HANCOCK JOHN VARIABLE LIFE ACCOUNT S, 485BPOS, 1998-04-28

HANCOCK JOHN VARIABLE LIFE ACCOUNT S
485BPOS, 1998-04-28

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<PAGE>

As filed with the Securities and Exchange Commission on April 27, 1998

Registration No. 33-64366
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------

FORM S-6
Post-Effective Amendment No. 7 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)
--------------------

RONALD J. BOGAGE, 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, 1998 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 1997 pursuant to Rule 24f-2 on February 26, 1998.
<PAGE>

CROSS-REFERENCE TABLE

<TABLE>
<CAPTION>
Form N-8B-2 Item Caption in Prospectus
- ---------------- ---------------------
<S> <C>
1, 2 Cover, The Account and The Series
Funds or Fund, JHVLICO and John Hancock

3 Inapplicable

4 Cover, Distribution of Policies

5,6 The Account and The Series Funds or
Fund, State Regulation

7, 8, 9 Inapplicable

10(a),(b),(c),(d),(e) Policy Provisions and Benefits

10(f) Voting Privileges

10(g),(h) Changes that JHVLICO Can Make

10(i) Appendix--Other Policy
Provisions, The Account and
The Series Funds or Fund

11, 12 Summary, The Account and The Series
Funds or 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 Funds or Fund

17 Summary, Policy Provisions and Benefits

18 The Account and The Series Funds or Fund,
Tax Considerations

19 Reports

20 Changes that JHVLICO Can Make

21 Policy Provisions and Benefits

22 Policy Provisions and Benefits

</TABLE>
<PAGE>

<TABLE>
<S> <C>
23 Distribution of Policies

24 Not Applicable

25 JHVLICO and John Hancock

26 Not Applicable

27,28,29,30 JHVLICO and John Hancock, Board
of Directors and Executive
Officers of JHVLICO

31,32,33,34 Not Applicable

35 JHVLICO and John Hancock

37 Not Applicable

38,39,40,41(a) Distribution of Policies,
JHVLICO and John Hancock,
Charges and Expenses

42, 43 Not Applicable

44 The Account and The Series Funds or Fund,
Policy Provisions,
Appendix--Illustration of Death
Benefits, Surrender Values
and Accumulated Premiums

45 Not Applicable

46 The Account and The Series Funds or Fund,
Policy Provisions,
Appendix--Illustration of Death
Benefits, Surrender Values
and Accumulated Values

47, 48, 49, 50 Not Applicable

51 Policy Provisions and Benefits,
Appendix--Other Policy
Provisions

52 The Account and The Series Funds,
Changes that JHVLICO Can Make

53,54,55 Not Applicable

56,57,58 Not Applicable

59 Financial Statements

</TABLE>
<PAGE>

[LOGO OF JOHN HANCOCK APPEARS HERE]

John Hancock Variable Life Insurance Company
(JHVLICO)

FLEXIBLE PREMIUM VARIABLE LIFE SURVIVORSHIP INSURANCE POLICY JOHN HANCOCK
VARIABLE LIFE ACCOUNT S

John Hancock Place Boston, Massachusetts 02117

JOHN HANCOCK SERVICING OFFICE:
P.O. Box 111 Boston, Massachusetts 02117

TELEPHONE 1-800-REAL LIFE (1-800-732-5543) FAX 617-572-5410

PROSPECTUS MAY 1, 1998

The flexible premium variable life survivorship policy ("Policy") described in
this Prospectus can be funded, at the discretion of the Owner, by any of the
variable subaccounts of John Hancock Variable Life Account S (the "Account"), by
a fixed subaccount (the "Fixed Account"), or by any combination of the Fixed
Account and the variable subaccounts (collectively, the "Subaccounts"). The
assets of each variable Subaccount will be invested in a corresponding
investment portfolio ("Portfolio") of John Hancock Variable Series Trust I, a
"series" type mutual fund advised by John Hancock Mutual Life Insurance Company
("John Hancock") or of M Fund, Inc., a "series" type mutual fund advised by M
Financial Investment Advisers, Inc. (collectively, the "Funds"). The assets of
the Fixed Account will be invested in the general account of John Hancock
Variable Life Insurance Company ("JHVLICO").

The Prospectuses for the Funds, which are attached to this Prospectus,
describe the investment objectives, policies and risks of investing in the
Portfolios of the Funds: Managed, Growth & Income, Equity Index, Large Cap
Value, Large Cap Growth, Mid Cap Value, Mid Cap Growth, Diversified Mid Cap
Growth (formerly, Special Opportunities), Real Estate Equity, Small/Mid Cap
CORE, Small Cap Value, Small Cap Growth, Global Equity, International Balanced,
International Equity Index (formerly, International Equities), International
Opportunities, Emerging Markets Equity, Short-Term Bond (formerly, Short-Term
U.S. Government), Bond Index, Sovereign Bond, Strategic Bond, High Yield Bond,
Money Market, Edinburgh Overseas Equity, Turner Core Growth, Frontier Capital
Appreciation, and Enhanced U.S. Equity. Other variable Subaccounts and
Portfolios may be added in the future.

Replacing existing insurance with a Policy described in this Prospectus may
not be to your advantage.

THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
IT IS NOT VALID UNLESS ATTACHED TO CURRENT PROSPECTUSES FOR THE FUNDS.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
<S> <C>
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
JHVLICO and JOHN HANCOCK . . . . . . . . . . . . . . . . . . . . . . 7
THE ACCOUNT AND THE SERIES FUNDS . . . . . . . . . . . . . . . . . . 7
The Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
The Series Funds . . . . . . . . . . . . . . . . . . . . . . . . . 8
THE FIXED ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . 12
POLICY PROVISIONS AND BENEFITS . . . . . . . . . . . . . . . . . . . 13
Requirements for Issuance of Policy . . . . . . . . . . . . . . . . 13
Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Account Value and Surrender Value . . . . . . . . . . . . . . . . . 15
Policy Split Option . . . . . . . . . . . . . . . . . . . . . . . . 16
Death Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Transfers Among Subaccounts . . . . . . . . . . . . . . . . . . . . 18
Telephone Transfers and Policy Loans . . . . . . . . . . . . . . . 19
Loan Provisions and Indebtedness . . . . . . . . . . . . . . . . . 19
Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Exchange Privilege . . . . . . . . . . . . . . . . . . . . . . . . 21
CHARGES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . 21
Charges Deducted from Premiums . . . . . . . . . . . . . . . . . . 21
Sales Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Reduced Charges for Eligible Groups . . . . . . . . . . . . . . . . 23
Charges Deducted from Account Value or Assets . . . . . . . . . . . 23
Guarantee of Premiums and Certain Charges . . . . . . . . . . . . . 25
DISTRIBUTION OF POLICIES . . . . . . . . . . . . . . . . . . . . . . 25
TAX CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 26
Policy Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Charge for JHVLICO's Taxes . . . . . . . . . . . . . . . . . . . . 28
Policy Split Option . . . . . . . . . . . . . . . . . . . . . . . . 28
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS OF JHVLICO . . . . . . . . 28
REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
VOTING PRIVILEGES . . . . . . . . . . . . . . . . . . . . . . . . . . 29
CHANGES THAT JHVLICO CAN MAKE . . . . . . . . . . . . . . . . . . . . 30
STATE REGULATION . . . . . . . . . . . . . . . . . . . . . . . . . . 30
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
REGISTRATION STATEMENT . . . . . . . . . . . . . . . . . . . . . . . 30
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . 31
APPENDIX--OTHER POLICY PROVISIONS . . . . . . . . . . . . . . . . . . 65
APPENDIX--IMPACT OF YEAR 2000 . . . . . . . . . . . . . . . . . . . . 67
APPENDIX--ILLUSTRATION OF DEATH BENEFITS, SURRENDER VALUES AND
ACCUMULATED PREMIUMS . . . . . . . . . . . . . . . . . . . . . . . . 68
</TABLE>

THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS.
<PAGE>

INDEX OF DEFINED WORDS AND PHRASES

Below are listed certain words and phrases used in this Prospectus, together
with identification of the page on which each is defined or explained:

<TABLE>
<CAPTION>
Page
<S> <C>
Account.......................................... 7
Account Value.................................... 1
Additional Sum Insured........................... 17
Age.............................................. 66
Basic Sum Insured................................ 1
DAC Tax.......................................... 21
Death Benefit.................................... 16
Fixed Account.................................... 12
Funds............................................ Front Cover
Grace Period..................................... 20
Guaranteed Minimum Death Benefit................. 17
Guaranteed Minimum Death Benefit Premium......... 14
Indebtedness..................................... 19
Investment Rule.................................. 14
Loan Assets...................................... 18
Minimum First Premium............................ 13
Planned Premium.................................. 13
Policy Anniversary............................... 66
Portfolio........................................ Front Cover
Servicing Office................................. 7
Subaccount....................................... Front Cover
Surrender Value.................................. 15
Target Premium................................... 22
Total Sum Insured................................ 17
Valuation Date................................... 12
Valuation Period................................. 12
Variable Subaccounts............................. 2
7-Pay Limit...................................... 15
</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 on two insureds, with a death
benefit payable only when the last surviving 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
survivorship life insurance in providing lifetime protection against economic
loss resulting from the death of the second of two persons insured. The Policies
are primarily insurance and not investments.

The Policies work generally as follows. A premium payment is periodically made
to JHVLICO. JHVLICO takes from each premium an amount for processing expenses,
taxes, and sales expenses. JHVLICO then places the rest of the premium into
Subaccounts as directed by the owner of the Policy (the "Owner"). The assets
allocated to each variable Subaccount are invested in shares of the
corresponding Portfolio of the Funds. The currently available Portfolios are
identified on the cover of this Prospectus. The assets allocated to the Fixed
Account are invested in the general account of JHVLICO. During the year, JHVLICO
takes charges from each Subaccount and credits or charges each Subaccount with
its respective investment performance. The insurance charge, which is deducted
from the invested assets attributable to each Policy ("Account Value"), varies
monthly with the then attained age of the insureds and with the amount of
insurance provided at the start of each month.

The Policy provides for payment of death benefit proceeds when the last
surviving insured dies. The death benefit proceeds 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 last
surviving insured. Under Option A, the Owner may also elect an Extra Death
Benefit feature that may result in a higher death benefit in some cases. The
Policy also increases the death benefit if necessary to ensure that the Policy
will continue to qualify as life insurance under the Federal tax laws.

Within limits prescribed by JHVLICO, the Owner may also elect whether to
purchase the coverage as part of the "Basic Sum Insured" or as an "Additional
Sum Insured." The Basic Sum Insured will not lapse during the first ten Policy
years, so long as (1) specified Guaranteed Minimum Death Benefit Premiums have
been paid, and (2) the Additional Sum Insured is not scheduled to exceed the
Basic Sum Insured at any time. The Owner may elect for this Guaranteed Minimum
Death Benefit feature to extend beyond ten years. The Additional Sum Insured is
subject to lapse, but has certain cost and other advantages.

The initial Account Value is the amount of the premium that JHVLICO credits to
the Policy, after deduction of the initial charges. The Account Value increases
or decreases daily depending on the investment experience of the Subaccounts to
which the amounts are allocated at the direction of the Owner. JHVLICO does not
guarantee a minimum amount of Account Value. 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 either of the insureds is living.
The Surrender Value is the Account Value less any Indebtedness. 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.

1
<PAGE>

The minimum Total Sum Insured that may be bought at issue is $500,000. All
persons insured must meet specified age limits and certain health and other
criteria called "underwriting standards." The smoking status of the insureds is
generally reflected in the insurance charges made. Policies issued under certain
circumstances will not directly reflect the sexes of the insureds in either the
premium rates or the charges and values under the Policy.

WHAT IS THE AMOUNT OF THE PREMIUMS?

Premiums are flexible, and the Owner may choose the amount and frequency of
premium payments, so long as each premium payment is at least $100 and meets
certain other requirements.

The minimum amount of premium required at the time of Policy issue is
determined by JHVLICO based on the characteristics of each insured, the Policy's
Total Sum Insured at issue, and the Policy options selected by the Owner. Unless
the Guaranteed Minimum Death Benefit is in effect, if the Policy Account Value
at the beginning of any Policy month is insufficient to pay the monthly Policy
charges then due, JHVLICO will estimate the amount of additional premiums
necessary to keep the Policy in force for three months. The Owner will have a 61
day grace period to pay at least that amount or the Policy will lapse.

At the time of Policy issue, the Owner may designate the amount and frequency
of Planned Premium payments. The Owner may pay premiums other than the Planned
Premium payments, subject to certain limitations.

The Policy has a Guaranteed Minimum Death Benefit provision which guarantees
that the basic Sum Insured will not lapse during the first ten Policy years if
(1) prescribed amounts of premiums have been paid, based on the characteristics
of each insured and the amount of the Basic Sum Insured at issue and (2) any
Additional Sum Insured is not scheduled to exceed the Basic Sum Insured at any
time. The Owner may at the time of application elect for this feature to be
extended beyond the first ten Policy years for an additional charge.

WHAT IS JOHN HANCOCK VARIABLE LIFE ACCOUNT S?

The Account is a separate investment account of JHVLICO, operated as a unit
investment trust, which supports benefits payable under the Policies. The
Account is subdivided into a number of variable Subaccounts, each of which
corresponds to one of the Portfolios of the Funds. The assets of each variable
Subaccount within the Account are invested in the corresponding Portfolio of the
Funds. The current Portfolios of the Funds are: Managed, Growth & Income, Equity
Index, Large Cap Value, Large Cap Growth, Mid Cap Value, Mid Cap Growth,
Diversified Mid Cap Growth (formerly, Special Opportunities), Real Estate
Equity, Small/Mid Cap CORE, Small Cap Value, Small Cap Growth, Global Equity,
International Balanced, International Equity Index (formerly, International
Equities), International Opportunities, Emerging Markets Equity, Short-Term Bond
(formerly, Short-Term U.S. Government), Bond Index, Sovereign Bond, Strategic
Bond, High Yield Bond, Money Market, Edinburgh Overseas Equity, Turner Core
Growth, Frontier Capital Appreciation, and Enhanced U.S. Equity.

The figures in the following chart are expressed as a percentage of each
Portfolio's average daily net assets. The figures reflect the investment
management fees currently payable and the 1997 other fund expenses allocated to
John Hancock Variable Series Trust I (except that other fund expenses for the
Small/Mid Cap CORE, Global Equity, Emerging Markets Equity, Bond Index, and High
Yield Bond Portfolios are based upon estimates for the current fiscal year).

2
<PAGE>

<TABLE>
<CAPTION>
Other
Fund
Other Fund Total Expenses
Expenses Fund Absent
Management After Expense Operating Expense
Fund Name Fee Reimbursement Expenses Reimbursement*
--------- ---------- ------------- --------- --------------
<S> <C> <C> <C> <C>
Managed ................................. 0.33% 0.04% 0.37% N/A
Growth & Income ......................... 0.25% 0.03% 0.28% N/A
Equity Index ............................ 0.15% 0.25% 0.40% 0.40%
Large Cap Value ......................... 0.75% 0.25% 1.00% 0.31%
Large Cap Growth ....................... 0.39% 0.05% 0.44% N/A
Mid Cap Value ........................... 0.80% 0.25% 1.05% 0.34%
Mid Cap Growth ......................... 0.85% 0.25% 1.10% 0.57%
Diversified Mid Cap Growth .............. 0.75% 0.10% 0.85% N/A
Real Estate Equity ...................... 0.60% 0.09% 0.69% N/A
Small/Mid Cap CORE ...................... 0.80% 0.25% 1.05% N/A
Small Cap Value ......................... 0.80% 0.25% 1.05% 0.50%
Small Cap Growth ....................... 0.75% 0.25% 1.00% 0.37%
Global Equity ........................... 0.90% 0.25% 1.15% N/A
International Balanced .................. 0.85% 0.25% 1.10% 0.71%
International Equity Index .............. 0.18% 0.19% 0.37% N/A
International Opportunities ............. 0.97% 0.25% 1.22% 0.60%
Emerging Markets Equity ................. 1.30% 0.25% 1.55% N/A
Short-Term Bond ......................... 0.30% 0.21% 0.51% N/A
Bond Index .............................. 0.15% 0.25% 0.40% N/A
Sovereign Bond .......................... 0.25% 0.06% 0.31% N/A
Strategic Bond .......................... 0.75% 0.25% 1.00% 0.57%
High Yield Bond ......................... 0.65% 0.25% 0.90% N/A
Money Market ............................ 0.25% 0.08% 0.33% N/A
</TABLE>
- ---------

* John Hancock reimburses a Portfolio when the Portfolio's other fund expenses
exceed 0.25% of the Portfolio's average daily net assets.

M Fund, Inc. pays M Financial Investment Advisers, Inc. ("M Financial") a fee
for providing investment management services to each of the Portfolios. The Fund
also pays for certain other fund expenses. The figures in the following chart
are expressed as a percentage of each Portfolio's average daily net assets. The
figures reflect the investment management fees currently payable and the 1997
other fund expenses allocated to the Fund.

<TABLE>
<CAPTION>
Other Total Fund
Investment Fund Operating Other Fund Expenses
Portfolio Management Fee Expenses Expenses Absent Reimbursement*
--------- -------------- -------- ---------- -----------------------
<S> <C> <C> <C> <C>
Edinburgh Overseas Equity ........... 1.05% 0.25% 1.30% 3.89%
Turner Core Growth .................. 0.45% 0.25% 0.70% 5.72%
Frontier Capital Appreciation ....... 0.90% 0.25% 1.15% 1.96%
Enhanced U.S. Equity ................ 0.55% 0.25% 0.80% 4.87%
</TABLE>

- ---------

* M Financial reimburses a Portfolio when the Portfolio's other fund expenses
exceed 0.25% of the Portfolio's average daily net assets.

For a full description of the Funds, see the Prospectuses for the Funds
attached to this Prospectus.

3
<PAGE>

WHAT ARE THE CHARGES MADE BY JHVLICO?

Premium Processing Charge. A 1.25% charge deducted from each premium payment.
This charge will be reduced for Policies with a Total Sum Insured at issue of
more than $5,000,000, subject to a minimum charge of .50%.

State Premium Tax Charge and Federal DAC Tax Charge. Charges deducted from
each premium payment, currently 2.35% for state premium taxes and 1.25% as a
Federal deferred acquisition cost or "DAC Tax" charge.

Sales Charge. A charge deducted from each premium payment in the amount of 30%
of premiums paid in the first Policy year up to the "target premium" and 3.5% of
premiums paid during the first Policy year in excess of that target. The current
sales charge in subsequent Policy years on premiums up to the target premium
generally is: 15% of such premiums in each of years 2 through 5; 10% of such
premiums in each of years 6 through 10; 3% of such premiums in years 11 through
20; and 0% of such premiums thereafter. The current sales charge in subsequent
Policy years on premiums paid in excess of the target premium is: 3.5% of such
excess premiums paid in years 2 through 10; 3% of such excess premiums paid in
years 11 through 20; and 0% of such excess premiums paid thereafter. Subject to
maximums set forth in the Policy, certain of these charges may be increased
after the tenth Policy year.

Issue Charge. A charge deducted monthly from Account Value in an amount equal
to $55.55 for the first 5 Policy years, plus 2c per $1,000 of the Total Sum
Insured at issue for the first 3 Policy years, except that the charge per $1,000
is guaranteed not to exceed $200 per month.

Administrative Charge. A charge deducted monthly from Account Value in an
amount equal to no more than $10 for all Policy years plus 3c per $1,000 of the
Total Sum Insured at issue (currently $7.50 for all Policy years, plus 1c per
$1,000 of the Total Sum Insured at issue for the first 10 Policy years, except
that the $7.50 charge currently is zero for any Policy with a Total Sum Insured
at issue of at least $5,000,000).

Insurance Charge. A charge based upon the amount for which JHVLICO is at risk,
considering the attained age and risk classification of each of the insureds and
JHVLICO's then current monthly insurance rates (never to exceed rates set forth
in the Policy) deducted monthly from Account Value.

Guaranteed Minimum Death Benefit Charge. If the Guaranteed Minimum Death
Benefit option is elected beyond the first 10 Policy years, a maximum charge
starting at the beginning of the eleventh Policy year not to exceed 3c per
$1,000 (currently 1c per $1,000) of the Basic Sum Insured at issue, deducted
monthly from Account Value.

Charge for Mortality and Expense Risks. A charge deducted daily from the
variable Subaccounts at a maximum effective annual rate of .90% of the assets of
each variable Subaccount. The current charges are: for a Policy with Sum Insured
at issue of at least $500,000 but less than $5 million, .625% of assets; at
least $5 million but less than $15 million, .575% of assets; and $15 million or
more, .525% of assets.

Charge for Extra Mortality Risks. An additional charge, depending upon the
ages of the insureds and the degree of additional mortality risk, required if
either of the insureds 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 may be deducted from premiums when paid or deducted monthly from Account
Value.

4
<PAGE>

Charge for Partial Withdrawal. A charge of $20 deducted from Account Value at
the time of withdrawal.

See "Charges and Expenses" for a fuller description of the charges under the
Policy.

IS THERE A CHARGE AGAINST THE ACCOUNT FOR FEDERAL INCOME TAX?

Currently no charge is made against any Subaccount for Federal income taxes;
but if JHVLICO incurs, or expects to incur, income taxes attributable to any
Subaccount or this class of Policies in future years, it reserves the right to
make a charge. JHVLICO expects that it will continue to be taxed as a life
insurance company. See "Charge for JHVLICO's Taxes."

WHAT IS THE RELATIONSHIP BETWEEN THE PREMIUM AND THE AMOUNT ALLOCATED TO THE
SUBACCOUNTS?

The initial net premium is allocated by JHVLICO from its general account to
the Money Market Subaccount on the date of issue of the Policy. The initial net
premium is the gross Minimum First Premium, plus any additional amount of
premium that has been paid prior to the date of issue, less the premium
processing charge, and less the charges deducted for sales expenses, state
premium taxes, and the Federal DAC Tax. These charges also apply to subsequent
premium payments. Twenty days after the date of issue, the amount in the Money
Market Subaccount is reallocated among the Subaccounts in accordance with the
Owner's election. Net premiums derived from payments received after this
reallocation date are allocated, generally on the date of receipt, to one or
more of the Subaccounts as elected by the Owner.

HOW ARE AMOUNTS ALLOCATED TO EACH SUBACCOUNT?

At issue and subsequently thereafter, the Owner will provide us with the rule
("Investment Rule") we will follow to invest net premiums or other amounts in
any of the Subaccounts. The Owner may change the Investment Rule under which
JHVLICO will allocate amounts to Subaccounts. See "Premiums--Billing, Allocation
of Premium Payments (Investment Rule)."

WHAT COMMISSIONS ARE PAID TO AGENTS?

The Policies are sold through agents who are licensed by state authorities to
sell JHVLICO's insurance policies. Commissions payable to agents are described
under "Distribution of Policies." Sales expenses in any year are not equal to
the deduction for sales expenses in that year. Rather, total sales expenses
under the Policies are intended to be recovered over the lifetimes of the
insureds covered by the Policies.

WHAT IS THE DEATH BENEFIT?

The death benefit proceeds, payable when the last insured dies, 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 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. (The Total Sum
Insured is the Basic Sum Insured plus the amount of any Additional Sum
Insured.) If this Option is elected, the Owner may also elect an optional
Extra Death Benefit feature, under which the death benefit will increase if
and when the Policy Account Value exceeds a certain predetermined amount.

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<PAGE>

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 last surviving insured,
and varies in amount based on investment results.

The death benefit of the Policy under either Option A or Option 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 Minimum Death Benefit provision, the Policy is guaranteed
not to lapse during the first 10 Policy years, provided the amount of premiums
paid, accumulated at 4% interest, minus any withdrawals, also accumulated at 4%
interest, is at least equal to the Guaranteed Minimum Death Benefit Premiums,
accumulated at 4% interest. For an additional charge, the Owner also may elect
for this benefit to continue beyond the tenth Policy year. However, the
Guaranteed Minimum Death Benefit will not apply to any Policy if the Additional
Sum Insured is scheduled to exceed the Basic Sum Insured at any time. 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 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 the
Surrender Value. Interest charged on any loan will accrue and compound daily at
an effective annual rate of 5% in the first 20 Policy years and 4.5% 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 for both insureds,
or within 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.

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<PAGE>

WHAT INVESTMENT TRANSFERS ARE ALLOWED AN OWNER?

The Owner may transfer the Account Value among the variable Subaccounts or
into the Fixed Account at any time. Transfers out of the Fixed Account, however,
are subject to restrictions.

ARE THE BENEFITS UNDER A POLICY SUBJECT TO FEDERAL INCOME TAX?

The benefits under Policies described in this Prospectus are expected to
receive the same tax treatment under the Internal Revenue Code of 1986 as
benefits under traditional fixed-benefit life insurance policies. Thus, death
benefits payable under the Policies will not be included in the beneficiary's
gross income. Also, the Owner is not taxed on interest and gains under the
Policy unless and until values are actually received through withdrawal,
surrender, or other distributions.

Under Federal tax law, distributions from Policies on which premiums greater
than a "7-pay" premium limit (as defined in the law) have been paid, will be
subject to special taxation. See "Premiums--7-Pay Premium Limit" and "Policy
Proceeds" for a discussion of how the "7-pay" premium limit may be exceeded
under a Policy. A distribution on such a Policy (called a "modified endowment")
will be taxed to the extent there is any income (gain) to the Owner and an
additional penalty tax may be imposed on the taxable amount.

JHVLICO AND JOHN HANCOCK

JHVLICO, a stock life insurance company chartered in 1979 under Massachusetts
law, is authorized to transact a life insurance and annuity business in
Massachusetts and all other states, except New York. JHVLICO began selling
variable life insurance policies in 1980.

JHVLICO is a wholly-owned subsidiary of John Hancock, a company chartered in
Massachusetts in 1862. Its Home Office is at John Hancock Place, Boston,
Massachusetts 02117. John Hancock's assets are approximately $59 billion and it
has invested over $380 million in JHVLICO in connection with JHVLICO's
organization and operations. It is anticipated that John Hancock will from time
to time make additional capital contributions to JHVLICO to enable it to meet
its reserve requirements and expenses in connection with its business, and John
Hancock is committed to make additional capital contributions if necessary to
ensure that JHVLICO maintains a positive net worth.

THE ACCOUNT AND THE SERIES FUNDS

THE ACCOUNT

The Account, a separate account established under Massachusetts law in 1993,
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

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<PAGE>

for Policies where the insured is classified as a substandard risk and a portion
of these premiums is allocated to the Account.

The Account is registered with the Securities and Exchange Commission (the
"Commission") under the 1940 Act. Such registration does not involve supervision
by the Commission of the management or policies of the Account, JHVLICO or John
Hancock.

The assets in each variable Subaccount are invested in the corresponding
Portfolio of the Funds, but the assets of one variable Subaccount are not
necessarily legally insulated from liabilities associated with another variable
Subaccount. New variable Subaccounts may be added or existing variable
Subaccounts may be deleted as new Portfolios are added to or deleted from the
Funds and made available to Owners.

THE SERIES FUNDS

Each Fund is a "series" type of mutual fund registered with the Commission
under the 1940 Act as an open-end diversified management investment company.
Each Fund serves as the investment medium for the Account and other unit
investment trust separate accounts established for other variable life insurance
policies and variable annuity contracts. (See the attached Fund Prospectuses for
a description of a need to monitor for possible conflicts and other
consequences.) A very brief summary of the investment objectives of each
Portfolio is set forth below.

Managed Portfolio

The investment objective of this Portfolio is to achieve maximum long-term
total return consistent with prudent investment risk. Investments will be made
in common stocks, convertibles and other equity investments, in bonds and other
fixed income securities and in money market instruments.

Growth & Income Portfolio

The investment objective of this Portfolio is to achieve intermediate and
long-term growth of capital, with income as a secondary consideration. This
objective will be pursued by investments principally in common stocks (and
securities convertible into or with rights to purchase common stocks) of
companies believed to offer growth potential over both the intermediate and the
long term.

Equity Index Portfolio

The investment objective of this Portfolio is to provide investment results
that correspond to the total return of the U.S. market as represented by the S&P
500 utilizing common stocks that are publicly traded in the United States.

Large Cap Value Portfolio

The investment objective of this Portfolio is to provide substantial dividend
income, as well as long-term capital appreciation, through investments in the
common stocks of established companies believed to offer favorable prospects for
increasing dividends and capital appreciation.

Large Cap Growth Portfolio

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<PAGE>

believed to offer above-average capital appreciation opportunities. Current
income is not an objective of the Portfolio.

Mid Cap Value Portfolio

The investment objective of this Portfolio is to provide long-term growth of
capital primarily through investment in the common stocks of medium
capitalization companies believed to sell at a discount to their intrinsic
value.

Mid Cap Growth Portfolio

The investment objective of this Portfolio is to provide long-term growth of
capital through a non-diversified portfolio investing primarily in common stocks
of medium capitalization companies.

Diversified Mid Cap Growth Portfolio

The investment objective of this Portfolio is to provide long-term growth of
capital through a diversified portfolio investing primarily in common stocks of
medium capitalization growth companies.

Real Estate Equity Portfolio

The investment objective of this Portfolio is to provide above-average income
and long-term growth of capital by investment principally in equity securities
of companies in the real estate and related industries.

Small/Mid Cap CORE Portfolio

The investment objective of this Portfolio is to achieve long-term growth of
capital through a broadly diversified portfolio of equity securities of U.S.
issuers which are included in the Russell 2500 Index at the time of investment.

Small Cap Value Portfolio

The investment objective of this Portfolio is to provide long-term growth of
capital by investing in a well diversified portfolio of equity securities of
small capitalization companies exhibiting value characteristics.

Small Cap Growth Portfolio

The investment objective of this Portfolio is to provide long-term growth of
capital through a diversified portfolio investing primarily in common stocks of
small capitalization emerging growth companies.

Global Equity Portfolio

The investment objective of this Portfolio is to achieve long-term growth of
capital through a diversified portfolio of marketable securities, primarily
equity securities, of both U.S. and foreign issuers.

