HANCOCK JOHN VARIABLE LIFE ACCOUNT S, 497, 1999-05-24

HANCOCK JOHN VARIABLE LIFE ACCOUNT S
497, 1999-05-24

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<PAGE>

PROSPECTUS DATED MAY 3, 1999
-----------------------------------------------
VARIABLE MASTER PLAN PLUS
-----------------------------------------------

a flexible premium variable life insurance policy
issued by

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY ("JHVLICO")

JHVLICO LIFE SERVICING OFFICE
-----------------------------

EXPRESS DELIVERY U.S. MAIL
---------------- ---------
529 Main Street (X-4) P.O. Box 111
Charlestown, MA 02129 Boston, MA 02117

PHONE: 1-800-732-5543 / FAX: 1-617-886-3048

The policy provides an investment option with fixed rates of return declared
by JHVLICO and the following 27 variable investment options:
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VARIABLE INVESTMENT OPTION MANAGED BY
-------------------------- ----------
<S> <C>
Managed . . . . . . . . . . . . . . . . . . . . . . . . Independence Investment Associates, Inc.
Growth & Income . . . . . . . . . . . . . . . . . . . . Independence Investment Associates, Inc.
Equity Index . . . . . . . . . . . . . . . . . . . . . State Street Global Advisors
Large Cap Value . . . . . . . . . . . . . . . . . . . . T. Rowe Price Associates, Inc.
Large Cap Growth . . . . . . . . . . . . . . . . . . . Independence Investment Associates, Inc.
Mid Cap Value . . . . . . . . . . . . . . . . . . . . . Neuberger Berman, LLC
Mid Cap Growth . . . . . . . . . . . . . . . . . . . . Janus Capital Corporation
Real Estate Equity . . . . . . . . . . . . . . . . . . Independence Investment Associates, Inc.
Small/Mid Cap Growth.. . . . . . . . . . . . . . . . . Wellington Management Company, LLP
Small/Mid Cap CORE . . . . . . . . . . . . . . . . . . Goldman Sachs Asset Management
Small Cap Value . . . . . . . . . . . . . . . . . . . INVESCO Management & Research, Inc.
Small Cap Growth . . . . . . . . . . . . . . . . . . .. John Hancock Advisers, Inc.
Global Equity . . . . . . . . . . . . . . . . . . . .. Scudder Kemper Investments, Inc.
International Balanced . . . . . . . . . . . . . . . .. Brinson Partners, Inc.
International Equity Index . . . . . . . . . . . . . .. Independence International Associates, Inc.
International Opportunities . . . . . . . . . . . . ... Rowe Price-Fleming International, Inc.
Emerging Markets Equity . . . . . . . . . . . . . . ... Montgomery Asset Management, LLC
Short-Term Bond . . . . . . . . . . . . . . . . . ... Independence Investment Associates, Inc.
Bond Index . . . . . . . . . . . . . . . . . . . . ... Mellon Bond Associates, LLP
Sovereign Bond . . . . . . . . . . . . . . . . . . . .. John Hancock Advisers, Inc.
Global Bond . . . . . . . . . . . . . . . . . . . . .. J.P. Morgan Investment Management, Inc.
High Yield Bond . . . . . . . . . . . . . . . . . . .. Wellington Management Company, LLP
Money Market. . . . . . . . . . . . . . . . . . . . .. John Hancock Mutual Life Insurance Company
Brandes International Equity. . . . . . . . . . . . . . Brandes Investment Partners, L.P.
Turner Core Growth. . . . . . . . . . . . . . . . . . . Turner Investment Partners, Inc.
Frontier Capital Appreciation. . . . . . . . . . . . .. Frontier Capital management Company, Inc.
Enhanced U.S. Equity. Franklin Portfolio Associates, LLC
- ---------------------------------------------------------------------------------------------------------
</TABLE>

We may add or delete variable investment options in the future.
<PAGE>

When you select one or more of these variable investment options, we invest
your money in the corresponding investment option(s) of the John Hancock
Variable Series Trust I (the "Trust") or of M Fund, Inc. (together, the trust
and M Fund, Inc. are referred to as the "Series Funds"). The Series Funds are
mutual funds that offer a number of different investment options (which are
called "funds"). The investment results of each variable investment option you
select will depend on those of the corresponding fund of one of the Series
Funds. Attached to this prospectus are prospectuses for the Series Funds that
contain detailed information about each fund offered under the policy. Be sure
to read the prospectuses for the Series Funds before selecting any of the
variable investment options shown on page 1.

GUIDE TO THIS PROSPECTUS

This prospectus contains information that you should know before you buy a
policy or exercise any of your rights under the policy. However, please keep in
mind that this is a prospectus - - it is not the policy. The prospectus
---
simplifies many policy provisions to better communicate the policy's essential
features. Your rights and obligations under the policy will be determined by the
language of the policy itself. When you receive your policy, read it carefully.

This prospectus is arranged in the following way:

. The section which follows is called "Basic Information". It is in a
question and answer format. We suggest you read the Basic Information
section before reading any other section of the prospectus.

. Behind the Basic Information section are illustrations of
hypothetical policy benefits that help clarify how the policy works.
These start on page 19.

. Behind the illustrations is a section called "Additional Information"
that gives more details about the policy. It generally does not
---
repeat information that is in the Basic Information section. A table
of contents for the Additional Information section appears on page
26.

. Behind the Additional Information section are the financial
statements for JHVLICO and Separate Account S. These start on page
40.

. Finally, there is an Alphabetical Index of Key Words and Phrases at
the back of the prospectus on page 79.

After the Alphabetical Index of Key Words and Phrases, this prospectus ends and
the prospectuses for the Series Funds begin.

Please note that the Securities and Exchange Commission ("SEC") has not
approved or disapproved these securities, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.

<PAGE>

BASIC INFORMATION

This part of the prospectus provides answers to commonly asked questions about
the policy.

Here are the page numbers where the questions and answers appear:
<TABLE>
<CAPTION>
<S> <C>
Question Pages to See
- -------- ------------

.What is the policy?. . . . . . . . . . . . . . . . . . . . . .. 4
.Who owns the policy?. . . . . . . . . . . . . . . . . . . . .. 4
.How can I invest money in the policy?. . . . . . . . . . . . .. 4-5
.Is there a minimum amount I must invest?. . . . . . . . . . . . 5-6
.How will the value of my investment in the policy change over 7-8
time?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.What charges will JHVLICO deduct from my investment in the 8-9
policy?. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.What charges will the Series Funds deduct from my investment
in the policy?. . . . . . . . . . . . . . . . . . . . . . . . . 9-10

.What other charges could JHVLICO impose in the future?. . . . . 10-11
.How can I change my policy's investment allocations?. . . . . . 11
.How can I access my investment in the policy?. . . . . . . . .. 11-13
.How much will JHVLICO pay when the insured person dies?. . . .. 13-14
.How can I change my policy's insurance coverage?. . . . . . . . 14-15
.Can I cancel my policy after it's issued?. . . . . . . . . . .. 15
.Can I choose the form in which JHVLICO pays out policy
proceeds?. . . . . . . . . . . . . . . . . . . . . . . . . . .. 15-16
.To what extent can JHVLICO vary the terms and conditions of
its policies in particular cases?. . . . . . . . . . . . . . . 16

.How will my policy be treated for income tax purposes?. . . . . 16-17
.How do I communicate with JHVLICO?. . . . . . . . . . . . . . . 17-18
</TABLE>

<PAGE>

WHAT IS THE POLICY?

The policy's primary purpose is to provide lifetime protection against
economic loss due to the death of the insured person. The value of the amount
you have invested under the policy may increase or decrease daily based upon the
investment results of the variable investment options that you choose. The
amount we pay to the policy's beneficiary if the insured person dies (we call
this the "death benefit") may be similarly affected.

While the insured person is alive, you will have a number of options under the
policy. Here are some major ones:

. Determine when and how much you invest in the various investment
options

. Borrow or withdraw amounts you have in the investment options

. Change the beneficiary who will receive the death benefit

. Change the amount of insurance

. Turn in (i.e., "surrender") the policy for the full amount of its
surrender value

. Choose the form in which we will pay out the death benefit or other
proceeds

Most of these options are subject to limits that are explained later in this
prospectus.

WHO OWNS THE POLICY?

That's up to the person who applies for the policy. The owner of the policy is
the person who can exercise most of the rights under the policy, such as the
right to choose the investment options or the right to surrender the policy. In
many cases, the person buying the policy is also the person who will be the
owner. However, the application for a policy can name another person or entity
(such as a trust) as owner. Whenever we've used the term "you" in this
prospectus, we've assumed that the reader is the person who has whatever right
or privilege is being discussed. There may be tax consequences if the owner and
the insured person are different, so you should discuss this issue with your tax
adviser.

HOW CAN I INVEST MONEY IN THE POLICY?

Premium Payments

We call the investments you make in the policy "premiums" or "premium
payments". The amount we require as your first premium depends upon the
-----
specifics of your policy and the insured person. Except as noted below, you can
make any other premium payments you wish at any time. That's why the policy is
called a "flexible premium" policy.

Minimum premium payment

Each premium payment must be at least $100.

<PAGE>

Maximum premium payments

Federal tax law limits the amount of premium payments you can make relative to
the amount of your policy's insurance coverage. We will not knowingly accept any
amount by which a premium payment exceeds the maximum. If you exceed certain
other limits, the law may impose a penalty on amounts you take out of your
policy. We'll monitor your premium payments and let you know if you're about to
exceed this limit. More discussion of these tax law requirements begins on page
34. Also, we may refuse to accept any amount of an additional premium if:

. that amount of premium would increase our insurance risk exposure,
and

. the insured person doesn't provide us with adequate evidence that he
or she continues to meet our requirements for issuing insurance.

In no event, however, will we refuse to accept any premium necessary to prevent
the policy or the guaranteed minimum death benefit feature from terminating. We
reserve the right to limit premium payments above the amount of cumulative
Guaranteed Minimum Death Benefit Premiums (whether or not the guaranteed minimum
death benefit feature described on page 6 is in effect).

Ways to pay premiums

If you pay premiums by check or money order, they must be drawn on a U.S. bank
in U.S. dollars and made payable to "John Hancock Variable Life Insurance
Company." Premiums after the first must be sent to the JHVLICO Life Servicing
Office at the appropriate address shown on page 1 of this prospectus.

We will also accept premiums:

. by wire or by exchange from another insurance company, or

. if we agree to it, through a salary deduction plan with your
employer.

You can obtain information on these other methods of premium payment by
contacting your JHVLICO representative or by contacting the JHVLICO Life
Servicing Office.

IS THERE A MINIMUM AMOUNT I MUST INVEST?

Planned Premiums

The Policy Specifications page of your policy will show the "Planned Premium"
for the policy. You choose this amount in the policy application. The premium
reminder notice we send you is based on this amount. You will also choose how
often to pay premiums-- annually, semi-annually, quarterly or monthly. The date
on which such a payment is "due" is referred to in the policy as a "modal
processing date." However, payment of Planned Premiums is not necessarily
required. You need only invest enough to keep the policy in force (see "Lapse
and reinstatement" and "Guaranteed minimum death benefit feature" below).

<PAGE>

Lapse and reinstatement

Either your entire policy or the Additional Sum Insured portion of your Total
Sum Insured can lapse for failure to pay charges due under the policy. If the
guaranteed minimum death benefit feature is in effect, only the Additional Sum
insured, if any, can lapse. If the guaranteed minimum death benefit feature is
not in effect, the entire policy can lapse. In either case, if the policy's
- ---
surrender value is not sufficient to pay the charges on a monthly deduction
date, we will notify you of how much you will need to pay to keep any Additional
Sum Insured or the policy in force. You will have a 61 day "grace period" to
make that payment. If you don't pay at least the required amount by the end of
the grace period, the Additional Sum Insured or your policy will terminate
(i.e., "lapse"). If your policy lapses, all coverage under the policy will
cease. Even if the policy or the Additional Sum Insured terminates in this way,
you can still reactivate (i.e., "reinstate") it within 1 year from the beginning
of the grace period. You will have to provide evidence that the insured person
still meets our requirements for issuing coverage. You will also have to pay a
minimum amount of premium and be subject to the other terms and conditions
applicable to reinstatements, as specified in the policy. If the guaranteed
minimum death benefit is not in effect and the insured person dies during the
grace period, we will deduct any unpaid monthly charges from the death benefit.
During such a grace period, you cannot make a partial withdrawal or policy loan.

Guaranteed minimum death benefit feature

This feature is available only if the insured person meets certain
underwriting requirements. The feature guarantees that your Basic Sum Insured
will not lapse during the first 10 policy years, regardless of adverse
investment performance, if both of the following are true:

. any Additional Sum Insured under the policy is not scheduled to
exceed the Basic Sum Insured at any time (see "How much will JHVLICO
pay when the insured person dies?" on page 29), and

. on each during that 10 year period the amount of cumulative premiums
you have paid accumulated at 4% (less all withdrawals from the policy
accumulated at 4%) equals or exceeds the sum of all Guaranteed
Minimum Death Benefit Premiums due to date accumulated at 4%.

The Guaranteed Minimum Death Benefit Premium (or "GMDB Premium) is defined in
the policy and is "due" on each monthly deduction date. The term "monthly
deduction date" is defined on page 29. On the application for the policy, you
may elect for this feature to extend beyond the tenth policy year. If you so
elect, we will impose a special charge for this feature after the tenth policy
year. You may revoke the election at any time.

No GMDB Premium will ever be greater than the so-called "guideline premium"
for the policy as defined in Section 7702 of the Internal Revenue Code. Also,
the GMDB Premiums may change in the event of any change in the Additional Sum
Insured of the policy or any change in the death benefit option (see "How much
will JHVLICO pay when the insured person dies?" on page 13).

<PAGE>

If the guaranteed minimum death benefit test is not satisfied on any monthly
deduction date, we will notify you immediately and tell you how much you will
need to pay to keep the feature in effect. You will have until the second
monthly deduction date after default to make that payment. If you don't pay at
least the required amount by the end of that period, the feature will lapse. The
feature may be reinstated in accordance with the terms of the policy within 5
years after the policy anniversary on which default occurred. If it is
reinstated more than 1 year after such policy anniversary, we will require
evidence that the insured person still meets our requirements for issuing
coverage. We may refuse to reinstate the feature more than once during the life
of the policy.

The guaranteed minimum death benefit feature applies only to the Basic Sum
Insured. It does not apply to any amount of Additional Sum Insured (see "How
---
much will JHVLICO pay when the insured person dies?" on page 13).

If there are monthly charges that remain unpaid because of this feature, we
will deduct such charges when there is sufficient surrender value to pay them.

HOW WILL THE VALUE OF MY INVESTMENT IN THE POLICY CHANGE OVER TIME?

From each premium payment you make, we deduct the charges described under
"Deductions from premium payments" below. We invest the rest in the investment
options you've elected. Special investment rules apply for the first 20 days
after your policy becomes effective. (See "Commencement of investment
performance" beginning on page 30.)

Over time, the amount you've invested in any variable investment option will
--------
increase or decrease the same as if you had invested the same amount directly in
the corresponding fund of one of the Series Funds and had reinvested all fund
dividends and distributions in additional fund shares; except that we will
deduct certain additional charges which will reduce your account value. We
describe these charges under "What charges will JHVLICO deduct from my
investment in the policy?" below.

The amount you've invested in the fixed investment option will earn interest
-----
at a rate we declare from time to time. We guarantee that this rate will be at
least 4%. If you want to know what the current declared rate is, just call or
write to us. The current declared rate will also appear in the annual statement
we will send you. Amounts you invest in the fixed investment option will not be
---
subject to the mortality and expense risk charge described on page 9. Otherwise,
the charges applicable to the fixed investment option are the same as those
applicable to the variable investment options.

At any time, the "account value" of your policy is equal to:

. the amount you invested,

. plus or minus the investment experience of the investment options
you've chosen,

<PAGE>

. minus all charges we deduct, and

. minus all withdrawals you have made.

If you take a loan on the policy, however, your account value will be computed
somewhat differently. This is discussed beginning on page 12.

WHAT CHARGES WILL JHVLICO DEDUCT FROM MY INVESTMENT IN THE POLICY?

Deductions from premium payments

. Premium tax charge - A charge to cover state premium taxes we currently
--------------------
expect to pay, on average. This charge is currently 2.35% of each premium.

. DAC tax charge - A charge to cover the increased Federal income tax
----------------
burden that we currently expect will result from receipt of premiums. This
charge is currently 1.25% of each premium.

. Sales charge - A charge to help defray our sales costs. The current
--------------
charge is 9% of premiums paid in each of the first 10 policy years up to
the Target Premium, 3% of premiums paid in each of policy years 11 through
20 up to the Target Premium, and 0% of premiums paid in each policy year
thereafter up to the Target Premium. We reserve the right to increase the
percentages for policy years 11 through 20 and thereafter up to 5% and 3%,
respectively. Because policies of this type were first offered in 1994,
the lower current rates after the tenth policy year are not yet applicable
to any policy. No charge is currently deducted from premiums paid in
excess of the Target Premium, but we reserve the right to impose such a
charge of up to 3% of such excess premiums paid in any policy year. The
"Target Premium" is determined at the time the policy is issued and will
appear in the "Policy Specifications" section of the policy.

Deductions from account value

. Issue charge - A monthly charge to help defray our administrative costs.
--------------
This charge has two parts: (1) a flat dollar charge of $12.50 deducted
only during the first three policy years, and (2) a charge per $1,000 of
Basic Sum Insured at issue that varies by age and that is deducted only
during the first ten policy years. Both parts of this charge will appear
in the "Policy Specifications" section of the policy. As an example, the
second part of this monthly charge for a 45 year old is 17c per $1,000 of
Basic Sum Insured.

. Administrative charge - A monthly charge to help defray our
-----------------------
administrative costs. This charge also has two parts: (1) a flat dollar
charge of up to $4 (currently $2.50), and (2) a charge of up to 6c per
$1,000 of Basic Sum Insured at issue (currently 2c per $1,000 of Basic Sum
Insured at issue).

. Insurance charge - A monthly charge for the cost of insurance. To
------------------
determine the charge, we multiply the amount of insurance for which we are
at risk by a cost of insurance rate. The rate is derived from an actuarial
table. The table in your policy will show the maximum cost of insurance
-------
rates. The cost of insurance rates that we currently apply are generally
less than the maximum rates. We will review the cost of

<PAGE>

insurance rates at least every 5 years and may change them from time to
time. However, those rates will never be more than the maximum rates shown
in the policy. The table of rates we use will depend on the insurance risk
characteristics and (usually) gender of the insured person, the Total Sum
Insured and the length of time the policy has been in effect. Regardless
of the table used, cost of insurance rates generally increase each year
that you own your policy, as the insured person's attained age increases.
(The insured person's "attained age" on any date is his or her age on the
birthday nearest that date.) Higher current insurance rates are generally
applicable to policies issued on a "guaranteed issue" basis, where only
very limited underwriting information is obtained. This is often the case
with policies issued to trustees, employers and similar entities.

. Extra mortality charge - A monthly charge specified in your policy for
------------------------
additional mortality risk if the insured person is subject to certain
types of special insurance risk.

. M &E charge - A daily charge for mortality and expense risks we assume.
-------------
This charge is deducted from the variable investment options. It does not
apply to the fixed investment option. The current charge is at an
effective annual rate of .14% of the value of the assets in each variable
investment option. We guarantee that this charge will never exceed an
effective annual rate of .40%.

. Guaranteed minimum death benefit charge - A monthly charge beginning in
-----------------------------------------
the eleventh policy year if the guaranteed minimum death benefit feature
is elected to extend beyond the first ten policy years. This charge is
currently 1c per $1,000 of Basic Sum Insured and is guaranteed not to
exceed 2c per $1,000 of Basic Sum Insured. Because policies of this type
were first offered in 1994, this charge is not yet applicable to any
policy at the current rate.

. Optional benefits charge - Monthly charges for any optional insurance
--------------------------
benefits added to the policy by means of a rider.

. Partial withdrawal charge - A charge for each partial withdrawal of
-------------------------
account value to compensate us for the administrative expenses of
processing the withdrawal. The charge is equal to the lesser of $20 or 2%
of the withdrawal amount.

WHAT CHARGES WILL THE SERIES FUNDS DEDUCT FROM MY INVESTMENT IN THE POLICY?

The Series Funds must pay investment management fees and other operating
expenses. These fees and expenses are different for each fund of the Series
Funds and reduce the investment return of each fund. Therefore, they also
indirectly reduce the return you will earn on any variable investment options
you select.

The figures in the following chart for the funds of the Trust are expressed as
percentages of each fund's average daily net assets for 1998 (rounded to two
decimal places). The percentages reflect the investment management fees that
were payable for1998 and the 1998 other operating expenses that would have been
allocated to the funds under the allocation rules currently in effect.

<PAGE>

<TABLE>
<CAPTION>
Other Total Fund Other Operating
Investment Operating Operating Expenses
Fund Name Management Fee Expenses Expenses Absent Reimbursement*
- --------- -------------- ---------- ----------- -----------------------
<S> <C> <C> <C> <C>
Managed . . . . . . . 0.32% 0.05% 0.37% 0.05%
Growth & Income. . . . 0.25% 0.05% 0.30% 0.05%
Equity Index . . . . . 0.14% 0.08% 0.22% 0.08%
Large Cap Value. . . . 0.74% 0.07% 0.81% 0.07%
Large Cap Growth . . . 0.37% 0.05% 0.42% 0.05%
Mid Cap Value. . . . . 0.80% 0.05% 0.85% 0.05%
Mid Cap Growth. . . . 0.85% 0.08% 0.93% 0.08%
Real Estate Equity . . 0.60% 0.05% 0.65% 0.05%
Small/Mid Cap Growth** 0.75% 0.05% 0.80% 0.05%
Small/Mid Cap CORE . . 0.80% 0.10% 0.90% 0.23%
Small Cap Value. . . . 0.80% 0.07% 0.87% 0.07%
Small Cap Growth . . . 0.75% 0.08% 0.83% 0.08%
Global Equity. . . . . 0.90% 0.10% 1.00% 0.50%
International Balanced 0.85% 0.10% 0.95% 0.64%
International Equity
Index . . . . . . . . 0.17% 0.10% 0.27% 0.23%
International
Opportunities . . . . 0.87% 0.10% 0.97% 0.32%
Emerging Markets
Equity. . . . . . . . 1.30% 0.10% 1.40% 0.68%
Short-Term Bond. . . . 0.30% 0.05% 0.35% 0.05%
Bond Index . . . . . . 0.15% 0.05% 0.20% 0.05%
Sovereign Bond . . . . 0.25% 0.05% 0.30% 0.05%
Global Bond**. . . . . 0.69% 0.06% 0.75% 0.06%
High Yield Bond. . . . 0.65% 0.07% 0.72% 0.07%
Money Market . . . . . 0.25% 0.05% 0.30% 0.05%
</TABLE>

* John Hancock reimburses a fund when the fund's other operating expenses
exceed 0.10% of the fund's average daily net assets.

** Small/Mid Cap Growth was formerly "Diversified Mid Cap Growth" and Global
Bond was formerly "Strategic Bond."

The figures in the following chart for the funds of M Fund, Inc. are
expressed as percentages of each fund's average daily net assets for 1998
(rounded to two decimal places). The percentages reflect the investment
management fees currently payable and the 1998 other operating expenses
allocated to M Fund, Inc.

