<PAGE>
As filed with the Securities and Exchange Commission on April_, 1997
Registration No. 333-425
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM S-6
Post-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
--------------------
It is proposed that this filing become effective(check appropriate box)
/ / immediately upon filing pursuant to paragraph (b) of Rule 485
--
/X/ on May 1, 1997 pursuant to paragraph (b) of Rule 485
--
/ / 60 days after filing pursuant to paragraph (a)(1) of Rule 485
--
/ / on (date) pursuant to paragraph (a)(1) of Rule 485
--
If appropriate check the following box
/ / this post-effective amendment designates a new effective date for a
--
previously filed amendment
Pursuant to the provisions of Rule 24f-2, Registrant has registered an
indefinite amount of the securities being offered and filed its Notice for
fiscal year 1996 pursuant to Rule 24f-2 on February 26, 1997.
FCC0008)
<PAGE>
CROSS-REFERENCE TABLE
Form N-8B-2 Item Caption in Prospectus
- ---------------- ---------------------
1, 2 Cover, The Account and The Series
Fund, JHVLICO and John Hancock
3 Inapplicable
4 Cover, Distribution of Policies
5, 6 The Account and The Series Fund
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 Fund
11, 12 Summary, The Account and The Series
Fund, 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 Fund
17 Summary, Policy
Provisions and Benefits
18 The Account and The Series Fund,
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 Fund,
Policy Provisionsand Benefits
Appendix--Illustration of Death
Benefits, Surrender Values
and Accumulated Premiums
45 Not Applicable
46 The Account and The Series Fund,
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 Fund,
Changes that JHVLICO
Can Make
53,54,55 Not Applicable
56,57,58 Not Applicable
59 Financial Statements
<PAGE>
John Hancock Variable Life
Insurance Company
(JHVLICO)
[LOGO OF MEDALLION EXECUTIVE VARIABLE LIFE APPEARS HERE]
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
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 MAY 1, 1997
This Prospectus describes a flexible premium variable life policy ("Policy")
which 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
(the "Fund"), a "series" type mutual fund advised by John Hancock Mutual Life
Insurance Company ("John Hancock"). The assets of the Fixed Account will be
invested in the general account of John Hancock Variable Life Insurance
Company ("JHVLICO").
The Prospectus for the Fund, which is attached to this Prospectus, describes
the investment objectives, policies and risks of investing in the Portfolios
of the Fund: Growth & 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. Other variable Subaccounts
and Portfolios may be added in the future.
Replacing existing insurance with a Policy described in this Prospectus may
not be to your advantage.
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
IT IS NOT VALID UNLESS ATTACHED TO A CURRENT PROSPECTUS FOR THE FUND.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SUMMARY................................................................... 1
JHVLICO and JOHN HANCOCK.................................................. 6
THE ACCOUNT AND SERIES FUND............................................... 6
The Account............................................................. 6
Series Fund............................................................. 6
THE FIXED ACCOUNT......................................................... 9
POLICY PROVISIONS AND BENEFITS............................................ 9
Requirements for Issuance of Policy..................................... 9
Premiums................................................................ 10
Account Value and Surrender Value....................................... 12
Death Benefits.......................................................... 13
Transfers Among Subaccounts............................................. 15
Loan Provisions and Indebtedness........................................ 16
Default................................................................. 17
Exchange Privilege...................................................... 18
CHARGES AND EXPENSES...................................................... 18
Charges Deducted from Premiums.......................................... 18
Sales Charges........................................................... 18
Reduced Charges for Eligible Groups..................................... 19
Charges Deducted from Account Value or Assets........................... 20
Guarantee of Certain Charges............................................ 22
DISTRIBUTION OF POLICIES.................................................. 22
TAX CONSIDERATIONS........................................................ 23
Policy Proceeds......................................................... 23
Charge for JHVLICO's Taxes.............................................. 24
Corporate and H.R. 10 Plans............................................. 24
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS OF JHVLICO...................... 25
REPORTS................................................................... 25
VOTING PRIVILEGES......................................................... 26
CHANGES THAT JHVLICO CAN MAKE............................................. 26
LEGAL MATTERS............................................................. 27
REGISTRATION STATEMENT.................................................... 27
EXPERTS................................................................... 27
FINANCIAL STATEMENTS...................................................... 27
APPENDIX--OTHER POLICY PROVISIONS......................................... A-1
Settlement Provisions................................................... A-1
Additional Insurance Benefits........................................... A-1
General Provisions...................................................... A-1
APPENDIX--ILLUSTRATION OF DEATH BENEFITS, SURRENDER VALUES AND ACCUMULATED
PREMIUMS................................................................. A-3
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS.
<PAGE>
INDEX OF DEFINED WORDS AND PHRASES
Below are listed certain words and phrases used in this Prospectus, together
with identification of the page on which each is defined or explained:
<TABLE>
<CAPTION>
Page
<S> <C>
Account.............................................................. 6
Account Value........................................................ 1
Additional Sum Insured............................................... 14
Age.................................................................. A-2
Basic Sum Insured.................................................... 1
DAC Tax.............................................................. 18
Death Benefit........................................................ 13
Fixed Account........................................................ 9
Fund.......................................................... Front Cover
Grace Period......................................................... 17
Guaranteed Death Benefit............................................. 14
Guaranteed Death Benefit Premium..................................... 10
Indebtedness......................................................... 16
Investment Rule...................................................... 11
Loan Account......................................................... 16
Minimum First Premium................................................ 10
Modal Processing Date................................................ 10
Planned Premium...................................................... 10
Policy Anniversary................................................... A-2
Portfolio..................................................... Front Cover
Servicing Office..................................................... 6
Subaccount.................................................... Front Cover
Surrender Value...................................................... 12
Target Premium....................................................... 19
Total Sum Insured.................................................... 13
Valuation Date....................................................... 8
Valuation Period..................................................... 8
Variable Subaccounts.......................................... Front Cover
7-Pay Limit.......................................................... 11
</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 taxes and sales
expenses. JHVLICO then places the rest of the premium into as many 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 Fund. The currently available Portfolios are identified on the cover of
this Prospectus. The assets allocated to the Fixed Account are invested in the
general account of 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
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 five
Policy years, so long as the Guaranteed Death Benefit Premiums specified in
the Policy have been paid. The Additional Sum Insured is subject to lapse, but
has certain cost and other advantages.
The initial Account Value is the amount of the premium that JHVLICO credits
to the Policy, after deduction of the initial charges. The Account Value
increases or decreases daily depending on the investment experience of the
Subaccounts to which the amounts are allocated at the direction of the Owner.
JHVLICO does not guarantee a minimum amount of Account Value. The Owner bears
the investment risk for that portion of the Account Value allocated to the
variable Subaccounts. The Owner may surrender a Policy at any time while the
insured is living. The Surrender Value is the Account Value less any
Indebtedness plus, in the first two Policy years, any Sales Charge Refund. The
Owner may also make partial withdrawals from a Policy, subject to certain
restrictions and an administrative charge. 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 $100,000. All
persons insured must meet specified age limits and certain health and other
criteria called "underwriting standards." The smoking status of the insured is
generally reflected in the insurance charges made. Policies issued under
certain circumstances will not directly reflect the sex of the insured in
either the premium rates or the charges and values under the Policy.
1
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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 $50 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 Total Sum Insured at issue, and the Policy options selected by the
Owner. Unless the Guaranteed 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.
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 Fund. The assets of each variable
Subaccount are invested in the corresponding Portfolio of the Fund. The
Portfolios of the Fund 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 and Equity Index.
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.
<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.
2
<PAGE>
For a full description of the Fund see the Prospectus for the Fund attached
to this Prospectus.
WHAT ARE THE CHARGES MADE BY JHVLICO?
State Premium Tax Charge and Federal DAC Tax Charge. Charges deducted from
each premium payment, currently 2.35% for state premium taxes and 1.25% as a
Federal deferred acquisition cost or "DAC Tax" charge.
Sales Charge Deduction from Premium. A charge deducted from premium payments
equal to no more than 6% of the Target Premium received in Policy years 1
through 10 and no more than 3% of the Target Premium in any year after Policy
year 10. JHVLICO currently intends to waive this deduction from premiums
received after the first 10 Policy years.