International Balanced Portfolio

The investment objective of this Portfolio is to maximize total U.S. dollar
return, consisting of capital appreciation and current income, through
investment in non-U.S. equity and fixed income securities.

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<PAGE>

International Equity Index Portfolio

The investment objective of this Portfolio is to provide investment results
that correspond to the total return of the major developed international
(non-U.S.) equity markets, as represented by the MSCI AEFE GDP Index.

International Opportunities Portfolio

The investment objective of this Portfolio is to provide capital appreciation
through investments in common stocks of primarily well-established, non-United
States companies.

Emerging Markets Equity Portfolio

The investment objective of this Portfolio is to achieve capital appreciation
by investing primarily in equity securities of companies in countries having
economies and markets generally considered by the World Bank or the United
Nations to be emerging or developing.

Short-Term Bond Portfolio

The investment objective of this Portfolio is to provide a high level of
current income consistent with a low degree of share price fluctuation through
investment primarily in a diversified portfolio of short- and intermediate-term
investment-grade debt obligations.

Bond Index Portfolio

The investment objective of this Portfolio is to provide investment results
that correspond to the total return and risk characteristics of the U.S.
investment grade fixed income market, as represented by a Lehman Brothers bond
index that tracks the performance of investment grade debt securities.

Sovereign Bond Portfolio

The investment objective of this Portfolio is to provide as high a level of
long-term total rate of return as is consistent with prudent investment risk
through investment primarily in a diversified portfolio of freely marketable
debt securities.

Strategic Bond Portfolio

The investment objective of this Portfolio is to provide total return
consistent with moderate risk of capital and maintenance of liquidity, through a
portfolio of domestic and international fixed income securities.

High Yield Bond Portfolio

The investment objective of this Portfolio is to provide high current income
and capital appreciation with capital preservation through investing primarily
in high yield (below investment grade) debt securities.

Money Market Portfolio

The investment objective of this Portfolio is to provide maximum current
income consistent with capital preservation and liquidity, through investment in
high quality money market instruments.

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<PAGE>

Boston, MA 02109, provides sub-investment advice with respect to the Managed,
Growth & Income, Large Cap Growth, Real Estate Equity, and Short-Term Bond
Portfolios. Independence International Associates, Inc., a subsidiary of IIA
located at the same address as IIA, is a sub-investment adviser to the
International Equity Index Portfolio.

Another indirectly owned subsidiary of John Hancock, John Hancock Advisers,
Inc., located at 101 Huntington Avenue, Boston, MA 02199, provides
sub-investment advice with respect to the Sovereign Bond, Diversified Mid Cap
Growth, and Small Cap Growth Portfolios.

T. Rowe Price Associates, Inc., located at 100 East Pratt St., Baltimore, MD
21202, provides sub-investment advice with respect to the Large Cap Value
Portfolio and its subsidiary, Rowe Price-Fleming International, Inc., also
located at 100 East Pratt St., Baltimore, MD 21202, provides sub-investment
advice with respect to the International Opportunities Portfolio.

State Street Bank & Trust, N.A., at Two International Place, Boston, MA 02110,
is the sub-investment adviser to the Equity Index Portfolio. INVESCO Management
& Research located at 101 Federal Street, Boston, MA 02110, is the
sub-investment adviser to the Small Cap Value Portfolio. Janus Capital
Corporation, with its 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.

Goldman Sachs & Company, located at One New York Plaza, New York, New York
10004, is sub-investment adviser to the Small/Mid Cap CORE Portfolio. Scudder
Kemper Investments, Inc., located at 345 Park Avenue, New York, New York 10154,
is the sub-investment adviser to the Global Equity Portfolio. Montgomery Asset
Management, LLC, located at 101 California Street, San Francisco, California
94111, is the sub-investment adviser to the Emerging Markets Equity Portfolio.
Mellon Bond Associates, located at One Mellon Bank Center, Suite 4135,
Pittsburgh, Pennsylvania 15258, is the sub-investment adviser to the Bond Index
Portfolio. Wellington Management Company, LLC, located at 75 State Street,
Boston, Massachusetts 02109, is the sub-investment adviser to the High Yield
Bond Portfolio.

Edinburgh Overseas Equity Portfolio. The investment objective of this
Portfolio is long-term capital appreciation with reasonable investment risk
through active management and investment in common stock and common stock
equivalents of foreign issuers. Current income, if any, is incidental.

Turner Core Growth Portfolio. The investment objective of this Portfolio is to
seek long-term capital appreciation through a diversified portfolio of common
stocks that show strong earnings potential with reasonable market prices.

Frontier Capital Appreciation Portfolio. The investment objective of this
Portfolio is to maximum capital appreciation through investment in common stock
of companies of all sizes, with emphasis on stocks of small-to
medium-capitalization companies. Importance is placed on growth and price
appreciation, rather than income.

Enhanced U.S. Equity Portfolio. The investment objective of this Portfolio is
to provide above market total return through investment in common stock of
companies perceived to provide a return higher than that of the S&P 500 at
approximately the same level of investment risk as the S&P 500.

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<PAGE>

M Financial Investment Advisers, Inc., acts as the investment manager for the
four Portfolios described above. Edinburgh Fund Managers PLC, provides
sub-investment advice to the Edinburgh Overseas Equity Portfolio; Turner
Investment Partners, Inc., provides sub-investment advice to the Turner Core
Growth Portfolio; Frontier Capital Management Company, Inc., provides
sub-investment advice to the Frontier Capital Appreciation Portfolio; and
Franklin Portfolio Associates Trust provides sub-investment advice to the
Enhanced U.S. Equity Portfolio.

JHVLICO will purchase and redeem Fund shares for the Account at their net
asset value without any sales or redemption charges. Shares of the Fund
represent an interest in one of the Portfolios which corresponds to a variable
Subaccount of the Account. Any dividend or capital gains distributions received
by the Account will be reinvested in Fund shares at their net asset value as of
the dates paid.

On each Valuation Date, shares of each Portfolio are purchased or redeemed by
JHVLICO for each variable Subaccount based on, among other things, the amount of
net premiums allocated to the variable Subaccount, distributions reinvested,
transfers to, from and among variable Subaccounts, all to be effected as of that
date. Such purchases and redemptions are effected at the net asset value per
Fund share for each Portfolio determined on that same Valuation Date. A
Valuation Date is any date on which the New York Stock Exchange is open for
trading and on which the Fund values its shares. A Valuation Period is that
period of time from the beginning of the day following a Valuation Date to the
end of the next following Valuation Date.

A full description of each Fund, its investment objectives, policies and
restrictions, its charges, expenses and all other aspects of its operation is
contained in the attached Prospectuses and the statement of additional
information referred to therein, which should be read together with this
Prospectus.

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.

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<PAGE>

provisions of these Acts, and JHVLICO has been advised that the staff of the
Securities and Exchange Commission has not reviewed the disclosure in this
Prospectus relating to the Fixed Account. Disclosure regarding the Fixed Account
may, however, be subject to certain generally-applicable provisions of the
Federal securities laws relating to accuracy and completeness of statements made
in prospectuses.

POLICY PROVISIONS AND BENEFITS

REQUIREMENTS FOR ISSUANCE OF POLICY

The Policy is generally available with a minimum Total Sum Insured at issue of
$500,000 and a minimum Basic Sum Insured of $250,000. At the time of issue, each
insured must be age 20 through 80. All persons insured must meet certain health
and other criteria called "underwriting standards." The smoking status of each
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 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 sex-neutral rates, charges, or values that would
apply to such Policies.

PREMIUMS

Payment Flexibility. Premiums are flexible. The Owner may choose the amount
and frequency of premium payments, so long as each premium payment is at least
$100 and meets the other requirements described below.

Minimum First Premium. The amount of premium required at the time of issue is
determined by JHVLICO, and depends on the age, sex, smoking status, and
underwriting class of each of the insureds at issue, the Policy's Total 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 full force and effect. See "Death Benefits." There is no grace
period for the payment of the Minimum First Premium.

Minimum Premiums. If the Policy's Surrender Value at the beginning of any
Policy month is insufficient to pay the monthly Policy charges then due, JHVLICO
will notify the Owner and the Policy will enter a grace period, unless the
Guaranteed Minimum Death Benefit is in effect. If premiums sufficient to pay at
least three months' estimated charges are not paid by the end of the grace
period, the Policy will lapse. See "Default."

Planned Premium Schedule. At the time of issue, the Owner may designate a
Planned Premium schedule for the amount and frequency of premium payments.
JHVLICO will send billing statements for the amount chosen, at the frequency
chosen. The Owner may change the Planned Premium after issue. The Owner may also
pay a premium in excess of the Planned Premium, subject to the limitations
described below. At the time of Policy issuance, JHVLICO will determine whether
the Planned Premium schedule will exceed the 7-Pay limit discussed below. If so,
JHVLICO's standard procedures prohibit issuance of the Policy unless the Owner
signs a form acknowledging that fact.

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<PAGE>

Account Value to increase to such an extent that an increase in death benefit is
necessary either to satisfy federal tax law requirements or because of the way
the Optional Extra Death Benefit feature operates, JHVLICO has the right to not
accept the excess portion of that premium payment or to require evidence of
insurability before that portion is accepted. In no event, however, will JHVLICO
refuse to accept any premium necessary to maintain the Guaranteed Minimum Death
Benefit in effect under a Policy.

Whether or not the Guaranteed Minimum Death Benefit is in effect, JHVLICO also
reserves the right to limit premium payments above the amount of the cumulative
Guaranteed Minimum Death Benefit Premiums. JHVLICO will not, however, refuse to
accept any premium payment that is required to keep the Policy from lapsing.

Guaranteed Minimum Death Benefit Premiums. A Guaranteed Minimum Death Benefit
feature may apply during the first ten Policy years and, if the Owner has
elected, thereafter. See "Death Benefits." The Guaranteed Minimum Death Benefit
Premiums required to maintain this benefit in force depend on the issue age,
sex, smoking status, and underwriting class of each of the insureds at issue and
the Basic Sum Insured at issue. This premium will be higher than the Minimum
First Premium and is 85% of the target premium (discussed under "Sales Charge").
To keep the Guaranteed Minimum Death Benefit in effect, the amount of actual
premiums paid, accumulated at 4% interest, minus any withdrawals, also
accumulated at 4% interest, must at each Policy anniversary be at least equal to
the Guaranteed Minimum Death Benefit Premiums due to date accumulated at 4%
interest. If this test is not satisfied on any Policy anniversary, a 61-day
grace period will commence as of that anniversary and JHVLICO will notify the
Owner of the shortfall. This notice will be mailed to the Owner's last-known
address at least 31 days prior to the end of the grace period. If JHVLICO does
not receive payment for the amount of the deficiency by the end of the grace
period, the Guaranteed Minimum Death Benefit feature will lapse unless and until
restored as described under "Default--Reinstatement." The Guaranteed Minimum
Death Benefit will not apply if the Additional Sum Insured is scheduled to
exceed the Basic Sum Insured at any time.

Billing, Allocation of Premium Payments (Investment Rule). The Owner may at
any time elect to be billed by JHVLICO for an amount of premium other than the
Guaranteed Minimum Death Benefit Premium. The Owner may also elect to be billed
for premiums on an annual, semi-annual or quarterly basis. An automatic
check-writing ("premiumatic") program may be available to an Owner interested in
making monthly premium payments. All premiums are payable at JHVLICO's Servicing
Office.

Any premium payment will be processed by JHVLICO as of the end of the
Valuation Period in which it is received, unless one of the three exceptions
noted below is applicable. Each premium payment will be reduced by the premium
processing charge, the state premium tax charge, the 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 premiums (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:

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<PAGE>

(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 limit is
the total of net level premiums that would have been payable at any time for the
Policy to be fully paid-up after the payment of 7 level annual premiums. If the
total premiums paid exceed the 7-pay limit, the Policy will be treated as a
"modified endowment", which means that the Owner will be subject to tax to the
extent of any income (gain) on any distributions made from the Policy. A
material change in the Policy will result in a new 7-pay limit and test period.
A reduction in the Policy's benefits within the 7-year period following issuance
of, or a material change in, the Policy may also result in the application of
the modified endowment treatment. See "Policy Proceeds" under "Tax
Considerations." If JHVLICO receives any premium payment that will cause a
Policy to become a modified endowment, the excess portion of that premium
payment will not be accepted unless the Owner signs an acknowledgment of that
fact. When it identifies such an excess premium, JHVLICO sends the Owner
immediate notice and refunds the excess premium if it has not received notice of
the acknowledgment by the time the premium payment check has had a reasonable
time to clear the banking system, but in no case longer than two weeks.

ACCOUNT VALUE AND SURRENDER VALUE

Amount of Account Value. The Account Value increases or decreases depending
upon a number of factors, such as the applicable Subaccount's investment
experience, the proportion of the Account Value invested in each Subaccount and
the interest credited to any Loan Account established upon the making of a
Policy loan. In general the Account Value for any day equals the Account Value
for the previous day, decreased by charges against the Account Value, increased
or decreased by the investment experience of the Subaccounts, increased by net
premiums received and decreased by any partial withdrawal. No minimum amount of
Account Value is guaranteed.

A Policy loan will not affect the total amount of Account Value at the time
the loan is made but will result in a different rate of return being credited to
the Loan Account portion of the Account Value.

Amount of Surrender Value. The Surrender Value will be the Account Value less
any Indebtedness.

When Policy May Be Surrendered. A Policy may be surrendered for its Surrender
Value at any time while either of the insureds 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.

If a Policy is surrendered during the second Policy year, a portion of the
sales charge, equal to 5% of premiums paid in the second Policy year up to one
target premium, will be refunded to the Owner.

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<PAGE>

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 when
at least one of the insureds is still living, provided that the Policy is not in
a grace period. This privilege, which reduces the Account Value by the amount of
the withdrawal and the associated charge, may not be used to reduce the Account
Value below the amount JHVLICO estimates will be required to pay three months'
charges under the Policy as they fall due. The withdrawal will be effective as
of the end of the Valuation Period in which JHVLICO receives written notice
satisfactory to it at its Home Office.

A withdrawal will reduce any Option A death benefit by the amount withdrawn.
JHVLICO reserves the right to refuse any withdrawal request that would cause the
Policy's death benefit to fall below $500,000.

An amount equal to the Account Value withdrawn will be removed from each
Subaccount in the same proportion as the Account Value is then allocated among
the Subaccounts. A withdrawal is not a loan and, once made, cannot be repaid.

A withdrawal may have significant tax consequences. See "Tax Considerations."

POLICY SPLIT OPTION

The Owner may elect a rider that permits the Policy's current Total Sum
Insured to be split on a "50/50" basis into two other individual life insurance
policies on the lives of the insured persons. Such a split will not require
evidence of insurability of either insured, but is permitted only upon the
insureds' divorce or the occurrence of certain Federal tax law changes. This
rider must be elected at the time of application for a Policy, but may be
cancelled at any time by the Owner. The monthly charge for the rider is 3c per
$1000 of current Sum Insured. Certain conditions, described in the rider, must
be met prior to effecting a Policy split. The rider automatically terminates on
the date of death of the first insured to die, the Policy anniversary nearest
the older insured's 80th birthday, or the date the Policy terminates, whichever
is earliest.

Tax Considerations. See "Tax Considerations--Policy Split Option", for
possible tax consequences of a Policy split under the option described above.

DEATH BENEFITS

The death benefit proceeds are payable when the last surviving 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 last surviving 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 death benefit described below under "Optional Extra Death Benefit
Feature" and "Definition of Life Insurance", and minus the amount of any
partial withdrawals that have been made over the life of the Policy.

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<PAGE>

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."

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.

Optional Extra Death Benefit Feature (Option M). If Option A is elected, the
Owner may also elect an Optional Extra Death Benefit feature. Pursuant to this
feature the death benefit under Option A will be no less than the amount of the
Policy Account Value at the beginning of the Policy year in which the last
surviving insured dies, multiplied by a factor specified in the Policy. The
factor is based on the younger insured's age. The Optional Extra Death Benefit
feature may result in an Option A death benefit that is higher than the minimum
death benefit required under Federal tax law, as described below under
"Definition of Life Insurance." Although there is no special charge for the
optional Extra Death Benefit feature, the monthly cost of insurance deductions
will be based on the amount of death benefit then in effect, including any
additional death benefit pursuant to this option. An election of this option
must be made at the time of application for the Policy, although the Owner may
revoke the election at any time. There may be tax consequences involved, if
revoking the Optional Extra Death Benefit feature under Option A causes a
reduction in death benefit. See "Tax Considerations--Policy Proceeds."

Definition of Life Insurance. Federal tax law requires a minimum death benefit
in relation to cash value for a Policy to qualify as life insurance. The death
benefit of a Policy will be increased if necessary to ensure that the Policy
will continue to qualify as life insurance. The higher death benefit amount will
be equal to the Policy Account Value on the date of death of the last surviving
insured, times a percentage which declines with age and which is set out in the
Policy. The monthly deductions for the cost of insurance will be based on the
amount of death benefit then in effect, including any additional death benefit
required to satisfy the definition of life insurance.

Guaranteed Minimum Death Benefit. During the first 10 Policy years (and
thereafter if the Owner elects), the Basic Sum Insured is guaranteed not to
lapse, provided that (1) the amount of premiums paid through each Policy
anniversary, accumulated at 4% interest, minus any withdrawals, also accumulated
at 4% interest, is at least equal to the Guaranteed Minimum Death Benefit
Premiums accumulated at 4% interest and (2) any Additional Sum Insured under a
Policy is not scheduled to exceed the Basic Sum Insured at any time. At any time
when this feature is not in force, the death benefit of the Policy is not
guaranteed. The election to extend the Guaranteed Minimum Death Benefit beyond
ten Policy years must be made at the time of Policy issuance, and the Owner may
revoke the election at any time. JHVLICO imposes a charge after the tenth Policy
year if the Owner elects to extend this benefit.

Additional Sum Insured. The Owner may apply for an amount of Additional Sum
Insured under the Policy, pursuant to which an additional amount of death
benefit will be paid upon the death of the last surviving 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.

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<PAGE>

continue to qualify as life insurance (see "Death Benefits--Definition of Life
Insurance") or an increase pursuant to the Optional Extra Death Benefit feature.
Any increase or decrease in Additional Sum Insured will become effective at the
beginning of the first Policy month after JHVLICO receives in good order at its
Servicing Office all information necessary to process the change, and, in the
case of an increase in coverage, approves the change.

Any decision by the Owner to modify the amount of Additional Sum Insured
coverage after issue can have significant tax consequences. See "Tax
Considerations--Policy Proceeds."

Also, the Owner may elect among several forms of Additional Sum Insured
coverage at the time the Owner applies for it: a level amount of coverage; an
amount of coverage that increases on each Policy anniversary up to a prescribed
limit; an amount of coverage that increases on each Policy anniversary to the
amount of premiums paid during prior Policy years plus the Planned Premium for
the current Policy year, subject to certain limits; or a combination of those
forms of coverage.

The amount of target premium under a Policy is not affected by the amount of
the Additional Sum Insured. Accordingly, the amount of sales charge paid by the
Owner and the amount of compensation paid to the selling insurance agent may be
less if coverage is included as Additional Sum Insured, rather than as Basic Sum
Insured.

The amount of any Additional Sum Insured is not included in any Guaranteed
Minimum Death Benefit. Therefore, if the Policy's Account Value is insufficient
to pay the monthly charges as they fall due (including the charges for the
Additional Sum Insured) the Additional Sum Insured coverage will lapse, even if
the Basic Sum Insured stays in effect pursuant to the Guaranteed Minimum Death
Benefit feature.

The Additional Sum Insured is limited to 400% of the Basic Sum Insured.
Generally, an Owner will incur lower sales charges and have more flexible
coverage with respect to the Additional Sum Insured than with respect to the
Basic Sum Insured. On the other hand, for Owners that wish to take advantage of
the Guaranteed Minimum Death Benefit, the proportion of the Policy's Sum Insured
that is guaranteed can be increased by taking out more coverage as Basic Sum
Insured at the time of Policy issue. The Guaranteed Minimum Death Benefit does
not apply to either the Basic Sum Insured or any Additional Sum Insured if the
Additional Sum Insured is scheduled to exceed the Basic Sum Insured at any time.
In such a case, it could be to the Owner's advantage either to increase the
amount of coverage applied for as Basic Sum Insured in order that the Guaranteed
Minimum Death Benefit will be available or, if such guarantee is not of value to
the Owner, to maximize the proportion of the Additional Sum Insured.

Temporary Coverage Prior to Policy Delivery. If a specified amount of premium
is paid with the application for a Policy, temporary survivorship term coverage
may be available prior to the time that coverage under the Policy takes effect.
Temporary term coverage under all applications with John Hancock and its
affiliates will not exceed $1,000,000, and 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.

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<PAGE>

Transfers out of the Fixed Account to the variable Subaccounts are permitted
only once each Policy year and only during the 31-day period beginning on the
Policy anniversary. Transfers out of the Fixed Account may be requested from 60
days before to 30 days after the Policy anniversary. If received on or before
the Policy anniversary, requests for transfer out of the Fixed Account will be
processed on the Policy anniversary (or the next Valuation Date if the Policy
anniversary does not occur on a Valuation Date); if received after the Policy
anniversary, they will be processed at the end of the Valuation Period in which
JHVLICO receives the request at its Servicing Office. (JHVLICO reserves the
right to defer such Fixed Account transfers for up to six months.) If an Owner
requests a transfer out of the Fixed Account 61 days or more prior to the Policy
anniversary, that portion of the reallocation will not be processed and the
Owner's confirmation statement will not reflect a transfer out of the Fixed
Account as to such request. Transfers among variable Subaccounts and transfers
into the Fixed Account may be requested at any time. A maximum of 20% of Fixed
Account assets or, if greater, $500 may be transferred out of the Fixed Account
in any Policy year. Currently, there is no minimum amount limit on transfers out
of the Fixed Account, but JHVLICO reserves the right to impose such a limit in
the future. No transfers among Subaccounts may be made while the Policy is in a
grace period. If an Owner requests a change inconsistent with the transfer
provisions, the portion of the request inconsistent with the transfer provisions
will not be effective.

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,
either of the insureds is alive, and the Policy is not in a grace period. The
Owner may borrow money, assigning the Policy as the only security for the loan,
by completion of a form satisfactory to JHVLICO or, if the telephone transaction
authorization form has been completed, by telephone. The Loan Value will be 90%
of the Surrender Value. Interest charged on any loan will accrue and compound
daily at an effective annual rate of 5% in the first 20 Policy years, and 4.5%
thereafter.

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<PAGE>

then current Investment Rule. For example, if the entire loan outstanding is
$3000 of which $1000 was borrowed from the Fixed Account, then upon a repayment
of $1500, $500 would be allocated to the Fixed Account and the remaining $1000
would be allocated to the appropriate Subaccounts as stipulated in the then
current Investment Rule. If an Owner wishes any payment to constitute a loan
repayment (rather than a premium payment), the Owner must so specify.

Effect of Loan and Indebtedness. While the Indebtedness is outstanding, that
portion of the Account Value that is in Loan Assets is credited with interest at
a rate that is 1% less than the loan interest rate for the first 20 Policy years
and .5% less than the loan interest rate thereafter. The rate accredited to Loan
Assets will usually be different than the net return for the Subaccounts. Since
Loan Assets 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 all permanently affected by
any Indebtedness, whether or not it is repaid in whole or in part. The amount of
any Indebtedness is subtracted from the amount otherwise payable when the Policy
proceeds become payable.

Whenever the Indebtedness equals or exceeds 90% of the Account Value, the
Policy terminates 31 days after notice has been mailed by JHVLICO to the Owner
and any assignee of record at their last known addresses, specifying the minimum
amount that 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 Minimum Death
Benefit is in force, at the beginning of each Policy month, JHVLICO determines
whether the Account Value, net of any Indebtedness, is sufficient to pay all
monthly charges then due under the Policy. If not, the Policy is in default and
JHVLICO will notify the Owner of the amount estimated to be necessary to pay
three months' deductions, and a grace period will be in effect until 61 days
after the date the notice was mailed. If JHVLICO does not receive payment of at
least this amount by the end of the grace period, the Policy will lapse, and any
remaining amount owed to the Owner as of the date of lapse will be paid to the
Owner.

If the Guaranteed Minimum Death Benefit is in effect and the Policy provides
for an Additional Sum Insured, the grace period and lapse procedures set forth
in the preceding paragraph will apply only to the Additional Sum Insured. Lapse
of the Additional Sum Insured can have significant tax consequences. See "Tax
Considerations--Policy Proceeds." If the Guaranteed Minimum Death Benefit has
been in effect and lapses at the end of a grace period (as described in
"Premiums--Guaranteed Minimum Death Benefit Premiums"), the usual default, grace
period and lapse procedures described in the preceding paragraph will be applied
commencing with the first day of the first Policy month following the lapse of
the Guaranteed Minimum Death Benefit.

The insurance under the Policy continues in full force during any grace period
but, if the last surviving 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.

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<PAGE>

Reinstatement. A lapsed Policy (or a lapsed Additional Sum Insured, if the
Basic Sum Insured remains in force or is reinstated) or the Guaranteed Minimum
Death Benefit may be reinstated in accordance with the Policy's terms. Evidence
of insurability satisfactory to JHVLICO will be required (except as to a request
to restore the Guaranteed Minimum Death Benefit within 1 year after the
beginning of its grace period) and payment of the required premium and charges.
The request must be received at JHVLICO's Servicing Office within 1 year after
the beginning of the grace period (or 5 years if the request relates only to the
Guaranteed Minimum Death Benefit). JHVLICO reserves the right to refuse
Guaranteed Minimum Death Benefit restorations after the first. 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."

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 and to any variations in Policy provisions required by the regulatory
authorities of the state that has approved the Policy for issue.

CHARGES AND EXPENSES

CHARGES DEDUCTED FROM PREMIUMS

In addition to the sales charge (see "Sales Charge" below), the following
charges are deducted from premiums:

Premium Processing Charge. 1.25% of each premium payment will be deducted from
each premium payment for collection and Policy processing costs. This charge
will be reduced for a Policy with a Total Sum Insured at issue of more than
$5,000,000, subject to a minimum charge equal to .50%. The premium processing
charge for these larger Policies will be the greater of .50% or the percentage
computed pursuant to the following mathematical formula:

1.25% X ( 1 - [ (Total Sum Insured at Issue - $5,000,000) X .25 ] )
-----------------------------------------
$10,000,000

State Premium Tax Charge. A charge currently equal to 2.35% of each premium
payment will be deducted from each premium payment. 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.

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<PAGE>

but reserves the right, subject to any required regulatory approval, to change
this charge for Policies not yet issued in order to correspond with changes in
the Federal income tax treatment of the Policies' deferred acquisition costs.

SALES CHARGE

A charge is made to compensate JHVLICO for the cost of selling the Policy.
This cost includes agents' commissions, commission overrides, advertising, and
the printing of Prospectuses and sales literature. The amount of the charge in
any Policy year cannot be specifically related to sales expenses for that year.
JHVLICO expects to recover its total sales expenses over the period the Policies
are in effect. To the extent that sales charges are insufficient to cover total
sales expenses, the sales expenses may be recovered from other sources,
including gains from the charge for mortality and expense risks and other gains
with respect to the Policies, or from JHVLICO's general assets. See
"Distribution of Policies."

The sales charge in the first Policy year is equal to 30% of the premiums paid
up to one "target premium" and 3.5% of all premiums in excess of the target
premium in that year. The target premium is established at issue and is the
amount of the level premium that would be necessary to support a whole life
insurance policy in the amount of the Basic Sum Insured at the maximum
guaranteed cost of insurance rates, assuming deductions or charges for the other
policy expenses at the maximum levels guaranteed under the Policy and a net
interest rate of 5%. Target premiums will vary based on the issue age, sex,
smoking status and underwriting class of each of the insureds.

The current sales charge for premiums paid up to one target premium in
subsequent Policy years is 15% in years 2 through 5, 10% in years 6 through 10,
3% for years 11 through 20 and 0% thereafter. The current sales charge for
premiums paid in excess of the target premium is 3.5% in years 2 through 10, 3%
in years 11 through 20 and 0% thereafter.

The guaranteed maximum sales charges under the Policy are no higher than the
current sales charges, except that the guaranteed maximum sales charge for
premiums paid up to one target premium is 4% in years 11 through 20 and 3%
thereafter and, for premiums paid in excess of one target premium, is 3% after
year 20. Because the Policies were first offered only in 1993, sales charges at
the lower current rates are not yet applicable under any outstanding Policy.

Notwithstanding the foregoing, if the younger insured is age 71 or older at
the time of Policy issuance, the current and guaranteed sales charge in Policy
year 12 and thereafter is 0%.

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 $14,000 if he paid $10,000 in
each of the first ten Policy years, but would pay total sales charges of only
$9,750 if he paid $20,000 (i.e., two times the target premium amount) in every
other Policy year up to the ninth Policy year. However, delaying the payment of
target premiums to later Policy years could increase the risk that the
Guaranteed Minimum Death Benefit may lapse and that the Account Value will be
insufficient to pay monthly Policy charges as they come due. As a result, the
Policy or any Additional Sum Insured may lapse. See "Default." Conversely,
accelerating the payment of target premiums to earlier Policy years could cause
aggregate premiums paid to exceed the Policy's 7-pay premium limit and, as a
result, cause the Policy to become a modified endowment, with adverse tax
consequences to the Owner upon receipt of Policy distributions. See
"Premiums--7-Pay Premium Limit."

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<PAGE>

REDUCED CHARGES FOR ELIGIBLE GROUPS

The sales charge and issue charge (described below) otherwise applicable may
be reduced with respect to Policies issued to a class of associated individuals
or to a trustee, employer or similar entity where JHVLICO anticipates that the
sales to the members of the class will result in lower than normal sales or
administrative expenses. 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; and any other such circumstances which
justify a reduction in sales or administrative expenses. Any reduction will be
reasonable and will apply uniformly to all prospective Policy purchasers in the
class and will not be unfairly discriminatory to the interests of any Policy
Owner.