<TABLE>
<CAPTION> Other Operating
Other Total Fund Expenses
Investment Operating Operating Absent
Fund Name Management Fee Expenses Expenses Reimbursement*
- --------- -------------- ---------- ---------- ----------------

<S> <C> <C> <C> <C>
Brandes International Equity** . . . . . . . . . . . . . . . . . . . . . 1.02% 0.25% 1.27% 2.52%
Turner Core Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.45% 0.25% 0.70% 2.97%
Frontier Capital Appreciation . . . . . . . . . . . . . . . . . . . . . . 0.90% 0.25% 1.15% 0.85%
Enhanced U.S. Equity. . . . . . . . . . . . . . . . . . . . . . . . . . . 0.55% 0.25% 0.80% 1.79%
</TABLE>

* M Financial Investment Advisers, Inc. reimburses a fund when the fund's other
operating expenses exceed 0.25% of the fund's average daily net assets.

** Brandes International Equity was formerly "Edinburgh Overseas Equity."

WHAT OTHER CHARGES COULD JHVLICO IMPOSE IN THE FUTURE?

We currently make no charge against account value for our Federal income
taxes, but if we incur, or expect to incur, income taxes attributable to any
subaccount of the Account or this class of policies in future years, we reserve
the right to make such a charge. Any such charge would

<PAGE>

reduce what you earn on any affected investment options. However, we expect that
no such charge will be necessary.

Under current laws, we may incur state and local taxes (in addition to premium
taxes) in several states. At present, these taxes are not significant. If there
is a material change in applicable state or local tax laws, we may make charges
for such taxes.

We also reserve the right to increase the premium tax charge and the DAC tax
charge in order to correspond, respectively, with changes in the state premium
tax levels and with changes in the Federal income tax treatment of the deferred
acquisition costs for this type of policy.

HOW CAN I CHANGE MY POLICY'S INVESTMENT ALLOCATIONS?

Future premium payments

At any time, you may change the investment options in which future premium
payments will be invested. You make the original allocation in the application
for the policy. The percentages you select must be in whole numbers and must
equal 100% in total.

Transfers of existing account value

You may also transfer your existing account value from one investment option
to another. To do so, you must tell us how much to transfer, either as a whole
number percentage or as a specific dollar amount.

Under our current rules, you can make transfers out of any variable investment
--------
option anytime you wish. However, transfers out of the fixed investment option
-----
are currently subject to the following restrictions:

. You can only make such a transfer once a year and only during the 31 day
period following your policy anniversary.

. We must receive the request for such a transfer during the period beginning
60 days prior to the policy anniversary and ending 30 days after it.

. The most you can transfer at any one time is the greater of $500 or 20%
of the assets in your fixed investment option.

We reserve the right to impose a minimum amount limit on transfers out of the
fixed investment option. We also reserve the right to impose limits on the
number and frequency of transfers out of the variable investment options.

HOW CAN I ACCESS MY INVESTMENT IN THE POLICY?

Full surrender

You may surrender your policy in full at any time. If you do, we will pay you
the account value less any policy loans plus, if surrender occurs in the first
three policy years, a refund of all sales charges deducted within 365 days prior
to the date of surrender. This is called your "surrender value." You must return
your policy when you request a full surrender.

<PAGE>

Partial withdrawals

You may make a partial withdrawal of your surrender value at any time. Each
partial withdrawal must be at least $1,000. There is a charge (usually $20) for
each partial withdrawal. We will automatically reduce the account value of your
policy by the amount of the withdrawal and the related charge. Each investment
option will be reduced in the same proportion as the account value is then
allocated among them. We will not permit a partial withdrawal if it would cause
your account value to fall below 3 months' worth of monthly charges (see
"Deductions from account value" on page 7). We also reserve the right to refuse
any partial withdrawal that would cause the policy's Total Sum Insured to fall
below $100,000. Any partial withdrawal (other than a Terminated ASI Withdrawal
Amount, as described below) will reduce your death benefit under any of the
death benefit options (see "How much will JHVLICO pay when the insured person
dies?" on page 13) and under the guaranteed death benefit feature (see page 6).
Under Option A or Option M, such a partial withdrawal will reduce the Total Sum
Insured. Under Option B, such a partial withdrawal will reduce your account
value. Under the guaranteed death benefit feature, such a partial withdrawal
will reduce the Basic Sum Insured. A "Terminated ASI Withdrawal Amount" is any
partial withdrawal made while there is an Additional Sum Insured under the
policy that later lapses as described on page 6. The total of all Terminated ASI
Withdrawal Amounts cannot exceed the Additional Sum Insured in effect
immediately before the Additional Sum Insured lapses.

Policy loans

You may borrow from your policy at any time after it has been in effect for 1
year by completing a form satisfactory to us or, if the telephone transaction
authorization form has been completed, by telephone. However, you can't borrow
from your policy during a "grace period" (see "Lapse and reinstatement" on page
6). The maximum amount you can borrow is equal to 90% of your account value.

The minimum amount of each loan is $1,000. The interest charged on any loan is
an effective annual rate of 4.5% in the first 20 policy years and 4.25%
thereafter. Accrued interest will be added to the loan daily and will bear
interest at the same rate as the original loan amount. The amount of the loan is
deducted from the investment options in the same proportion as the account value
is then allocated among them and is placed in a special loan account. This
special loan account will earn interest at an effective annual rate of 4.0%.
However, if we determine that a loan will be treated as a taxable distribution
because of the differential between the loan interest rate and the rate being
credited on the special loan account, we reserve the right to decrease the rate
credited on the special loan account to a rate that would, in our reasonable
judgement, result in the transaction being treated as a loan under Federal tax
law.

You can repay all or part of a loan at any time. Each repayment will be
allocated among the investment options as follows:

. The same proportionate part of the loan as was borrowed from the
fixed investment option will be repaid to the fixed investment
option.

<PAGE>

. The remainder of the repayment will be allocated among the investment
options in the same way a new premium payment would be allocated.

If you want a payment to be used as a loan repayment, you must include
instructions to that effect. Otherwise, all payments will be assumed to be
premium payments.

HOW MUCH WILL JHVLICO PAY WHEN THE INSURED PERSON DIES?

In your application for the policy, you will tell us how much life insurance
coverage you want on the life of the insured person. This is called the "Total
Sum Insured." Total Sum Insured is composed of the Basic Sum Insured and any
Additional Sum Insured you elect. The only limitation on how much Additional Sum
Insured you can have is that it cannot exceed 400% of the Basic Sum Insured.
There are a number of factors you should consider in determining whether to
elect coverage in the form of Basic Sum Insured or in the form of Additional Sum
insured. These factors are discussed under "Basic Sum Insured vs. Additional Sum
Insured" on page 29.

When the insured person dies, we will pay the death benefit minus any
outstanding loans. There are three ways of calculating the death benefit. You
choose which one you want in the application. The three death benefit options
are:

. Option A - The death benefit will equal the greater of (1) the Total
Sum Insured, or (2) the minimum insurance amount (as described
below).

. Option B -The death benefit will equal the greater of (1) the Total
Sum Insured plus your policy's account value on the date of death, or
(2) the minimum insurance amount.

. Option M - The death benefit will equal the greater of (1) the Total
Sum Insured plus any optional extra death benefit (as described
below), or (2) the minimum insurance amount.

For the same premium payments, the death benefit under Option B will tend to
be higher than the death benefit under Option A or Option M. On the other hand,
the monthly insurance charge will be higher under Option B to compensate us for
the additional insurance risk. Because of that, the account value will tend to
be higher under Option A or Option M than under Option B for the same premium
payments.

Optional extra death benefit feature

The optional extra death benefit is determined as follows:

. First, we multiply your account value plus any refund of sales
charges by a factor specified in the policy. The factor is based on
the insured person's age on the date of calculation.

. We will then subtract your Total Sum Insured.

<PAGE>

This feature may result in the Option M death benefit being higher than the
minimum insurance amount. Although there is no special charge for this feature,
your monthly insurance charge will be based on that higher death benefit amount.
Election of this feature must be made in the application for the policy.

The minimum insurance amount

In order for a policy to qualify as life insurance under Federal tax law,
there has to be a minimum amount of insurance in relation to account value. For
policies of this type, we will apply the "cash value accumulation test" as
described in Federal tax law. Under the cash value accumulation test, we compute
the minimum insurance amount each business day by multiplying the account value
on that date plus any refund of sales charges by the death benefit factor
applicable on that date. The death benefit factors are derived by applying the
cash value accumulation test. The death benefit factor decreases as attained age
increases. A table showing the factor for each age will appear in the policy.

HOW CAN I CHANGE MY POLICY'S INSURANCE COVERAGE?

Increase in coverage

The Basic Sum Insured generally cannot be increased after policy issue. After
the first policy year, you may request an increase in the Additional Sum Insured
at any time. However, you will have to provide us with evidence that the insured
person still meets our requirements for issuing insurance coverage.

Decrease in coverage

The Basic Sum Insured generally cannot be decreased after policy issue. After
the first policy year, you may request a reduction in the Additional Sum Insured
at any time, but only if:

. the remaining Total Sum Insured will be at least $100,000, and

. the remaining Total Sum Insured will at least equal the minimum
required by the tax laws to maintain the policy's life insurance
status.

We may refuse any decrease in Additional Sum Insured if it would cause the
death benefit to reflect an increase pursuant to the optional extra death
benefit feature.

Change of death benefit option

At any time, you may change your coverage from death benefit Option A to
Option B or vice-versa. However, if you change from Option A to Option B, we
will require evidence that the insured person still meets our requirements for
issuing coverage. This is because such a change increases our insurance risk
exposure. If you have chosen death benefit Option M, you can never change to
either Option A or Option B.

<PAGE>

Tax consequences

Please read "Tax considerations" starting on page 34 to learn about possible
tax consequences of changing your insurance coverage under the policy.

CAN I CANCEL MY POLICY AFTER IT'S ISSUED?

You have the right to cancel your policy within the latest of the following
periods:

. 10 days after you receive it (this period may be longer in some
states);

. 10 days after mailing by JHVLICO of the Notice of Withdrawal Right;
or

. 45 days after the date Part A of the application has been completed.

This is often referred to as the "free look" period. To cancel your policy,
simply deliver or mail the policy to JHVLICO at one of the addresses shown on
page 1, or to the JHVLICO representative who delivered the policy to you.

In most states, you will receive a refund of any premiums you've paid. In some
states, the refund will be your account value on the date of cancellation plus
all charges deducted by JHVLICO or the Series Funds prior to that date. The date
of cancellation will be the date of such mailing or delivery.

CAN I CHOOSE THE FORM IN WHICH JHVLICO PAYS OUT POLICY PROCEEDS?

Choosing a payment option

You may choose to receive proceeds from the policy as a single sum. This
includes proceeds that become payable because of death or full surrender.
Alternatively, you can elect to have proceeds of $1,000 or more applied to any
of a number of other payment options, including the following:

. Option 1 - Proceeds left with us to accumulate with interest

. Option 2A - Equal monthly payments of a specified amount until all
proceeds are paid out

. Option 2B - Equal monthly payments for a specified period of time

. Option 3 - Equal monthly payments for life, but with payments
guaranteed for a specific number of years

. Option 4 - Equal monthly payments for life with no refund

. Option 5 - Equal monthly payments for life with a refund if all of
the proceeds haven't been paid out

<PAGE>

You cannot choose an option if the monthly payments under the option would be
less than $50. We will issue a supplementary agreement when the proceeds are
applied to any alternative payment option. That agreement will spell out the
terms of the option in full. We will credit interest on each of the above
options. For Options 1 and 2A, the interest will be at least an effective annual
rate of 3 1/2%.

Changing a payment option

You can change the payment option at any time before the proceeds are payable.
If you haven't made a choice, the payee of the proceeds has a prescribed period
in which he or she can make that choice.

Tax impact

There may be tax consequences to you or your beneficiary depending upon which
payment option is chosen. You should consult with a qualified tax adviser before
making that choice.

TO WHAT EXTENT CAN JHVLICO VARY THE TERMS AND CONDITIONS OF ITS POLICIES IN
PARTICULAR CASES?

Listed below are some variations we can make in the terms of our policies. Any
variation will be made only in accordance with uniform rules that we apply
fairly to all of our customers.

State law insurance requirements

Insurance laws and regulations apply to JHVLICO in every state in which its
policies are sold. As a result, various terms and conditions described in the
prospectus may vary depending upon where you reside. These variations will be
reflected in your policy or in endorsements attached to your policy.

Variations in expenses or risks

We may vary the charges and other terms of our policies where special
circumstances result in sales or administrative expenses, mortality risks or
other risks that are different from those normally associated with the policies.
These include the type of variations discussed under "Reduced charges for
eligible classes" on page 32. No variation in any charge will exceed any maximum
stated in this prospectus with respect to that charge.

HOW WILL MY POLICY BE TREATED FOR INCOME TAX PURPOSES?

Generally, death benefits paid under policies such as yours are not subject to
income tax. Earnings on your account value are not subject to income tax as long
as we don't pay them out to you. If we do pay out any amount of your account
value upon surrender or partial withdrawal, all or part of that distribution
should generally be treated as a return of the premiums you've paid and should
not be subject to income tax. Amounts you borrow are generally not taxable to
you.

However, some of the tax rules change if your policy is found to be a
"modified endowment contract." This can happen if you've paid more than a
certain amount of premiums that is

<PAGE>

prescribed by the tax laws. Additional taxes and penalties may be payable for
policy distributions of any kind.

For further information about the tax consequences of owning a policy, please
read "Tax considerations" beginning of page 34.

HOW DO I COMMUNICATE WITH JHVLICO?

General Rules

You should mail or express all checks and money orders for premium payments
and loan repayments to the JHVLICO Life Servicing Office at the appropriate
address shown on page 1.

Certain requests must be made in writing and be signed and dated by you. They
include the following:

. loans, surrenders or partial withdrawals

. transfers of account value among investment options

. change of allocation among investment options for new premium
payments

. change of death benefit option

. increase or decrease in Total Sum Insured

. change of beneficiary

. election of payment option for policy proceeds

. tax withholding elections

. election of telephone transaction privilege

You should mail or express these requests to the JHVLICO Life Servicing Office
at the appropriate address shown on page 1. You should also send notice of the
insured person's death and related documentation to the JHVLICO Life Servicing
Office. We don't consider that we've "received" any communication until such
time as it has arrived at the proper place and in the proper and complete form.

We have special forms that should be used for a number of the requests
mentioned above. You can obtain these forms from the JHVLICO Life Servicing
Office or your JHVLICO representative. Each communication to us must include
your name, your policy number and the name of the insured person. We cannot
process any request that doesn't include this required information. Any
communication that arrives after the close of our business day, or on a day that
is not a business day, will be considered "received" by us on the next following
business day.

<PAGE>

Our business day currently closes at 4:00 p.m. Eastern Standard Time, but
special circumstances (such as suspension of trading on a major exchange) may
dictate an earlier closing time.

Telephone Transactions

If you complete a special authorization form, you can request loans, transfers
among investment options and changes of allocation among investment options
simply by telephoning us at 1-800-732-5543 or by faxing us at 1-617-886-3048.
Any fax request should include your name, daytime telephone number, policy
number and, in the case of transfers and changes of allocation, the names of the
investment options involved. We will honor telephone instructions from anyone
who provides the correct identifying information, so there is a risk of loss to
you if this service is used by an unauthorized person. However, you will receive
written confirmation of all telephone transactions. There is also a risk that
you will be unable to place your request due to equipment malfunction or heavy
phone line usage. If this occurs, you should submit your request in writing.

The policies are not designed for professional market timing organizations or
other entities that use programmed and frequent transfers among investment
options. For reasons such as that, we reserve the right to change our telephone
transaction policies or procedures at any time. We also reserve the right to
suspend or terminate the privilege altogether.

<PAGE>

ILLUSTRATION OF DEATH BENEFITS, ACCOUNT VALUES, SURRENDER VALUES AND
ACCUMULATED PREMIUMS

The following tables illustrate the changes in death benefit, account value
and surrender value of the policy under certain hypothetical circumstances that
we assume solely for this purpose. Each table separately illustrates the
operation of a policy for a specified issue age, premium payment schedule and
Total Sum Insured. The amounts shown are for the end of each policy year and
assume that all of the account value is invested in funds that achieve
investment returns at constant annual rates of 0%, 6% and 12% before any fees or
expenses. (Investment return reflects investment income and all realized and
unrealized capital gains and losses.) The tables assume annual Planned Premiums
that are paid at the beginning of each policy year for an insured person who is
a 35 year old male standard non-smoker underwriting risk when the policy is
issued.

Tables are provided for each of the two death benefit options. The tables
headed "Current Charges" assume that the current rates for all charges deducted
by JHVLICO will apply in each year illustrated. The tables headed "Maximum
Charges" are the same, except that the maximum permitted rates for all years are
used for all charges. The tables do not reflect any charge that we reserve the
right to make but are not currently making.

With respect to fees and expenses deducted from Series Fund assets, the
amounts shown in all tables reflect (1) investment management fees equivalent to
an effective annual rate of .61%, and (2) an assumed average asset charge for
all other Trust operating expenses equivalent to an effective annual rate of
.10%. These rates are the arithmetic average for all funds of the Series Funds.
In other words, they are based on the hypothetical assumption that policy
account values are allocated equally among the variable investment options. The
actual rates associated with any policy will vary depending upon the actual
allocation of policy values among the investment options.

The second column of each table shows the amount you would have at the end of
each Policy year if an amount equal to the assumed Planned Premiums were
invested to earn interest, after taxes, at 5% compounded annually. This is not a
policy value. It is included for comparison purposes only.

Because your circumstances will no doubt differ from those in the
illustrations that follow, values under your policy will differ, in most cases
substantially. Upon request, we will furnish you with a comparable illustration
reflecting your proposed insured person's issue age, sex and underwriting risk
classification, and the Total Sum Insured and annual Planned Premium amount
requested.

<PAGE>

PLAN: FLEXIBLE PREMIUM VARIABLE LIFE
$100,000 TOTAL SUM INSURED
MALE, ISSUE AGE 45, FULLY UNDERWRITTEN NONSMOKER UNDERWRITING CLASS
OPTION A DEATH BENEFIT
NO GUARANTEED MINIMUM DEATH BENEFIT OPTION AFTER TENTH POLICY YEAR
PLANNED PREMIUM: $5,267 FOR SEVEN YEARS*
USING CURRENT CHARGES

<TABLE>
<CAPTION>
Death Benefit Surrender Value
--------------------------------------------- ---------------------------------------------
Planned Premiums Assuming hypothetical gross annual return of Assuming hypothetical gross annual return of
End of accumulated at --------------------------------------------- ---------------------------------------------
Policy Year 5% annual interest 0% 6% 12% 0% 6% 12%
- ----------- ------------------ -------------- -------------- -------------- ------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 5,530 $100,000 $100,000 $100,000 $ 4,405 $ 4,659 $ 4,913
2 11,337 100,000 100,000 100,000 8,275 9,030 9,815
3 17,434 100,000 100,000 100,000 12,084 13,597 15,234
4 23,836 100,000 100,000 100,000 15,521 18,064 20,928
5 30,559 100,000 100,000 100,000 19,389 23,254 27,780
6 37,617 100,000 100,000 100,000 23,227 28,718 35,408
7 45,028 100,000 100,000 111,367 27,046 34,481 43,883
8 47,280 100,000 100,000 118,492 26,262 35,702 48,170
9 49,644 100,000 100,000 126,209 25,480 36,990 52,916
10 52,126 100,000 100,000 134,568 24,697 38,345 58,169
11 54,732 100,000 100,000 144,099 24,109 39,976 64,192
12 57,469 100,000 100,000 154,387 23,509 41,685 70,849
13 60,342 100,000 100,000 165,488 22,890 43,474 78,200
14 63,359 100,000 100,000 177,483 22,256 45,349 86,324
15 66,527 100,000 100,000 190,445 21,606 47,318 95,304
16 69,853 100,000 100,000 204,483 20,944 49,388 105,236
17 73,346 100,000 100,000 219,679 20,263 51,562 116,214
18 77,013 100,000 100,000 236,125 19,555 53,843 128,343
19 80,864 100,000 100,747 253,926 18,811 56,233 141,731
20 84,907 100,000 102,523 273,199 18,019 58,729 156,498
25 108,366 100,000 112,505 395,913 12,805 72,692 255,807
30 138,305 100,000 124,827 579,947 4,578 89,526 415,941
35 176,516 ** 140,086 859,014 ** 109,314 670,319
</TABLE>

- ---------
* The illustrations assume that Planned Premiums equal to the Target Premium
are paid at the start of each of the first seven Policy Years. The Death
Benefit and Surrender Value will differ if premiums are paid in different
amounts or frequencies, if policy loans are taken, or if Additional Sum
Insured, Guaranteed Minimum Death Benefit after the tenth Policy Year, or
optional rider benefits are elected.
** Policy lapses unless additional premium payments are made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY THE OWNER. THE
DEATH BENEFIT AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT RETURN AVERAGE 0%, 6%, OR 12% OVER
A PERIOD OF YEARS, BUT ALSO FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.