Sales Charge Deduction from Account Value. A charge deducted monthly from
Account Value, for the first 5 Policy years, in an amount set forth in the
Policy that varies by age and sex per $1,000 of Basic Sum Insured at issue.
For example, this monthly amount for a 45 year old male is 30c per $1,000 of
Basic Sum Insured.
Issue Charge. A charge deducted monthly from Account Value at the rate of
$20 per month for the first 12 Policy months, plus, for the first 5 Policy
years, an amount set forth in the Policy that varies by age and sex per $1,000
of the Basic Sum Insured at issue. For example, this additional monthly amount
for a 45 year old male is 3c per $1,000 of Basic Sum Insured.
Maintenance Charge. A charge deducted monthly from Account Value in an
amount equal to no more than $8 (currently $6) for all Policy years.
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.
Charge for Mortality and Expense Risks. A charge deducted daily from the
variable Subaccounts at a maximum effective annual rate of .90% (currently
.60%) of the assets of each variable Subaccount.
Charge for Extra Mortality Risks. An additional charge, depending upon the
age of the insured and the degree of additional mortality risk, required if
the insured does not qualify for the standard underwriting class. This
additional charge is deducted monthly from Account Value.
Charge for Optional Rider Benefits. An additional charge required if the
Owner elects to purchase any optional insurance benefits by 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".
3
<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 charges
deducted for sales expenses, state premium taxes and the Federal DAC Tax
charge. These charges also apply to subsequent premium payments. Twenty days
after the date of issue, the amount in the Money Market Subaccount is
reallocated among the Subaccounts in accordance with the Owner's election. Net
premiums derived from payments received after this reallocation date are
allocated, generally on the date of receipt, to one or more of the Subaccounts
as elected by the Owner.
HOW ARE AMOUNTS ALLOCATED TO EACH SUBACCOUNT?
At issue and subsequently thereafter, the Owner will provide us with the
rule ("Investment Rule") we will follow to invest net premiums or other
amounts in any of the Subaccounts. The Owner may change the Investment Rule
under which JHVLICO will allocate amounts to Subaccounts. See "Premiums--
Billing, Allocation of Premium Payments (Investment Rule)".
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.
The death benefit of the Policy under Options A or B 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 Death Benefit provision, the Policy is guaranteed not
to lapse during the first 5 Policy years, provided that, on each Modal
Processing Date, the amount of cumulative premiums paid, minus any
withdrawals, is at least equal to the cumulative amount of Guaranteed Death
Benefit Premiums due to date. The Guaranteed Minimum Death Benefit Feature
applies only to the Basic Sum Insured and not to any amount of Additional Sum
Insured.
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
4
<PAGE>
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 Owner may obtain a Policy loan in the maximum amount of 90% of that
portion of the Account Value attributable to the variable Subaccount
investments plus 100% of that portion of the Account Value attributable to
Fixed Account investments and minus any existing Indebtedness. Interest
charged on any loan will accrue and compound daily at an effective annual rate
determined by JHVLICO at the start of each Policy year. This interest rate
will be 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.
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 by delivering or mailing it within 45 days
after the date Part A of the application has been completed, or within at
least 10 days after receipt of the Policy by the Owner, or within 10 days
after mailing by JHVLICO of a Notice of Withdrawal Right, whichever is latest,
to JHVLICO's 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 Fund.
WHAT INVESTMENT TRANSFERS ARE ALLOWED AN OWNER?
The Owner may transfer the Account Value among the variable Subaccounts or
into the Fixed Account at any time. Transfers out of the Fixed Account,
however, are subject to restrictions.
ARE THE BENEFITS UNDER A POLICY SUBJECT TO FEDERAL INCOME TAX?
The benefits under Policies described in this Prospectus are expected to
receive the same tax treatment under the Internal Revenue Code of 1986 as
benefits under traditional fixed-benefit life insurance policies. Thus, death
benefits payable under the Policies will not be included in the beneficiary's
gross income. Also, the Owner is not taxed on interest and gains under the
Policy unless and until values are actually received through withdrawal,
surrender, or other distributions.
Under Federal tax law, distributions from Policies on which premiums greater
than a "7-pay" premium limit (as defined in the law) have been paid, will be
subject to special taxation. See "Premiums--7-Pay Premium Limit" and "Policy
Proceeds" for a discussion of how the "7-pay" premium limit may be exceeded
under a Policy. A distribution on such a Policy (called a "modified
endowment") will be taxed to the extent there is any income (gain) to the
Owner and an additional penalty tax may be imposed on the taxable amount.
5
<PAGE>
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 SERIES FUND
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 the variable Subaccounts are invested in the corresponding
Portfolio of the Fund, but the assets of one variable Subaccount are not
necessarily legally insulated from liabilities associated with another
variable Subaccount. New variable Subaccounts may be added or existing
variable Subaccounts may be deleted as new Portfolios are added to or deleted
from the Fund and made available to Owners.
SERIES FUND
The Fund is a "series" type of mutual fund registered with the Commission
under the 1940 Act as an open-end diversified management investment company.
The Fund serves as the investment medium for the Account and other unit
investment trust separate accounts established for other variable life
insurance policies and variable annuity contracts. (See the attached Fund
Prospectus for a description of a need to monitor for possible conflicts and
other consequences.) A very brief summary of the investment objectives of each
Portfolio is set forth below.
Growth & Income Portfolio: to achieve intermediate and long-term growth of
capital, with income as a secondary consideration. This objective will be
pursued by investments principally in common stocks (and
6
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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: 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: 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: to provide maximum current income consistent with
capital preservation and liquidity. It seeks to achieve this objective by
investing in a managed portfolio of high quality money market instruments.
Managed Portfolio: to achieve maximum long-term total return consistent with
prudent investment risk. Investments will be made in common stocks,
convertibles and other equity investments, in bonds and other fixed income
securities and in money market instruments.
Real Estate Equity Portfolio: to provide above-average income and long-term
growth of capital by investment principally in equity securities of companies
in the real estate and related industries.
International Equities Portfolio: to achieve long-term growth of capital by
investing primarily in foreign equity securities.
Special Opportunities Portfolio: to achieve long-term capital appreciation
by emphasizing investments in equity securities of issuers in various economic
sectors.
Short-Term U.S. Government Portfolio: to provide a high level of current
income consistent with the maintenance of principal, through investment in a
portfolio of short-term U.S. Treasury securities and U.S. Government agency
securities.
Equity Index Portfolio: to provide investment results that correspond to the
total return of the U.S. market as represented by the S&P 500 utilizing common
stocks that are publicly traded in the United States.
Large Cap Value Portfolio: to provide substantial dividend income, as well
as long-term capital appreciation, through investments in the common stocks of
established companies believed to offer favorable prospects for increasing
dividends and capital appreciation.
Mid Cap Growth Portfolio: to provide long-term growth of capital through a
non-diversified portfolio investing largely in common stocks of medium
capitalization companies.
Mid Cap Value Portfolio: 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: to provide long-term growth of capital through a
diversified portfolio investing primarily in common stocks of small
capitalization emerging growth companies.
Small Cap Value Portfolio: to provide long-term growth of capital by
investing in a well diversified portfolio of equity securities of small
capitalization companies exhibiting growth value characteristics.
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Strategic Bond Portfolio: to provide a high total return consistent with
moderate risk of capital and maintenance of liquidity, from a portfolio of
domestic and international fixed income securities.
International Opportunities Portfolio: to provide capital appreciation
through investment in common stocks of primarily well-established, non-United
States companies.
International Balanced Portfolio: to maximize total U.S. dollar return,
consisting of capital appreciation and current income through investment in
non-U.S. equity and fixed income securities.
John Hancock acts as the investment manager for the 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
and Income, Large Cap Growth, 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, provides
sub-investment advice with respect to the Sovereign Bond, Small Cap Growth and
Special Opportunities Portfolios; and John Hancock Advisers, Inc. 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.
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 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.
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 of the Fund which corresponds
to a variable Subaccount of the Account. Any dividend or capital gains
distributions received by the Account will be reinvested in Fund shares at
their net asset value as of the dates paid.