CHARGES DEDUCTED FROM ACCOUNT VALUE OR ASSETS

The following charges are deducted from Account Value or assets:

Issue Charge. JHVLICO will deduct an issue charge from Account Value,
currently at the rate of $55.55 per month for the first 5 Policy years, plus 2c
per $1,000 of the Total Sum Insured at issue per month for the first 3 Policy
years. The charge per $1,000 of Total Sum Insured at issue is guaranteed not to
exceed $200 per month. Thus, for a Policy with a Total Sum Insured at issue of
$1,000,000, the aggregate amount deducted during the first 3 Policy years would
be $2,719.80.

The issue charge is to compensate JHVLICO for expenses incurred in connection
with the issuance of the Policy, other than sales expenses. Such expenses
include medical examinations, insurance underwriting costs and costs incurred in
processing applications and establishing permanent Policy records.

Administrative Charge. JHVLICO will deduct from the Account Value a maximum
charge of $10 for all Policy years plus 3c per $1,000 of the Total Sum Insured
at issue per month. The current monthly charge is $7.50 for all Policy years,
plus 1c per $1,000 of the Total Sum Insured at issue for the first 10 Policy
years, except that the $7.50 charge currently is zero for any Policy with a
Total Sum Insured at issue of at least $5,000,000. Thus, for a Policy with a
Total Sum Insured at issue of $1,000,000 and using the current administrative
charge, the aggregate amount deducted during the first 10 Policy years would be
$2,100.

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 each of the insureds 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 the 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 each 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'

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<PAGE>

Standard Ordinary Mortality Tables, as set forth in the Policy. The insurance
charge is not affected by the death of the first insured to die.

If an insured's underwriting risk classification has worsened, any
subsequently-added Additional Sum Insured coverage may have higher insurance
charge rates than the Basic Sum Insured. If an insured's underwriting risk
classification has improved, cost of insurance rates on the Total Sum Insured
may be reduced, as may the target premium with respect to subsequent premium
payments.

Lower current insurance rates are offered at most ages for insureds who
qualify as non-smokers. To qualify, an insured must meet additional requirements
that relate to smoking habits.

Guaranteed Minimum Death Benefit Charge. There is no charge for any Guaranteed
Minimum Death Benefit during the first 10 Policy years. If the Guaranteed
Minimum Death Benefit option is elected for a period beyond the first 10 Policy
years, JHVLICO deducts a charge from Account Value beginning in the eleventh
Policy year. The maximum monthly charge is 3c per $1000 of the Basic Sum Insured
at issue and the current monthly charge is 1c per $1,000 of the Basic Sum
Insured at issue. If the Guaranteed Minimum Death Benefit lapses due to failure
to pay sufficient premiums, the charge will be discontinued. Because the
Policies were first offered only in 1993, no Guaranteed Minimum Death Benefit
charge is yet applicable to any Policy at the current rate.

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 effective annual rate of
this charge will vary, depending upon the Total Sum Insured at issue. The table
below shows the current levels of this charge. 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.

<TABLE>
<CAPTION>
Current Charge For
Total Sum Insured at Issue Mortality and Expense Risks
-------------------------- ---------------------------
<S> <C>
$500,000 but less than $5 million .625% of assets
$5 million but less than $15 million .575% of assets
Greater than $15 million .525% of assets
</TABLE>

Charges for Extra Mortality Risks. An insured who does not qualify for the
standard underwriting class must pay an additional charge because of the extra
mortality risk. The level of the charge depends upon the ages of the insureds
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 may be deducted from premiums when paid or 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.

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<PAGE>

Charge for Partial Withdrawal. JHVLICO will deduct a charge in the amount of
$20 on a partial withdrawal of Surrender Value, as described under "Account
Value and Surrender Value." The charge will be deducted from Account Value. The
charge is to compensate JHVLICO for the administrative expenses of effecting the
withdrawal.

Fund Investment Management Fee and Other Fund Expenses. The Account purchases
shares of the Funds at net asset value, a value which reflects the deduction
from the assets of each Fund of its investment management fees and certain
non-advisory Fund operating expenses, which are described in the Summary of this
Prospectus. For a full description of these deductions, see the attached
Prospectuses for the Funds.

The monthly deductions from Account Value described above are deducted on the
date of issue and on the first day of each Policy month thereafter. These
deductions are made from the Subaccounts in proportion to the amount of Account
Value in each. For each month that JHVLICO is unable to deduct any charge
because there is insufficient Account Value, the uncollected charges will
accumulate and be deducted when and if sufficient Account Value is available.

GUARANTEE OF PREMIUMS AND CERTAIN CHARGES

The Policy's Guaranteed Minimum Death Benefit Premium is guaranteed not to
increase. The premium processing charge, the state premium tax charge, the
Federal DAC Tax charge, the issue charge and the charge for partial withdrawals
are guaranteed not to increase over the life of the Policy. The administrative
charge, the Guaranteed Minimum Death Benefit Charge, the sales charge, the
mortality and expense risk charge, and the insurance charge are guaranteed not
to exceed the maximums set forth in the Policy.

DISTRIBUTION OF POLICIES

Applications are solicited by agents who are licensed by state insurance
authorities to sell JHVLICO's Policies and who are also registered
representatives ("representatives") of John Hancock 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 45% of the target premium paid in the first Policy year, 5% of the
target premium paid in the second through fifth Policy years, and 3% of the
target premium paid in each year thereafter. The maximum commission on any
premium paid in any year in excess of the target premium is 3%.

25
<PAGE>

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 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. In addition, these representatives may earn
"credits" toward qualification for attendance at certain business meetings
sponsored by John Hancock.

Distributors serves as principal underwriter for other separate accounts
registered under the 1940 Act: John Hancock Variable Annuity Accounts U, I and
V, John Hancock Mutual Variable Life Insurance Account UV and John Hancock
Variable Life Accounts U and V. Distributors is also the principal underwriter
for John Hancock Variable Series Trust I.

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 and the
investment diversification requirements mentioned below, as JHVLICO believes it
will, 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.

26
<PAGE>

paid for riders. But under certain circumstances within the first 15 Policy
years, the Owner may be taxed on a withdrawal of Policy values even if total
withdrawals do not exceed total premiums paid.

JHVLICO also believes that, except as noted below, loans received under the
Policy will be treated as indebtedness of an Owner and that no part of any loan
will constitute income to the Owner. However, the amount of any loan outstanding
will be taxed to the Owner if a Policy lapses.

Distributions under Policies on which premiums greater than the "7-pay" limit
(see "Premiums--7-Pay Premium Limit") have been paid will be treated as
distributions from a "modified endowment," which are subject to special taxation
based on Federal tax law. The Owner of such a Policy will be taxed on
distributions such as loans, surrenders and partial withdrawals to the extent of
any income (gain) to the Owner (income-first basis). The distributions affected
will be those made on or after, and within the two year period prior to, the
time the Policy becomes a modified endowment. Additionally, a 10% penalty tax
may be imposed on affected income distributed before the Owner attains
age 59 1/2.

Furthermore, any time there is a "material change" in a Policy (such as an
increase in Additional Sum Insured, the addition of certain other Policy
benefits after issue, or reinstatement of a lapsed Policy), the Policy will be
subject to a new "7-pay" test, with the possibility of a tax on distributions if
it were subsequently to become a modified endowment. Moreover, if benefits under
a Policy are reduced (such as a reduction in the Total Sum Insured or death
benefit or the reduction or cancellation of certain rider benefits, or Policy
termination) during the 7 years in which the 7-pay test is being applied, the
7-pay limit will be recalculated based on the reduced benefits. If the premiums
paid to date are greater than the recalculated 7-pay limit, the Policy will
become a modified endowment.

All modified endowments issued by the same insurer (or affiliates) to the
Owner during any calendar year generally will be treated as one contract for the
purpose of applying the modified endowment rules. Your tax advisor should be
consulted if you have questions regarding the possible impact of the 7-pay limit
on your Policy.

The Code and Treasury Regulations set forth requirements for the
diversification of the investments underlying variable life insurance policies.
JHVLICO and the Portfolios intend to comply with these requirements with respect
to the Policy. Failure to meet these requirements would mean that the Policy
would not be treated as a life insurance contract, subjecting the Owner to
Federal income tax on the income and gains under the Policy.

The Treasury Department has said in the past that it may issue a regulation or
a ruling prescribing the circumstances in which an Owner's control over
investments underlying a variable life insurance policy may cause the Owner,
rather than the insurance company, to be treated as the owner of the assets in
the Account, with the effect that income and gains from the Account would be
included in the Owner's income for Federal income tax purposes. Under current
law, we believe that JHVLICO, and not the Policy Owner, would be considered the
owner of the assets of the Account. However, JHVLICO has reserved certain rights
to alter the Policy and the investment alternatives of the Account if necessary
to comply with any such regulation or ruling.

The United States Congress and the Treasury Department have in the past and
may in the future consider new legislation that, if enacted, could change the
Federal tax treatment of life insurance policy income or death benefits. Any
such change could have a retroactive effect. We suggest you consult with your
legal or tax adviser, if you have any questions about this.

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.

27
<PAGE>

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.

POLICY SPLIT OPTION

An Owner may elect to split a Policy into two other individual life insurance
policies, as described under "Policy Split Option." A Policy split could have
adverse tax consequences including, but not limited to, the recognition of
taxable income in an amount up to any taxable gain in the Policy at the time of
the split.

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; President and Chief Operating Officer,
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.

Robert R. Reitano 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.

Michele G. VanLeer Director of JHVLICO; Senior Vice President, John
Hancock Mutual Life Insurance Company.

Robert S. Paster Director, JHVLICO; Second Vice President, John
Hancock Mutual Life Insurance Company.

Barbara L. Luddy Director and Actuary of JHVLICO; Second Vice
President, John Hancock Mutual Life Insurance
Company.

Daniel L. Ouellette Vice President, Marketing, JHVLICO; Second Vice
President, John Hancock Mutual Life Insurance
Company.

Patrick F. Smith Controller of JHVLICO; Assistant Controller, John
Hancock Mutual Life Insurance Company.
</TABLE>

28
<PAGE>

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.

Owners will be sent semiannually a report containing the financial statements
of the Funds, including a list of securities held in each Portfolio.

VOTING PRIVILEGES

All of the assets in the variable Subaccounts of the Account are invested in
shares of the corresponding Portfolios of the Funds. JHVLICO will vote the
shares of each of the Portfolios of the Funds which are deemed attributable to
qualifying variable life insurance policies and variable annuity contracts at
regular and special meetings of the Funds' shareholders in accordance with
instructions received from owners of such policies or contracts. Shares of the
Funds held in the Account which are not attributable to such policies or
contracts and shares for which instructions from owners are not received will be
represented by JHVLICO at the meeting and will be voted for and against each
matter in the same proportions as the votes based upon the instructions received
from the owners of all such policies and contracts.

The number of Fund shares held in each variable Subaccount deemed attributable
to each owner is determined by dividing the amount of a Policy's Account Value
held in the variable Subaccount by the net asset value of one share in the
corresponding Fund Portfolio in which the assets of that variable Subaccount are
invested. Fractional votes will be counted. The number of shares as to which the
owner may give instructions will be determined as of the record date for the
Funds' meetings.

Owners of Policies may give instructions regarding the election of the Board
of Trustees of each Fund, ratification of the selection of independent auditors,
approval of Fund investment advisory agreements and other matters requiring a
vote under the 1940 Act. Owners will be furnished information and forms by
JHVLICO in order that voting instructions may be given.

JHVLICO may, when required by state insurance regulatory authorities,
disregard voting instructions if the instructions require that the shares be
voted so as to change the investment objectives of the Portfolios or to approve
or disapprove an investment advisory or underwriting contract for the Funds.
JHVLICO also may disregard voting instructions in favor of changes initiated by
an owner or a Fund's Board of Trustees in an investment policy, investment
adviser or principal underwriter of a 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

29
<PAGE>

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 or variable Subaccount by withdrawing
the same percentage of each investment in the Account with appropriate
adjustments to avoid odd lots and fractions, (2) to operate the Account as a
"management-type investment company" under the 1940 Act, or in any other form
permitted by law, the investment adviser of which would be JHVLICO, an affiliate
or John Hancock, (3) to deregister the Account under the 1940 Act, (4) to
substitute for the Portfolio shares held by a Subaccount any other investment
permitted by law, and (5) to take any action necessary to comply with or obtain
any exemptions from the 1940 Act. JHVLICO would notify owners of any of the
foregoing changes and, to the extent legally required, obtain approval of owners
and any regulatory body prior thereto. Such notice and approval, however, may
not be legally required in all cases.

STATE REGULATION

JHVLICO is subject to regulation and supervision by the Massachusetts
Commissioner of Insurance who periodically examines its affairs. It also is
subject to the applicable insurance laws and regulations of all jurisdictions in
which it is authorized to do business.

JHVLICO is required to submit annual statements of its operations, including
financial statements, to the insurance departments of the various jurisdictions
in which it does business for purposes of determining solvency and compliance
with local insurance laws and regulations.

LEGAL MATTERS

The legal validity of the Policies described in this Prospectus has been
passed on by Ronald J. Bocage, Vice President and Counsel for JHVLICO. Messrs.
Freedman, Levy, Kroll & Simonds, Washington, D.C., have advised 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.

30
<PAGE>

EXPERTS

The financial statements of the Account and JHVLICO included in this
Prospectus have been audited by Ernst & Young LLP, independent auditors, for the
periods indicated in their reports thereon which appear elsewhere herein and
have been included in reliance on their reports given on their authority as
experts in accounting and auditing.

Actuarial matters included in this Prospectus have been examined by Deborah A.
Poppel, F.S.A., an Actuary of JHVLICO.

FINANCIAL STATEMENTS

The financial statements of JHVLICO included herein should be distinguished
from the financial statements of the Account and should be considered only as
bearing upon the ability of JHVLICO to meet its obligations under the Policies.

31
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT S

STATEMENT OF ASSETS AND LIABILITIES

DECEMBER 31, 1997

<TABLE>
<CAPTION>
Large Cap Sovereign International Small Cap International Mid Cap Large Cap
Growth Bond Equities Growth Balanced Growth Value
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
----------- ----------- ------------- ---------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in shares of
portfolios of John
Hancock Variable Series
Trust I, at value........ $32,504,276 $19,461,475 $8,790,049 $2,504,952 $1,475,245 $3,614,752 $5,190,146
Investments in shares of
portfolios of M Fund
Inc., at value........... -- -- -- -- -- -- --
Receivable from:
John Hancock Variable
Series Trust I.......... 133,074 65,642 50,618 36,983 20 1,467 56,855
M Fund Inc............... -- -- -- -- -- -- --
----------- ----------- ---------- ---------- ---------- ---------- ----------
TOTAL ASSETS.............. 32,637,350 19,527,117 8,840,667 2,541,935 1,475,265 3,616,219 5,247,001
LIABILITIES
Payable to:
John Hancock Variable
Life Insurance Company.. 132,745 65,444 50,522 36,949 -- 1,429 56,794
M Fund Inc............... -- -- -- -- -- -- --
Asset charges payable..... 329 198 96 34 20 38 61
----------- ----------- ---------- ---------- ---------- ---------- ----------
TOTAL LIABILITIES......... 133,074 65,642 50,618 36,983 20 1,467 56,855
----------- ----------- ---------- ---------- ---------- ---------- ----------
NET ASSETS................ $32,504,276 $19,461,475 $8,790,049 $2,504,952 $1,475,245 $3,614,752 $5,190,146
=========== =========== ========== ========== ========== ========== ==========
<CAPTION>
Money Mid Cap Special Real Estate
Market Value Opportunities Equity
Subaccount Subaccount Subaccount Subaccount
----------- ---------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Investments in shares of
portfolios of John
Hancock Variable Series
Trust I, at value........ $14,171,123 $6,066,901 $8,833,185 $4,191,379
Investments in shares of
portfolios of M Fund
Inc., at value........... -- -- -- --
Receivable from:
John Hancock Variable
Series Trust I.......... 907,716 32,571 1,906 4,723
M Fund Inc............... -- -- -- --
----------- ---------- ---------- ----------
TOTAL ASSETS.............. 15,078,839 6,099,472 8,835,091 4,196,102
LIABILITIES
Payable to:
John Hancock Variable
Life Insurance Company.. 907,538 32,502 1,806 4,668
M Fund Inc............... -- -- -- --
Asset charges payable..... 178 69 100 55
----------- ---------- ---------- ----------
TOTAL LIABILITIES......... 907,716 32,571 1,906 4,723
----------- ---------- ---------- ----------
NET ASSETS................ $14,171,123 $6,066,901 $8,833,185 $4,191,379
=========== ========== ========== ==========
</TABLE>
- ---------
See accompanying notes.

32
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT S

STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)

DECEMBER 31, 1997

<TABLE>
<CAPTION>
Short-Term Turner
Growth & U.S. Small Cap International Equity Strategic Core
Income Managed Government Value Opportunities Index Bond Growth
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
----------- ----------- ----------- ---------- ------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in shares of
portfolios of John
Hancock Variable Series
Trust I, at value........ $47,996,192 $21,775,321 $12,476,155 $3,972,890 $6,035,554 $16,437,919 $1,620,281 $ --
Investments in shares of
portfolios of M Fund
Inc., at value........... -- -- -- -- -- -- -- 1,014,974
Receivable from:
John Hancock Variable
Series Trust I.......... 82,373 207,062 13,811 65,403 83,379 81,011 96,827 --
M Fund Inc............... -- -- -- -- -- -- -- 1,017
----------- ----------- ----------- ---------- ---------- ----------- ---------- ----------
TOTAL ASSETS.............. 48,078,565 21,982,383 12,489,966 4,038,293 6,118,933 16,518,930 1,717,108 1,015,991
LIABILITIES
Payable to:
John Hancock Variable
Life Insurance Company.. 81,787 206,820 13,698 65,352 83,313 80,813 96,806 --
M Fund Inc............... -- -- -- -- -- -- -- 1,004
Asset charges payable..... 586 242 113 51 66 198 21 13
----------- ----------- ----------- ---------- ---------- ----------- ---------- ----------
TOTAL LIABILITIES......... 82,373 207,062 13,811 65,403 83,379 81,011 96,827 1,017
----------- ----------- ----------- ---------- ---------- ----------- ---------- ----------
NET ASSETS................ $47,996,192 $21,775,321 $12,476,155 $3,972,890 $6,035,554 $16,437,919 $1,620,281 $1,014,974
=========== =========== =========== ========== ========== =========== ========== ==========
<CAPTION>
Edinburgh Frontier
International Capital Enhanced
Equity Appreciation U.S. Equity
Subaccount Subaccount Subaccount
------------- ------------ -------------
<S> <C> <C> <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........... 2,336,598 5,392,998 497,205
Receivable from:
John Hancock Variable
Series Trust I.......... -- -- --
M Fund Inc............... 81 13,180 6,438
---------- ---------- --------
TOTAL ASSETS.............. 2,336,679 5,406,178 503,643
LIABILITIES
Payable to:
John Hancock Variable
Life Insurance Company.. -- -- --
M Fund Inc............... 55 13,127 6,433
Asset charges payable..... 26 53 5
---------- ---------- --------
TOTAL LIABILITIES......... 81 13,180 6,438
---------- ---------- --------
NET ASSETS................ $2,336,598 $5,392,998 $497,205
========== ========== ========
</TABLE>
- ---------
See accompanying notes.

33
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT S

STATEMENTS OF OPERATIONS

FOR THE YEARS AND PERIODS ENDED DECEMBER 31,

<TABLE>
<CAPTION>
Large Cap Growth Subaccount Sovereign Bond Subaccount
---------------------------------- -----------------------------
1997 1996 1995 1997 1996 1995
---------- ----------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distribution received from:
John Hancock Variable
Series Trust I................ $2,884,498 $ 2,452,382 $509,637 $855,742 $242,881 $ 66,972
M Fund, Inc.................... -- -- -- -- -- --
---------- ----------- -------- -------- -------- --------
Total investment income......... 2,884,498 2,452,382 509,637 855,742 242,881 66,972
Expenses:
Mortality and expense risks.... 91,256 49,880 17,330 39,184 14,129 4,148
---------- ----------- -------- -------- -------- --------
Net investment income (loss).... 2,793,242 2,402,502 492,307 816,558 228,752 62,824
Net realized and unrealized
gain (loss) on investments:
Net realized gains (losses).... 619,721 444,487 126,908 80,538 5,746 21,718
Net unrealized appreciation
(depreciation) during the
period........................ 2,301,920 (1,104,574) 180,251 63,687 (69,973) 34,574
---------- ----------- -------- -------- -------- --------
Net realized and unrealized
gain (loss) on investments..... 2,921,641 (660,087) 307,159 144,225 (64,227) 56,292
---------- ----------- -------- -------- -------- --------
Net increase (decrease) in
net assets resulting from
operations..................... $5,714,883 $ 1,742,415 $799,466 $960,783 $164,525 $119,116
========== =========== ======== ======== ======== ========
<CAPTION>
Small Cap
Growth International Balanced
International Equities Subaccount Subaccount Subaccount
---------------------------------- ------------------- -----------------------
1997 1996 1995 1997 1996* 1997 1996*
----------- --------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Distribution received from:
John Hancock Variable
Series Trust I................ $ 422,913 $ 52,188 $ 19,501 $ 473 $ 512 $ 61,249 $2,947
M Fund, Inc.................... -- -- -- -- -- -- --
----------- -------- -------- -------- -------- -------- ------
Total investment income......... 422,913 52,188 19,501 473 512 61,249 2,947
Expenses:
Mortality and expense risks.... 33,893 23,132 10,434 6,547 1,547 4,443 356
----------- -------- -------- -------- -------- -------- ------
Net investment income (loss).... 389,020 29,056 9,067 (6,074) (1,035) 56,806 2,591
Net realized and unrealized
gain (loss) on investments:
Net realized gains (losses).... 244,810 165,730 (25,931) 21,707 (40,018) 8,667 56
Net unrealized appreciation
(depreciation) during the
period........................ (1,219,540) 137,729 153,715 126,699 (2,665) (67,714) 5,307
----------- -------- -------- -------- -------- -------- ------
Net realized and unrealized
gain (loss) on investments..... (974,730) 303,459 127,784 148,406 (42,683) (59,047) 5,363
----------- -------- -------- -------- -------- -------- ------
Net increase (decrease) in
net assets resulting from
operations..................... $ (585,710) $332,515 $136,851 $142,332 $(43,718) $ (2,241) $7,954
=========== ======== ======== ======== ======== ======== ======
<CAPTION>
Large Cap
Mid Cap Growth Value
Subaccount Subaccount
------------------ -------------------
1997 1996* 1997 1996*
--------- ------- -------- ---------
<S> <C> <C> <C> <C>
Investment income:
Distribution received from:
John Hancock Variable
Series Trust I................ $ -- $1,177 $194,199 $13,644
M Fund, Inc.................... -- -- -- --
-------- ------ -------- -------
Total investment income......... 1,177 194,199 13,644
Expenses:
Mortality and expense risks.... 8,287 719 11,163 964
-------- ------ -------- -------
Net investment income (loss).... (8,287) 458 183,036 12,680
Net realized and unrealized
gain (loss) on investments:
Net realized gains (losses).... 1,235 (391) 164,821 1,327
Net unrealized appreciation
(depreciation) during the
period........................ 486,186 6,440 279,449 23,553
-------- ------ -------- -------
Net realized and unrealized
gain (loss) on investments..... 487,421 6.049 444,270 24,880
-------- ------ -------- -------
Net increase (decrease) in
net assets resulting from
operations..................... $479,134 $6,507 $627,306 $37,560
======== ====== ======== =======
</TABLE>
- ---------
* From May 1, 1996 (commencement of operations).

See accompanying notes.

34
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT S

STATEMENTS OF OPERATIONS (CONTINUED)

FOR THE YEARS AND PERIODS ENDED DECEMBER 31,

<TABLE>
<CAPTION>
Mid Cap Value
Money Market Subaccount Subaccount Special Opportunities Subaccount
---------------------------- ------------------ ---------------------------------
1997 1996 1995 1997 1996* 1997 1996 1995
-------- -------- -------- --------- ------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series
Trust I........................... $758,434 $287,321 $119,746 $446,081 $ 6,878 $ 878,600 $238,163 $ 40,159
M Fund Inc......................... -- -- -- -- -- -- -- --
-------- -------- -------- -------- ------- --------- -------- --------
Total investment income.............. 758,434 287,321 119,746 446,081 6,878 878,600 238,163 40,159

Expenses:
Mortality and expense risks......... 66,882 30,722 12,117 11,421 377 35,934 21,146 4,949
-------- -------- -------- -------- ------- --------- -------- --------
Net investment income................ 691,552 256,599 107,629 434,660 6,501 842,666 217,017 35,210

Net realized and unrealized gain
(loss) on investments:
Net realized gains.................. -- -- -- 101,787 845 297,666 317,400 28,812
Net unrealized appreciation
(depreciation) during the
period............................. -- -- -- (39,717) 13,910 (730,748) 344,786 185,349
-------- -------- -------- -------- ------- --------- -------- --------
Net realized and unrealized gain
(loss) on investments............... -- -- -- 62,070 14,755 (433,082) 662,186 214,161
-------- -------- -------- -------- ------- --------- -------- --------

Net increase in net assets resulting
from operations..................... $691,552 $256,599 $107,629 $496,730 $21,256 $ 409,584 $879,203 $249,371
======== ======== ======== ======== ======= ========= ======== ========
<CAPTION>

Real Estate Equity Subaccount Growth & Income Subaccount
------------------------------ ------------------------------------
1997 1996 1995 1997 1996 1995
-------- -------- ------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series
Trust I........................... $246,677 $ 50,204 $32,578 $5,917,063 $3,056,625 $ 669,643
M Fund Inc......................... -- -- -- -- -- --
-------- -------- ------- ---------- ---------- ----------
Total investment income.............. 246,677 50,204 32,578 5,917,063 3,056,625 669,643

Expenses:
Mortality and expense risks......... 13,879 4,547 2,766 169,135 89,391 23,428
-------- -------- ------- ---------- ---------- ----------
Net investment income................ 232,798 45,657 29,812 5,747,928 2,967,234 646,215

Net realized and unrealized gain
(loss) on investments:
Net realized gains.................. 252,095 19,122 613 2,390,414 512,402 170,322
Net unrealized appreciation
(depreciation) during the
period............................. (13,488) 191,067 25,077 435,778 (496,647) 322,628
-------- -------- ------- ---------- ---------- ----------
Net realized and unrealized gain
(loss) on investments............... 238,607 210,189 25,690 2,826,192 15,755 492,950
-------- -------- ------- ---------- ---------- ----------

Net increase in net assets resulting
from operations..................... $471,405 $255,846 $55,502 $8,574,120 $2,982,989 $1,139,165
======== ======== ======= ========== ========== ==========
</TABLE>

- ---------
* From May 1, 1996 (commencement of operations).

See accompanying notes.

35
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT S

STATEMENTS OF OPERATIONS (CONTINUED)

FOR THE YEARS AND PERIODS ENDED DECEMBER 31,

<TABLE>
<CAPTION>
Short-Term U.S.
Managed Subaccount Government Subaccount
--------------------------------- -----------------------------
1997 1996 1995 1997 1996 1995
---------- ---------- -------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series
Trust I................................. $1,879,954 $1,281,149 $316,774 $415,542 $181,937 $64,502
M Fund Inc............................... -- -- -- -- -- --
---------- ---------- -------- -------- -------- -------
Total investment income.................... 1,879,954 1,281,149 316,774 415,542 181,937 64,502

Expenses:
Mortality and expense risks............... 65,383 35,103 10,978 20,551 9,277 2,917
---------- ---------- -------- -------- -------- -------
Net investment income...................... 1,814,571 1,246,046 305,796 394,991 172,660 61,585

Net realized and unrealized gain (loss) on
investments:
Net realized gains........................ 171,318 124,493 179,131 35,294 (52,888) 8,251
Net unrealized appreciation (depreciation)
during the year.......................... 715,231 (507,517) 51,622 (25,976) (7,734) 22,112
---------- ---------- -------- -------- -------- -------
Net realized and unrealized gain (loss) on
investments............................... 886,549 (383,024) 230,753 9,318 (60,622) 30,363
---------- ---------- -------- -------- -------- -------

Net increase (decrease) in net assets
resulting from operations................. $2,701,120 $ 863,022 $536,549 $404,309 $112,038 $91,948
========== ========== ======== ======== ======== =======
<CAPTION>
International
Small Cap Value Opportunities
Subaccount Subaccount
--------------------- -----------------------
1997 1996* 1997 1996*
----------- -------- ------------ --------
<S> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series
Trust I................................ $ 299,278 $ 8,296 $ 69,078 $ 2,965
M Fund Inc.............................. -- -- -- --
---------- ------- --------- -------
Total investment income................... 299,278 8,296 69,078 2,965

Expenses:
Mortality and expense risks.............. 8,494 523 13,177 1,439
---------- ------- --------- -------
Net investment income..................... 290,784 7,773 55,901 1,526

Net realized and unrealized gain (loss) on
investments:
Net realized gains....................... 75,149 58 80,782 242
Net unrealized appreciation (depreciation)
during the year......................... (18,626) 14,046 (260,664) 36,666
---------- ------- --------- -------
Net realized and unrealized gain (loss) on
investments.............................. 56,523 14,104 (179,882) 36,908
---------- ------- --------- -------

Net increase (decrease) in net assets
resulting from operations................ $ 347,307 $21,877 $(123,981) $38,434
========== ======= ========= =======
<CAPTION>
Equity Index
Subaccount
----------------------
1997 1996*
---------- ----------
<S> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series............ $ 409,920 $23,300
Trust I
M Fund Inc.............................. -- --
---------- -------
Total investment income................... 409,920 23,300

Expenses:
Mortality and expense risks.............. 31,223 1,962
---------- -------
Net investment income..................... 378,697 21,338

Net realized and unrealized gain (loss) on
investments:
Net realized gains....................... 901,978 17,398
Net unrealized appreciation (depreciation)
during the year......................... 392,256 55,782
---------- -------
Net realized and unrealized gain (loss) on
investments.............................. 1,294,234 73,180
---------- -------

Net increase (decrease) in net assets
resulting from operations................ $1,672,931 $94,518
========== =======
</TABLE>

- ---------
* From May 1, 1996 (commencement of operations).