<PAGE>

PLAN: FLEXIBLE PREMIUM VARIABLE LIFE
$100,000 TOTAL SUM INSURED
MALE, ISSUE AGE 45, FULLY UNDERWRITTEN NONSMOKER UNDERWRITING CLASS
OPTION A DEATH BENEFIT
NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH POLICY YEAR
PLANNED PREMIUM: $5,267 FOR SEVEN YEARS*
USING MAXIMUM CHARGES

<TABLE>
<CAPTION>
Death Benefit Surrender Value
--------------------------------------------- ---------------------------------------------
Planned Premiums Assuming hypothetical gross annual return of Assuming hypothetical gross annual return of
End of accumulated at --------------------------------------------- ---------------------------------------------
Policy Year 5% annual interest 0% 6% 12% 0% 6% 12%
- ----------- ------------------ -------------- -------------- -------------- -------------- -------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 5,530 $100,000 $100,000 $100,000 $ 4,242 $ 4,490 $ 4,739
2 11,337 100,000 100,000 100,000 7,957 8,691 9,455
3 17,434 100,000 100,000 100,000 11,621 13,086 14,673
4 23,836 100,000 100,000 100,000 14,910 17,368 20,136
5 30,559 100,000 100,000 100,000 18,620 22,348 26,716
6 37,617 100,000 100,000 100,000 22,279 27,568 34,015
7 45,028 100,000 100,000 106,844 25,885 33,039 42,101
8 47,280 100,000 100,000 112,948 24,855 33,919 45,915
9 49,644 100,000 100,000 119,466 23,787 34,809 50,089
10 52,126 100,000 100,000 126,426 22,673 35,704 54,649
11 54,732 100,000 100,000 134,341 21,709 36,811 59,846
12 57,469 100,000 100,000 142,772 20,684 37,930 65,519
13 60,342 100,000 100,000 151,755 19,592 39,058 71,711
14 63,359 100,000 100,000 161,330 18,426 40,194 78,468
15 66,527 100,000 100,000 171,523 17,173 41,334 85,834
16 69,853 100,000 100,000 182,378 15,820 42,472 93,859
17 73,346 100,000 100,000 193,934 14,353 43,604 102,595
18 77,013 100,000 100,000 206,229 12,751 44,721 112,093
19 80,864 100,000 100,000 219,306 10,990 45,815 122,408
20 84,907 100,000 100,000 233,219 9,043 46,874 133,596
25 108,366 ** 100,000 317,459 ** 51,339 205,117
30 138,305 ** 100,000 432,086 ** 52,736 309,895
35 176,516 ** 100,000 588,326 ** 45,412 459,092
</TABLE>

<PAGE>

PLAN: FLEXIBLE PREMIUM VARIABLE LIFE
$100,000 TOTAL SUM INSURED
MALE, ISSUE AGE 45, FULLY UNDERWRITTEN NONSMOKER UNDERWRITING CLASS
OPTION B DEATH BENEFIT
NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH POLICY YEAR
PLANNED PREMIUM: $5,267 FOR SEVEN YEARS*
USING CURRENT CHARGES

<TABLE>
<CAPTION>
Death Benefit Surrender Value
--------------------------------------------- ---------------------------------------------
Planned Premiums Assuming hypothetical gross annual return of Assuming hypothetical gross annual return of
End of accumulated at --------------------------------------------- ---------------------------------------------
Policy Year 5% annual interest 0% 6% 12% 0% 6% 12%
- ----------- ------------------ -------------- -------------- -------------- -------------- -------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 5,530 $103,923 $104,176 $104,430 $ 4,397 $ 4,650 $ 4,904
2 11,337 107,775 108,527 109,309 8,249 9,001 9,783
3 17,434 111,551 113,055 114,683 12,025 13,529 15,157
4 23,836 115,413 117,937 120,777 15,413 17,937 20,777
5 30,559 119,216 123,040 127,518 19,216 23,040 27,518
6 37,617 122,974 128,392 134,991 22,974 28,392 34,991
7 45,028 126,697 134,015 143,290 26,698 34,015 43,290
8 47,280 125,821 135,083 147,392 25,821 35,083 47,392
9 49,644 124,949 136,204 151,947 24,949 36,204 51,947
10 52,126 124,078 137,376 157,001 24,078 37,376 57,001
11 54,732 123,403 138,804 162,818 23,403 38,804 62,818
12 57,469 122,712 140,284 169,258 22,712 40,284 69,258
13 60,342 122,001 141,813 176,386 22,001 41,813 76,386
14 63,359 121,272 143,397 184,281 21,272 43,397 84,281
15 66,527 120,526 145,038 193,028 20,526 45,038 93,028
16 69,853 119,768 146,746 202,727 19,768 46,746 102,727
17 73,346 118,989 148,515 214,501 18,989 48,515 113,475
18 77,013 118,182 150,338 230,657 18,182 50,338 125,371
19 80,864 117,334 152,206 248,168 17,334 52,206 138,517
20 84,907 116,432 154,109 267,135 16,432 54,109 153,025
25 108,366 110,554 163,539 388,086 10,554 63,539 250,750
30 138,305 101,735 172,035 569,900 1,735 72,035 408,736
35 176,516 ** 175,992 846,244 ** 75,992 660,354
</TABLE>

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.

<PAGE>

PLAN: FLEXIBLE PREMIUM VARIABLE LIFE
$100,000 TOTAL SUM INSURED MALE, ISSUE AGE
45, FULLY UNDERWRITTEN NONSMOKER UNDERWRITING CLASS
OPTION B DEATH BENEFIT
NO GUARANTEED MINIMUM DEATH BENEFIT OPTION AFTER TENTH POLICY YEAR
PLANNED PREMIUM: $5,267 FOR SEVEN YEARS*
USING MAXIMUM CHARGES

<TABLE>
<CAPTION>
Death Benefit Surrender Value
--------------------------------------------- ---------------------------------------------
Planned Premiums Assuming hypothetical gross annual return of Assuming hypothetical gross annual return of
End of accumulated at --------------------------------------------- ---------------------------------------------
Policy Year 5% annual interest 0% 6% 12% 0% 6% 12%
- ----------- ------------------ -------------- -------------- -------------- -------------- -------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 5,530 $103,754 $104,001 $104,249 $ 4,228 $ 4,475 $ 4,723
2 11,337 107,441 108,170 108,930 7,915 8,644 9,404
3 17,434 111,061 112,513 114,086 11,535 12,987 14,560
4 23,836 114,760 117,190 119,925 14,760 17,190 19,925
5 30,559 118,386 122,059 126,360 18,386 22,059 26,360
6 37,617 121,937 127,127 133,451 21,937 27,127 33,451
7 45,028 125,406 132,398 141,262 25,406 32,398 41,262
8 47,280 124,233 133,045 144,763 24,233 33,045 44,763
9 49,644 123,016 133,666 148,582 23,016 33,666 48,582
10 52,126 121,745 134,248 152,744 21,745 34,248 52,744
11 54,732 120,618 134,993 157,495 20,618 34,993 57,495
12 57,469 119,423 135,692 162,673 19,423 35,692 62,673
13 60,342 118,153 136,335 168,320 18,153 36,335 68,320
14 63,359 116,805 136,914 174,479 16,805 36,914 74,479
15 66,527 115,365 137,413 181,192 15,365 37,413 81,192
16 69,853 113,823 137,815 188,507 13,823 37,815 88,507
17 73,346 112,167 138,101 196,474 12,167 38,101 96,474
18 77,013 110,380 138,249 205,145 10,380 38,249 105,145
19 80,864 108,442 138,228 214,573 8,442 38,228 114,573
20 84,907 106,332 138,008 224,815 6,332 38,008 124,815
25 108,366 ** 132,820 295,378 ** 32,820 190,850
30 138,305 ** 116,301 401,939 ** 16,301 288,273
35 176,516 ** ** 547,212 ** ** 427,009
</TABLE>

<PAGE>

PLAN: FLEXIBLE PREMIUM VARIABLE LIFE
$100,000 TOTAL SUM INSURED
MALE, ISSUE AGE 45, FULLY UNDERWRITTEN NONSMOKER UNDERWRITING CLASS
OPTION M DEATH BENEFIT
NO GUARANTEED MINIMUM DEATH BENEFIT
AFTER TENTH POLICY YEAR PLANNED PREMIUM: $5,267 FOR SEVEN YEARS*
USING CURRENT CHARGES

<TABLE>
<CAPTION>
Death Benefit Surrender Value
--------------------------------------------- ---------------------------------------------
Planned Premiums Assuming hypothetical gross annual return of Assuming hypothetical gross annual return of
End of accumulated at --------------------------------------------- ---------------------------------------------
Policy Year 5% annual interest 0% 6% 12% 0% 6% 12%
- ----------- ------------------ -------------- -------------- -------------- -------------- -------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 5,530 $100,000 $100,000 $100,000 $ 4,407 $ 4,661 $ 4,915
2 11,337 100,000 100,000 100,000 8,281 9,037 9,823
3 17,434 100,000 100,000 100,000 12,096 13,610 15,250
4 23,836 101,194 116,919 134,547 15,528 18,028 20,841
5 30,559 135,801 161,330 191,063 19,255 22,986 27,348
6 37,617 152,838 186,763 227,820 22,881 28,096 34,430
7 45,028 167,233 210,247 264,343 26,429 33,389 42,172
8 47,280 152,479 203,668 271,042 25,431 34,133 45,634
9 49,644 139,191 197,638 278,472 24,490 34,942 49,460
10 52,126 127,184 192,081 286,618 23,596 35,810 53,680
11 54,732 117,312 187,961 296,502 22,940 36,934 58,530
12 57,469 108,293 184,096 307,016 22,308 38,108 63,844
13 60,342 100,028 180,441 318,141 21,695 39,326 69,656
14 63,359 100,000 177,005 329,954 21,076 40,598 76,025
15 66,527 100,000 173,784 342,503 20,440 41,927 83,012
16 69,853 100,000 170,812 355,934 19,792 43,325 90,695
17 73,346 100,000 168,040 370,224 19,123 44,785 99,123
18 77,013 100,000 165,429 385,361 18,428 46,301 108,353
19 80,864 100,000 162,956 401,359 17,695 47,865 118,432
20 84,907 100,000 160,584 418,190 16,914 49,466 129,410
25 108,366 100,000 149,226 513,528 11,727 57,647 199,290
30 138,305 100,000 139,467 634,160 3,475 66,334 303,012
35 176,516 ** 130,421 783,481 ** 74,809 451,469
</TABLE>

** Policy lapses unless additional premium payments are made.

<PAGE>

PLAN: FLEXIBLE PREMIUM VARIABLE LIFE
$100,000 TOTAL SUM INSURED
MALE, ISSUE AGE 45, FULLY UNDERWRITTEN NONSMOKER UNDERWRITING CLASS
OPTION M DEATH BENEFIT
NO GUARANTEED MINIMUM DEATH BENEFIT OPTION AFTER TENTH POLICY YEAR
PLANNED PREMIUM: $5,267 FOR SEVEN YEARS*
USING MAXIMUM CHARGES

<TABLE>
<CAPTION>
Death Benefit Surrender Value
--------------------------------------------- ---------------------------------------------
Planned Premiums Assuming hypothetical gross annual return of Assuming hypothetical gross annual return of
End of accumulated at --------------------------------------------- ---------------------------------------------
Policy Year 5% annual interest 0% 6% 12% 0% 6% 12%
- ----------- ------------------ -------------- -------------- -------------- -------------- -------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 5,530 $100,000 $100,000 $100,000 $ 4,242 $ 4,490 $ 4,739
2 11,337 100,000 100,000 100,000 7,957 8,691 9,455
3 17,434 100,000 100,000 100,000 11,621 13,086 14,673
4 23,836 100,000 112,317 129,282 14,906 17,314 20,021
5 30,559 130,237 154,698 183,160 18,462 22,037 26,211
6 37,617 146,155 178,477 217,546 21,876 26,844 32,870
7 45,028 159,141 199,828 250,919 25,145 31,727 40,022
8 47,280 142,966 190,877 253,838 23,839 31,983 42,728
9 49,644 128,279 182,253 256,795 22,565 32,215 45,600
10 52,126 114,937 173,925 259,748 21,319 32,418 48,637
11 54,732 103,854 166,938 263,770 20,304 32,796 52,057
12 57,469 100,000 160,142 267,735 19,279 33,142 55,664
13 60,342 100,000 153,556 271,672 18,188 33,459 59,468
14 63,359 100,000 147,170 275,560 17,022 33,747 63,479
15 66,527 100,000 140,962 279,360 15,768 34,001 67,694
16 69,853 100,000 134,936 283,068 14,412 34,218 72,113
17 73,346 100,000 129,085 286,666 12,940 34,395 76,735
18 77,013 100,000 123,388 290,102 11,331 34,527 81,551
19 80,864 100,000 117,844 293,355 9,561 34,607 86,544
20 84,907 100,000 112,444 296,390 7,601 34,629 91,699
25 108,366 ** 100,000 308,594 ** 33,271 119,733
30 138,305 ** 100,000 314,374 ** 24,127 150,181
35 176,516 ** ** 313,234 ** ** 180,457
</TABLE>

<PAGE>

ADDITIONAL INFORMATION

This section of the prospectus provides additional detailed information that
is not contained in the Basic Information section on pages 3 through 16.

<TABLE>
<CAPTION>
CONTENTS OF THIS SECTION PAGES TO SEE
- ------------------------ ------------
<S> <C>
Description of JHVLICO ...................................... 27
How we support the policy and investment options 27-28
Procedures for issuance of a policy.......................... 28-29
Basic Sum Insured vs. Additional Sum Insured 29-30
Commencement of investment performance....................... 30
How we process certain policy transactions 30-31
Effects of policy loans...................................... 31
Additional information about how certain policy charges work 31-32
How we market the policies................................... 32-33
Tax considerations........................................... 33-35
Reports that you will receive................................ 35
Voting privileges that you will have......................... 35-36
Changes that JHVLICO can make as to your policy 36
Adjustments we make to death benefits........................ 36-37
When we pay policy proceeds.................................. 37
Other details about exercising rights and paying benefits 37
Year 2000 Issues............................................. 38
Legal matters................................................ 38
Registration statement filed with the SEC.................... 38
Accounting and actuarial experts............................. 38
Financial statements of JHVLICO and the Account 38
List of Directors and Executive Officers of JHVLICO 39
</TABLE>

<PAGE>

DESCRIPTION OF JHVLICO

We are JHVLICO, a stock life insurance company chartered in 1979 under
Massachusetts law. We are authorized to transact a life insurance and annuity
business in all states other than New York and in the District of Columbia. We
began selling variable life insurance policies in 1980.

We are regulated and supervised by the Massachusetts Commissioner of
Insurance, who periodically examines our affairs. We also are subject to the
applicable insurance laws and regulations of all jurisdictions in which we are
authorized to do business. We are required to submit annual statements of our
operations, including financial statements, to the insurance departments of the
various jurisdictions in which we do business for purposes of determining
solvency and compliance with local insurance laws and regulations. The
regulation to which we are subject, however, does not provide a guarantee as to
such matters.

We are a wholly-owned subsidiary of John Hancock Mutual Life Insurance Company
("John Hancock"), a company chartered in Massachusetts in 1862. John Hancock's
home office is at John Hancock Place, Boston, Massachusetts 02117. John
Hancock's assets are approximately $67 billion and it has invested over $380
million in JHVLICO in connection with our organization and operation. It is
anticipated that John Hancock will from time to time make additional capital
contributions to JHVLICO to enable us to meet our reserve requirements and
expenses in connection with our business. John Hancock is committed to make
additional capital contributions if necessary to ensure that we maintain a
positive net worth.

HOW WE SUPPORT THE POLICY AND INVESTMENT OPTIONS

Separate Account S

The variable investment options shown on page 1 are in fact subaccounts of
Separate Account S (the "Account"), a separate account established by us under
Massachusetts law. The Account meets the definition of "separate account" under
the Federal securities laws and is registered as a unit investment trust under
the Investment Company Act of 1940 ("1940 Act"). Such registration does not
involve supervision by the SEC of the management of the Account or JHVLICO.

The Account's assets are the property of JHVLICO. Each policy provides that
amounts we hold in the Account pursuant to the policies cannot be reached by any
other persons who may have claims against us.

The assets in each subaccount are invested in the corresponding fund of one of
the Series Funds, but the assets of one subaccount are not necessarily legally
insulated from liabilities associated with another subaccount. New subaccounts
may be added as new funds are added to the Series Funds and made available to
policy owners. Existing subaccounts may be deleted if existing funds are deleted
from the Series Funds.

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

On each business day, shares of each fund are purchased or redeemed by us for
each subaccount based on, among other things, the amount of net premiums
allocated to the subaccount, distributions reinvested, and transfers to, from
and among subaccounts, all to be effected as of that date. Such purchases and
redemptions are effected at each fund's net asset value per share determined for
that same date. A "business day" is any date on which the New York Stock
Exchange is open for trading. We compute policy values for each business day as
of the close of that day (usually 4:00 p.m. Eastern Standard Time).

<PAGE>

Our general account

Our obligations under the policy's fixed investment option are backed by our
general account assets. Our general account consists of assets owned by us other
than those in the Account and in other separate accounts that we may establish.
Subject to applicable law, we have sole discretion over the investment of assets
of the general account and policy owners do not share in the investment
experience of, or have any preferential claim on, those assets. Instead, we
guarantee that the account value allocated to the fixed investment option will
accrue interest daily at an effective annual rate of at least 4% without regard
to the actual investment experience of the general account.

Because of exemptive and exclusionary provisions, interests in our fixed
investment option have not been registered under the Securities Act of 1933 and
our general account has not been registered as an investment company under the
1940 Act. Accordingly, neither the general account nor any interests therein are
subject to the provisions of these acts, and we have been advised that the staff
of the SEC has not reviewed the disclosure in this prospectus relating to the
fixed investment option. Disclosure regarding the fixed investment option may,
however, be subject to certain generally-applicable provisions of the Federal
securities laws relating to accuracy and completeness of statements made in
prospectuses.

PROCEDURES FOR ISSUANCE OF A POLICY

Generally, the policy is available with a minimum Total Sum Insured at issue
of $100,000 and a minimum Basic Sum Insured at issue of $50,000. At the time of
issue, the insured person must have an attained age of at least 20 and no more
than 85. All insured persons must meet certain health and other insurance risk
criteria called "underwriting standards".

Policies issued in Montana or in connection with certain employee plans will
not directly reflect the sex of the insured person in either the premium rates
or the charges or values under the policy. The illustrations set forth in this
prospectus are sex-distinct and, therefore, may not reflect the rates, charges,
or values that would apply to such policies.

Minimum Initial Premium

The Minimum Initial Premium must be received by us at our Life Servicing
Office in order for the policy to be in full force and effect. There is no grace
period for the payment of the Minimum Initial Premium. The Minimum Initial
Premium is determined by us based on the characteristics of the insured person,
the Total Sum Insured at issue, and the policy options you have selected.

Commencement of insurance coverage

After you apply for a policy, it can sometimes take up to several weeks for us
to gather and evaluate all the information we need to decide whether to issue a
policy to you and, if so, what the insured person's rate class should be. After
we approve an application for a policy and assign an appropriate insurance rate
class, we will prepare the policy for delivery. We will not pay a death benefit
under a policy unless the policy is in effect when the insured person dies
(except for the circumstances described under "Temporary insurance coverage
prior to policy delivery" on page 29).

The policy will take effect only if all of the following conditions are
satisfied:

. The policy is delivered to and received by the applicant.

. The Minimum Initial Premium is received by us.

. Each insured person is living and still meets our health criteria for
issuing insurance.

If all of the above conditions are satisfied, the policy will take effect on
the date shown in the policy as the "date of issue." That is the date on which
we begin to deduct monthly charges. Policy months, policy years and policy
anniversaries are all measured from the date of issue.

<PAGE>

Backdating

In order to preserve a younger age at issue for the insured person, we can
designate a date of issue that is up to 60 days earlier than the date that would
otherwise apply. This is referred to as "backdating" and is allowed under state
insurance laws. Backdating can also be used in certain corporate-owned life
insurance cases involving multiple policies to retain a common monthly deduction
date.

The conditions for coverage described above under "Commencement of insurance
coverage" must still be satisfied, but in a backdating situation the policy
takes effect retroactively. Backdating results in a lower insurance charge
(because of the insured person's younger age at issue), but monthly charges
begin earlier than would otherwise be the case. Those monthly charges will be
deducted as soon as we receive premiums sufficient to pay them.

Temporary coverage prior to policy delivery

If a specified amount of premium is paid with the application for a policy and
other conditions are met, we will provide temporary term life insurance coverage
on the insured person for a period prior to the time coverage under the policy
takes effect. Such temporary term coverage will be subject to the terms and
conditions described in the application for the policy, including limits on
amount and duration of coverage.

Monthly deduction dates

Each charge that we deduct monthly is assessed against your account value or
the subaccounts at the close of business on the date of issue and at the close
of the first business day in each subsequent policy month.

BASIC SUM INSURED VS. ADDITIONAL SUM INSURED

As noted earlier in this prospectus, you should consider a number of factors
in determining whether to elect coverage in the form of Basic Sum Insured or in
the form of Additional Sum Insured.

The amount of sales charge deducted from premiums and from account value and
the amount of compensation paid to the selling insurance agent will be less if
coverage is included as Additional Sum Insured, rather than as Basic Sum
Insured. On the other hand, the amount of any Additional Sum Insured is not
included in the guaranteed minimum death benefit feature. Therefore, if the
policy's surrender value is insufficient to pay the monthly charges as they fall
due (including the charges for the Additional Sum Insured), the Additional Sum
Insured coverage will lapse, even if the Basic Sum Insured stays in effect
pursuant to the guaranteed minimum death benefit feature.

Generally, you will incur lower sales charges and have more flexible coverage
with respect to the Additional Sum Insured than with respect to the Basic Sum
Insured. If this is your priority, you may wish to maximize the proportion of
the Additional Sum Insured. However, if your priority is to take advantage of
the guaranteed minimum death benefit feature, the proportion of the Policy's
Total Sum Insured that is guaranteed can be increased by taking out more
coverage as Basic Sum Insured at the time of policy issuance. As stated earlier
in this prospectus, the guaranteed minimum death benefit feature does not apply
if the Additional Sum Insured is scheduled to exceed the Basic Sum Insured at
any time. If such was the case, you would presumably wish to maximize the
proportion of the Additional Sum Insured.

If you want to purchase Additional Sum Insured, you may select from among
several forms of it: a level amount of coverage; an amount of coverage that
increases on each policy anniversary up to a prescribed limit; an amount of
coverage that increases on each policy anniversary to the amount of premiums
paid during prior policy years plus the Planned Premium for the current policy
year, subject to certain limits; or a combination of those forms of coverage.

Any decision you make to modify the amount of Additional Sum Insured coverage
after issue can

<PAGE>

have significant tax consequences (see "Tax Considerations" beginning on page
34).

COMMENCEMENT OF INVESTMENT PERFORMANCE

Any premium payment processed prior to the twentieth day after the date of
issue will automatically be allocated to the Money Market investment option. On
the twentieth day following the date of issue, the policy's account value will
be reallocated automatically among the investment options you have chosen.

All other premium payments will be allocated among the investment options you
have chosen as soon as they are processed.

HOW WE PROCESS CERTAIN POLICY TRANSACTIONS

Premium payments

We will process any premium payment as of the day we receive it, unless one of
the following exceptions applies:

(1) We will process a payment received prior to a policy's date of issue as if
received on the date of issue.

(2) If the Minimum Initial Premium is not received prior to the date of issue,
we will process each premium payment received thereafter as if received on the
business day immediately preceding the date of issue until all of the Minimum
Initial Premium is received.

(3) We will process the portion of any premium payment for which we require
evidence of the insured person's continued insurability only after we have
received such evidence and found it satisfactory to us.

(4) If we receive any premium payment that will cause a policy to become a
modified endowment or will cause a policy to lose its status as life insurance
under the tax laws, we will not accept the excess portion of that premium
payment and will immediately notify the owner. We will refund the excess premium
when the premium payment check has had time to clear the banking system (but in
no case more than two weeks after receipt), except in the following
circumstances:

. The tax problem resolves itself prior to the date the refund is to be
made; or

. The tax problem relates to modified endowment status and we receive a signed
acknowledgment from the owner prior to the refund date instructing us to
process the premium notwithstanding the tax issues involved.

In the above cases, we will treat the excess premium as having been received on
the date the tax problem resolves itself or the date we receive the signed
acknowledgment. We will then process it accordingly.

(5) If a premium payment is received or is otherwise scheduled to be processed
(as specified above) on a date that is not a business day, the premium payment
will be processed on the business day next following that date.

Transfers among investment options

Any reallocation among investment options must be such that the total in all
investment options after reallocation equals 100% of account value. Transfers
out of a variable investment option will be effective at the end of the business
day in which we receive at our Life Servicing Office notice satisfactory to us.