On each Valuation Date, shares of each Portfolio are purchased or redeemed
by 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.
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A full description of the Fund, its investment objectives, policies and
restrictions, its charges, expenses and all other aspects of its operation is
contained in the attached Prospectus and the statement of additional
information referred to therein, which should be read together with this
Prospectus.
THE FIXED ACCOUNT
An Owner may allocate premiums to the Fixed Account or transfer all or a
part of the Account Value under a Policy to the Fixed Account. The amount so
allocated or transferred will become a part of 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 Basic Sum Insured at issue
of $100,000. At the time of issue, the insured must be age 20 through 75. 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.
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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
$50 and meets the other requirements described below.
Minimum First Premium. The amount of premium required at the time of issue
is determined by JHVLICO, and depends on the age, sex, 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 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. If the
payment of a given premium will cause the Policy Account Value to increase to
such an extent that an increase in death benefit is necessary to satisfy
federal tax law requirements, 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 Death Benefit in effect under
a Policy. Also, if an Owner has elected to use the "guideline premium and cash
value corridor" test for Federal income tax premium limitation purposes,
JHVLICO will not accept the portion of the premium which exceeds the maximum
amount permitted under that test. See "Definition of Life Insurance" under
"Death Benefits".
Guaranteed Death Benefit Premiums. A Guaranteed Death Benefit feature may
apply during the first five Policy years. See "Death Benefits". The Guaranteed
Death Benefit Premiums required to maintain this benefit in force depend on
the issue age, sex, underwriting class of the insured at issue, the Basic Sum
Insured at issue, the ratio of Basic Sum Insured to Total Sum Insured at issue
and any additional benefits selected. 1/12th of the Guaranteed Death Benefit
Premium is required for Owners electing a monthly premium payment mode; 1/4 of
the Guaranteed Death Benefit Premium is required for Owners electing the
quarterly mode; 1/2 of the Guaranteed Death Benefit Premium is required for
Owners electing the semi-annual mode; and the full Guaranteed Death Benefit
Premium is required for Owners electing the annual mode. The due date for each
premium is referred to as the Modal Processing Date. To keep the Guaranteed
Death Benefit in effect, the amount of actual premiums paid minus any
withdrawals must at each Modal Processing Date be at least equal to the
Guaranteed Death Benefit Premiums due to date. If this test is not satisfied
on any Modal Processing Date, JHVLICO will notify the Owner of the shortfall
immediately and a Guaranteed Death Benefit grace period will commence as of
that anniversary. The Guaranteed Death Benefit grace period will end on the
second monthly processing date after
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the determination of the shortfall. The notice will be mailed to the Owner's
last-known address at least 31 days prior to the end of the Guaranteed Death
Benefit grace period. If JHVLICO does not receive payment for the amount of
the deficiency by the end of the Guaranteed Death Benefit grace period, the
Guaranteed Death Benefit feature will permanently lapse with no possibility
for restoration.
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 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 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 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
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payment that will cause a Policy to become a modified endowment, the excess
portion of that premium payment will not be accepted unless the Owner signs an
acknowledgment of that fact. When it identifies such an excess premium,
JHVLICO sends the Owner immediate notice and refunds the excess premium if it
has not received notice of the acknowledgment by the time the premium payment
has had a reasonable time to clear the banking system, but in no case longer
than two weeks.
ACCOUNT VALUE AND SURRENDER VALUE
Amount of Account Value. The Account Value increases or decreases depending
upon a number of factors, such as the applicable Subaccount's investment
experience, the proportion of the Account Value invested in each Subaccount
and the interest credited to any Loan Account established upon the making of a
Policy loan. In general the Account Value for any day equals the Account Value
for the previous day, decreased by charges against the Account Value and by
any partial withdrawal, increased or decreased by the investment experience of
the Subaccounts and increased by net premiums received. No minimum amount of
Account Value is guaranteed.
A Policy loan will not affect the total amount of Account Value at the time
the loan is made but will result in a different rate of return being credited
to the Loan Account portion of the Account Value.
Amount of Surrender Value. The Surrender Value will be the Account Value
less any Indebtedness. Upon a full surrender during the first two Policy
years, JHVLICO will add to the Surrender Value an amount equal to the excess
of (a) the total sales charges that have been deducted (whether from premiums
or Account Value) under the Policy to date over (b) the sum of 30% of premiums
paid under the Policy that do not exceed one "SEC Guideline Annual Premium",
plus 10% of any additional premiums paid that do not exceed a second SEC
Guideline Annual Premium, plus 9% of any premiums paid in excess of two such
SEC Guideline Annual Premiums. This excess amount is the "Sales Charge
Refund". The SEC Guideline Annual premium is the level annual premium that
would be required for a fixed life insurance policy on the life of the insured
with a face amount equal to the Basic Sum Insured, plus any Additional Sum
Insured, and having the same optional insurance riders, if any, as the Policy,
based on certain assumptions prescribed by the Commission for this purpose.
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 Home Office.
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A withdrawal will reduce any Option A Total Sum Insured by the amount
withdrawn. A withdrawal will not reduce any Option B Total Sum Insured but,
because Account Value will be reduced, the death benefit under this option
also will be reduced. JHVLICO reserves the right to refuse any withdrawal
request that would cause the Policy's Total Sum Insured to fall below
$100,000.
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".
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".
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. Owners who prefer to have
insurance coverage that generally does not vary in amount and lower cost of
insurance charges should choose Option A.
Definition of Life Insurance. Federal tax law requires a minimum death
benefit in relation to cash value for a Policy to qualify as life insurance.
The death benefit of a Policy will be increased if necessary to ensure that
the Policy will continue to qualify as life insurance. One of two tests under
current Federal tax law can be used to determine if a Policy complies with the
definition of life insurance in Section 7702 of the Code.
The "guideline premium and cash value corridor" test limits the amount of
premiums payable under a Policy to a certain amount for an insured of a
particular age and sex. The test also applies a prescribed "Corridor Factor"
to determine a minimum ratio of death benefit to Account Value. The Corridor
Factor depends upon the attained age of the insured. The Corridor Factor
decreases slightly (or remains the same at older and younger ages) from year
to year as the attained age of the insured increases. A complete list of
Corridor Factors is set forth in the Policy. All Option B Policies will be
subject to the "guideline premium and cash value corridor" test.
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The Owner may, at the time an Option A death benefit is applied for, choose
either the "guideline premium and cash value corridor" test discussed above or
may elect for the Policy to be governed by the "cash value accumulation test"
under Section 7702.
The "cash value accumulation test" also limits the amount of premiums
payable under a Policy to a prescribed amount, using a minimum ratio of death
benefit to a Policy's Account Value, but employs as a standard a "net single
premium" computed in compliance with the Code. If the Account Value under a
Policy is at any time greater than the net single premium at the insured's age
and sex for the proposed death benefit, the death benefit will be increased
automatically by multiplying the Account Value by a "Death Benefit Factor"
computed in compliance with the Code. The Death Benefit Factor depends upon
the sex and then attained age of the insured. The Death Benefit Factor
decreases slightly from year to year as the attained age of the insured
increases. A complete list of Death Benefit Factors is set forth in the
Policy. An Option A death benefit using the cash value accumulation test will
offer the best opportunity for the Owner who is looking for an increasing
death benefit in later Policy year and/or would like to fund the Policy at the
"7-pay" limit for the full 7 years. An Option A death benefit using the
guideline premium and cash value corridor test will offer the best opportunity
for the Account Value under a Policy to increase without increasing the death
benefit as quickly as it might under the other options.
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 Death Benefit. During the first 5 Policy years the Policy is
guaranteed not to lapse, provided that the amount of premiums paid through
each Modal Processing Date minus any withdrawals is at least equal to the sum
of the cumulative Guaranteed Death Benefit Premiums due to date. At any time
when this feature is not in force, the death benefit of the Policy is not
guaranteed and the Policy may lapse if the Account Value falls to a low level.
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 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 $100,000 or (b) if immediately following the reduction, the
Policy's current death benefit would reflect an increase necessary for the
Policy to continue to qualify as life insurance (see "Death Benefits--
Definition of Life Insurance"). 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".