See accompanying notes.

36
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT S

STATEMENTS OF OPERATIONS (CONTINUED)

FOR THE YEARS AND PERIODS ENDED DECEMBER 31,

<TABLE>
<CAPTION>
Strategic Edinburgh Frontier Enhanced
Bond Turner Core Growth International Equity Capital Appreciation U.S.
Subaccount Subaccount Subaccount Subaccount Equity
------------------ ------------------- --------------------- --------------------- Subaccount
1997 1996* 1997 1996* 1997 1996* 1997 1996* 1997**
--------- ------- --------- -------- --------- --------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I.......... $ 74,850 $7,425 $ -- $ -- $ -- $ -- $ -- $ -- $ --
M Fund Inc............... -- -- 91,360 21,778 32,677 5,263 128,190 -- 15,335
-------- ------ -------- ------- -------- -------- --------- -------- -------
Total investment income.... 74,850 7,425 91,360 21,778 32,677 5,263 128,190 15,335

Expenses:
Mortality and expense
risks................... 3,820 349 4,071 2,140 7,502 2,280 10,040 1,679 478
-------- ------ -------- ------- -------- -------- --------- -------- -------
Net investment income
(loss)................... 71,030 7,076 87,289 19,638 25,175 2,983 118,150 (1,679) 14,857

Net realized and unrealized
gain (loss) on investments:
Net realized gains
(losses)................. 8,335 22 76,711 (9,767) 12,541 (2,433) 614,358 (21,044) 4,177
Net unrealized appreciation
(depreciation) during the
year..................... (11,727) (591) 32,626 16,054 (26,022) (12,286) (368,570) 5,101 6,844
-------- ------ -------- ------- -------- -------- --------- -------- -------
Net realized and unrealized
gain (loss) on
investments............... (3,392) (569) 109,337 6,287 (13,481) (14,719) 245,788 (15,943) 11,021
-------- ------ -------- ------- -------- -------- --------- -------- -------

Net increase (decrease) in
net assets resulting from
operations................ $ 67,638 $6,507 $196,626 $25,925 $ 11,694 $(11,736) $ 363,938 $(17,622) $25,878
======== ====== ======== ======= ======== ======== ========= ======== =======
</TABLE>

- ---------
* From May 1, 1996 (commencement of operations).
** From July 1, 1997 (commencement of operations).

See accompanying notes.

37
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT S

STATEMENTS OF CHANGES IN NET ASSETS

For the years and periods ended December 31,

Large Cap Growth Subaccount Sovereign Bond Subaccount
----------------------------------------- --------------------------------------
1997 1996 1995 1997 1996 1995
------------- ------------ ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net
assets from operations:
Net investment income (loss).. $ 2,793,242 $ 2,402,502 $ 492,307 $ 816,558 $ 228,752 $ 62,824
Net realized gains
(losses)..................... 619,721 444,487 126,908 80,538 5,746 21,718
Net unrealized appreciation
(depreciation) during the
period....................... 2,301,920 (1,104,574) 180,251 63,687 (69,973) 34,574
------------ ----------- ----------- ----------- ---------- ----------
Net increase (decrease) in net
assets resulting from
operations.................... 5,714,883 1,742,415 799,466 960,783 164,525 119,116

From policyholder transactions:
Net premiums from
policyholders................ 20,264,849 13,036,922 8,115,186 21,324,560 4,312,776 1,370,188
Net benefits to policyholders. (10,390,849) (4,928,834) (2,752,131) (8,009,615) (679,839) (318,068)
------------ ----------- ----------- ----------- ---------- ----------
Net increase in net assets
resulting from policyholder
transactions.................. 9,874,000 8,108,088 5,363,055 13,314,945 3,632,937 1,052,120
------------ ----------- ----------- ----------- ---------- ----------
Net increase in net assets..... 15,588,883 9,850,503 6,162,521 14,275,728 3,797,462 1,171,236

Net assets at beginning of
period........................ 16,915,393 7,064,890 902,369 5,185,747 1,388,285 217,049
------------ ----------- ----------- ----------- ---------- ----------

Net assets at end of period.... $ 32,504,276 $16,915,393 $ 7,064,890 $19,461,475 $5,185,747 $1,388,285
============ =========== =========== =========== ========== ==========
<CAPTION>
Small Cap Growth International Balanced
International Equities Subaccount Subaccount Subaccount
---------------------------------------- ------------------------- ------------------------
1997 1996 1995 1997 1996* 1997 1996*
------------ ------------ ------------ ------------ ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net
assets from operations:
Net investment income (loss). $ 389,020 $ 29,056 $ 9,067 $ (6,074) $ (1,035) $ 56,806 $ 2,591
Net realized gains
(losses).................... 244,810 165,730 (25,931) 21,707 (40,018) 8,667 56
Net unrealized appreciation
(depreciation) during the
period..................... (1,219,540) 137,729 153,715 126,699 (2,665) (67,714) 5,307
----------- ----------- ----------- ----------- ---------- ---------- --------
Net increase (decrease) in net
assets resulting from
operations................... (585,710) 332,515 136,851 142,332 (43,718) (2,241) 7,954

From policyholder transactions:
Net premiums from
policyholders............... 8,150,400 4,750,218 2,620,265 2,870,481 1,120,880 1,608,069 148,617
Net benefits to policyholders (4,505,840) (1,906,352) (1,194,625) (1,005,386) (579,637) (282,878) (4,276)
----------- ----------- ----------- ----------- ---------- ---------- --------
Net increase in net assets
resulting from policyholder
transactions................. 3,644,560 2,843,866 1,425,640 1,865,095 541,243 1,325,191 144,341
----------- ----------- ----------- ----------- ---------- ---------- --------
Net increase in net assets.... 3,058,850 3,176,381 1,562,491 2,007,427 497,525 1,322,950 152,295

Net assets at beginning of
period....................... 5,731,199 2,554,818 992,327 497,525 -- 152,295 --
----------- ----------- ----------- ----------- ---------- ---------- --------

Net assets at end of period... $ 8,790,049 $ 5,731,199 $ 2,554,818 $ 2,504,952 $ 497,525 $1,475,245 $152,295
=========== =========== =========== =========== ========== ========== ========
<CAPTION>
Mid Cap Growth Large Cap Value
Subaccount Subaccount
---------------------- -------------------------
1997 1996* 1997 1996*
----------- --------- ------------ -----------
<S> <C> <C> <C> <C>
Increase (decrease) in net
assets from operations:
Net investment income (loss). $ (8,287) $ 458 $ 183,036 $ 12,680
Net realized gains
(losses).................... 1,235 (391) 164,821 1,327
Net unrealized appreciation
(depreciation) during the
period...................... 486,186 6,440 279,449 23,553
---------- -------- ----------- --------
Net increase (decrease) in net
assets resulting from
operations................... 479,134 6,507 627,306 37,560

From policyholder transactions:
Net premiums from
policyholders............... 3,212,754 858,546 5,421,062 767,660
Net benefits to policyholders (915,459) (26,730) (1,620,578) (42,864)
---------- -------- ----------- --------
Net increase in net assets
resulting from policyholder
transactions................. 2,297,295 831,816 3,800,484 724,796
---------- -------- ----------- --------
Net increase in net assets.... 2,776,429 838,323 4,427,790 762,356

Net assets at beginning of
period....................... 838,323 -- 762,356 --
---------- -------- ----------- --------

Net assets at end of period... $3,614,752 $838,323 $ 5,190,146 $762,356
========== ======== =========== ========
</TABLE>

- ---------
* From May 1, 1996 (commencement of operations).

See accompanying notes.

38
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT S

STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

FOR THE YEARS AND PERIODS ENDED DECEMBER 31,

<TABLE>
<CAPTION>
Mid Cap
Value
Money Market Subaccount Subaccount
------------------------------------------- ----------------------
1997 1996 1995 1997 1996*
------------- ------------ ------------ ----------- --------
<S> <C> <C> <C> <C> <C>
Increase in net assets from
operations:
Net investment income........ $ 691,552 $ 256,599 $ 107,629 $ 434,660 $ 6,501
Net realized gains........... -- -- -- 101,787 845
Net unrealized appreciation
(depreciation) during the
period...................... -- -- -- (39,717) 13,910
------------- ------------ ------------ ----------- --------
Net increase in net assets
resulting from operations.... 691,552 256,599 107,629 496,730 21,256

From policyholder transactions:
Net premiums from
policyholders............... 103,737,470 36,814,029 19,983,940 6,323,061 324,248
Net benefits to
policyholders............... (100,296,756) (31,658,283) (17,720,190) (1,089,206) (9,188)
------------- ------------ ------------ ----------- --------
Net increase in net assets
resulting from policyholder
transactions................. 3,440,714 5,155,746 2,263,750 5,233,855 315,060
------------- ------------ ------------ ----------- --------
Net increase in net assets.... 4,132,266 5,412,345 2,371,379 5,730,585 336,316

Net assets at beginning of
period....................... 10,038,857 4,626,512 2,255,133 336,316 --
------------- ------------ ------------ ----------- --------

Net assets at end of period... $ 14,171,123 $ 10,038,857 $ 4,626,512 $ 6,066,901 $336,316
============= ============ ============ =========== ========
<CAPTION>

Special Opportunities Subaccount Real Estate Equity Subaccount
-------------------------------------- ------------------------------------
1997 1996 1995 1997 1996 1995
----------- ----------- ---------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Increase in net assets from
operations:
Net investment income........ $ 842,666 $ 217,017 $ 35,210 $ 232,798 $ 45,657 $ 29,812
Net realized gains........... 297,666 317,400 28,812 252,095 19,122 613
Net unrealized appreciation
(depreciation) during the
period...................... (730,748) 344,786 185,349 (13,488) 191,067 25,077
----------- ----------- ---------- ----------- ---------- ---------
Net increase in net assets
resulting from operations.... 409,584 879,203 249,371 471,405 255,846 55,502

From policyholder transactions:
Net premiums from
policyholders............... 8,511,081 4,939,686 1,639,491 4,833,914 748,683 466,306
Net benefits to
policyholders............... (6,274,668) (1,301,761) (551,692) (2,393,463) (295,788) (370,910)
----------- ----------- ---------- ----------- ---------- ---------
Net increase in net assets
resulting from policyholder
transactions................. 2,236,413 3,637,925 1,087,799 2,440,451 452,895 95,396
----------- ----------- ---------- ----------- ---------- ---------
Net increase in net assets.... 2,645,997 4,517,128 1,337,170 2,911,858 708,741 150,898

Net assets at beginning of
period....................... 6,187,188 1,670,060 332,890 1,279,523 570,782 419,884
----------- ----------- ---------- ----------- ---------- ---------

Net assets at end of period... $ 8,833,185 $ 6,187,188 $1,670,060 $ 4,191,379 $1,279,523 $ 570,782
=========== =========== ========== =========== ========== =========
<CAPTION>

Growth & Income Subaccount
----------------------------------------
1997 1996 1995
------------ ----------- -----------
<S> <C> <C> <C>
Increase in net assets from
operations:
Net investment income........ $ 5,747,928 $ 2,967,234 $ 646,215
Net realized gains........... 2,390,414 512,402 170,322
Net unrealized appreciation
(depreciation) during the
period...................... 435,778 (496,647) 322,628
------------ ----------- -----------
Net increase in net assets
resulting from operations.... 8,574,120 2,982,989 1,139,165

From policyholder transactions:
Net premiums from
policyholders............... 35,535,599 19,263,021 8,168,426
Net benefits to
policyholders............... (21,776,809) (5,502,524) (1,740,418)
------------ ----------- -----------
Net increase in net assets
resulting from policyholder
transactions................. 13,758,790 13,760,497 6,428,008
------------ ----------- -----------
Net increase in net assets.... 22,332,910 16,743,486 7,567,173

Net assets at beginning of
period....................... 25,663,282 8,919,796 1,352,623
------------ ----------- -----------

Net assets at end of period... $ 47,996,192 $25,663,282 $ 8,919,796
============ =========== ===========
</TABLE>

- ---------
* From May 1, 1996 (commencement of operations).

See accompanying notes.

39
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT S

STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

FOR THE YEARS AND PERIODS ENDED DECEMBER 31,

<TABLE>
<CAPTION>
Short-Term U.S.
Managed Subaccount Government Subaccount
--------------------------------------- --------------------------------------
1997 1996 1995 1997 1996 1995
------------ ------------ ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C>

Increase (decrease) in net assets from
operations:
Net investment income................... $ 1,814,571 $ 1,246,046 $ 305,796 $ 394,991 $ 172,660 $ 61,585
Net realized gains (losses)............. 171,318 124,493 179,131 35,294 (52,888) 8,251
Net unrealized appreciation
(depreciation) during the period....... 715,231 (507,517) 51,622 (25,976) (7,734) 22,112
----------- ----------- ----------- ----------- ----------- ----------
Net increase (decrease) in net assets
resulting from operations............... 2,701,120 863,022 536,549 404,309 112,038 91,948

From policyholder transactions:
Net premiums from policyholders......... 16,914,475 9,996,216 5,502,408 12,911,228 8,757,242 2,439,840
Net benefits to policyholders........... (9,357,535) (3,151,700) (2,875,967) (4,234,624) (7,683,085) (364,204)
----------- ----------- ----------- ----------- ----------- ----------
Net increase in net assets resulting from
policyholder transactions............... 7,556,940 6,844,516 2,626,441 8,676,604 1,074,157 2,075,636
----------- ----------- ----------- ----------- ----------- ----------
Net increase in net assets............... 10,258,060 7,707,538 3,162,990 9,080,913 1,186,195 2,167,584

Net assets at beginning of period........ 11,517,261 3,809,723 646,733 3,395,242 2,209,047 41,463
----------- ----------- ----------- ----------- ----------- ----------

Net assets at end of period.............. $21,775,321 $11,517,261 $ 3,809,723 $12,476,155 $ 3,395,242 $2,209,047
=========== =========== =========== =========== =========== ==========
<CAPTION>
Small Cap Value International Opportunities
Subaccount Subaccount
--------------------- ----------------------------
1997 1996* 1997 1996*
---------- -------- ------------ -----------
<S> <C> <C> <C> <C>

Increase (decrease) in net assets from
operations:
Net investment income................... $ 290,784 $ 7,773 $ 55,901 $ 1,526
Net realized gains (losses)............. 75,149 58 80,782 242
Net unrealized appreciation
(depreciation) during the period....... (18,626) 14,046 (260,664) 36,666
---------- -------- ----------- --------
Net increase (decrease) in net assets
resulting from operations............... 347,307 21,877 (123,981) 38,434

From policyholder transactions:
Net premiums from policyholders......... 4,182,527 335,271 8,906,153 960,081
Net benefits to policyholders........... (897,951) (16,141) (3,655,731) (89,402)
---------- -------- ----------- --------
Net increase in net assets resulting from
policyholder transactions............... 3,284,576 319,130 5,250,422 870,679
---------- -------- ----------- --------
Net increase in net assets............... 3,631,883 341,007 5,126,441 909,113

Net assets at beginning of period........ 341,007 -- 909,113 --
---------- -------- ----------- --------

Net assets at end of period.............. $3,972,890 $341,007 $ 6,035,554 $909,113
========== ======== =========== ========
</TABLE>

- ---------
* From May 1, 1996 (commencement of operations).

See accompanying notes.

40
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT S

STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

FOR THE YEARS AND PERIODS ENDED DECEMBER 31,

Increase (decrease) in net assets from
operations:
Net investment income (loss).................. $ 378,697 $ 21,338 $ 71,030 $ 7,076 $ 87,289 $ 19,638
Net realized gains (losses)................... 901,978 17,398 8,335 22 76,711 (9,767)
Net unrealized appreciation (depreciation)
during the period............................ 392,256 55,782 (11,727) (591) 32,626 16,054
----------- ---------- ---------- -------- ---------- ----------
Net increase (decrease) in net assets resulting
from operations............................... 1,672,931 94,518 67,638 6,507 196,626 25,925

From policyholder transactions:
Net premiums from policyholders............... 23,412,687 1,282,798 1,828,179 259,231 743,622 1,135,180
Net benefits to policyholders................. (9,622,006) (403,009) (534,164) (7,110) (580,027) (506,352)
----------- ---------- ---------- -------- ---------- ----------
Net increase in net assets resulting from
policyholder transactions..................... 13,790,681 879,789 1,294,015 252,121 163,595 628,828
----------- ---------- ---------- -------- ---------- ----------
Net increase in net assets..................... 15,463,612 974,307 1,361,653 258,628 360,221 654,753

Net assets at beginning of period.............. 974,307 -- 258,628 -- 654,753 --
----------- ---------- ---------- -------- ---------- ----------

Net assets at end of period.................... $16,437,919 $ 974,307 $1,620,281 $258,628 $1,014,974 $ 654,753
=========== ========== ========== ======== ========== ==========
<CAPTION>

Edinburgh Frontier Enhanced
International Equity Capital Appreciation US
Subaccount Subaccount Equity
------------------------ ------------------------ Subaccount
1997 1996* 1997 1996* 1997**
----------- ---------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>

Increase (decrease) in net assets from
operations:
Net investment income (loss).................. $ 25,175 $ 2,983 $ 118,150 $ (1,679) $ 14,857
Net realized gains (losses)................... 12,541 (2,433) 614,358 (21,044) 4,177
Net unrealized appreciation (depreciation)
during the period............................ (26,022) (12,286) (368,570) 5,101 6,844
----------- ---------- ----------- ---------- --------
Net increase (decrease) in net assets resulting
from operations............................... 11,694 (11,736) 363,938 (17,622) 25,878

From policyholder transactions:
Net premiums from policyholders............... 2,484,010 1,021,041 10,030,418 1,535,063 475,503
Net benefits to policyholders................. (1,088,249) (80,162) (5,969,436) (549,363) (4,176)
----------- ---------- ----------- ---------- --------
Net increase in net assets resulting from
policyholder transactions..................... 1,395,761 940,879 4,060,982 985,700 471,327
----------- ---------- ----------- ---------- --------
Net increase in net assets..................... 1,407,455 929,143 4,424,920 968,078 497,205

Net assets at beginning of period.............. 929,143 -- 968,078 -- --
----------- ---------- ----------- ---------- --------

Net assets at end of period.................... $ 2,336,598 $ 929,143 $ 5,392,998 $ 968,078 $497,205
=========== ========== =========== ========== ========
</TABLE>

- ---------
* From May 1, 1996 (commencement of operations).
** From July 1, 1997 (commencement of operations).

See accompanying notes.

41
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT S

NOTES TO FINANCIAL STATEMENTS

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-two 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-two Portfolios of the Fund and 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,
Frontier Capital Appreciation, and Enhanced U.S. Equity Portfolios. Each
Portfolio has a different investment objective.

The net assets of the Account may not be less than the amount required under
state insurance law to provide for death benefits (without regard to the minimum
death benefit guarantee) and other policy benefits. Additional assets are held
in 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 federal income
taxes, or provision for federal income taxes, attributable to the operations of
the Account or to the policies

42
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT S

NOTES TO FINANCIAL STATEMENTS--CONTINUED

2. SIGNIFICANT ACCOUNTING POLICIES--CONTINUED

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, 1997, 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.

43
<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, 1997 were as follows:

<TABLE>
<CAPTION>
Shares
Subaccount Owned Cost Value
- ---------- ------ ---- -----
<S> <C> <C> <C>
Large Cap Growth....................... 1,561,287 $31,151,210 $32,504,276
Sovereign Bond......................... 1,956,128 19,437,026 19,461,475
International Equities................. 578,299 9,765,082 8,790,049
Small Cap Growth....................... 220,819 2,380,918 2,504,952
International Balanced................. 145,916 1,537,651 1,475,245
Mid Cap Growth......................... 303,110 3,122,126 3,614,752
Large Cap Value........................ 382,482 4,887,145 5,190,146
Money Market........................... 1,417,112 14,171,123 14,171,123
Mid Cap Value.......................... 437,535 6,092,708 6,066,901
Special Opportunities.................. 574,138 9,030,644 8,833,185
Real Estate Equity..................... 263,435 3,978,788 4,191,379
Growth & Income........................ 2,890,378 47,801,795 47,996,192
Managed................................ 1,517,509 21,524,241 21,775,321
Short-Term U.S. Government............. 1,237,301 12,488,078 12,476,155
Small Cap Value........................ 320,361 3,977,470 3,972,890
International Opportunities............ 567,935 6,259,552 6,035,554
Equity Index........................... 1,156,526 15,989,880 16,437,919
Strategic Bond......................... 158,189 1,632,599 1,620,281
Turner Core Growth..................... 75,183 966,293 1,014,974
Edinburgh International Equity......... 234,598 2,374,907 2,336,598
Frontier Capital Appreciation.......... 361,461 5,756,467 5,392,998
Enhanced U.S. Equity................... 32,949 490,361 497,205
</TABLE>

44
<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, 1997, were as follows:

<TABLE>
<CAPTION>
Subaccount Purchases Sales
- ---------- --------- -----
<S> <C> <C>
Large Cap Growth.............................. $20,094,623 $ 7,427,382
Sovereign Bond................................ 21,367,667 7,236,163
International Equities........................ 8,130,858 4,097,278
Small Cap Growth.............................. 2,578,061 719,040
International Balanced........................ 1,670,073 288,058
Mid Cap Growth................................ 3,122,169 833,161
Large Cap Value............................... 5,031,714 1,048,194
Money Market.................................. 59,512,461 55,380,195
Mid Cap Value................................. 6,426,342 757,826
Special Opportunities......................... 8,664,245 5,585,165
Real Estate Equity............................ 4,202,541 1,529,291
Growth & Income............................... 37,713,543 18,206,825
Managed....................................... 17,294,008 7,922,497
Short-Term U.S. Government.................... 13,060,114 3,988,519
Small Cap Value............................... 4,303,961 728,601
International Opportunities................... 8,336,576 3,030,253
Equity Index.................................. 22,483,862 8,314,485
Strategic Bond................................ 1,944,789 579,743
Turner Core Growth............................ 830,019 579,134
Edinburgh International Equity................ 2,552,366 1,131,429
Frontier Capital Appreciation................. 9,434,861 5,293,298
Enhanced U.S. Equity.......................... 561,076 74,892
</TABLE>

5. IMPACT OF YEAR 2000 (UNAUDITED)

The John Hancock Variable Life Account S, along with John Hancock Mutual Life
Insurance Company, its ultimate parent (together, John Hancock), have developed
a plan to modify or replace significant portions of the Account's computer
information and automated technologies so that its systems will function
properly with respect to the dates in the year 2000 and thereafter. The Account
presently believes that with modifications to existing systems and conversions
to new technologies, the year 2000 will not pose significant operational
problems for its computer systems. However, if certain modifications and
conversions are not made, or are not completed timely, the year 2000 issue could
have an adverse impact on the operations of the Account.

45
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT S

NOTES TO FINANCIAL STATEMENTS--CONTINUED

5. IMPACT OF YEAR 2000 (UNAUDITED)--CONTINUED

arrangements as it deems appropriate, there is no guarantee that the systems of
other companies on which the Account's systems rely will be converted timely or
will not have an adverse effect on the Account's systems.

The Account expects the project to be substantially complete by early 1999.
This completion target was derived utilizing numerous assumptions of future
events, including availability of certain resources and other factors. However,
there can be no guarantee that this completion target will be achieved.

46
<PAGE>

REPORT 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,
Frontier Capital Appreciation and Enhanced U.S. Equity Subaccounts) as of
December 31, 1997, and the related statements of operations, and statements of
changes in net assets for each of the periods indicated therein. These financial
statements are the responsibility of the Account's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of each of the respective
subaccounts constituting John Hancock Variable Life Account S at December 31,
1997, 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, MA
February 6, 1998

47
<PAGE>

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

To the Directors and Policyholders
John Hancock Variable Life Insurance Company

We have audited the accompanying statutory-basis statements of financial
position of John Hancock Variable Life Insurance Company as of December 31, 1997
and 1996, 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.

As described in Note 1 to the financial statements, the Company presents its
financial statements in conformity with accounting practices prescribed or
permitted by the Commonwealth of Massachusetts Division of Insurance, which
practices differ from generally accepted accounting principles. The variances
between such practices and generally accepted accounting principles also are
described in Note 1. The effects on the financial statements of these variances
are not reasonably determinable but are presumed to be material.

In our opinion, because of the effects of the matter described in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of John Hancock Variable Life Insurance Company at December 31, 1997 and 1996,
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, 1997 and 1996, 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, MA
February 18, 1998

48
<PAGE>

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

STATUTORY-BASIS STATEMENTS OF FINANCIAL POSITION

<TABLE>
<CAPTION>
December 31
-------------------
1997 1996
---- ----
(In millions)
<S> <C> <C>
ASSETS
Bonds--Note 6......................................... $1,092.7 $ 753.5
Preferred stocks...................................... 17.2 9.6
Common stocks......................................... 2.3 1.4
Investment in affiliates.............................. 79.1 72.0
Mortgage loans on real estate--Note 6................. 273.9 212.1
Real estate........................................... 39.9 38.8
Policy loans.......................................... 106.8 80.8
Cash items:
Cash in banks....................................... 83.1 26.7
Temporary cash investments.......................... 60.1 5.2
-------- --------
143.2 31.9
Premiums due and deferred............................. 33.8 36.8
Investment income due and accrued..................... 24.7 22.6
Other general account assets.......................... 16.8 17.8
Assets held in separate accounts...................... 4,691.1 3,290.5
-------- --------
TOTAL ASSETS.......................................... $6,521.5 $4,567.8
======== ========
OBLIGATIONS AND STOCKHOLDER'S EQUITY
OBLIGATIONS
Policy reserves..................................... $1,124.3 $ 877.8
Federal income and other taxes payable--Note 1...... 36.1 29.4
Other accrued expenses.............................. 335.1 75.1
Asset valuation reserve--Note 1..................... 18.6 16.6
Obligations related to separate accounts............ 4,685.7 3,285.8
-------- --------
TOTAL OBLIGATIONS..................................... 6,199.8 4,284.7
STOCKHOLDER'S EQUITY
Common Stock, $50 par value; authorized 50,000
shares; issued and outstanding 50,000 shares...... 2.5 2.5
Paid-in capital..................................... 377.5 377.5
Unassigned deficit.................................... (58.3) (96.9)
-------- --------
TOTAL STOCKHOLDER'S EQUITY............................ 321.7 283.1
-------- --------
TOTAL OBLIGATIONS AND STOCKHOLDER'S EQUITY............ $6,521.5 $4,567.8
======== ========
</TABLE>

The accompanying notes are an integral part of the statutory-basis financial
statements.

49
<PAGE>

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

STATUTORY-BASIS STATEMENTS OF OPERATIONS AND UNASSIGNED DEFICIT

<TABLE>
<CAPTION>
Year ended December 31
-----------------------
1997 1996
---- ----
(In millions)
<S> <C> <C>
INCOME
Premiums......................................... $ 872.7 $ 820.6
Net investment income--Note 3.................... 89.7 76.1
Other, net....................................... 420.1 406.0
-------- --------
1,382.5 1,302.7
BENEFITS AND EXPENSES
Payments to policyholders and beneficiaries...... 264.0 236.1
Additions to reserves to provide for future
payments to policyholders and beneficiaries.... 814.2 790.1
Expenses of providing service to policyholders
and obtaining new insurance--Note 5............ 216.2 183.8
State and miscellaneous taxes.................... 19.1 17.3
-------- --------
1,313.5 1,227.3
-------- --------
GAIN FROM OPERATIONS BEFORE FEDERAL INCOME
TAXES AND NET REALIZED CAPITAL LOSSES........ 69.0 75.4
Federal income taxes--Note 1....................... 38.5 38.6
-------- --------
GAIN FROM OPERATIONS BEFORE NET REALIZED
CAPITAL LOSSES............................... 30.5 36.8
Net realized capital losses--Note 4................ (3.0) (1.5)
-------- --------
NET INCOME.................................... 27.5 35.3
Unassigned deficit at beginning of year............ (96.9) (131.3)
Net unrealized capital gains and other
adjustments--Note 4............................... 5.0 2.5
Other reserves and adjustments..................... 6.1 (3.4)
-------- --------
UNASSIGNED DEFICIT AT END OF YEAR............. $ (58.3) $ (96.9)
======== ========
</TABLE>

The accompanying notes are an integral part of the statutory-basis financial
statements.

50
<PAGE>

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

STATUTORY-BASIS STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Year ended December 31
-----------------------
1997 1996
---- ----
(In millions)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Insurance premiums................................... $ 877.0 $ 824.2
Net investment income................................ 89.9 73.4
Benefits to policyholders and beneficiaries.......... (245.2) (212.7)
Dividends paid to policyholders...................... (18.7) (15.7)
Insurance expenses and taxes......................... (250.2) (196.6)
Net transfers to separate accounts................... (703.2) (524.2)
Other, net........................................... 379.9 386.7
------- -------
NET CASH PROVIDED FROM OPERATIONS................. 129.5 335.1
------- -------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Bond purchases....................................... (621.6) (489.9)
Bond sales........................................... 197.3 228.3
Bond maturities and scheduled redemptions............ 34.1 27.8
Bond prepayments..................................... 51.6 31.9
Stock purchases...................................... (15.7) (6.5)
Proceeds from stock sales............................ 6.7 0.4
Real estate purchases................................ (1.3) (10.5)
Real estate sales.................................... 0.4 8.5
Other invested assets purchases...................... (1.0) 0.0
Proceeds from the sale of other invested assets...... 0.3 1.5
Mortgage loans issued................................ (94.5) (84.4)
Mortgage loan repayments............................. 32.4 17.7
Other, net........................................... 393.1 (104.6)
------- -------
NET CASH USED IN INVESTING ACTIVITIES............. (18.2) (379.8)
------- -------
INCREASE (DECREASE) IN CASH AND TEMPORARY CASH
INVESTMENTS........................................... 111.3 (44.7)
Cash and temporary cash investments at beginning of
year.................................................. 31.9 76.6
------- -------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF YEAR..... $ 143.2 $ 31.9
======= =======
</TABLE>

The accompanying notes are an integral part of the statutory-basis financial
statements.