If received on or before the policy anniversary, requests for transfer out of
the fixed investment option will be processed on the policy anniversary (or the
next business day if the policy anniversary does not occur on a business day).
If received after the policy anniversary, such a request will be processed at
the end of the business day in which we receive the request at our Life
Servicing Office. If you request a transfer out of the fixed investment option
61 days or more prior to the policy anniversary, we will not process that
portion of the reallocation, and your confirmation statement will not reflect a
transfer out

<PAGE>

of the fixed investment option as to such request. Currently, there is no
minimum amount limit on transfers into the fixed investment option, but we
reserve the right to impose such a limit in the future. We have the right to
defer transfers of amounts out of the fixed investment option for up to six
months.

Telephone transfers and policy loans

Once you have completed a written authorization, you may request a transfer or
policy loan by telephone or by fax. If the fax request option becomes
unavailable, another means of telecommunication will be substituted.

If you authorize telephone transactions, you will be liable for any loss,
expense or cost arising out of any unauthorized or fraudulent telephone
instructions which we reasonably believe to be genuine, unless such loss,
expense or cost is the result of our mistake or negligence. We employ procedures
which provide safeguards against the execution of unauthorized transactions, and
which are reasonably designed to confirm that instructions received by telephone
are genuine. These procedures include requiring personal identification, tape
recording calls, and providing written confirmation to the owner. If we do not
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine, we may be liable for any loss due to unauthorized or
fraudulent instructions.

Effective date of other policy transactions

The following transactions take effect on the monthly deduction date on or
next following the date we approve your request:

. Total Sum Insured increases or decreases

. Reinstatements of lapsed policies

. Change of death benefit Option from A to B

A change from Option B to Option A is effective on the monthly deduction date
on or next following the date we receive the request.

We process loans, surrenders, partial withdrawals and loan repayments as of
the day we receive such request or repayment.

EFFECTS OF POLICY LOANS

The account value, the surrender value, and any death benefit above the Total
Sum Insured are permanently affected by any loan, whether or not it is repaid in
whole or in part. This is because the amount of the loan is deducted from the
investment options and placed in a special loan account. The investment options
and the special loan account will generally have different rates of investment
return.

The amount of the outstanding loan (which includes accrued and unpaid
interest) is subtracted from the amount otherwise payable when the policy
proceeds become payable.

Whenever the outstanding loan equals or exceeds 90% of the account value, the
policy will terminate 31 days after we have mailed notice of termination to you
(and to any assignee of record at such assignee's last known address) specifying
the minimum amount that must be paid to avoid termination, unless a repayment of
at least the amount specified is made within that period.

ADDITIONAL INFORMATION ABOUT HOW CERTAIN POLICY CHARGES WORK

Sales expenses and related charges

The sales charges help to compensate us for the cost of selling our policies.
(See "What charges will JHVLICO deduct from my investment in the policy?" in the
Basic Information section of this prospectus.) The amount of the charges in any
policy year does not specifically correspond to sales expenses for that year. We
expect to recover our total sales expenses over the life of the policies. To the
extent that the sales charges do not cover total sales expenses, the sales
expenses may be recovered from other sources, including gains from the charge
for mortality and expense risks and other gains with

<PAGE>

respect to the policies, or from our general assets. (See "How we market the
policies" on page 28.)

Effect of premium payment pattern

You may structure the timing and amount of premium payments to minimize the
sales charges, although doing so involves certain risks. Paying less than one
Target Premium in the first policy year or paying more than one Target Premium
in any policy year could reduce your total sales charges over time. For example,
if the Target Premium was $10,000 and you paid a premium of $10,000 in each of
the first ten policy years, you would pay total sales charges of $9,000. If you
paid $20,000 (i.e., two times the Target Premium amount) in every other policy
year up to the ninth policy year, you would pay total sales charges of only
$4,500. However, delaying the payment of Target Premiums to later policy years
could increase the risk that the guaranteed minimum death benefit feature will
lapse and the account value will be insufficient to pay monthly policy charges
as they come due. As a result, the policy or any Additional Sum Insured may
lapse and eventually terminate. Conversely, accelerating the payment of Target
Premiums to earlier policy years could cause aggregate premiums paid to exceed
the policy's 7-pay premium limit and, as a result, cause the policy to become a
modified endowment, with adverse tax consequences to you upon receipt of policy
distributions. (See "Tax consequences" beginning on page 29.)

Monthly charges

We deduct the monthly charges described in the Basic Information section from
your policy's investment options in proportion to the amount of account value
you have in each. For each month that we cannot deduct any charge because of
insufficient account value, the uncollected charges will accumulate and be
deducted when and if sufficient account value becomes available.

The insurance under the policy continues in full force during any grace period
but, if the insured person dies during the policy grace period, the amount of
unpaid monthly charges is deducted from the death benefit otherwise payable.

Reduced charges for eligible classes

The charges otherwise applicable (including the M&E charge) may be reduced
with respect to policies issued to a class of associated individuals or to a
trustee, employer or similar entity where we anticipate that the sales to the
members of the class will result in lower than normal sales or administrative
expenses, lower taxes or lower risks to us. We will make these reductions in
accordance with our rules in effect at the time of the application for a policy.
The factors we consider in determining the eligibility of a particular group for
reduced charges, and the level of the reduction, are as follows: the nature of
the association and its organizational framework; the method by which sales will
be made to the members of the class; the facility with which premiums will be
collected from the associated individuals and the association's capabilities
with respect to administrative tasks; the anticipated lapse and surrender rates
of the policies; the size of the class of associated individuals and the number
of years it has been in existence; the aggregate amount of premiums paid; and
any other such circumstances which result in a reduction in sales or
administrative expenses, lower taxes or lower risks. Any reduction in charges
will be reasonable and will apply uniformly to all prospective policy purchasers
in the class and will not unfairly discriminate against any owner.

HOW WE MARKET THE POLICIES

Signator Investors, Inc. ("Signator"), an indirect wholly-owned subsidiary of
John Hancock located at 197 Clarendon Street, Boston, MA 02117, is registered as
a broker-dealer under the Securities Exchange Act of 1934 and is a member of the
National Association of Securities Dealers, Inc. and the Securities Investor
Protection Corporation. Signator acts as principal underwriter and principal
distributor of the policies pursuant to a sales agreement among John Hancock,
Signator, JHVLICO, and the Account. Signator also serves as

<PAGE>

principal underwriter for 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, all of which are registered under the 1940 Act. Signator
is also the principal underwriter for John Hancock Variable Series Trust I.

Applications for policies are solicited by agents who are licensed by state
insurance authorities to sell JHVLICO's policies and who are also registered
representatives ("representatives") of Signator or other broker-dealer firms, as
discussed below. John Hancock performs insurance underwriting and determines
whether to accept or reject the application for a policy and each insured
person's risk classification. JHVLICO will make the appropriate refund if a
policy ultimately is not issued or is returned under the "free look" provision.
Officers and employees of John Hancock and JHVLICO are covered by a blanket bond
by a commercial carrier in the amount of $25 million.

Signator's representatives are compensated for sales of the policies on a
commission and service fee basis by Signator, and JHVLICO reimburses Signator
for such compensation and for other direct and indirect expenses (including
agency expense allowances, general agent, district manager and supervisor's
compensation, agent's training allowances, deferred compensation and insurance
benefits of agents, general agents, district managers and supervisors, agency
office clerical expenses and advertising) actually incurred in connection with
the marketing and sale of the policies.

The maximum commission payable to a Signator representative for selling a
policy is 14% of the Target Premium paid in each of the first 10 policy years,
and 3% of the Target Premium paid in each policy year thereafter. The maximum
commission on any premium paid in any policy year in excess of the Target
Premium is 2%.

Representatives with less than four years of service with Signator and those
compensated on salary plus bonus or level commission programs may be paid on a
different basis. Representatives who meet certain productivity and persistency
standards with respect to the sale of policies issued by JHVLICO and John
Hancock will be eligible for additional compensation.

The policies are also sold through other registered broker-dealers that have
entered into selling agreements with Signator and whose representatives are
authorized by applicable law to sell variable life insurance policies. The
commissions which will be paid by such broker-dealers to their representatives
will be in accordance with their established rules. The commission rates may be
more or less than those set forth above for Signator's representatives. In
addition, their qualified registered representatives may be reimbursed by the
broker-dealers under expense reimbursement allowance programs in any year for
approved voucherable expenses incurred. Signator will compensate the
broker-dealers as provided in the selling agreements, and JHVLICO will reimburse
Signator for such amounts and for certain other direct expenses in connection
with marketing the policies through other broker-dealers.

Representatives of Signator and the other broker-dealers mentioned above may
also earn "credits" toward qualification for attendance at certain business
meetings sponsored by John Hancock.

The offering of the policies is intended to be continuous, but neither JHVLICO
nor Signator is obligated to sell any particular amount of policies.

TAX CONSIDERATIONS

This description of federal income tax consequences is only a brief summary
and is not intended as tax advice. Tax consequences will vary based on your own
particular circumstances, and for further information you should consult a
qualified tax advisor. Federal, state and local tax laws, regulations and
interpretations can change from time to time. As a result, the tax consequences
to you and the beneficiary may be altered, in some cases retroactively.

<PAGE>

Policy proceeds

We believe the policy will receive the same federal income and estate tax
treatment as fixed benefit life insurance policies. Section 7702 of the Internal
Revenue Code (the "Code") defines life insurance for federal tax purposes. If
certain standards are met at issue and over the life of the policy, the policy
will satisfy that definition. We will monitor compliance with these standards.

If the policy complies with the definition of life insurance, we believe the
death benefit under the policy will be excludable from the beneficiary's gross
income under the Code. In addition, increases in account value as a result of
interest or investment experience will not be subject to federal income tax
unless and until values are actually received through distributions.
Distributions for tax purposes can include amounts received upon surrender or
partial withdrawals. You may also be deemed to have received a distribution for
tax purposes if you assign all or part of your policy rights or change your
policy's ownership.

In general, the owner will be taxed on the amount of distributions that exceed
the premiums paid under the policy. But under certain circumstances within the
first 15 policy years, the owner may be taxed on a distribution even if total
withdrawals do not exceed total premiums paid. Any taxable distribution will be
ordinary income to the owner (rather than capital gains).

We also believe that, except as noted below, loans received under the policy
will be treated as indebtedness of an owner and that no part of any loan will
constitute income to the owner. However, the amount of any outstanding loan that
was not previously considered income (as discussed below) will be treated as if
it had been distributed to the owner if the policy terminates for any reason.

It is possible that, despite our monitoring, a policy might fail to qualify as
life insurance under Section 7702 of the Code. This could happen, for example,
if we inadvertently failed to return to you any premium payments that were in
excess of permitted amounts, or if a Series Fund failed to meet certain
investment diversification or other requirements of the Code. If this were to
occur, you would be subject to income tax on the income and gains under the
policy for the period of the disqualification and for subsequent periods.

In the past, the United States Treasury Department has stated that it
anticipated issuing guidelines prescribing circumstances in which the ability of
a policy owner to direct his or her investment to particular funds may cause the
policy owner, rather than the insurance company, to be treated as the owner of
the shares of those funds. In that case, any income and gains attributable to
those shares would be included in your current gross income for federal income
tax purposes. Under current law, however, we believe that we, and not the owner
of a policy, would be considered the owner of the fund's shares for tax
purposes.

Tax consequences of ownership or receipt of policy proceeds under federal,
state and local estate, inheritance, gift and other tax laws depend on the
circumstances of each owner or beneficiary.

Because there may be unfavorable tax consequences (including recognition of
taxable income and the loss of income tax-free treatment for any death benefit
payable to the beneficiary), you should consult a qualified tax adviser prior to
changing the policy's ownership or making any assignment of ownership interests.

7-pay premium limit

At the time of policy issuance, we will determine whether the Planned Premium
schedule will exceed the 7-pay limit discussed below. If so, our standard
procedures prohibit issuance of the policy unless you sign a form acknowledging
that fact.

The 7-pay limit is the total of net level premiums that would have been
payable at any time for a comparable fixed policy to be fully "paid-up" after
the payment of 7 equal annual premiums. "Paid-up"

<PAGE>

means that no further premiums would be required to continue the coverage in
force until maturity, based on certain prescribed assumptions. If the total
premiums paid at any time during the first 7 policy years exceed the 7-pay
limit, the policy will be treated as a "modified endowment", which can have
adverse tax consequences.

The owner will be taxed on distributions and loans from a "modified endowment"
to the extent of any income (gain) to the owner (on an income-first basis). The
distributions and loans affected will be those made on or after, and within the
two year period prior to, the time the policy becomes a modified endowment.
Additionally, a 10% penalty tax may be imposed on taxable portions of such
distributions or loans that are made before the owner attains age 5 91/2.

Furthermore, any time there is a "material change" in a policy (such as an
increase in Additional Sum Insured, the addition of certain other policy
benefits after issue, a change in death benefit option, or reinstatement of a
lapsed policy), the policy will have a new 7-pay limit as if it were a
newly-issued policy. If a prescribed portion of the policy's then account value,
plus all other premiums paid within 7 years after the material change, at any
time exceed the new 7-pay limit, the policy will become a modified endowment.

Moreover, if benefits under a policy are reduced (such as a reduction in the
Total Sum Insured or death benefit or the reduction or cancellation of certain
rider benefits) during the 7 years in which a 7-pay test is being applied, the
7-pay limit will be recalculated based on the reduced benefits. If the premiums
paid to date are greater than the recalculated 7-pay limit, the policy will
become a modified endowment.

All modified endowments issued by the same insurer (or its affiliates) to the
owner during any calendar year generally will be treated as one contract for the
purpose of applying the modified endowment rules. A policy received in exchange
for a modified endowment will itself also be a modified endowment. You should
consult your tax advisor if you have questions regarding the possible impact of
the 7-pay limit on your policy.

Corporate and H.R. 10 plans

The policy may be acquired in connection with the funding of retirement plans
satisfying the qualification requirements of Section 401 of the Code. If so, the
Code provisions relating to such plans and life insurance benefits thereunder
should be carefully scrutinized. We are not responsible for compliance with the
terms of any such plan or with the requirements of applicable provisions of the
Code.

REPORTS THAT YOU WILL RECEIVE

At least annually, we will send you a statement setting forth the following
information as of the end of the most recent reporting period: the amount of the
death benefit, the Basic Sum Insured and the Additional Sum Insured, the account
value, the portion of the account value in each investment option, the surrender
value, premiums received and charges deducted from premiums since the last
report, and any outstanding policy loan (and interest charged for the preceding
policy year). Moreover, you also will receive confirmations of premium payments,
transfers among investment options, policy loans, partial withdrawals and
certain other policy transactions.

Semiannually we will send you a report containing the financial statements of
each Series Fund, including a list of securities held in each fund.

VOTING PRIVILEGES THAT YOU WILL HAVE

All of the assets in the subaccounts of the Account are invested in shares of
the corresponding funds of the Series Funds. We will vote the shares of each of
the funds of the Series Funds which are deemed attributable to variable life
insurance policies at regular and special meetings of the Series Funds'
shareholders in accordance with instructions received from owners of such
policies. Shares of the Series Funds held in the Account which are not
attributable

<PAGE>

to such policies, as well as shares for which instructions from owners are not
received, will be represented by us at the meeting. We will vote such shares for
and against each matter in the same proportions as the votes based upon the
instructions received from the owners of such policies.

We determine the number of a fund's shares held in a subaccount attributable
to each owner by dividing the amount of a policy's account value held in the
subaccount by the net asset value of one share in the fund. Fractional votes
will be counted. We determine the number of shares as to which the owner may
give instructions as of the record date for the Series Fund's meeting. Owners of
policies may give instructions regarding the election of the Board of Trustees
or Board of Directors of the Series Fund, ratification of the selection of
independent auditors, approval of Series Fund investment advisory agreements and
other matters requiring a shareholder vote. We will furnish owners with
information and forms to enable owners to give voting instructions.

However, we may, in certain limited circumstances permitted by the SEC's
rules, disregard voting instructions. If we do disregard voting instructions,
you will receive a summary of that action and the reasons for it in the next
semi-annual report to owners.

CHANGES THAT JHVLICO CAN MAKE AS TO YOUR POLICY

Changes relating to a Series Fund or the Account

The voting privileges described in this prospectus reflect our understanding
of applicable Federal securities law requirements. To the extent that applicable
law, regulations or interpretations change to eliminate or restrict the need for
such voting privileges, we reserve the right to proceed in accordance with any
such revised requirements. We also reserve the right, subject to compliance with
applicable law, including approval of owners if so required, (1) to transfer
assets determined by JHVLICO to be associated with the class of policies to
which your policy belongs from the Account to another separate account or
subaccount, (2) to operate the Account as a "management-type investment company"
under the 1940 Act, or in any other form permitted by law, the investment
adviser of which would be JHVLICO, an affiliate or John Hancock, (3) to
deregister the Account under the 1940 Act, (4) to substitute for the fund shares
held by a subaccount any other investment permitted by law, and (5) to take any
action necessary to comply with or obtain any exemptions from the 1940 Act. We
would notify owners of any of the foregoing changes and, to the extent legally
required, obtain approval of owners and any regulatory body prior thereto. Such
notice and approval, however, may not be legally required in all cases.

Other permissible changes

We reserve the right to make any changes in the policy necessary to ensure the
policy is within the definition of life insurance under the Federal tax laws and
is in compliance with any changes in Federal or state tax laws.

In our policies, we reserve the right to make certain changes if they would
serve the best interests of policy owners or would be appropriate in carrying
out the purposes of the policies. Such changes include the following:

. Changes necessary to comply with or obtain or continue exemptions under
the federal securities laws

. Combining or removing investment options

. Changes in the form of organization of any separate account

Any such changes will be made only to the extent permitted by applicable laws
and only in the manner permitted by such laws. When required by law, we will
obtain your approval of the changes and the approval of any appropriate
regulatory authority.

ADJUSTMENTS WE MAKE TO DEATH BENEFITS

If the insured person commits suicide within certain time periods, the amount
of death benefit we

<PAGE>

pay will be limited as described in the policy. Also, if an application
misstated the age or gender of the insured person, we will adjust the amount of
any death benefit as described in the policy.

WHEN WE PAY POLICY PROCEEDS

General

We will pay any death benefit, withdrawal, surrender value or loan within 7
days after we receive the last required form or request (and, with respect to
the death benefit, any other documentation that may be required). If we don't
have information about the desired manner of payment within 7 days after the
date we receive notification of the insured person's death, we will pay the
proceeds as a single sum, normally within 7 days thereafter.

Delay to challenge coverage

We may challenge the validity of your insurance policy based on any material
misstatements made to us in the application for the policy. We cannot make such
a challenge, however, beyond certain time limits that are specified in the
policy.

Delay for check clearance

We reserve the right to defer payment of that portion of your account value
that is attributable to a premium payment made by check for a reasonable period
of time (not to exceed 15 days) to allow the check to clear the banking system.

Delay of separate account proceeds

We reserve the right to defer payment of any death benefit, loan or other
distribution that is derived from a variable investment option if (a) the New
York Stock Exchange is closed (other than customary weekend and holiday
closings) or trading on the New York Stock Exchange is restricted; (b) an
emergency exists, as a result of which disposal of securities is not reasonably
practicable or it is not reasonably practicable to fairly determine the account
value; or (c) the SEC by order permits the delay for the protection of owners.
Transfers and allocations of account value among the investment options may also
be postponed under these circumstances. If we need to defer calculation of
separate account values for any of the foregoing reasons, all delayed
transactions will be processed at the next values that we do compute.

OTHER DETAILS ABOUT EXERCISING RIGHTS AND PAYING BENEFITS

Joint ownership

If more than one person owns a policy, all owners must join in most requests
to exercise rights under the policy.

Assigning your policy

You may assign your rights in the policy to someone else as collateral for a
loan or for some other reason. Assignments do not require the consent of any
revocable beneficiary. A copy of the assignment must be forwarded to us. We are
not responsible for any payment we make or any action we take before we receive
notice of the assignment in good order. Nor are we responsible for the validity
of the assignment. An absolute assignment is a change of ownership. All
collateral assignees of record must consent to any full surrender, partial
withdrawal or loan from the policy.

Your beneficiary

You name your beneficiary when you apply for the policy. The beneficiary is
entitled to the proceeds we pay following the insured person's death. You may
change the beneficiary during the insured person's lifetime. Such a change
requires the consent of any irrevocable named beneficiary. A new beneficiary
designation is effective as of the date you sign it, but will not affect any
payments we make before we receive it. If no beneficiary is living when the
insured person dies, we will pay the insurance proceeds to the owner or the
owner's estate.

<PAGE>

YEAR 2000 ISSUES

The advent of the Year 2000 presents a technological challenge to JHVLICO. In
close cooperation with John Hancock Mutual Life Insurance Company, its parent,
JHVLICO has developed and is executing 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 has substantially completed the process of remediating its systems and
expects the compliance testing component of the project to be substantially
complete by June, 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. For more information about the impact
of year 2000, please refer to Note 12 of the Notes to Statutory-Basis Financial
Statements of John Hancock Variable Life Insurance Company included in this
prospectus.

LEGAL MATTERS

The legal validity of the policies described in this prospectus has been
passed on by Ronald J. Bocage, Vice President and Counsel for JHVLICO. Messrs.
Freedman, Levy, Kroll & Simonds, Washington, D.C., have advised us on certain
Federal securities law matters in connection with the policies.

REGISTRATION STATEMENT FILED WITH THE SEC

This prospectus omits certain information contained in the Registration
Statement which has been filed with the SEC. More details may be obtained from
the SEC upon payment of the prescribed fee.

ACCOUNTING AND ACTUARIAL EXPERTS

The financial statements of JHVLICO and the Account included in this
prospectus have been audited by Ernst & Young LLP, independent auditors, for the
periods indicated in their report thereon which appears 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 OF JHVLICO AND THE ACCOUNT

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

<PAGE>

LIST OF DIRECTORS AND EXECUTIVE OFFICERS OF JHVLICO

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

<TABLE>
<CAPTION>
Directors 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.
Michele G. Van Leer Vice Chairman of the Board and President of JHVLICO;
Senior Vice President, John Hancock Mutual Life
Insurance Company.
Joseph A. Tomlinson Director and Vice President of JHVLICO; Vice President,
John Hancock Mutual Life Insurance Company.
Ronald J. Bocage Director, Vice President and Counsel of JHVLICO; Vice
President and Counsel, 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.
Malcolm Cheung Director of JHVLICO; Second Vice President, John
Hancock Mutual Life Insurance Company
Robert S. Paster Director of JHVLICO; Second Vice President, John
Hancock Mutual Life Insurance Company.
Barbara L. Luddy Director and Actuary of JHVLICO; Second Vice President,
John Hancock Mutual Life Insurance Company.
Daniel L. Ouellette Vice President, Marketing, of JHVLICO; Vice President,
John Hancock Mutual Life Insurance Company.
Patrick F. Smith Controller of JHVLICO; Assistant Controller, John
Hancock Mutual Life Insurance Company.
</TABLE>

The business address of all Directors and officers of JHVLICO is John Hancock
Place, Boston, Massachusetts 02117.

<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, 1998
and 1997, and the related statutory-basis statements of operations and
unassigned deficit and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

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

In our 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, 1998 and 1997, 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, 1998 and 1997, and the results
of its operations and its cash flows for the years then ended in conformity with
accounting practices prescribed or permitted by the Commonwealth of
Massachusetts Division of Insurance.