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
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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 sales charge deducted from premiums and from Account Value and
the amount of compensation paid to the selling insurance agent will be less if
coverage is included as Additional Sum Insured, rather than as Basic Sum
Insured. The Guaranteed Death Benefit Premium will be affected by the amount
of any Additional Sum Insured elected relative to the Total Sum Insured.
The amount of any Additional Sum Insured is not included in any Guaranteed
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 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 Death Benefit, the proportion of the Policy's
Total Sum Insured that is guaranteed can be increased by taking out more
coverage as Basic Sum Insured at the time of Policy issue. It could be to the
Owner's advantage either to increase the amount of coverage applied for as
Basic Sum Insured in order that the Guaranteed Death Benefit will be available
or, if such guarantee is not of value to the Owner, to maximize the proportion
of the Additional Sum Insured.
Temporary Coverage Prior to Policy Delivery. If a specified amount of
premium is paid with the application for a Policy, temporary term coverage may
be available prior to the time that coverage under the Policy takes effect.
Temporary term coverage is subject to the terms and conditions described in
the application for a Policy.
TRANSFERS AMONG SUBACCOUNTS
The Owner may reallocate the amounts held for the Policy in the Subaccounts
with no charge at any time, except as noted below. The Owner may either (1)
use percentages (in whole numbers) to be transferred among Subaccounts or (2)
designate the dollar amount of funds to be transferred among Subaccounts. The
reallocation must be such that the total in the Subaccounts after reallocation
equals 100% of Account Value. Transfers out of a variable Subaccount will be
effective at the end of the Valuation Period in which JHVLICO receives at its
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
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transferred out of the Fixed Account in any Policy year. Currently, there is
no minimum amount limit on transfers out of the Fixed Account, but JHVLICO
reserves the right to impose such a limit in the future.
No transfers 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 90%
of that portion of the Account Value attributable to the variable Subaccount
investments plus 100% of that portion of the Account Value attributable to
Fixed Account investments. Interest charged on any loan will accrue and
compound daily at an effective annual rate determined by JHVLICO at the start
of each Policy Year. This interest rate will be 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 the
Loan Account, a portion of JHVLICO's general account. Each Subaccount will be
reduced in the same proportion as the Account Value is then allocated among
the Subaccounts. Upon each loan repayment, the same proportionate amount of
the entire loan as was borrowed from the Fixed Account will be repaid to the
Fixed Account. The remainder of the loan repayment will be allocated to the
appropriate Subaccounts as stipulated in the 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 the Loan Account is credited with
interest at a rate that is .75% less than the loan interest rate for the
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<PAGE>
first 20 Policy years and, thereafter, .25% less than the loan interest rate.
This rate will usually be different than the net return for the Subaccounts.
Since the Loan Account and the remaining portion of the Account Value will
generally have different rates of investment return, the Account Value, the
Surrender Value and any death benefit above the Total Sum Insured are
permanently affected by any Indebtedness, whether or not repaid in whole or in
part. The amount of any Indebtedness is subtracted from the amount otherwise
payable when the Policy proceeds become payable.
Whenever the Indebtedness equals or exceeds the Account Value, the Policy
terminates 31 days after notice has been mailed by JHVLICO to the Owner and
any assignee of record at their last known addresses specifying the minimum
amount which must be paid to keep the Policy in force 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 Death Benefit
is in force, at the beginning of each Policy month JHVLICO 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 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 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 Death Benefit has been in
effect and lapses at the end of a grace period (as described in "Premiums--
Guaranteed 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 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) may be reinstated in
accordance with the Policy's terms. Evidence of insurability satisfactory to
JHVLICO will be required 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. A reinstatement of the Basic Sum Insured or the
Additional Sum Insured may be deemed a material change for Federal income tax
purposes. See "Premiums--7-Pay Premium Limit" and "Tax Considerations".
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<PAGE>
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 Charges" below), the following
charges are deducted from premiums:
State Premium Tax Charge. A charge currently equal to 2.35% of each premium
payment will be deducted from each premium payment. Premium taxes vary from
state to state. The 2.35% rate is the average rate currently expected to be
paid on premiums received in all states over the lifetimes of the insureds
covered by the Policies. JHVLICO will not increase this charge under
outstanding Policies, but reserves the right to change this charge for
Policies not yet issued in order to correspond with changes in the state
premium tax levels.
Federal DAC Tax Charge. A charge currently equal to 1.25% of each premium
payment will be deducted from each premium payment to cover the estimated cost
to JHVLICO of the Federal income tax treatment of the Policies' deferred
acquisition costs--commonly referred to as the "DAC Tax". JHVLICO has
determined that this charge is reasonable in relation to JHVLICO's increased
Federal income tax burden under the Internal Revenue Code resulting from the
receipt of premiums. JHVLICO will not increase this charge under outstanding
Policies, but reserves the right, subject to any required regulatory approval,
to change this charge for Policies not yet issued in order to correspond with
changes in the Federal income tax treatment of the Policies' deferred
acquisition costs.
SALES CHARGES
Charges are 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".
From Premiums. Part of the sales charge is deducted from premiums received.
The amount is 6% of the premiums received in Policy years 1 through 10 that do
not exceed that year's total Target Premium and 3% of the premiums received in
Policy years 11 and later that do not exceed each year's Target Premium. The
Target Premium is established at issue and is the sum of Base Policy Target
Premium and any rider premium. The Base
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<PAGE>
Policy Target Premium is set forth in the Policy. Target Premiums will vary
based on the issue age, sex, and underwriting class of the insured. JHVLICO
currently intends to make this deduction only in the first 10 Policy years,
but this is not contractually guaranteed and the right is reserved to continue
deductions over a longer period. Because the Policies were first offered for
sale in 1996, no Policies have yet been outstanding for more than 10 years.
No sales charge is deducted from a premium payment received in excess of one
Target Premium in any Policy year.
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 $6,000 if he
paid $10,000 in each of the first ten Policy years, but would pay total sales
charges of only $3,000 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 Death Benefit will lapse and that the Surrender
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".
From Account Value. The remainder of the sales charge is deducted monthly
from Account Value, for the first 5 Policy years, in an amount set forth in
the Policy that varies by age and sex per $1,000 of the Basic Sum Insured at
issue. For example, this monthly amount for a male age 45 is 30c per $1,000 of
Basic Sum Insured.
REDUCED CHARGES FOR ELIGIBLE GROUPS
The sales charges 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 Owner.
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<PAGE>
CHARGES DEDUCTED FROM ACCOUNT VALUE OR ASSETS
The following charges are deducted from Account Value or assets:
Issue Charge. JHVLICO will deduct monthly an issue charge from Account
Value, at the rate of $20 per month for the first 12 Policy months, plus, for
the first 5 Policy years, an amount set forth in the Policy that varies by age
and sex per $1,000 of the Basic Sum Insured at issue. For example, this
additional monthly amount for a 45 year old male is 3c per $1000 of Basic Sum
Insured.
The issue charge is to compensate JHVLICO for expenses incurred in
connection with the issuance of the Policy, other than sales expenses. Such
expenses include medical examinations, insurance underwriting costs and costs
incurred in processing applications and establishing permanent Policy records.
Maintenance charge. JHVLICO will deduct from the Account Value a monthly
charge not to exceed $8 for all Policy years. The current monthly charge is
$6.
This charge is to compensate JHVLICO for administrative expenses, including
recordkeeping, processing death claims and surrenders, making Policy changes,
reporting and other communications to Owners and other similar expense and
overhead costs.
Insurance Charge. The insurance charge deducted monthly from Account Value
is based on the attained age of the insured and the amount at risk. The amount
at risk is the difference between the current death benefit and the Account
Value (after reflecting all charges against Account Value). The amount of the
insurance charge is determined by multiplying JHVLICO's then current monthly
rate for insurance by the amount at risk.
Current monthly rates for insurance are based on the sex, age, smoking
status and underwriting class of the insureds and the length of time the
Policy has been in effect. JHVLICO will review these rates at least every 5
years, and may change these rates from time to time based on JHVLICO's
expectations of future experience. However, these rates will never be more
than the guaranteed maximum rates based on the 1980 Commissioners' Standard
Ordinary Mortality Tables, as set forth in the Policy.
