decrease) in
net assets
resulting from
operations...... $ 1,742,415 $799,466 $(25,018) $ 164,525 $ 119,116 $ 476 $332,515 $ 136,851 $ (31,807) $(43,718)
=========== ======== ======== ========= ========= ======== =========== =========== =========== ========
<CAPTION>
International Mid Cap Large Cap
Balanced Growth Value
Subaccount Subaccount Subaccount
------------- ---------- ----------
1996* 1996* 1996*
------------- ---------- ----------
<S> <C> <C> <C>
Investment
income:
Distribution
received from:
John Hancock
Variable Series
Trust.......... $2,947 $1,177 $13,644
M Fund, Inc..... -- -- --
------------- ---------- ----------
Total investment
income.......... 2,947 1,177 13,644
Expenses:
Mortality and
expense risks.. 356 719 964
------------- ---------- ----------
Net investment
income (loss)... 2,591 458 12,680
Net realized and
unrealized gain
(loss) on
investments:
Net realized
gains (losses). 56 (391) 1,327
Net unrealized
appreciation
(depreciation)
during the
year........... 5,307 6,440 23,553
------------- ---------- ----------
Net realized and
unrealized gain
(loss) on
investments..... 5,363 6,049 24,880
------------- ---------- ----------
Net increase
(decrease) in
net assets
resulting from
operations...... $7,954 $6,507 $37,560
============= ========== ==========
</TABLE>
*From May 1, 1996 (commencement of operations).
See accompanying notes.
32
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
Mid Cap Special
Value Opportunities
Money Market Subaccount Subaccount Subaccount Real Estate Equity Subaccount
------------------------- ---------- ------------------------ ------------------------------
1996 1995 1994 1996* 1996 1995 1994** 1996 1995 1994
-------- -------- ------- ---------- -------- -------- ------ ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment
income:
Distributions
received from:
John Hancock
Variable Series
Trust.......... $287,321 $119,746 $39,245 $ 6,878 $238,163 $ 40,159 $1,493 $ 50,204 $ 32,578 $ 10,909
M Fund, Inc..... -- -- -- -- -- -- -- -- -- --
-------- -------- ------- ------- -------- -------- ------ ---------- --------- ---------
Total investment
income.......... 287,321 119,746 39,245 6,878 238,163 40,159 1,493 50,204 32,578 10,909
Expenses:
Mortality and
expense risks.. 30,722 12,117 5,184 377 21,146 4,949 607 4,547 2,766 689
-------- -------- ------- ------- -------- -------- ------ ---------- --------- ---------
Net investment
income.......... 256,599 107,629 34,061 6,501 217,017 35,210 886 45,657 29,812 10,220
Net realized and
unrealized gain
(loss) on
investments:
Net realized
gains (losses). -- -- -- 845 317,400 28,812 (117) 19,122 613 (10,840)
Net unrealized
appreciation
(depreciation)
during the
year........... -- -- -- 13,910 344,786 185,349 3,155 191,067 25,077 9,936
-------- -------- ------- ------- -------- -------- ------ ---------- --------- ---------
Net realized and
unrealized gain
(loss) on
investments..... -- -- -- 14,755 662,186 214,161 3,038 210,189 25,690 (904)
-------- -------- ------- ------- -------- -------- ------ ---------- --------- ---------
Net increase
(decrease) in
net assets
resulting from
operations $256,599 $107,629 $34,061 $21,256 $879,203 $249,371 $3,924 $ 255,846 $ 55,502 $ 9,316
======== ======== ======= ======= ======== ======== ====== ========== ========= =========
<CAPTION>
Growth & Income Subaccount
-------------------------------
1996 1995 1994
----------- ---------- --------
<S> <C> <C> <C>
Investment
income:
Distributions
received from:
John Hancock
Variable Series
Trust.......... $3,056,625 $ 669,643 $70,819
M Fund, Inc..... -- -- --
----------- ---------- --------
Total investment
income.......... 3,056,625 669,643 70,819
Expenses:
Mortality and
expense risks.. 89,391 23,428 3,073
----------- ---------- --------
Net investment
income.......... 2,967,234 646,215 67,746
Net realized and
unrealized gain
(loss) on
investments:
Net realized
gains (losses). 512,402 170,322 (1,272)
Net unrealized
appreciation
(depreciation)
during the
year........... (496,647) 322,628 (67,362)
----------- ---------- --------
Net realized and
unrealized gain
(loss) on
investments..... 15,755 492,950 (68,634)
----------- ---------- --------
Net increase
(decrease) in
net assets
resulting from
operations $2,982,989 $1,139,165 $ (888)
=========== ========== ========
</TABLE>
* From May 1, 1996 (commencement of operations).
** From May 6, 1994 (commencement of operations).
See accompanying notes.
33
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
Small Cap International Equity Strategic
Short-Term U.S. Value Opportunities Index Bond
Managed Subaccount Government Subaccount Subaccount Subaccount Subaccount Subaccount
----------------------------- ------------------------ ---------- ------------- ----------- ----------
1996 1995 1994 1996 1995 1994** 1996* 1996* 1996* 1996*
---------- -------- -------- -------- ------- ------ ---------- ------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment
income:
Distributions
received from:
John Hancock
Variable Series
Trust.......... $1,281,149 $316,774 $ 12,985 $181,937 $64,502 $ 331 $ 8,296 $ 2,965 $23,300 $7,425
M Fund, Inc..... -- -- -- -- -- -- -- -- -- --
---------- -------- -------- -------- ------- ----- ------- ------- ------- ------
Total investment
income.......... 1,281,149 316,774 12,985 181,937 64,502 331 8,296 2,965 23,300 7,425
Expenses:
Mortality and
expense risks.. 35,103 10,978 1,318 9,277 2,917 25 523 1,439 1,962 349
---------- -------- -------- -------- ------- ----- ------- ------- ------- ------
Net investment
income (loss)... 1,246,046 305,796 11,667 172,660 61,585 306 7,773 1,526 21,338 7,076
Net realized and
unrealized gain
(loss) on
investments:
Net realized
gains (losses). 124,493 179,131 (4,727) (52,888) 8,251 (1) 58 242 17,398 22
Net unrealized
appreciation
(depreciation)
during the
year........... (507,517) 51,622 (8,296) (7,734) 22,112 (325) 14,046 36,666 55,782 (591)
---------- -------- -------- -------- ------- ----- ------- ------- ------- ------
Net realized and
unrealized gain
(loss) on
investments..... (383,024) 230,753 (13,023) (60,622) 30,363 (326) 14,104 36,908 73,180 (569)
---------- -------- -------- -------- ------- ----- ------- ------- ------- ------
Net increase
(decrease) in
net assets
resulting from
operations...... $ 863,022 $536,549 $ (1,356) $112,038 $91,948 $ (20) $21,877 $38,434 $94,518 $6,507
========== ======== ======== ======== ======= ===== ======= ======= ======= ======
<CAPTION>
Edinburgh Frontier
Turner Core International Capital
Growth Equity Appreciation
Subaccount Subaccount Subaccount
----------- ------------- ------------
1996* 1996* 1996*
----------- ------------- ------------
<S> <C> <C> <C>
Investment
income:
Distributions
received from:
John Hancock
Variable Series
Trust.......... $ -- $ -- $ --
M Fund, Inc..... 21,778 5,263 --
----------- ------------- ------------
Total investment
income.......... 21,778 5,263 --
Expenses:
Mortality and
expense risks.. 2,140 2,280 1,679
----------- ------------- ------------
Net investment
income (loss)... 19,638 2,983 (1,679)
Net realized and
unrealized gain
(loss) on
investments:
Net realized
gains (losses). (9,767) (2,433) (21,044)
Net unrealized
appreciation
(depreciation)
during the
year........... 16,054 (12,286) 5,101
----------- ------------- ------------
Net realized and
unrealized gain
(loss) on
investments..... 6,287 (14,719) (15,943)
----------- ------------- ------------
Net increase
(decrease) in
net assets
resulting from
operations...... $25,925 $(11,736) $(17,622)
=========== ============= ============
</TABLE>
* From May 1, 1996 (commencement of operations).
** From May 1, 1994 (commencement of operations).
See accompanying notes.
34
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Large Cap Growth Subaccount Sovereign Bond Subaccount International Equities Subaccount
------------------------------------- -------------------------------- ------------------------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
----------- ----------- ----------- ---------- ---------- -------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Increase
(decrease) in
net assets from
operations:
Net investment
income (loss).. $ 2,402,502 $ 492,307 $ 37,023 $ 228,752 $ 62,824 $ 6,574 $ 29,056 $ 9,067 $ 9,195
Net realized
gains (losses). 444,487 126,908 (37,955) 5,746 21,718 (2,259) 165,730 (25,931) 5,934
Net unrealized
appreciation
(depreciation)
during the
year........... (1,104,574) 180,251 (24,086) (69,973) 34,574 (3,839) 137,729 153,715 (46,936)
----------- ----------- ----------- ---------- ---------- -------- ----------- ----------- ----------
Net increase
(decrease) in
net assets
resulting from
operations...... 1,742,415 799,466 (25,018) 164,525 119,116 476 332,515 136,851 (31,807)
From policyholder
transactions:
Net premiums
from
policyholders . 13,036,922 8,115,186 2,165,201 4,312,776 1,370,188 279,171 4,750,218 2,620,265 1,223,410
Net benefits to
policyholders.. (4,928,834) (2,752,131) (1,250,017) (679,839) (318,068) (62,598) (1,906,352) (1,194,625) (199,276)
----------- ----------- ----------- ---------- ---------- -------- ----------- ----------- ----------
Net increase in
net assets from
policyholder
transactions.... 8,108,088 5,363,055 915,184 3,632,937 1,052,120 216,573 2,843,866 1,425,640 1,024,134
----------- ----------- ----------- ---------- ---------- -------- ----------- ----------- ----------
Net increase in
net assets...... 9,850,503 6,162,521 890,166 3,797,462 1,171,236 217,049 3,176,381 1,562,491 992,327
Net assets at
beginning of
period.......... 7,064,890 902,369 12,203 1,388,285 217,049 -- 2,554,818 992,327 --
----------- ----------- ----------- ---------- ---------- -------- ----------- ----------- ----------
Net assets at end
of period....... $16,915,393 $ 7,064,890 $ 902,369 $5,185,747 $1,388,285 $217,049 $ 5,731,199 $ 2,554,818 $ 992,327
=========== =========== =========== ========== ========== ======== =========== =========== ==========
<CAPTION>
Small Cap International Mid Cap Large Cap
Growth Balanced Growth Value
Subaccount Subaccount Subaccount Subaccount
----------- ------------- ---------- ----------
1996* 1996* 1996* 1996*
----------- ------------- ---------- ----------
<S> <C> <C> <C> <C>
Increase
(decrease) in
net assets from
operations:
Net investment
income (loss).. $ (1,035) $ 2,591 $ 458 $ 12,680
Net realized
gains (losses). (40,018) 56 (391) 1,327
Net unrealized
appreciation
(depreciation)
during the
year........... (2,665) 5,307 6,400 23,553
----------- ------------- ---------- ----------
Net increase
(decrease) in
net assets
resulting from
operations...... (43,718) 7,954 6,507 37,560
From policyholder
transactions:
Net premiums
from
policyholders . 1,120,880 148,617 858,546 767,660
Net benefits to
policyholders.. (579,637) (4,276) (26,730) (42,864)
----------- ------------- ---------- ----------
Net increase in
net assets from
policyholder
transactions.... 541,243 144,341 831,816 724,796
----------- ------------- ---------- ----------
Net increase in
net assets...... 497,525 152,295 838,323 762,356
Net assets at
beginning of
period.......... -- -- -- --
----------- ------------- ---------- ----------
Net assets at end
of period....... $ 497,525 $152,295 $838,323 $762,356
=========== ============= ========== ==========
</TABLE>
* From May 1, 1996 (commencement of operations).
See accompanying notes.
35
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
Mid Cap
Value
Money Market Subaccount Subaccount Special Opportunities Subaccount
--------------------------------------- ----------- ---------------------------------------
1996 1995 1994 1996* 1996 1995 1994**
------------ ------------ ----------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase
(decrease) in
net assets from
operations:
Net investment
income......... $ 256,599 $ 107,629 $ 34,061 $ 6,501 $ 217,017 $ 35,210 $ 886
Net realized
gains (losses). -- -- -- 845 317,400 28,812 (117)
Net unrealized
appreciation
(depreciation)
during the
year........... -- -- -- 13,910 344,786 185,349 3,155
------------ ------------ ----------- -------- ------------ ----------- ---------
Net increase
(decrease) in
net assets
resulting from
operations...... 256,599 107,629 34,061 21,256 879,203 249,371 3,924
From policyholder
transactions:
Net premiums
from
policyholders.. 36,814,029 19,983,940 7,344,361 324,248 4,939,686 1,639,491 333,168
Net benefits to
policyholders.. (31,658,283) (17,720,190) (5,123,289) (9,188) (1,301,761) (551,692) (4,202)
------------ ------------ ----------- -------- ------------ ----------- ---------
Net increase in
net assets from
policyholder
transactions.... 5,155,746 2,263,750 2,221,072 315,060 3,637,925 1,087,799 328,966
------------ ------------ ----------- -------- ------------ ----------- ---------
Net increase in
net assets...... 5,412,345 2,371,379 2,255,133 336,316 4,517,128 1,337,170 332,890
Net assets at
beginning of
period.......... 4,626,512 2,255,133 -- -- 1,670,060 332,890 --
------------ ------------ ----------- -------- ------------ ----------- ---------
Net assets at end
of period....... $ 10,038,857 $ 4,626,512 $ 2,255,133 $336,316 $ 6,187,188 $ 1,670,060 $ 332,890
============ ============ =========== ======== ============ =========== =========
<CAPTION>
Real Estate Equity Subaccount Growth & Income Subaccount
--------------------------------- ------------------------------------
1996 1995 1994 1996 1995 1994
----------- ---------- ---------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase
(decrease) in
net assets from
operations:
Net investment
income......... $ 45,657 $ 29,812 $ 10,220 $ 2,967,234 $ 646,215 $ 67,746
Net realized
gains (losses). 19,122 613 (10,840) 512,402 170,322 (1,272)
Net unrealized
appreciation
(depreciation)
during the
year........... 191,067 25,077 9,936 (496,647) 322,628 (67,362)
----------- ---------- ---------- ------------ ----------- -----------
Net increase
(decrease) in
net assets
resulting from
operations...... 255,846 55,502 9,316 2,982,989 1,139,165 (888)
From policyholder
transactions:
Net premiums
from
policyholders.. 748,683 466,306 525,631 19,263,021 8,168,426 1,606,781
Net benefits to
policyholders.. (295,788) (370,910) (115,063) (5,502,524) (1,740,418) (253,270)
----------- ---------- ---------- ------------ ----------- -----------
Net increase in
net assets from
policyholder
transactions.... 452,895 95,396 410,568 13,760,497 6,428,008 1,353,511
----------- ---------- ---------- ------------ ----------- -----------
Net increase in
net assets...... 708,741 150,898 419,884 16,743,486 7,567,173 1,352,623
Net assets at
beginning of
period.......... 570,782 419,884 -- 8,919,796 1,352,623 --
----------- ---------- ---------- ------------ ----------- -----------
Net assets at end
of period....... $1,279,523 $ 570,782 $ 419,884 $25,663,282 $8,919,796 $1,352,623
=========== ========== ========== ============ =========== ===========
</TABLE>
* From May 1, 1996 (commencement of operations).
** From May 6, 1994 (commencement of operations).
See accompanying notes.
36
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
Small Cap International Equity
Short-Term U.S. Value Opportunities Index
Managed Subaccount Government Subaccount Subaccount Subaccount Subaccount
----------------------------------- -------------------------------- ---------- ------------- ----------
1996 1995 1994 1996 1995 1994** 1996* 1996* 1996*
----------- ----------- --------- ----------- ---------- ------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Increase
(decrease) in
net assets from
operations:
Net investment
income (loss).. $ 1,246,046 $ 305,796 $ 11,667 $ 172,660 $ 61,585 $ 306 $ 7,773 $ 1,526 $ 21,338
Net realized
gains (losses). 124,493 179,131 (4,727) (52,888) 8,251 (1) 58 242 17,398
Net unrealized
appreciation
(depreciation)
during the
year........... (507,517) 51,622 (8,296) (7,734) 22,112 (325) 14,046 36,666 55,782
----------- ----------- --------- ----------- ---------- ------- -------- -------- ----------
Net increase
(decrease) in
net assets
resulting from
operations...... 863,022 536,549 (1,356) 112,038 91,948 (20) 21,877 38,434 94,518
From policyholder
transactions:
Net premiums
from
policyholders.. 9,996,216 5,502,408 859,794 8,757,242 2,439,840 41,816 335,271 960,081 1,282,798
Net benefits to
policyholders.. (3,151,700) (2,875,967) (211,705) (7,683,085) (364,204) (333) (16,141) (89,402) (403,009)
----------- ----------- --------- ----------- ---------- ------- -------- -------- ----------
Net increase in
net assets from
policyholder
transactions.... 6,844,516 2,626,441 648,089 1,074,157 2,075,636 41,483 319,130 870,679 879,789
----------- ----------- --------- ----------- ---------- ------- -------- -------- ----------
Net increase in
net assets...... 7,707,538 3,162,990 646,733 1,186,195 2,167,584 41,463 341,007 909,113 974,307
Net assets at
beginning of
period.......... 3,809,723 646,733 -- 2,209,047 41,463 -- -- -- --
----------- ----------- --------- ----------- ---------- ------- -------- -------- ----------
Net assets at end
of period....... $11,517,261 $ 3,809,723 $ 646,733 $ 3,395,242 $2,209,047 $41,463 $341,007 $909,113 $ 974,307
=========== =========== ========= =========== ========== ======= ======== ======== ==========
<CAPTION>
Turner Edinburgh Frontier
Strategic Core International Capital
Bond Growth Equity Appreciation
Subaccount Subaccount Subaccount Subaccount
---------- ----------- ------------- ------------
1996* 1996* 1996* 1996*
---------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
Increase
(decrease) in
net assets from
operations:
Net investment
income (loss).. $ 7,076 $ 19,638 $ 2,983 $ (1,679)
Net realized
gains (losses). 22 (9,767) (2,433) (21,044)
Net unrealized
appreciation
(depreciation)
during the
year........... (591) 16,054 (12,286) 5,101
---------- ----------- ------------- ------------
Net increase
(decrease) in
net assets
resulting from
operations...... 6,507 25,925 (11,736) (17,622)
From policyholder
transactions:
Net premiums
from
policyholders.. 259,231 1,135,180 1,021,041 1,535,063
Net benefits to
policyholders.. (7,110) (506,352) (80,162) (549,363)
---------- ----------- ------------- ------------
Net increase in
net assets from
policyholder
transactions.... 252,121 628,828 940,879 985,700
---------- ----------- ------------- ------------
Net increase in
net assets...... 258,628 654,753 929,143 968,078
Net assets at
beginning of
period.......... -- -- -- --
---------- ----------- ------------- ------------
Net assets at end
of period....... $258,628 $ 654,753 $ 929,143 $ 968,078
========== =========== ============= ============
</TABLE>
* From May 1, 1996 (commencement of operations).
** From May 1, 1994 (commencement of operations).
See accompanying notes.
37
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. ORGANIZATION
John Hancock Variable Life Account S (the Account) is a separate investment
account of John Hancock Variable Life Insurance Company (JHVLICO), a wholly-
owned subsidiary of John Hancock Mutual Life Insurance Company (John Hancock).
The Account was formed to fund variable life insurance policies (Policies)
issued by JHVLICO. The Account is operated as a unit investment trust
registered under the Investment Company Act of 1940, as amended, and currently
consists of twenty-one subaccounts. The assets of each subaccount are invested
exclusively in shares of a corresponding Portfolio of John Hancock Variable
Series Trust I (the Fund) or of M Fund, Inc. (M Fund). New subaccounts may be
added as new Portfolios are added to the Fund or to M Fund, or as other
investment options are developed, and made available to policyholders. The
twenty-one Portfolios of the Fund and of M Fund which are currently available
are the Large Cap Growth, Sovereign Bond, International Equities, Small Cap
Growth, International Balanced, Mid Cap Growth, Large Cap Value, Money Market,
Mid Cap Value, Special Opportunities, Real Estate Equity, Growth & Income,
Managed, Short-Term U.S. Government, Small Cap Value, International
Opportunities, Equity Index, Strategic Bond, Turner Core Growth, Edinburgh
International Equity and Frontier Capital Appreciation Portfolios. Each
Portfolio has a different investment objective.
The net assets of the Account may not be less than the amount required under
state insurance law to provide for death benefits (without regard to the
minimum death benefit guarantee) and other policy benefits. Additional assets
are held in JHVLICO's general account to cover the contingency that the
guaranteed minimum death benefit might exceed the death benefit which would
have been payable in the absence of such guarantee.
The assets of the Account are the property of JHVLICO. The portion of the
Account's assets applicable to the policies may not be charged with
liabilities arising out of any other business JHVLICO may conduct.
2. SIGNIFICANT ACCOUNTING POLICIES
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
VALUATION OF INVESTMENTS
Investment in shares of the Fund and of M Fund are valued at the reported
net asset values of the respective Portfolios. Investment transactions are
recorded on the trade date. Dividend income is recognized on the ex-dividend
date. Realized gains and losses on sales of 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
38
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
NOTES TO FINANCIAL STATEMENTS--CONTINUED
2. SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
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.
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, 1996, 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.