51
<PAGE>

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

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 financial statements requires management to make estimates
and assumptions that affect amounts reported in the financial statements and
accompanying notes. Such estimates and assumptions could change in the future as
more information becomes known, which could impact the amounts reported and
disclosed herein.

Basis of Presentation: The financial statements have been prepared using
accounting practices prescribed or permitted by the Commonwealth of
Massachusetts Division of Insurance and in conformity with the practices of the
National Association of Insurance Commissioners (NAIC), which practices differ
from generally accepted accounting principles (GAAP).

The significant differences from GAAP include: (1) policy acquisition costs are
charged to expense as incurred rather than deferred and amortized over the
related premium-paying period; (2) policy reserves are based on statutory
mortality, morbidity, and interest requirements without consideration of
withdrawals and Company experience; (3) certain assets designated as
"nonadmitted assets" are excluded from the balance sheet by direct charges to
surplus; (4) reinsurance recoverables are netted against reserves and claim
liabilities rather than reflected as an asset; (5) bonds held as available for
sale are recorded at amortized cost or market value as determined by the NAIC
rather than at fair value; (6) an Asset Valuation Reserve and Interest
Maintenance Reserve as prescribed by the NAIC are not calculated under GAAP.
Under GAAP, realized capital gains and losses are reported in the income
statement on a pretax basis as incurred and investment valuation allowances are
provided when there has been a decline in value deemed other than temporary; (7)
investments in affiliates are carried at their net equity value with changes in
value being recorded directly to unassigned deficit rather than consolidated in
the financial statements; (8) no provision is made for the deferred income tax
effects of temporary differences between book and tax basis reporting; and (9)
certain items, including modifications to required policy reserves resulting
from changes in actuarial assumptions or increased benefits, are recorded
directly to unassigned deficit rather than being reflected in income. The
effects of the foregoing variances from GAAP have not been determined but are
presumed to be material.

The significant accounting practices of the Company are as follows:

Pending Statutory Standards: 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 approved by the NAIC in 1998 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 is not expected to be material.

52
<PAGE>

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED

Revenues and Expenses: Premium revenues are recognized over the premium-paying
period of the policies whereas expenses, including the acquisition costs of new
business, are charged to operations as incurred and policyholder dividends are
provided as paid or accrued.

Cash and Temporary Cash Investments: Cash includes currency on hand and demand
deposits with financial institutions. Temporary cash investments are short-term,
highly-liquid investments both readily convertible to known amounts of cash and
so near maturity that there is insignificant risk of changes in value because of
changes in interest rates.

Valuation of Assets: General account investments are carried at amounts
determined on the following bases:

Bond and stock values are carried as prescribed by the NAIC; bonds generally
at amortized amounts or cost, preferred stocks generally at cost and common
stocks at fair value. The discount or premium on bonds is amortized using the
interest method.

Investments in affiliates are included on the statutory equity method.

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 $2.1 million in 1997 and $1.2 million in
1996.

Real estate acquired in satisfaction of debt and held for sale is carried at
the lower of cost or market as of the date of foreclosure.

Policy loans are carried at outstanding principal balance, not in excess of
policy cash surrender value.

Asset Valuation and Interest Maintenance Reserves: The Asset Valuation Reserve
(AVR) is computed in accordance with the prescribed NAIC formula and represents
a provision for possible fluctuations in the value of bonds, equity securities,
mortgage loans, real estate and other invested assets. Changes to the AVR are
charged or credited directly to the unassigned deficit.

The Company also records the NAIC prescribed Interest Maintenance Reserve (IMR)
that represents that portion of the after tax net accumulated unamortized
realized capital gains and losses on sales of fixed income securities,
principally bonds and mortgage loans, attributable to changes in the general
level of interest rates. Such gains and losses are deferred and amortized into
income over the remaining expected lives of the investments sold. At December
31, 1997, the IMR, net of 1997 amortization of $1.2 million, amounted to $7.8
million, which is included in policy reserves. The corresponding 1996 amounts
were $1.2 million and $5.9 million, respectively.

Goodwill: The excess of cost over the statutory book value of the net assets of
life insurance business acquired was $13.1 million and $15.1 million at December
31, 1997 and 1996, respectively, and generally is amortized over a ten-year
period using a straight-line method.

Accumulated amortization was $8.8 million and $6.7 million at December 31, 1997
and 1996, respectively.

53
<PAGE>

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED

Separate Accounts: Separate account assets and liabilities reported in the
accompanying statements of financial position represent funds that are
separately administered, principally for variable life insurance policies, and
for which the contractholder, rather than the Company, generally bears the
investment risk. Separate account obligations are intended to be satisfied from
separate account assets and not from assets of the general account. Separate
accounts generally are reported at fair value. The operations of the separate
accounts are not included in the statement of operations; however, income earned
on amounts initially invested by the Company in the formation of new separate
accounts is included in other income.

Fair Value Disclosure of Financial Instruments: Statement of Financial
Accounting Standards (SFAS) No. 107, "Disclosure about Fair Value of Financial
Instruments," requires disclosure of fair value information about certain
financial instruments, whether or not recognized in the statement of financial
position, for which it is practicable to estimate the value. In situations where
quoted market prices are not available, fair values are based on estimates using
present value or other valuation techniques. SFAS No. 107 excludes certain
financial instruments and all nonfinancial instruments from its disclosure
requirements. Therefore, the aggregate fair value amounts presented do not
represent the underlying value of the Company. See Note 11.

The methods and assumptions utilized by the Company in estimating its fair value
disclosures for financial instruments are as follows:

The carrying amounts reported in the statement of financial position for cash
and temporary cash investments approximate their fair values.

Fair values for public bonds are obtained from an independent pricing service.
Fair values for private placement securities and publicly traded bonds not
provided by the independent pricing service are estimated by the 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, 1997. The fair
value for commitments to purchase real estate approximates the amount of the
initial commitment.

54
<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 41/2% for policies issued on or
thereafter. Reserves for single premium policies are determined by the net
single premium method using the 1958 CSO mortality table, with an assumed
interest rate of 4%. Reserves for universal life policies issued prior to 1985
are equal to the gross account value which at all times exceeds minimum
statutory requirements. Reserves for universal life policies issued from 1985
through 1988 are maintained at the greater of the Commissioner's Reserve
Valuation Method (CRVM) using the 1958 CSO mortality table, with 41/2% interest
or the cash surrender value. Reserves for universal life policies issued after
1988 and for flexible variable policies are maintained using the greater of the
cash surrender value or the CRVM method with the 1980 CSO mortality table and
51/2% interest for policies issued from 1988 through 1992; 5% interest for
policies issued in 1993 and 1994; and 41/2% interest for policies issued in 1995
through 1997.

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 $29.6 million in 1997 and $33.5 million in 1996.

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.

Adjustments to Policy Reserves: From time to time, the Company finds it
appropriate to modify certain required policy reserves because of changes in
actuarial assumptions or increased benefits. Reserve modifications resulting
from such determinations are recorded directly to stockholder's equity. During
1997, the Company refined certain assumptions inherent in the calculation of
reserves related to AIDS claims under individual life policies resulting in a
$6.4 million increase in stockholder's equity at December 31, 1997.

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

55
<PAGE>

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED

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.

NOTE 2--ACQUISITION

On June 23, 1993, the Company acquired all of the outstanding shares of stock of
Colonial Penn Annuity and Life Insurance Company (CPAL) from Colonial Penn Life
Insurance Company for an aggregate purchase price of approximately $42.5
million. At the date of acquisition, assets of CPAL were approximately $648.5
million, consisting principally of cash and temporary cash investments and
liabilities were approximately $635.2 million, consisting principally of
reserves related to a block of interest sensitive single-premium whole life
insurance business assumed by CPAL from Charter National Life Insurance Company
(Charter). The purchase price includes contingent payments of up to
approximately $7.3 million payable between 1994 and 1998 based on the actual
lapse experience of the business in force on June 23, 1993. The Company made
contingent payments to CPAL of $1.5 million during each of 1997 and 1996.
Unamortized goodwill at December 31, 1997 was $13.1 million and is being
amortized over ten years on a straight-line basis.

On June 24, 1993, the Company contributed $24.6 million in additional capital to
CPAL. CPAL was renamed John Hancock Life Insurance Company of America (JHLICOA)
on July 7, 1993. JHLICOA manages the business assumed from Charter and does not
currently issue new business.

NOTE 3--NET INVESTMENT INCOME

Investment income has been reduced by the following amounts:

<TABLE>
<CAPTION>
1997 1996
---- ----
(In millions)
<S> <C> <C>
Investment expenses.................................... $5.0 $7.0
Interest expense....................................... 0.7 0.0
Depreciation expense................................... 1.1 0.9
Investment taxes....................................... 0.4 0.5
---- ----
$7.2 $8.4
==== ====
</TABLE>

NOTE 4--NET CAPITAL GAINS (LOSSES) AND OTHER ADJUSTMENTS

Net realized capital losses consist of the following items:

<TABLE>
<CAPTION>
1997 1996
---- ----
(In millions)
<S> <C> <C>
Net gains (losses) from asset sales................. $ 0.8 $(0.2)
Capital gains tax................................... (0.7) (1.0)
Net capital gains transferred to IMR................ (3.1) (0.3)
----- -----
Realized Capital Losses........................... $(3.0) $(1.5)
===== =====
</TABLE>

56
<PAGE>

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 4--NET CAPITAL GAINS (LOSSES) AND OTHER ADJUSTMENTS--CONTINUED

Net unrealized capital gains and other adjustments consist of the following
items:

<TABLE>
<CAPTION>
1997 1996
---- ----
(In millions)
<S> <C> <C>
Net gains from changes in security values and book value adjustments ........... $ 7.0 $ 3.7
Increase in asset valuation reserve ............................................. (2.0) (1.2)
----- -----
Net Unrealized Capital Gains and Other Adjustments ............................ $ 5.0 $ 2.5
===== =====
</TABLE>

NOTE 5--TRANSACTIONS WITH PARENT

The Company's Parent provides the Company with personnel, property and
facilities in carrying out certain of its corporate functions. The Parent
annually determines a fee for these services and facilities based on a number of
criteria which were revised in 1997 and 1996 to reflect continuing changes in
the Company's operations. The amount of the service fee charged to the Company
was $123.6 million and $111.7 million in 1997 and 1996, respectively, which has
been included in insurance and investment expenses. The Parent has guaranteed
that, if necessary, it will make additional capital contributions to prevent the
Company's stockholder's equity from declining below $1.0 million.

The service fee charged to the Company by the Parent includes $0.9 million and
$1.6 million in 1997 and 1996, respectively, representing the portion of the
provision for retiree benefit plans determined under the accrual method,
including a provision for the 1993 transition liability which is being amortized
over twenty years, that was allocated to the Company.

The Company has a modified coinsurance agreement with John Hancock to reinsure
50% of 1994 through 1997 issues of flexible premium variable life insurance and
scheduled premium variable life insurance policies. In connection with this
agreement, John Hancock transferred $22.0 million and $24.5 million of cash for
tax, commission, and expense allowances to the Company, which increased the
Company's net gain from operations by $10.1 million and $15.7 million in 1997
and 1996, respectively.

The Company has a modified coinsurance agreement with John Hancock to reinsure
50% of 1995 through 1997 issues of certain retail annuity contracts
(Independence Preferred and Declaration). In connection with this agreement, the
Company made a net cash payment of $1.1 million and received a net cash payment
of $35.0 million for surrender benefits, tax, reserve increase, commission,
expense allowances and premium. This agreement increased the Company's net gain
from operations by $9.8 million and $15.1 million and in 1997 and 1996,
respectively.

Effective January 1, 1997, the Company entered into a stop-loss agreement with
John Hancock to reinsure mortality claims in excess of 110% of expected
mortality claims in 1997 for all policies that are not reinsured under any other
indemnity agreement. In connection with the agreement, John Hancock transferred
$2.4 million of cash for mortality claims to the Company, which increased the
Company's net gain from operations by $1.3 million.

57
<PAGE>

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 6--INVESTMENTS

The statement value and fair value of bonds are shown below:

<TABLE>
<CAPTION>
Gross Gross
Statement Unrealized Unrealized Fair
Year ended December 31, 1997 Value Gains Losses Value
- ---------------------------- --------- ---------- ---------- -----
(In millions)
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies . . $ 254.5 $ 0.2 $0.1 $ 254.6
Obligations of states and
political subdivisions . . . . 12.1 1.0 0.0 13.1
Debt securities issued by
foreign governments . . . . . 0.2 0.0 0.0 0.2
Corporate securities . . . . . 712.7 43.9 2.7 753.9
Mortgage-backed securities . . 113.2 3.5 0.0 116.7
-------- ----- ---- --------
Total bonds . . . . . . . . . $1,092.7 $48.6 $2.8 $1,138.5
======== ===== ==== ========
</TABLE>

<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 subdivisions . . . . . 12.6 0.4 0.0 13.0
Debt securities issued by foreign
governments. . . . . . . . . . . 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
====== ===== ==== ======
</TABLE>

The statement value and fair value of bonds at December 31, 1997, 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 . . . . . . . . . . . . . . . . $ 89.1 $ 90.7
Due after one year through five years . . . . . . . . . 466.8 477.0
Due after five years through ten years . . . . . . . . 284.2 299.2
Due after ten years . . . . . . . . . . . . . . . . . . 139.4 154.9
-------- --------
979.5 1,021.8
Mortgage-backed securities . . . . . . . . . . . . . . 113.2 116.7
-------- --------
$1,092.7 $1,138.5
======== ========
</TABLE>

Gross gains of $1.1 million in 1997 and $1.3 million in 1996 and gross losses of
$4.5 million in 1997 and $2.1 million in 1996 were realized from the sale of
bonds.

58
<PAGE>

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 6--INVESTMENTS--CONTINUED

At December 31, 1997, bonds with an admitted asset value of $3.6 million were on
deposit with state insurance departments to satisfy regulatory requirements.

The cost of common stocks was $0.0 million at December 31, 1997 and 1996,
respectively. Gross unrealized appreciation on common stocks totaled $2.3
million, and gross unrealized depreciation totaled $0.0 million at December 31,
1997. The fair value of preferred stock totaled $17.2 million at December 31,
1997 and $9.6 million at December 31, 1996.

Bonds with amortized cost of $2.0 million were nonincome producing for the
twelve months ended December 31, 1997.

At December 31, 1997, the mortgage loan portfolio was diversified by geographic
region and specific collateral property type as displayed below. The Company
controls credit risk through credit approvals, limits and monitoring procedures.

<TABLE>
<CAPTION>
Statement Geographic Statement
Property Type Value Concentration Value
------------- --------- ------------- ---------
(In millions) (In millions)
<S> <C> <C> <C>
Apartments. . . . . . $104.1 East North Central . . $ 32.7
Hotels. . . . . . . . 3.8 Middle Atlantic . . . 11.3
Industrial. . . . . . 51.3 Mountain . . . . . . . 17.9
Office buildings . . 32.2 New England . . . . . 35.8
Retail. . . . . . . . 33.2 Pacific . . . . . . . 64.2
Agricultural. . . . . 38.8 South Atlantic . . . . 67.9
Other . . . . . . . . 10.5 West North Central . . 2.5
West South Central . . 41.6
------ ------
$273.9 $273.9
====== ======
</TABLE>

At December 31, 1997, the fair values of the commercial and agricultural
mortgage loans portfolios were $243.8 million and $42.0 million, respectively.
The corresponding amounts as of December 31, 1996 were approximately $189.0
million and $30.4 million, respectively.

The maximum and minimum lending rates for mortgage loans during 1997 were 10.49%
and 8.14% for agricultural loans and 8.53% and 7.42% for other properties.
Generally, the maximum percentage of any loan to the value of security at the
time of the loan, exclusive of insured, guaranteed or purchase money mortgages,
is 75%. For city mortgages, fire insurance is carried on all commercial and
residential properties at least equal to the excess of the loan over the maximum
loan which would be permitted by law on the land without the building, except as
permitted by regulations of the Federal Housing Commission on loans fully
insured under the provisions of the National Housing Act. For agricultural
mortgage loans, fire insurance is not normally required on land based loans
except in those instances where a building is critical to the farming operation.
Fire insurance is required on all agri-business facilities in an aggregate
amount equal to the loan balance.

59
<PAGE>

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 7--REINSURANCE

The Company cedes business to reinsurers to share risks under variable life,
universal life and flexible variable life insurance policies for the purpose of
reducing exposure to large losses. Premiums, benefits and reserves ceded to
reinsurers in 1997 were $427.4 million, $18.3 million, and $10.1 million,
respectively. The corresponding amounts in 1996 were $384.3 million, $9.9
million, and $12.1 million, respectively.

Reinsurance ceded contracts do not relieve the Company from its obligations to
policyholders. The Company remains liable to its policyholders for the portion
reinsured to the extent that any reinsurer does not meet its obligations for
reinsurance ceded to it under the reinsurance agreements. Failure of the
reinsurers to honor their obligations could result in losses to the Company;
consequently, estimates are established for amounts deemed or estimated to be
uncollectible. To minimize its exposure to significant losses from reinsurance
insolvencies, the Company evaluates the financial condition of its reinsurers
and monitors concentration of credit risk arising from similar characteristics
of the reinsurer.

Neither the Company, nor any of its related parties, control, either directly or
indirectly, any external reinsurers with which the Company conducts business. No
policies issued by the Company have been reinsured with a foreign company which
is controlled, either directly or indirectly, by a party not primarily engaged
in the business of insurance.

The Company has not entered into any reinsurance agreements in which the
reinsurer may unilaterally cancel any reinsurance for reasons other than
nonpayment of premiums or other similar credits. The Company does not have any
reinsurance agreements in effect in which the amount of losses paid or accrued
through December 31, 1997 would result in a payment to the reinsurer of amounts
which, in the aggregate and allowing for offset of mutual credits from other
reinsurance agreements with the same reinsurer, exceed the total direct premiums
collected under the reinsured policies.

NOTE 8--FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

The Company utilizes a variety of off-balance sheet financial instruments as
part of its efforts to hedge and manage fluctuations in the market value of its
investment portfolio attributable to changes in general interest rate levels and
to manage duration mismatch of assets and liabilities. Those instruments include
swaps, caps, and future contracts.

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 interest rate cap contracts to manage exposure on
underlying security values due to a rise in interest rates. Maturities of
current agreements range through 2007.

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

60
<PAGE>

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 8--FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK--CONTINUED

but not in the future cash requirements, as the Company intends to close the
open positions prior to settlement. Net deferred losses on financial contracts
were $2.8 million and $0.0 million at December 31, 1997 and 1996, respectively.

The Company enters into currency rate swap agreements to manage exposure to
foreign exchange rate fluctuations. Maturities of current agreements range
through 2009. Should the counterparty fail to meet the terms of the contract,
the Company's market risk is limited to the currency rate differential.

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
--------------
1997 1996
---- ----
(In millions)
<S> <C> <C>
Futures contracts to sell securities . . . . . . . . . . . . $ 40.8 $ 73.0
====== ======
Notional amount of interest rate swaps, currency rate swaps,
and interest rate caps to:
Receive variable rates . . . . . . . . . . . . . . . . . . $323.7 $215.9
====== ======
Receive fixed rates . . . . . . . . . . . . . . . . . . . $ 25.0 $ 26.6
====== ======
</TABLE>

The Company's exposure to credit risk is the risk of loss from a counterparty
failing to perform according to the terms of the contract. The Company
continually monitors its positions and the credit ratings of the counterparties
to these financial instruments. To limit exposure associated with counterparty
nonperformance on interest rate and currency agreements, the Company enters into
master netting agreements with its counterparties. The Company believes the risk
of incurring losses due to nonperformance by its counterparties is remote and
that such losses, if any, would not be material.

Based on the market rates in effect at December 31, 1997, the Company's interest
rate swaps, currency rate swaps and interest rate caps represented (assets)
liabilities to the Company with fair values of $7.8 million, $2.1 million and
$(1.4) million, respectively. The corresponding amounts as of December 31, 1996
were $2.3 million, $(8.2) million, and $(2.0) million, respectively. The fair
values of the swap agreements are not recognized in the financial statements.

61
<PAGE>

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 9--POLICY RESERVES, POLICYHOLDERS' AND BENEFICIARIES' FUNDS AND OBLIGATIONS
RELATED TO SEPARATE ACCOUNTS

The Company's annuity reserves and deposit fund liabilities that are subject to
discretionary withdrawal, with and without adjustment, are summarized as
follows:

<TABLE>
<CAPTION>
December 31, 1997 Percent
----------------- -------
(In millions)
<S> <C> <C>
Subject to discretionary withdrawal (with
adjustment)
With market value adjustment........................ $ 0.4 0.0%
At book value less surrender charge................. 970.3 88.7
-------- -----
Total with adjustment............................... 970.7 88.7
Subject to discretionary withdrawal at book value
(without adjustment)............................... 118.9 10.9
Not subject to discretionary withdrawal--general
account............................................ 4.1 0.4
-------- -----
Total annuity reserves and deposit liabilities...... $1,093.7 100.0%
======== =====
</TABLE>

NOTE 10--COMMITMENTS AND CONTINGENCIES

The Company has extended commitments to purchase long-term bonds and issue real
estate mortgages totalling $168.6 million and $28.3 million, respectively, at
December 31, 1997. 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 estimated fair value of the commitments described
above is $194.5 million at December 31, 1997. The majority of these commitments
expire in 1998.

In the normal course of its business operations, the Company is involved with
litigation from time to time with claimants, beneficiaries and others, and a
number of litigation matters were pending as of December 31, 1997. It is the
opinion of management, after consultation with counsel, that the ultimate
liability with respect to these claims, if any, will not materially affect the
financial position or results of operations of the Company.

62
<PAGE>

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 11--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
------------------------------------------
1997 1996
-------------------- -----------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ----- -------- -----
(In millions)
<S> <C> <C> <C> <C>
Assets
Bonds--Note 6................................ $1,092.7 $1,138.5 $753.5 $790.5
Preferred stocks--Note 6..................... 17.2 17.2 9.6 9.6
Common stocks--Note 6........................ 2.3 2.3 1.4 1.4
Mortgage loans on real estate--Note 6........ 273.9 285.8 212.1 219.4
Policy loans--Note 1......................... 106.8 106.8 80.8 80.8
Cash and cash equivalents--Note 1............ 143.2 143.2 31.9 31.9
Derivatives liabilities relating to:--Note 8
Interest rate swaps.......................... -- 7.8 -- 2.3
Currency rate swaps.......................... -- 2.1 -- (8.2)
Interest rate caps........................... -- (1.4) -- (2.0)
Liabilities
Commitments--Note 10......................... -- 194.5 -- 76.2
</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.

NOTE 12--IMPACT OF YEAR 2000 (UNAUDITED)

The Company relies on John Hancock, its parent company, for information
processing services. John Hancock has developed a plan to modify or replace
significant portions of its computer information and automated technologies so
that its systems, including those relied upon by the Company, will function
properly with respect to the dates in the year 2000 and thereafter. The Company,
along with John Hancock, presently believes that with modifications to existing
systems and conversions to new technologies, the year 2000 will not pose
significant operational problems for the computer systems upon which the Company
relies. However, if certain modifications and conversions are not made, or are
not completed timely, the year 2000 issue could have an adverse impact on the
operations of the Company.

John Hancock as early as 1994 had begun assessing, modifying and converting the
software related to its significant systems and has initiated formal
communications with significant business partners and customers to determine the
extent to which interface systems are vulnerable to those third parties' failure
to remediate their own year 2000 issues. While John Hancock is developing
alternative third party processing arrangements as it deems appropriate, there
is no guarantee that the systems of other companies on which John Hancock's
systems rely will be converted timely or will not have an adverse effect on John
Hancock's systems, including those upon which the Company relies.

63
<PAGE>

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 12--IMPACT OF YEAR 2000 (UNAUDITED)--CONTINUED

John Hancock expects the project to be substantially complete by early 1999.
This completion target was derived utilizing numerous assumptions of future
events, including availability of certain resources and other factors. However,
there can be no guarantee that this completion target will be achieved.

64
<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 when. You should consult your tax advisor 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 the
yearly renewable term benefits discussed below, which are subject to the
restrictions and limitations set forth therein, may be included in a Policy by
rider.

YEARLY RENEWABLE TERM INSURANCE. This is term insurance on the life of one of
the insureds under the base Policy and payable upon the death of the covered
insured person. This insurance is level or decreasing in amount and may be
applied for, or increased, at any time upon evidence of insurability and any
other underwriting requirements. The yearly coverage also may be cancelled by
the Owner at any time. The charges for this coverage will be separately billed
to and paid by the Owner and not out of Account Value. An increase or a decrease
in this insurance may have significant tax consequences. See "Premiums--7-Pay
Premium Limit" and "Tax Considerations."

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 on the death of the last surviving insured

65
<PAGE>

there is no surviving Beneficiary, the Owner will be the Beneficiary, but if the
Owner was one of the insureds, his or her 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.

If a Policy has joint Owners, both Owners must join in any request or
instructions to JHVLICO under the Policy.

MISSTATEMENT OF AGE OR SEX. If the age or sex of an insured has been
misstated, JHVLICO will adjust the Policy benefits to those which would have
been purchased at the correct age or sex by the most recent insurance charge
deducted by Account Value.

SUICIDE. If either 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 either insured commits suicide 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 described
in the Policy. Subject to terms and conditions set forth in the Policy, we will
make coverage available to any surviving insured, if the surviving insured
elects such coverage within 60 days after the suicide.

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.

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 life time of an
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.

66
<PAGE>

APPENDIX--IMPACT OF YEAR 2000

The advent of the Year 2000 presents a technological challenge to JHVLICO. In
close cooperation with John Hancock Mutual Life Insurance Company, its ultimate
parent, JHVLICO has developed a plan to modify or replace significant portions
of JHVLICO's computer information and automated technologies so that its systems
will function properly with respect to dates in the year 2000 and thereafter.
The plan also involves coordination and testing with business partners to ensure
that external factors do not adversely impact JHVLICO's systems. JHVLICO
presently believes that with modifications to existing systems and conversions
to new technologies, the year 2000 will not pose significant operational
problems for its computer systems. However, if certain modifications and
conversions are not made, or are not completed on time, the year 2000 issue
could have an adverse impact on the operations of JHVLICO.

JHVLICO expects the project to be substantially complete by early 1999. This
completion target was derived utilizing numerous assumptions of future events,
including availability of certain resources and other factors. However, there
can be no guarantee that this estimate will be achieved, that these steps will
be sufficient or that actual results may not differ materially from those
anticipated.

67
<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 identified issue ages, Planned Premium
schedule and Sum Insured and shows how the death benefit and Surrender Value may
vary over an extended period of time assuming hypothetical rates of investment
return (i.e., investment income and capital gains and losses, realized or
unrealized) equivalent to constant gross annual rates of 0%, 6% and 12%. The
tables are based on given annual Planned Premiums paid at the beginning of each
Policy year and will assist in a comparison of the death benefit and surrender
value figures set forth in the tables with those under other variable life
insurance policies which may be issued by JHVLICO or other companies. Tables are
provided for Option A, without the Extra Death Benefit feature, as well as for
Option B death benefits. The death benefit and Surrender Value for a Policy
would be different from those shown if premiums are paid in different amounts or
at different times or if the actual gross rates of investment return average 0%,
6% or 12% over a period of years, but nevertheless fluctuate above or below the
average for individual Policy years, or if the Policy were issued in a state in
which no distinctions are made based on the gender of the insureds.

The amounts shown for the death benefit and Surrender Value are as of the end
of each Policy year. The first two tables headed "Using Current Charges" assume
that the current rates for insurance, sales, risk, and expense charges will
apply in each year illustrated. The two tables headed "Using Maximum Charges"
assumes 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
.61%) and an assumed average asset charge for the annual nonadvisory operating
expenses of each Portfolio of the Funds (equivalent to an effective annual rate
of .19%). For a description of expenses charged to the Portfolios, see the
attached Prospectuses for the Funds. The charges for the daily investment
management fee and the annual non-advisory operating expenses are based on the
hypothetical assumption that Policy values are allocated equally among the
variable Subaccounts. The actual Portfolio charges and expenses associated with
any Policy will vary depending upon the actual allocation of Policy values among
Subaccounts.

The tables reflect that no charge is currently made to the Accounts for
Federal income taxes. However, JHVLICO reserves the right to make such a charge
in the future and any charge would require higher rates of investment return in
order to produce the same Policy values. All of the tables do, however, reflect
the imposition of a Federal DAC Tax charge in the amount of 1.25% of all
premiums paid and a state premium tax charge in the amount of 2.35% of all
premiums paid.

The tables assume that the Guaranteed Minimum Death Benefit has not been
elected beyond the tenth Policy year and that no Additional Sum Insured or
optional rider benefits have been elected.

The second column of each table shows the amount to which the total premiums
paid to the end of a Policy year during the premium paying period 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 insureds' ages, sexes, underwriting risk classifications and the Total
Sum Insured at issue and Planned Premium amount requested, and assuming annual
Planned Premiums.