Lower current insurance rates are offered at most ages for insureds who
qualify for the standard or select 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.
Beginning on the first processing date of the tenth Policy year, JHVLICO
intends to make a credit to the Account Value on a monthly basis. This credit
will be reflected as a reduction to the insurance charge as described below.
This credit is not guaranteed but it is JHVLICO's present intention to effect
this reduction in the tenth Policy year and each Policy year thereafter.
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The amount of the reduction will depend upon the length of time the Policy
has been in force. In the tenth Policy year the monthly insurance charge will
be reduced by an amount equal to a percentage of the current non-loaned
portion of the Account Value. This percentage will begin at an effective
annual rate of .20% in the tenth Policy year and increase annually by .01%
through and including the thirtieth Policy year. Thereafter the percentage
reduction each year the Policy remains in force will be at an effective annual
rate of .40%.
For example, it is expected that the reduction percentage in Policy year 11
would be at an effective annual rate of .21%, in Policy year 20 would be .30%
and in Policy year 30 would be .40%.
JHVLICO reserves the right to modify or discontinue this reduction. Because
the Policies were first offered for sale in 1996, no reductions have yet been
made.
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 .90% of the value of the assets of each
variable Subaccount attributable to the Policy. The current charge is at an
effective annual rate of .60%. 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 or select underwriting class must pay an additional charge because of
the extra mortality risk. The level of the charge depends upon the age of the
insured and the degree of extra mortality risk. This additional charge is
deducted monthly from Account Value.
Charges for Optional Rider Benefits. An additional charge must be paid if
the Owner elects to purchase any optional insurance benefit by Policy 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 Fund at net asset value, a value which reflects the
deduction from the assets of the 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 Prospectus for the Fund.
The monthly deductions from Account Value described above are deducted on
the date of issue and on the first day of each Policy month thereafter. These
deductions are made from the Subaccounts in proportion to the
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amount of Account Value in each. For each month that JHVLICO is unable to
deduct any charge because there is insufficient Account Value, the uncollected
charges will accumulate and be deducted when and if sufficient Account Value
is available.
GUARANTEE OF CERTAIN CHARGES
The state premium tax charge, the Federal DAC Tax charge, the issue charge
and the charge for partial withdrawals are guaranteed not to increase over the
life of the Policy. The administrative charge, the sales charges, the
mortality and expense risk charge, and the insurance charge are guaranteed not
to exceed the maximums set forth in the Policy.
DISTRIBUTION OF POLICIES
Applications are solicited by agents who are licensed by state insurance
authorities to sell JHVLICO's Policies and who are also registered
representatives ("representatives") of John Hancock 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, Distributors acts as the principal
underwriter of the Policies. The sales agreement will remain in effect until
terminated upon sixty days' written notice by any party. JHVLICO will make the
appropriate refund if a Policy ultimately is not issued or is returned under
the short-term cancellation provision. Officers and employees of John Hancock
and JHVLICO are covered by a blanket bond by a commercial carrier in the
amount of $25 million.
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 20% of the Target Premium paid in the first Policy year plus an
amount equal to 6% of the first Policy year's Target Premium which will be
payable to the representative in each of Policy years 2 through 4; 6% of the
Target Premium paid in Policy years 2 through 4; and 3% of the Target Premium
paid in each year thereafter. The maximum commission on any premium paid in
any Policy year in excess of the Target Premium is 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, 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
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<PAGE>
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 the Fund.
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.
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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.
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.
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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 of JHVLICO; Second Vice President,
John Hancock Mutual Life Insurance Company.
Barbara L. Luddy Director and Actuary, JHVLICO; Second Vice
President, John Hancock Mutual Life
Insurance Company.
Daniel L. Ouellette Vice President, Marketing, JHVLICO; Vice
President, John Hancock Mutual Life
Insurance Company.
Patrick F. Smith Controller of JHVLICO; Assistant
Controller, John Hancock Mutual Life
Insurance Company.
</TABLE>
The business address of all Directors and officers of JHVLICO is John
Hancock Place, Boston, Massachusetts 02117.
REPORTS
At least once each Policy year a statement will be sent to the Owner setting
forth the amount of the death benefit, Basic Sum Insured, Additional Sum
Insured, Account Value, the portion of the Account Value in each Subaccount,
Surrender Value, premiums received and charges deducted from premiums since
the last report, and any outstanding Policy loan (and interest charged for the
preceding Policy year) as of the last day of such year. Moreover,
confirmations will be furnished to Owners of premium payments, transfers among
Subaccounts, Policy loans, partial withdrawals and certain other Policy
transactions.
25
<PAGE>
Owners will be sent semiannually a report containing the financial
statements of the Fund, 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 Fund. JHVLICO will vote the
shares of each of the Portfolios of the Fund which are deemed attributable to
qualifying variable life insurance policies and variable annuity contracts at
regular and special meetings of the Fund's shareholders in accordance with
instructions received from owners of such policies or contracts. Shares of the
Fund 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 Fund's meeting.
Owners of Policies may give instructions regarding the election of the Board
of Trustees of the Fund, ratification of the selection of independent
auditors, approval of Fund investment advisory agreements and other matters
requiring a vote under the 1940 Act. Owners will be furnished information and
forms by 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 of the Fund
or to approve or disapprove an investment advisory or underwriting contract
for the Fund. JHVLICO also may disregard voting instructions in favor of
changes initiated by an owner or the Fund's Board of Trustees in an investment
policy, investment adviser or principal underwriter of the Fund, if JHVLICO
(i) reasonably disapproves of such changes and (ii) in the case of a change of
investment policy or investment adviser, makes a good-faith determination that
the proposed change is contrary to state law or prohibited by state regulatory
authorities or that the change would be inconsistent with a variable
Subaccount's investment objectives or would result in the purchase of
securities which vary from the general quality and nature of investments and
investment techniques utilized by other separate accounts of JHVLICO or of an
affiliated life insurance company, which separate accounts have investment
objectives similar to those of the variable Subaccount. In the event JHVLICO
does disregard voting instructions, a summary of that action and the reasons
for such action will be included in the next semi-annual report to owners.
CHANGES THAT JHVLICO CAN MAKE
The voting privileges described in this Prospectus are afforded based on
JHVLICO's understanding of applicable Federal securities law requirements. To
the extent that applicable law, regulations or interpretations change to
eliminate or restrict the need for such voting privileges, JHVLICO reserves
the right to proceed in accordance with any such revised requirements. JHVLICO
also reserves the right, subject to compliance with applicable law, including
approval of owners if so required, (1) to transfer assets determined by
JHVLICO to be associated with the class of policies to which the Policies
belong from the Account to another separate account
26
<PAGE>
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.
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 Randi M.
Sterrn, F.S.A., an Actuary of JHVLICO.
FINANCIAL STATEMENTS
The financial statements of JHVLICO included herein should be distinguished
from the financial statements of the Account and should be considered only as
bearing upon the ability of JHVLICO to meet its obligations under the
Policies.
27
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 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.
28
<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.
29
<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.
30
<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.
31
<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.
32
<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.
33
<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.
34
<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.
35
<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
36
<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.
37
<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>
38
<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>
39
<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
40
<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
41
<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.
42
<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.
43
<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.
44
<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.
45
<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,
46
<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.
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
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.
48
<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>
49
<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.
50
<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>
51
<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.
52
<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>
53
<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.
54
<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.
55
<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.
The tax treatment of the Policy proceeds may vary, depending on which
settlement option is chosen and the timing of such choice. You should consult
your tax adviser in this regard.
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 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 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. Tables are provided for Options A and B. The
death benefit and Surrender Value for a Policy would be different if premiums
are paid in different amounts or at different times or if the actual gross
rates of investment return average 0%, 6% or 12% over a period of years, but
nevertheless fluctuate above or below the average for individual Policy years,
or if the Policy were issued under circumstances in which no distinctions are
made based on the gender of the insured.