39
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
NOTES TO FINANCIAL STATEMENTS--CONTINUED
4. DETAILS OF INVESTMENTS
The details of the shares owned and cost and value of investments in the
Portfolios of the Fund and of M Fund at December 31, 1996 were as follows:
<TABLE>
<CAPTION>
Shares
Portfolio Owned Cost Value
- - --------- ------ ---- -----
<S> <C> <C> <C>
Large Cap Growth............................. 967,051 $17,864,249 $16,915,393
Sovereign Bond............................... 530,744 5,224,985 5,185,747
International Equities....................... 340,514 5,486,692 5,731,199
Small Cap Growth............................. 50,081 500,190 497,525
International Balanced....................... 14,654 146,989 152,295
Mid Cap Growth............................... 82,009 831,883 838,323
Large Cap Value.............................. 68,746 738,803 762,356
Money Market................................. 1,003,886 10,038,857 10,038,857
Mid Cap Value................................ 29,635 322,406 336,316
Special Opportunities........................ 374,484 5,653,898 6,187,188
Real Estate Equity........................... 87,427 1,053,443 1,279,523
Growth & Income.............................. 1,751,234 25,904,663 25,663,282
Managed...................................... 862,567 11,981,412 11,517,261
Short-Term U.S. Government................... 337,936 3,381,189 3,395,242
Small Cap Value.............................. 31,780 326,961 341,007
International Opportunities.................. 85,789 872,447 909,113
Equity Index................................. 87,799 918,525 974,307
Strategic Bond............................... 25,460 259,219 258,628
Turner Core Growth........................... 56,444 638,699 654,753
Edinburgh International Equity............... 94,043 941,429 929,143
Frontier Capital Appreciation................ 77,323 962,978 968,078
</TABLE>
40
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
NOTES TO FINANCIAL STATEMENTS--CONTINUED
4. DETAILS OF INVESTMENTS--CONTINUED
Purchases, including reinvestment of dividend distributions and proceeds
from sales of shares in the Portfolios of the Fund and of M Fund for the
period ended December 31, 1996, were as follows:
<TABLE>
<CAPTION>
Portfolio Purchases Sales
- - --------- --------- -----
<S> <C> <C>
Large Cap Growth....................................... $13,801,918 $ 3,291,328
Sovereign Bond......................................... 4,228,908 367,218
International Equities................................. 4,596,976 1,724,053
Small Cap Growth....................................... 1,088,331 548,123
International Balanced................................. 149,257 2,270
Mid Cap Growth......................................... 853,272 20,998
Large Cap Value........................................ 764,170 26,694
Money Market........................................... 20,675,470 15,263,124
Mid Cap Value.......................................... 330,711 9,150
Special Opportunities.................................. 5,044,400 1,189,458
Real Estate Equity..................................... 650,379 151,826
Growth & Income........................................ 19,938,274 3,210,534
Managed................................................ 9,970,006 1,888,444
Short-Term U.S. Government............................. 4,417,686 3,170,870
Small Cap Value........................................ 342,052 15,149
International Opportunities............................ 948,368 76,163
Equity Index........................................... 1,295,138 394,011
Strategic Bond......................................... 265,544 6,347
Turner Core Growth..................................... 928,008 279,542
Edinburgh International Equity......................... 1,129,122 185,260
Frontier Capital Appreciation.......................... 1,259,852 275,830
</TABLE>
41
<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
Large Cap Growth, Sovereign Bond, International Equities, Small Cap Growth,
International Balanced, Mid Cap Growth, Large Cap Value, Money Market, Mid Cap
Value, Special Opportunities, Real Estate Equity, Growth & Income, Managed,
Short-Term U.S. Government, Small Cap Value, International Opportunities,
Equity Index, Strategic Bond, Turner Core Growth, Edinburgh International
Equity and Frontier Capital Appreciation Subaccounts) as of December 31, 1996,
and the related statements of operations and changes in net assets for each of
the periods indicated therein. These financial statements are the
responsibility of the Account's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with 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,
1996, 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 7, 1997
42
<PAGE>
Board of Directors
John Hancock Variable Life Insurance Company
We have audited the accompanying statutory-basis statements of financial
position of John Hancock Variable Life Insurance Company as of December 31,
1996 and 1995, and the related statutory-basis statements of operations and
unassigned deficit and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
As described in Note 1 to the financial statements, the Company presents its
financial statements in conformity with accounting practices prescribed or
permitted by the Commonwealth of Massachusetts Division of Insurance, which
practices differ from generally accepted accounting principles. The variances
between such practices and generally accepted accounting principles also are
described in Note 1. The effects on the financial statements of these
variances are not reasonably determinable but are presumed to be material.
In our report dated February 7, 1996, we expressed an opinion that the 1995
financial statements of the Company fairly present, in all material respects,
the Company's financial position, results of operations, and cash flows 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. As described in Note 1, the accompanying
statutory-basis financial statements are no longer considered to be prepared
in conformity with generally accepted accounting principles. Accordingly, our
present opinion on the 1995 financial statements, as presented in the
following paragraph, is different from that expressed in our previous report.
In our opinion, because of the effects of the matter described in the second
preceding paragraph, the financial statements referred to above do not present
fairly, in conformity with generally accepted accounting principles, the
financial position of John Hancock Variable Life Insurance Company at December
31, 1996 and 1995, or the results of its operations or its cash flows for the
years then ended.
Also, in our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of John Hancock
Variable Life Insurance Company at December 31, 1996 and 1995, and the results
of its operations and its cash flows for the years then ended in conformity
with accounting practices prescribed or permitted by the Commonwealth of
Massachusetts Division of Insurance.
Ernst & Young LLP
Boston, Massachusetts
February 14, 1997
43
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
December 31
------------------
1996 1995
---- ----
(In millions)
<S> <C> <C>
Assets
Bonds--Note 7.............................................. $ 753.5 $ 552.8
Preferred stocks........................................... 9.6 5.0
Common stocks.............................................. 1.4 1.7
Investment in affiliates................................... 72.0 65.3
Mortgage loans on real estate--Note 7...................... 212.1 146.7
Real estate................................................ 38.8 36.4
Policy loans............................................... 80.8 61.8
Cash items:
Cash in banks............................................ 26.7 11.6
Temporary cash investments............................... 5.2 65.0
-------- --------
31.9 76.6
Premiums due and deferred.................................. 36.8 39.6
Investment income due and accrued.......................... 22.6 18.6
Other general account assets............................... 17.8 20.8
Assets held in separate accounts........................... 3,290.5 2,421.0
-------- --------
TOTAL ASSETS............................................... $4,567.8 $3,446.3
======== ========
Obligations and Stockholder's Equity
OBLIGATIONS
Policy reserves.......................................... $ 877.8 $ 612.3
Federal income and other taxes payable--Note 1........... 29.4 14.2
Other accrued expenses................................... 75.1 138.7
Asset valuation reserve--Note 1.......................... 16.6 15.4
Obligations related to separate accounts................. 3,285.8 2,417.0
-------- --------
TOTAL OBLIGATIONS.......................................... 4,284.7 3,197.6
Stockholder's Equity--Notes 2 and 6
Common Stock, $50 par value; authorized 50,000 shares;
issued and
outstanding 50,000 shares............................... 2.5 2.5
Paid-in capital.......................................... 377.5 377.5
Unassigned deficit......................................... (96.9) (131.3)
-------- --------
TOTAL STOCKHOLDER'S EQUITY................................. 283.1 248.7
-------- --------
TOTAL OBLIGATIONS AND STOCKHOLDER'S EQUITY................. $4,567.8 $3,446.3
======== ========
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
44
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF OPERATIONS AND UNASSIGNED DEFICIT
<TABLE>
<CAPTION>
Year ended December 31
------------------------
1996 1995
---- ----
(In millions)
<S> <C> <C>
Income
Premiums............................................ $ 820.6 $ 570.9
Net investment income--Note 4....................... 76.1 62.1
Other, net.......................................... 406.0 85.7
----------- ----------
1,302.7 718.7
Benefits and Expenses
Payments to policyholders and beneficiaries......... 236.1 213.4
Additions to reserves to provide for future payments
to policyholders and beneficiaries................. 790.1 282.4
Expenses of providing service to policyholders and
obtaining new insurance--Note 6.................... 183.8 150.7
State and miscellaneous taxes....................... 17.3 12.7
----------- ----------
1,227.3 659.2
----------- ----------
GAIN FROM OPERATIONS BEFORE FEDERAL INCOME TAXES
AND NET REALIZED CAPITAL GAINS (LOSSES).......... 75.4 59.5
Federal income taxes--Note 1.......................... 38.6 28.4
----------- ----------
GAIN FROM OPERATIONS BEFORE NET REALIZED CAPITAL
GAINS (LOSSES)................................... 36.8 31.1
Net realized capital gains (losses)--Note 5........... (1.5) 0.5
----------- ----------
NET INCOME........................................ 35.3 31.6
Unassigned deficit at beginning of year............... (131.3) (162.1)
Net unrealized capital gains (losses) and other ad-
justments--Note 5.................................... 2.5 (3.0)
Other reserves and adjustments........................ (3.4) 2.2
----------- ----------
UNASSIGNED DEFICIT AT END OF YEAR................. $ (96.9) $ (131.3)
=========== ==========
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
45
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31
----------------------
1996 1995
---- ----
(In millions)
<S> <C> <C>
Cash flows from operating activities:
Insurance premiums................................. $ 824.2 $ 574.0
Net investment income.............................. 73.4 59.2
Benefits to policyholders and beneficiaries........ (212.7) (198.3)
Dividends paid to policyholders.................... (15.7) (13.2)
Insurance expenses and taxes....................... (196.6) (161.5)
Net transfers to separate accounts................. (524.2) (257.4)
Other, net......................................... 386.7 55.1
----------- -----------
NET CASH PROVIDED FROM OPERATIONS.............. 335.1 57.9
----------- -----------
Cash flows used in investing activities:
Bond purchases..................................... (489.9) (172.5)
Bond sales......................................... 228.3 18.9
Bond maturities and scheduled redemptions.......... 27.8 36.0
Bond prepayments................................... 31.9 20.6
Stock purchases.................................... (6.5) (1.7)
Proceeds from stock sales.......................... 0.4 1.4
Real estate purchases.............................. (10.5) (16.2)
Real estate sales.................................. 8.5 9.3
Other invested assets purchases.................... 0.0 (0.4)
Proceeds from the sale of other invested assets.... 1.5 0.3
Mortgage loans issued.............................. (84.4) (19.8)
Mortgage loan repayments........................... 17.7 21.1
Other, net......................................... (104.6) 45.7
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES.......... (379.8) (57.3)
----------- -----------
INCREASE (DECREASE) IN CASH AND TEMPORARY CASH IN-
VESTMENTS........................................... (44.7) 0.6
Cash and temporary cash investments at beginning of
year................................................ 76.6 76.0
----------- -----------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF YEAR... $ 31.9 $ 76.6
=========== ===========
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
46
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES
John Hancock Variable Life Insurance Company (the Company) is a wholly-owned
subsidiary of John Hancock Mutual Life Insurance Company (John Hancock). The
Company, domiciled in the Commonwealth of Massachusetts, principally writes
variable and universal life insurance policies. Those policies primarily are
marketed through John Hancock's sales organization, which includes a career
agency system composed of company-owned, unionized branch offices and
independent general agencies. Policies also are sold through various
unaffiliated securities broker-dealers and certain other financial
institutions. Currently, the Company writes business in all states except New
York.
The preparation of the financial statements requires management to make
estimates and assumptions that affect amounts reported in the financial
statements and accompanying notes. Such estimates and assumptions could change
in the future as more information becomes known, which could impact the
amounts reported and disclosed herein.
Basis of Presentation: The financial statements have been prepared using
accounting practices prescribed or permitted by the Commonwealth of
Massachusetts Division of Insurance and in conformity with the practices of
the National Association of Insurance Commissioners (NAIC), which practices
differ from generally accepted accounting principles (GAAP). The 1995
financial statements presented for comparative purposes were previously
described as being prepared in accordance with GAAP for stock life insurance
companies wholly-owned by a mutual life insurance company. Pursuant to
Financial Accounting Standards Board Interpretation 40, "Applicability of
Generally Accepted Accounting Principles to Mutual Life Insurance and Other
Enterprises" (FIN 40), as amended, which is effective for 1996 financial
statements, financial statements based on statutory accounting practices can
no longer be described as prepared in conformity with GAAP. Furthermore,
financial statements prepared in conformity with statutory accounting
practices for periods prior to the effective date of FIN 40 are not considered
GAAP presentations when presented in comparative form with financial
statements for periods subsequent to the effective date. Accordingly, the 1995
financial statements are no longer considered to be presented in conformity
with GAAP.
The significant differences from GAAP include: (1) policy acquisition costs
are charged to expense as incurred rather than deferred and amortized over the
related premium-paying period; (2) policy reserves are based on statutory
mortality, morbidity, and interest requirements without consideration of
withdrawals and Company experience; (3) certain assets designated as
"nonadmitted assets" are excluded from the balance sheet by direct charges to
surplus; (4) reinsurance recoverables are netted against reserves and claim
liabilities rather than reflected as an asset; (5) bonds held as available for
sale are recorded at amortized cost or market value as determined by the NAIC
rather than at fair value; (6) an Asset Valuation Reserve and Interest
Maintenance Reserve as prescribed by the NAIC are not calculated under GAAP.
Under GAAP, realized capital gains and losses are reported in the income
statement on a pretax basis as incurred and investment valuation allowances
are provided when there has been a decline in value deemed other than
temporary; (7) investments in affiliates are carried at their net equity value
with changes in value being recorded directly to unassigned deficit rather
than consolidated in the financial statements; and (8) no provision is made
for the deferred income tax effects of temporary differences between book and
tax basis reporting. The effects of the foregoing variances from GAAP have not
been determined but are presumed to be material.
47
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
The significant accounting practices of the Company are as follows:
Pending Statutory Standards: The NAIC currently is in the process of
recodifying statutory accounting practices, the result of which is expected to
constitute the only source of prescribed statutory accounting practices.
Accordingly, that project, which is expected to be completed in 1999 will
likely change, to some extent, prescribed statutory accounting practices, and
may result in changes to the accounting practices that the Company uses to
prepare its statutory-basis financial statements. The impact of any such
changes on the Company's unassigned deficit cannot be determined at this time
and could be material.
Revenues and Expenses: Premium revenues are recognized over the premium-paying
period of the policies whereas expenses, including the acquisition costs of
new business, are charged to operations as incurred and policyholder dividends
are provided as paid or accrued.
Cash and Temporary Cash Investments: Cash includes currency on hand and demand
deposits with financial institutions. Temporary cash investments are short-
term, highly-liquid investments both readily convertible to known amounts of
cash and so near maturity that there is insignificant risk of changes in value
because of changes in interest rates.
Valuation of Assets: General account investments are carried at amounts
determined on the following bases:
Bond and stock values are carried as prescribed by the NAIC; bonds
generally at amortized amounts or cost, preferred stocks generally at cost
and common stocks at 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. Accumulated depreciation amounted to $1.2 million in 1996 and $0.5
million in 1995.
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,
48
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
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, 1996, the IMR, net of 1996 amortization of $1.2 million, amounted to $5.9
million, which is included in policy reserves. The corresponding 1995 amounts
were $1.2 million and $6.9 million, respectively.
Separate Accounts: Separate account assets and liabilities reported in the
accompanying statements of financial position represent funds that are
separately administered and for which the contractholder, rather than the
Company, generally bears the investment risk. Separate account contractholders
have no claim against the assets of the general account of the Company.
Separate account assets are reported at market value. The operations of the
separate accounts are not included in the summary of operations; however,
income earned on amounts initially invested by the Company in the formation of
new separate accounts is included in other income.
Fair Values of Financial Instruments: Statement of Financial Accounting
Standards (SFAS) No. 107, "Disclosure about Fair Value of Financial
Instruments," requires disclosure of fair value information about financial
instruments, whether or not recognized in the statement of financial position,
for which it is practicable to estimate the value. In situations where quoted
market prices are not available, fair values are based on estimates using
present value or other valuation techniques. SFAS No. 107 excludes certain
financial instruments and all nonfinancial instruments from its disclosure
requirements. Therefore, the aggregate fair value amounts presented do not
represent the underlying value of the Company.
The methods and assumptions utilized by the Company in estimating its fair
value disclosures for financial instruments are as follows:
The carrying amounts reported in the statement of financial position for
cash and temporary cash investments approximate their fair values.
Fair values for public bonds are obtained from an independent pricing
service. Fair values for private placement securities and publicly traded
bonds not provided by the independent pricing service are estimated by the
Company by discounting expected future cash flows using current market
rates applicable to the yield, credit quality and maturity of the
investments. The fair values for common and preferred stocks, other than
its subsidiary investments, which are carried at equity values, are based
on quoted market prices.
The fair value of interest rate swaps and currency rate swaps is estimated
using a discounted cash flow method adjusted for the difference between the
rate of the existing swap and the current swap market rate. Discounted cash
flows in foreign currencies are converted to U.S. dollars using current
exchange rates.
The fair value for mortgage loans is estimated using discounted cash flow
analyses using interest rates adjusted to reflect the credit
characteristics of the underlying loans. Mortgage loans with similar
characteristics and credit risks are aggregated into qualitative categories
for purposes of the fair value calculations.
The carrying amount in the statement of financial position for policy loans
approximates their fair value.
The fair value for outstanding commitments to purchase long-term bonds and
issue real estate mortgages is estimated using a discounted cash flow
method incorporating adjustments for the difference in the level of
interest rates between the dates the commitments were made and December 31,
1996. The fair value for commitments to purchase real estate approximates
the amount of the initial commitment.
49
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
Capital Gains and Losses: Realized capital gains and losses are determined
using the specific identification basis. Realized capital gains and losses,
net of taxes and amounts transferred to the IMR, are included in net gain or
loss. Unrealized gains and losses, which consist of market value and book
value adjustments, are shown as adjustments to the unassigned deficit.
Policy Reserves: Life reserves are developed by actuarial methods and are
determined based on published tables using statutorily specified interest
rates and valuation methods that will provide, in the aggregate, reserves that
are greater than or equal to the minimum or guaranteed policy cash values or
the amounts required by the Commonwealth of Massachusetts Division of
Insurance. Reserves for variable life insurance policies are maintained
principally on the modified preliminary term method using the 1958 and 1980
Commissioner's Standard Ordinary (CSO) mortality tables, with an assumed
interest rate of 4% for policies issued prior to May 1, 1983 and 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 and 1996.
Federal Income Taxes: Federal income taxes are reported in the financial
statements based on amounts determined to be payable as a result of operations
within the current accounting period. The operations of the Company are
consolidated with John Hancock in filing a consolidated federal income tax
return for the affiliated group. The federal income taxes of the Company are
allocated on a separate return basis with certain adjustments. The Company
made payments of $33.5 million in 1996 and $32.2 million in 1995.
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 temporary differences that may exist
between financial reporting and taxable income or loss.
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 1995 amounts have been reclassified to permit
comparison with the corresponding 1996 amounts.
50
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
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, 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 each of 1996 and 1995.
Unamortized goodwill at December 31, 1996 was $15.2 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>
1996 1995
---- ----
(In millions)
<S> <C> <C>
Investment expenses............................................... $ 7.0 $ 5.1
Depreciation expense.............................................. 0.9 1.0
Investment taxes.................................................. 0.5 0.5
------ ------
$ 8.4 $ 6.6
====== ======
</TABLE>
51
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 5--NET CAPITAL GAINS (LOSSES) AND OTHER ADJUSTMENTS
Net realized capital gains (losses) consist of the following items:
<TABLE>
<CAPTION>
1996 1995
---- ----
(In millions)
<S> <C> <C>
Net gains (losses) from asset sales............................. $ (0.2) $ 4.0
Capital gains tax............................................... (1.0) (2.5)
Net capital gains transferred to IMR............................ (0.3) (1.0)
------ ------
Realized Capital Gains (Losses)............................... $ (1.5) $ 0.5
====== ======
</TABLE>
Net unrealized capital gains (losses) and other adjustments consist of the
following items:
<TABLE>
<CAPTION>
1996 1995
---- ----
(In millions)
<S> <C> <C>
Net gains (losses) from changes in security values and book
value adjustments.............................................. $ 3.7 $ (0.2)
Increase in asset valuation reserve............................. (1.2) (2.8)
------ ------
Net Unrealized Capital Gains (Losses) and Other Adjustments... $ 2.5 $ (3.0)
====== ======
</TABLE>
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 1996 and 1995 to reflect continuing changes
in the Company's operations. The amount of the service fee charged to the
Company was $111.7 million and $97.9 million in 1996 and 1995, 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 $1.6 million and
$1.8 million in 1996 and 1995, 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 1996, 1995 and 1994 issues of
flexible premium variable life insurance and scheduled premium variable life
insurance policies. In connection with this agreement, John Hancock
transferred $24.5 million and $32.7 million of cash for tax, commission, and
expense allowances to the Company, which increased the Company's net gain from
operations by $15.7 million and $20.3 million in 1996 and 1995, respectively.
Effective January 1, 1996, the Company entered into a modified coinsurance
agreement with John Hancock to reinsure 50% of 1995 and 1996 issues of retail
annuity contracts (Independence Preferred and Declaration). In connection with
this agreement, John Hancock transferred $23.2 million of cash for surrender
benefits, tax, reserve increase, commission, expense allowances and premium to
the Company, which increased the Company's net gain from operations by $15.1
million in 1996.
52
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
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, 1996 Value Gains Losses Value
---------------------------- --------- ---------- ---------- -----
(In millions)
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations
of U.S. government corporations and
agencies............................... $ 44.4 $ 0.2 $0.2 $ 44.4
Obligations of states and political sub-
divisions.............................. 12.6 0.4 0.0 13.0
Debt securities issued by foreign gov-
ernments............................... 0.8 0.1 0.0 0.9
Corporate securities.................... 623.2 29.8 3.4 649.6
Mortgage-backed securities.............. 72.5 10.2 0.1 82.6
------ ----- ---- ------
Total bonds........................... $753.5 $40.7 $3.7 $790.5
====== ===== ==== ======
<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 sub-
divisions.............................. 11.4 1.1 0.0 12.5
Debt securities issued by foreign gov-
ernments............................... 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
------ ----- ---- ------
Total bonds............................. $552.8 $46.2 $1.7 $597.3
====== ===== ==== ======
</TABLE>
The statement value and fair value of bonds at December 31, 1996, 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....................................... $ 51.6 $ 52.9
Due after one year through five years......................... 260.8 267.7
Due after five years through ten years........................ 244.3 253.7
Due after ten years........................................... 124.3 133.6
------ ------
681.0 707.9
Mortgage-backed securities.................................... 72.5 82.6
------ ------
$753.5 $790.5
====== ======
</TABLE>
53
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 7--INVESTMENTS--CONTINUED
Proceeds from sales of bonds during 1996 and 1995 were $228.3 million and
$18.9 million, respectively. Gross gains of $1.3 million in 1996 and $0.2
million in 1995 and gross losses of $2.1 million in 1996 and $0.1 million in
1995 were realized on these transactions.
The cost of common stocks was $0.0 million and $0.1 million at December 31,
1996 and 1995, respectively. Gross unrealized appreciation on common stocks
totaled $1.4 million, and gross unrealized depreciation totaled $0.0 million
at December 31, 1996. The fair value of preferred stock totaled $9.6 million
at December 31, 1996 and $5.2 million at December 31, 1995.
Bonds with amortized cost of $11.3 million were nonincome producing for the
twelve months ended December 31, 1996.