68
<PAGE>

PLAN: FLEXIBLE PREMIUM VARIABLE LIFE SURVIVORSHIP
$500,000 TOTAL SUM INSURED
MALE, ISSUE AGE 55, NONSMOKER UNDERWRITING CLASS
FEMALE, ISSUE AGE 50, NONSMOKER UNDERWRITING CLASS
OPTION A DEATH BENEFIT
NO GUARANTEED MINIMUM DEATH BENEFIT OPTION AFTER TENTH POLICY YEAR
PLANNED PREMIUM: $8,156*
USING CURRENT CHARGES

<TABLE>
<CAPTION>
Death Benefit Surrender Value
------------------------------ -------------------------------
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at ------------------------------ -------------------------------
Year 5% annual interest 0% 6% 12% 0% 6% 12%
- ------- ------------------ -------- -------- ---------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 8,564 $500,000 $500,000 $ 500,000 $ 4,292 $ 4,576 $ 4,860
2 17,556 500,000 500,000 500,000 10,099 11,005 11,945
3 26,998 500,000 500,000 500,000 14,968 16,841 18,860
4 36,912 500,000 500,000 500,000 20,233 23,431 27,013
5 47,322 500,000 500,000 500,000 25,356 30,249 35,945
6 58,252 500,000 500,000 500,000 31,393 38,405 46,883
7 69,728 500,000 500,000 500,000 37,335 46,920 58,953
8 81,779 500,000 500,000 500,000 43,180 55,804 72,269
9 94,432 500,000 500,000 500,000 48,925 65,075 86,961
10 107,717 500,000 500,000 500,000 54,568 74,742 103,167
11 121,667 500,000 500,000 500,000 60,751 85,504 121,760
12 136,314 500,000 500,000 500,000 66,798 96,706 142,254
13 151,694 500,000 500,000 500,000 72,696 108,356 164,841
14 167,843 500,000 500,000 500,000 78,435 120,465 189,736
15 184,799 500,000 500,000 500,000 84,002 133,043 217,180
16 202,603 500,000 500,000 500,000 89,385 146,103 247,445
17 221,297 500,000 500,000 522,226 94,550 159,641 280,787
18 240,926 500,000 500,000 571,829 99,474 173,663 317,442
19 261,536 500,000 500,000 624,611 104,131 188,179 357,715
20 283,177 500,000 500,000 680,880 108,492 203,200 401,940
25 408,735 500,000 500,000 1,029,971 125,457 287,666 697,475
30 568,983 500,000 513,472 1,532,978 124,514 387,777 1,157,712
35 773,504 500,000 611,269 2,261,388 81,475 500,930 1,853,188
</TABLE>

* The illustrations assume that Planned Premiums equal to the Target Premium are
paid at the start of each Policy Year. The Death Benefit and Surrender Value
will differ if premiums are paid in different amounts or frequencies, if
policy loans are taken, or if Additional Sum Insured, Guaranteed Minimum Death
Benefit after the tenth Policy Year, or optional rider benefits are elected.

IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY THE OWNER. THE
DEATH BENEFIT AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT RETURN AVERAGE 0%, 6%, OR 12% OVER
A PERIOD OF YEARS, BUT ALSO FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.

69
<PAGE>

PLAN: FLEXIBLE PREMIUM VARIABLE LIFE SURVIVORSHIP
$500,000 TOTAL SUM INSURED
MALE, ISSUE AGE 55, NONSMOKER UNDERWRITING CLASS
FEMALE, ISSUE AGE 50, NONSMOKER UNDERWRITING CLASS
OPTION B DEATH BENEFIT
NO GUARANTEED MINIMUM DEATH BENEFIT OPTION AFTER TENTH POLICY YEAR
PLANNED PREMIUM: $8,156*
USING CURRENT CHARGES

<TABLE>
<CAPTION>
Death Benefit Surrender Value
------------------------------ -------------------------------
Assuming Hypothetical Assuming Hypothetical
Planned Premiums Gross Annual Return of 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 $ 8,564 $504,292 $504,576 $ 504,860 $ 4,292 $ 4,576 $ 4,860
2 17,556 509,690 510,596 511,536 10,098 11,003 11,943
3 26,998 514,964 516,836 518,855 14,964 16,836 18,855
4 36,912 520,222 523,419 526,998 20,222 23,419 26,998
5 47,322 525,333 530,221 535,911 25,333 30,221 35,911
6 58,252 531,350 538,352 546,816 31,350 38,352 46,816
7 69,728 537,268 546,832 558,840 37,268 46,832 58,840
8 81,779 543,083 555,674 572,094 43,083 55,674 72,094
9 94,432 548,794 564,890 586,702 48,794 64,890 86,702
10 107,717 554,395 574,490 602,799 54,395 74,490 102,799
11 121,667 560,532 585,171 621,256 60,532 85,171 121,256
12 136,314 566,519 596,268 641,564 66,519 96,268 141,564
13 151,694 572,341 607,779 663,899 72,341 107,779 163,899
14 167,843 577,984 619,707 688,453 77,984 119,707 188,453
15 184,799 583,429 632,049 715,433 83,429 132,049 215,433
16 202,603 588,659 644,801 745,070 88,659 144,801 245,070
17 221,297 593,628 657,933 777,590 93,628 157,933 277,590
18 240,926 598,303 671,422 813,250 98,303 171,422 313,250
19 261,536 602,646 685,242 852,333 102,646 185,242 352,333
20 283,177 606,614 699,358 895,145 106,614 199,358 395,145
25 408,735 619,714 773,564 1,178,906 119,714 273,564 678,906
30 568,983 608,892 839,723 1,614,211 108,892 339,723 1,114,211
35 773,504 547,168 863,117 2,260,537 47,168 363,117 1,760,537
</TABLE>

70
<PAGE>

<TABLE>
<CAPTION>
Death Benefit Surrender Value
------------------------------ ------------------------------
Assuming hypothetical Assuming hypothetical
Planned Premiums gross annual return of 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 $ 8,564 $500,000 $500,000 $ 500,000 $ 4,130 $ 4,409 $ 4,688
2 17,556 500,000 500,000 500,000 9,764 10,646 11,563
3 26,998 500,000 500,000 500,000 14,447 16,267 18,228
4 36,912 500,000 500,000 500,000 19,515 22,613 26,083
5 47,322 500,000 500,000 500,000 24,429 29,158 34,662
6 58,252 500,000 500,000 500,000 30,242 37,003 45,177
7 69,728 500,000 500,000 500,000 35,861 45,083 56,661
8 81,779 500,000 500,000 500,000 41,274 53,393 69,197
9 94,432 500,000 500,000 500,000 46,466 61,926 82,880
10 107,717 500,000 500,000 500,000 51,419 70,672 97,811
11 121,667 500,000 500,000 500,000 56,590 80,127 114,642
12 136,314 500,000 500,000 500,000 61,465 89,787 133,011
13 151,694 500,000 500,000 500,000 66,007 99,627 153,059
14 167,843 500,000 500,000 500,000 70,171 109,615 174,941
15 184,799 500,000 500,000 500,000 73,902 119,714 198,835
16 202,603 500,000 500,000 500,000 77,144 129,882 224,948
17 221,297 500,000 500,000 500,000 79,803 140,052 253,510
18 240,926 500,000 500,000 512,954 81,853 150,218 284,759
19 261,536 500,000 500,000 556,410 83,192 160,313 318,656
20 283,177 500,000 500,000 601,952 83,722 170,279 355,347
25 408,735 500,000 500,000 866,879 69,231 215,722 587,032
30 568,983 ** 500,000 1,208,364 ** 240,387 912,562
35 773,504 ** 500,000 1,652,961 ** 209,402 1,354,587
</TABLE>

* The illustrations assume that Planned Premiums equal to the Target Premium
are paid at the start of each Policy Year. The Death Benefit and Surrender
Value will differ if premiums are paid in different amounts or frequencies,
if policy loans are taken, or if Additional Sum Insured, Guaranteed Minimum
Death Benefit after the tenth Policy Year, or optional rider benefits are
elected.
** Policy lapses unless additional premium payments are made.

71
<PAGE>

PLAN: FLEXIBLE PREMIUM VARIABLE LIFE SURVIVORSHIP
$500,000 TOTAL SUM INSURED
MALE, ISSUE AGE 55, NONSMOKER UNDERWRITING CLASS
FEMALE, ISSUE AGE 50, NONSMOKER UNDERWRITING CLASS
OPTION B DEATH BENEFIT
NO GUARANTEED MINIMUM DEATH BENEFIT OPTION AFTER TENTH POLICY YEAR
PLANNED PREMIUM: $8,156*
USING MAXIMUM CHARGES

<TABLE>
<CAPTION>
Death Benefit Surrender Value
------------------------------ ----------------------------
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at ------------------------------ ----------------------------
Year 5% annual interest 0% 6% 12% 0% 6% 12%
- ------- ------------------ -------- -------- ---------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 8,564 $504,130 $504,409 $ 504,687 $ 4,130 $ 4,409 $ 4,687
2 17,556 509,355 510,237 511,154 9,762 10,645 11,562
3 26,998 514,443 516,262 518,223 14,443 16,262 18,223
4 36,912 519,504 522,600 526,069 19,504 22,600 26,069
5 47,322 524,407 529,131 534,630 24,407 29,131 34,630
6 58,252 530,200 536,951 545,112 30,200 36,951 45,112
7 69,728 535,790 544,990 556,541 35,790 44,990 56,541
8 81,779 541,157 553,236 568,987 41,157 53,236 68,987
9 94,432 546,285 561,674 582,531 46,285 61,674 82,531
10 107,717 551,149 570,284 597,253 51,149 70,284 97,253
11 121,667 556,199 579,546 613,774 56,199 79,546 113,774
12 136,314 560,912 588,936 631,694 60,912 88,936 131,694
13 151,694 565,242 598,408 651,100 65,242 98,408 151,100
14 167,843 569,130 607,896 672,070 69,130 107,896 172,070
15 184,799 572,507 617,323 694,682 72,507 117,323 194,682
16 202,603 575,300 626,600 719,014 75,300 126,600 219,014
17 221,297 577,391 635,592 745,104 77,391 135,592 245,104
18 240,926 578,749 644,240 773,083 78,749 144,240 273,083
19 261,536 579,248 652,388 802,995 79,248 152,388 302,995
20 283,177 578,776 659,883 834,898 78,776 159,883 334,898
25 408,735 556,489 680,148 1,025,130 56,489 180,148 525,130
30 568,983 ** 638,570 1,256,701 ** 138,570 756,701
35 773,504 ** ** 1,499,160 ** ** 999,160
</TABLE>

* The illustrations assume that Planned Premiums equal to the Target Premium
are paid at the start of each Policy Year. The Death Benefit and Surrender
Value will differ if premiums are paid in different amounts or frequencies,
if policy loans are taken, or if Additional Sum Insured, Guaranteed Minimum
Death Benefit after the tenth Policy Year, or optional rider benefits are
elected.
** Policy lapses unless additional premium payments are made.

72
<PAGE>

[LOGO APPEARS HERE]

POLICIES ISSUED BY JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
JOHN HANCOCK PLACE, BOSTON, MASSACHUSETTS 02117

S8143-M 5/98

73
<PAGE>

[LOGO OF JOHN HANDCOCK APPEARS HERE]

John Hancock Variable Life
Insurance Company
(JHVLICO)

FLEXIBLE PREMIUM VARIABLE LIFE SURVIVORSHIP INSURANCE POLICY
JOHN HANCOCK VARIABLE LIFE ACCOUNT S

John Hancock Place
Boston, Massachusetts 02117

JOHN HANCOCK SERVICING OFFICE:
P.O. Box 111
Boston, Massachusetts 02117

TELEPHONE 1-800-REAL LIFE (1-800-732-5543)
FAX 617-572-5410

PROSPECTUS MAY 1, 1998

Replacing existing insurance with a Policy described in this Prospectus may
not be to your advantage.

THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE. IT IS NOT
VALID UNLESS ATTACHED TO CURRENT PROSPECTUSES FOR THE FUNDS.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR

ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
<S> <C>
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
JHVLICO and JOHN HANCOCK . . . . . . . . . . . . . . . . . . . . . . 7
THE ACCOUNT AND THE SERIES FUNDS . . . . . . . . . . . . . . . . . . 7
The Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
The Series Funds . . . . . . . . . . . . . . . . . . . . . . . . . 8
THE FIXED ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . 12
POLICY PROVISIONS AND BENEFITS . . . . . . . . . . . . . . . . . . . 13
Requirements for Issuance of Policy . . . . . . . . . . . . . . . . 13
Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Account Value and Surrender Value . . . . . . . . . . . . . . . . . 15
Policy Split Option . . . . . . . . . . . . . . . . . . . . . . . . 16
Death Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Transfers Among Subaccounts . . . . . . . . . . . . . . . . . . . . 19
Telephone Transfers and Policy Loans . . . . . . . . . . . . . . . 19
Loan Provisions and Indebtedness . . . . . . . . . . . . . . . . . 20
Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Exchange Privilege . . . . . . . . . . . . . . . . . . . . . . . . 21
CHARGES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . 21
Charges Deducted from Premiums . . . . . . . . . . . . . . . . . . 21
Sales Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Reduced Charges for Eligible Groups . . . . . . . . . . . . . . . . 23
Charges Deducted from Account Value or Assets . . . . . . . . . . . 23
Guarantee of Premiums and Certain Charges . . . . . . . . . . . . . 25
DISTRIBUTION OF POLICIES . . . . . . . . . . . . . . . . . . . . . . 25
TAX CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 26
Policy Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Charge for JHVLICO's Taxes . . . . . . . . . . . . . . . . . . . . 28
Policy Split Option . . . . . . . . . . . . . . . . . . . . . . . . 28
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS OF JHVLICO . . . . . . . . 29
REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
VOTING PRIVILEGES . . . . . . . . . . . . . . . . . . . . . . . . . . 30
CHANGES THAT JHVLICO CAN MAKE . . . . . . . . . . . . . . . . . . . . 30
STATE REGULATION . . . . . . . . . . . . . . . . . . . . . . . . . . 31
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
REGISTRATION STATEMENT . . . . . . . . . . . . . . . . . . . . . . . 31
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . 31
APPENDIX--OTHER POLICY PROVISIONS . . . . . . . . . . . . . . . . . . 65
APPENDIX--IMPACT OF YEAR 2000 . . . . . . . . . . . . . . . . . . . . 67
APPENDIX--ILLUSTRATION OF DEATH BENEFITS, SURRENDER VALUES AND
ACCUMULATED PREMIUMS . . . . . . . . . . . . . . . . . . . . . . . . 68
</TABLE>

INDEX OF DEFINED WORDS AND PHRASES

Below are listed certain words and phrases used in this Prospectus, together
with identification of the page on which each is defined or explained:

<TABLE>
<CAPTION>
Page
<S> <C>
Account.............................................................. 7
Account Value........................................................ 1
Additional Sum Insured............................................... 17
Age.................................................................. 66
Basic Sum Insured.................................................... 1
DAC Tax.............................................................. 22
Death Benefit........................................................ 17
Fixed Account........................................................ 12
Funds........................................................... Front Cover
Grace Period......................................................... 19
Guaranteed Minimum Death Benefit..................................... 17
Guaranteed Minimum Death Benefit Premium............................. 14
Indebtedness......................................................... 20
Investment Rule...................................................... 14
Loan Assets.......................................................... 20
Minimum First Premium................................................ 13
Planned Premium...................................................... 13
Policy Anniversary................................................... 66
Portfolio....................................................... Front Cover
Servicing Office..................................................... 7
Subaccount...................................................... Front Cover
Surrender Value...................................................... 15
Total Sum Insured.................................................... 17
Target Premium....................................................... 22
Valuation Date....................................................... 12
Valuation Period..................................................... 12
Variable Subaccounts................................................. 2
7-Pay Limit.......................................................... 15
</TABLE>

1
<PAGE>

SUMMARY

WHAT IS THE VARIABLE LIFE POLICY BEING OFFERED?

The Policy provides for payment of death benefit proceeds when the last
surviving 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
last surviving insured. Under Option A, the Owner may also elect an Extra Death
Benefit feature that may result in a higher death benefit in some cases. 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.

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 either of the insureds is living.
The Surrender Value is the Account Value less any Indebtedness. At issue, the
Owner may elect to purchase an Enhanced Cash Value Rider which will provide a
benefit payable in addition to the Surrender Value if the Policy is surrendered
in the first nine Policy years. The Owner may also make partial withdrawals from
a Policy, subject to certain restrictions and an administrative charge. If the
Owner surrenders in the early Policy years, the

2
<PAGE>

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 Total minimum Sum Insured that may be bought at issue is $1,000,000. All
persons insured must meet specified age limits and certain health and other
criteria called "underwriting standards." The smoking status of the insureds is
generally reflected in the insurance charges made. Policies issued under certain
circumstances will not directly reflect the sexes of the insureds in either the
premium rates or the charges and values under the Policy.

WHAT IS THE AMOUNT OF THE PREMIUMS?

Premiums are flexible, and the Owner may choose the amount and frequency of
premium payments, so long as each premium payment is at least $100 and meets
certain other requirements.

WHAT IS JOHN HANCOCK VARIABLE LIFE ACCOUNT S?

The Account is a separate investment account of JHVLICO, operated as a unit
investment trust, which supports benefits payable under the Policies. The
Account is subdivided into a number of variable Subaccounts, each of which
corresponds to one of the Portfolios of the Funds. The assets of each variable
Subaccount within the Account are invested in a corresponding Portfolio of the
Funds. The current Portfolios of the Funds are: Managed, Growth & Income, Equity
Index, Large Cap Value, Large Cap Growth, Mid Cap Value, Mid Cap Growth,
Diversified Mid Cap Growth, Real Estate Equity, Small/Mid Cap CORE, Small Cap
Value, Small Cap Growth, Global Equity, International Balanced, International
Equity Index, International Opportunities, Emerging Markets Equity, Short-Term
Bond, Bond Index, Sovereign Bond, Strategic Bond, High Yield Bond, Money Market,
Edinburgh Overseas Equity, Turner Core Growth, Frontier Capital Appreciation,
and Enhanced U.S. Equity.

3
<PAGE>

<TABLE>
<CAPTION>
Other
Fund
Other Fund Total Expenses
Expenses Fund Absent
Management After Expense Operating Expense
Fund Name Fee Reimbursement Expenses Reimbursement*
--------- ---------- ------------- --------- --------------
<S> <C> <C> <C> <C>
Managed.................. 0.33% 0.04% 0.37% N/A
Growth & Income ......... 0.25% 0.03% 0.28% N/A
Equity Index............. 0.15% 0.25% 0.40% 0.40%
Large Cap Value.......... 0.75% 0.25% 1.00% 0.31%
Large Cap Growth......... 0.39% 0.05% 0.44% N/A
Mid Cap Value............ 0.80% 0.25% 1.05% 0.34%
Mid Cap Growth........... 0.85% 0.25% 1.10% 0.57%
Diversified Mid Cap
Growth.................. 0.75% 0.10% 0.85% N/A
Real Estate Equity....... 0.60% 0.09% 0.69% N/A
Small/Mid Cap CORE....... 0.80% 0.25% 1.05% N/A
Small Cap Value.......... 0.80% 0.25% 1.05% 0.50%
Small Cap Growth......... 0.75% 0.25% 1.00% 0.37%
Global Equity............ 0.90% 0.25% 1.15% N/A
International Balanced... 0.85% 0.25% 1.10% 0.71%
International Equity
Index................... 0.18% 0.19% 0.37% N/A
International
Opportunities........... 0.97% 0.25% 1.22% 0.60%
Emerging Markets
Equity.................. 1.30% 0.25% 1.55% N/A
Short-Term Bond.......... 0.30% 0.21% 0.51% N/A
Bond Index............... 0.15% 0.25% 0.40% N/A
Sovereign Bond........... 0.25% 0.06% 0.31% N/A
Strategic Bond........... 0.75% 0.25% 1.00% 0.57%
High Yield Bond.......... 0.65% 0.25% 0.90% N/A
Money Market............. 0.25% 0.08% 0.33% N/A

</TABLE>

* John Hancock reimburses a Portfolio when the Portfolio's other fund expenses
exceed 0.25% of the Portfolio's average daily net assets.

M Fund, Inc., pays M Financial Investment Advisers, Inc. ("M Financial") a
fee for providing investment management services to each of the Portfolios. The
Fund also pays for certain other fund expenses. The figures in the following
chart are expressed as a percentage of each Portfolio's average daily net
assets. The figures reflect the investment management fees currently payable and
the 1997 other fund expenses allocated to the Fund.

Other Total Fund
Investment Fund Operating Other Fund Expenses
Portfolio Management Fee Expenses Expenses Absent Reimbursement*
- --------- -------------- -------- ---------- -----------------------
<S> <C> <C> <C> <C>
Edinburgh Overseas
Equity................. 1.05% 0.25% 1.30% 3.89%
Turner Core Growth...... 0.45% 0.25% 0.70% 5.72%
Frontier Capital
Appreciation........... 0.90% 0.25% 1.15% 1.96%
Enhanced U.S. Equity.... 0.55% 0.25% 0.80% 4.87%

</TABLE>

- ---------

* M Financial reimburses a Portfolio when the Portfolio's other fund expenses
exceed 0.25% of the Portfolio's average daily net assets.

For a full description of the Funds, see the Prospectuses for the Funds
attached to this Prospectus.

4
<PAGE>

WHAT ARE THE CHARGES MADE BY JHVLICO?

Sales Charge. A charge deducted from each premium payment in the amount of 30%
of premiums paid in the first Policy year up to the "target premium" and 3.5% of
premiums paid during the first Policy year in excess of that target. The current
sales charge in subsequent Policy years on premiums paid up to target premium
generally is: 15% of such premiums in each of years 2 through 5; 10% of such
premiums in each of years 6 through 10; 3% of such premiums in years 11 through
20; and 0% of such premiums thereafter. The current sales charge in subsequent
Policy years on premiums paid in excess of the target premium is 3.5%: of such
excess premiums paid in years 2 through 10; 3% of such excess premiums paid in
years 11 through 20; and 0% of such excess premiums paid thereafter. Subject to
maximums set forth in the Policy, certain of these charges may be increased
after the tenth Policy year.

Guaranteed Minimum Death Benefit Charge. If the Guaranteed Minimum Death
Benefit option is elected beyond the first 10 Policy years, a maximum charge
starting at the beginning of the eleventh Policy year not to exceed 3c per
$1,000 (currently 1c per $1000) of the Basic Sum Insured at issue, deducted
monthly from Account Value.

Charge for Mortality and Expense Risks. A charge made daily from the Variable
Subaccounts at a maximum effective annual rate of .60% of the assets of each
Variable Subaccount. The current level of this charge is an effective annual
rate of .35% of the assets of the Account.

Charge for Optional Enhanced Cash Value Rider. There is a charge for the rider
equal to 2% of premium paid in the first Policy year up to the annual target
premium. This charge is assessed in the first Policy year only.

5
<PAGE>

Charge for Other Optional Rider Benefits. An additional charge required if the
Owner elects to purchase any optional insurance benefits by rider (other than
the Enhanced Cash Value Rider). Any such additional charge may be deducted from
premiums when paid or deducted monthly from Account Value.

Charge for Partial Withdrawal. A charge of $20 made against Account Value at
the time of withdrawal.

See "Charges and Expenses", for a fuller description of the charges under the
Policy.

IS THERE A CHARGE AGAINST THE ACCOUNT FOR FEDERAL INCOME TAX?

WHAT IS THE RELATIONSHIP BETWEEN THE PREMIUM AND THE AMOUNT ALLOCATED TO THE
SUBACCOUNTS?

HOW ARE AMOUNTS ALLOCATED TO EACH SUBACCOUNT?

WHAT COMMISSIONS ARE PAID TO AGENTS?

WHAT IS THE DEATH BENEFIT?

6
<PAGE>

of any Additional Sum Insured.) If this Option is elected, the Owner may also
elect an optional Extra Death Benefit feature, under which the death benefit
will increase if and when the Policy Account Value exceeds a certain
predetermined amount.

HOW DOES THE ACCOUNT VALUE OF A POLICY VARY IN RELATION TO THE SUBACCOUNTS'
INVESTMENT EXPERIENCE?

WHAT IS THE LOAN PROVISION AND HOW DOES A LOAN AFFECT THE DEATH BENEFIT, ACCOUNT
VALUE AND SURRENDER VALUE?

The Owner may obtain a Policy loan in the maximum amount of 90% of the
Surrender Value. Interest charged on any loan will accrue and compound daily at
an effective annual rate of 5% in the first 20 Policy years and 4.5% thereafter.
A loan plus accrued and compounded interest ("Indebtedness") may be repaid at
the discretion of the Owner in whole or in part in accordance with the terms of
the Policy.

IS THERE A SHORT-TERM CANCELLATION RIGHT?

7
<PAGE>

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?

JHVLICO AND JOHN HANCOCK

THE ACCOUNT AND THE SERIES FUNDS

THE ACCOUNT

8
<PAGE>

for Policies where the insured is classified as a substandard risk and a portion
of these premiums is allocated to the Account.

THE SERIES FUNDS

Managed Portfolio

Growth & Income Portfolio

Equity Index Portfolio

Large Cap Value Portfolio

Large Cap Growth Portfolio

9
<PAGE>

believed to offer above-average capital appreciation opportunities. Current
income is not an objective of the Portfolio.

Mid Cap Value Portfolio

Mid Cap Growth Portfolio

The investment objective of this Portfolio is to provide long-term growth of
capital through a non-diversified portfolio investing primarily in common stocks
of medium capitalization companies.

Diversified Mid Cap Growth Portfolio

The investment objective of this Portfolio is to provide long-term growth of
capital through a diversified portfolio investing primarily in common stocks of
medium capitalization growth companies.

Real Estate Equity Portfolio

Small/Mid Cap CORE Portfolio

Small Cap Value Portfolio

Small Cap Growth Portfolio

Global Equity Portfolio

International Balanced Portfolio

10
<PAGE>

International Equity Index Portfolio

International Opportunities Portfolio

The investment objective of this Portfolio is to provide capital appreciation
through investments in common stocks of primarily well-established, non-United
States companies.

Emerging Markets Equity Portfolio

Short-Term Bond Portfolio

Bond Index Portfolio

Sovereign Bond Portfolio

Strategic Bond Portfolio

High Yield Bond Portfolio

Money Market Portfolio

The investment objective of this Portfolio is to provide maximum current
income consistent with capital preservation and liquidity, through investment in
high quality money market instruments.

11
<PAGE>

Boston, MA 02109, provides sub-investment advice with respect to the Managed,
Growth & Income, Large Cap Growth, Real Estate Equity, and Short-Term Bond
Portfolios. Independence International Associates, Inc., a subsidiary of IIA
located at the same address as IIA, is sub-investment adviser to the
International Equity Index 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.

12
<PAGE>

THE FIXED ACCOUNT

13
<PAGE>

POLICY PROVISIONS AND BENEFITS

REQUIREMENTS FOR ISSUANCE OF POLICY

The Policy is generally available with a minimum Total Sum Insured at issue of
$1,000,000 and a minimum Basic Sum Insured of $500,000. At the time of issue,
each insured must be age 20 through 80. All persons insured must meet certain
health and other criteria called "underwriting standards." The smoking status of
each 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.

PREMIUMS

Minimum First Premium. The amount of premium required at the time of issue is
determined by JHVLICO, and depends on the age, sex, smoking status, and
underwriting class of each of the insureds at issue, the Policy's Total 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.

14
<PAGE>

Account Value to increase to such an extent that an increase in death benefit is
necessary either to satisfy federal tax law requirements or because of the way
to the Optional Extra Death Benefit feature operates, JHVLICO has the right to
not accept the excess portion of that premium payment or to require evidence of
insurability before that portion is accepted. In no event, however, will JHVLICO
refuse to accept any premium necessary to maintain the Guaranteed Minimum Death
Benefit in effect under a Policy.

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:

15
<PAGE>

(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.

ACCOUNT VALUE AND SURRENDER VALUE

Amount of Surrender Value. The Surrender Value will be the Account Value less
any Indebtedness.

16
<PAGE>

A withdrawal may have significant tax consequences. See "Tax Considerations."

Optional Enhanced Cash Value Rider. The Owner may elect an Enhanced Cash Value
Rider to be attached to the Policy. This rider allows for the Owner to receive
an Enhanced Cash Value benefit (in addition to the Surrender Value) if the
Policy is surrendered within the first nine Policy years. The Enhanced Cash
Value benefit is set forth in the specification pages of the Policy.

There is a charge for the rider equal to 2% of premium paid in the first
Policy year up to the annual target premium. This charge is assessed in the
first Policy year only.

The Enhanced Cash Value benefit is included in the Account Value when
calculating the death benefit and insurance charges associated with the Policy.
The amount available for withdrawal and the Loan Value of the Policy is based on
the Surrender Value, and neither shall in any way be increased due to the
Enhanced Cash Value Rider.

POLICY SPLIT OPTION

Tax Considerations. See "Tax Considerations--Policy Split Option", for
possible tax consequences of a Policy split under the option described above.

17
<PAGE>

DEATH BENEFITS

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 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 last
surviving 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).

18
<PAGE>

Death Benefit beyond ten Policy years must be made at the time of Policy
issuance, and the Owner may revoke the election at any time. JHVLICO imposes a
charge after the tenth Policy year if the Owner elects to extend this benefit.

The Basic Sum Insured generally cannot be increased or decreased after issue,
whereas the amount of Additional Sum Insured can be decreased, or, upon
application and submission of evidence of insurability, increased subsequent to
Policy issuance. JHVLICO may refuse to accept any request to reduce the
Additional Sum Insured (a) that would cause the Policy's current Total Sum
Insured to fall below $1,000,000 or (b) if immediately following the reduction,
the Policy's current death benefit would reflect an increase necessary for the
Policy to continue to qualify as life insurance (see "Death Benefits--Definition
of Life Insurance") or an increase pursuant to the Optional Extra Death Benefit
feature. Any increase or decrease in Additional Sum Insured will become
effective at the beginning of the first Policy month after JHVLICO receives in
good order at its Servicing Office all information necessary to process the
change, and, in the case of an increase in coverage, approves the change.

Any decision by the Owner to modify the amount of Additional Sum Insured
coverage after issue can have significant tax consequences. See "Tax
Considerations--Policy Proceeds."