ERNST & YOUNG LLP

Boston, Massachusetts
February 19, 1999

<PAGE>

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

STATUTORY-BASIS STATEMENTS OF FINANCIAL POSITION

<TABLE>
<CAPTION>
December 31
--------------------
1998 1997
--------- -----------
(In millions)
<S> <C> <C>
ASSETS
Bonds--Note 6 . . . . . . . . . . . . . . . . . . . . $1,185.8 $1,092.7
Preferred stocks . . . . . . . . . . . . . . . . . . . 36.5 17.2
Common stocks . . . . . . . . . . . . . . . . . . . . 3.1 2.3
Investment in affiliates . . . . . . . . . . . . . . . 81.7 79.1
Mortgage loans on real estate--Note 6 . . . . . . . . 388.1 273.9
Real estate . . . . . . . . . . . . . . . . . . . . . 41.0 39.9
Policy loans . . . . . . . . . . . . . . . . . . . . . 137.7 106.8
Cash items:
Cash in banks . . . . . . . . . . . . . . . . . . . 11.4 83.1
Temporary cash investments . . . . . . . . . . . . . 8.5 60.1
-------- --------
19.9 143.2
Premiums due and deferred . . . . . . . . . . . . . . 32.7 33.8
Investment income due and accrued . . . . . . . . . . 29.8 24.7
Other general account assets . . . . . . . . . . . . . 47.5 16.8
Assets held in separate accounts . . . . . . . . . . . 6,595.2 4,691.1
-------- --------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . $8,599.0 $6,521.5
======== ========
OBLIGATIONS AND STOCKHOLDER'S EQUITY
OBLIGATIONS
Policy reserves . . . . . . . . . . . . . . . . . . $1,652.0 $1,124.3
Federal income and other taxes payable--Note 1 . . . 44.3 36.1
Other general account obligations . . . . . . . . . 150.9 481.9
Transfers from separate accounts, net . . . . . . . (190.3) (146.8)
Asset valuation reserve--Note 1 . . . . . . . . . . 21.9 18.6
Obligations related to separate accounts . . . . . . 6,589.4 4,685.7
-------- --------
TOTAL OBLIGATIONS . . . . . . . . . . . . . . . . . . 8,268.2 6,199.8
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 . . . . . . . . . . . . . . . . . (49.2) (58.3)
-------- --------
TOTAL STOCKHOLDER'S EQUITY . . . . . . . . . . . . . . 330.8 321.7
-------- --------
TOTAL OBLIGATIONS AND STOCKHOLDER'S EQUITY . . . . . . $8,599.0 $6,521.5
======== ========
</TABLE>

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

<PAGE>

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

STATUTORY-BASIS STATEMENTS OF OPERATIONS AND UNASSIGNED DEFICIT

<TABLE>
<CAPTION>
Year ended December 31
-----------------------
1998 1997
----------- -------------
(In millions)
<S> <C> <C>
INCOME
Premiums . . . . . . . . . . . . . . . . . . . . $1,272.3 $ 872.7
Net investment income--Note 3 . . . . . . . . . 122.8 89.7
Other, net . . . . . . . . . . . . . . . . . . . 618.1 449.1
-------- --------
2,013.2 1,411.5
BENEFITS AND EXPENSES
Payments to policyholders and beneficiaries . . 301.4 264.0
Additions to reserves to provide for future
payments to policyholders and beneficiaries . 1,360.2 826.2
Expenses of providing service to policyholders
and obtaining new insurance
--Note 5 . . . . . . . . . . . . . . . . . . . 274.2 233.2
State and miscellaneous taxes . . . . . . . . . 28.1 19.1
-------- --------
1,963.9 1,342.5
-------- --------
GAIN FROM OPERATIONS BEFORE FEDERAL INCOME
TAXES AND NET REALIZED CAPITAL LOSSES . . . 49.3 69.0
Federal income taxes--Note 1 . . . . . . . . . . . 33.1 38.5
-------- --------
GAIN FROM OPERATIONS BEFORE NET REALIZED
CAPITAL
LOSSES . . . . . . . . . . . . . . . . . . . 16.2 30.5
Net realized capital losses--Note 4 . . . . . . . (0.6) (3.0)
-------- --------
NET INCOME . . . . . . . . . . . . . . . . . 15.6 27.5
Unassigned deficit at beginning of year . . . . . (58.3) (96.9)
Net unrealized capital (losses) gains and other
adjustments--Note 4 . . . . . . . . . . . . . . . (6.0) 5.0
Other reserves and adjustments . . . . . . . . . . (0.5) 6.1
-------- --------
UNASSIGNED DEFICIT AT END OF YEAR . . . . . . . . $ (49.2) $ (58.3)
======== ========
</TABLE>

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

<PAGE>

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

STATUTORY-BASIS STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Year ended December 31
-----------------------
1998 1997
----------- ------------
(In millions)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Insurance premiums . . . . . . . . . . . . . . . $1,275.3 $ 877.0
Net investment income . . . . . . . . . . . . . . 118.2 89.9
Benefits to policyholders and beneficiaries . . . (275.5) (245.2)
Dividends paid to policyholders . . . . . . . . . (22.3) (18.7)
Insurance expenses and taxes . . . . . . . . . . (296.9) (267.2)
Net transfers to separate accounts . . . . . . . (874.4) (715.2)
Other, net . . . . . . . . . . . . . . . . . . . 551.3 408.9
-------- -------
NET CASH PROVIDED FROM OPERATIONS . . . . . . 475.7 129.5
-------- -------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Bond purchases . . . . . . . . . . . . . . . . . (618.8) (621.6)
Bond sales . . . . . . . . . . . . . . . . . . . 340.7 197.3
Bond maturities and scheduled redemptions . . . . 111.8 34.1
Bond prepayments . . . . . . . . . . . . . . . . 76.5 51.6
Stock purchases . . . . . . . . . . . . . . . . . (23.4) (15.7)
Proceeds from stock sales . . . . . . . . . . . . 1.9 6.7
Real estate purchases . . . . . . . . . . . . . . (4.2) (1.3)
Real estate sales . . . . . . . . . . . . . . . . 2.1 0.4
Other invested assets purchases . . . . . . . . . 0.0 (1.0)
Proceeds from the sale of other invested assets . 0.0 0.3
Mortgage loans issued . . . . . . . . . . . . . . (145.5) (94.5)
Mortgage loan repayments . . . . . . . . . . . . 33.2 32.4
Other, net . . . . . . . . . . . . . . . . . . . (435.2) 393.1
-------- -------
NET CASH USED IN INVESTING ACTIVITIES . . . . (660.9) (18.2)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in short-term note payable . . . . . 61.9 0.0
-------- -------
NET CASH PROVIDED FROM FINANCING ACTIVITIES . 61.9 0.0
-------- -------
(DECREASE) INCREASE IN CASH AND TEMPORARY CASH
INVESTMENTS. . . . . . . . . . . . . . . . . . . . (123.3) 111.3
Cash and temporary cash investments at beginning of
year . . . . . . . . . . . . . . . . . . . . . . . 143.2 31.9
-------- -------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF YEAR $ 19.9 $ 143.2
======== =======
</TABLE>

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

<PAGE>

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS

NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES

John Hancock Variable Life Insurance Company (the Company) is a wholly-owned
subsidiary of John Hancock Mutual Life Insurance Company (John Hancock). The
Company, domiciled in the Commonwealth of Massachusetts, principally writes
variable and universal life insurance policies. Those policies primarily are
marketed through John Hancock's sales organization, which includes a career
agency system composed of company-owned, unionized branch offices and
independent general agencies. Policies also are sold through various
unaffiliated securities broker-dealers and certain other financial institutions.
Currently, the Company writes business in all states except New York.

The preparation of 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, are recorded directly to unassigned
deficit rather than being reflected in income. The effects of the foregoing
variances from GAAP have not been determined but are presumed to be material.

The significant accounting practices of the Company are as follows:

Pending Statutory Standards: During March 1998, the NAIC adopted the
codification of statutory accounting practices, which is effective in 2001.
Codification will likely change, to some extent, prescribed statutory accounting
practices and may result in changes to the accounting practices that the Company
uses to prepare its statutory-basis financial statements. Codification will
require adoption by the various states before it becomes the prescribed
statutory basis of accounting for insurance companies domesticated within those
states. Accordingly, before codification becomes effective for the Company, the
Massachusetts Division of Insurance must adopt codification as the prescribed
basis of accounting on which domestic insurers must report their statutory-basis
results to the Division of Insurance. The impact of any such changes on the
Company's unassigned deficit is not expected to be material.

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

<PAGE>

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED

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

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

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

Investments in affiliates are included on the statutory equity method.

Loan-backed bonds and structured securities are valued at amortized cost using
the interest method including anticipated prepayments. Prepayment assumptions
are obtained from broker dealer surveys or internal estimates and are based on
the current interest rate and economic environment. The retrospective
adjustment method is used to value all such securities except for
interest-only securities, which are valued using the prospective method.

The net interest effect of interest rate and currency rate swap transactions
is recorded as an adjustment of interest income as incurred. The initial cost
of interest rate cap agreements is amortized to net investment income over the
life of the related agreement. Gains and losses on financial futures contracts
used as hedges against interest rate fluctuations are deferred and recognized
in income over the period being hedged.

Mortgage loans are carried at outstanding principal balance or amortized cost.

Investment real estate is carried at depreciated cost, less encumbrances.
Depreciation on investment real estate is recorded on a straight-line basis.
Accumulated depreciation amounted to $3.0 million in 1998 and $2.1 million in
1997.

Real estate acquired in satisfaction of debt and real estate held for sale are
carried at the lower of cost or fair value.

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

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, 1998, the IMR, net of 1998 amortization of $2.4 million, amounted to $10.7
million, which is included in policy reserves. The corresponding 1997 amounts
were $1.2 million and $7.8 million, respectively.

Goodwill: The excess of cost over the statutory book value of the net assets of
life insurance business acquired was $11.4 million and $13.1 million at December
31, 1998 and 1997, respectively, and generally is amortized over a ten-year
period using a straight-line method.

<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.

Fair values for futures contracts are based on quoted market prices. Fair
values for interest rate swap, cap agreements, and currency swap agreements
are based on current settlement values. The current settlement values are
based on brokerage quotes that utilize pricing models or formulas using
current assumptions.

The fair value for mortgage 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, 1998.

Capital Gains and Losses: Realized capital gains and losses are determined using
the specific identification method. Realized capital gains and losses, net of
taxes and amounts transferred to the IMR, are included in net gain or loss.
Unrealized gains and losses, which consist of market value and book value
adjustments, are shown as adjustments to the unassigned deficit.

<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 1998.

Federal Income Taxes: Federal income taxes are reported in the financial
statements based on amounts determined to be payable as a result of operations
within the current accounting period. The operations of the Company are
consolidated with John Hancock in filing a consolidated federal income tax
return basis for the affiliated group. The federal income taxes of the Company
are allocated on a separate return basis with certain adjustments. The Company
made payments of $38.2 million in 1998 and $29.6 million in 1997.

Income before taxes differs from taxable income principally due to tax-exempt
investment income, the limitation placed on the tax deductibility of
policyholder dividends, accelerated depreciation, differences in policy reserves
for tax return and financial statement purposes, capitalization of policy
acquisition expenses for tax purposes and other adjustments prescribed by the
Internal Revenue Code.

Amounts for disputed tax issues relating to the prior years are charged or
credited directly to policyholders' contingency reserve.

Adjustments to Policy Reserves: From time to time, the Company finds it
appropriate to modify certain required policy reserves because of changes in
actuarial assumptions. Reserve modifications resulting from such determinations
are recorded directly to stockholder's equity. During 1997, the Company refined
certain actuarial assumptions inherent in the calculation of reserves related to
AIDS claims under individual life insurance policies resulting in a $6.4 million
increase in stockholder's equity at December 31, 1997. No additional refinements
were made during 1998.

Reinsurance: Premiums, commissions, expense reimbursements, benefits and
reserves related to reinsured business are accounted for on bases consistent
with those used in accounting for the original policies issued and the terms of
the reinsurance contracts. Premiums ceded to other companies have been reported
as a reduction of premium income. Amounts applicable to reinsurance ceded for
future policy benefits, unearned premium reserves and claim liabilities have
been reported as reductions of these items.

Reclassification: Certain 1997 amounts have been reclassified to conform to the
1998 presentation.

<PAGE>

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
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 1998 and 1997.

On June 24, 1993, the Company contributed $24.6 million in additional capital to
CPAL. CPAL was renamed John Hancock Life Insurance Company of America (JHLICOA)
on July 7, 1993. JHLICOA was subsequently renamed Investors Partner Life Company
(IPL) on March 5, 1998. IPL 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>
1998 1997
------- -------
(In millions)
<S> <C> <C>
Investment expenses . . . . . . . . . . . . . . . . . . . . $ 8.3 $5.0
Interest expense . . . . . . . . . . . . . . . . . . . . . 2.4 0.7
Depreciation expense . . . . . . . . . . . . . . . . . . . 0.8 1.1
Investment taxes . . . . . . . . . . . . . . . . . . . . . 0.7 0.4
----- ----
$12.2 $7.2
===== ====
</TABLE>

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

Net realized capital gains (losses) consist of the following items:

<TABLE>
<CAPTION>
1998 1997
------ ------
(In millions)
<S> <C> <C>
Net gains from asset sales . . . . . . . . . . . . . . . . . $ 7.6 $ 0.8
Capital gains tax . . . . . . . . . . . . . . . . . . . . . (2.9) (0.7)
Net capital gains transferred to IMR . . . . . . . . . . . . (5.3) (3.1)
----- -----
Net Realized Capital Losses . . . . . . . . . . . . . . . $(0.6) $(3.0)
===== =====
</TABLE>

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

<TABLE>
<CAPTION>
1998 1997
------ ------
(In millions)
<S> <C> <C>
Net (losses) gains from changes in security values
and book value adjustments . . . . . . . . . . . . $ (2.7) $ 7.0
Increase in asset valuation reserve . . . . . . . . (3.3) (2.0)
-------------- -----
Net Unrealized Capital (Losses) Gains and Other
Adjustments . . . . . . . . . . . . . . . . . . $ (6.0) $ 5.0
============== =====
</TABLE>

<PAGE>

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
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 1998 and 1997 to reflect continuing changes in
the Company's operations. The amount of the service fee charged to the Company
was $157.5 million and $123.6 million in 1998 and 1997, 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 $0.7 million and
$0.9 million in 1998 and 1997, 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 1998 issues of flexible premium variable life insurance and
scheduled premium variable life insurance policies. In connection with this
agreement, John Hancock transferred $4.9 million and $22.0 million of cash for
tax, commission, and expense allowances to the Company, which increased the
Company's net gain from operations by $22.2 million and $10.1 million in 1998
and 1997, respectively.

The Company also has a modified coinsurance agreement with John Hancock to
reinsure 50% of 1995 through 1998 issues of certain retail annuity contracts
(Independence Preferred and Declaration). In connection with this agreement, the
Company received a net cash payment of $12.7 million in 1998 and made a net cash
payment of $1.1 million in 1997 for surrender benefits, tax, reserve increase,
commission, expense allowances and premium. This agreement increased the
Company's net gain from operations by $8.4 million and $9.8 million in 1998 and
1997, 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 1998 and 1997 for all policies that are not reinsured under
any other indemnity agreement. In connection with the agreement, John Hancock
received $1.0 million in 1998 and transferred $2.4 million in 1997 of cash for
mortality claims to the Company, which decreased by $0.5 million and increased
by $1.3 million the Company's net gain from operations in 1998 and 1997,
respectively.

At December 31, 1998, the Company had outstanding a short-term note of $61.9
million payable to an affiliate at a variable rate of interest. The note is part
of a revolving line of credit. Interest paid in 1998 was $2.9 million. The note
is included in other general account obligations.

<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
December 31, 1998 Value Gains Losses Value
----------------- --------- ---------- ---------- ----------
(In millions)
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies . . $ 5.1 $ 0.1 $ 0.0 $ 5.2
Obligations of states and
political subdivisions . . . . 3.2 0.3 0.0 3.5
Corporate securities . . . . . 925.2 50.4 15.0 960.6
Mortgage-backed securities . . 252.3 10.0 0.1 262.2
-------- ----- ----- -------
Total bonds . . . . . . . . . $1,185.8 $60.8 $15.1 $1,231.5
======== ===== ===== ========
</TABLE>

<TABLE>
<CAPTION>
December 31, 1997
-----------------
<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>

The statement value and fair value of bonds at December 31, 1998, 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 . . . . . . . . . . . . . . . . $ 57.3 $ 59.1
Due after one year through five years . . . . . . . . . 283.4 294.1
Due after five years through ten years . . . . . . . . 374.9 388.7
Due after ten years . . . . . . . . . . . . . . . . . . 217.9 227.4
-------- --------
933.5 969.3
Mortgage-backed securities . . . . . . . . . . . . . . 252.3 262.2
-------- --------
$1,185.8 $1,231.5
======== ========
</TABLE>

Gross gains of $3.4 million in 1998 and $1.1 million in 1997 and gross losses of
$0.7 million in 1998 and $4.5 million in 1997 were realized from the sale of
bonds.

At December 31, 1998, bonds with an admitted asset value of $8.6 million were on
deposit with state insurance departments to satisfy regulatory requirements.

The cost of common stocks was $2.1 million and $0.0 million at December 31, 1998
and 1997, respectively. At December 31, 1998, gross unrealized appreciation on
common stocks totaled $1.3 million, and gross unrealized

<PAGE>

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 6--INVESTMENTS--CONTINUED

depreciation totaled $0.3 million. The fair value of preferred stock totaled
$36.5 million at December 31, 1998 and $17.2 million at December 31, 1997.

Bonds with amortized cost of $0.9 million were non-income producing for the
twelve months ended December 31, 1998.

At December 31, 1998, 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 . . . . . $106.4 East North Central . $ 56.4
Hotels . . . . . . . 9.6 East South Central . 0.9
Industrial . . . . . 71.9 Middle Atlantic . . . 26.2
Office buildings . . 78.2 Mountain . . . . . . 27.5
Retail . . . . . . . 29.6 New England . . . . . 36.9
Agricultural . . . . 71.5 Pacific . . . . . . . 96.4
Other . . . . . . . . 20.9 South Atlantic . . . 83.8
West North Central . 13.1
West South Central . 43.3
Other . . . . . . . . 3.6
------ ------
$388.1 $388.1
====== ======
</TABLE>

At December 31, 1998, the fair values of the commercial and agricultural
mortgage loans portfolios were $331.3 million and $70.0 million, respectively.
The corresponding amounts as of December 31, 1997 were approximately $243.8
million and $42.0 million, respectively.

The maximum and minimum lending rates for mortgage loans during 1998 were 9.19%
and 6.82% for agricultural loans and 8.88% and 6.56% 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.

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 1998 were $590.2 million, $21.5 million, and $8.2 million,
respectively. The corresponding amounts in 1997 were $427.4 million, $18.3
million, and $10.1 million, respectively.

<PAGE>

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 7--REINSURANCE--CONTINUED

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, 1998 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 notional amounts, carrying values and estimated fair values of the Company's
derivative instruments were as follows at December 31:

<TABLE>
<CAPTION>
Assets (Liabilities)
Number of Contracts/ ----------------------------------------
Notional Amounts 1998 1997
--------------------- --------------------- -----------------
Carrying Fair Carrying Fair
1998 1997 Value Value Value Value
---------- ---------- ---------- --------- -------- --------
($ In millions)
<S> <C> <C> <C> <C> <C> <C>
Futures contracts to
sell securities . . 947 367 $(0.5) $ (0.5) $(0.4) $(0.4)
Interest rate swap
agreements . . . . . $365.0 $245.0 -- (17.7) -- (7.8)
Interest rate cap
agreements . . . . . 89.4 89.4 3.1 3.1 1.4 1.4
Currency rate swap
agreements . . . . . 15.8 14.3 -- (3.3) -- (2.1)
</TABLE>

The Company uses futures contracts, interest rate swap, cap agreements, and
currency rate swap agreements for other than trading purposes to hedge and
manage its exposure to changes in interest rate levels, foreign exchange rate
fluctuations and to manage duration mismatch of assets and liabilities.

The futures contracts expire in 1999. The interest rate swap agreements expire
in 1999 to 2009. The interest rate cap agreements expire in 2006 to 2007. The
currency rate swap agreements expire in 2006 to 2009.

The Company's exposure to credit risk is the risk of loss from a counterparty
failing to perform to the terms of the contract. The Company continually
monitors its position and the credit ratings of the counterparties to these
derivative instruments. To limit exposure associated with counterparty
nonperformance on interest rate and currency swap agreements, the Company enters
into master netting agreements with its counterparties. The Company believes the
risk of incurring losses due to nonperformance by its counterparties is remote
and that such losses, if any, would be immaterial. Futures contracts trade on
organized exchanges and, therefore, have minimal credit risk.

<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, 1998 Percent
----------------- ---------
(In millions)
<S> <C> <C>
Subject to discretionary withdrawal (with
adjustment)
With market value adjustment . . . . . . . . . $ 0.9 0.1%
At book value less surrender charge . . . . . 1,677.9 88.8
-------- -----
Total with adjustment . . . . . . . . . . . 1,678.8 88.9
Subject to discretionary withdrawal at book value
(without adjustment) . . . . . . . . . . . . . 203.6 10.8
Not subject to discretionary withdrawal--general
account . . . . . . . . . . . . . . . . . . . . 6.5 0.3
-------- -----
Total annuity reserves and deposit
liabilities. . . . . . . . . . . . . . . . $1,888.9 100.0%
======== =====
</TABLE>

NOTE 10--COMMITMENTS AND CONTINGENCIES

The Company has extended commitments to purchase long-term bonds and issue real
estate mortgages totaling $5.9 million and $24.8 million, respectively, at
December 31, 1998. 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 $32.1 million at December 31, 1998. The majority of these commitments
expire in 1999.

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, 1998. 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.

<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
---------------------------------------------
1998 1997
----------------------- -------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
----------- ----------- --------- --------
(In millions)
<S> <C> <C> <C> <C>
Assets
Bonds--Note 6 . . . . . . $1,185.8 $1,231.5 $1,092.7 $1,138.5
Preferred stocks--Note 6 . 36.5 36.5 17.2 17.2
Common stocks--Note 6 . . 3.1 3.1 2.3 2.3
Mortgage loans on real
estate--Note 6 . . . . . 388.1 401.3 273.9 285.8
Policy loans--Note 1 . . . 137.7 137.7 106.8 106.8
Cash and cash
equivalents--Note 1 . . 19.9 19.9 143.2 143.2
Derivatives assets
(liabilities) relating
to:--Note 8
Futures contracts . . . . (0.5) (0.5) (0.4) (0.4)
Interest rate swaps . . . -- (17.7) -- (7.8)
Currency rate swaps . . . -- (3.3) -- (2.1)
Interest rate caps . . . . 3.1 3.1 1.4 1.4
Liabilities
Commitments--Note 10 . . . -- 32.1 -- 194.5
</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 is executing its plan to address the impact of
the Year 2000 issues that result from computer programs being written using two
digits to reflect the year rather than four to define the applicable year and
century. Historically, the first two digits were hardcoded to save memory. Many
of John Hancock's computer programs that have date-sensitive software, including
those relied upon by the Company, may recognize a date using "00" as the year
1900 rather than the year 2000. This could result in an information technology
(IT) system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices or engage in similar normal business activities. In addition,
non-IT systems including, but not limited to, security alarms, elevators and
telephones are subject to malfunction due to their dependence on embedded
technology such as microcontrollers for proper operation. As described, the Year
2000 project presents a number of challenges for financial institutions since
the correction of Year 2000 issues in IT and non-IT systems will be complex and
costly for the entire industry.

