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PROSPECTUS DATED JUNE 30, 2000
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VARIABLE ESTATE PROTECTION II
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a flexible premium variable life survivorship insurance policy
issued by
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
("JHVLICO")
The policy provides an investment option with fixed rates of return
declared by JHVLICO and the following variable investment options:
<TABLE>
<CAPTION>
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VARIABLE INVESTMENT OPTION MANAGED BY
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<S> <C>
Managed..................................... Independence Investment Associates, Inc.
Growth & Income............................. Independence Investment Associates, Inc.
Fidelity VIP Contrafund(R).................. Fidelity Management and Research Company
Equity Index................................ State Street Global Advisors
Large Cap Value............................. T. Rowe Price Associates, Inc.
American Leaders Large Cap Value............ Federated Investment Management Company
Large Cap Growth............................ Independence Investment Associates, Inc.
Large Cap Aggressive Growth................. Alliance Capital Management L.P.
Fidelity VIP Growth......................... Fidelity Management and Research Company
AIM V.I. Value.............................. A I M Advisors, Inc.
Janus Aspen Global Technology............... Janus Capital Corporation
Mid Cap Value............................... Neuberger Berman, LLC
Fundamental Mid Cap Growth.................. OppenheimerFunds, Inc.
Mid Cap Growth.............................. Janus Capital Corporation
Real Estate Equity.......................... Independence Investment Associates, Inc. and Morgan
Stanley Dean Witter Investment Management, Inc.
Small/Mid Cap CORE.......................... Goldman Sachs Asset Management
Small/Mid Cap Growth........................ Wellington Management Company, LLP
Small Cap Value............................. INVESCO Management & Research, Inc.
Small Cap Growth............................ John Hancock Advisers, Inc.
MFS New Discovery........................... MFS Investment Management(R)
Global Balanced............................. Brinson Partners, Inc.
Janus Aspen Worldwide Growth................ Janus Capital Corporation
Templeton International Securities.......... Templeton Investment Counsel, Inc.
International Equity Index.................. Independence International Associates, Inc.
International Opportunities................. Rowe Price-Fleming International, Inc.
Emerging Markets Equity..................... Morgan Stanley Dean Witter Investment Management, Inc.
Short-Term Bond............................. Independence Investment Associates, Inc.
Bond Index.................................. Mellon Bond Associates, LLP
Active Bond................................. John Hancock Advisers, Inc.
Core Bond................................... Federated Investment Management Company
Global Bond................................. J.P. Morgan Investment Management, Inc.
High Yield Bond............................. Wellington Management Company, LLP
Money Market................................ John Hancock Life Insurance Company
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</TABLE>
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The variable investment options shown on page 1 are those available as of the
date of this prospectus. We may add, modify or delete variable investment
options in the future.
When you select one or more of these variable investment options, we invest
your money in the corresponding investment option(s) of one or more of the
following: the John Hancock Variable Series Trust I, the AIM Variable Insurance
Funds, Inc., the Templeton Variable Products Series Fund, Fidelity's Variable
Insurance Products Fund and Variable Insurance Products Fund II, the Janus Aspen
Series (Service Shares Class), and the MFS Variable Insurance Trust (together,
"the Trusts"). In this prospectus, the investment options of the Trusts are
referred to as "funds". In the prospectuses for the Trusts, the investment
options may be referred to as "funds", "portfolios" or "series".
Each Trust is a so-called "series" type mutual fund registered with the
Securities and Exchange Commission ("SEC"). The investment results of each
variable investment option you select will depend on those of the corresponding
fund of one of the Trusts. Each of the funds is separately managed and has its
own investment objective and strategies. Attached at the end of this prospectus
is a prospectus for each Trust. The Trust prospectuses contain detailed
information about each available fund. Be sure to read those prospectuses
before selecting any of the variable investment options shown on page 1.
* * * * * * * * * * * *
Please note that the 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.
* * * * * * * * * * * *
JHVLICO LIFE SERVICING OFFICE
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EXPRESS DELIVERY U.S. MAIL
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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
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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
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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 24.
. Behind the illustrations is a section called "Additional Information"
that gives more details about the policy. It generally does not
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repeat information that is in the Basic Information section. A table
of contents for the Additional Information section appears on page
33.
. Behind the Additional Information section are the financial
statements for JHVLICO and Separate Account S. These start on page
47.
. Finally, there is an Alphabetical Index of Key Words and Phrases at
the back of the prospectus on page 129.
After the Alphabetical Index of Key Words and Phrases, this prospectus ends and
the prospectuses for the Trusts begin.