19
<PAGE>

TRANSFERS AMONG SUBACCOUNTS

Transfers out of the Fixed Account to the variable Subaccounts are permitted
only once each Policy year and only during the 31-day period beginning on the
Policy anniversary. Transfers out of the Fixed Account may be requested from 60
days before to 30 days after the Policy anniversary. If received on or before
the Policy anniversary, requests for transfer out of the Fixed Account will be
processed on the Policy anniversary (or the next Valuation Date if the Policy
anniversary does not occur on a Valuation Date); if received after the Policy
anniversary, they will be processed at the end of the Valuation Period in which
JHVLICO receives the request at its Servicing Office. (JHVLICO reserves the
right to defer such Fixed Account transfers for up to six months.) If an Owner
requests a transfer out of the Fixed Account 61 days or more prior to the Policy
anniversary, that portion of the reallocation will not be processed and the
Owner's confirmation statement will not reflect a transfer out of the Fixed
Account as to such request. Transfers among variable Subaccounts and transfers
into the Fixed Account may be requested at any time. A maximum of 20% of Fixed
Account assets or, if greater, $500 may be transferred out of the Fixed Account
in any Policy year. Currently, there is no minimum amount limit on transfers out
of the Fixed Account, but JHVLICO reserves the right to impose such a limit in
the future. If an Owner requests a change inconsistent with the transfer
provisions, the portion of the request inconsistent with the transfer provisions
will not be effective. No transfers among Subaccounts may be made while the
Policy is in a grace period.

20
<PAGE>

LOAN PROVISIONS AND INDEBTEDNESS

Loan Provisions. Loans may be made at any time a Loan Value is available,
either of the insureds is alive and the Policy is not in a grace period. The
Owner may borrow money, assigning the Policy as the only security for the loan,
by completion of a form satisfactory to JHVLICO or, if the telephone transaction
authorization form has been completed, by telephone. The Loan Value will be 90%
of the Surrender Value. Interest charged on any loan will accrue and compound
daily at an effective annual rate of 5% in the first 20 Policy years, and 4.5%
thereafter.

The amount of any outstanding loan plus accrued interest is called the
"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 last surviving
insured's death and while the Policy is not in a grace period. When a loan is
made, an amount equal to the loan proceeds will be transferred out of the
Account and the Fixed Account, as applicable. This amount is allocated to a
portion of JHVLICO's general account called the "Loan Assets". Each Subaccount
will be reduced in the same proportion as the Account Value is then allocated
among the Subaccounts. Upon each loan repayment, the same proportionate amount
of the entire loan as was borrowed from the Fixed Account will be repaid to the
Fixed Account. The remainder of the loan repayment will be allocated to the
appropriate Subaccounts as stipulated in the then current Investment Rule. For
example, if the entire loan outstanding is $3000 of which $1000 was borrowed
from the Fixed Account, then upon a repayment of $1500, $500 would be allocated
to the Fixed Account and the remaining $1000 would be allocated to the
appropriate Subaccounts as stipulated in the then current Investment Rule. If an
Owner wishes any payment to constitute a loan repayment (rather than a premium
payment), the Owner must so specify.

Effect of Loan and Indebtedness. While the Indebtedness is outstanding, that
portion of the Account Value that is in Loan Assets is credited with interest at
a rate that is 1% less than the loan interest rate for the first 20 Policy years
and .5% less than the loan interest rate thereafter. The rate credited to Loan
Assets will usually be different than the net return for the Subaccounts. Since
Loan Assets and the remaining portion of the Account Value will generally have
different rates of investment return, any death benefit above the Sum Insured,
the Account Value, the Surrender Value and any death benefit above the Total Sum
Insured are all permanently affected by any Indebtedness, whether or not it is
repaid in whole or in part. The amount of any Indebtedness is subtracted from
the amount otherwise payable when the Policy proceeds become payable.

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

21
<PAGE>

EXCHANGE PRIVILEGE

-----------------

CHARGES AND EXPENSES

CHARGES DEDUCTED FROM PREMIUMS

In addition to the sales charge (see "Sales Charge" below), the following
charges are deducted from premiums:

22
<PAGE>

(Total Sum Insured at
[ Issue - $5,000,000) ]
1.25% X ( 1- ------------------------ X .25 )
$10,000,000

Federal DAC Tax Charge. A charge currently equal to 1.25% of each premium
payment will be deducted from each premium payment to cover the estimated cost
to JHVLICO of the Federal income tax treatment of the Policies' deferred
acquisition costs--commonly referred to as the "DAC Tax." JHVLICO has determined
that this charge is reasonable in relation to JHVLICO's increased Federal income
tax burden under the Internal Revenue Code resulting from the receipt of
premiums. JHVLICO will not increase this charge under outstanding Policies, but
reserves the right, subject to any required regulatory approval, to change this
charge for Policies not yet issued in order to correspond with changes in the
Federal income tax treatment of the Policies' deferred acquisition costs.

SALES CHARGE

23
<PAGE>

Notwithstanding the foregoing, if the younger insured is age 71 or older at
the time of Policy issuance, the current and guaranteed sales charge in Policy
year 12 and thereafter is 0%.

REDUCED CHARGES FOR ELIGIBLE GROUPS

CHARGES DEDUCTED FROM ACCOUNT VALUE OR ASSETS

The following charges are deducted from Account Value or assets:

Administrative Charge. JHVLICO will deduct from the Account Value a maximum
charge of $10 for all Policy years plus 3c per $1,000 of the Total Sum Insured
at issue. The current monthly charge is $7.50 for all Policy years, plus 1c per
$1,000 of the Total Sum Insured at issue for the first 10 Policy years, except
that the $7.50 charge

24
<PAGE>

currently is zero for any Policy with a Total Sum Insured at issue of at least
$5,000,000. Thus, for a Policy with a Total Sum Insured at issue of $1,000,000
and using the current administrative charge, the aggregate amount deducted
during the first 10 Policy years would be $2,100.

Insurance Charge. The insurance charge deducted monthly from Account Value is
based on the attained age of each of the insureds 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 the Account Value). The
amount at risk would also be affected if the Owner purchased the Enhanced Cash
Value Rider. See "Optional Enhanced Cash Value Rider" under "Account Value and
Surrender Value." The amount of the insurance charge is determined by
multiplying JHVLICO's then current monthly rate for insurance by the amount at
risk.

Lower current insurance rates are offered at most ages for insureds who
qualify as non-smokers. To qualify, an insured must meet additional requirements
that relate to smoking habits.

Charge for Mortality and Expense Risks. A daily charge is deducted from the
variable Subaccounts for mortality and expense risks assumed by JHVLICO at a
maximum effective annual rate of .60% of the value of the assets of each
variable Subaccount attributable to the Policies. The current level of this
charge is an effective annual rate of .35% of the assets of the Account. 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.

25
<PAGE>

Charges for Other Optional Rider Benefits. An additional charge must be paid
if the Owner elects to purchase any optional insurance benefit by Policy rider
(other than the Enhanced Cash Value Rider). Any such additional charge may be
deducted from premiums when paid or deducted monthly from Account Value.

GUARANTEE OF PREMIUMS AND CERTAIN CHARGES

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

26
<PAGE>

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.

The maximum commission payable to a Distributors representative for selling a
Policy is 65% of the target premium paid in the first Policy year, 12% of the
target premium paid in the second through fifth Policy years, 7.5% of the target
premium paid in the sixth through tenth Policy years, and 3% of the target
premium paid in each year thereafter. The maximum commission on any premium paid
in any year in excess of the target premium is 3%.

TAX CONSIDERATIONS

27
<PAGE>

POLICY PROCEEDS

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.

28
<PAGE>

Federal estate and state and local estate, inheritance and other tax
consequences of ownership or receipt of Policy proceeds depend on the
circumstances of each Owner or beneficiary.

CHARGE FOR JHVLICO'S TAXES

POLICY SPLIT OPTION

29
<PAGE>

BOARD OF DIRECTORS AND EXECUTIVE OFFICERS OF JHVLICO

The Directors and Executive Officers of JHVLICO and their principal
occupations during the past five years are as follows:

Directors--Officers Principal Occupations
- ------------------- ---------------------
<S> <C>
David F. D'Alessandro Chairman of the Board and Chief Executive
Officer of JHVLICO; President and Chief
Operating Officer, 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.

Robert R. Reitano Director of JHVLICO; Vice President, John
Hancock Mutual Life Insurance Company.

Ronald J. Bocage Director and Counsel, JHVLICO; Vice President
and Counsel, John Hancock Mutual Life Insurance
Company.

Joseph A. Tomlinson Director and Vice President, JHVLICO; Vice
President, John Hancock Mutual Life Insurance
Company.

Michele G. VanLeer Director of JHVLICO; Senior Vice President, John
Hancock Mutual Life Insurance Company.

Robert S. Paster Director, JHVLICO; Second Vice President, John
Hancock Mutual Life Insurance Company.

Barbara L. Luddy Director and Actuary of JHVLICO; Second Vice
President, John Hancock Mutual Life Insurance
Company.

Daniel L. Ouellette Vice President, Marketing, JHVLICO; Second 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

30
<PAGE>

Owners will be sent semiannually a report containing the financial statements
of the Funds, including a list of securities held in each Portfolio.

VOTING PRIVILEGES

CHANGES THAT JHVLICO CAN MAKE

31
<PAGE>

variable Subaccount by withdrawing the same percentage of each investment in the
Account with appropriate adjustments to avoid odd lots and fractions, (2) to
operate the Account as a "management-type investment company" under the 1940
Act, or in any other form permitted by law, the investment adviser of which
would be JHVLICO, an affiliate or John Hancock, (3) to deregister the Account
under the 1940 Act, (4) to substitute for the Portfolio shares held by a
Subaccount any other investment permitted by law, and (5) to take any action
necessary to comply with or obtain any exemptions from the 1940 Act. JHVLICO
would notify owners of any of the foregoing changes and, to the extent legally
required, obtain approval of owners and any regulatory body prior thereto. Such
notice and approval, however, may not be legally required in all cases.

STATE REGULATION

LEGAL MATTERS

REGISTRATION STATEMENT

EXPERTS

Actuarial matters included in this Prospectus have been examined by Deborah A.
Poppel, F.S.A., an Actuary of JHVLICO.

FINANCIAL STATEMENTS

32
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT S

STATEMENT OF ASSETS AND LIABILITIES

DECEMBER 31, 1997
<TABLE>
<CAPTION>
Large Cap Sovereign International Small Cap International Mid Cap Large Cap
Growth Bond Equities Growth Balanced Growth Value
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
----------- ----------- ------------- ---------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in shares of
portfolios of John
Hancock Variable Series
Trust I, at value ............ $32,504,276 $19,461,475 $8,790,049 $2,504,952 $1,475,245 $3,614,752 $5,190,146
Investments in shares of
portfolios of M Fund
Inc., at value ............... -- -- -- -- -- -- --
Receivable from:
John Hancock Variable
Series Trust I .............. 133,074 65,642 50,618 36,983 20 1,467 56,855
M Fund Inc. .................. -- -- -- -- -- -- --
----------- ----------- ---------- ---------- ---------- ---------- ----------
TOTAL ASSETS .................. 32,637,350 19,527,117 8,840,667 2,541,935 1,475,265 3,616,219 5,247,001
LIABILITIES
Payable to:
John Hancock Variable
Life Insurance Company 132,745 65,444 50,522 36,949 -- 1,429 56,794
M Fund Inc. .................. -- -- -- -- -- -- --
Asset charges payable ......... 329 198 96 34 20 38 61
----------- ----------- ---------- ---------- ---------- ---------- ----------
TOTAL LIABILITIES ............. 133,074 65,642 50,618 36,983 20 1,467 56,855
----------- ----------- ---------- ---------- ---------- ---------- ----------
NET ASSETS ................... $32,504,276 $19,461,475 $8,790,049 $2,504,952 $1,475,245 $3,614,752 $5,190,146
=========== =========== ========== ========== ========== ========== ==========

<CAPTION>
Money Mid Cap Special Real Estate
Market Value Opportunities Equity
Subaccount Subaccount Subaccount Subaccount
----------- ---------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Investments in shares of
portfolios of John
Hancock Variable Series
Trust I, at value ............ $14,171,123 $6,066,901 $8,833,185 $4,191,379
Investments in shares of
portfolios of M Fund
Inc., at value ............... -- -- -- --
Receivable from:
John Hancock Variable
Series Trust I .............. 907,716 32,571 1,906 4,723
M Fund Inc. .................. -- -- -- --
----------- ---------- ---------- ----------
TOTAL ASSETS .................. 15,078,839 6,099,472 8,835,091 4,196,102
LIABILITIES
Payable to:
John Hancock Variable
Life Insurance Company 907,538 32,502 1,806 4,668
M Fund Inc. .................. -- -- -- --
Asset charges payable ......... 178 69 100 55
----------- ---------- ---------- ----------
TOTAL LIABILITIES ............. 907,716 32,571 1,906 4,723
----------- ---------- ---------- ----------
NET ASSETS .................... $14,171,123 $6,066,901 $8,833,185 $4,191,379
=========== ========== ========== ==========
</TABLE>
- ---------
See accompanying notes.

33
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT S

STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)

DECEMBER 31, 1997
<TABLE>
<CAPTION>
Short-Term Turner
Growth & U.S. Small Cap International Equity Strategic Core
Income Managed Government Value Opportunities Index Bond Growth
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
----------- ----------- ----------- ---------- ------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in shares of
portfolios of John
Hancock Variable Series
Trust I, at value....... $47,996,192 $21,775,321 $12,476,155 $3,972,890 $6,035,554 $16,437,919 $1,620,281 $ --
Investments in shares of
portfolios of M Fund
Inc., at value.......... -- -- -- -- -- -- -- 1,014,974
Receivable from:
John Hancock Variable
Series Trust I......... 82,373 207,062 13,811 65,403 83,379 81,011 96,827 --
M Fund Inc. ............ -- -- -- -- -- -- -- 1,017
----------- ----------- ----------- ---------- ---------- ----------- ---------- ----------
TOTAL ASSETS............. 48,078,565 21,982,383 12,489,966 4,038,293 6,118,933 16,518,930 1,717,108 1,015,991
LIABILITIES
Payable to:
John Hancock Variable Life
Insurance Company....... 81,787 206,820 13,698 65,352 83,313 80,813 96,806 --
M Fund Inc. ............ -- -- -- -- -- -- -- 1,004
Asset charges payable.... 586 242 113 51 66 198 21 13
----------- ----------- ----------- ---------- ---------- ----------- ---------- ----------
TOTAL LIABILITIES........ 82,373 207,062 13,811 65,403 83,379 81,011 96,827 1,017
----------- ----------- ----------- ---------- ---------- ----------- ---------- ----------
NET ASSETS............... $47,996,192 $21,775,321 $12,476,155 $3,972,890 $6,035,554 $16,437,919 $1,620,281 $1,014,974
=========== =========== =========== ========== ========== =========== ========== ==========

<CAPTION>
Edinburgh Frontier
International Capital Enhanced
Equity Appreciation U.S. Equity
Subaccount Subaccount Subaccount
------------- ------------ -------------
<S> <C> <C> <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.......... 2,336,598 5,392,998 497,205
Receivable from:
John Hancock Variable
Series Trust I......... -- -- --
M Fund Inc. ............ 81 13,180 6,438
---------- ---------- --------
TOTAL ASSETS............. 2,336,679 5,406,178 503,643
LIABILITIES
Payable to:
John Hancock Variable Life
Insurance Company....... -- -- --
M Fund Inc. ............ 55 13,127 6,433
Asset charges payable.... 26 53 5
---------- ---------- --------
TOTAL LIABILITIES........ 81 13,180 6,438
---------- ---------- --------
NET ASSETS............... $2,336,598 $5,392,998 $497,205
========== ========== ========
</TABLE>
- ---------
See accompanying notes.

34
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT S

STATEMENTS OF OPERATIONS

FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>

Large Cap Growth Subaccount Sovereign Bond Subaccount
---------------------------------- -----------------------------
1997 1996 1995 1997 1996 1995
---------- ------------ -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distribution received from:
John Hancock Variable
Series Trust I ................ $2,884,498 $ 2,452,382 $509,637 $855,742 $242,881 $ 66,972
M Fund, Inc. ................... -- -- -- -- -- --
---------- ----------- -------- -------- -------- --------
Total investment income ......... 2,884,498 2,452,382 509,637 855,742 242,881 66,972
Expenses:
Mortality and expense risks .... 91,256 49,880 17,330 39,184 14,129 4,148
---------- ----------- -------- -------- -------- --------
Net investment income (loss) .... 2,793,242 2,402,502 492,307 816,558 228,752 62,824
Net realized and unrealized
gain (loss) on investments:
Net realized gains (losses) .... 619,721 444,487 126,908 80,538 5,746 21,718
Net unrealized appreciation
(depreciation) during the
period ......................... 2,301,920 (1,104,574) 180,251 63,687 (69,973) 34,574
---------- ----------- -------- -------- -------- --------
Net realized and unrealized
gain (loss) on investments ..... 2,921,641 (660,087) 307,159 144,225 (64,227) 56,292
---------- ----------- -------- -------- -------- --------
Net increase (decrease) in
net assets resulting from
operations ..................... $5,714,883 $ 1,742,415 $799,466 $960,783 $164,525 $119,116
========== =========== ======== ======== ======== ========

<CAPTION>
Small Cap
Growth International Balanced
International Equities Subaccount Subaccount Subaccount
---------------------------------- ------------------- -----------------------
1997 1996 1995 1997 1996* 1997 1996*
------------- --------- ---------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Distribution received from:
John Hancock Variable
Series Trust I ................ $ 422,913 $ 52,188 $ 19,501 $ 473 $ 512 $ 61,249 $2,947
M Fund, Inc. ................... -- -- -- -- -- -- --
----------- -------- -------- -------- -------- -------- ------
Total investment income ......... 422,913 52,188 19,501 473 512 61,249 2,947
Expenses:
Mortality and expense risks .... 33,893 23,132 10,434 6,547 1,547 4,443 356
----------- -------- -------- -------- -------- -------- ------
Net investment income (loss) .... 389,020 29,056 9,067 (6,074) (1,035) 56,806 2,591
Net realized and unrealized
gain (loss) on investments:
Net realized gains (losses) .... 244,810 165,730 (25,931) 21,707 (40,018) 8,667 56
Net unrealized appreciation
(depreciation) during the
period ......................... (1,219,540) 137,729 153,715 126,699 (2,665) (67,714) 5,307
----------- -------- -------- -------- -------- -------- ------
Net realized and unrealized
gain (loss) on investments ..... (974,730) 303,459 127,784 148,406 (42,683) (59,047) 5,363
----------- -------- -------- -------- -------- -------- ------
Net increase (decrease) in
net assets resulting from
operations ..................... $ (585,710) $332,515 $136,851 $142,332 $(43,718) $ (2,241) $7,954
=========== ======== ======== ======== ======== ======== ======

<CAPTION>
Mid Cap Growth Large Cap
Subaccount Value
Manage Subbcount
----------------- -----------------
1997 1996* 1997 1996*
--------- ------- -------- ---------
<S> <C> <C> <C> <C>

Investment income:
Distribution received from:
John Hancock Variable
Series Trust I. ............... $ -- $1,177 $194,199 $13,644
M Fund, Inc. ................... -- -- -- --
-------- ------ -------- -------
Total investment income ......... 1,177 194,199 13,644
Expenses:
Mortality and expense risks .... 8,287 719 11,163 964
-------- ------ -------- -------
Net investment income (loss) .... (8,287) 458 183,036 12,680
Net realized and unrealized
gain (loss) on investments:
Net realized gains (losses) .... 1,235 (391) 164,821 1,327
Net unrealized appreciation
(depreciation) during the
period ......................... 486,186 6,440 279,449 23,553
-------- ------ -------- -------
Net realized and unrealized
gain (loss) on investments ..... 487,421 6,049 444,270 24,880
-------- ------ -------- -------
Net increase (decrease) in
net assets resulting from
operations ..................... $479,134 $6,507 $627,306 $37,560
======== ====== ======== =======
</TABLE>
- ---------
* From May 1, 1996 (commencement of operations).
See accompanying notes.

35
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT S

STATEMENTS OF OPERATIONS (CONTINUED)

FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
Mid Cap Value
Money Market Subaccount Subaccount Special Opportunities Subaccount
---------------------------- ------------------ ---------------------------------
1997 1996 1995 1997 1996* 1997 1996 1995
-------- -------- -------- --------- ------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series
Trust I...................... $758,434 $287,321 $119,746 $446,081 $ 6,878 $ 878,600 $238,163 $ 40,159
M Fund Inc. .................. -- -- -- -- -- -- -- --
-------- -------- -------- -------- ------- --------- -------- --------
Total investment income......... 758,434 287,321 119,746 446,081 6,878 878,600 238,163 40,159

Expenses:
Mortality and expense risks.... 66,882 30,722 12,117 11,421 377 35,934 21,146 4,949
-------- -------- -------- -------- ------- --------- -------- --------
Net investment income........... 691,552 256,599 107,629 434,660 6,501 842,666 217,017 35,210

Net realized and unrealized gain
(loss) on investments:
Net realized gains............ -- -- -- 101,787 845 297,666 317,400 28,812
Net unrealized appreciation
(depreciation) during the
period....................... -- -- -- (39,717) 13,910 (730,748) 344,786 185,349
-------- -------- -------- -------- ------- --------- -------- --------
Net realized and unrealized
gain (loss) on investments... -- -- -- 62,070 14,755 (433,082) 662,186 214,161
-------- -------- -------- -------- ------- --------- -------- --------
Net increase in net assets
resulting from operations...... $691,552 $256,599 $107,629 $496,730 $21,256 $ 409,584 $879,203 $249,371
======== ======== ======== ======== ======= ========= ======== ========
<CAPTION>

Real Estate Equity Subaccount Growth & Income Subaccount
------------------------------ -----------------------------------
1997 1996 1995 1997 1996 1995
---------- --------- -------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series
Trust I...................... $246,677 $ 50,204 $32,578 $5,917,063 $3,056,625 $ 669,643
M Fund Inc. .................. -- -- -- -- -- --
-------- -------- ------- ---------- ---------- ----------
Total investment income......... 246,677 50,204 32,578 5,917,063 3,056,625 669,643

Expenses:
Mortality and expense risks.... 13,879 4,547 2,766 169,135 89,391 23,428
-------- -------- ------- ---------- ---------- ----------
Net investment income........... 232,798 45,657 29,812 5,747,928 2,967,234 646,215

Net realized and unrealized gain
(loss) on investments:
Net realized gains............ 252,095 19,122 613 2,390,414 512,402 170,322
Net unrealized appreciation
(depreciation) during the
period....................... (13,488) 191,067 25,077 435,778 (496,647) 322,628
-------- -------- ------- ---------- ---------- ----------
Net realized and unrealized
gain (loss) on investments... 238,607 210,189 25,690 2,826,192 15,755 492,950
-------- -------- ------- ---------- ---------- ----------
Net increase in net assets
resulting from operations...... $471,405 $255,846 $55,502 $8,574,120 $2,982,989 $1,139,165
======== ======== ======= ========== ========== ==========
</TABLE>
- ---------
* From May 1, 1996 (commencement of operations).

See accompanying notes.

36
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT S

STATEMENTS OF OPERATIONS (CONTINUED)

FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>

Short-Term U.S.
Managed Subaccount Government Subaccount
--------------------------------- -----------------------------
1997 1996 1995 1997 1996 1995
---------- ----------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I..... $1,879,954 $1,281,149 $316,774 $415,542 $181,937 $64,502
M Fund Inc.............................. -- -- -- -- -- --
---------- ---------- -------- -------- -------- -------
Total investment income................... 1,879,954 1,281,149 316,774 415,542 181,937 64,502

Expenses:
Mortality and expense risks.............. 65,383 35,103 10,978 20,551 9,277 2,917
---------- ---------- -------- -------- -------- -------
Net investment income..................... 1,814,571 1,246,046 305,796 394,991 172,660 61,585

Net realized and unrealized gain (loss) on
investments:
Net realized gains...................... 171,318 124,493 179,131 35,294 (52,888) 8,251
Net unrealized appreciation
(depreciation) during the
year................................... 715,231 (507,517) 51,622 (25,976) (7,734) 22,112
---------- ---------- -------- -------- -------- -------
Net realized and unrealized gain (loss)
on investments......................... 886,549 (383,024) 230,753 9,318 (60,622) 30,363
---------- ---------- -------- -------- -------- -------
Net increase (decrease) in net assets
resulting from operations................ $2,701,120 $ 863,022 $536,549 $404,309 $112,038 $91,948
========== ========== ======== ======== ======== =======

<CAPTION>
International
Small Cap Value Opportunities Equity Index
Subaccount Subaccount Subaccount
------------------- ------------------- --------------------
1997 1996* 1997 1996* 1997 1996*
-------- ------- --------- ------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I..... $299,278 $ 8,296 $ 69,078 $ 2,965 $ 409,920 $23,300
M Fund Inc.............................. -- -- -- -- -- --
-------- ------- --------- ------- ---------- -------
Total investment income................... 299,278 8,296 69,078 2,965 409,920 23,300

Expenses:
Mortality and expense risks ............. 8,494 523 13,177 1,439 31,223 1,962
-------- ------- --------- ------- ---------- -------
Net investment income..................... 290,784 7,773 55,901 1,526 378,697 21,338

Net realized and unrealized gain (loss) on
investments:
Net realized gains...................... 75,149 58 80,782 242 901,978 17,398
Net unrealized appreciation
(depreciation) during the
year................................... (18,626) 14,046 (260,664) 36,666 392,256 55,782
-------- ------- --------- ------- ---------- -------
Net realized and unrealized gain (loss)
on investments......................... 56,523 14,104 (179,882) 36,908 1,294,234 73,180
-------- ------- --------- ------- ---------- -------
Net increase (decrease) in net assets
resulting from operations................ $347,307 $21,877 $(123,981) $38,434 $1,672,931 $94,518
======== ======= ========= ======= ========== =======
</TABLE>
- ---------
* From May 1, 1996 (commencement of operations).

See accompanying notes.

37
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT S

STATEMENTS OF OPERATIONS (CONTINUED)

FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>

Strategic Edinburgh Frontier Enhanced
Bond Turner Core Growth International Equity Capital Appreciation U.S.
Subaccount Subaccount Subaccount Subaccount Equity
----------------- ------------------- --------------------- --------------------- Subaccount
1997 1996* 1997 1996* 1997 1996* 1997 1996* 1997**
--------- ------- --------- --------- ---------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series
Trust I..................... $ 74,850 $7,425 $ -- $ -- $ -- $ -- $ -- $ -- $ --
M Fund Inc. ................. -- -- 91,360 21,778 32,677 5,263 128,190 -- 15,335
-------- ------ -------- ------- -------- -------- --------- -------- -------
Total investment income........ 74,850 7,425 91,360 21,778 32,677 5,263 128,190 15,335

Expenses:
Mortality and expense risks... 3,820 349 4,071 2,140 7,502 2,280 10,040 1,679 478
Net investment income (loss)... 71,030 7,076 87,289 19,638 25,175 2,983 118,150 (1,679) 14,857

Net realized and unrealized
gain (loss) on investments:
Net realized gains (losses).. 8,335 22 76,711 (9,767) 12,541 (2,433) 614,358 (21,044) 4,177
Net unrealized appreciation
(depreciation) during the
year........................ (11,727) (591) 32,626 16,054 (26,022) (12,286) (368,570) 5,101 6,844
-------- ------ -------- ------- -------- -------- --------- -------- -------
Net realized and unrealized
gain (loss) on investments.... (3,392) (569) 109,337 6,287 (13,481) (14,719) 245,788 (15,943) 11,021
-------- ------ -------- ------- -------- -------- --------- -------- -------
Net increase (decrease) in
net assets resulting from
operations.................... $ 67,638 $6,507 $196,626 $25,925 $ 11,694 $(11,736) $ 363,938 $(17,622) $25,878
======== ====== ======== ======= ======== ======== ========= ======== =======
</TABLE>
- ---------
* From May 1, 1996 (commencement of operations).
** From July 1, 1997 (commencement of operations).

See accompanying notes.

38
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT S

STATEMENTS OF CHANGES IN NET ASSETS

FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>

Large Cap Growth Subaccount Sovereign Bond Subaccount
---------------------------------------- -------------------------------------
1997 1996 1995 1997 1996 1995
------------- ------------ ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income (loss)........ $ 2,793,242 $ 2,402,502 $ 492,307 $ 816,558 $ 228,752 $ 62,824
Net realized gains (losses)......... 619,721 444,487 126,908 80,538 5,746 21,718
Net unrealized appreciation
(depreciation) during the period.... 2,301,920 (1,104,574) 180,251 63,687 (69,973) 34,574
------------ ----------- ----------- ----------- ---------- ----------
Net increase (decrease) in net
assets resulting from operations.... 5,714,883 1,742,415 799,466 960,783 164,525 119,116

From policyholder transactions:
Net premiums from policyholders..... 20,264,849 13,036,922 8,115,186 21,324,560 4,312,776 1,370,188
Net benefits to policyholders....... (10,390,849) (4,928,834) (2,752,131) (8,009,615) (679,839) (318,068)
------------ ----------- ----------- ----------- ---------- ----------
Net increase in net assets
resulting from policyholder
transactions........................ 9,874,000 8,108,088 5,363,055 13,314,945 3,632,937 1,052,120
------------ ----------- ----------- ----------- ---------- ----------
Net increase in net assets........... 15,588,883 9,850,503 6,162,521 14,275,728 3,797,462 1,171,236

Net assets at beginning of period.... 16,915,393 7,064,890 902,369 5,185,747 1,388,285 217,049
------------ ----------- ----------- ----------- ---------- ----------

Net assets at end of period.......... $ 32,504,276 $16,915,393 $ 7,064,890 $19,461,475 $5,185,747 $1,388,285
============ =========== =========== =========== ========== ==========

From policyholder transactions:
Net premiums from policyholders.... 8,150,400 4,750,218 2,620,265 2,870,481 1,120,880 1,608,069 148,617
Net benefits to policyholders...... (4,505,840) (1,906,352) (1,194,625) (1,005,386) (579,637) (282,878) (4,276)
----------- ----------- ----------- ----------- ---------- ---------- --------
Net increase in net assets
resulting from policyholder
transactions....................... 3,644,560 2,843,866 1,425,640 1,865,095 541,243 1,325,191 144,341
----------- ----------- ----------- ----------- ---------- ---------- --------
Net increase in net assets.......... 3,058,850 3,176,381 1,562,491 2,007,427 497,525 1,322,950 152,295

Net assets at beginning of period... 5,731,199 2,554,818 992,327 497,525 -- 152,295 --
----------- ----------- ----------- ----------- ---------- ---------- --------

Net assets at end of period......... $ 8,790,049 $ 5,731,199 $ 2,554,818 $ 2,504,952 $ 497,525 $1,475,245 $152,295
=========== =========== =========== =========== ========== ========== ========

<CAPTION>
Mid Cap Growth Large Cap Value
Subaccount Subaccount
--------------------- -----------------------
1997 1996* 1997 1996*
----------- --------- ------------ ---------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income (loss)....... $ (8,287) $ 458 $ 183,036 $ 12,680
Net realized gains (losses)........ 1,235 (391) 164,821 1,327
Net unrealized appreciation
(depreciation) during the period... 486,186 6,440 279,449 23,553
---------- -------- ----------- --------
Net increase (decrease) in net
assets resulting from operations... 479,134 6,507 627,306 37,560

From policyholder transactions:
Net premiums from policyholders.... 3,212,754 858,546 5,421,062 767,660
Net benefits to policyholders...... (915,459) (26,730) (1,620,578) (42,864)
---------- -------- ----------- --------
Net increase in net assets
resulting from policyholder
transactions....................... 2,297,295 831,816 3,800,484 724,796
---------- -------- ----------- --------
Net increase in net assets.......... 2,776,429 838,323 4,427,790 762,356

Net assets at beginning of period... 838,323 -- 762,356 --
---------- -------- ----------- --------

Net assets at end of period......... $3,614,752 $838,323 $ 5,190,146 $762,356
========== ======== =========== ========
</TABLE>
- ---------
* From May 1, 1996 (commencement of operations).