At December 31, 1996, 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.............. $ 96.0
Industrial.............. 35.0
Office buildings........ 11.3
Retail.................. 29.0
Agricultural............ 28.9
Other................... 11.9
------
$212.1
======
</TABLE>
<TABLE>
<CAPTION>
Geographic Statement
Concentration Value
------------- ---------
(In millions)
<S> <C>
East North Central...... $ 31.1
Middle Atlantic......... 11.5
Mountain................ 7.6
New England............. 27.6
Pacific................. 49.9
South Atlantic.......... 58.8
West South Central...... 25.6
------
$212.1
======
</TABLE>
At December 31, 1996, the fair values of the commercial and agricultural
mortgage loans portfolios were $189.0 million and $30.4 million, respectively.
The corresponding amounts as of December 31, 1995 were approximately $132.1
million and $22.2 million, respectively.
The maximum and minimum lending rates for mortgage loans during 1996 were
8.69% and 7.04% for agricultural loans and 8.5% and 7.2% for other properties.
Generally, the maximum percentage of any loan to the value of security at the
time of the loan, exclusive of insured or guaranteed or purchase money
mortgages, is 75%. For city mortgages, fire insurance is carried on all
commercial and residential properties at least equal to the excess of the loan
over the maximum loan which would be permitted by law on the land without the
building, except as permitted by regulations of the Federal Housing Commission
on loans fully insured under the provisions of the National Housing Act. For
agricultural mortgage loans, fire insurance is not normally required on land
based loans except in those instances where a building is critical to the
farming operation. Fire insurance is required on all agri-business facilities
in an aggregate amount equal to the loan balance.
54
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
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 1996 were $384.3 million, $9.9 million, and $12.1 million,
respectively. The corresponding amounts in 1995 were $72.4 million, $8.7
million, and $12.1 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--FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Company enters into interest rate swap contracts for the purpose of
converting the interest rate characteristics (fixed or variable) of certain
investments to match those of related insurance liabilities. Maturities of
current agreements range through 2011. These swaps involve, to varying
degrees, interest rate risk in excess of amounts recognized in the statement
of financial position.
The Company enters into currency rate swap agreements to manage exposure to
foreign exchange rate fluctuations. Maturities of current agreements range
through 2006. Should the counterparty fail to meet the terms of the contract,
the Company's market risk is limited to the currency rate differential.
The Company enters into interest rate cap contracts to manage exposure on
underlying security values due to a rise in interest rates. Maturities of
current agreements range through 2006.
The Company also uses financial futures contracts to hedge public bonds
intended for future sale in order to lock in the market value at the date of
contract. The Company is subject to the risks associated with changes in the
value of the underlying securities; however, such changes in value generally
are offset by changes in the value of the hedged items. The contract or
notional amounts of the contracts represent the extent of the Company's
involvement but not in the future cash requirements, as the Company intends to
close the open positions prior to settlement.
The contract or notional amount of the foregoing financial instruments, which
indicates the Company's involvement and in certain instances, maximum credit
risk related to those instruments, is as follows:
<TABLE>
<CAPTION>
December 31
-------------
1996 1995
---- ----
(In millions)
<S> <C> <C>
Futures contracts to sell securities............................ $ 73.0 $ 0.0
======= =====
Notional amount of interest rate swaps, currency rate swaps, and
interest rate caps to:
Receive variable rates........................................ $ 215.9 $ 0.0
======= =====
Receive fixed rates........................................... $ 26.6 $ 5.0
======= =====
</TABLE>
55
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 9--FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK--CONTINUED
The Company continually monitors its positions and the credit ratings of the
counterparties to these financial instruments. The Company believes the risk
of incurring losses due to the nonperformance by its counterparties is remote
and that any such losses would be immaterial.
Based on the market rates in effect at December 31, 1996, the Company's
interest rate swaps, currency rate swaps and interest rate caps represented
(assets) liabilities to the Company with fair values of $2.3 million, $(8.2)
million and $(2.0) million, respectively. The corresponding amounts as of
December 31, 1995 were $0.0 million.
NOTE 10--POLICYHOLDERS' RESERVES AND BENEFICIARIES' FUND
The Company's annuity reserves and deposit fund liabilities that are subject
to discretionary withdrawal and subject to discretionary withdrawal (without
adjustment) are summarized as follows:
<TABLE>
<CAPTION>
December 31, 1996 Percent
----------------- -------
(In millions)
<S> <C> <C>
Subject to discretionary withdrawal at book value
less surrender charge............................... $441.9 89.3%
Subject to discretionary withdrawal at book value
(without adjustment)................................ 53.0 10.7
------ -----
Total annuity reserves and deposit liabilities....... $494.9 100.0%
====== =====
</TABLE>
NOTE 11--COMMITMENTS AND CONTINGENCIES
The Company has extended commitments to purchase long-term bonds and real
estate and issue real estate mortgages totalling $42.1 million, $0.1 million,
and $33.5 million, respectively, at December 31, 1996. 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 $76.2 million at December 31,
1996. The majority of these commitments expire in 1997.
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, 1996. 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.
56
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 12--FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and fair values of the
Company's financial instruments:
<TABLE>
<CAPTION>
Year ended December 31
--------------------------------
1996 1995
--------------- ---------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ------ -------- ------
(In millions)
<S> <C> <C> <C> <C>
Assets
Bonds--Note 7............................... $753.5 $790.5 $552.8 $597.3
Preferred stocks--Note 7.................... 9.6 9.6 5.0 5.2
Common stocks--Note 7....................... 1.4 1.4 1.7 1.7
Mortgage loans on real estate--Note 7....... 212.1 219.4 146.7 154.3
Policy loans--Note 1........................ 80.8 80.8 61.8 61.8
Cash and cash equivalents--Note 1........... 31.9 31.9 76.6 76.6
Derivatives liabilities relating to:--Note 9
Interest rate swaps......................... -- 2.3 -- 0.0
Currency rate swaps......................... -- (8.2) -- 0.0
Interest rate caps.......................... -- (2.0) -- 0.0
Liabilities
Commitments--Note 11........................ -- 76.2 -- 23.8
</TABLE>
The carrying amounts in the table are included in the statutory-basis
statements of financial position. The method and assumptions utilized by the
Company in estimating its fair value disclosures are described in Note 1.
57
<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. In general, 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 Servicing 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 those which would have
been purchased at the correct age or sex by the most recent insurance charge
deducted from Account Value.
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, the
Policy will terminate and 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 less 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, Policy years
and Policy anniversaries 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 during the lifetime of
the insured 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 Servicing 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 Total 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 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 for the Cash Value
Accumulation Test and Options A and B for the Guideline Premium and Cash Value
Corridor Test. 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 five tables headed "Using Current Charges"
assume that the current rates for insurance, sales, risk, and expense charges
will apply in each year illustrated. The five 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 .61%) 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 .19%). 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 premium processing charge of 1.25% of all
premiums paid, a Federal DAC Tax charge in the amount of 1.25% of all premiums
paid and a state 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 Total
Sum Insured at issue and Planned Premium amount requested, and assuming annual
Planned Premiums.
A-3
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE
$500,000 TOTAL SUM INSURED
MALE, ISSUE AGE 45, FULLY UNDERWRITTEN NONSMOKER UNDERWRITING CLASS
OPTION A DEATH BENEFIT
CASH VALUE ACCUMULATION TEST
NO GUARANTEED MINIMUM DEATH BENEFIT OPTION AFTER TENTH POLICY YEAR
PLANNED PREMIUM: $9,060*
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 $ 9,513 $ 500,000 $ 500,000 $ 500,000 $ 4,325 $ 4,627 $ 4,930
2 19,502 500,000 500,000 500,000 10,281 11,262 12,279
3 29,990 500,000 500,000 500,000 16,065 18,110 20,310
4 41,002 500,000 500,000 500,000 21,743 25,248 29,168
5 52,565 500,000 500,000 500,000 27,350 32,726 38,978
6 64,707 500,000 500,000 500,000 32,887 40,562 49,846
7 77,455 500,000 500,000 500,000 38,378 48,799 61,914
8 90,841 500,000 500,000 500,000 43,815 57,446 75,302
9 104,896 500,000 500,000 500,000 49,193 66,520 90,154
10 119,653 500,000 500,000 500,000 54,496 76,026 106,612
11 135,149 500,000 500,000 500,000 60,835 87,149 126,071
12 151,420 500,000 500,000 500,000 67,001 98,723 147,569
13 168,504 500,000 500,000 500,000 72,911 110,695 171,271
14 186,442 500,000 500,000 500,000 78,568 123,091 197,439
15 205,277 500,000 500,000 500,000 83,962 135,932 226,366
16 225,054 500,000 500,000 500,000 89,106 149,258 258,394
17 245,819 500,000 500,000 536,780 93,978 163,085 293,820
18 267,623 500,000 500,000 592,964 98,561 177,437 332,789
19 290,518 500,000 500,000 653,108 102,839 192,341 375,630
20 314,556 500,000 500,000 717,584 106,785 207,822 422,705
25 454,028 500,000 500,000 1,119,524 120,634 295,358 736,965
30 632,033 500,000 556,924 1,701,320 120,504 404,124 1,234,541
35 859,217 500,000 679,521 2,567,782 97,307 533,502 2,016,002
</TABLE>
- - --------
* The illustrations assume that Planned Premiums equal to the Target Premium
are paid at the start of each Policy year. The Death Benefit and Surrender
Value will differ if premiums are paid in different amounts or frequencies,
if Policy loans are taken, or if Additional Sum Insured, Guaranteed Minimum
Death Benefit after the tenth Policy year, or optional rider benefits are
elected.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT
RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY
THE OWNER. THE DEATH BENEFIT AND SURRENDER VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT RETURN
AVERAGE 0%, 6%, OR 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATE ABOVE OR
BELOW THE AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE
THAT THESE HYPOTHETICAL INVESTMENT RESULTS CAN BE ACHIEVED FOR ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
A-4
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE
$500,000 TOTAL SUM INSURED
MALE, ISSUE AGE 45, FULLY UNDERWRITTEN NONSMOKER UNDERWRITING CLASS
OPTION A DEATH BENEFIT
CASH VALUE ACCUMULATION TEST
NO GUARANTEED MINIMUM DEATH BENEFIT OPTION AFTER TENTH POLICY YEAR
PLANNED PREMIUM: $9,060*
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 $ 9,513 $500,000 $500,000 $ 500,000 $ 2,870 $ 3,125 $ 3,381
2 19,502 500,000 500,000 500,000 7,327 8,122 8,952
3 29,990 500,000 500,000 500,000 11,550 13,171 14,928
4 41,002 500,000 500,000 500,000 15,534 18,268 21,351
5 52,565 500,000 500,000 500,000 19,261 23,397 28,250
6 64,707 500,000 500,000 500,000 22,722 28,549 35,670
7 77,455 500,000 500,000 500,000 25,880 33,686 43,634
8 90,841 500,000 500,000 500,000 28,707 38,782 52,179
9 104,896 500,000 500,000 500,000 31,167 43,799 61,341
10 119,653 500,000 500,000 500,000 33,219 48,693 71,159
11 135,149 500,000 500,000 500,000 35,980 54,630 82,941
12 151,420 500,000 500,000 500,000 38,275 60,451 95,661
13 168,504 500,000 500,000 500,000 40,092 66,142 109,437
14 186,442 500,000 500,000 500,000 41,400 71,677 124,397
15 205,277 500,000 500,000 500,000 42,168 77,024 140,685
16 225,054 500,000 500,000 500,000 42,334 82,127 158,453
17 245,819 500,000 500,000 500,000 41,829 86,918 177,881
18 267,623 500,000 500,000 500,000 40,560 91,312 199,170
19 290,518 500,000 500,000 500,000 38,415 95,202 222,564
20 314,556 500,000 500,000 500,000 35,278 98,480 248,365
25 454,028 500,000 500,000 641,348 453 101,566 422,189
30 632,033 ** 500,000 931,819 ** 60,974 676,162
35 859,217 ** ** 1,315,024 ** ** 1,032,444
</TABLE>
- - --------
* The illustrations assume that Planned Premiums equal to the Target Premium
are paid at the start of each Policy year. The Death Benefit and Surrender
Value will differ if premiums are paid in different amounts or frequencies,
if Policy loans are taken, or if Additional Sum Insured, Guaranteed Minimum
Death Benefit after the tenth Policy year, or optional rider benefits are
elected.
** Policy lapses unless additional premium payments are made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT
RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY
THE OWNER. THE DEATH BENEFIT AND SURRENDER VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT RETURN
AVERAGE 0%, 6%, OR 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATE ABOVE OR
BELOW THE AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE
THAT THESE HYPOTHETICAL INVESTMENT RESULTS CAN BE ACHIEVED FOR ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
A-5
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE
$500,000 TOTAL SUM INSURED
MALE, ISSUE AGE 45, FULLY UNDERWRITTEN NONSMOKER UNDERWRITING CLASS
OPTION B DEATH
BENEFIT CASH VALUE ACCUMULATION TEST
NO GUARANTEED MINIMUM DEATH BENEFIT OPTION AFTER TENTH POLICY YEAR
PLANNED PREMIUM; $9,060*
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 $ 9,513 $ 504,317 $ 504,618 $ 504,920 $ 4,317 $ 4,618 $ 4,920
2 19,502 510,250 511,228 512,242 10,250 11,228 12,242
3 29,990 515,997 518,032 520,222 15,997 18,032 20,222
4 41,002 521,623 525,106 529,000 21,623 25,106 29,000
5 52,565 527,164 532,497 538,697 27,164 32,497 38,697
6 64,707 532,622 540,222 549,413 32,622 40,222 49,413
7 77,455 538,021 548,322 561,282 38,021 48,322 61,282
8 90,841 543,354 556,805 574,419 43,354 56,805 74,419
9 104,896 548,616 565,684 588,953 48,616 65,684 88,953
10 119,653 553,787 574,958 605,014 53,787 74,958 105,014
11 135,149 559,973 585,800 623,970 59,973 85,800 123,970
12 151,420 565,953 597,022 644,814 65,953 97,022 144,814
13 168,504 571,626 608,536 667,640 71,626 108,536 167,640
14 186,442 576,991 620,351 692,654 76,991 120,351 192,654
15 205,277 582,031 632,459 720,069 82,031 132,459 220,069
16 225,054 586,754 644,880 750,148 86,754 144,880 250,148
17 245,819 591,129 657,593 783,138 91,129 157,593 283,138
18 267,623 595,130 670,581 819,321 95,130 170,581 319,321
19 290,518 598,731 683,826 859,007 98,731 183,826 359,007
20 314,556 601,892 697,294 902,522 101,892 197,294 402,522
25 454,028 609,808 766,770 1,191,821 109,808 266,770 691,821
30 632,033 599,155 833,736 1,649,302 99,155 333,736 1,149,302
35 859,217 560,508 885,583 2,385,569 60,508 385,583 1,872,944
</TABLE>
- - --------
* The illustrations assume that Planned Premiums equal to the Target Premium
are paid at the start of each Policy year. The Death Benefit and Surrender
Value will differ if premiums are paid in different amounts or frequencies,
if Policy loans are taken, or if Additional Sum Insured, Guaranteed Minimum
Death Benefit after the tenth Policy year, or optional rider benefits are
elected.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT
RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY
THE OWNER. THE DEATH BENEFIT AND SURRENDER VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT RETURN
AVERAGE 0%, 6%, OR 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATE ABOVE OR
BELOW THE AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE
THAT THESE HYPOTHETICAL INVESTMENT RESULTS CAN BE ACHIEVED FOR ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
A-6
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE
$500,000 TOTAL SUM INSURED
MALE, ISSUE AGE 45, FULLY UNDERWRITTEN NONSMOKER UNDERWRITING CLASS
OPTION B DEATH BENEFIT
CASH VALUE ACCUMULATION TEST
NO GUARANTEED MINIMUM DEATH BENEFIT OPTION AFTER TENTH POLICY YEAR
PLANNED PREMIUM: $9,060*
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 $ 9,513 $ 502,851 $ 503,104 $ 503,360 $ 2,851 $ 3,104 $ 3,360
2 19,502 507,265 508,053 508,876 7,265 8,053 8,876
3 29,990 511,419 513,021 514,757 11,419 13,021 14,757
4 41,002 515,307 517,997 521,029 15,307 17,997 21,029
5 52,565 518,906 522,957 527,708 18,906 22,957 27,708
6 64,707 522,207 527,884 534,820 22,207 27,884 34,820
7 77,455 525,168 532,731 542,361 25,168 32,731 42,361
8 90,841 527,760 537,458 550,340 27,760 37,458 50,340
9 104,896 529,942 542,013 558,755 29,942 42,013 58,755
10 119,653 531,669 546,336 567,597 31,669 46,336 67,597
11 135,149 534,049 551,568 578,112 34,049 51,568 78,112
12 151,420 535,902 556,526 589,199 35,902 56,526 89,199
13 168,504 537,214 561,177 600,897 37,214 61,177 100,897
14 186,442 537,957 565,470 613,229 37,957 65,470 113,229
15 205,277 538,099 569,347 626,220 38,099 69,347 126,220
16 225,054 537,581 572,720 639,868 37,581 72,720 139,868
17 245,819 536,337 575,488 654,160 36,337 75,488 154,160
18 267,623 534,280 577,525 669,062 34,280 77,525 169,062
19 290,518 531,309 578,682 684,517 31,309 78,682 184,517
20 314,556 527,330 578,807 700,468 27,330 78,807 200,468
25 454,028 ** 558,775 785,881 ** 58,775 285,881
30 632,033 ** ** 868,193 ** ** 368,193
35 859,217 ** ** 904,774 ** ** 404,774
</TABLE>
- - --------
* The illustrations assume that Planned Premiums equal to the Target Premium
are paid at the start of each Policy year. The Death Benefit and Surrender
Value will differ if premiums are paid in different amounts or frequencies,
if Policy loans are taken, or if Additional Sum Insured, Guaranteed Minimum
Death Benefit after the tenth Policy year, or optional rider benefits are
elected.
** Policy lapses unless additional premium payments are made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT
RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY
THE OWNER. THE DEATH BENEFIT AND SURRENDER VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT RETURN
AVERAGE 0%, 6%, OR 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATE ABOVE OR
BELOW THE AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE
THAT THESE HYPOTHETICAL INVESTMENT RESULTS CAN BE ACHIEVED FOR ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
A-7
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE
$500,000 TOTAL SUM INSURED
MALE, ISSUE AGE 45, FULLY UNDERWRITTEN NONSMOKER UNDERWRITING CLASS
OPTION M DEATH BENEFIT
CASH VALUE ACCUMULATION TEST
NO GUARANTEED MINIMUM DEATH BENEFIT OPTION AFTER TENTH POLICY YEAR
------------------------------------------------------------------
PLANNED PREMIUM: $9,060*
------------------------
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 $ 9,513 $ 500,000 $ 500,000 $ 500,000 $ 4,325 $ 4,627 $ 4,930
2 19,502 500,000 500,000 500,000 10,281 11,262 12,279
3 29,990 500,000 500,000 500,000 16,065 18,110 20,310
4 41,002 500,000 500,000 500,000 21,743 25,248 29,168
5 52,565 500,000 500,000 500,000 27,350 32,726 38,978
6 64,707 500,000 500,000 500,000 32,887 40,562 49,846
7 77,455 500,000 500,000 500,000 38,378 48,799 61,914
8 90,841 500,000 500,000 500,000 43,815 57,446 75,302
9 104,896 500,000 500,000 500,000 49,193 66,520 90,154
10 119,653 500,000 500,000 500,000 54,496 76,026 106,612
11 135,149 500,000 500,000 500,000 60,835 87,149 126,071
12 151,420 500,000 500,000 558,256 67,001 98,723 147,472
13 168,504 500,000 500,000 619,670 72,911 110,695 170,840
14 186,442 500,000 500,000 682,691 78,568 123,091 196,345
15 205,277 500,000 500,000 747,439 83,962 135,932 224,160
16 225,054 500,000 500,000 814,151 89,106 149,258 254,502
17 245,819 500,000 500,737 882,936 93,978 163,085 287,564
18 267,623 500,000 522,869 953,954 98,561 177,346 323,561
19 290,518 500,000 543,851 1,027,454 102,839 191,997 362,725
20 314,556 500,000 563,734 1,103,599 106,785 207,027 405,288
25 454,028 500,000 648,837 1,531,276 120,634 287,618 678,787
30 632,033 500,000 712,331 2,051,428 120,504 375,979 1,082,776
35 859,217 500,000 762,535 2,705,385 97,307 471,311 1,672,158
</TABLE>
- - --------
* The illustrations assume that Planned Premiums equal to the Target Premium
are paid at the start of each Policy year. The Death Benefit and Surrender
Value will differ if premiums are paid in different amounts or frequencies,
if Policy loans are taken, or if Additional Sum Insured, Guaranteed Minimum
Death Benefit after the tenth Policy year, or optional rider benefits are
elected.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT
RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY
THE OWNER. THE DEATH BENEFIT AND SURRENDER VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT RETURN
AVERAGE 0%, 6%, OR 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATE ABOVE OR
BELOW THE AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE
THAT THESE HYPOTHETICAL INVESTMENT RESULTS CAN BE ACHIEVED FOR ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
A-8
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE
$500,000 TOTAL SUM INSURED
MALE, ISSUE AGE 45, FULLY UNDERWRITTEN NONSMOKER UNDERWRITING CLASS
OPTION M DEATH BENEFIT
CASH VALUE ACCUMULATION TEST
NO GUARANTEED MINIMUM DEATH BENEFIT OPTION AFTER TENTH POLICY YEAR
PLANNED PREMIUM: $9,060*
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 $ 9,513 $ 500,000 $ 500,000 $ 500,000 $ 2,870 $ 3,125 $ 3,381
2 19,502 500,000 500,000 500,000 7,327 8,122 8,952
3 29,990 500,000 500,000 500,000 11,550 13,171 14,928
4 41,002 500,000 500,000 500,000 15,534 18,268 21,351
5 52,565 500,000 500,000 500,000 19,261 23,397 28,250
6 64,707 500,000 500,000 500,000 22,722 28,549 35,670
7 77,455 500,000 500,000 500,000 25,880 33,686 43,634
8 90,841 500,000 500,000 500,000 28,707 38,782 52,179
9 104,896 500,000 500,000 500,000 31,167 43,799 61,341
10 119,653 500,000 500,000 500,000 33,219 48,693 71,159
11 135,149 500,000 500,000 500,000 35,980 54,630 82,941
12 151,420 500,000 500,000 500,000 38,275 60,451 95,661
13 168,504 500,000 500,000 500,000 40,092 66,142 109,437
14 186,442 500,000 500,000 500,000 41,400 71,677 124,397
15 205,277 500,000 500,000 500,000 42,168 77,024 140,685
16 225,054 500,000 500,000 506,866 42,334 82,127 158,445
17 245,819 500,000 500,000 544,610 41,829 86,918 177,374
18 267,623 500,000 500,000 581,732 40,560 91,312 197,311
19 290,518 500,000 500,000 618,194 38,415 95,202 218,243
20 314,556 500,000 500,000 653,954 35,278 98,480 240,159
25 454,028 500,000 500,000 823,142 453 101,566 364,884
30 632,033 ** 500,000 973,245 ** 60,974 513,694
35 859,217 ** ** 1,100,759 ** ** 680,363
</TABLE>
- - --------
* The illustrations assume that Planned Premiums equal to the Target Premium
are paid at the start of each Policy year. The Death Benefit and Surrender
Value will differ if premiums are paid in different amounts or frequencies,
if Policy loans are taken, or if Additional Sum Insured, Guaranteed Minimum
Death Benefit after the tenth Policy year, or optional rider benefits are
elected.