**********
3
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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 appears:
<TABLE>
<CAPTION>
Question Beginning on page
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<S> <C>
.What is the policy?....................................................... 5
.Who owns the policy?...................................................... 5
.How can I invest money in the policy?..................................... 5
.Is there a minimum amount I must invest?.................................. 7
.How will the value of my investment in the policy change over time?....... 8
.What charges will JHVLICO deduct from my investment in the policy?........ 9
.What charges will the Trusts deduct from my investment in the policy?..... 11
.What other charges could JHVLICO impose in the future?.................... 13
.How can I change my policy's investment allocations?...................... 14
.How can I access my investment in the policy?............................. 15
.How much will JHVLICO pay when the last insured person dies?.............. 16
.What optional rider benefits can I choose?................................ 18
.How can I change my policy's insurance coverage?.......................... 19
.Can I cancel my policy after it's issued?................................. 19
.Can I choose the form in which JHVLICO pays out policy proceeds?.......... 20
.To what extent can JHVLICO vary the terms and conditions of its policies
in particular cases?..................................................... 21
.How will my policy be treated for income tax purposes?.................... 21
.How do I communicate with JHVLICO?........................................ 21
</TABLE>
4
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WHAT IS THE POLICY?
This is a so-called "survivorship" policy that provides coverage on two
insured persons. The policy's primary purpose is to provide lifetime protection
against economic loss due to the death of the last surviving 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 upon the death of the
last surviving insured person (we call this the "death benefit") may be
similarly affected.
While either of the insured persons 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
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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.
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Minimum premium payment
Each premium payment must be at least $100.
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
40. 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 persons don't provide us with adequate evidence that they
continue 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 7 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 2 of this prospectus.
We will also accept premiums:
. by wire or by exchange from another insurance company,
. via an electronic funds transfer program (any owner interested in
making monthly premium payments must use this method), or
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. 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.
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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).
Lapse and reinstatement
Either your entire policy or the Additional Sum Insured portion of your Total
Sum Insured can terminate (i.e., "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,
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if the policy's surrender value is not sufficient to pay the charges on a
monthly deduction date (as defined on page 36), 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 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 2 years from
the beginning of the grace period. You will have to provide evidence that the
surviving insured persons still meet 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 last surviving
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 persons meet certain
underwriting requirements and only if you've elected death benefit Option B (see
"How much will JHVLICO pay when the last insured person dies?" on page 16). The
feature guarantees that your Basic Sum Insured will not lapse, 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 last insured person dies?" on page 16), and
. on each monthly deduction date 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%.
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The Guaranteed Minimum Death Benefit Premium (or "GMDB Premium) is defined in
the policy and one-twelfth of it is "due" on each monthly deduction date. 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 last insured person dies?" on page 16).
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 61 days 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 monthly
deduction date on which default occurred. If it is reinstated more than 1 year
after such monthly deduction date, we will require evidence that the surviving
insured persons still meet 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
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much will JHVLICO pay when the last insured person dies?" on page 16).
The guaranteed minimum death benefit feature will cease to apply on the policy
anniversary nearest the 100th birthday of the younger insured person (whether or
not such insured person is then alive). Also, the feature cannot be reinstated
after that policy anniversary. However, the optional "Age 100 waiver of charges
rider", if elected at the time of application for the policy, will continue the
guaranteed minimum death benefit feature beyond that policy anniversary.
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 to premiums processed
prior to the 20th day after your policy becomes effective. (See "Commencement of
investment performance" on page 37.)
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 the Trust 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
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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
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subject to the asset-based risk charge described on page 10. 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,
. 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 on page 15.
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
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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.
. Premium processing charge - A charge to help defray our administrative
-------------------------
costs. This charge is 1.25% of each premium. For policies with a Total Sum
Insured of $5 million or more, this charge will be reduced to as low as
.50%
. Sales charge - A charge to help defray our sales costs. The charge for
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premiums paid in the first policy year is 30% of premiums paid up to the
Target Premium, and 3.5% of premiums paid in excess of the Target Premium.
The charge for premiums paid after the first policy year up to the Target
Premium is 15% in policy years 2 through 5, 10% in policy years 6 through
10, up to 4% (currently 3%) in policy years 11 through 20, and up to 3%
(currently 0%) thereafter. The charge for premiums paid after the first
policy year in excess of the Target Premium is 3.5% in policy years 2
through 10, 3% in policy years 11 through 20, and up to 3% (currently 0%)
thereafter. If the younger of the insured persons is age 71 or older when
the policy is issued, there will be no sales
9
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charges deducted from premiums paid after the eleventh policy year.
Because policies of this type were first offered in 1993, the foregoing
waiver and the lower current rates after policy year 10 are not yet
applicable to any policy. The "Target Premium" is determined at the time
the policy is issued and will appear in the "Policy Specifications"
section of the policy.
. Optional enhanced cash value rider charge - A charge to cover the cost of
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this rider, if elected, equal to 2% of premium paid in the first policy
year that does not exceed the Target Premium.
Deductions from account value
. Issue charge - A monthly charge to help defray our administrative costs.
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This charge has two parts: (1) a flat dollar amount of $55.55 deducted
only during the first five policy years, and (2) a charge of 2c per $1,000
of Total Sum Insured at issue that is deducted only during the first three
policy years. The second part of this monthly charge is guaranteed not to
exceed $200.