The amounts shown for the death benefit and Surrender Value are as of the
end of each Policy year. The first three tables headed "Using Current Charges"
assume that the current rates for insurance, sales, risk, and expense charges
will apply in each year illustrated, including the planned reductions after
the first 10 Policy years in cost of insurance charges and sales charges
deducted from premiums. The three tables headed "Using Maximum Charges" assume
that the maximum (guaranteed) insurance, sales, risk, and expense charges will
be made in each year illustrated. The amounts shown in all tables reflect an
average asset charge for the daily investment advisory expense charges to the
Portfolios of the Fund (equivalent to an effective annual rate of .58%) and an
assumed average asset charge for the annual nonadvisory operating expenses of
each Portfolio of the Fund (equivalent to an effective annual rate of .18%).
For a description of expenses charged to the Portfolios, including the
reimbursement of any Portfolio for annual non-advisory operating expenses in
excess of an effective annual rate of .25%, a continuing obligation of the
Fund's investment adviser, see the attached Prospectus for the Fund. The
charges for the daily investment management fee and the annual non-advisory
operating expenses are based on the hypothetical assumption that Policy values
are allocated equally among the nine variable Subaccounts. The actual
Portfolio charges and expenses associated with any Policy will vary depending
upon the actual allocation of Policy values among Subaccounts.
The tables reflect that no charge is currently made to the Account for
Federal income taxes. However, JHVLICO reserves the right to make such a
charge in the future and any charge would require higher rates of investment
return in order to produce the same Policy values. All of the tables do,
however, reflect the imposition of a Federal DAC Tax charge and a premium tax
charge.
The tables assume that no Additional Sum Insured or optional rider benefits
have been elected, that the application for the Policy has been fully
underwritten and that the insured has qualified for JHVLICO's select
underwriting class.
The second column of each table shows the amount to which the total premiums
paid to the end of a Policy year would accumulate if an amount equal to those
premiums were invested to earn interest, after taxes, at 5% compounded
annually.
JHVLICO will furnish upon request a comparable illustration reflecting the
proposed insured's age, sex, underwriting risk classification and the Sum
Insured at issue and Planned Premium amount requested, and assuming annual
Planned Premiums.
A-3
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE
$100,000 TOTAL SUM INSURED
MALE, ISSUE AGE 45, FULLY UNDERWRITTEN SELECT UNDERWRITING CLASS
OPTION A DEATH BENEFIT
GUIDELINE PREMIUM AND CASH VALUE CORRIDOR TEST
PLANNED PREMIUM: $2,000*
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 $ 2,100 $ 100,000 $100,000 $100,000 $ 927 $ 1,007 $ 1,087
2 4,305 100,000 100,000 100,000 2,226 2,450 2,686
3 6,620 100,000 100,000 100,000 3,172 3,616 4,099
4 9,051 100,000 100,000 100,000 4,246 4,984 5,819
5 11,604 100,000 100,000 100,000 5,285 6,394 7,700
6 14,284 100,000 100,000 100,000 6,680 8,253 10,176
7 17,098 100,000 100,000 100,000 8,033 10,174 12,890
8 20,053 100,000 100,000 100,000 9,343 12,159 15,869
9 23,156 100,000 100,000 100,000 10,606 14,209 19,139
10 26,414 100,000 100,000 100,000 11,845 16,359 22,778
11 29,834 100,000 100,000 100,000 13,157 18,710 26,922
12 33,426 100,000 100,000 100,000 14,418 21,146 31,497
13 37,197 100,000 100,000 100,000 15,626 23,670 36,553
14 41,157 100,000 100,000 100,000 16,776 26,284 42,147
15 45,315 100,000 100,000 100,000 17,866 28,994 48,347
16 49,681 100,000 100,000 100,000 18,891 31,801 55,227
17 54,265 100,000 100,000 100,000 19,846 34,712 62,877
18 59,078 100,000 100,000 100,000 20,726 37,733 71,398
19 64,132 100,000 100,000 100,000 21,524 40,869 80,912
20 69,439 100,000 100,000 109,779 22,232 44,128 91,482
25 100,227 100,000 100,000 188,119 24,222 62,726 163,582
30 139,522 100,000 100,000 297,508 22,504 87,128 283,341
35 189,673 100,000 126,444 507,642 13,776 120,423 483,468
</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, 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
$100,000 TOTAL SUM INSURED
MALE, ISSUE AGE 45, FULLY UNDERWRITTEN SELECT UNDERWRITING CLASS
OPTION A DEATH BENEFIT
GUIDELINE PREMIUM AND CASH VALUE CORRIDOR TEST
PLANNED PREMIUM: $2,000*
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 $ 2,100 $ 100,000 $ 100,000 $ 100,000 $ 608 $ 677 $ 747
2 4,305 100,000 100,000 100,000 1,570 1,755 1,948
3 6,620 100,000 100,000 100,000 2,165 2,516 2,900
4 9,051 100,000 100,000 100,000 2,870 3,440 4,089
5 11,604 100,000 100,000 100,000 3,523 4,364 5,359
6 14,284 100,000 100,000 100,000 4,516 5,690 7,137
7 17,098 100,000 100,000 100,000 5,443 7,026 9,051
8 20,053 100,000 100,000 100,000 6,301 8,366 11,112
9 23,156 100,000 100,000 100,000 7,082 9,705 13,332
10 26,414 100,000 100,000 100,000 7,778 11,036 15,721
11 29,834 100,000 100,000 100,000 8,447 12,417 18,366
12 33,426 100,000 100,000 100,000 9,021 13,784 21,226
13 37,197 100,000 100,000 100,000 9,500 15,135 24,329
14 41,157 100,000 100,000 100,000 9,878 16,466 27,704
15 45,315 100,000 100,000 100,000 10,148 17,773 31,384
16 49,681 100,000 100,000 100,000 10,301 19,045 35,406
17 54,265 100,000 100,000 100,000 10,322 20,271 39,812
18 59,078 100,000 100,000 100,000 10,195 21,437 44,651
19 64,132 100,000 100,000 100,000 9,898 22,526 49,979
20 69,439 100,000 100,000 100,000 9,410 23,518 55,871
25 100,227 100,000 100,000 112,042 3,314 26,402 97,428
30 139,522 ** 100,000 173,974 ** 22,479 165,690
35 189,673 ** 0 288,906 ** ** 275,149
</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, or optional rider
benefits are elected.