John Hancock began to address the Year 2000 project as early as 1994. John
Hancock's plan to address the Year 2000 Project includes an awareness campaign,
an assessment period, a renovation stage, validation work and an implementation
of Company solutions.

The continuous awareness campaign serves several purposes: defining the problem,
gaining executive level support and sponsorship, establishing a team and overall
strategy, and assessing existing information system management resources.
Additionally, the awareness campaign establishes an education process to ensure
that all employees are aware of the Year 2000 issue and knowledgeable of their
role in securing solutions.

<PAGE>

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 12--IMPACT OF YEAR 2000 (UNAUDITED)--CONTINUED

The assessment phase, which was completed for both IT and non-IT systems as of
April 1998, included the identification, inventory, analysis, and prioritization
of IT and non-IT systems and processes to determine their conversion or
replacement.

The renovation stage reflects the conversion, validation, replacement, or
elimination of selected platforms, applications, databases and utilities,
including the modification of applicable interfaces. Additionally, the
renovation stage includes performance, functionality, and regression testing and
implementation. As of December 31, 1998, the renovation phase was substantially
complete for computer applications, systems and desktops. For all remaining
components, the renovation phase is underway and will be complete before the end
of the second quarter of 1999.

The validation phase consists of the compliance testing of renovated systems.
The validation phase is expected to be complete by mid 1999, after renovation is
accomplished. Testing facilities will be used through the remainder of 1999 to
perform special functional testing. Special functional testing includes testing,
as required, with material third parties and industry groups and performing
reviews of "dry runs" of year-end activities. Scheduled testing of material
relationships with third parties, including those impacting the Company, is
underway. It is anticipated that testing with material business partners will
continue through much of 1999.

Finally, the implementation phase involves the actual implementation of
converted or replaced platforms, applications, databases, utilities, interfaces,
and contingency planning. Implementation is being performed concurrently during
the renovation phase and is expected to be completed before the end of the
second quarter of 1999.

The costs of the Year 2000 project consist of internal IT personnel and external
costs such as consultants, programmers, replacement software, and hardware. The
costs of the Year 2000 project are expensed as incurred. The project is funded
partially through a reallocation of resources from discretionary projects.
Through December 31, 1998, John Hancock has incurred and expensed approximately
$9.8 million in related payroll costs for its internal IT personnel on the
project. The estimated range of remaining internal IT personnel costs of the
project is approximately $8 to $9 million. Through December 31, 1998, John
Hancock has incurred and expensed approximately $36.4 million in external costs
for the project. The estimated range of remaining external costs of the project
is approximately $35 to $36 million. The total costs of the Year 2000 project to
John Hancock, based on management's best estimates, include approximately $18
million in internal IT personnel, $7.4 million in the external modification of
software, $34.2 million for external solution providers, $19.4 million in
replacement costs of non-compliant IT systems and $12.6 million in oversight,
test facilities and other expenses. Accordingly, the estimated range of total
costs of the Year 2000 project to John Hancock, internal and external, is
approximately $90 to $95 million. However, there can be no guarantee that these
estimates will be achieved and actual results could materially differ from those
plans. Specific factors that might cause such material differences include, but
are not limited to, the availability and cost of personnel trained in this area,
the ability to locate and correct all relevant computer codes, and similar
uncertainties.

<PAGE>

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 12--IMPACT OF YEAR 2000 (UNAUDITED)--CONTINUED

John Hancock's total Year 2000 project costs include the estimated impact of
external solution providers and are based on presently available information.
However, there is no guarantee that the systems of other companies that John
Hancock's systems rely on will be timely converted, or that a failure to convert
by another company, or a conversion that is incompatible with John Hancock's
systems, including those upon which the Company relies, would not have material
adverse effect on John Hancock or the Company. It is documented in trade
publications that companies in foreign countries are not acting as intensively
as domestic companies to remediate Year 2000 issues. Accordingly, it is expected
that Company facilities based outside the United States face higher degrees of
risks from data exchanges with material business partners. In addition, the
Company has numerous customers that hold products of the Company. Nearly all
products sold by the Company contain date sensitive data, examples of which are
policy expiration dates, birth dates and premium payment dates. Finally, the
regulated nature of the Company's industry exposes it to potential supervisory
or enforcement actions relating to Year 2000 issues.

John Hancock's contingency planning initiative related to the Year 2000 project
is underway. The plan is addressing John Hancock's readiness as well as that of
material business partners on whom John Hancock and the Company depend. John
Hancock's contingency plans are being designed to keep each subsidiary's
operations functioning in the event of a failure or delay due to the Year 2000
record format and date calculation changes. Contingency plans are being
constructed based on the foundation of extensive business resumption plans that
John Hancock has maintained and updated periodically, which outline responses to
situations that may affect critical business functions. These plans also provide
emergency operations guidance, which defines a documented order of actions to
respond to problems. These extensive business resumption plans are being
enhanced to cover Year 2000 situations.

<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 Equity Index (formerly,
International Equities), Small Cap Growth, International Balanced, Mid Cap
Growth, Large Cap Value, Money Market, Mid Cap Value, Diversified Mid Cap Growth
(formerly, Special Opportunities), Real Estate Equity, Growth & Income, Managed,
Short-Term Bond (formerly, Short-Term U.S. Government), Small Cap Value,
International Opportunities, Equity Index, Strategic Bond, Turner Core Growth,
Enhanced U.S. Equity Fund, Brandes International Equity (formerly, Edinburgh
Overseas Equity Fund), Frontier Capital Appreciation Enhanced U.S. Equity,
Emerging Markets Equity, Global Equity, Bond Index, Small/Mid Cap CORE, and High
Yield Bond Subaccounts) as of December 31, 1998, 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.

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,
1998, the results of their operations and the changes in their net assets for
each of the periods indicated, in conformity with generally accepted accounting
principles.

ERNST & YOUNG LLP

Boston, Massachusetts
February 10, 1999

<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT S

STATEMENT OF ASSETS AND LIABILITIES

DECEMBER 31, 1998

<TABLE>
<CAPTION>
INTERNATIONAL
LARGE CAP SOVEREIGN EQUITY SMALL CAP INTERNATIONAL
GROWTH BOND INDEX GROWTH BALANCED
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ----------- ------------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments in shares
of portfolios of John
Hancock Variable
Series Trust I, at
value. . . . . . . . $65,018,220 $32,541,967 $ 12,595,630 $ 9,078,106 $3,103,327
Investments in shares
of portfolios of M
Fund Inc., at value -- -- -- -- --
Receivable from:
John Hancock Variable
Series Trust I . . 70,159 83,725 29,266 29,789 1,571
M Fund Inc. . . . . -- -- -- -- --
----------- ----------- ------------ ----------- ----------
Total assets . . . . 65,088,379 32,625,692 12,624,896 9,107,895 3,104,898
LIABILITIES
Payable to:
John Hancock Variable
Life Insurance
Company . . . . . . 69,513 83,401 29,117 29,679 1,535
M Fund Inc. . . . . -- -- -- -- --
Asset charges payable 646 324 149 110 36
----------- ----------- ------------ ----------- ----------
Total liabilities . . 70,159 83,725 29,266 29,789 1,571
----------- ----------- ------------ ----------- ----------
Net assets . . . . . $65,018,220 $32,541,967 $ 12,595,630 $ 9,078,106 $3,103,327
=========== =========== ============ =========== ==========
</TABLE>

<TABLE>
<CAPTION>
DIVERSIFIED
MID CAP LARGE CAP MONEY MID CAP MID CAP
GROWTH VALUE MARKET VALUE GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments in shares
of portfolios of John
Hancock Variable
Series Trust I, at
value. . . . . . . . $12,678,444 $16,629,520 $ 86,511,658 $15,754,611 $7,491,413
Investments in shares
of portfolios of M
Fund Inc., at value -- -- -- --- --
Receivable from:
John Hancock Variable
Series Trust I . . 103,676 40,755 20,713,657 117,109 15,168
M Fund Inc. . . . . -- -- -- -- --
----------- ----------- ------------ ----------- ----------
Total assets . . . . 12,782,120 16,670,275 107,225,315 15,871,720 7,506,581
LIABILITIES
Payable to:
John Hancock Variable
Life Insurance
Company . . . . . . 103,543 40,591 20,712,867 116,945 15,077
M Fund Inc. . . . . -- -- -- -- --
Asset charges payable 133 164 790 164 91
----------- ----------- ------------ ----------- ----------
Total liabilities . . 103,676 40,755 20,713,657 117,109 15,168
----------- ----------- ------------ ----------- ----------
Net assets . . . . . $12,678,444 $16,629,520 $ 86,511,658 $15,754,611 $7,491,413
=========== =========== ============ =========== ==========
</TABLE>

See accompanying notes.

<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT S

STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)

DECEMBER 31, 1998

<TABLE>
<CAPTION>
REAL ESTATE GROWTH & SHORT-TERM SMALL CAP
EQUITY INCOME MANAGED BOND VALUE
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments in shares
of portfolios of John
Hancock Variable
Series Trust I, at
value. . . . . . . . $ 4,772,174 $96,407,275 $40,066,692 $19,246,506 $10,510,748
Investments in shares
of portfolios of M
Fund Inc., at value -- -- -- -- --
Receivable from:
John Hancock Variable
Series Trust I . . 115,349 147,773 64,500 1,482 40,758
M Fund Inc. . . . . -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Total assets . . . . 4,887,523 96,555,048 40,131,192 19,247,988 10,551,506
LIABILITIES
Payable to:
John Hancock Variable
Life Insurance
Company . . . . . . 115,288 146,677 64,069 1,304 40,631
M Fund Inc. . . . . -- -- -- -- --
Asset charges payable 61 1,096 431 178 127
----------- ----------- ----------- ----------- -----------
Total liabilities . . 115,349 147,773 64,500 1,482 40,758
----------- ----------- ----------- ----------- -----------
Net assets . . . . . $ 4,772,174 $96,407,275 $40,066,692 $19,246,506 $10,510,748
=========== =========== =========== =========== ===========
</TABLE>

<TABLE>
<CAPTION>
TURNER BRANDES
INTERNATIONAL EQUITY STRATEGIC CORE INTERNATIONAL
OPPORTUNITIES INDEX BOND GROWTH EQUITY
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------- ----------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments in shares
of portfolios of John
Hancock Variable
Series Trust I, at
value. . . . . . . . $18,958,530 $53,964,646 $8,279,571 $ -- $ --
Investments in shares
of portfolios of M
Fund Inc., at value -- -- -- 4,900,189 6,340,754
Receivable from:
John Hancock Variable
Series Trust I . . 130,881 381,439 149 -- --
M Fund Inc. . . . . -- -- -- 121,074 59
----------- ----------- ---------- ---------- ----------
Total assets . . . . 19,089,411 54,346,085 8,279,720 5,021,263 6,340,813
LIABILITIES
Payable to:
John Hancock Variable
Life Insurance
Company . . . . . . 130,683 380,886 55 121,024 --
M Fund Inc. . . . . -- -- -- -- --
Asset charges payable 198 552 94 50 59
----------- ----------- ---------- ---------- ----------
Total liabilities . . 130,881 381,438 149 121,074 59
----------- ----------- ---------- ---------- ----------
Net assets . . . . . $18,958,530 $53,964,647 $8,279,571 $4,900,189 $6,340,754
=========== =========== ========== ========== ==========
</TABLE>

See accompanying notes.

<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT S

STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)

DECEMBER 31, 1998

<TABLE>
<CAPTION>
FRONTIER EMERGING HIGH
CAPITAL ENHANCED MARKETS GLOBAL BOND SMALL/MID YIELD
APPRECIATION U.S. EQUITY EQUITY EQUITY INDEX CAP CORE BOND
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. . . . . . . . . . . . . . . . . . $ -- $ -- $187,005 $164,028 $1,065,457 $303,153 $4,527,584
Investments in shares of portfolios of M
Fund Inc., at value . . . . . . . . . . 9,675,718 2,474,617
Receivable from:
John Hancock Variable Series Trust I . . -- -- 2 2 16 4 20
M Fund Inc. . . . . . . . . . . . . . . 17,003 16,938 -- -- -- -- --
---------- ---------- -------- -------- ---------- -------- ----------
Total assets . . . . . . . . . . . . . . 9,692,721 2,491,555 187,007 164,030 1,065,473 303,157 4,527,604
LIABILITIES
Payable to:
John Hancock Variable Life Insurance
Company . . . . . . . . . . . . . . . . 16,917 16,917 -- -- -- -- --
M Fund Inc. . . . . . . . . . . . . . . -- -- 2 2 16 4 20
Asset charges payable . . . . . . . . . . 86 21 -- -- -- -- --
---------- ---------- -------- -------- ---------- -------- ----------
Total liabilities . . . . . . . . . . . . 17,003 16,938 2 2 16 4 20
---------- ---------- -------- -------- ---------- -------- ----------
Net assets . . . . . . . . . . . . . . . $9,675,718 $2,474,617 $187,005 $164,028 $1,065,457 $303,153 $4,527,584
========== ========== ======== ======== ========== ======== ==========
</TABLE>

See accompanying notes.

<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT S

STATEMENTS OF OPERATIONS

FOR THE YEARS AND PERIODS ENDED DECEMBER 31,

<TABLE>
<CAPTION>
LARGE CAP GROWTH SOVEREIGN BOND
SUBACCOUNT SUBACCOUNT
------------------------------------- -------------------------------
1998 1997 1996 1998 1997 1996
----------- ----------- ------------ ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions
received from:
John Hancock
Variable Series
Trust I . . . . . $ 6,312,073 $ 2,884,498 $ 2,452,382 $2,190,901 $855,742 $242,881
M Fund Inc. . . . . -- -- -- -- -- --
----------- ----------- ----------- ---------- -------- --------
Total investment
income . . . . . . . 6,312,073 2,884,498 2,452,382 2,190,901 855,742 242,881
Expenses:
Mortality and expense
risks . . . . . . . 168,652 91,256 49,880 93,556 39,184 14,129
----------- ----------- ----------- ---------- -------- --------
Net investment income 6,143,421 2,793,242 2,402,502 2,097,345 816,558 228,752
Net realized and
unrealized gain
(loss) on
investments:
Net realized gains . 1,750,881 619,721 444,487 185,230 80,538 5,746
Net unrealized
appreciation
(depreciation)
during the period . 8,041,022 2,301,920 (1,104,574) (378,058) 63,687 (69,973)
----------- ----------- ----------- ---------- -------- --------
Net realized and
unrealized gain
(loss) on investments 9,791,903 2,921,641 (660,087) (192,828) 144,225 (64,227)
----------- ----------- ----------- ---------- -------- --------
Net increase in net
assets resulting from
operations . . . . . $15,935,324 $ 5,714,883 $ 1,742,415 $1,904,517 $960,783 $164,525
=========== =========== =========== ========== ======== ========
</TABLE>

<TABLE>
<CAPTION>
INTERNATIONAL EQUITY INDEX SMALL CAP GROWTH
SUBACCOUNT SUBACCOUNT
---------------------------------- --------------------------------
1998 1997 1996 1998 1997 1996*
---------- ------------ -------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions
received from:
John Hancock
Variable Series
Trust I . . . . . $1,930,710 $ 422,913 $ 52,188 $ -- $ 473 $ 512
M Fund Inc. . . . . -- -- -- -- -- --
---------- ----------- -------- ---------- -------- --------
Total investment
income . . . . . . . 1,930,710 422,913 52,188 -- 473 512
Expenses:
Mortality and expense
risks . . . . . . . 45,651 33,893 23,132 22,593 6,547 1,547
---------- ----------- -------- ---------- -------- --------
Net investment income
(loss) . . . . . . . 1,885,059 389,020 29,056 (22,593) (6,074) (1,035)
Net realized and
unrealized gain
(loss) on
investments:
Net realized gains
(losses). . . . . . 152,030 244,810 165,730 58,729 21,707 (40,018)
Net unrealized
appreciation
(depreciation)
during the period . 78,480 (1,219,540) 137,729 1,070,805 126,699 (2,665)
---------- ----------- -------- ---------- -------- --------
Net realized and
unrealized gain
(loss) on investments 230,510 (974,730) 303,459 1,129,534 148,406 (42,683)
---------- ----------- -------- ---------- -------- --------
Net increase
(decrease) in net
assets resulting from
operations . . . . . $2,115,569 $ (585,710) $332,515 $1,106,941 $142,332 $(43,718)
========== =========== ======== ========== ======== ========
</TABLE>

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

See accompanying notes.

<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT S

STATEMENTS OF OPERATIONS (CONTINUED)

FOR THE YEARS AND PERIODS ENDED DECEMBER 31,

<TABLE>
<CAPTION>
INTERNATIONAL BALANCED MID CAP GROWTH
SUBACCOUNT SUBACCOUNT
------------------------------ --------------------------------
1998 1997 1996* 1998 1997 1996*
---------- --------- ------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions
received from:
John Hancock
Variable Series
Trust I . . . . . $ 185,760 $ 61,249 $ 2,947 $1,114,374 $ -- $ 1,177
M Fund Inc. . . . . -- -- -- -- -- --
---------- -------- ------- ---------- -------- --------
Total investment
income . . . . . . . 185,760 61,249 2,947 1,114,374 -- 1,177
Expenses:
Mortality and expense
risks . . . . . . . 9,687 4,443 356 26,123 8,287 719
---------- -------- ------- ---------- -------- --------
Net investment income
(loss) . . . . . . . 176,073 56,806 2,591 1,088,251 (8,287) 458
Net realized and
unrealized gain
(loss) on
investments:
Net realized gains
(losses). . . . . . 24,206 8,667 56 599,619 1,235 (391)
Net unrealized
appreciation
(depreciation)
during the period . 147,461 (67,714) 5,307 1,184,263 486,186 6,440
---------- -------- ------- ---------- -------- --------
Net realized and
unrealized gain
(loss) on investments 171,667 (59,047) 5,363 1,783,882 487,421 6,049
---------- -------- ------- ---------- -------- --------
Net increase
(decrease) in net
assets resulting from
operations . . . . . $ 347,740 $ (2,241) $ 7,954 $2,872,133 $479,134 $ 6,507
========== ======== ======= ========== ======== ========
</TABLE>

<TABLE>
<CAPTION>
LARGE CAP VALUE MONEY MARKET
SUBACCOUNT SUBACCOUNT
----------------------------- -------------------------------
1998 1997 1996* 1998 1997 1996
---------- -------- ------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions
received from:
John Hancock
Variable Series
Trust I . . . . . $ 797,874 $194,199 $13,644 $1,854,829 $758,434 $287,321
M Fund Inc. . . . . -- -- -- -- -- --
---------- -------- ------- ---------- -------- --------
Total investment
income . . . . . . . 797,874 194,199 13,644 1,854,829 758,434 287,321
Expenses:
Mortality and expense
risks . . . . . . . 41,415 11,163 964 167,813 66,882 30,722
---------- -------- ------- ---------- -------- --------
Net investment income 756,459 183,036 12,680 1,687,016 691,552 256,599
Net realized and
unrealized gain on
investments:
Net realized gains . 330,827 164,821 1,327 -- -- --
Net unrealized
appreciation during
the period . . . . 145,355 279,449 23,553 -- -- --
---------- -------- ------- ---------- -------- --------
Net realized and
unrealized gain on
investments. . . . . 476,182 444,270 24,880 -- -- --
---------- -------- ------- ---------- -------- --------
Net increase in net
assets resulting from
operations . . . . . $1,232,641 $627,306 $37,560 $1,687,016 $691,552 $256,599
========== ======== ======= ========== ======== ========
</TABLE>

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

See accompanying notes.

<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT S

STATEMENTS OF OPERATIONS (CONTINUED)

FOR THE YEARS AND PERIODS ENDED DECEMBER 31,

<TABLE>
<CAPTION>
MID CAP VALUE DIVERSIFIED MID CAP GROWTH
SUBACCOUNT SUBACCOUNT
--------------------------------- -------------------------------------------
1998 1997 1996* 1998 1997 1996
------------ --------- -------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions
received from:
John Hancock
Variable Series
Trust I . . . . . $ 120,469 $446,081 $ 6,878 $ 142,469 $ 878,600 $ 238,163
M Fund Inc. . . . . -- -- -- -- -- --
----------- -------- -------- ------------- ------------ ------------
Total investment
income . . . . . . . 120,469 446,081 6,878 142,469 878,600 238,163
Expenses:
Mortality and expense
risks . . . . . . . 45,020 11,421 377 34,432 35,934 21,146
----------- -------- -------- ------------- ------------ ------------
Net investment income 75,449 434,660 6,501 108,037 842,666 217,017
Net realized and
unrealized gain
(loss) on
investments:
Net realized gains
(losses). . . . . . (538,516) 101,787 845 232,246 297,666 317,400
Net unrealized
appreciation
(depreciation)
during the period . (830,390) (39,717) 13,910 236,333 (730,748) 344,786
----------- -------- -------- ------------- ------------ ------------
Net realized and
unrealized gain
(loss) on investments (1,368,906) 62,070 14,755 468,579 (433,082) 662,186
----------- -------- -------- ------------- ------------ ------------
Net increase
(decrease) in net
assets resulting from
operations . . . . . $(1,293,457) $496,730 $ 21,256 $ 576,616 $ 409,584 $ 879,203
=========== ======== ======== ============= ============ ============
</TABLE>

<TABLE>
<CAPTION>
REAL ESTATE EQUITY GROWTH & INCOME
SUBACCOUNT SUBACCOUNT
--------------------------------- --------------------------------------
1998 1997 1996 1998 1997 1996
------------ --------- -------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions
received from:
John Hancock
Variable Series
Trust I . . . . . $ 305,783 $246,677 $ 50,204 $ 9,266,175 $5,917,063 $3,056,625
M Fund Inc. . . . . -- -- -- -- -- --
----------- -------- -------- ----------- ---------- ----------
Total investment
income . . . . . . . 305,783 246,677 50,204 9,266,175 5,917,063 3,056,625
Expenses:
Mortality and expense
risks . . . . . . . 22,716 13,879 4,547 290,361 169,135 89,391
----------- -------- -------- ----------- ---------- ----------
Net investment income 283,067 232,798 45,657 8,975,814 5,747,928 2,967,234
Net realized and
unrealized gain
(loss) on
investments:
Net realized gains
(losses). . . . . . (454,979) 252,095 19,122 2,061,212 2,390,414 512,402
Net unrealized
appreciation
(depreciation)
during the period . (698,676) (13,488) 191,067 7,759,307 435,778 (496,647)
----------- -------- -------- ----------- ---------- ----------
Net realized and
unrealized gain
(loss) on investments (1,153,655) 238,607 210,189 9,820,519 2,826,192 15,755
----------- -------- -------- ----------- ---------- ----------
Net increase
(decrease) in net
assets resulting from
operations . . . . . $ (870,588) $471,405 $255,846 $18,796,333 $8,574,120 $2,982,989
=========== ======== ======== =========== ========== ==========
</TABLE>

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

See accompanying notes.