** Policy lapses unless additional premium payments are made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY THE OWNER. THE
DEATH BENEFIT AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT RETURN AVERAGE 0%, 6%, OR 12%
OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL
INVESTMENT RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
TIME.
A-9
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE
$500,000 TOTAL SUM INSURED
MALE, ISSUE AGE 45, FULLY UNDERWRITTEN NONSMOKER UNDERWRITING CLASS
OPTION A DEATH BENEFIT
GUIDELINE PREMIUM AND CASH VALUE CORRIDOR TEST
NO GUARANTEED MINIMUM DEATH BENEFIT OPTION AFTER TENTH POLICY YEAR
PLANNED PREMIUM: $9,060*
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 $ 9,513 $ 500,000 $ 500,000 $ 500,000 $ 4,325 $ 4,627 $ 4,930
2 19,502 500,000 500,000 500,000 10,281 11,262 12,279
3 29,990 500,000 500,000 500,000 16,065 18,110 20,310
4 41,002 500,000 500,000 500,000 21,743 25,248 29,168
5 52,565 500,000 500,000 500,000 27,350 32,726 38,978
6 64,707 500,000 500,000 500,000 32,887 40,562 49,846
7 77,455 500,000 500,000 500,000 38,378 48,799 61,914
8 90,841 500,000 500,000 500,000 43,815 57,446 75,302
9 104,896 500,000 500,000 500,000 49,193 66,520 90,154
10 119,653 500,000 500,000 500,000 54,496 76,026 106,612
11 135,149 500,000 500,000 500,000 60,835 87,149 126,071
12 151,420 500,000 500,000 500,000 67,001 98,723 147,569
13 168,504 500,000 500,000 500,000 72,911 110,695 171,271
14 186,442 500,000 500,000 500,000 78,568 123,091 197,439
15 205,277 500,000 500,000 500,000 83,962 135,932 226,366
16 225,054 500,000 500,000 500,000 89,106 149,258 258,394
17 245,819 500,000 500,000 500,000 93,978 163,085 293,893
18 267,623 500,000 500,000 500,000 98,561 177,437 333,287
19 290,518 500,000 500,000 500,000 102,839 192,341 377,068
20 314,556 500,000 500,000 519,438 106,785 207,822 425,769
25 454,028 500,000 500,000 878,833 120,634 295,358 757,615
30 632,033 500,000 500,000 1,395,751 120,504 405,813 1,304,440
35 859,217 500,000 581,166 2,320,741 97,307 553,491 2,210,230
</TABLE>
- - --------
* The illustrations assume that Planned Premiums equal to the Target Premium
are paid at the start of each Policy year. The Death Benefit and Surrender
Value will differ if premiums are paid in different amounts or frequencies,
if Policy loans are taken, or if Additional Sum Insured, Guaranteed Minimum
Death Benefit after the tenth Policy year, or optional rider benefits are
elected.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT
RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY
THE OWNER. THE DEATH BENEFIT AND SURRENDER VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT RETURN
AVERAGE 0%, 6%, OR 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATE ABOVE OR
BELOW THE AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE
THAT THESE HYPOTHETICAL INVESTMENT RESULTS CAN BE ACHIEVED FOR ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
A-10
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE
$500,000 TOTAL SUM INSURED
MALE, ISSUE AGE 45, FULLY UNDERWRITTEN NONSMOKER UNDERWRITING CLASS
OPTION A DEATH BENEFIT
GUIDELINE PREMIUM AND CASH VALUE CORRIDOR TEST
NO GUARANTEED MINIMUM DEATH BENEFIT OPTION AFTER TENTH POLICY
YEAR PLANNED PREMIUM: $9,060*
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 $ 9,513 $ 500,000 $ 500,000 $ 500,000 $ 2,870 $ 3,125 $ 3,381
2 19,502 500,000 500,000 500,000 7,327 8,122 8,952
3 29,990 500,000 500,000 500,000 11,550 13,171 14,928
4 41,002 500,000 500,000 500,000 15,534 18,268 21,351
5 52,565 500,000 500,000 500,000 19,261 23,397 28,250
6 64,707 500,000 500,000 500,000 22,722 28,549 35,670
7 77,455 500,000 500,000 500,000 25,880 33,686 43,634
8 90,841 500,000 500,000 500,000 28,707 38,782 52,179
9 104,896 500,000 500,000 500,000 31,167 43,799 61,341
10 119,653 500,000 500,000 500,000 33,219 48,693 71,159
11 135,149 500,000 500,000 500,000 35,980 54,630 82,941
12 151,420 500,000 500,000 500,000 38,275 60,451 95,661
13 168,504 500,000 500,000 500,000 40,092 66,142 109,437
14 186,442 500,000 500,000 500,000 41,400 71,677 124,397
15 205,277 500,000 500,000 500,000 42,168 77,024 140,685
16 225,054 500,000 500,000 500,000 42,334 82,127 158,453
17 245,819 500,000 500,000 500,000 41,829 86,918 177,881
18 267,623 500,000 500,000 500,000 40,560 91,312 199,170
19 290,518 500,000 500,000 500,000 38,415 95,202 222,564
20 314,556 500,000 500,000 500,000 35,278 98,480 248,365
25 454,028 500,000 500,000 500,000 453 101,566 430,474
30 632,033 ** 500,000 795,550 ** 60,974 743,504
35 859,217 ** ** 1,314,533 ** ** 1,251,936
</TABLE>
- - --------
* The illustrations assume that Planned Premiums equal to the Target Premium
are paid at the start of each Policy year. The Death Benefit and Surrender
Value will differ if premiums are paid in different amounts or frequencies,
if Policy loans are taken, or if Additional Sum Insured, Guaranteed Minimum
Death Benefit after the tenth Policy year, or optional rider benefits are
elected.
** Policy lapses unless additional premium payments are made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT
RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY
THE OWNER. THE DEATH BENEFIT AND SURRENDER VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT RETURN
AVERAGE 0%, 6%, OR 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATE ABOVE OR
BELOW THE AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE
THAT THESE HYPOTHETICAL INVESTMENT RESULTS CAN BE ACHIEVED FOR ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
A-11
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE
$500,000 TOTAL SUM INSURED
MALE, ISSUE AGE 45, FULLY UNDERWRITTEN NONSMOKER UNDERWRITING CLASS
OPTION B DEATH BENEFIT
GUIDELINE PREMIUM AND CASH VALUE CORRIDOR TEST
NO GUARANTEED MINIMUM DEATH BENEFIT OPTION AFTER TENTH POLICY YEAR
PLANNED PREMIUM: $9,060*
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 $ 9,513 $ 504,317 $ 504,618 $ 504,920 $ 4,317 $ 4,618 $ 4,920
2 19,502 510,250 511,228 512,242 10,250 11,228 12,242
3 29,990 515,997 518,032 520,222 15,997 18,032 20,222
4 41,002 521,623 525,106 529,000 21,623 25,106 29,000
5 52,565 527,164 532,497 538,697 27,164 32,497 38,697
6 64,707 532,622 540,222 549,413 32,622 40,222 49,413
7 77,455 538,021 548,322 561,282 38,021 48,322 61,282
8 90,841 543,354 556,805 574,419 43,354 56,805 74,419
9 104,896 548,616 565,684 588,953 48,616 65,684 88,953
10 119,653 553,787 574,958 605,014 53,787 74,958 105,014
11 135,149 559,973 585,800 623,970 59,973 85,800 123,970
12 151,420 565,953 597,022 644,814 65,953 97,022 144,814
13 168,504 571,626 608,536 667,640 71,626 108,536 167,640
14 186,442 576,991 620,351 692,654 76,991 120,351 192,654
15 205,277 582,031 632,459 720,069 82,031 132,459 220,069
16 225,054 586,754 644,880 750,148 86,754 144,880 250,148
17 245,819 591,129 657,593 783,138 91,129 157,593 283,138
18 267,623 595,130 670,581 819,321 95,130 170,581 319,321
19 290,518 598,731 683,826 859,007 98,731 183,826 359,007
20 314,556 601,892 697,294 902,522 101,892 197,294 402,522
25 454,028 609,808 766,770 1,191,821 109,808 266,770 691,821
30 632,033 599,155 833,736 1,649,302 99,155 333,736 1,149,302
35 859,217 560,508 885,583 2,373,001 60,508 385,583 1,873,001
</TABLE>
- - --------
* The illustrations assume that Planned Premiums equal to the Target Premium
are paid at the start of each Policy year. The Death Benefit and Surrender
Value will differ if premiums are paid in different amounts or frequencies,
if Policy loans are taken, or if Additional Sum Insured, Guaranteed Minimum
Death Benefit after the tenth Policy year, or optional rider benefits are
elected.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT
RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY
THE OWNER. THE DEATH BENEFIT AND SURRENDER VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT RETURN
AVERAGE 0%, 6%, OR 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATE ABOVE OR
BELOW THE AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE
THAT THESE HYPOTHETICAL INVESTMENT RESULTS CAN BE ACHIEVED FOR ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
A-12
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE
$500,000 TOTAL SUM INSURED
MALE, ISSUE AGE 45, FULLY UNDERWRITTEN NONSMOKER UNDERWRITING CLASS
OPTION B DEATH BENEFIT
GUIDELINE PREMIUM AND CASH VALUE CORRIDOR TEST
NO GUARANTEED MINIMUM DEATH BENEFIT OPTION AFTER TENTH POLICY YEAR
PLANNED PREMIUM: $9,060*
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 $ 9,513 $ 502,851 $ 503,104 $ 503,360 $ 2,851 $ 3,104 $ 3,360
2 19,502 507,265 508,053 508,876 7,265 8,053 8,876
3 29,990 511,419 513,021 514,757 11,419 13,021 14,757
4 41,002 515,307 517,997 521,029 15,307 17,997 21,029
5 52,565 518,906 522,957 527,708 18,906 22,957 27,708
6 64,707 522,207 527,884 534,820 22,207 27,884 34,820
7 77,455 525,168 532,731 542,361 25,168 32,731 42,361
8 90,841 527,760 537,458 550,340 27,760 37,458 50,340
9 104,896 529,942 542,013 558,755 29,942 42,013 58,755
10 119,653 531,669 546,336 567,597 31,669 46,336 67,597
11 135,149 534,049 551,568 578,112 34,049 51,568 78,112
12 151,420 535,902 556,526 589,199 35,902 56,526 89,199
13 168,504 537,214 561,177 600,897 37,214 61,177 100,897
14 186,442 537,957 565,470 613,229 37,957 65,470 113,229
15 205,277 538,099 569,347 626,220 38,099 69,347 126,220
16 225,054 537,581 572,720 639,868 37,581 72,720 139,868
17 245,819 536,337 575,488 654,160 36,337 75,488 154,160
18 267,623 534,280 577,525 669,062 34,280 77,525 169,062
19 290,518 531,309 578,682 684,517 31,309 78,682 184,517
20 314,556 527,330 578,807 700,468 27,330 78,807 200,468
25 454,028 ** 558,775 785,881 ** 58,775 285,881
30 632,033 ** ** 868,193 ** ** 368,193
35 859,217 ** ** 904,774 ** ** 404,774
</TABLE>
- - --------
* The illustrations assume that Planned Premiums equal to the Target Premium
are paid at the start of each Policy year. The Death Benefit and Surrender
Value will differ if premiums are paid in different amounts or frequencies,
if Policy loans are taken, or if Additional Sum Insured, Guaranteed Minimum
Death Benefit after the tenth Policy year, or optional rider benefits are
elected.
** Policy lapses unless additional premium payments are made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT
RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY
THE OWNER. THE DEATH BENEFIT AND SURRENDER VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT RETURN
AVERAGE 0%, 6%, OR 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATE ABOVE OR
BELOW THE AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE
THAT THESE HYPOTHETICAL INVESTMENT RESULTS CAN BE ACHIEVED FOR ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
A-13
<PAGE>
[LOGO OF JOHN HANCOCK APPEARS HERE]
POLICIES ISSUED BY JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
JOHN HANCOCK PLACE, BOSTON, MASSACHUSETTS 02117
[STOCK NUMBER] 4/97
<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.
Registrant further represents that the fees and charges deducted under the
Policies, in the aggregate, are reasonable in relation to the services rendered,
the expenses expected to be incurred, and the risks assumed by the insurance
company.
UNDERTAKING REGARDING INDEMNIFICATION
Pursuant to Section X of JHVLICO's Bylaws and Section 67 of the
Massachusetts Business Corporation Law, JHVLICO indemnifies each director,
former director, officer, and former officer, and his heirs and legal
representatives from liability incurred or imposed in connection with any legal
action in which he may be involved by reason of any alleged act or omission as
an officer or a director of JHVLICO.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following Papers and Documents:
The facing sheet.
Cross-Reference Table.
The prospectus consisting of 70 pages.
The undertaking regarding indemnification.
The undertaking to file reports.
The signatures.
The following exhibits:
<PAGE>
1.A. (1) JHVLICO Board Resolution establishing the separate account,
previously filed electronically on October 30, 1996.
(2) Not Applicable.
(3) (a) Distribution Agreement and Amendment, previously filed
electronically on October 30, 1996.
(b) Specimen Variable Contracts Selling Agreement between John
Hancock Mutual Life Insurance Company and selling broker-
dealers, previously filed electronically on October 30, 1996.
(c) Schedule of sales commissions included in the text under the
heading "Distribution of Policies" in the prospectus.
(4) Not Applicable.
(5) Form of flexible premium variable life insurance policy.
(6) (a) JHVLICO Certificate of Incorporation, previously filed
electronically on October 30, 1996.
(b) JHVLICO By-laws, previously filed electronically on October
30, 1996.
(7) Not Applicable.
(8) Not Applicable.
(9) Not Applicable.
(10) Forms of individual and master applications for Policy, previously
filed electronically on October 30, 1996.
<PAGE>
2. Included as exhibit 1.A(5) above.
3. Opinion and consent of counsel as to securities being registered.
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 premium policy pursuant to Rule
6e-3(T)(b)(12)(iii).
9. Powers of attorney for Tomlinson, D'Alessandro, Shaw, Luddy, Lee, Reitano,
Van Leer and Paster, previously filed electronically on October 30, 1996.
Power of attorney for Ronald J. Bocage, incorporated by reference from Form
10-K annual report for John Hancock Variable Life Insurance Company (File
No. 33-62895), filed March 28, 1997.
10. Not Applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the John
Hancock Variable Life Insurance Company has duly caused this 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 28th day of March, 1997.
JOHN HANCOCK VARIABLE LIFE
INSURANCE COMPANY
(SEAL)
/s/ Henry D. Shaw
By ____________________________
Henry D. Shaw
President
/s/ Sandra M. DaDalt
Attest: _______________________________
Sandra M. DaDalt
Assistant Secretary
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
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.
Signature Title Date
--------- ----- ----
/s/ Barbara L. Luddy
______________________
Barbara L. Luddy Director(Principal
Financial Officer) March 28, 1997
/s/ Patrick F. Smith
______________________ Controller (Principal
Patrick F. Smith Accounting Officer) March 28, 1997
/s/ Henry D. Shaw
______________________ Vice Chairman of the Board
Henry D. Shaw and President(Acting Principal
for himself and as Executive Officer) March 28, 1997
Attorney-In-Fact
FOR: David D. D'Alessandro Chairman of the Board
Robert R. Reitano Director
Thomas J. Lee Director
Michele G. Van Leer Director
Barbara L. Luddy Director
Ronald J. Bogage Director
<PAGE>
-3-
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, John Hancock Variable Life Account S, has duly caused this
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 28th day of March, 1997.
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
(Registrant)
By John Hancock Mutual Life Insurance Company
(Depositor)
(SEAL)
/s/ Henry D. Shaw
By ______________________________
Henry D. Shaw
President
/s/ Sandra M. DaDalt
Attest: _______________________________
Sandra M. DaDalt
Assistant Secretary
<PAGE>
-3-
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, John Hancock Variable Life Account S, has duly caused this
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 28th day of March, 1997.
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
(Registrant)
By John Hancock Mutual Life Insurance Company
(Depositor)
(SEAL)
/s/ Henry D. Shaw
By ______________________________
Henry D. Shaw
President
/s/ Sandra M. DaDalt
Attest: _______________________________
Sandra M. DaDalt
Assistant Secretary
<PAGE>
Exhibit 1(a)(5)
[JOHN HANCOCK LOGO APPEARS HERE]
John Hancock Place
Boston, Massachusetts 02117
[(800) 732-5543]
INSURED [John Hancock] TOTAL SUM INSURED AT ISSUE [$500,000]
POLICY NUMBER [U1 00 000 000] DATE OF ISSUE [September 1, 1996]
PLAN Majestic VUL
INDIVIDUAL VARIABLE LIFE INSURANCE
The John Hancock Variable Life Insurance Company ("the Company") agrees, subject
to the conditions and provisions of this policy, to pay the Death Benefit to the
Beneficiary upon the death of the Insured if such death occurs while the policy
is in full force, and to provide the other benefits, rights, and privileges of
the policy. The Death Benefit (see Section 4) will be payable, subject to the
"Deferral of Determinations and Payments" provision, on receipt at the Home
Office of the Company of due proof of the Insured's death.
The policy, which includes any Riders which are a part of the policy on
delivery, is issued in consideration of the application and payment of the
Minimum Initial Premium as shown on page 3.
The Policy Specifications and the conditions and provisions on this and the
following pages are part of the policy.
THE POLICY IS A LEGAL CONTRACT BETWEEN THE OWNER AND THE COMPANY. READ YOUR
POLICY CAREFULLY.
Signed for the Company at Boston, Massachusetts:
/s/ Henry D. Shaw /s/ [SIGNATURE APPEARS HERE]
PRESIDENT SECRETARY
Variable Life Insurance policy
Flexible Premiums
Death Benefit payable at death of Insured
Not eligible for dividends
Benefits, premiums, and the Premium Class are shown in the Policy
Specifications.
To the extent any benefit, payment, or value under this policy (including the
Account Value) is based on the investment experience of a Separate Account, such
benefit, payment, or value may increase or decrease in accordance with the
investment experience of the Separate Account and is not guaranteed as to fixed
dollar amount. However, this policy may provide a Guaranteed Minimum Death
Benefit , if such option is elected at issue and provided that premiums are paid
on a timely basis and other conditions are met as described in Sections 4, 6,
and 7.
Right to Cancel--The Owner may surrender this policy by delivering or mailing it
to the Company at Boston, Massachusetts (or to the agent or agency office
through which it was delivered) within 45 days after the date of Part A of the
application, or within 10 days after receipt by the Owner of the policy, or
within 10 days after mailing by the Company of the Notice of Withdrawal Right,
whichever is latest. Immediately on such delivery or mailing, the policy shall
be deemed void from the beginning. Any premium paid on this policy will be
refunded within 10 days after timely receipt from the Owner of appropriate
written notice (including the surrendered policy, if it has been delivered)
exercising the rights described above.
1
<PAGE>
<TABLE>
<CAPTION>
Policy Provisions Alphabetical Guide
Section Section
<C> <S> <C> <C>
1. Policy Specifications 8. Account Value
2. Table Of Rates 14. Allocation To Subaccounts
3. Definitions 16. Annual Report To Owner
4. Death Benefit 23. Assignment
5. Payments 12. Basis of Computations
6. Guaranteed Minimum Death 9. Charges
Benefit Premium Target
7. Grace Period 22. Claims Of Creditors
8. Account Value 27. The Contract
9. Charges 4. Death Benefit
10. Loans 21. Deferral Of Determinations And Payments
11. Surrenders and Withdrawals 3. Definitions
12. Basis of Computations 7. Grace Period
13. Separate Account and Fixed 6. Guaranteed Minimum Death Benefit Premium
Account Target
14. Allocation To Subaccounts 24. Incontestability
15. Investment Policy Change 19. Interest On Proceeds
16. Annual Report To Owner 15. Investment Policy Change
17. Reinstatement 10. Loans
18. Owner and Beneficiary 25. Misstatements
19. Interest On Proceeds 18. Owner and Beneficiary
20. Transfer of Assets to 5. Payments
Fixed Account
21. Deferral Of Determinations 1. Policy Specifications
And Payments 17. Reinstatement
22. Claims Of Creditors 13. Separate Account and Fixed Account
23. Assignment 28. Settlement Provisions
24. Incontestability 26. Suicide Exclusion
25. Misstatements 11. Surrenders And Withdrawals
26. Suicide Exclusion 2. Table Of Rates
27. The Contract 20. Transfer of Assets to Fixed Account
28. Settlement Provisions
</TABLE>
2
<PAGE>
1. POLICY SPECIFICATIONS
Insured [John Hancock]
Issue Age [45]
Sex [Male]
Premium Class [Standard]
[Non-Smoker]
Owner, Beneficiary As designated in the application subject to
Section 18 of the policy
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Policy Number [U1 00 000 000] Plan Majestic VUL
Date of Issue [September 1, 1996] Sum Insured
Basic Sum Insured at Issue $[250,000]
Additional Sum Insured at Issue $[250,000]
==========
Total Sum Insured at Issue $[500,000]
</TABLE>
<TABLE>
<CAPTION>
Death Benefit Option [Option A]
at Issue
Other Benefits and Specifications
---------------------------------
<S> <C>
Minimum Total Sum Insured $ 500,000
Minimum Basic Sum Insured $ 100,000
Definition of Life Insurance Elected [Cash Value Accumulation Test]
</TABLE>
PREMIUMS
--------
<TABLE>
<CAPTION>
<S> <C>
Planned Premium $[4,530] per year for [all]Policy Years
Target Premium $[4,530] per year
Minimum Initial Premium $[4,530]
Guaranteed Minimum Death $[4,530] per year
Benefit Premium
Billing Interval [Annual]
</TABLE>
3
<PAGE>
1. POLICY SPECIFICATIONS, continued
CURRENT POLICY CHARGES
----------------------
<TABLE>
<CAPTION>
Deductions from Premium Payments
Sales Charge
Policy Up to Target Excess
Years Premium
---------------------------------------------------
<S> <C> <C> <C>
1 30% 3.5%
---------------------------------------------------
2-10 10% 3.5%
---------------------------------------------------
11+ 4% 3.5%
---------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
State Premium Tax 2.35% of Payments
Federal DAC Tax 1.25% of Payments
Premium Processing Charge 1.25% of Payments
Enhanced Cash Value 2% of the premium paid in the first Policy
Rider Charge year only, up to the Target Premium amount
</TABLE>
<TABLE>
<CAPTION>
Monthly Deductions from Account Value*
<S> <C>
Administrative Charge $[5.00] for all Policy Years
Issue Charge $[.10] per $1000 of Basic Sum Insured at Issue
deducted for the first 10 Policy Years, not to
be less than $5.00 nor more than $200.00
Cost of Insurance Determined in accordance with Section 9, and
Charge deducted for all Policy Years
Deductions from Separate Account*
Mortality and Expense .35% of Account Value (deducted daily at a rate of
Risk Charge .000957%) for all Policy Years
</TABLE>
*We reserve the right to change the amount or percentage of any of these
charges, but no charge will exceed the amount or percentage shown in the Table
of Maximum Policy Charges on page 3B.