** Policy lapses unless additional premium payments are made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT
RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY
THE OWNER. THE DEATH BENEFIT AND SURRENDER VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT RETURN
AVERAGE 0%, 6%, OR 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATE ABOVE OR
BELOW THE AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE
THAT THESE HYPOTHETICAL INVESTMENT RESULTS CAN BE ACHIEVED FOR ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
A-5
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE
$100,000 TOTAL SUM INSURED
MALE, ISSUE AGE 45, FULLY UNDERWRITTEN SELECT UNDERWRITING CLASS
OPTION A DEATH BENEFIT
GUIDELINE PREMIUM AND CASH VALUE CORRIDOR TEST
PLANNED PREMIUM: $2,000*
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 $ 2,100 $100,925 $101,005 $101,084 $ 925 $ 1,005 $ 1,084
2 4,305 102,060 102,284 102,518 2,220 2,444 2,678
3 6,620 103,160 103,601 104,082 3,160 3,601 4,082
4 9,051 104,223 104,957 105,787 4,223 4,957 5,787
5 11,604 105,249 106,350 107,646 5,249 6,350 7,646
6 14,284 106,627 108,185 110,088 6,627 8,185 10,088
7 17,098 107,956 110,072 112,755 7,956 10,072 12,755
8 20,053 109,236 112,012 115,667 9,236 12,012 15,667
9 23,156 110,461 114,003 118,845 10,461 14,003 18,845
10 26,414 111,653 116,075 122,358 11,653 16,075 22,358
11 29,834 112,906 118,327 126,335 12,906 18,327 26,335
12 33,426 114,097 120,637 130,688 14,097 20,637 30,688
13 37,197 115,219 123,003 135,452 15,219 23,003 35,452
14 41,157 116,268 125,420 140,664 16,268 25,420 40,664
15 45,315 117,238 127,885 146,367 17,238 27,885 46,367
16 49,681 118,121 130,392 152,607 18,121 30,392 52,607
17 54,265 118,912 132,935 159,434 18,912 32,935 59,434
18 59,078 119,600 135,507 166,903 19,600 35,507 66,903
19 64,132 120,178 138,098 175,072 20,178 38,098 75,072
20 69,439 120,634 140,698 184,006 20,634 40,698 84,006
25 100,227 120,786 153,481 243,062 20,786 53,481 143,062
30 139,522 116,102 164,288 336,044 16,102 64,288 236,044
35 189,673 103,643 168,929 481,847 3,643 68,929 381,847
</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, 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
$100,000 TOTAL SUM INSURED
MALE, ISSUE AGE 45, FULLY UNDERWRITTEN SELECT UNDERWRITING CLASS
OPTION A DEATH BENEFIT
GUIDELINE PREMIUM AND CASH VALUE CORRIDOR TEST
PLANNED PREMIUM: $2,000*
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 $ 2,100 $ 100,602 $ 100,671 $ 100,741 $ 602 $ 671 $ 741
2 4,305 101,396 101,578 101,771 1,556 1,738 1,931
3 6,620 102,137 102,484 102,863 2,137 2,484 2,863
4 9,051 102,823 103,384 104,022 2,823 3,384 4,022
5 11,604 103,452 104,274 105,248 3,452 4,274 5,248
6 14,284 104,413 105,556 106,964 4,413 5,556 6,964
7 17,098 105,300 106,832 108,792 5,300 6,832 8,792
8 20,053 106,106 108,095 110,735 6,106 8,095 10,735
9 23,156 106,825 109,334 112,796 6,825 9,334 12,796
10 26,414 107,447 110,538 114,976 7,447 10,538 14,976
11 29,834 108,027 111,763 117,347 8,027 11,763 17,347
12 33,426 108,498 112,937 119,854 8,498 12,937 19,854
13 37,197 108,859 114,056 122,505 8,859 14,056 22,505
14 41,157 109,104 115,108 125,309 9,104 15,108 25,309
15 45,315 109,227 116,083 128,272 9,227 16,083 28,272
16 49,681 109,217 116,964 131,396 9,217 16,964 31,396
17 54,265 109,060 117,732 134,681 9,060 17,732 34,681
18 59,078 108,740 118,360 138,123 8,740 18,360 38,123
19 64,132 108,237 118,822 141,714 8,237 18,822 41,714
20 69,439 107,533 119,086 145,447 7,533 19,086 45,447
25 100,227 100,473 116,458 166,032 473 16,458 66,032
30 139,522 ** 103,151 187,882 ** 3,151 87,882
35 189,673 ** ** 203,716 ** ** 103,716
</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, or optional rider
benefits are elected.
** Policy lapses unless additional premium payments are made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT
RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY
THE OWNER. THE DEATH BENEFIT AND SURRENDER VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT RETURN
AVERAGE 0%, 6%, OR 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATE ABOVE OR
BELOW THE AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE
THAT THESE HYPOTHETICAL INVESTMENT RESULTS CAN BE ACHIEVED FOR ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
A-7
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE
$100,000 TOTAL SUM INSURED
MALE, ISSUE AGE 45, FULLY UNDERWRITTEN SELECT UNDERWRITING CLASS
OPTION A DEATH BENEFIT
GUIDELINE PREMIUM AND CASH VALUE CORRIDOR TEST
PLANNED PREMIUM: $2,000*
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 $ 2,100 $ 100,000 $ 100,000 $1 00,000 $ 927 $ 1,007 $ 1,087
2 4,305 100,000 100,000 100,000 2,226 2,450 2,686
3 6,620 100,000 100,000 100,000 3,172 3,616 4,099
4 9,051 100,000 100,000 100,000 4,246 4,984 5,819
5 11,604 100,000 100,000 100,000 5,285 6,394 7,700
6 14,284 100,000 100,000 100,000 6,680 8,253 10,176
7 17,098 100,000 100,000 100,000 8,033 10,174 12,890
8 20,053 100,000 100,000 100,000 9,343 12,159 15,869
9 23,156 100,000 100,000 100,000 10,606 14,209 19,139
10 26,414 100,000 100,000 100,000 11,845 16,359 22,778
11 29,834 100,000 100,000 100,000 13,157 18,710 26,922
12 33,426 100,000 100,000 100,000 14,418 21,146 31,497
13 37,197 100,000 100,000 100,000 15,626 23,670 36,553
14 41,157 100,000 100,000 100,000 16,776 26,284 42,147
15 45,315 100,000 100,000 100,000 17,866 28,994 48,347
16 49,681 100,000 100,000 100,886 18,891 31,801 55,222
17 54,265 100,000 100,000 111,875 19,846 34,712 62,788
18 59,078 100,000 100,000 123,604 20,726 37,733 71,090
19 64,132 100,000 100,000 136,144 21,524 40,869 80,198
20 69,439 100,000 100,000 149,561 22,232 44,128 90,184
25 100,227 100,000 100,000 232,796 24,222 62,726 156,449
30 139,522 100,000 116,386 353,026 22,504 85,919 260,613
35 189,673 100,000 141,818 530,123 13,776 112,912 422,072
</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, 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
$100,000 TOTAL SUM INSURED
MALE, ISSUE AGE 45, FULLY UNDERWRITTEN SELECT UNDERWRITING CLASS
OPTION A DEATH BENEFIT
GUIDELINE PREMIUM AND CASH VALUE CORRIDOR TEST
PLANNED PREMIUM: $2,000*
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 $ 2,100 $ 100,000 $ 100,000 $ 100,000 $ 608 $ 677 $ 747
2 4,305 100,000 100,000 100,000 1,570 1,755 1,948
3 6,620 100,000 100,000 100,000 2,165 2,516 2,900
4 9,051 100,000 100,000 100,000 2,870 3,440 4,089
5 11,604 100,000 100,000 100,000 3,523 4,364 5,359
6 14,284 100,000 100,000 100,000 4,516 5,690 7,137
7 17,098 100,000 100,000 100,000 5,443 7,026 9,051
8 20,053 100,000 100,000 100,000 6,301 8,366 11,112
9 23,156 100,000 100,000 100,000 7,082 9,705 13,332
10 26,414 100,000 100,000 100,000 7,778 11,036 15,721
11 29,834 100,000 100,000 100,000 8,447 12,417 18,366
12 33,426 100,000 100,000 100,000 9,021 13,784 21,226
13 37,197 100,000 100,000 100,000 9,500 15,135 24,329
14 41,157 100,000 100,000 100,000 9,878 16,466 27,704
15 45,315 100,000 100,000 100,000 10,148 17,773 31,384
16 49,681 100,000 100,000 100,000 10,301 19,045 35,406
17 54,265 100,000 100,000 100,000 10,322 20,271 39,812
18 59,078 100,000 100,000 100,000 10,195 21,437 44,651
19 64,132 100,000 100,000 100,000 9,898 22,526 49,979
20 69,439 100,000 100,000 100,000 9,410 23,518 55,871
25 100,227 100,000 100,000 139,922 3,314 26,402 94,034
30 139,522 ** 100,000 201,087 ** 22,479 148,448
35 189,673 ** ** 280,946 ** ** 223,683
</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, 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>
[LOGO OF JOHN HANCOCK WORLDWIDE SPONSOR APPEARS HERE]
POLICIES ISSUED BY JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
JOHN HANCOCK PLACE, BOSTON, MASSACHUSETTS 02117
S8151 5/97
<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.
REPRESENTATION OF REASONABLENESS
Registrant 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 64 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, included
in the initial filing of this registration statement, filed January
25, 1996.
(2) Not Applicable.
(3) (a) Distribution Agreement and Amendment, included in the initial
filing of this registration statement, filed January 25, 1996.
(b) Specimen Variable Contracts Selling Agreement between John Hancock
Mutual Life Insurance Company and selling broker-dealers, included
in the initial filing of this registration statement, filed
January 25,1996.
(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, included in
Pre-Effective Amendment No.1 to this registration statement,
filed July 25, 1996.
(6) (a) JHVLICO Certificate of Incorporation, included in the initial
filing of this registration statement, filed January 25, 1996.
(b) JHVLICO By-laws, included in the initial filing of this
registration statement, filed January 25, 1996.
(7) Not Applicable.
(8) Not Applicable.
(9) Not Applicable.