<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT S

STATEMENTS OF OPERATIONS (CONTINUED)

FOR THE YEARS AND PERIODS ENDED DECEMBER 31,

<TABLE>
<CAPTION>
MANAGED SHORT-TERM BOND
SUBACCOUNT SUBACCOUNT
---------------------------------- --------------------------------------
1998 1997 1996 1998 1997 1996
---------- ---------- ----------- ------------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions
received from:
John Hancock
Variable Series
Trust I . . . . . $3,606,186 $1,879,954 $1,281,149 $ 977,164 $ 415,542 $181,937
M Fund Inc. . . . . -- -- -- -- -- --
---------- ---------- ---------- ------------ --------- --------
Total investment
income . . . . . . . 3,606,186 1,879,954 1,281,149 977,164 415,542 181,937
Expenses:
Mortality and expense
risks . . . . . . . 121,905 65,383 35,103 50,947 20,551 9,277
---------- ---------- ---------- ------------ --------- --------
Net investment income 3,484,281 1,814,571 1,246,046 926,217 394,991 172,660
Net realized and
unrealized gain
(loss) on
investments:
Net realized gains
(losses). . . . . . 278,186 171,318 124,493 24,740 35,294 (52,888)
Net unrealized
appreciation
(depreciation)
during the period . 1,791,231 715,231 (507,517) (136,999) (25,976) (7,734)
---------- ---------- ---------- ------------ --------- --------
Net realized and
unrealized gain
(loss) on investments 2,069,417 886,549 (383,024) (112,259) 9,318 (60,622)
---------- ---------- ---------- ------------ --------- --------
Net increase in net
assets resulting from
operations . . . . . $5,553,698 $2,701,120 $ 863,022 $ 813,958 $ 404,309 $112,038
========== ========== ========== ============ ========= ========
</TABLE>

<TABLE>
<CAPTION>
SMALL CAP VALUE INTERNATIONAL OPPORTUNITIES
SUBACCOUNT SUBACCOUNT
------------------------------ ---------------------------------
1998 1997 1996* 1998 1997 1996*
---------- --------- ------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions
received from:
John Hancock
Variable Series
Trust I . . . . . $ 47,350 $299,278 $ 8,296 $ 103,399 $ 69,078 $ 2,965
M Fund Inc. . . . . -- -- -- -- -- --
--------- -------- ------- ---------- --------- -------
Total investment
income . . . . . . . 47,350 299,278 8,296 103,399 69,078 2,965
Expenses:
Mortality and expense
risks . . . . . . . 33,335 8,494 523 50,003 13,177 1,439
--------- -------- ------- ---------- --------- -------
Net investment income 14,015 290,784 7,773 53,396 55,901 1,526
Net realized and
unrealized gain
(loss) on
investments:
Net realized gains
(losses). . . . . . (9,919) 75,149 58 191,495 80,782 242
Net unrealized
appreciation
(depreciation)
during the period . (523,693) (18,626) 14,046 1,108,416 (260,664) 36,666
--------- -------- ------- ---------- --------- -------
Net realized and
unrealized gain
(loss) on investments (533,612) 56,523 14,104 1,299,911 (179,882) 36,908
--------- -------- ------- ---------- --------- -------
Net increase
(decrease) in net
assets resulting from
operations . . . . . $(519,597) $347,307 $21,877 $1,353,307 $(123,981) $38,434
========= ======== ======= ========== ========= =======
</TABLE>

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

See accompanying notes.

<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT S

STATEMENTS OF OPERATIONS (CONTINUED)

FOR THE YEARS AND PERIODS ENDED DECEMBER 31,

<TABLE>
<CAPTION>
EQUITY INDEX STRATEGIC BOND
SUBACCOUNT SUBACCOUNT
------------------------------- --------------------------------
1998 1997 1996* 1998 1997 1996*
---------- ---------- ------- -------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions
received from:
John Hancock
Variable Series
Trust I . . . . . $1,337,750 $ 409,920 $23,300 $303,545 $ 74,850 $ 7,425
M Fund Inc. . . . . -- -- -- -- -- --
---------- ---------- ------- -------- -------- --------
Total investment
income . . . . . . . 1,337,750 409,920 23,300 303,545 74,850 7,425
Expenses:
Mortality and expense
risks . . . . . . . 126,021 31,223 1,962 19,894 3,820 349
---------- ---------- ------- -------- -------- --------
Net investment income 1,211,729 378,697 21,338 283,651 71,030 7,076
Net realized and
unrealized gain
(loss) on
investments:
Net realized gains . 691,270 901,978 17,398 81,659 8,335 22
Net unrealized
appreciation
(depreciation)
during the period . 6,098,919 392,256 55,782 43,608 (11,727) (591)
---------- ---------- ------- -------- -------- --------
Net realized and
unrealized gain
(loss) on investments 6,790,189 1,294,234 73,180 125,267 (3,392) (569)
---------- ---------- ------- -------- -------- --------
Net increase in net
assets resulting from
operations . . . . . $8,001,918 $1,672,931 $94,518 $408,918 $ 67,638 $ 6,507
========== ========== ======= ======== ======== ========
</TABLE>

<TABLE>
<CAPTION>
TURNER CORE GROWTH BRANDES INTERNATIONAL EQUITY
SUBACCOUNT SUBACCOUNT
---------------------------- --------------------------------
1998 1997 1996* 1998 1997 1996
-------- --------- -------- -------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions
received from:
John Hancock
Variable Series
Trust I . . . . . $ -- $ -- $ -- $ -- $ -- $ --
M Fund Inc. . . . . 84,940 91,360 21,778 358,080 32,677 5,263
-------- --------- ------- -------- -------- --------
Total investment
income . . . . . . . 84,940 91,360 21,778 358,080 32,677 5,263
Expenses:
Mortality and expense
risks . . . . . . . 7,737 4,071 2,140 14,434 7,502 2,280
-------- --------- ------- -------- -------- --------
Net investment income 77,203 87,289 19,638 343,646 25,175 2,983
Net realized and
unrealized gain
(loss) on
investments:
Net realized gains
(losses). . . . . . 156,278 76,711 (9,767) 89,337 12,541 (2,433)
Net unrealized
appreciation
(depreciation)
during the period . 562,620 32,626 16,054 91,915 (26,022) (12,286)
-------- --------- ------- -------- -------- --------
Net realized and
unrealized gain
(loss) on investments 718,898 109,337 6,287 181,252 (13,481) (14,719)
-------- --------- ------- -------- -------- --------
Net increase
(decrease) in net
assets resulting from
operations . . . . . $796,101 $ 196,626 $25,925 $524,898 $ 11,694 $(11,736)
======== ========= ======= ======== ======== ========
</TABLE>

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

See accompanying notes.

<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT S

STATEMENTS OF OPERATIONS (CONTINUED)

FOR THE YEARS AND PERIODS ENDED DECEMBER 31,

<TABLE>
<CAPTION>
ENHANCED
FRONTIER CAPITAL APPRECIATION U.S. EQUITY
SUBACCOUNT SUBACCOUNT
-------------------------------- --------------------
1998 1997 1996* 1998 1997**
---------- ---------- --------- -------- ----------
<S> <C> <C> <C> <C> <C>
Investment income:
Distributions
received from:
John Hancock
Variable Series
Trust I . . . . . $ -- $ -- $ -- $ -- $ --
M Fund Inc. . . . . 34,738 128,190 -- 72,302 15,335
--------- --------- -------- -------- --------
Total investment
income . . . . . . . 34,738 128,190 -- 72,302 15,335
Expenses:
Mortality and expense
risks . . . . . . . 24,841 10,040 1,679 4,069 478
--------- --------- -------- -------- --------
Net investment income
(loss) . . . . . . . 9,897 118,150 (1,679) 68,233 14,857
Net realized and
unrealized gain
(loss) on
investments:
Net realized gains
(losses). . . . . . (445,752) 614,358 (21,044) 87,723 4,177
Net unrealized
appreciation
(depreciation)
during the period . 432,064 (368,570) 5,101 89,677 6,844
--------- --------- -------- -------- --------
Net realized and
unrealized gain
(loss) on investments (13,688) 245,788 (15,943) 177,400 11,021
--------- --------- -------- -------- --------
Net increase
(decrease) in net
assets resulting from
operations . . . . . $ (3,791) $ 363,938 $(17,622) $245,633 $ 25,878
========= ========= ======== ======== ========
</TABLE>

<TABLE>
<CAPTION>
EMERGING SMALL/
MARKETS GLOBAL BOND MID CAP HIGH YIELD
EQUITY EQUITY INDEX CORE BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ---------- ------------
1998*** 1998*** 1998*** 1998*** 1998***
---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Investment income:
Distributions
received from:
John Hancock
Variable Series
Trust I . . . . . $ 522 $ 491 $ 23,842 $ -- $ 88,721
M Fund Inc. . . . . -- -- -- -- --
-------- -------- -------- -------- --------
Total investment
income . . . . . . . 522 491 23,842 -- 88,721
Expenses:
Mortality and expense
risks . . . . . . . 387 339 937 535 1,962
-------- -------- -------- -------- --------
Net investment income
(loss) . . . . . . . 135 152 22,905 (535) 86,759
Net realized and
unrealized gain
(loss) on
investments:
Net realized gains
(losses). . . . . . (45,975) (21,835) 1,002 (25,196) 64,824
Net unrealized
appreciation
(depreciation)
during the period . 2,289 4,812 (10,217) 18,718 149,416
-------- -------- -------- -------- --------
Net realized and
unrealized gain
(loss) on investments (43,686) (17,023) (9,215) (6,478) 214,240
-------- -------- -------- -------- --------
Net increase
(decrease) in net
assets resulting from
operations . . . . . $(43,551) $(16,871) $ 13,690 $ (7,013) $300,999
======== ======== ======== ======== ========
</TABLE>

- ---------
* From May 1, 1996 (commencement of operations).
** From July 1, 1997 (commencement of operations).
*** From May 1, 1998 (commencement of operations).

See accompanying notes.

<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 SOVEREIGN BOND
SUBACCOUNT SUBACCOUNT
--------------------------------------- -----------------------------------------
1998 1997 1996 1998 1997 1996
----------- ------------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . . . . . $ 6,143,421 $ 2,793,242 $ 2,402,502 $ 2,097,345 $ 816,558 $ 228,752
Net realized gains . . . . . . . . . . . . . 1,750,881 619,721 444,487 185,230 80,538 5,746
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . . 8,041,022 2,301,920 (1,104,574) (378,058) 63,687 (69,973)
----------- ------------ ----------- ----------- ----------- ----------
Net increase in net assets resulting from
operations . . . . . . . . . . . . . . . . . 15,935,324 5,714,883 1,742,415 1,904,517 960,783 164,525
From policyholder transactions:
Net premiums from policyholders . . . . . . 20,264,849 13,036,922 21,324,560 4,312,776
Net benefits to policyholders . . . . . . . (10,390,849) (4,928,834) (8,009,615) (679,839)
----------- ------------ ----------- ----------- ----------- ----------
Net increase in net assets resulting from
policyholder transactions . . . . . . . . . 16,578,620 9,874,000 8,108,088 11,175,975 13,314,945 3,632,937
----------- ------------ ----------- ----------- ----------- ----------
Net increase in net assets . . . . . . . . . 32,513,944 15,588,883 9,850,503 13,080,492 14,275,728 3,797,462
Net assets at beginning of period . . . . . . 32,504,276 16,915,393 7,064,890 19,461,475 5,185,747 1,388,285
----------- ------------ ----------- ----------- ----------- ----------
Net assets at end of period . . . . . . . . . $65,018,220 $ 32,504,276 $16,915,393 $32,541,967 $19,461,475 $5,185,747
=========== ============ =========== =========== =========== ==========
</TABLE>

<TABLE>
<CAPTION>
INTERNATIONAL EQUITY INDEX SMALL CAP GROWTH
SUBACCOUNT SUBACCOUNT
-------------------------------------- ----------------------------------------
1998 1997 1996 1998 1997 1996*
----------- ------------ ------------ ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) . . . . . . . . . $ 1,885,059 $ 389,020 $ 29,056 $ (22,593) $ (6,074) $ (1,035)
Net realized gains (losses) . . . . . . . . . 152,030 244,810 165,730 58,729 21,707 (40,018)
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . . . 78,480 (1,219,540) 137,729 1,070,805 126,699 (2,665)
----------- ----------- ----------- ---------- ----------- ----------
Net increase (decrease) in net assets resulting
from operations . . . . . . . . . . . . . . . 2,115,569 (585,710) 332,515 1,106,941 142,332 (43,718)
From policyholder transactions:
Net premiums from policyholders . . . . . . . 8,150,400 4,750,218 2,870,481 1,120,880
Net benefits to policyholders . . . . . . . . (4,505,840) (1,906,352) (1,005,386) (579,637)
----------- ----------- ----------- ---------- ----------- ----------
Net increase in net assets resulting from
policyholder transactions . . . . . . . . . . 1,690,012 3,644,560 2,843,866 5,466,213 1,865,095 541,243
----------- ----------- ----------- ---------- ----------- ----------
Net increase in net assets . . . . . . . . . . 3,805,581 3,058,850 3,176,381 6,573,154 2,007,427 497,525
Net assets at beginning of period . . . . . . . 8,790,049 5,731,199 2,554,818 2,504,952 497,525 0
----------- ----------- ----------- ---------- ----------- ----------
Net assets at end of period . . . . . . . . . . $12,595,630 $ 8,790,049 $ 5,731,199 $9,078,106 $ 2,504,952 $ 497,525
=========== =========== =========== ========== =========== ==========
</TABLE>

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

See accompanying notes.

<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT S

STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

FOR THE YEARS AND PERIODS ENDED DECEMBER 31,

<TABLE>
<CAPTION>
INTERNATIONAL BALANCED MID CAP GROWTH
SUBACCOUNT SUBACCOUNT
---------------------------------- ----------------------------------------
1998 1997 1996* 1998 1997 1996*
----------- ----------- --------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets from
operations:
Net investment income
(loss). . . . . . . $ 176,073 $ 56,806 $ 2,591 $ 1,088,251 $ (8,287) $ 458
Net realized gains
(losses). . . . . . 24,206 8,667 56 599,619 1,235 (391)
Net unrealized
appreciation
(depreciation)
during the period . 147,461 (67,714) 5,307 1,184,263 486,186 6,440
----------- ---------- -------- ----------- ----------- ----------
Net increase
(decrease) in net
assets resulting from
operations . . . . . 347,740 (2,241) 7,954 2,872,133 479,134 6,507
From policyholder
transactions:
Net premiums from
policyholders . . . -- 1,608,069 148,617 -- 3,212,754 858,546
Net benefits to
policyholders . . . -- (282,878) (4,276) -- (915,459) (26,730)
----------- ---------- -------- ----------- ----------- ----------
Net increase in net
assets resulting from
policyholder
transactions . . . . 1,280,342 1,325,191 144,341 6,191,559 2,297,295 831,816
----------- ---------- -------- ----------- ----------- ----------
Net increase in net
assets. . . . . . . . 1,628,082 1,322,950 152,295 9,063,692 2,776,429 838,323
Net assets at
beginning of period . 1,475,245 152,295 0 3,614,752 838,323 0
----------- ---------- -------- ----------- ----------- ----------
Net assets at end of
period. . . . . . . . $ 3,103,327 $1,475,245 $152,295 $12,678,444 $ 3,614,752 $ 838,323
=========== ========== ======== =========== =========== ==========
</TABLE>

<TABLE>
<CAPTION>
LARGE CAP VALUE MONEY MARKET
SUBACCOUNT SUBACCOUNT
----------------------------------- --------------------------------------------
1998 1997 1996* 1998 1997 1996
----------- ------------ --------- ----------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Increase in net assets from operations:
Net investment income . . . . . . . . . . . . $ 756,459 $ 183,036 $ 12,680 $ 1,687,016 $ 691,552 $ 256,599
Net realized gains . . . . . . . . . . . . . 330,827 164,821 1,327 -- -- --
Net unrealized appreciation during the period 145,355 279,449 23,553 -- -- --
----------- ----------- -------- ----------- ------------- ------------
Net increase in net assets resulting from
operations. . . . . . . . . . . . . . . . . . 1,232,641 627,306 37,560 1,687,016 691,552 256,599
From policyholder transactions:
Net premiums from policyholders . . . . . . . -- 5,421,062 767,660 -- 103,737,470 36,814,029
Net benefits to policyholders . . . . . . . . -- (1,620,578) (42,864) -- (100,296,756) (31,658,283)
----------- ----------- -------- ----------- ------------- ------------
Net increase in net assets resulting from
policyholder transactions . . . . . . . . . . 10,206,733 3,800,484 724,796 70,653,519 3,440,714 5,155,746
----------- ----------- -------- ----------- ------------- ------------
Net increase in net assets . . . . . . . . . . 11,439,374 4,427,790 762,356 72,340,535 4,132,266 5,412,345
Net assets at beginning of period . . . . . . 5,190,146 762,356 0 14,171,123 10,038,857 4,626,512
----------- ----------- -------- ----------- ------------- ------------
Net assets at end of period . . . . . . . . . $16,629,520 $ 5,190,146 $762,356 $86,511,658 $ 14,171,123 $ 10,038,857
=========== =========== ======== =========== ============= ============
</TABLE>

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

See accompanying notes.

<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 DIVERSIFIED MID CAP GROWTH
SUBACCOUNT SUBACCOUNT
---------------------------------------- ------------------------------------------
1998 1997 1996* 1998 1997 1996
------------ ------------ ------------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . . . . $ 75,449 $ 434,660 $ 6,501 $ 108,037 $ 842,666 $ 217,017
Net realized gains (losses) . . . . . . . (538,516) 101,787 845 232,246 297,666 317,400
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . (830,390) (39,717) 13,910 236,333 (730,748) 344,786
----------- ----------- ------------ ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations . . . . . . . . (1,293,457) 496,730 21,256 576,616 409,584 879,203
From policyholder transactions:
Net premiums from policyholders . . . . . 6,323,061 324,248 8,511,081 4,939,686
Net benefits to policyholders . . . . . . (1,089,206) (9,188) (6,274,668) (1,301,761)
----------- ----------- ------------ ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from policyholder transactions . 10,981,167 5,233,855 315,060 (1,918,388) 2,236,413 3,637,925
----------- ----------- ------------ ----------- ----------- -----------
Net increase (decrease) in net assets . . . 9,687,710 5,730,585 336,316 (1,341,772) 2,645,997 4,517,128
Net assets at beginning of period . . . . . 6,066,901 336,316 0 8,833,185 6,187,188 1,670,060
----------- ----------- ------------ ----------- ----------- -----------
Net assets at end of period . . . . . . . . $15,754,611 $ 6,066,901 $ 336,316 $ 7,491,413 $ 8,833,185 $ 6,187,188
=========== =========== ============ =========== =========== ===========
</TABLE>

<TABLE>
<CAPTION>
REAL ESTATE EQUITY GROWTH & INCOME
SUBACCOUNT SUBACCOUNT
------------------------------------- ------------------------------------------
1998 1997 1996 1998 1997 1996
----------- ------------ ----------- ----------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . . . . . . $ 283,067 $ 232,798 $ 45,657 $ 8,975,814 $ 5,747,928 $ 2,967,234
Net realized gains (losses) . . . . . . . . . (454,979) 252,095 19,122 2,061,212 2,390,414 512,402
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . . (698,676) (13,488) 191,067 7,759,307 435,778 (496,647)
---------- ----------- ---------- ----------- ------------ -----------
Net increase (decrease) in net assets resulting
from operations . . . . . . . . . . . . . . . (870,588) 471,405 255,846 18,796,333 8,574,120 2,982,989
From policyholder transactions:
Net premiums from policyholders . . . . . . . 4,833,914 748,683 35,535,599 19,263,021
Net benefits to policyholders . . . . . . . . (2,393,463) (295,788) (21,776,809) (5,502,524)
---------- ----------- ---------- ----------- ------------ -----------
Net increase in net assets resulting from
policyholder transactions . . . . . . . . . . 1,451,383 2,440,451 452,895 29,614,750 13,758,790 13,760,497
---------- ----------- ---------- ----------- ------------ -----------
Net increase in net assets . . . . . . . . . . 580,795 2,911,856 708,741 48,411,083 22,332,910 16,743,486
Net assets at beginning of period . . . . . . 4,191,379 1,279,523 570,782 47,996,192 25,663,282 8,919,796
---------- ----------- ---------- ----------- ------------ -----------
Net assets at end of period . . . . . . . . . $4,772,174 $ 4,191,379 $1,279,523 $96,407,275 $ 47,996,192 $25,663,282
========== =========== ========== =========== ============ ===========
</TABLE>

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

See accompanying notes.

<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT S

STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

FOR THE YEARS AND PERIODS ENDED DECEMBER 31,

<TABLE>
<CAPTION>
MANAGED SHORT-TERM BOND
SUBACCOUNT SUBACCOUNT
-------------------------------------- ------------------------------------------
1998 1997 1996 1998 1997 1996
----------- ------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . . . . . $ 3,484,281 $ 1,814,571 $ 1,246,046 $ 926,217 $ 394,991 $ 172,660
Net realized gains (losses) . . . . . . . . 278,186 171,318 124,493 24,740 35,294 (52,888)
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . . 1,791,231 715,231 (507,517) (136,999) (25,976) (7,734)
----------- ----------- ----------- ----------- ----------- -----------
Net increase in net assets resulting from
operations . . . . . . . . . . . . . . . . . 5,553,698 2,701,120 863,022 813,958 404,309 112,038
From policyholder transactions:
Net premiums from policyholders . . . . . . 16,914,475 9,996,216 12,911,228 8,757,242
Net benefits to policyholders . . . . . . . (9,357,535) (3,151,700) (4,234,624) (7,683,085)
----------- ----------- ----------- ----------- ----------- -----------
Net increase in net assets resulting from
policyholder transactions . . . . . . . . . 12,737,673 7,556,940 6,844,516 5,956,393 8,676,604 1,074,157
----------- ----------- ----------- ----------- ----------- -----------
Net increase in net assets . . . . . . . . . 18,291,371 10,258,060 7,707,538 6,770,351 9,080,913 1,186,195
Net assets at beginning of period . . . . . . 21,775,321 11,517,261 3,809,723 12,476,155 3,395,242 2,209,047
----------- ----------- ----------- ----------- ----------- -----------
Net assets at end of period . . . . . . . . . $40,066,692 $21,775,321 $11,517,261 $19,246,506 $12,476,155 $ 3,395,242
=========== =========== =========== =========== =========== ===========
</TABLE>

<TABLE>
<CAPTION>
SMALL CAP VALUE INTERNATIONAL OPPORTUNITIES
SUBACCOUNT SUBACCOUNT
----------------------------------- --------------------------------------
1998 1997 1996* 1998 1997 1996*
------------ ----------- --------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets from
operations:
Net investment income $ 14,015 $ 290,784 $ 7,773 $ 53,396 $ 55,901 $ 1,526
Net realized gains
(losses). . . . . . (9,919) 75,149 58 191,495 80,782 242
Net unrealized
appreciation
(depreciation)
during the period . (523,693) (18,626) 14,046 1,108,416 (260,664) 36,666
----------- ---------- -------- ----------- ----------- --------
Net increase
(decrease) in net
assets resulting from
operations . . . . . (519,597) 347,307 21,877 1,353,307 (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 . . . . 7,057,455 3,284,576 319,130 11,569,669 5,250,422 870,679
----------- ---------- -------- ----------- ----------- --------
Net increase in net
assets . . . . . . . 6,537,858 3,631,883 341,007 12,922,976 5,126,441 909,113
Net assets at
beginning of period 3,972,890 341,007 0 6,035,554 909,113 0
----------- ---------- -------- ----------- ----------- --------
Net assets at end of
period . . . . . . . $10,510,748 $3,972,890 $341,007 $18,958,530 $ 6,035,554 $909,113
=========== ========== ======== =========== =========== ========
</TABLE>

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

See accompanying notes.