See accompanying notes.

39
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT S

STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

FOR THE YEARS AND PERIODS ENDED DECEMBER 31,

<TABLE>
<CAPTION>
Mid Cap
Value
Money Market Subaccount Subaccount
-------------------------------------------- -----------------------
1997 1996 1995 1997 1996*
-------------- ------------- ------------- ------------ ---------

<S> <C> <C> <C> <C> <C>
Increase in net assets from
operations:
Net investment income . . . $ 691,552 $ 256,599 $ 107,629 $ 434,660 $ 6,501
Net realized gains -- -- -- 101,787 845
Net unrealized appreciation
(depreciation) during the
period. . . . . . . . . . . -- -- -- (39,717) 13,910
------------- ------------ ------------ ----------- --------
Net increase in net assets
resulting from operations . 691,552 256,599 107,629 496,730 21,256

From policyholder
transactions:
Net premiums from
policyholders . . . . . . . 103,737,470 36,814,029 19,983,940 6,323,061 324,248
Net benefits to
policyholders . . . . . . . (100,296,756) (31,658,283) (17,720,190) (1,089,206) (9,188)
------------- ------------ ------------ ----------- --------
Net increase in net assets
resulting from policyholder
transactions. . . . . . . . 3,440,714 5,155,746 2,263,750 5,233,855 315,060
------------- ------------ ------------ ----------- --------
Net increase in net assets . 4,132,266 5,412,345 2,371,379 5,730,585 336,316

Net assets at beginning of
period. . . . . . . . . . . 10,038,857 4,626,512 2,255,133 336,316 --
------------- ------------ ------------ ----------- --------

Net assets at end of period. $ 14,171,123 $ 10,038,857 $ 4,626,512 $ 6,066,901 $336,316
============= ============ ============ =========== ========

Special Opportunities Subaccount Real Estate Equity Subaccount
--------------------------------------- -------------------------------------
1997 1996 1995 1997 1996 1995
------------ ------------ ----------- ------------ ----------- ----------

<S> <C> <C> <C> <C> <C> <C>
Increase in net assets from
operations:
Net investment income . . . $ 842,666 $ 217,017 $ 35,210 $ 232,798 $ 45,657 $ 29,812
Net realized gains 297,666 317,400 28,812 252,095 19,122 613
Net unrealized appreciation
(depreciation) during the
period. . . . . . . . . . . (730,748) 344,786 185,349 (13,488) 191,067 25,077
----------- ----------- ---------- ----------- ---------- ---------
Net increase in net assets
resulting from operations . 409,584 879,203 249,371 471,405 255,846 55,502

From policyholder
transactions:
Net premiums from
policyholders . . . . . . . 8,511,081 4,939,686 1,639,491 4,833,914 748,683 466,306
Net benefits to
policyholders . . . . . . . (6,274,668) (1,301,761) (551,692) (2,393,463) (295,788) (370,910)
----------- ----------- ---------- ----------- ---------- ---------
Net increase in net assets
resulting from policyholder
transactions. . . . . . . . 2,236,413 3,637,925 1,087,799 2,440,451 452,895 95,396
----------- ----------- ---------- ----------- ---------- ---------
Net increase in net assets . 2,645,997 4,517,128 1,337,170 2,911,858 708,741 150,898

Net assets at beginning of
period. . . . . . . . . . . 6,187,188 1,670,060 332,890 1,279,523 570,782 419,884
----------- ----------- ---------- ----------- ---------- ---------

Net assets at end of period. $ 8,833,185 $ 6,187,188 $1,670,060 $ 4,191,379 $1,279,523 $ 570,782
=========== =========== ========== =========== ========== =========

Growth & Income Subaccount
-------------------------------------------
1997 1996 1995
------------- ------------ --------------

<S> <C> <C> <C>
Increase in net assets from
operations:
Net investment income . . . $ 5,747,928 $ 2,967,234 $ 646,215
Net realized gains 2,390,414 512,402 170,322
Net unrealized appreciation
(depreciation) during the
period. . . . . . . . . . . 435,778 (496,647) 322,628
------------ ----------- -----------
Net increase in net assets
resulting from operations . 8,574,120 2,982,989 1,139,165

From policyholder
transactions:
Net premiums from
policyholders . . . . . . . 35,535,599 19,263,021 8,168,426
Net benefits to
policyholders . . . . . . . (21,776,809) (5,502,524) (1,740,418)
------------ ----------- -----------
Net increase in net assets
resulting from policyholder
transactions. . . . . . . . 13,758,790 13,760,497 6,428,008
------------ ----------- -----------
Net increase in net assets . 22,332,910 16,743,486 7,567,173

Net assets at beginning of
period. . . . . . . . . . . 25,663,282 8,919,796 1,352,623
------------ ----------- -----------

Net assets at end of period. $ 47,996,192 $25,663,282 $ 8,919,796
============ =========== ===========
</TABLE>

- ---------
* From May 1, 1996 (commencement of operations).

See accompanying notes.

40
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT S

STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

FOR THE YEARS AND PERIODS ENDED DECEMBER 31,

<TABLE>
<CAPTION>
Short-Term U.S.
Managed Subaccount Government Subaccount
---------------------------------------- ---------------------------------------
1997 1996 1995 1997 1996 1995
------------ ------------ ------------ ------------ ------------ -----------

<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . . . $ 1,814,571 $ 1,246,046 $ 305,796 $ 394,991 $ 172,660 $ 61,585
Net realized gains (losses). . . . . . . 171,318 124,493 179,131 35,294 (52,888) 8,251
Net unrealized appreciation
(depreciation) during the period. . . . 715,231 (507,517) 51,622 (25,976) (7,734) 22,112
----------- ----------- ----------- ----------- ----------- ----------
Net increase (decrease) in net assets
resulting from operations. . . . . . . . 2,701,120 863,022 536,549 404,309 112,038 91,948

From policyholder transactions:
Net premiums from policyholders. . . . . 16,914,475 9,996,216 5,502,408 12,911,228 8,757,242 2,439,840
Net benefits to policyholders. . . . . . (9,357,535) (3,151,700) (2,875,967) (4,234,624) (7,683,085) (364,204)
----------- ----------- ----------- ----------- ----------- ----------
Net increase in net assets resulting from
policyholder transactions. . . . . . . . 7,556,940 6,844,516 2,626,441 8,676,604 1,074,157 2,075,636
----------- ----------- ----------- ----------- ----------- ----------
Net increase in net assets. . . . . . . . 10,258,060 7,707,538 3,162,990 9,080,913 1,186,195 2,167,584

Net assets at beginning of period . . . . 11,517,261 3,809,723 646,733 3,395,242 2,209,047 41,463
----------- ----------- ----------- ----------- ----------- ----------

Net assets at end of period . . . . . . . $21,775,321 $11,517,261 $ 3,809,723 $12,476,155 $ 3,395,242 $2,209,047
=========== =========== =========== =========== =========== ==========

<CAPTION>
Small Cap Value International Opportunities
Subaccount Subaccount
--------------------- ----------------------------
1997 1996* 1997 1996*
----------- --------- --------------- --------------

<S> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . . . $ 290,784 $ 7,773 $ 55,901 $ 1,526
Net realized gains (losses). . . . . . . 75,149 58 80,782 242
Net unrealized appreciation
(depreciation) during the period. . . . (18,626) 14,046 (260,664) 36,666
---------- -------- ----------- --------
Net increase (decrease) in net assets
resulting from operations. . . . . . . . 347,307 21,877 (123,981) 38,434

From policyholder transactions:
Net premiums from policyholders. . . . . 4,182,527 335,271 8,906,153 960,081
Net benefits to policyholders. . . . . . (897,951) (16,141) (3,655,731) (89,402)
---------- -------- ----------- --------
Net increase in net assets resulting from
policyholder transactions. . . . . . . . 3,284,576 319,130 5,250,422 870,679
---------- -------- ----------- --------
Net increase in net assets. . . . . . . . 3,631,883 341,007 5,126,441 909,113

Net assets at beginning of period . . . . 341,007 -- 909,113 --
---------- -------- ----------- --------

Net assets at end of period . . . . . . . $3,972,890 $341,007 $ 6,035,554 $909,113
========== ======== =========== ========
</TABLE>

- ---------
* From May 1, 1996 (commencement of operations).

See accompanying notes.

41
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT S

STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

FOR THE YEARS AND PERIODS ENDED DECEMBER 31,

<TABLE>
<CAPTION>
Equity Strategic
Index Bond Turner Core Growth
Subaccount Subaccount Subaccount
------------------------- ---------------------- ------------------------
1997 1996* 1997 1996* 1997 1996*
------------ ----------- ----------- --------- ----------- -----------

<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) . . . . . . . . . $ 378,697 $ 21,338 $ 71,030 $ 7,076 $ 87,289 $ 19,638
Net realized gains (losses). . . . . . . . . . 901,978 17,398 8,335 22 76,711 (9,767)
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . . . 392,256 55,782 (11,727) (591) 32,626 16,054
----------- ---------- ---------- -------- ---------- ----------
Net increase (decrease) in net assets resulting
from operations. . . . . . . . . . . . . . . . 1,672,931 94,518 67,638 6,507 196,626 25,925

From policyholder transactions:
Net premiums from policyholders. . . . . . . . 23,412,687 1,282,798 1,828,179 259,231 743,622 1,135,180
Net benefits to policyholders. . . . . . . . . (9,622,006) (403,009) (534,164) (7,110) (580,027) (506,352)
----------- ---------- ---------- -------- ---------- ----------
Net increase in net assets resulting from
policyholder transactions. . . . . . . . . . . 13,790,681 879,789 1,294,015 252,121 163,595 628,828
----------- ---------- ---------- -------- ---------- ----------
Net increase in net assets. . . . . . . . . . . 15,463,612 974,307 1,361,653 258,628 360,221 654,753

Net assets at beginning of period . . . . . . . 974,307 -- 258,628 -- 654,753 --
----------- ---------- ---------- -------- ---------- ----------

Net assets at end of period . . . . . . . . . . $16,437,919 $ 974,307 $1,620,281 $258,628 $1,014,974 $ 654,753
=========== ========== ========== ======== ========== ==========

Edinburgh Frontier Enhanced
International Equity Capital Appreciation US
Subaccount Subaccount Equity
------------------------- ------------------------- Subaccount
1997 1996* 1997 1996* 1997**
------------ ----------- ------------ ----------- ------------

<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) . . . . . . . . . $ 25,175 $ 2,983 $ 118,150 $ (1,679) $ 14,857
Net realized gains (losses). . . . . . . . . . 12,541 (2,433) 614,358 (21,044) 4,177
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . . . (26,022) (12,286) (368,570) 5,101 6,844
----------- ---------- ----------- ---------- --------
Net increase (decrease) in net assets resulting
from operations. . . . . . . . . . . . . . . . 11,694 (11,736) 363,938 (17,622) 25,878

From policyholder transactions:
Net premiums from policyholders. . . . . . . . 2,484,010 1,021,041 10,030,418 1,535,063 475,503
Net benefits to policyholders. . . . . . . . . (1,088,249) (80,162) (5,969,436) (549,363) (4,176)
----------- ---------- ----------- ---------- --------
Net increase in net assets resulting from
policyholder transactions. . . . . . . . . . . 1,395,761 940,879 4,060,982 985,700 471,327
----------- ---------- ----------- ---------- --------
Net increase in net assets. . . . . . . . . . . 1,407,455 929,143 4,424,920 968,078 497,205

Net assets at beginning of period . . . . . . . 929,143 -- 968,078 -- --
----------- ---------- ----------- ---------- --------

Net assets at end of period . . . . . . . . . . $ 2,336,598 $ 929,143 $ 5,392,998 $ 968,078 $497,205
=========== ========== =========== ========== ========
</TABLE>

- ---------
* From May 1, 1996 (commencement of operations).
** From July 1, 1997 (commencement of operations).

See accompanying notes.

42
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT S

NOTES TO FINANCIAL STATEMENTS

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-two 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-two Portfolios of the Fund and 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,
Frontier Capital Appreciation, and Enhanced U.S. Equity Portfolios. Each
Portfolio has a different investment objective.

2. SIGNIFICANT ACCOUNTING POLICIES

ESTIMATES

VALUATION OF INVESTMENTS

FEDERAL INCOME TAXES

The operations of the Account are included in the federal income tax return of
JHVLICO, which is taxed as a life insurance company under the Internal Revenue
Code. JHVLICO has the right to charge the Account any federal income taxes, or
provision for federal income taxes, attributable to the operations of the
Account or to the policies

43
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT S

NOTES TO FINANCIAL STATEMENTS--CONTINUED

2. SIGNIFICANT ACCOUNTING POLICIES--CONTINUED

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 makes certain deductions for administrative expenses and state premium
taxes from premium payments before amounts are transferred to the Account.

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.

44
<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, 1997 were as follows:

45
<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, 1997, were as follows:

5. IMPACT OF YEAR 2000 (UNAUDITED)

John Hancock as early as 1994 had begun assessing, modifying and converting
the software related to its significant systems and has initiated formal
communications with its significant business partners and customers to determine
the extent to which John Hancock's interface systems are vulnerable to those
third parties' failure to remediate their own year 2000 issues. While John
Hancock is developing alternative third party processing arrangements as it
deems appropriate, there is no guarantee that the systems of other companies on
which the Account's systems rely will be converted timely or will not have an
adverse effect on the Account's systems.

46
<PAGE>

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

Policyholders
John Hancock Variable Life Account S
of John Hancock Variable Life Insurance Company

Ernst & Young LLP

Boston, MA

February 6, 1998

47
<PAGE>

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

To the Directors and Policyholders
John Hancock Variable Life Insurance Company

Ernst & Young LLP

Boston, MA

February 18, 1998

48
<PAGE>

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

STATUTORY-BASIS STATEMENTS OF FINANCIAL POSITION

The accompanying notes are an integral part of the statutory-basis financial
statements.

49
<PAGE>

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

STATUTORY-BASIS STATEMENTS OF OPERATIONS AND UNASSIGNED DEFICIT

<TABLE>
<CAPTION>
Year ended December 31
-----------------------
1997 1996
---- ----
(In millions)
<S> <C> <C>
INCOME
Premiums........................................ $ 872.7 $ 820.6
Net investment income--Note 3................... 89.7 76.1
Other, net...................................... 420.1 406.0
-------- --------
1,382.5 1,302.7
BENEFITS AND EXPENSES
Payments to policyholders and beneficiaries..... 264.0 236.1
Additions to reserves to provide for future
payments to policyholders and beneficiaries... 814.2 790.1
Expenses of providing service to policyholders
and obtaining new insurance--
Note 5........................................ 216.2 183.8
State and miscellaneous taxes................... 19.1 17.3
-------- --------
1,313.5 1,227.3
-------- --------
GAIN FROM OPERATIONS BEFORE FEDERAL INCOME
TAXES AND NET REALIZED CAPITAL LOSSES....... 69.0 75.4
Federal income taxes--Note 1 38.5 38.6
-------- --------
GAIN FROM OPERATIONS BEFORE NET REALIZED
CAPITAL LOSSES.............................. 30.5 36.8
Net realized capital losses--Note 4............... (3.0) (1.5)
-------- --------
NET INCOME................................... 27.5 35.3
Unassigned deficit at beginning of year........... (96.9) (131.3)
Net unrealized capital gains and other
adjustments--Note 4.............................. 5.0 2.5
Other reserves and adjustments.................... 6.1 (3.4)
-------- --------
UNASSIGNED DEFICIT AT END OF YEAR............ $ (58.3) $ (96.9)
======== ========
</TABLE>

The accompanying notes are an integral part of the statutory-basis financial
statements.

50
<PAGE>

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

STATUTORY-BASIS STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Year ended December 31
-----------------------
1997 1996
---- ----
(In millions)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Insurance premiums.............................. $ 877.0 $ 824.2
Net investment income........................... 89.9 73.4
Benefits to policyholders and beneficiaries..... (245.2) (212.7)
Dividends paid to policyholders................. (18.7) (15.7)
Insurance expenses and taxes.................... (250.2) (196.6)
Net transfers to separate accounts.............. (703.2) (524.2)
Other, net...................................... 379.9 386.7
------- -------
NET CASH PROVIDED FROM OPERATIONS............ 129.5 335.1
------- -------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Bond purchases.................................. (621.6) (489.9)
Bond sales...................................... 197.3 228.3
Bond maturities and scheduled redemptions....... 34.1 27.8
Bond prepayments................................ 51.6 31.9
Stock purchases................................. (15.7) (6.5)
Proceeds from stock sales....................... 6.7 0.4
Real estate purchases........................... (1.3) (10.5)
Real estate sales............................... 0.4 8.5
Other invested assets purchases................. (1.0) 0.0
Proceeds from the sale of other invested assets 0.3 1.5
Mortgage loans issued........................... (94.5) (84.4)
Mortgage loan repayments........................ 32.4 17.7
Other, net...................................... 393.1 (104.6)
------- -------
NET CASH USED IN INVESTING ACTIVITIES........ (18.2) (379.8)
------- -------
INCREASE (DECREASE) IN CASH AND TEMPORARY CASH
INVESTMENTS...................................... 111.3 (44.7)
Cash and temporary cash investments at beginning of
year............................................. 31.9 76.6
------- -------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF YEAR $ 143.2 $ 31.9
======= =======
</TABLE>

The accompanying notes are an integral part of the statutory-basis financial
statements.

51
<PAGE>

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS

NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES

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; (8) no provision is made for the deferred income
tax effects of temporary differences between book and tax basis reporting; and
(9) certain items, including modifications to required policy reserves resulting
from changes in actuarial assumptions or increased benefits, are recorded
directly to unassigned deficit rather than being reflected in income. The
effects of the foregoing variances from GAAP have not been determined but are
presumed to be material.

The significant accounting practices of the Company are as follows:

52
<PAGE>

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED

Valuation of Assets: General account investments are carried at amounts
determined on the following bases:

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.

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.

The Company also records the NAIC prescribed Interest Maintenance Reserve (IMR)
that represents that portion of the after tax net accumulated unamortized
realized capital gains and losses on sales of fixed income securities,
principally bonds and mortgage loans, attributable to changes in the general
level of interest rates. Such gains and losses are deferred and amortized into
income over the remaining expected lives of the investments sold. At
December 31, 1997, the IMR, net of 1997 amortization of $1.2 million, amounted
to $7.8 million, which is included in policy reserves. The corresponding 1996
amounts were $1.2 million and $5.9 million, respectively.

Goodwill: The excess of cost over the statutory book value of the net assets of
life insurance business acquired was $13.1 million and $15.1 million at
December 31, 1997 and 1996, respectively, and generally is amortized over a ten-
year period using a straight-line method.

Accumulated amortization was $8.8 million and $6.7 million at December 31, 1997
and 1996, respectively.

53
<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 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 carrying amount in the statement of financial position for policy loans
approximates their fair value.

54
<PAGE>

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED

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 through 1997.

55
<PAGE>

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED

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.

NOTE 2--ACQUISITION

On June 23, 1993, the Company acquired all of the outstanding shares of stock of
Colonial Penn Annuity and Life Insurance Company (CPAL) from Colonial Penn Life
Insurance Company for an aggregate purchase price of approximately
$42.5 million. At the date of acquisition, assets of CPAL were approximately
$648.5 million, consisting principally of cash and temporary cash investments
and liabilities were approximately $635.2 million, consisting principally of
reserves related to a block of interest sensitive single-premium whole life
insurance business assumed by CPAL from Charter National Life Insurance Company
(Charter). The purchase price includes contingent payments of up to
approximately $7.3 million payable between 1994 and 1998 based on the actual
lapse experience of the business in force on June 23, 1993. The Company made
contingent payments to CPAL of $1.5 million during each of 1997 and 1996.
Unamortized goodwill at December 31, 1997 was $13.1 million and is being
amortized over ten years on a straight-line basis.

NOTE 3--NET INVESTMENT INCOME

Investment income has been reduced by the following amounts:

1997 1996
---- ----
(In millions)

Investment expenses....................................... $5.0 $7.0
Interest expense.......................................... 0.7 0.0
Depreciation expense...................................... 1.1 0.9
Investment taxes.......................................... 0.4 0.5
---- ----
$7.2 $8.4
==== ====

NOTE 4--NET CAPITAL GAINS (LOSSES) AND OTHER ADJUSTMENTS

Net realized capital losses consist of the following items:

1997 1996
---- ----
(In millions)

Net gains (losses) from asset sales....................... 0.8 $(0.2)
Capital gains tax......................................... (0.7) (1.0)
Net capital gains transferred to IMR...................... (3.1) (0.3)
---- -----
Realized Capital Losses................................... (3.0) $(1.5)
==== =====

56
<PAGE>

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 4--NET CAPITAL GAINS (LOSSES) AND OTHER ADJUSTMENTS--CONTINUED

Net unrealized capital gains and other adjustments consist of the following
items:

1997 1996
---- ----
(In millions)
Net gains from changes in security values and book
value adjustments........................................ $7.0 $3.7
Increase in asset valuation reserve....................... (2.0) (1.2)
---- ----
Net Unrealized Capital Gains and Other Adjustments........ $5.0 $2.5
==== ====

NOTE 5--TRANSACTIONS WITH PARENT

57
<PAGE>

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 6--INVESTMENTS

The statement value and fair value of bonds are shown below:

<TABLE>
<CAPTION>
Gross Gross
Statement Unrealized Unrealized Fair
Year ended December 31, 1997 Value Gains Losses Value
- ---------------------------- --------- ---------- ---------- ---------
(In millions)
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of U.S. government
corporations and agencies......................................... $ 254.5 $ 0.2 $0.1 $ 254.6
Obligations of states and political subdivisions.................... 12.1 1.0 0.0 13.1
Debt securities issued by foreign governments....................... 0.2 0.0 0.0 0.2
Corporate securities................................................ 712.7 43.9 2.7 753.9
Mortgage-backed securities.......................................... 113.2 3.5 0.0 116.7
-------- ----- ---- --------
Total bonds......................................................... $1,092.7 $48.6 $2.8 $1,138.5
======== ===== ==== ========
</TABLE>

<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 subdivisions.................... 12.6 0.4 0.0 13.0
Debt securities issued by foreign governments....................... 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
======== ===== ==== ========
</TABLE>

Statement Fair
Value Value
---------- ---------
(In millions)

<S> <C> <C>
Due in one year or less..................................................................... $ 89.1 $ 90.7
Due after one year through five years....................................................... 466.8 477.0
Due after five years through ten years...................................................... 284.2 299.2
Due after ten years......................................................................... 139.4 154.9
-------- --------
979.5 1,021.8
Mortgage-backed securities.................................................................. 113.2 116.7
-------- --------
$1,092.7 $1,138.5
======== ========
</TABLE>

Gross gains of $1.1 million in 1997 and $1.3 million in 1996 and gross losses of
$4.5 million in 1997 and $2.1 million in 1996 were realized from the sale of
bonds.

58
<PAGE>

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 6--INVESTMENTS--CONTINUED

At December 31, 1997, bonds with an admitted asset value of $3.6 million were on
deposit with state insurance departments to satisfy regulatory requirements.

The cost of common stocks was $0.0 million at December 31, 1997 and 1996,
respectively. Gross unrealized appreciation on common stocks totaled
$2.3 million, and gross unrealized depreciation totaled $0.0 million at
December 31, 1997. The fair value of preferred stock totaled $17.2 million at
December 31, 1997 and $9.6 million at December 31, 1996.

Bonds with amortized cost of $2.0 million were nonincome producing for the
twelve months ended December 31, 1997.

Statement Geographic Statement
Property Type Value Concentration Value
------------- --------- ------------- ---------
(In millions) (In millions)

Apartments............. $104.1 East North Central....... $ 32.7
Hotels................. 3.8 Middle Atlantic.......... 11.3
Industrial............. 51.3 Mountain................. 17.9
Office buildings....... 32.2 New England.............. 35.8
Retail................. 33.2 Pacific.................. 64.2
Agricultural........... 38.8 South Atlantic........... 67.9
Other.................. 10.5 West North Central....... 2.5
West South Central....... 41.6
------ ------
$273.9 $273.9
====== ======

59
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JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 7--REINSURANCE

Neither the Company, nor any of its related parties, control, either directly or
indirectly, any external reinsurers with which the Company conducts business.
No policies issued by the Company have been reinsured with a foreign company
which is controlled, either directly or indirectly, by a party not primarily
engaged in the business of insurance.

NOTE 8--FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

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 2007.

60
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JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 8--FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK--CONTINUED

December 31
----------------------
1997 1996
---- ----
(In millions)

Futures contracts to sell securities................... $ 40.8 $ 73.0
======= =======
Notional amount of interest rate swaps, currency rate
swaps, and interest rate caps to:
Receive variable rates............................... $ 323.7 $ 215.9
======= =======
Receive fixed rates.................................. $ 25.0 $ 26.6
======= =======

The Company's exposure to credit risk is the risk of loss from a counterparty
failing to perform according to the terms of the contract. The Company
continually monitors its positions and the credit ratings of the counterparties
to these financial instruments. To limit exposure associated with counterparty
nonperformance on interest rate and currency agreements, the Company enters into
master netting agreements with its counterparties. The Company believes the
risk of incurring losses due to nonperformance by its counterparties is remote
and that such losses, if any, would not be material.

61
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JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 9--POLICY RESERVES, POLICYHOLDERS' AND BENEFICIARIES' FUNDS AND OBLIGATIONS
RELATED TO SEPARATE ACCOUNTS

The Company's annuity reserves and deposit fund liabilities that are subject to
discretionary withdrawal, with and without adjustment, are summarized as
follows:

December 31, 1997 Percent
----------------- -------
(In millions)

Subject to discretionary withdrawal (with
adjustment)
With market value adjustment....................... $ 0.4 0.0%
At book value less surrender charge................ 970.3 88.7
-------- -----
Total with adjustment.............................. 970.7 88.7
Subject to discretionary withdrawal at book value
(without adjustment).............................. 118.9 10.9
Not subject to discretionary withdrawal--general
account........................................... 4.1 0.4
-------- -----
Total annuity reserves and deposit liabilities..... $1,093.7 100.0%
======== =====

NOTE 10--COMMITMENTS AND CONTINGENCIES

62
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JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 11--FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table presents the carrying amounts and fair values of the
Company's financial instruments:

Year ended December 31
-----------------------------------------
1997 1996
----------------------- ----------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ----- -------- -----
(In millions)
Assets
Bonds--Note 6................... $1,092.7 $1,138.5 $753.5 $790.5
Preferred stocks--Note 6........ 17.2 17.2 9.6 9.6
Common stocks--Note 6........... 2.3 2.3 1.4 1.4
Mortgage loans on real
estate--Note 6................ 273.9 285.8 212.1 219.4
Policy loans--Note 1............ 106.8 106.8 80.8 80.8
Cash and cash equivalents--Note
1............................. 143.2 143.2 31.9 31.9
Derivatives liabilities relating
to:--Note 8
Interest rate swaps............. -- 7.8 -- 2.3
Currency rate swaps............. -- 2.1 -- (8.2)
Interest rate caps.............. -- (1.4) -- (2.0)
Liabilities
Commitments--Note 10............ -- 194.5 -- 76.2

NOTE 12--IMPACT OF YEAR 2000 (UNAUDITED)

The Company relies on John Hancock, its parent company, for information
processing services. John Hancock has developed a plan to modify or replace
significant portions of its computer information and automated technologies so
that its systems, including those relied upon by the Company, will function
properly with respect to the dates in the year 2000 and thereafter. The
Company, along with John Hancock, presently believes that with modifications to
existing systems and conversions to new technologies, the year 2000 will not
pose significant operational problems for the computer systems upon which the
Company relies. However, if certain modifications and conversions are not made,
or are not completed timely, the year 2000 issue could have an adverse impact on
the operations of the Company.

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JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 12--IMPACT OF YEAR 2000 (UNAUDITED)--CONTINUED

John Hancock expects the project to be substantially complete by early 1999.
This completion target was derived utilizing numerous assumptions of future
events, including availability of certain resources and other factors.
However, there can be no guarantee that this completion target will be achieved.