(10) Forms of individual and master applications for Policy, included in
Pre-Effective Amendment No.1 to this registration statement, filed
July 25, 1996.
<PAGE>
2. Included as exhibit 1.A(5) above.
3. Opinion and consent of counsel as to securities being registered, included
in Pre-Effective Amendment No.1 to this registration statement,
filed July 27, 1997.
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), included in Pre-Effective Amendment No.1 to this
registration statement, filed July 27, 1997.
9. Powers of attorney for Cleary, Tomlinson, D'Alessandro, Shaw, Luddy, Lee,
Reitano, Van Leer and Paster, included in the initial filing of this
registration statement, filed January 25, 1996. Power of Attorney for
Ronald J. Bocage, incorporated by reference from Form 10-K annual report of
John Hancock Variable Life Insurance Company (File No. 33-62895) filed
March 28, 1997.
10. Representations, Description and Undertaking pursuant to Rule 6e-
3(T)(b)(13)(iii)(F) under the Investment Company Act of 1940, included in
the initial filing of this registration statement, filed January 25, 1996.
11. Exemptive Relief Relied Upon, included in the initial filing of this
registration statement, filed January 25, 1996.
12. Representation of Counsel pursuant to Rule 485(b).
27. Financial Data Schedule.
<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 27th day of March, 1997.
JOHN HANCOCK VARIABLE LIFE
INSURANCE COMPANY
(SEAL)
By /s/ HENRY D. SHAW
----------------------------
Henry D. Shaw
President
Attest: /s/ SANDRA M. DADALT
-----------------------------
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/ Robert R. Reitano
- -----------------------
Robert R. Reitano Director (Principal March 27, 1997
Accounting Officer)
/s/ Patrick F. Smith
- ----------------------- Controller (Principal March 27, 1997
Patrick F. Smith Accounting Officer)
/s/ Henry D. Shaw
- ----------------------- Vice Chairman of the Board
Henry D. Shaw and President(Acting Principal March 27, 1997
for himself and as Executive Officer)
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. Bocage Director
<PAGE>
-3-
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, John Hancock Variable Life Account S, certifies that it meets all
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and 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 27th day of March, 1997.
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
(Registrant)
By John Hancock Mutual Life Insurance Company
(Depositor)
(SEAL)
By /s/ HENRY D. SHAW
-------------------------
Henry D. Shaw
President
Attest: /s/ SANDRA M. DADALT
--------------------------------
Sandra M. DaDalt
Counsel
<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
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<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
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<NET-CHANGE-FROM-OPS> 1,792,415
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<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
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<INVESTMENTS-AT-VALUE> 5,185,747
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</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
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<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
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<DISTRIBUTIONS-OF-GAINS> 0
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<NET-CHANGE-IN-ASSETS> 3,176,381
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> SMALL CAP GROWTH
<S> <C>
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<PERIOD-START> JAN-01-1996
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<PAGE>
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<NAME> INTERNATIONAL BALANCED
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<TABLE> <S> <C>
<PAGE>
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<SERIES>
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<NAME> MID CAP GROWTH
<S> <C>
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<NET-INVESTMENT-INCOME> 458
<REALIZED-GAINS-CURRENT> (391)
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</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
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<OTHER-ITEMS-ASSETS> 0
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<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
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<GROSS-EXPENSE> 964
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<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
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<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
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<SHARES-COMMON-PRIOR> 0
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<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 10,038,857
<DIVIDEND-INCOME> 287,321
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 30,722
<NET-INVESTMENT-INCOME> 256,599
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<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
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<GROSS-EXPENSE> 30,722
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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
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<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 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
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<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
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<OVERDIST-NET-GAINS-PRIOR> 0
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<GROSS-EXPENSE> 21,146
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
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</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
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<PER-SHARE-DIVIDEND> 0
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<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
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<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 89,391
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
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<PER-SHARE-DIVIDEND> 0
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<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
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<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
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<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
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<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
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<SHARES-COMMON-PRIOR> 0
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<OVERDISTRIBUTION-NII> 0
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<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
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<NUMBER-OF-SHARES-SOLD> 8,757,292
<NUMBER-OF-SHARES-REDEEMED> 7,683,085
<SHARES-REINVESTED> 0
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<ACCUMULATED-NII-PRIOR> 0
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<GROSS-EXPENSE> 9,277
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</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
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<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 341,012
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<OTHER-ITEMS-LIABILITIES> 5
<TOTAL-LIABILITIES> 5
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
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<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
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<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 341,007
<DIVIDEND-INCOME> 8,296
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<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
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<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
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<GROSS-EXPENSE> 523
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<PER-SHARE-NAV-BEGIN> 0
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</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
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<PAYABLE-FOR-SECURITIES> 32,547
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<TOTAL-LIABILITIES> 32,559
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<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 909,113
<DIVIDEND-INCOME> 2,965
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<NET-INVESTMENT-INCOME> 1,526
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<APPREC-INCREASE-CURRENT> 36,666
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<NUMBER-OF-SHARES-SOLD> 960,081
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</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
<INVESTMENTS-AT-COST> 918,525
<INVESTMENTS-AT-VALUE> 974,307
<RECEIVABLES> 21,534
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 995,841
<PAYABLE-FOR-SECURITIES> 21,519
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 15
<TOTAL-LIABILITIES> 21,534
<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> 974,307
<DIVIDEND-INCOME> 23,300
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 1,962
<NET-INVESTMENT-INCOME> 21,338
<REALIZED-GAINS-CURRENT> 17,318
<APPREC-INCREASE-CURRENT> 55,782
<NET-CHANGE-FROM-OPS> 94,518
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,282,798
<NUMBER-OF-SHARES-REDEEMED> 403,009
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 974,307
<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> 1,962
<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> 18
<NAME> STRATEGIC 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> 259,219
<INVESTMENTS-AT-VALUE> 258,628
<RECEIVABLES> 19,681
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 278,309
<PAYABLE-FOR-SECURITIES> 19,677
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4
<TOTAL-LIABILITIES> 19,681
<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> 258,628
<DIVIDEND-INCOME> 7,425
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 349
<NET-INVESTMENT-INCOME> 7,076
<REALIZED-GAINS-CURRENT> 22
<APPREC-INCREASE-CURRENT> (591)
<NET-CHANGE-FROM-OPS> 6,507
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 259,231
<NUMBER-OF-SHARES-REDEEMED> 7,110
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 258,628
<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> 349
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
EXHIBIT 6
[John Hancock Mutual Life
Insurance Company Letterhead]
March 27, 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 Post-Effective
Amendment No. 1 to this Registration Statement on Form S-6 by John Hancock
Variable Life Insurance Company (JHVLICO) under the Securities Act of 1933, as
amended, with respect to flexible premium variable life insurance policies under
which amounts will be allocated by JHVLICO to one or more of the subaccounts of
John Hancock Variable Life Account S ("Account"). The flexible premium policy
is described in the prospectus included in 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
illustrations of death benefits, surrender values, 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.
/RANDI M. STERRN/
-----------------
Randi M. Sterrn, FSA
Senior Associate Actuary
FCC0070.DOC (MEVL)
<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 Post-Effective Amendment
No. 1 to the Registration Statement (Form S-6, No. 333-425).
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Boston, Massachusetts
April 2, 1997
<PAGE>
EXHIBIT 12
[John Hancock Mutual Life Insurance Company Letterhead]
March 27, 1997
United States Securities
and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: John Hancock Variable Life Account S
File Nos. 811-7782 and 333-425
Commissioners:
This opinion is being furnished with respect to the filing of this post-
effective amendment of the Registrant's Registration Statement with the
Securities and Exchange Commission as required by Rule 485 under the Securities
Act of 1933.
We have acted as counsel to Registrant for the purpose of preparing this
post-effective amendment which is being filed pursuant to paragraph (b) of Rule
485 and hereby represent to the Commission that in our opinion this post-
effective amendment does not contain disclosures which would render it
ineligible to become effective pursuant to paragraph (b).
We hereby consent to the filing of this opinion with and as a part of this
post-effective amendment to Registrant's Registration Statement with the
Commission.
Very truly yours,
/s/ Sandra M. DaDalt.
--------------------
Sandra M. DaDalt
Counsel