3A
<PAGE>
1. POLICY SPECIFICATIONS, continued
MAXIMUM POLICY CHARGES
----------------------
<TABLE>
<CAPTION>
Deductions from Premium Payments
Sales Charge
Policy Up to Target Excess
Years Premium
---------------------------------------------------
<S> <C> <C> <C>
1 30% 3.5%
---------------------------------------------------
2-10 10% 3.5%
---------------------------------------------------
11+ 4% 3.5%
---------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
State Premium Tax 2.35% of Payments
Federal DAC Tax 1.25% of Payments
Premium Processing Charge 1.25% of Payments
Enhanced Cash Value 2% of premium paid in the first Policy Year only,
Rider Charge up to the Target Premium amount
Monthly Deductions from Account Value
Administrative Charge $10.00 for all Policy Years
Issue Charge $.10 per $1000 of Basic Sum Insured at Issue
deducted for the first 10 Policy Years, not to be
less than $5.00 nor more than $200.00
Cost of Insurance Charge Determined in accordance with Section 9, and
deducted for all Policy Years; Maximum Monthly
Rates are shown in Section 2
Deductions from Separate Account
Mortality and Expense Risk .60% of Account Value (deducted Charge daily at
a rate of .001639%) for all Policy Years
</TABLE>
3B
<PAGE>
1. POLICY SPECIFICATIONS, continued
Insured [John Hancock] Plan [Majestic VUL]
Policy Number [U1 00 000 000]
Rider Date of Issue [September 1, 1996]
Rider Information
-----------------
<TABLE>
<CAPTION>
Type Description
- - --------------------------------------------------------------------------------
Enhanced Cash Value Rider Additional cash value available upon surrender
during the first 9 policy years, equal to the
following percentages of the annual Target
Premium at issue:
<S> <C> <C>
Policy Year ECV Percentage
1 40
2 55
3 65
4 70
5 70
6 60
7 50
8 40
9 20
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
</TABLE>
3C
<PAGE>
<TABLE>
<CAPTION>
2. TABLE OF RATES
A. RATE TABLE
Maximum Monthly Optional Extra
Rates per Required Death Benefit
Age/1/ $1,000 of Additional Death Factor
Net Amount at Benefit Factor
Risk2
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
45 0.3800 2.8779
46 0.4109 2.7904
47 0.4444 2.7064
48 0.4796 2.6255
49 0.5190 2.5477
50 0.5609 2.4728
51 0.6104 2.4008
52 0.6658 2.3317
53 0.7287 2.2654
54 0.8002 2.2019
55 0.8767 2.1412
56 0.9601 2.0831
57 1.0468 2.0275
58 1.1396 1.9742
59 1.2392 1.9230
60 1.3500 1.8740
61 1.4736 1.8269
62 1.6134 1.7818
63 1.7722 1.7387
64 1.9491 1.6976
65 2.1434 1.6584
66 2.3510 1.6211
67 2.5728 1.5855
68 2.8088 1.5516
69 3.0653 1.5191
70 3.3537 1.4880
71 3.6820 1.4583
72 4.0603 1.4301
73 4.4962 1.4033
74 4.9835 1.3781
75 5.5133 1.3546
</TABLE>
1. On a Policy anniversary, "age" means the age of the Insured at his or her
birthday nearest that date. That "age" will apply until the next anniversary.
2. Maximum Monthly Rates and Minimum Values are based on the 1980 Commissioners
Standard Ordinary Unismoke Mortality Table.
4
<PAGE>
<TABLE>
<CAPTION>
2. TABLE OF RATES, continued
A. RATE TABLE (cont'd.)
Age/1/ Maximum Monthly Required Optional Extra
Rates per Additional Death Death Benefit
$1,000 of Net Benefit Factor Factor
Amount at Risk/2/
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
76 6.0765 1.3325
77 6.6657 1.3117
78 7.2759 1.2922
79 7.9239 1.2737
80 8.6352 1.2560
81 9.4308 1.2392
82 10.3390 1.2232
83 11.3735 1.2082
84 12.5138 1.1942
85 13.7377 1.1812
86 15.0218 1.1692
87 16.3566 1.1580
88 17.7380 1.1475
89 19.1720 1.1374
90 20.6777 1.1277
91 22.2871 1.1181
92 24.0635 1.1082
93 26.1199 1.0979
94 28.8130 1.0869
95 32.8176 1.0748
96 39.6429 1.0616
97 53.0660 1.0476
98 85.5269 1.0334
99 165.3400 1.0198
</TABLE>
1. On a Policy anniversary, "age" means the age of the Insured at his or her
birthday nearest that date. That "age" will apply until the next anniversary.
2. Maximum Monthly Rates and Minimum Values are based on the 1980 Commissioners
Standard Ordinary Unismoke Mortality Table.
4A
<PAGE>
3. DEFINITIONS
- - --------------
The term "Account Value" is as defined in Section 8.
The term "Age" means on any policy anniversary, the age of the person in
question at his or her birthday nearest that date.
The term "Annual Processing Date" means every 12th Processing Date starting with
the Processing Date next after the Date of Issue.
The term "Excess Premium" means that portion of the total Premiums received
during any Policy Year that exceeds the Target Premium.
The term "Fixed Account" means an account established by us which accumulates at
rates which we will determine and declare from time to time, but which will not
be less than 4%. The assets of a Fixed Account are invested in a segment of our
General Account. The General Account consists of assets owned by us other than
those in the Separate Account.
The term "Fund" means a series type mutual fund registered under the Investment
Company Act of 1940 as an open-end diversified management investment company.
The term "Guaranteed Minimum Death Benefit Premium" is as defined in Section 6.
The term "in full force" means that the policy has not lapsed in accordance with
Section 7.
The term "indebtedness" means the unpaid balance of a policy loan. As provided
in Section 10, the policy loan amount includes accrued interest.
The "Minimum Initial Premium" is shown on page 3.
The term "Modal Processing Date" means the first Processing Date of each premium
billing interval.
The term "Net Premium" is as defined in Section 5.
The term "Payment" means, unless otherwise stated, payment at our Home Office in
Boston, Massachusetts.
The "Planned Premium" is shown on Page 3.
The term "Policy Year" means (a) or (b) below whichever is applicable:
(a) The first Policy Year is the period beginning on the Date of Issue and
ending on the Valuation Date immediately preceding the first Annual Processing
Date;
(b) Each subsequent Policy Year is the period beginning on an Annual
Processing Date and ending on the Valuation Date immediately preceding the
next Annual Processing Date.
The term "Portfolio" means each division, with a specific investment objective,
of a Fund.
The term "Premium" is as defined in Section 5.
The term "Processing Date" means the first day of a policy month. A policy month
shall begin on the day in each calendar month which corresponds to the day of
the calendar month on which the Date of Issue occurred. If the Date of Issue is
the 29th, 30th, or 31st day of a calendar month, then for any calendar month
which has fewer days, the first day of the policy month will be the last day of
such calendar month. The Date of Issue is not a Processing Date.
The term "Separate Account", unmodified, means a separate investment account,
established by us pursuant to applicable law, in which you are eligible to
invest under this policy.
The term "Subaccount" means a Variable Account or a Fixed Account.
The "Target Premium" is shown on Page 3.
The term "Valuation Date" means any date on which we are open for business, the
New York Stock Exchange is open for trading, and on which the Fund values its
Portfolio.
5
<PAGE>
The term "Valuation Period" means the period of time from the beginning of the
day following a Valuation Date to the end of the next following Valuation Date.
The term "Variable Account" means each division, with a specific investment
objective, of a Separate Account. The assets of each Variable Account are
invested solely in shares of the corresponding Portfolio of a Fund.
The terms "we", "us", and "our" refer only to the John Hancock Variable Life
Insurance Company.
The term "written notice" means, unless otherwise stated, a written notice
received at our Home Office in Boston, Massachusetts.
The terms "you" and "your" refer only to the Owner of this policy.
6
<PAGE>
- - --------------------------------------------------------------------------------
4. DEATH BENEFIT
- - --------------------------------------------------------------------------------
The Death Benefit will equal the death benefit of the policy minus any
indebtedness on the date of death. We will also deduct any unpaid charges under
Section 9. In addition, if the Insured dies during a grace period as described
in subsection A of Section 7, we will also deduct the amount of any unpaid
shortfall described in that section.
The death benefit of the policy depends in part on which of the following
Options is in effect. The Option at Issue is selected in the application for
the policy.
Option A: The death benefit is the Total Sum Insured, plus any Required
Additional Death Benefit as described below.
Option B: The death benefit is the Total Sum Insured plus the Account Value on
the date of death of the Insured, plus any Required Additional Death Benefit
as described below.
Option M: The death benefit is the Total Sum Insured, plus any Optional Extra
Death Benefit as described below. If the application indicates that
calculation of the Optional Extra Death Benefit does not begin at the Date of
Issue, the death benefit will be determined as described for Option A until
the policy anniversary on which the Optional Extra Death Benefit calculation
begins.
The Total Sum Insured equals the sum of the Basic Sum Insured and any Additional
Sum Insured, subject to the provisions on withdrawals in Section 11.
. Required Additional Death Benefit For Options A and B (and for Option M if
prior to calculation date)
If death benefit Option A or B has been selected, the death benefit of the
policy will be increased if necessary to ensure that the policy will continue to
qualify as life insurance under federal tax law. The amount of any such
increase is the Required Additional Death Benefit.
With respect to Option A (and for Option M if prior to calculation date), the
Required Additional Death Benefit on any date will be equal to the amount, if
any, by which the Total Required Death Benefit as of such date, as defined
below, exceeds the Total Sum Insured.
With respect to Option B, the Required Additional Death Benefit on any date will
be equal to the amount, if any, by which the Total Required Death Benefit as of
such date, as defined below, exceeds the sum of the Total Sum Insured and the
Account Value.
The Total Required Death Benefit will equal (i) the Account Value multiplied by
(ii) the applicable Required Additional Death Benefit Factor shown in Section 2.
A charge for any Required Additional Death Benefit in effect on any Processing
Date will be deducted from the Account Value on such date. Such charge will be
determined as described in the Cost of Insurance Charge subsection of Section 9.
. Optional Extra Death Benefit for Option M
If death benefit Option M has been selected, the death benefit of the policy
will be increased if necessary to ensure that the death benefit of the policy is
not less than the Option M Target Death Benefit. The amount of any increase is
the Optional Extra Death Benefit.
The Optional Extra Death Benefit on any date will be equal to the amount, if
any, by which the Option M Target Death Benefit as of such date, as defined
below, exceeds the Total Sum Insured.
The Option M Target Death Benefit will be equal to the Account Value on such
date multiplied by the applicable Optional Extra Death Benefit Factor shown in
Section 2.
A charge for any Optional Extra Death Benefit in effect on any Processing Date
will be deducted from the Account Value on such date. Such charge will be
determined as described in the Cost of Insurance Charge provisions subsection of
Section 9.
. Change of Death Benefit Option
You may change from Option B to Option A, Option M to Option A, or Option A to
Option M. At the time of a change from Option B to Option A, the Death Benefit
under the new Option will be the same as it was under the old Option. A change
from Option B will therefore increase the Basic Sum Insured by the Account Value
at the time the new Option takes effect. A change to Option M will require
evidence of insurability satisfactory to us.
7
<PAGE>
Guaranteed Minimum Death Benefit
The Guaranteed Minimum Death Benefit Feature (the "GMDB Feature") is only
available if page 3 indicates that the GMDB Feature applies to this policy.
If the GMDB Feature is in effect even though unpaid Section 9 charges exceed the
policy's Surrender Value, a Guaranteed Minimum Death Benefit will be guaranteed
upon the death of the Insured, provided that the funding requirements described
in Sections 6 and 7 continue to be met and there has not been a failure to repay
on a timely basis any excess indebtedness in accordance with Section 10. The
Guaranteed Minimum Death Benefit will be equal to the Basic Sum Insured (reduced
by withdrawals as described in Section 11) less any indebtedness on the date of
death and less any unpaid monthly charges under Section 9.
- - --------------------------------------------------------------------------------
5. PAYMENTS
- - --------------------------------------------------------------------------------
Payments under the policy shall be made only to us at our Home Office. A
premium reminder notice for Planned Premiums, as shown in the application for
the policy, will be sent to you at the beginning of each payment interval.
When we receive a payment, we first deduct any amount specified as payment of
accrued interest on loans then due under Section 10 and any amount specified as
loan repayment. The remainder will constitute Premium. We then deduct all of the
applicable charges listed under "Deductions from Premium Payments" in Section 1.
The remainder will constitute Net Premium.
If coverage under the policy takes effect in accordance with the provisions of
the application, the following will apply:
(a) All amounts received prior to the Date of Issue will be processed
as if received on the Date of Issue.
(b) If a payment equal to the Minimum Initial Premium is not received
prior to the Date of Issue, a portion of each payment subsequently
received will be processed as if received on the Date of Issue.
Each such portion will be equal to the (i) Minimum Initial Premium
minus (ii) all payments previously received. The remainder, if
any, of each such payment will be processed as of the date of
receipt.
Premiums are payable in advance and a premium receipt will be furnished upon
request. Except as provided above, all payments will be processed as of the
date of receipt.
You may pay Premiums in an amount other than the Target Premium or the Planned
Premium at any time while the policy is in full force. At our option, we may
either (i) refuse any Premium that causes the policy to be in violation of
section 7702 of the IRS Code or any successor provision (unless such Premium is
necessary to continue coverage), or (ii) require evidence of insurability for
such Premium.
- - --------------------------------------------------------------------------------
6. GUARANTEED MINIMUM DEATH BENEFIT PREMIUM TARGET
- - --------------------------------------------------------------------------------
If the Guaranteed Minimum Death Benefit ("GMDB") Feature described in Section 4
is in effect at the Date of Issue, it will only continue to be available if at
all times, other than a grace period described in Subsection A of Section 7, the
GMDB Premium Balance equals or exceeds the GMDB Premium Target described below.
The GMDB Premium Balance, as of any given Processing Date, equals (a) the sum of
all Premiums paid plus interest applied to each Premium payment from the date of
payment to such Processing Date (with interest calculated at an annual effective
rate of 4%) reduced by (b) the sum of all withdrawals as described in Section 11
plus interest applied to each withdrawal amount from the date of withdrawal to
such Processing Date (with interest calculated at an annual effective rate of
4%).
The GMDB Premium Target, as of any given Processing Date, equals (a) the Monthly
GMDB Premium times the number of GMDB Premium Monthly Due Dates that have
occurred since the Date of Issue (including the Date of Issue and such
Processing Date) plus (b) interest applied to each Monthly GMDB Premium from its
GMDB Premium Monthly Due Date to such Processing Date, with interest calculated
at an annual effective rate of 4%.
GMDB Premium Monthly Due Date shall mean the Date of Issue and each Processing
Date thereafter.
Monthly GMDB Premium shall equal the Guaranteed Minimum Death Benefit Premium
shown on page 3 (if the GMDB Feature is in effect) divided by 12.
8
<PAGE>
- - --------------------------------------------------------------------------------
7. GRACE PERIOD
- - --------------------------------------------------------------------------------
On any Processing Date the provisions of Subsection A or Subsection B, or both,
will apply as described below.
The Policy will be tested under the Subsection A grace period provisions on any
Processing Date that the Guaranteed Minimum Death Benefit Feature is in effect
under the policy.
The Policy will be tested under the Subsection B grace period provisions on any
Processing Date that there is an Additional Sum Insured in effect under the
policy or there is not a Guaranteed Minimum Death Benefit Feature in effect
under the policy.
A. If the Guaranteed Minimum Death Benefit Feature is in effect:
On each Processing Date, we will compare the GMDB Premium Balance on such
Processing Date to the GMDB Premium Target on such Processing Date. If, on any
such Processing Date, the GMDB Premium Balance is less than the GMDB Premium
Target, the GMDB Feature will be deemed to be in default as of such Processing
Date.
The amount by which the GMDB Premium Target exceeds the GMDB Premium Balance is
the "GMDB shortfall". In order to keep the Guaranteed Minimum Death Benefit
Feature in effect, a GMDB shortfall must be paid within a period which ends on
the second Processing Date after the date of default, which period shall be
referred to as "GMDB Grace Period". We will send notice to your last known
address and the last known address of any assignee of record with us at least 31
days before the end of the GMDB Grace Period specifying the minimum payment that
you must make to continue the Guaranteed Minimum Death Benefit Feature in force
beyond the end of the GMDB Grace Period.
If a payment at least equal to the GMDB shortfall is received before the end of
the GMDB Grace Period, the Guaranteed Minimum Death Benefit Feature will remain
in effect under the policy subject to the requirements described in Section 6
and this section. Any payment will be processed as of the date of receipt at our
Home Office. If a payment at least equal to the GMDB shortfall is not received
by the end of the GMDB Grace Period, the Guaranteed Minimum Death Benefit
Feature will be discontinued and no longer be in effect. If such Feature is
discontinued, then on the Processing Date on which the GMDB Grace Period ends
and on each Processing Date thereafter, the policy will be tested as described
in subsection B and the provisions of that subsection will apply whether or not
those provisions have been applied previously.
If the Insured dies during the GMDB Grace Period, we will deduct from the
proceeds the GMDB shortfall.
B. If there is an Additional Sum Insured in effect or if the Guaranteed Minimum
Death Benefit Feature has not been elected or has been removed:
On any Processing Date in which either an Additional Sum Insured is in effect or
the Guaranteed Minimum Death Benefit Feature is not in effect, we will determine
whether the total of all unpaid Section 9 charges as of such date are greater
than the Account Value minus indebtedness as of such date. If, on any such
Processing Date, the Account Value minus indebtedness is less than the total of
all Section 9 charges for that Processing Date, there will be a default as of
the Processing Date on which such determination is made.
If on such date of default, there is both the Guaranteed Minimum Death Benefit
Feature in effect and an Additional Sum Insured in effect, then only the
Additional Sum Insured will be in danger of discontinuance and the default will
be an Additional Sum Insured Default (referred to below as an "ASI Default").
If there is not a Guaranteed Minimum Death Benefit Feature in effect, the entire
policy will be in danger of lapsing and the default will be a "Policy Default".
The minimum amount you must pay to cure either type of default is "the Default
Payment". The Default Payment will be equal to a payment which, after deduction
of all Section 5 charges (i.e., Premium Tax Charge, DAC Tax Charge, Premium
Processing Charge, and Sales Charge) equals: (i) any and all Section 9 charges
unpaid prior to the date of default plus (ii) three times the total of all
Section 9 charges for the date of default.
An amount at least equal to the Default Payment must be received within a grace
period of 61 days after the date of default. We will send notice to your last
known address and to the last known address of any assignee of record with us at
least 31 days before the end of this grace period specifying whether there is an
ASI Default or a Policy Default and the Default Payment which you must make to
cure the default.
If a payment at least equal to the Default Payment is received before the end of
the grace period, there will no longer be a default. Any payment received will
be processed as of the date of receipt at our Home Office. When payment is
received, any Section 9 charges which are past due and unpaid will be deducted
from the Account Value.
9
<PAGE>
If there is an ASI Default and a payment at least equal to the Default Payment
is not received by the end of the grace period, then any Additional Sum Insured
will cease to be in effect and will be removed from the policy. If there is a
Policy Default and a payment at least equal to the Default Payment is not
received by the end of the grace period, then the Policy will lapse and will no
longer be in full force. Upon a lapse of the policy the remaining Surrender
Value, if any, will be paid to the Owner.
No Rider provisions will be in effect after the Policy ceases to be in full
force.
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8. ACCOUNT VALUE
- - --------------------------------------------------------------------------------
The Account Value on the Date of Issue equals the Net Premium received on or
prior to that date (as defined in Section 5). The Account Value as of the end of
any other Valuation Period is equal to the sum of (a) through (c) below:
(a) The value of the Fixed Account at the end of the Valuation Period. The
value in the Fixed Account at the end of a Valuation Period is equal to
the value of the Fixed Account at the beginning of the Valuation Period
plus the proportion of net premiums and loan repayments allocated to it
during the period, plus any amounts transferred to it and interest
credited to it during the period, minus the proportion of Section 9
charges, partial withdrawals, and loans deducted from it and amounts
transferred from it during the period. The value of the Fixed Account will
accrue interest daily at an effective annual rate of at least 4%.
(b) The value of all Variable Accounts as of the end of the Valuation
Period. The value of each Variable Account as of the end of a Valuation
Period is equal to the number of shares in such Variable Account at the
end of the Valuation Period multiplied by the unit value of such Variable
Account at the end of the Valuation Period.
(c) The amount of any Loan Assets (as defined in Section 10) at the end of the
Valuation Period.
Number of Shares in Variable Accounts
When transactions are made which affect a Variable Account, dollar amounts
are converted to number of shares. The number of shares for a transaction is
determined by dividing the dollar amount of the transaction by the unit value of
the Variable Account as of the end of the Valuation Period in which the
transaction occurs.
The number of shares increases when:
(a) any portion of a Net premium is credited to that Variable Account;
(b) transfers from the Fixed Account or other Variable Accounts are credited
to that Variable Account; or
(c) any portion of a loan is repaid to that Variable Account.
The number of shares in a Variable Account decreases when:
(a) any portion of a loan is taken from that Variable
Account;
(b) any portion of the charges described in Section 9 is deducted from that
Variable Account;
(c) any portion of a partial withdrawal is made from that Variable Account;
or
(d) a transfer is made from that Variable Account to the Fixed Account or
other Variable Account.