<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 INDEX STRATEGIC BOND
SUBACCOUNT SUBACCOUNT
------------------------------------- -----------------------------------------
1998 1997 1996* 1998 1997 1996*
----------- ------------ ----------- ---------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . . . . . . $ 1,211,729 $ 378,697 $ 21,338 $ 283,651 $ 71,030 $ 7,076
Net realized gains . . . . . . . . . . . . . . 691,270 901,978 17,398 81,659 8,335 22
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . . . 6,098,919 392,256 55,782 43,608 (11,727) (591)
----------- ----------- ---------- ---------- ----------- ------------
Net increase in net assets resulting from
operations . . . . . . . . . . . . . . . . . . 8,001,918 1,672,931 94,518 408,918 67,638 6,507
From policyholder transactions:
Net premiums from policyholders . . . . . . . 23,412,687 1,282,798 1,828,179 259,231
Net benefits to policyholders . . . . . . . . (9,622,006) (403,009) (534,164) (7,110)
----------- ----------- ---------- ---------- ----------- ------------
Net increase in net assets resulting from
policyholder transactions . . . . . . . . . . 29,524,810 13,790,681 879,789 6,250,372 1,294,015 252,121
----------- ----------- ---------- ---------- ----------- ------------
Net increase in net assets . . . . . . . . . . 37,526,728 15,463,612 974,307 6,659,290 1,361,653 258,628
Net assets at beginning of period . . . . . . . 16,437,919 974,307 0 1,620,281 258,628 0
----------- ----------- ---------- ---------- ----------- ------------
Net assets at end of period . . . . . . . . . . $53,964,647 $16,437,919 $ 974,307 $8,279,571 $ 1,620,281 $ 258,628
=========== =========== ========== ========== =========== ============
</TABLE>

<TABLE>
<CAPTION>
TURNER CORE GROWTH BRANDES INTERNATIONAL
SUBACCOUNT EQUITY SUBACCOUNT
----------------------------------- ---------------------------------------
1998 1997 1996* 1998 1997 1996
---------- ----------- ----------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets from
operations:
Net investment income $ 77,203 $ 87,289 $ 19,638 $ 343,646 $ 25,175 $ 2,983
Net realized gains
(losses). . . . . . 156,278 76,711 (9,767) 89,337 12,541 (2,433)
Net unrealized
appreciation
(depreciation)
during the period . 562,620 32,626 16,054 91,915 (26,022) (12,286)
---------- ---------- ---------- ---------- ----------- ----------
Net increase
(decrease) in net
assets resulting from
operations . . . . . 796,101 196,626 25,925 524,898 11,694 (11,736)
From policyholder
transactions:
Net premiums from
policyholders . . . 743,622 1,135,180 2,484,010 1,021,041
Net benefits to
policyholders . . . (580,027) (506,352) (1,088,249) (80,162)
---------- ---------- ---------- ---------- ----------- ----------
Net increase in net
assets resulting from
policyholder
transactions . . . . 3,089,114 163,595 628,828 3,479,258 1,395,761 940,879
---------- ---------- ---------- ---------- ----------- ----------
Net increase in net
assets . . . . . . . 3,885,215 360,221 654,753 4,004,156 1,407,455 929,143
Net assets at
beginning of period 1,014,974 654,753 0 2,336,598 929,143 0
---------- ---------- ---------- ---------- ----------- ----------
Net assets at end of
period . . . . . . . $4,900,189 $1,014,974 $ 654,753 $6,340,754 $ 2,336,598 $ 929,143
========== ========== ========== ========== =========== ==========
</TABLE>

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

See accompanying notes.

<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT S

STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

FOR THE YEARS AND PERIODS ENDED DECEMBER 31,

<TABLE>
<CAPTION>
FRONTIER CAPITAL APPRECIATION ENHANCED U.S. EQUITY
SUBACCOUNT SUBACCOUNT
------------------------------------- ---------------------------
1998 1997 1996* 1998 1997**
----------- ------------ ----------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets from
operations:
Net investment income $ 9,897 $ 118,150 $ (1,679) $ 68,233 $ 14,857
Net realized gains
(losses). . . . . . (445,752) 614,358 (21,044) 87,723 4,177
Net unrealized
appreciation
(depreciation)
during the period . 432,064 (368,570) 5,101 89,677 6,844
---------- ----------- ---------- ---------- ------------
Net increase
(decrease) in net
assets resulting from
operations . . . . . (3,791) 363,938 (17,622) 245,633 25,878
From policyholder
transactions:
Net premiums from
policyholders . . . 10,030,418 1,535,063 475,503
Net benefits to
policyholders . . . (5,969,436) (549,363) (4,176)
---------- ----------- ---------- ---------- ------------
Net increase in net
assets resulting from
policyholder
transactions . . . . 4,286,511 4,060,982 985,700 1,731,779 471,327
---------- ----------- ---------- ---------- ------------
Net increase in net
assets . . . . . . . 4,282,720 4,424,920 968,078 1,977,412 497,205
Net assets at
beginning of period 5,392,998 968,078 0 497,205 0
---------- ----------- ---------- ---------- ------------
Net assets at end of
period . . . . . . . $9,675,718 $ 5,392,998 $ 968,078 $2,474,617 $ 497,205
========== =========== ========== ========== ============
</TABLE>

<TABLE>
<CAPTION>
EMERGING SMALL/
MARKETS GLOBAL BOND MID CAP HIGH YIELD
EQUITY EQUITY INDEX CORE BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------- ---------- ------------
1998*** 1998*** 1998*** 1998*** 1998***
---------- ---------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets from
operations:
Net investment income
(loss). . . . . . . $ 135 $ 152 $ 22,905 $ (535) $ 86,759
Net realized gains
(losses). . . . . . (45,975) (21,835) 1,002 (25,196) 64,824
Net unrealized
appreciation
(depreciation)
during the period . 2,289 4,812 (10,217) 18,718 149,416
-------- -------- ---------- -------- ----------
Net increase
(decrease) in net
assets resulting from
operations . . . . . (43,551) (16,871) 13,690 (7,013) 300,999
From policyholder
transactions:
Net premiums from
policyholders . . .
Net benefits to
policyholders . . .
-------- -------- ---------- -------- ----------
Net increase in net
assets resulting from
policyholder
transactions . . . . 230,556 180,899 1,051,767 310,166 4,226,585
-------- -------- ---------- -------- ----------
Net increase in net
assets . . . . . . . 187,005 164,028 1,065,457 303,153 4,527,584
Net assets at
beginning of period 0 0 0 0 0
-------- -------- ---------- -------- ----------
Net assets at end of
period . . . . . . . $187,005 $164,208 $1,065,457 $303,153 $4,527,584
======== ======== ========== ======== ==========
</TABLE>

- ---------
* From May 1, 1996 (commencement of operations).
** From July 1, 1997 (commencement of operations).
*** From May 1, 1998 (commencement of operations).

See accompanying notes.

<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT S

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 1998

1. ORGANIZATION

John Hancock Variable Life Account S (the Account) is a separate investment
account of John Hancock Variable Life Insurance Company (JHVLICO), a
wholly-owned subsidiary of John Hancock Mutual Life Insurance Company (John
Hancock). The Account was formed to fund variable life insurance policies
(Policies) issued by JHVLICO. The Account is operated as a unit investment trust
registered under the Investment Company Act of 1940, as amended, and currently
consists of twenty-seven subaccounts. The assets of each subaccount are invested
exclusively in shares of a corresponding Portfolio of John Hancock Variable
Series Trust I (the Fund) or of M Fund Inc. (M Fund). New subaccounts may be
added as new Portfolios are added to the Fund or to M Fund, or as other
investment options are developed, and made available to policyholders. The
twenty-seven Portfolios of the Fund and M Fund which are currently available are
the Large Cap Growth, Sovereign Bond, International Equity Index (formerly,
International Equities), Small Cap Growth, International Balanced, Mid Cap
Growth, Large Cap Value, Money Market, Mid Cap Value, Diversified Mid Cap Growth
(formerly, Special Opportunities), Real Estate Equity, Growth & Income, Managed,
Short-Term Bond (formerly, Short-Term U.S. Government), Small Cap Value,
International Opportunities, Equity Index, Strategic Bond, Turner Core Growth,
Brandes International Equity (formerly, Edinburgh International Equity),
Frontier Capital Appreciation, Enhanced U.S. Equity, Emerging Markets Equity,
Global Equity, Bond Index, Small/Mid Cap CORE, and High Yield Bond Portfolios.
Each Portfolio has a different investment objective.

The net assets of the Account may not be less than the amount required under
state insurance law to provide for death benefits (without regard to the minimum
death benefit guarantee) and other policy benefits. Additional assets are held
in JHVLICO's general account to cover the contingency that the guaranteed
minimum death benefit might exceed the death benefit which would have been
payable in the absence of such guarantee.

The assets of the Account are the property of JHVLICO. The portion of the
Account's assets applicable to the policies may not be charged with liabilities
arising out of any other business JHVLICO may conduct.

2. SIGNIFICANT ACCOUNTING POLICIES

Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Valuation of Investments

Investment in shares of the Fund and of M Fund are valued at the reported net
asset values of the respective Portfolios. Investment transactions are recorded
on the trade date. Dividend income is recognized on the ex-dividend date.
Realized gains and losses on sales of respective Portfolio shares are determined
on the basis of identified cost.

Federal Income Taxes

The operations of the Account are included in the federal income tax return of
JHVLICO, which is taxed as a life insurance company under the Internal Revenue
Code. JHVLICO has the right to charge the Account any federal income taxes, or
provision for federal income taxes, attributable to the operations of the
Account or to the policies funded in the Account. Currently, JHVLICO does not
make a charge for income or other taxes. Charges for state and local taxes, if
any, attributable to the Account may also be made.

<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT S

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Expenses

JHVLICO assumes mortality and expense risks of the variable life insurance
policies for which asset charges are deducted at various rates ranging from .50%
to .625%, depending on the type of policy, of net assets (excluding policy
loans) of the Account. In addition, a monthly charge at varying levels for the
cost of insurance is deducted from the net assets of the Account.

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

Policy Loans

Policy loans represent outstanding loans plus accrued interest. Interest is
accrued (net of a charge for policy loan administration determined at an annual
rate of .75% of the aggregate amount of policyholder indebtedness) and
compounded daily. At December 31, 1998, 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.

<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, 1998 were as follows:

<TABLE>
<CAPTION>
SUBACCOUNT SHARES OWNED COST VALUE
---------- ------------ ----------- -------------
<S> <C> <C> <C>
Large Cap Growth . . . . . . 2,482,160 $55,624,133 $65,018,220
Sovereign Bond . . . . . . . 3,279,909 32,895,576 32,541,967
International Equity Index . 809,459 13,492,182 12,595,630
Small Cap Growth . . . . . . 698,985 7,883,267 9,078,106
International Balanced . . . 278,964 3,018,272 3,103,327
Mid Cap Growth . . . . . . . 838,771 11,001,555 12,678,444
Large Cap Value . . . . . . . 1,186,104 16,181,162 16,629,520
Money Market . . . . . . . . 8,651,166 86,511,658 86,511,658
Mid Cap Value . . . . . . . . 1,292,860 16,610,808 15,754,611
Diversified Mid Cap Growth . 469,987 7,452,538 7,491,413
Real Estate Equity . . . . . 383,006 5,258,257 4,772,174
Growth & Income . . . . . . . 4,945,907 88,453,571 96,407,275
Managed . . . . . . . . . . . 2,562,429 38,024,380 40,066,692
Short-Term Bond . . . . . . . 1,915,373 19,395,427 19,246,506
Small Cap Value . . . . . . . 906,973 11,039,020 10,510,748
International Opportunities . 1,552,119 18,074,112 18,958,530
Equity Index . . . . . . . . 3,048,380 47,417,688 53,964,646
Strategic Bond . . . . . . . 781,135 8,248,280 8,279,571
Turner Core Growth . . . . . 274,674 4,288,888 4,900,189
Brandes International Equity 584,940 6,287,148 6,340,754
Frontier Capital Appreciation 641,201 9,607,123 9,675,718
Enhanced U.S. Equity . . . . 136,946 2,378,097 2,474,617
Emerging Markets Equity . . . 26,387 184,716 187,005
Global Equity . . . . . . . . 16,615 159,217 164,028
Bond Index . . . . . . . . . 104,566 1,075,674 1,065,457
Small/Mid Cap CORE . . . . . 33,614 284,435 303,153
High Yield Bond . . . . . . . 490,466 4,378,169 4,527,584
</TABLE>

<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT S

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Purchases, including reinvestment of dividend distributions, and proceeds from
sales of shares in the Portfolios of the Fund and of M Fund for the period ended
December 31, 1998, were as follows:

<TABLE>
<CAPTION>
SUBACCOUNT PURCHASES SALES
---------- ------------ -------------
<S> <C> <C>
Large Cap Growth . . . . . . . . . . . . $ 29,361,732 $ 6,639,690
Sovereign Bond . . . . . . . . . . . . . 22,087,283 8,813,963
International Equity Index . . . . . . . 9,220,337 5,645,266
Small Cap Growth . . . . . . . . . . . . 7,281,622 1,838,002
International Balanced . . . . . . . . . 2,024,060 567,645
Mid Cap Growth . . . . . . . . . . . . . 9,361,504 2,081,694
Large Cap Value . . . . . . . . . . . . 13,202,174 2,238,984
Money Market . . . . . . . . . . . . . . 167,737,824 95,397,289
Mid Cap Value . . . . . . . . . . . . . 15,612,090 4,555,474
Diversified Mid Cap Growth . . . . . . . 3,272,496 5,082,848
Real Estate Equity . . . . . . . . . . . 5,551,879 3,817,431
Growth & Income . . . . . . . . . . . . 50,746,313 12,155,749
Managed . . . . . . . . . . . . . . . . 19,441,220 3,219,267
Short-Term Bond . . . . . . . . . . . . 15,288,727 8,406,118
Small Cap Value . . . . . . . . . . . . 8,944,813 1,873,344
International Opportunities . . . . . . 17,193,176 5,570,111
Equity Index . . . . . . . . . . . . . . 35,787,894 5,051,356
Strategic Bond . . . . . . . . . . . . . 9,312,827 2,778,805
Turner Core Growth . . . . . . . . . . . 4,233,351 1,067,034
Brandes International Equity . . . . . . 5,189,547 1,366,643
Frontier Capital Appreciation . . . . . 7,380,939 3,084,531
Enhanced U.S. Equity . . . . . . . . . . 2,489,737 689,724
Emerging Markets Equity . . . . . . . . 1,973,067 1,742,376
Global Equity . . . . . . . . . . . . . 2,561,712 2,380,660
Bond Index . . . . . . . . . . . . . . . 1,154,850 80,178
Small/Mid Cap CORE . . . . . . . . . . . 987,868 678,237
High Yield Bond . . . . . . . . . . . . 6,156,047 1,842,702
</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), is executing
its plan to address the impact of the Year 2000 issues that result from computer
programs being written using two digits to reflect the year rather than four to
define the applicable year and century. Historically, the first two digits were
hardcoded to save memory. Many of the John Hancock's computer programs that have
date-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in an information technology (IT) system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices or
engage in similar normal business activities. In addition, non-IT systems
including, but not limited to, security alarms, elevators and telephones are
subject to malfunction due to their dependence on embedded technology such as
microcontrollers for proper operation. As described, the Year 2000 project
presents a number of challenges for financial institutions since the correction
of Year 2000 issues in IT and non-IT systems will be complex and costly for the
entire industry.

<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT S

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

The continuous awareness campaign serves several purposes: defining the
problem, gaining executive level support and sponsorship, establishing a team
and overall strategy, and assessing existing information system management
resources. Additionally, the awareness campaign establishes an education process
to ensure that all employees are aware of the Year 2000 issue and knowledgeable
of their role in securing solutions.

The renovation stage reflects the conversion, validation, replacement, or
elimination of selected platforms, applications, databases and utilities,
including the modification of applicable interfaces. Additionally, the
renovation stage includes performance, functionality, and regression testing and
implementation. As of December 31, 1998, the renovation phase was substantially
complete for computer applications, systems and desktops. For all remaining
components the renovation phase is underway and will be complete before the end
of the second quarter of 1999.

The validation phase consists of the compliance testing of renovated systems.
The validation phase is expected to be complete by mid 1999, after renovation is
accomplished. John Hancock will use its testing facilities through the remainder
of 1999 to perform special functional testing. Special functional testing
includes testing, as required, with material third parties and industry groups
and to perform reviews of "dry run" of year-end activities. Scheduled testing of
John Hancock's material relationships with third parties is underway. It is
anticipated that testing with material business partners will continue through
much of 1999.

Finally, the implementation phase involves the actual implementation of
converted or replaced platforms, applications, databases, utilities, interfaces,
and contingency planning. John Hancock is concurrently performing implementation
during the renovation phase and plans to complete this phase before the end of
the second quarter of 1999.

The costs of the Year 2000 project consist of internal IT personnel, and
external costs such as consultants, programmers, replacement software, and
hardware. The costs of the Year 2000 project are expensed as incurred. The
project is funded partially through a reallocation of resources from
discretionary projects. Through December 31, 1998, John Hancock has incurred and
expensed approximately $9.8 million in related payroll costs for its internal IT
personnel on the project. The estimated range of remaining internal IT personnel
costs of the project is approximately $8 to $9 million. Through December 31,
1998, John Hancock has incurred and expensed approximately $36.4 million in
external costs for the project. The estimated range of remaining external costs
of the project is approximately $35 to $36 million. The total costs of the Year
2000 project, based on management's best estimates, include approximately $18
million in internal IT personnel, $7.4 million in the external modification of
software, $34.2 million for external solution providers, $19.4 million in
replacement costs of non-compliant IT systems and $12.6 million in oversight,
test facilities and other expenses. Accordingly, the estimated range of total
costs of the Year 2000 project, internal and external, is approximately $90 to
$95 million. However, there can be no guarantee that these estimates will be
achieved and actual results could materially differ from those plans. Specific
factors that might cause such material differences include, but are not limited
to, the availability and cost of personnel trained in this area, the ability to
locate and correct all relevant computer codes, and similar uncertainties.

<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT S

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

John Hancock's total Year 2000 project costs include the estimated impact of
external solution providers and are based on presently available information.
However, there is no guarantee that the systems of other companies that John
Hancock's systems rely on will be timely converted, or that a failure to convert
by another company, or a conversion that is incompatible with John Hancock's
systems, would not have material adverse effect on John Hancock. It is
documented in trade publications that companies in foreign countries are not
acting as intensively as domestic companies to remediate Year 2000 issues.
Accordingly, it is expected that Company facilities based outside the United
States face higher degrees of risks from data exchanges with material business
partners. In addition, John Hancock has thousands of individual and business
customers that hold insurance policies, annuities and other financial products
of John Hancock. Nearly all products sold by John Hancock contain date sensitive
data, examples of which are policy expiration dates, birth dates, premium
payment dates. Finally, the regulated nature of John Hancock's industry exposes
it to potential supervisory or enforcement actions relating to Year 2000 issues.

John Hancock's contingency planning initiative related to the Year 2000
project is underway. The plan is addressing John Hancock's readiness as well as
that of material business partners on whom John Hancock depends. John Hancock's
contingency plans are being designed to keep each business unit's operations
functioning in the event of a failure or delay due to the Year 2000 record
format and date calculation changes. Contingency plans are being constructed
based on the foundation of extensive business resumption plans that John Hancock
has maintained and updated periodically, which outline responses to situations
that may affect critical business functions. These plans also provide emergency
operations guidance, which defines a documented order of actions to respond to
problems. These extensive business resumption plans are being enhanced to cover
Year 2000 situations.

<PAGE>

ALPHABETICAL INDEX OF KEY WORDS AND PHRASES

This index should help you locate more information about many of the important
concepts in this prospectus.

<TABLE>
<CAPTION>
KEY WORD OR PHRASE PAGE KEY WORD OR PHRASE PAGE
<S> <C> <C> <C>
Account . . . . . . . 27 monthly deduction date............... 29
account value . . . . 7 mortality and expense risk charge.... 9
Additional Sum Insured 29 Option A; Option B: Option M......... 13
attained age. . . . . 9 optional benefits.................... 9

Basic Sum Insured . . 29 optional extra death feature
beneficiary . . . . . 37 owner................................ 4
business day. . . . . 27 partial withdrawal................... 12
changing Option A or B 15 partial withdrawal charge............ 9
changing the Total Sum
Insured . . . . . . 14 payment options...................... 15
charges . . . . . . . 7 Planned Premium...................... 5
Code. . . . . . . . . 34 policy anniversary................... 28
cost of insurance
rates. . . . . . . . 8 policy year.......................... 28
date of issue . . . . 28 premium; premium payment............. 4
death benefit . . . . 4 prospectus........................... 2
deductions. . . . . . 8 receive;receipt...................... 17
expenses of the Series
Funds . . . . . . . 9 reinstate; reinstatement............. 6
fixed investment
option . . . . . . . 28 sales charges........................ 8
full surrender. . . . 11 SEC.................................. 2
fund. . . . . . . . . 2 Separate Account S................... 27
grace period. . . . . 6 Series Funds......................... 2
guaranteed minimum
death benefit . . . 6 Servicing Office..................... 1
Guaranteed Minimum
Death Benefit special loan account................. 12
Premium. . . . . . . 6 subaccount........................... 27
insurance charge. . . 8 surrender............................ 11
insured person. . . . 4 surrender value...................... 11
investment options. . 1 Target Premium....................... 8
JHVLICO . . . . . . . 27 tax considerations................... 34
John Hancock Variable
Series Trust . . . . 2 telephone transfers................... 18
lapse . . . . . . . . 6 Total Sum Insured..................... 6

loan. . . . . . . . . 12 transfers of account value............ 11

loan interest . . . . 12 variable investment options........... 1

maximum premiums. . . 5 we;us................................. 27
Minimum Initial
Premium. . . . . . . 28 withdrawal............................ 12
minimum insurance
amount . . . . . . . 14 withdrawal charges.................... 9

minimum premiums. . . 4 you;your.............................. 4
modified endowment
contract . . . . . . 35
</TABLE>

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Policies Issued by John Hancock Variable Life Insurance Company
John Hancock Place, Boston, Massachusetts 02117

58149M 5/99