Unit Value of Variable Accounts
The unit value will vary from Valuation Date to Valuation Date to reflect the
investment performance of the each Variable Account. The unit value in any
Variable Account is $10.00 (ten dollars) on the first Valuation Date for the
Variable Account. The unit value at the end of any subsequent Valuation Period
Day is equal to the unit value at the end of the preceding Valuation Period
multiplied by the Net Investment Factor for that Variable Account for that
Valuation Period.
Net Investment Factor
The Net Investment Factor is determined for each Variable Account for each
Valuation Period. The Net Investment Factor equals the amount of investment
income and capital gains and losses (realized and unrealized) of the Variable
Account reduced by any amount charged against the Variable Account for taxes
paid, divided by the total assets of the Variable Account at the beginning of
the Valuation Period times 100% minus the Mortality and Expense Risk Charge
percentage for the Valuation Period.
10
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9. CHARGES
- - --------------------------------------------------------------------------------
On the Date of Issue and on every Processing Date, we will deduct, in order,
each of the charges (a) through (f) from the Account Value, where:
(a) is the Administrative Charge;
(b) is the Guaranteed Minimum Death Benefit Charge, if elected and if the
GMDB Feature is in effect;
(c) is the sum of the charges for Riders which are part of the policy, if
any, provided such charges are deducted from the Account Value;
(d) is the sum of all charges for ratings, if applicable;
(e) is the Issue Charge, if any; and
(f) is the Cost of Insurance Charge.
The Cost of Insurance Charge on the Date of Issue or on any Processing Date is
an amount equal to the applicable Applied Monthly Rate on that date divided by
1,000, multiplied by the Net Amount at Risk on that date.
Each Cost of Insurance Charge is deducted in advance of the insurance coverage
to which it applies.
The Net Amount at Risk is the amount determined by subtracting (a) from the
greater of (b) or (c) where:
(a) is the Account Value at the end of the immediately preceding Valuation
Period less all charges due on the Date of Issue or Processing Date;
(b) (i) is the Sum Insured divided by 1.0032737 for death benefit option A
or death benefit option M; or (ii) is the Sum Insured divided by
1.0032737, plus the Account Value for death benefit option B; and
(c) is the amount defined in (a) multiplied by the applicable Death Benefit
Factor described in Section 4.
The Applied Monthly Rates are the actual rates used to calculate the Cost of
Insurance Charge. We will determine the Applied Monthly Rates to be used for
this policy. The Applied Monthly Rates will be based on our expectations of
future mortality experience. They will be reviewed at least once every 5 Policy
Years. Any change in Applied Monthly Rates will be made on a uniform basis for
insureds of the same sex, Issue Age, and premium class, including smoker status,
and whose policies have been in force for the same length of time.
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10. LOANS
- - --------------------------------------------------------------------------------
You may borrow money from us on receipt at our Home Office of a completed form
satisfactory to us assigning the policy as the only security for the loan.
Loans may be made if a Loan Value is available and the Policy is not in a grace
period as defined in Section 7. Each loan must be for at least $1,000. We may
defer loans as provided by law or as provided in Section 21.
The Loan Value while the Policy is in full force will be equal to (a) minus (b)
minus (c) where: (a) is the Account Value, (b) is twelve times the sum of all
monthly charges deducted from the Account Value for the policy month in which
the loan is obtained, and (c) is (a) above minus (b) above multiplied by .75% in
Policy Years 1-20 and .25% thereafter. The amount of loan available will be the
Loan Value less any existing Indebtedness. Values will be determined, subject to
the "Deferral of Determinations and Payments" provision, at the end of the
Valuation Period in which the loan application is received at our Home Office.
The effective annual rate of Loan Interest for Policy Years 1-20 is 4.75%. The
effective annual rate of Loan Interest for Policy Years 21 and after is 4.25%.
The Loan Interest will accrue daily and will be payable on each Annual
Processing Date and on the date the loan is settled. Accrued interest will be
added to the loan daily and will bear interest from that date at the same rate.
Interest may be paid in advance at the equivalent effective rate.
A loan may be repaid in full or in part at any time before the Insured's death,
and while the policy is in full force.
When excess indebtedness occurs, the policy will terminate on the 31st day after
the Notice Date occurs if such excess has not been repaid by that date. "Excess
indebtedness" is the amount, if any, by which indebtedness exceeds an amount
equal to the Account Value. "Notice Date" is the date on which notice of excess
indebtedness is mailed to you and any assignee of record with us at the
address last known to us.
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<PAGE>
When a loan is made, the amount of the loan will be transferred to Loan Assets.
The amount of the loan also will be removed from the Subaccounts in
proportion to your policy investment in each Subaccount on the date such loan is
made. Upon loan repayment, Loan Assets will be reduced by the amount of the
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
then current Subaccount Investment Option.
Loan Assets are the total of all loans advanced plus interest credited on each
loan amount from the date of the loan at an effective annual rate of 4%.
- - --------------------------------------------------------------------------------
11. SURRENDERS AND WITHDRAWALS
- - --------------------------------------------------------------------------------
We will determine the Surrender Value of the policy if the Insured is then
alive, subject to Section 21, and if the policy is in full force. The policy
will terminate as of the Surrender Date. The Surrender Date is the end of the
day in which we have received at our Home Office (i) written notice requesting
full surrender of the policy, and (ii) the surrendered policy.
While the policy is in full force, the Surrender Value will be an amount equal
to the Account Value less any indebtedness.
When the policy ceases to be in full force under subsection B of Section 7, we
will pay the Surrender Value, if any, to you.
You may request a withdrawal of part of the Surrender Value in accordance with
our rules then in effect. The amount of the withdrawal will be removed from the
Subaccounts in proportion to your policy investment in each Subaccount on the
date such withdrawal is made. For each withdrawal, we reserve the right to make
a charge to the Account Value of an amount not to exceed $20. Each withdrawal
must be at least $1,000. No withdrawal can be made unless the resulting Total
Sum Insured is at least equal to the Minimum Total Sum Insured shown on page 3.
All amounts withdrawn will be subtracted from the GMDB Premium Balance as
described in Section 6 and will also be subtracted from your Account Value.
Further, your death benefit will be affected as follows: provided below.
With respect to determining the death benefit under Option A, the Total Sum
Insured will be reduced by the total of all withdrawals other than any
Terminated ASI Withdrawal Amounts. Your Death Benefit will continue to be
determined in accordance with Section 4, subject to these provisions.
With respect to determining the death benefit under Option B, the death
benefit will only be affected to the extent that the Account Value will be
reduced by all amounts withdrawn. However, withdrawals will not affect the
Total Sum Insured. Your Death Benefit will continue to be determined in
accordance with Section 4, subject to these provisions.
With respect to determining the death benefit under Option M, the Total Sum
Insured will be reduced by the total of all withdrawals other than any
Terminated ASI Withdrawal Amounts. Your Death Benefit will continue to be
determined in accordance with Section 4, subject to these provisions.
With respect to determining the death benefit under the Guaranteed Minimum
Death Benefit Feature, the Basic Sum Insured will be reduced by the total of
all withdrawals other than any Terminated ASI Withdrawal Amounts. Your Death
Benefit will continue to be determined in accordance with Section 4, subject
to these provisions.
Terminated ASI Withdrawal Amounts are any withdrawals made while there is an
Additional Sum Insured in effect which is later discontinued under the policy
because a timely default payment has not been made in connection with an ASI
Default as described in subsection B of Section 7. Under no circumstances may
the total of Terminated ASI Withdrawal Amounts exceed the Additional Sum Insured
in effect at the time the Additional Sum Insured is discontinued under
subsection B of Section 7.
12
<PAGE>
- - --------------------------------------------------------------------------------
12. BASIS OF COMPUTATIONS
- - --------------------------------------------------------------------------------
Minimum surrender values, reserves and net single premiums referred to in the
policy, if any, are computed on the basis of the Commissioners 1980 Standard
Ordinary Mortality Tables with percentage ratings, if applicable, and based on
the underwriting class of the Insured on the Date of Issue. The computations are
made using interest at the rate of 4% a year and using continuous functions.
The Account Value while the policy is in full force is computed as described in
Section 8. A detailed statement of the method of computation of values has been
filed with insurance supervisory officials of the jurisdiction in which this
policy has been delivered. The values are not less than the minimum values under
the law of that jurisdiction. Any values, reserves and premiums applicable to
any provision for an additional benefit shall be specified in the provision and
have no effect in determining the values available under the provisions of this
Section 12.
- - --------------------------------------------------------------------------------
13. SEPARATE ACCOUNT AND FIXED ACCOUNT
- - --------------------------------------------------------------------------------
We will allocate Net Premiums, other credits, and charges to the Variable
Accounts and the Fixed Account in accordance with Section 14. We will allocate a
proportional share of the investment results of the Variable Accounts to your
policy. We will make a Valuation Period Mortality and Expense Risk Charge in
accordance with the Policy Specifications. We reserve the right to increase this
charge at any time; however, it shall never exceed the maximum amount shown
in the Policy Specifications. We also reserve the right to make a charge for any
applicable income taxes.
The assets of the Variable Accounts will be invested in shares of corresponding
Portfolios of a Fund. The Portfolios will be valued at the end of each Valuation
Period at a fair value in accordance with applicable law. We will deduct
liabilities attributable to a Variable Account when determining the value of a
Variable Account. The Variable Accounts available on the Date of Issue of this
policy are shown in the Prospectus for this policy, along with any investment
management fees associated with the corresponding Portfolios.
The assets of the Separate Account are the property of the Company. They shall
be available to cover liabilities of our general account only to the extent that
the assets of the Separate Account exceed the liabilities of the Separate
Account arising under the variable life insurance policies supported by the
Separate Account.
We reserve the right to make certain changes if, in our judgment, they would
best serve the interests of the owners of policies such as this or would be
appropriate in carrying out the purposes of such policies. Any changes will be
made only to the extent and in the manner permitted by applicable laws. Also,
when required by law, we will obtain your approval of the changes and approval
from any appropriate regulatory authority.
Examples of the changes we may make include the following:
(a) To operate a Separate Account in any form permitted under the Investment
Company Act of 1940, or in any other form permitted by law.
(b) To take any action necessary to comply with or obtain and continue any
exemptions from the Investment Company Act of 1940.
(c) To transfer any assets in a Variable Account to another Variable Account;
or to add, combine or remove Subaccounts.
(d) To substitute, for the investment company stock held in any Portfolio,
another class of stock of the investment company or the stock of another
investment company or any other investment permitted by law.
(e) To make any other necessary technical changes in this policy in order to
conform with any action this provision permits us to take.
If any of these changes results in a material change in the underlying
investments of Variable Accounts to which the reserves for this policy are
allocated, we will notify you of such change. You may then make a new election
under the Subaccount Investment Option and the Variable Account Transfer
Provision.
13
<PAGE>
- - --------------------------------------------------------------------------------
14. ALLOCATION TO SUBACCOUNTS
- - --------------------------------------------------------------------------------
On the Date of Issue and during the first 19 days after the Date of Issue, Net
Premiums will be invested in the Money Market Subaccount. On the 20th day after
the Date of Issue, we will reallocate the amount in the Money Market Subaccount
in accordance with the Subaccount Investment Option, as chosen by you and shown
in the application for this policy. We will then allocate future Net Premiums
and other credits among the Subaccounts in accordance with this Subaccount
Investment Option. You may elect to change the Subaccount Investment Option at
any time. A change will be effective on the day in which we receive notice
satisfactory to us; however, fund transfers will not be made if the policy is in
a grace period. We reserve the right to impose limits on the number and
frequency of such changes. All percentages must be expressed as whole numbers.
The minimum percentage that may be allocated to any Subaccount and the maximum
number of Subaccounts in which assets may be held will be subject to our
administrative rules in effect at the time of election. We will allocate any
charges under Section 9 among the applicable Subaccounts in proportion to the
value of your policy investment in each Subaccount on the date of the charge.
Variable Account Transfer Provision
You may elect to transfer assets held in the Variable Accounts to any Subaccount
without charge. We reserve the right to impose limits on the number and
frequency of such transfers. A transfer will be effective on the day on which we
receive notice satisfactory to us.
Fixed Account Transfer Provision
Subject to the limitations below, you may elect by notice satisfactory to us to
transfer without charge part or all of the assets in a Fixed Account to any
Variable Account, in the manner described below. Except as provided in Section
15, such a transfer will be permitted only once during the period beginning 60
days before each policy anniversary and ending 30 days after such anniversary.
If notice is served on or before the anniversary, the transfer will be effective
on the anniversary date. If notice is received after the anniversary, the
transfer will be effective on the day we receive the notice. The maximum
transfer amount of any one transfer is 20% of the Fixed Account Assets, or $500,
if greater. We may defer the transfer for up to 6 months after your election
would be effective.
- - --------------------------------------------------------------------------------
15. INVESTMENT POLICY CHANGE
- - --------------------------------------------------------------------------------
The investment policy of the Portfolios shall not be materially changed unless a
statement of the change is filed with any jurisdiction requiring such filing. In
the event of such a change in investment policy, and while this policy is in
full force you may elect a transfer in accordance with Section 14 within 60 days
after (i) the effective date of the material change or (ii) the receipt of a
notice of the available options, whichever is later. No charge will be made for
any such transfer (regardless of the number of transfers previously made). Any
such transfer will be effective as of the day we receive the notice.
- - --------------------------------------------------------------------------------
16. ANNUAL REPORT TO OWNER
- - --------------------------------------------------------------------------------
While the policy is in full force, we will furnish annually to the Owner a
statement which shows:
(a) The Death Benefit, in accordance connection with the Death Benefit Option
elected, the Guaranteed Minimum Death Benefit if the GMDB Feature is in
effect, and the Account Value, all as of the date of the report;
(b) Payments received and charges made since the last report;
(c) Withdrawals since the last report; and
(d) Loan information.
14
<PAGE>
- - --------------------------------------------------------------------------------
17. REINSTATEMENT
- - --------------------------------------------------------------------------------
A. Restoration of Guaranteed Minimum Death Benefit Feature
If the Guaranteed Minimum Death Benefit Feature (GMDB Feature) has been removed
from the policy under subsection A of Section 7, the GMDB Feature may be
restored within 5 Policy Years after the beginning of the grace period described
in subsection A of Section 7, provided that the policy continues to be in full
force. In order to restore the GMDB Feature, we will require all of the
following:
(1) A written request to restore the GMDB Feature.
(2) Production of evidence of insurability satisfactory to us, unless
restoration is requested within 1 year after the beginning of the grace
period described in subsection A of Section 7.
(3) Payment of the difference between the GMDB Premium Target and the GMDB
Premium Balance on or before the Processing Date immediately following
the restoration request.
On the Processing Date on which the restoration takes effect, we will deduct
from the Account Value any unpaid Guaranteed Minimum Death Benefit charges under
Section 9.
We reserve the right to disallow restoration of the GMDB Feature more than once
during the life of the policy.
B. Reinstatement of Policy
If the policy lapses under subsection B of Section 7, it may be reinstated
within 1 year after the beginning of the grace period.
The date of reinstatement is the date as of which all 4 requirements below have
been satisfied:
(l) Written application for reinstatement.
(2) Production of evidence of insurability satisfactory to us.
(3) Our receipt of a payment which, after deduction of all applicable charges
listed under "Deductions from Premium Payments" in Section 1 is at least
equal to the sum of (i) all unpaid charges described in Section 9, plus
interest on each such charge from the date due up to and including the
date of reinstatement at an annual effective rate of 6%, plus (ii) the
total of all Section 9 charges for the three Processing Dates next
following the date of reinstatement, where the charges for each of the
next three Processing Dates are assumed to be equal to such charges on
the date of default. If the Guaranteed Minimum Death Benefit Feature had
been elected at issue and had not been removed more than 4 years prior to
the beginning of the grace period described in subsection B of Section 7,
it may be restored by paying the difference between the GMDB Premium
Target and the GMDB Premium Balance on or before the Processing Date
immediately following the date of reinstatement.
(4) Our approval of items (1) through (3).
On the date of reinstatement (i) a death benefit of the policy will be the same
as if no lapse had occurred and (ii) the policy will have indebtedness equal to
any indebtedness at the end of the day immediately preceding the date of
reinstatement.
The Account Value on the date of reinstatement will be the payment received in
connection with the reinstatement less the sum of all Section 9 charges that
would have been made from the date of lapse to the date of reinstatement if the
policy had not lapsed and less interest on each such charge at an effective
annual rate of 6% from the date such charge would have been due to the date of
reinstatement.
- - --------------------------------------------------------------------------------
18. OWNER AND BENEFICIARY
- - --------------------------------------------------------------------------------
The Owner and the Beneficiary will be as shown in the application unless you
change them or they are changed by the terms of this provision.
You shall have the sole and absolute power to exercise all rights and privileges
without the consent of any other person unless you provide otherwise by written
notice.
If there is no surviving Beneficiary upon the death of the Insured, you will be
the Beneficiary, but if you were the Insured, your estate will be Beneficiary.
While the Insured is alive, you may change the Owner and Beneficiary by written
notice. You may also revoke any change of Owner prior to its effective date by
written notice. No change or revocation will take effect unless we acknowledge
receipt on the notice. If such acknowledgment occurs, then (i) a change of
Beneficiary will take effect on the date the notice is signed, and (ii) a change
or a revocation of Owner will take effect as of the date specified in the
notice, or if no such date is specified, on the date the notice is signed. A
change or revocation will take effect whether or not you or the Insured is alive
on the date we acknowledge receipt. A change or revocation will be subject to
the rights of any assignee of record with us and subject to any payment made or
other action taken by us before we acknowledge receipt.
15
<PAGE>
- - --------------------------------------------------------------------------------
19. INTEREST ON PROCEEDS
- - --------------------------------------------------------------------------------
We will pay interest on proceeds paid in one sum in the event of the Insured's
death from the date of death to the date of payment. The rate will be the same
as declared for Option 1 in Section 28, Settlement Provisions, or such greater
rate as is required by law.
- - --------------------------------------------------------------------------------
20. TRANSFER OF ASSETS TO FIXED ACCOUNT
- - --------------------------------------------------------------------------------
At any time you may elect to transfer all assets held in all Variable Accounts
to the Fixed Account. No charge will be made for such transfer, regardless of
the number of transfers previously made.
- - --------------------------------------------------------------------------------
21. DEFERRAL OF DETERMINATIONS AND PAYMENTS
- - --------------------------------------------------------------------------------
We reserve the right to defer payment of the Surrender Value from the Fixed
Account for a period of six months.
During any period when the New York Stock Exchange is closed for trading (except
for normal holiday closings) or when the Securities and Exchange Commission
("the SEC") has determined that a state of emergency exists which may make
payment impractical, or the SEC by order permits postponement for the protection
of our policyholders, we reserve the right to do the following:
(1) To defer determination of the Account Value, and if such determination
has been deferred, to defer:
(a) determination of the values for a loan as of the end of the day we
receive the loan application at our Home Office, and payment of the
loan; and
(b) payment or application of any Death Benefit in excess of the
Guaranteed Minimum Death Benefit, if elected.
(2) To defer determination, application, processing, or payment of a
Surrender Value or any other policy transaction dependent upon Account
Value.
A deferral, as described above, will be applicable only if any portion of the
Account Value is invested in a Variable Account.
Except as provided in this provision we will make payment of the Death Benefit,
any Surrender Value, any withdrawal, or any loan amount within 7 days of the
date it becomes payable.
- - --------------------------------------------------------------------------------
22. CLAIMS OF CREDITORS
- - --------------------------------------------------------------------------------
The proceeds and any income payments under the policy will be exempt from the
claims of creditors to the extent permitted by law. These proceeds and payments
may not be assigned or withdrawn before becoming payable without our agreement.
- - --------------------------------------------------------------------------------
23. ASSIGNMENT
- - --------------------------------------------------------------------------------
Your interest in this policy may be assigned without the consent of any
revocable Beneficiary. Your interest, any interest of the Insured and of any
revocable Beneficiary shall be subject to the terms of the assignment.
We will not be on notice of any assignment unless it is in writing, nor will we
be on notice until a duplicate of the original assignment has been filed at our
Home Office. We assume no responsibility for the validity or sufficiency of any
assignment.
- - --------------------------------------------------------------------------------
24. INCONTESTABILITY
- - --------------------------------------------------------------------------------
This policy, except any provision for reinstatement or policy change requiring
evidence of insurability, shall be incontestable after it has been in force
during the lifetime of the Insured for two years from its Date of Issue, unless
fraud is involved and except for policy lapse under Section 10 or under
subsection B of Section 7.
A reinstatement and any policy change requiring evidence of insurability shall
be incontestable after it has been in force during the lifetime of the Insured
for two years from the effective date of such reinstatement or policy
change, except for policy lapse under Section 10 or under subsection B of
Section 7.
Any premium payment which we accept under Section 5 subject to insurability
shall be considered a policy change for purposes of this Section. Any increase
in the Death Benefit resulting from such payment shall be governed by the
immediately preceding paragraph.
16
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- - --------------------------------------------------------------------------------
25. MISSTATEMENTS
- - --------------------------------------------------------------------------------
If the age or sex of the Insured has been misstated, we will adjust the Basic
Sum Insured, any Additional Sum Insured, and every other benefit to that which
would have been purchased at the correct age or sex by the most recent Cost of
Insurance charge deducted under Section 9.
- - --------------------------------------------------------------------------------
26. SUICIDE EXCLUSION
- - --------------------------------------------------------------------------------
If the Insured commits suicide, while sane or insane, within 2 years from the
Date of Issue, the policy will terminate on the date of such suicide and we will
pay (in place of all other benefits, if any) an amount equal to the Premiums
paid less the amount of any indebtedness on the date of death and less any
withdrawals under Section 11. If the Insured commits suicide, while sane or
insane, after 2 years from the Date of Issue and within 2 years from the
effective date of any increase in the Death Benefit resulting from any payment
of Premium we are authorized to refuse under Section 5, the benefits payable
under the policy will not include the amount of such Death Benefit increase but
will include the amount of such Premium.
- - --------------------------------------------------------------------------------
27. THE CONTRACT
- - --------------------------------------------------------------------------------
The written application for the policy is attached at issue. The entire contract
between the applicant and us consists of the policy, such application, and any
riders and endorsements. However, additional written requests for policy changes
or acceptance of excess payment under Section 5 may be submitted to us after
issue and such additional requests may become part of the policy. All statements
made in any application shall, in the absence of fraud, be deemed
representations and not warranties. We will use no statement made by or on
behalf of the Insured to defend a claim under the policy unless it is in a
written application. Policy Years, policy months, and policy anniversaries are
measured from the Date of Issue.
Any reference in this policy to a date means a calendar day ending at midnight
local time at our Home Office.
An exchange of this policy for a new policy on a different plan may be made by
agreement between you and us in accordance with our published rules in effect at
that time.
We reserve the right to make any changes necessary in order to keep this policy
in compliance with any changes in federal or state tax laws. Other changes in
this policy may be made by agreement between you and us. Only the President,
Vice President, the Secretary, or an Assistant Secretary of the Company has
authority to waive or agree to change in any respect any of the conditions or
provisions of the policy, or to extend credit or to make an agreement for us.
18
<PAGE>
- - --------------------------------------------------------------------------------
28. SETTLEMENT PROVISIONS
- - --------------------------------------------------------------------------------
Optional Methods of Settlement
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 us,
under the terms of a supplementary agreement. The agreement will be issued when
the proceeds are applied through the choice of any one of the options below, or
any additional options we, in our sole discretion, may make available after
issue. We shall at least annually declare the rate of interest or amount of
payment for each option. Such declaration shall be effective until the date
specified in the next declaration.
Option 1--Interest income at the declared rate but not less than 3.5% a year on
proceeds held on deposit. The proceeds may be paid or withdrawn in whole or in
part at any time as elected.
Option 2A--Income of a Specified Amount, with payments each year totaling at
least 1/12th of the proceeds, until the proceeds plus interest is paid in full.
We will credit interest on unpaid balances at the declared rate but not less
than 3.5% a year.
Option 2B-- Income for a Fixed Period with each payment as declared but not less
than that shown in the Table for Option 2B.
Option 3-- Life Income with Payments for a Guaranteed Period, with each payment
as declared but not less than that shown in the Table for Option 3. If the Payee
dies within that period, we will pay the present value of the remaining
payments. In determining present value, we will use the same interest rate used
to determine the payments for this option.
Option 4-- Life Income without Refund at the death of the Payee of any part of
the proceeds applied. The amount of each payment shall be as declared but not
less than that shown in the Table for Option 4.
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.
The amount of each payment shall be as declared but not less than that shown in
the Table for Option 5.
You may choose an option by written notice to us: (a) while the Insured is
alive; and (b) before the proceeds become payable. If you have made no effective
choice, the Payee may make one by written notice within: (a) 6 months after the
death of the Insured; or (b) 2 months after the date on which the proceeds, if
any, are payable in any case except death.
No choice of an option may provide for payments of less than $50.00. The first
payment will be payable as of the date the proceeds are applied, except that
under Option 1 it will be payable at the end of the first payment interval.
The Payee under an option shall be the Insured, if living, and otherwise the
Beneficiary.
No option may be chosen without our consent if the proceeds are payable: (1) in
any case, except death, before the policy has been in force on the same plan for
at least 5 years; or (2) in any case to an executor, administrator, trustee,
corporation, partnership, association, or assignee.
A Payee may, by written notice, name and change a Contingent Payee to receive
any final amount that would otherwise be payable to the Payee's estate.
18
<PAGE>
Table for Settlement Options 2B, 3, 4, and 5
(Monthly payments for each $1,000 of proceeds applied)
<TABLE>
<CAPTION>
- - ------------------------------------- ------------------------------------------------------------------
Option 2B Age of Payee at Option 3 Option 4 Option 5
Income for a Fixed Birthday Nearest Life Income with Life Life
Period Date of First Guaranteed Income Income
Payment Period without with Cash
- - ------------------------------------- ---------------- Refund Refund
Period of Payment 10 20
Years Years Years
- - ------------------------------------- ------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 84.46 40 3.53 3.50 3.54 3.46
2 42.86 41 3.57 3.54 3.58 3.50
3 28.99 42 3.62 3.58 3.63 3.54
4 22.06 43 3.66 3.62 3.68 3.58
5 17.91 44 3.77 3.66 3.73 3.62
- - ------------------------------------- ---------------------------------------------------------------
6 15.14 45 3.76 3.71 3.78 3.66
7 13.16 46 3.82 3.75 3.83 3.71
8 11.68 47 3.87 3.80 3.89 3.75
9 10.53 48 3.93 3.85 3.95 3.80
10 9.61 49 3.99 3.90 4.02 3.85
- - ------------------------------------- ---------------------------------------------------------------
11 8.86 50 4.05 3.95 4.08 3.91
12 8.24 51 4.12 4.01 4.15 3.96
13 7.71 52 4.19 4.06 4.22 4.02
14 7.26 53 4.26 4.12 4.30 4.08
15 6.87 54 4.34 4.18 4.38 4.15
- - ------------------------------------- ---------------------------------------------------------------
16 6.53 55 4.42 4.24 4.47 4.21
17 6.23 56 4.50 4.31 4.56 4.28
18 5.96 57 4.59 4.37 4.66 4.36
19 5.73 58 4.69 4.44 4.76 4.44
20 5.51 59 4.79 4.50 4.87 4.52
- - ------------------------------------- ---------------------------------------------------------------
21 5.32 60 4.89 4.57 4.99 4.60
22 5.15 61 5.00 4.64 5.11 4.69
23 4.99 62 5.12 4.71 5.25 4.78
24 4.84 63 5.24 4.77 5.39 4.88
25 4.71 64 5.37 4.84 5.54 4.99
- - ------------------------------------- ---------------------------------------------------------------
26 4.59 65 5.50 4.91 5.70 5.09
27 4.47 66 5.64 4.97 5.87 5.21
28 4.37 67 5.79 5.03 6.06 5.33
29 4.27 68 5.94 5.09 6.26 5.46
30 4.18 69 6.10 5.14 6.47 5.59
- - ------------------------------------- ---------------------------------------------------------------
Annual, Semi-annual, or quarterly 70 6.27 5.19 6.69 5.73
payments under Option 2B are 71 6.44 5.24 6.94 5.88
11.839, 5.963, and 2.993 72 6.61 5.28 7.20 6.04
respectively times the monthly 73 6.79 5.32 7.48 6.20
payments. 74 6.98 5.36 7.79 6.38
- - ------------------------------------- ---------------------------------------------------------------
75 7.16 5.38 8.11 6.56
76 7.35 5.41 8.47 6.75
77 7.54 5.43 8.84 6.96
78 7.72 5.45 9.25 7.17
79 7.91 5.46 9.69 7.39
---------------------------------------------------------------
80 8.08 5.48 10.17 7.64
81 8.25 5.49 10.68 7.88
82 8.41 5.49 11.23 8.13
83 8.56 5.50 11.82 8.43
84 8.71 5.50 12.46 8.70
85 & over 8.83 5.51 13.14 8.99
---------------------------------------------------------------
Options 3, 4 and 5 are available only at the ages as shown.
---------------------------------------------------------------
</TABLE>
19
<PAGE>
Communications about this policy may be sent to the Company at John Hancock
Place, Boston, Massachusetts 02117.
Variable Life Insurance policy
Flexible Premiums
Death Benefit payable at death of Insured
Not eligible for dividends
Benefits, premiums and the Premium Class are shown in the Policy Specifications.
To the extent any benefit, payment, or value under this policy (including the
Account Value) is based on the investment experience of a Separate Account, such
benefit, payment, or value may increase or decrease in accordance with the
investment experience of the Separate Account and is not guaranteed as to fixed
dollar amount. However, this policy may provide a Guaranteed Minimum Death
Benefit if such option is elected at issue and provided that premiums are paid
and other conditions are met as described in Sections 4, 6, and 7.
Right to Cancel--The Owner may surrender this policy by delivering or mailing it
to the Company at Boston, Massachusetts (or to the agent or agency office
through which it was delivered) within 45 days after the date of Part A of the
application, or within 10 days after receipt by the Owner of the policy, or
within 10 days after mailing by the Company of the Notice of Withdrawal Right,
whichever is latest. Immediately on such delivery or mailing, the policy shall
be deemed void from the beginning. Any premium paid on this policy will be
refunded within 10 days after timely receipt from the Owner of appropriate
written notice (including the surrendered policy, if it has been delivered)
exercising the rights described above.
<PAGE>
EXHIBIT 3
[LETTERHEAD OF JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY APPEARS HERE]
March 26, 1997
Board of Directors
John Hancock Variable Life Insurance Company
Members of the Board:
In my capacity as Counsel to John Hancock Variable Life Insurance Company,
I have supervised the establishment of John Hancock Variable Life Account S (the
"Account") on May 27, 1993 by the Board of Directors of John Hancock Variable
Life Insurance Company (the "Company") as a separate account for assets
applicable to variable life insurance policies, pursuant to the provisions of
Section 132G of Chapter 175 of the General Laws of the Commonwealth of
Massachusetts. Moreover, I have participated in the preparation of this Pre-
Effective Amendment No. 1 to the Registration Statement on Form S-6 (the
"Registration Statement"), to be filed with the Securities and Exchange
Commission under the Securities Act of 1933 for the registration of individual
variable life insurance policies to be issued with respect to the Account.
I am of the following opinion:
(1) The Company is a corporation duly organized and validly existing under
the laws of the Commonwealth of Massachusetts.
(2) The Account is duly created and validly existing as a separate account
pursuant to the aforesaid provisions of Massachusetts law.
(3) The individual variable life insurance policies, when issued as
contemplated by this pre-effective amendment, will be legal and binding
obligations of the Company in accordance with their terms.
(4) The portion of the assets to be held in the Account equal to the
reserves and other liabilities under the individual variable life insurance
policies is not chargeable with liabilities arising out of any other business
the Company may conduct.
In arriving at the foregoing opinion, I have made such examination of law
and examined such records and other documents as in my judgement are necessary
or appropriate.
<PAGE>
I consent to the filing of this opinion as an exhibit to the Registration
Statement and to the use of my name under the caption "Legal Matters" in the
Prospectus contained in the Registration Statement.
Very truly yours,
Sandra M. DaDalt, Esq.
---------------------
Counsel
<PAGE>
EXHIBIT 6
[John Hancock Mutual Life Insurance Company Letterhead]
March 26, 1997
Board of Directors
John Hancock Variable Life Insurance Company
Re: Actuarial Opinion:
Members of the Board:
This opinion is furnished in connection with the filing of Pre-Effective
Amendment No. 1 to this Registration Statement on Form S-6 (File No. 333-15075)
by John Hancock Variable Life Insurance 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 indicated in this 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, 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 standard risk male age 45
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.
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.
Deborah A. Poppel, FSA
----------------------
Senior Associate Actuary
<PAGE>
EXHIBIT 7
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Prospectus and to the use of our reports dated February 7, 1997, with respect to
the financial statements of John Hancock Variable Life Account S, and dated
February 14, 1997, with respect to the financial statements of John Hancock
Variable Life Insurance Company, included in this Pre-Effective Amendment
No. 1 to the Registration Statement (Form S-6, No. 333-15075).
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Boston, Massachusetts
April 2, 1997
<PAGE>
EXHIBIT 8
March 1996
Description of JHMLICO's and JHVLICO's Issuance,
Transfer and Redemption Procedures for Policies
Pursuant to Rule 6e-3(T)(b)(12)(iii)
and
Method of Computing Adjustments upon Conversion to Fixed
Benefit Policies
Pursuant to Rule 6e-3(T)(b)(13)(v)(B).
--------------------------------------
Set forth below is the information called for under Rule 6e-3(T)(b)(12)(iii) and
Rule 6e-3(T)(b)(13)(v)(B) under the Investment Company Act 1940 ("1940 Act")
regarding certain procedures under John Hancock Mutual Life Insurance Company's
("JHMLICO") and John Hancock Variable Life Insurance Company's ("JHVLICO")
Flexible Premium Variable Life Insurance Policies (hereinafter referred to
individually as the "Policy" and collectively as the "Policies") newly issued in
1997, pursuant to a Form S-6 registration statement filed by JHVLICO and any
registration statement with respect to comparable Policies that may be filed by
JHMLICO.
Rule 6e-3(T)(b)(12)(iii) provides an exemption for a variable life insurance
separate account, its sponsoring insurance company, its investment adviser and
its principal underwriter from Sections 22(d), 22(e) and 27(c)(1) of the 1940
Act and Rule 22c-1 thereunder for issuance, transfer and redemption procedures
under a variable life insurance Policy to the extent necessary to assure
compliance with Rule 6e-3(T), state insurance law or established administrative
procedures of the life insurance company. The Rule requires, as a condition for
exemption, that such procedures be reasonable, fair and nondiscriminatory, and
be disclosed in the registration statement filed with respect to such variable
life insurance policies.
JHMLICO and JHVLICO represent that their procedures meet the foregoing standards
of Rule 6e-3(T)(b)(12)(iii), based on the following facts and circumstances:
1. Because of the insurance nature of the Policies and, in certain instances, as
a result of the requirements of the state insurance laws, the procedures
necessarily differ in significant respects from the procedures for mutual funds
and contractual plans for which the 1940 Act was designed.
<PAGE>
-2-
2. Many of the procedures have been adapted from those established and utilized
in connection with the administration of JHMLICO's fixed benefit life insurance
policies and earlier versions of variable life insurance policies issued by its
subsidiary, JHVLICO.
3. Certain procedures, including the 24-month conversion right to fixed benefit
policies, are required by Rule 6e-3(T).
4. JHMLICO and JHVLICO, in structuring their procedures to comply with Rule 6e-
3(T), state insurance laws, and their established administrative procedures,
have attempted to meet the intent of the 1940 Act to the extent deemed feasible.
5. Generally speaking, the state insurance laws to which both JHMLICO and
JHVLICO are subject reflect the fundamental principle that the procedures shall
not be unfair, unreasonable or unjustly discriminatory to any policyholder.
6. Because of the intricate insurance methodology underlying the procedures, it
is often difficult to determine, with certainty, whether and to what extent a
particular procedure, or a given step to that procedure, deviates from a
specific requirement of Section 22(d), 22(e) or 27(c)(1) of the 1940 Act or Rule
22c-1 thereunder.
Accordingly, the summary below includes the principal Policy provisions and
procedures that might be deemed to constitute, either directly or indirectly,
accommodation of the 1940 Act requirements and insurance practices. Given the
complexities of the Policies' operations, the summary, although comprehensive,
does not attempt to treat each and every mechanical variation or permutation
that might occur and does not repeat every provision or procedure that is
already set forth in the registration statement or exhibits thereto. At the
same time, the summary, in order to provide a comprehensive view of the
procedures, includes certain procedural steps that do not constitute a deviation
from the Sections and Rule cited above.
Rule 6e-3(T)(b)(13)(v)(B) grants an exemption for a flexible premium variable
life insurance separate account, its sponsoring insurance company, its
investment adviser and its principal underwriter from Section 27(d) of the 1940
Act for flexible premium variable life insurance policies which allow the
policyholder to convert a flexible premium variable life insurance policy into a
fixed benefit life insurance policy at any time during the first 24 months after
issuance. The Rule requires, as a condition for exemption, that the method of
computing any adjustments made in payments(or charges) or cash values to reflect
variances between the payments and cash values under the original policy and new
policy be set out in an exhibit to the registration statement filed with respect
to the variable life insurance Policy. JHMLICO's and JHVLICO's Policies provide
for such a conversion privilege. No adjustments in payments(or charges) and
cash values are made upon exercise of that privilege, as described below.
<PAGE>
-3-
This memorandum divides the information called for by Rules 6e-3(T)(b)(12)(iii)
and 6e-3(T)(b)(13)(v)(B) into three parts. The first part summarizes procedures
under the policies which might be deemed to involve, either directly or
indirectly, a "redemption" within the meaning of the 1940 Act. The second part
summarizes procedures which might be deemed to involve, either directly or
indirectly, a "purchase" transaction. The third part summarizes the procedures
for converting a Policy to a fixed benefit Policy.*/
-
This exhibit refers to procedures as they affect the respective variable
accounts of JHMLICO and JHVLICO ("the Account") used in funding the Policies.
Except as otherwise stated herein, these procedures do not necessarily reflect
the Fixed Account under the Policies which is held in the General Account of
each insurer. Whenever reference is made herein to JHMLICO it should also be
read as JHVLICO, insofar as JHVLICO and its Account are concerned, each insurer
having adopted identical procedures.
Except as otherwise defined herein, capitalized terms used in this memorandum
have the same meaning as are defined in the prospectus contained in the
applicable registration statement.
_____________________
*/ If an Owner requests a "purchase" or "redemption" transaction which is
- - -
impossible (for example, allocation of a loan or partial surrender to
subaccounts which have insufficient assets to support said allocation) or
impermissible (such as a reduction in the Basic Death Benefit below the minimum
required amount), JHMLICO will notify the Policy Owner to determine what action,
if any, the Policy Owner wishes to take instead.
<PAGE>
-4-
I. "Redemption" Procedures:
Surrender and Related Transactions
----------------------------------
JHMLICO's Policies provide for the payment of monies to a policyholder ("Owner")
or beneficiary upon presentation to JHMLICO of a Policy. Such presentation
might be deemed to constitute, either directly or indirectly, a "redemption" of
the Owner's interest within the meaning of the 1940 Act. Set forth below is a
summary of the principal policy provisions and procedures which might be viewed
as involving such a "redemption". The principal difference between such
"redemptions" and redemptions in the mutual fund or contractual plan context is
that under the Policies, the payee may be deemed not to receive a pro rata or
proportionate share of the assets in JHMLICO's account within the meaning of the
1940 Act. The amount received by the payee will depend upon the particular
benefit for which the Policy is presented, including, for example the Surrender
Value or Death Benefit.
There are also certain Policy provisions -- such as Policy loans -- under which
the Policy will not be presented to JHMLICO but which will affect the Owner's
benefits and involve a transfer of the assets supporting the Policy reserve out
of the Account. Finally, state insurance law may require that certain
requirements be met before JHMLICO is permitted to make payments to the payee.
A. Surrender Values
----------------
If the insured party under a Policy ("Insured") is alive, JHMLICO will pay,
within seven days, the Surrender Value next computed after receipt, at its Home
Office, of the Policy and a signed request for surrender. Computations with
respect to the investment experience of the subaccounts will be made as of 4:00
p.m., New York City time, on each day during which the New York Stock Exchange
is open for trading and on which the fund values its shares. This will enable
JHMLICO to pay the Surrender Value based on the next computed value after a
request is received.
While no premium is in default, the Surrender Value is equal to the Account
Value less any indebtedness, plus any Sales Charge Refund. In general, the
Account Value for any day equals the Policy Account Value for the previous day,
increased by any net premium and decreased by any charges against the Account
Value, accumulated at the subaccount's rate of return after charges against the
Account.
<PAGE>
-5-
No minimum amount of Policy Account Value is guaranteed. JHMLICO will make the
payment of the Surrender Value out of its General Account and transfer assets
from the Account to the General Account for the amounts held for the Policy in
the Account.
In lieu of payment of the Surrender Value upon surrender of a Policy in a single
sum, an election may be made to apply all or a portion of the proceeds under one
of the benefit settlement options described in the Policy or, with the approval
of JHMLICO, under other optional methods of settlement available from JHMLICO.
The election may be made by the Owner during the Insured's lifetime, or, if no
election is in effect at death, by the beneficiary. The benefit settlement
options are subject to the restrictions and limitations set forth in the Policy.
B. Death Claims
------------
JHMLICO will pay a death benefit to the beneficiary within seven days after
receipt at its Home Office of due proof of death of the Insured, and all other
requirements necessary 1/ to make payment. Provided the Policy is in full
-
force, 2/ the Death Benefit will be the greater of (1) the Total Sum Insured
-
(and Account Value, if any, under Option B) less any indebtedness on the date of
death, and (2) the Account Value at the end of the Valuation Period in which
death occurs multiplied by the applicable Death Benefit Factor or Corridor
Factor, as applicable, less any indebtedness on the date of death. The Death
Benefit is also less any overdue monthly deductions if death occurs during the
61 day Policy grace period.
The proceeds payable on death also reflect interest from the date of death to
the date of payment.
JHMLICO will make payment of the Death Benefit out of its General Account, and
will transfer assets from the Account to the General Account in an amount equal
to the amount held in the Account for the Policy terminated by death.
In lieu of payment of the Death Benefit in a single sum, a settlement option may
be selected as described in Section I.A, above.
<PAGE>
-6-
C. Default
--------
Premium Grace Period, Default and Lapse. Unless the Guaranteed Minimum Death
Benefit is in force, at the beginning of each Policy month JHMLICO determines
whether the Surrender Value is sufficient to pay all monthly charges then due
under the Policy. If not, the Policy is in default and JHMLICO will notify the
Owner of the amount estimated to be necessary to pay three months' deductions,
and a Policy grace period will be in effect until 61 days after the date the
notice was mailed. If JHMLICO does not receive payment of at least this amount
by the end of the Policy 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 has been in effect and lapses at the end
of a Guaranteed Minimum Death Benefit grace period, the usual default, Policy
grace period and lapse procedures described in the preceding paragraph will be
applied commencing with the first day of the Policy month in which the lapse of
the Guaranteed Minimum Death Benefit occurs.
The insurance continues in full force during the grace period but, if the
insured dies during the Policy grace period, the amount in default will be
deducted from the amount of 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. If in the Policy grace
period, the notice will specify the minimum amount which must be paid to
continue the Policy in force on a premium paying basis after the end of the
Policy grace period. If in the Guaranteed Minimum Death Benefit grace period,
the notice will specify the new amount which must be paid to continue the
Guaranteed Minimum Death Benefit feature in force.
- - ---------------
1/State insurance laws impose various requirements, such as receipt of a tax
- - -
waiver before payment of the Death Benefit may be made. In addition, payment of
the Death Benefit is subject to the provisions of the Policy regarding suicide
and incontestability.
2/"In full force" means that the Policy has not been surrendered or lapsed.
- - -
<PAGE>
-7-
D. Policy Loan
-----------
Loans may be made at any time a Loan Value is available. The Owner may borrow
money on completion of a form satisfactory to JHMLICO assigning the Policy as
the only security for the loan. Payment of the loan will be made from JHMLICO's
Home Office. The Loan Value will be 90% of the Account Value of the subaccounts
and 100% of the Fixed Account Value. Interest accrues and is compounded daily
at an effective annual rate determined by John Hancock at the start of each
Policy year. This interest rate will be 4.75% in Policy years 1 through 20 and
4.25% in Policy years 21 and beyond.
The amount of any outstanding loan plus accrued interest is called the
"indebtedness". A loan will not be permitted unless its is at least $1000. The
Owner may repay all or a portion of any indebtedness while the insured is living
and premiums are being duly paid. When a loan is made, shares are redeemed in
an aggregate equal to the amount of the loan and this aggregate value is
allocated to the Loan Account. The shares redeemed will be redeemed in each
subaccount in the same proportion as the Account Value is then allocated among
the subaccounts. Upon each loan repayment, the same proportionate amount of the
entire loan as was borrowed from the Fixed Account will be repaid to the Fixed
Account. The remainder of the loan repayment will be allocated to the
appropriate subaccounts as stipulated in the current Investment Rule.
Loan interest which is not paid by a Policy anniversary will be added to the
loan principal by automatically effecting an additional Policy loan. Amounts
transferred to the Policy loan account are credited with interest at .75% less
than the loan interest rate per annum for the first 20 Policy years and .25%
less than the loan interest rate per annum in years 21 and beyond, which
interest is transferred to the subaccount when the loan is repaid, according to
the Investment Rule then in effect.
While the indebtedness is outstanding, that portion of the Account Value that is
in the Loan Account is credited with interest at a rate of .75% less than the
loan rate for the first 20 Policy years and .25% less than the loan rate in
years 21 and later, a rate which will usually be different than the net return
for the subaccounts. Since the Loan Account and the remaining portion of the
Account Value will generally have different rates of investment return, any
Death Benefit above the 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 outstanding indebtedness is subtracted from the
amount otherwise payable when the Policy proceeds become payable.
Whenever the indebtedness equals or exceeds the Surrender Value, the Policy
terminates 31 days after notice has been mailed by JHMLICO to the Owner
specifiying the minimum amount that must be paid to keep the Policy in force
beyond that period. The Policy lapses unless a repayment of at least that
amount is made within that period.
<PAGE>
-8-
E. Transfers Among Variable Subaccounts
------------------------------------
The Owner may reallocate the amounts held for the Policy in the variable
subaccounts in each Policy year without charge. The Owner may use either
percentages (in whole numbers) or designate the dollar amount of funds to be
transferred between subaccounts. The reallocation must be such that the total
in the subaccounts after reallocation equals 100%. The change will be effective
at the end of the Valuation Period in which JHMLICO receives at its Home Office
notice satisfactory to JHMLICO.
F. Conversion Privilege
--------------------
The conversion privilege provided in a accordance with Rule 6e-3(T)(b)(13)(v)(B)
under the 1940 Act is discussed under III. below.
G. Partial Withdrawal of Account Value
-----------------------------------
An Owner may withdraw a portion of Account Value from the Policy on or after the
first Policy anniversary. This privilege, which reduces the Account Value by the
amount of the withdrawal and the associated charge, will be effective as of the
end of the Valuation Period in which JHMLICO receives written notice
satisfactory to it at its Home Office. The minimum amount that may be withdrawn
is $1000. The Total Sum Insured of the Policy will not be reduced until the
Account Value multiplied by the applicable Corridor or Death Benefit Factor is
less than or equal to the Total Sum Insured. At that time, the Total Sum Insured
is reduced by the amount of any withdrawals. An amount equal to $20 is charged
against Account Value for each partial withdrawal. When a withdrawal is made the
cumulative premiums calculated for purposes of determining the availability of
the Guaranteed Minimum Death Benefit feature will be adjusted. If the cumulative
premiums paid are less than the Guaranteed Minimum Death Benefit Premiums
required at this point, the Guaranteed Minimum Death Benefit will no longer be
in effect.
<PAGE>
-9-
II. Purchase and Related Transactions
--------------------------------------
Set out below is a summary of the principal provisions of the Policies and
administrative procedures thereunder that might be deemed to constitute, either
directly or indirectly, a "purchase" transaction within the meaning of the 1940
Act. The summary shows that, because of the insurance nature of the Policies,
the procedures involved necessarily differ in certain significant respects from
the purchase procedures for mutual funds and contractual plans. The chief
differences revolve around the premium rate structure and the insurance
underwriting (i.e., evaluation of risk) process. There are also certain Policy
provisions -- such as reinstatement -- which do not result in the issuance of a
Policy but which required certain payments by the Owner and involve a transfer
of assets supporting the Policy reserve into the Account.
A. Premium Schedules and Underwriting Standards
--------------------------------------------
Premiums for JHMLICO's Policies will not be the same for all Owners. The chief
reason is that the principle of pooling and distribution of mortality risks is
based upon the assumption that each Owner pays a premium commensurate with the
Insured's mortality risk which is actuarially determined based upon factors such
as age, sex, health and occupation. In the context of life insurance as
contrasted with mutual funds, a uniform premium (or "public offering price") for
all Insured's would discriminate unfairly in favor of those Insured's
representing greater mortality risks to the disadvantage of those representing
lesser risks. Accordingly, although there will be no uniform "Public offering
price" for all Insured's, there will be a single "price" for all Insured's in a
given actuarial category.
The Policies will be offered and sold pursuant to established premium targets 3/
-
and underwriting standards and in accordance with state insurance laws. Such
laws prohibit unfair discrimination among Policyholders, but recognize that
premiums may be based upon factors such as age, sex, health, and occupation. In
a few states, the premiums and values under the Policies will not directly
reflect the sex of the insured.
- - ----------------
3/In accordance with industry practice, JHMLICO will establish procedures to
- - -
handle errors in initial and subsequent premium payments to collect
underpayments, except for de minimis amounts.
<PAGE>
-10-
B. Application and Initial Premium Processing
------------------------------------------
Upon receipt of a completed application from a proposed Owner, JHMLICO will
follow certain insurance underwriting (i.e., evaluation of risk) procedures
designed to determine whether the proposed Insured is insurable. This process
may involve such verification procedures as medical examinations and may require
that further information be provided by the proposed Insured before a
determination can be made. A Policy cannot be issued, i.e., physically issued
through JHMLICO's computerized issue system until this underwriting procedure
has been completed. Policies issued on a guaranteed issue basis do not require
evidence of insurability.
The date on which a Policy is issued is referred to as the "Date of Issue". The
date of issue coincides with the beginning of a Valuation Period. It represents
the commencement of the suicide and contestable periods for purposes of the
Policies. It is also the date as of which the insurance age of the proposed
Insured is determined. It represents the first day of the Policy year and
therefore determines the Policy anniversary. It also marks the commencement of
the variability of benefits.
These processing procedures are designed to provide immediate benefits to the
proposed Owner in connection with payment of the initial premium and will not
dilute any benefit payable to an existing Owner. Although a Policy cannot be
issued until after the underwriting process has been completed, the proposed
Insured will receive immediate insurance coverage, if he has paid his minimum
first premium, subject to the other terms and conditions of JHMLICO's Receipt
and Conditional Temporary Insurance Agreement. If the minimum first premium is
paid with the application and the Policy is issued as applied for, the date of
issue in general will be the last of the Part A date or the Part B date of the
application or the date of most recent evidence of insurability, so that
variability of benefits will commence as of that date. If the minimum first
premium is not paid with the application, the date of issue will be the actual
date the application is processed for issue or the next valid issue date
provided the Owner pays the necessary premium. Except as referred to above, no
coverage will take effect with respect to a Policy until the minimum first
premium has been paid and the Policy is delivered to the Owner while the insured
is living and has not consulted, been examined, or treated by a doctor since the
latest Part B of the application was completed. If coverage under a Policy
never goes into effect, any premium paid will be returned without interest.
JHMLICO will require that the Policy be delivered and the minimum initial
premium paid within a specific period to protect itself against anti-selection
by the proposed Owner resulting from deterioration in the Insured's health.
Generally, the period will not exceed 60 days from the date of completion of the
latest of Parts A and B of the application and any required medical examination.
JHMLICO will transfer the appropriate amount from its general account to the
Account on the date the Policy is approved. The appropriate amount will be
calculated as though the net premium had in fact been transferred from the
General Account to the Account commencing on the date the Policy is issued.
<PAGE>
-11-
D. Reinstatement Provision
-----------------------
The Policy may be reinstated within 1 year after the beginning of the Policy
grace period. A Policy will be reinstated upon receipt by JHMLICO of a written
application for reinstatement and production of evidence of insurability
satisfactory to JHMLICO and payment of an amount equal to the sum of (a) and
(b).
(a)All paid monthly charges grossed up for State Premium Tax, Federal DAC Tax,
Premium Processing Charge, and Sales Load if applicable plus interest from the
due date to and including the date of the reinstatement at an effective rate of
6%.
(b)Total of all monthly deductions grossed up for State Premium Tax, Federal DAC
Tax, Premium Processing Charge, and Sales Load if applicable for the next three
monthly processing dates following the date of reinstatement, where the charges
for each of the next three processing dates are assumed to be equal to such
charges as on the date of default.
On the date of reinstatement the Policy will have (i) a Total Sum Insured as if
no lapse had occurred and (ii) indebtedness equal to any indebtedness at the end
of the day immediately preceding the date of reinstatement.
The Account Value on the date of reinstatement will be (a) less (b) and (c)
where:
(a) is the amount in Payment above;
(b) is the aggregate premium expense charges, i.e. sales charge, premium
processing charge, premium tax charge and Federal DAC tax charge; and
(c) is the sum of all Mortality Charges, Maintenance Charges and charges for
Riders and ratings, if any, that would have been made from the date of lapse to
the date of reinstatement if the Policy had not lapsed, with interest an
effective annual rate of 6% to the date of reinstatement.
In order to assist a lapsed Owner in making a considered judgment as to whether
to reinstate, JHMLICO may calculate the amount payable upon reinstatement and
"freeze" the amount for up to ten days.
<PAGE>
-12-
F. Repayment of Loan
-----------------
The Owner may repay all or a portion of any indebtedness while the insured is
living and premiums are duly paid. When a loan is made, shares are redeemed in
an aggregate value equal to the amount of the loan and this aggregate value is
transferred to the general account and carried as a Loan Account. The shares
redeemed will be redeemed in each subaccount in the same proportion as the
Account Value is then allocated among the subaccounts. Upon each loan
repayment, the same proportionate amount of the entire loan as was borrowed from
the Fixed Account will be repaid to the Fixed Account. The remainder of the
loan repayment will be allocated to the appropriate subaccounts as stipulated in
the current Investment Rule.
While the indebtedness is outstanding, that portion of the Account Value that is
in the Loan Account is credited with interest at a rate of at .75% less than the
loan rate in the first 20 Policy years and .25% less than the loan rate in years
21 and beyond, a rate which will usually be different than the net return for
the subaccounts. Since the Loan Account and the remaining portion of the
Account Value will generally have different rates of investment return, any
Death Benefit above the Total 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 outstanding indebtedness is subtracted from
the amount otherwise payable when the Policy proceeds become payable.
G. Correction of Misstatement of Age or Sex
----------------------------------------
If JHMLICO discovers that the age or sex of the Insured has been misstated,
JHMLICO will reconstruct the Policy by determining what benefits would have been
purchased at the correct age or sex by the most recent Cost of Insurance charge
deducted. Special adjustments may have to be made if the resultant face amount
is below JHMLICO's minimum size Policy.
Once the benefits are redetermined, JHMLICO will make the necessary adjustment
in the reserve assets in the Account to reflect the redetermined benefits and
the correct age and sex of the Insured.
<PAGE>
-13-
III. Conversion of Policy
--------------------
JHMLICO's Policies, in accordance with Rule 6e-3(T)(b)(v)(B) under the 1940 Act,
provide that the Owner within 24 months of issue, or any time after thereafter,
may transfer the entire Account Value under the Policy to the Fixed Account thus
creating a non-variable or fixed benefit life insurance Policy. This conversion
privilege is designed to permit an Owner to change his or her mind and to obtain
a fixed benefit Policy.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> LARGE CAP GROWTH
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 17,864,249
<INVESTMENTS-AT-VALUE> 16,915,393
<RECEIVABLES> 20,003
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 16,935,396
<PAYABLE-FOR-SECURITIES> 19,803
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 200
<TOTAL-LIABILITIES> 20,003
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 16,915,393
<DIVIDEND-INCOME> 2,452,382
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 44,880
<NET-INVESTMENT-INCOME> 2,402,502
<REALIZED-GAINS-CURRENT> 444,487
<APPREC-INCREASE-CURRENT> (1,104,574)
<NET-CHANGE-FROM-OPS> 1,792,415
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 13,036,922
<NUMBER-OF-SHARES-REDEEMED> (4,928,834)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 9,850,503
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 49,880
<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> SOVEREIGN BOND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 5,224,985
<INVESTMENTS-AT-VALUE> 5,185,747
<RECEIVABLES> 26,025
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5,211,772
<PAYABLE-FOR-SECURITIES> 25,968
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 57
<TOTAL-LIABILITIES> 26,025
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 5,185,747
<DIVIDEND-INCOME> 242,881
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 14,129
<NET-INVESTMENT-INCOME> 228,752
<REALIZED-GAINS-CURRENT> 5,746
<APPREC-INCREASE-CURRENT> (69,923)
<NET-CHANGE-FROM-OPS> 164,525
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,312,776
<NUMBER-OF-SHARES-REDEEMED> 679,839
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 3,797,462
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 14,129
<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 EQUITIES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 5,486,692
<INVESTMENTS-AT-VALUE> 5,731,199
<RECEIVABLES> 11,820
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5,743,019
<PAYABLE-FOR-SECURITIES> 11,736
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 84
<TOTAL-LIABILITIES> 11,820
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 5,731,199
<DIVIDEND-INCOME> 52,188
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 23,132
<NET-INVESTMENT-INCOME> 29,056
<REALIZED-GAINS-CURRENT> 165,730
<APPREC-INCREASE-CURRENT> 137,729
<NET-CHANGE-FROM-OPS> 332,515
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,750,218
<NUMBER-OF-SHARES-REDEEMED> 1,906,352
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 3,176,381
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 23,132
<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> SMALL CAP GROWTH
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 500,190
<INVESTMENTS-AT-VALUE> 497,525
<RECEIVABLES> 8
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 497,533
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 8
<TOTAL-LIABILITIES> 8
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 497,525
<DIVIDEND-INCOME> 512
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 1,547
<NET-INVESTMENT-INCOME> (1,035)
<REALIZED-GAINS-CURRENT> (40,018)
<APPREC-INCREASE-CURRENT> (2,665)
<NET-CHANGE-FROM-OPS> (42,118)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,120,880
<NUMBER-OF-SHARES-REDEEMED> 579,637
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 497,525
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,547
<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> INTERNATIONAL BALANCED
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 146,989
<INVESTMENTS-AT-VALUE> 152,295
<RECEIVABLES> 2
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 152,297
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2
<TOTAL-LIABILITIES> 2
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 152,295
<DIVIDEND-INCOME> 2,947
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 356
<NET-INVESTMENT-INCOME> 2,591
<REALIZED-GAINS-CURRENT> 56
<APPREC-INCREASE-CURRENT> 5,307
<NET-CHANGE-FROM-OPS> 7,954
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 148,617
<NUMBER-OF-SHARES-REDEEMED> 4,276
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 152,295
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 356
<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> 6
<NAME> MID CAP GROWTH
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 831,883
<INVESTMENTS-AT-VALUE> 838,323
<RECEIVABLES> 31,811
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 870,134
<PAYABLE-FOR-SECURITIES> 31,800
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 11
<TOTAL-LIABILITIES> 31,811
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 838,323
<DIVIDEND-INCOME> 1,177
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 719
<NET-INVESTMENT-INCOME> 458
<REALIZED-GAINS-CURRENT> (391)
<APPREC-INCREASE-CURRENT> 6,440
<NET-CHANGE-FROM-OPS> 6,509
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 858,546
<NUMBER-OF-SHARES-REDEEMED> 26,730
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 838,323
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 719
<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> 7
<NAME> LARGE CAP VALUE
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 738,803
<INVESTMENTS-AT-VALUE> 762,356
<RECEIVABLES> 10
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 762,366
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 10
<TOTAL-LIABILITIES> 10
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 762,356
<DIVIDEND-INCOME> 13,644
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 964
<NET-INVESTMENT-INCOME> 12,680
<REALIZED-GAINS-CURRENT> 1,327
<APPREC-INCREASE-CURRENT> 23,553
<NET-CHANGE-FROM-OPS> 37,560
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 767,660
<NUMBER-OF-SHARES-REDEEMED> 42,864
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 762,356
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 964
<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> 8
<NAME> MONEY MARKET
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 10,038,857
<INVESTMENTS-AT-VALUE> 10,038,857
<RECEIVABLES> 336,601
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 10,375,458
<PAYABLE-FOR-SECURITIES> 336,451
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 150
<TOTAL-LIABILITIES> 336,601
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 10,038,857
<DIVIDEND-INCOME> 287,321
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 30,722
<NET-INVESTMENT-INCOME> 256,599
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 256,599
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 36,814,029
<NUMBER-OF-SHARES-REDEEMED> 31,658,283
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 5,412,345
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 30,722
<AVERAGE-NET-ASSETS> 0
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 9
<NAME> MID CAP VALUE
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 322,406
<INVESTMENTS-AT-VALUE> 336,316
<RECEIVABLES> 6
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 336,322
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6
<TOTAL-LIABILITIES> 6
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 336,316
<DIVIDEND-INCOME> 6,878
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 377
<NET-INVESTMENT-INCOME> 6,501
<REALIZED-GAINS-CURRENT> 845
<APPREC-INCREASE-CURRENT> 13,910
<NET-CHANGE-FROM-OPS> 21,256
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 324,248
<NUMBER-OF-SHARES-REDEEMED> 9,188
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 336,316
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 377
<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
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<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 10
<NAME> SPECIAL OPPORTUNITIES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 5,653,898
<INVESTMENTS-AT-VALUE> 6,187,188
<RECEIVABLES> 10,196
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6,197,483
<PAYABLE-FOR-SECURITIES> 10,295
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 99
<TOTAL-LIABILITIES> 10,295
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 6,187,188
<DIVIDEND-INCOME> 238,163
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 21,146
<NET-INVESTMENT-INCOME> 217,017
<REALIZED-GAINS-CURRENT> 317,400
<APPREC-INCREASE-CURRENT> 344,786
<NET-CHANGE-FROM-OPS> 879,203
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,931,686
<NUMBER-OF-SHARES-REDEEMED> 1,301,761
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 4,517,128
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 21,146
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
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<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> REAL ESTATE EQUITY
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1,053,443
<INVESTMENTS-AT-VALUE> 1,279,523
<RECEIVABLES> 4,560
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,284,083
<PAYABLE-FOR-SECURITIES> 4,540
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 20
<TOTAL-LIABILITIES> 4,560
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,279,523
<DIVIDEND-INCOME> 50,204
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 4,547
<NET-INVESTMENT-INCOME> 46,657
<REALIZED-GAINS-CURRENT> 19,122
<APPREC-INCREASE-CURRENT> 191,067
<NET-CHANGE-FROM-OPS> 255,846
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 748,683
<NUMBER-OF-SHARES-REDEEMED> 295,788
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 708,741
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,547
<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> 12
<NAME> GROWTH & INCOME
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 25,904,663
<INVESTMENTS-AT-VALUE> 25,663,282
<RECEIVABLES> 195,552
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 25,858,834
<PAYABLE-FOR-SECURITIES> 195,180
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 372
<TOTAL-LIABILITIES> 195,552
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 25,663,282
<DIVIDEND-INCOME> 3,056,625
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 89,391
<NET-INVESTMENT-INCOME> 2,967,234
<REALIZED-GAINS-CURRENT> 512,402
<APPREC-INCREASE-CURRENT> (496,647)
<NET-CHANGE-FROM-OPS> 2,982,989
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 19,263,021
<NUMBER-OF-SHARES-REDEEMED> 5,502,524
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 16,743,486
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 89,391
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
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<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> 13
<NAME> MANAGED
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 11,981,412
<INVESTMENTS-AT-VALUE> 11,517,261
<RECEIVABLES> 4,549
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 11,521,810
<PAYABLE-FOR-SECURITIES> 4,408
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 141
<TOTAL-LIABILITIES> 4,549
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 11,517,261
<DIVIDEND-INCOME> 1,281,149
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 35,103
<NET-INVESTMENT-INCOME> 1,246,046
<REALIZED-GAINS-CURRENT> 124,493
<APPREC-INCREASE-CURRENT> (507,517)
<NET-CHANGE-FROM-OPS> 863,022
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9,996,216
<NUMBER-OF-SHARES-REDEEMED> 3,151,700
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 7,707,538
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 35,103
<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> 14
<NAME> SHORT-TERM U.S. GOVERNMENT
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 3,381,189
<INVESTMENTS-AT-VALUE> 3,395,242
<RECEIVABLES> 25,689
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,420,931
<PAYABLE-FOR-SECURITIES> 25,661
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 28
<TOTAL-LIABILITIES> 25,689
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 3,395,242
<DIVIDEND-INCOME> 181,937
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 9,277
<NET-INVESTMENT-INCOME> 172,660
<REALIZED-GAINS-CURRENT> (52,888)
<APPREC-INCREASE-CURRENT> (7,734)
<NET-CHANGE-FROM-OPS> 112,038
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,757,292
<NUMBER-OF-SHARES-REDEEMED> 7,683,085
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,186,195
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 9,277
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
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<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> 15
<NAME> SMALL CAP VALUE
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 326,961
<INVESTMENTS-AT-VALUE> 341,007
<RECEIVABLES> 5
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 341,012
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5
<TOTAL-LIABILITIES> 5
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 341,007
<DIVIDEND-INCOME> 8,296
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 523
<NET-INVESTMENT-INCOME> 7,773
<REALIZED-GAINS-CURRENT> 58
<APPREC-INCREASE-CURRENT> 14,046
<NET-CHANGE-FROM-OPS> 21,877
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 335,271
<NUMBER-OF-SHARES-REDEEMED> 16,141
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 341,007
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 523
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
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<PER-SHARE-NAV-END> 0
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<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 16
<NAME> INTERNATIONAL OPPORTUNITIES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 872,447
<INVESTMENTS-AT-VALUE> 909,113
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<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 941,672
<PAYABLE-FOR-SECURITIES> 32,547
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 12
<TOTAL-LIABILITIES> 32,559
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 909,113
<DIVIDEND-INCOME> 2,965
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 1,439
<NET-INVESTMENT-INCOME> 1,526
<REALIZED-GAINS-CURRENT> 242
<APPREC-INCREASE-CURRENT> 36,666
<NET-CHANGE-FROM-OPS> 38,434
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 960,081
<NUMBER-OF-SHARES-REDEEMED> 89,402
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 909,113
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,439
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
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<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 17
<NAME> EQUITY INDEX
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
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<TABLE> <S> <C>
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<NAME> STRATEGIC BOND
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<TABLE> <S> <C>
<PAGE>
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<NAME> TURNER CORE GROWTH
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
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<NAME> EDINBURGH INT'L EQUITY
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<PAGE>
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<NAME> FRONTEIR CAPITAL APPRECIATION
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