. 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 $10 (currently $7.50), and (2) a charge of 3c per $1,000
of Total Sum Insured at issue (currently 1c per $1,000 of Total Sum
Insured at issue). However, for policies with a Total Sum Insured at issue
of $5 million or more, the first part of this charge is currently zero.
. Insurance charge - A monthly charge for the cost of insurance. To
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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 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 each of the insured persons, 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 each insured person's attained age increases. (An
insured person's "attained age" on any date is his or her age on the
birthday nearest that date.) The insurance charge is not affected by the
death of the first insured person to die.
. Extra mortality charge - A monthly charge specified in your policy for
----------------------
additional mortality risk if either of the insured persons is subject to
certain types of special insurance risk.
. Asset-based risk charge - A monthly charge for mortality and expense
-----------------------
risks we assume. The charge is a percentage of that portion of your
account value allocated to variable investment options. The charge does
not apply to the fixed investment option. We guarantee that the percentage
will never exceed .0753% per month (.90% on an effective annual basis).
The actual percentage applied will vary depending upon the policy year in
which the charge is made and the Total Sum Insured at issue. For policy years
1 through 15, the current monthly percentages are as follows: .0669% for a
Total
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Sum Insured at issue of less than $5 million, .0627% for a Total Sum
Insured at issue of at least $5 million but less than $15 million, and
.0585% for a Total Sum Insured at issue of $15 million or more. (These
monthly percentages equate to the following effective annual percentages:
.80%, .75% and .70%, respectively.) For policy year 16 and thereafter, the
current monthly percentages are as follows: .0250% for a Total Sum Insured
at issue of less than $5 million, .0209% for a Total Sum Insured at issue
of at least $5 million but less than $15 million, and .0167% for a Total
Sum Insured at issue of $15 million or more. (These monthly percentages
equate to the following effective annual percentages: .30%, .25% and .20%,
respectively.) The reduction after 15 years has not occurred yet under any
policy, since no policy has yet been outstanding for 15 years.
. 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 at issue and is guaranteed not
to exceed 3c per $1,000 of Basic Sum Insured at issue. Because policies of
this type were first offered in 1993, this charge is not yet applicable to
any policy at the current rate.
. Policy split option rider charge - A monthly charge if this rider is
--------------------------------
elected at the time of application for the policy. The charge is 3c per
$1,000 of current Total Sum Insured.
. Age100 waiver of charges rider charge - A monthly charge if this rider is
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elected at the time of application for the policy. To determine the charge,
we multiply the amount of insurance for which we are at risk by a rate
based on age. The rate is derived from an actuarial table. The table in
your policy will show the maximum rates. The rates we will actually apply
could be less than the maximum rates. This charge will not be made until
the sixth policy year.
. Optional benefits charge - Monthly charges for certain other optional
------------------------
insurance benefits added to the policy by means of a rider. We currently
offer a number of such optional riders, such as the four year level term
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 Trusts deduct from my investment in the policy?
The Trusts must pay investment management fees and other operating
expenses. These fees and expenses are different for each fund 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 following figures for the funds are based on historical fund expenses,
as a percentage (rounded to two decimal places) of each fund's average daily net
assets for 1999, except as indicated in the Notes appearing at the end of this
table. Expenses of the funds are not fixed or specified under the terms of the
policy, and those expenses may vary from year to year.
11
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<TABLE>
<CAPTION>
Investment Distribution and Other Operating Total Fund Other Operating
Management Service Expenses With Operating Expenses Absent
Fund Name Fee (12b-1) Fees Reimbursement Expenses Reimbursement
--------- ---------- ---------------- --------------- ---------- ------------------
<S> <C> <C> <C> <C> <C>
JOHN HANCOCK VARIABLE SERIES TRUST I
(NOTE 1):
Managed ............................... 0.32% N/A 0.03% 0.35% 0.03%
Growth & Income ....................... 0.25% N/A 0.03% 0.28% 0.03%
Equity Index .......................... 0.14% N/A 0.00% 0.14% 0.08%
Large Cap Value ....................... 0.74% N/A 0.10% 0.84% 0.11%
American Leaders Large Cap Value ...... 0.80% N/A 0.10% 0.90% N/A
Large Cap Growth ...................... 0.36% N/A 0.03% 0.39% 0.03%
Large Cap Aggressive Growth ........... 0.98% N/A 0.10% 1.08% 0.19%
Mid Cap Value ......................... 0.80% N/A 0.10% 0.90% 0.12%
Mid Cap Growth ........................ 0.82% N/A 0.10% 0.92% 0.11%
Fundamental Mid Cap Growth ............ 0.85% N/A 0.10% 0.95% 0.24%
Real Estate Equity .................... 0.60% N/A 0.10% 0.70% 0.10%
Small/Mid Cap CORE .................... 0.80% N/A 0.10% 0.90% 0.66%
Small/Mid Cap Growth .................. 0.75% N/A 0.10% 0.85% 0.10%
Small Cap Value ....................... 0.80% N/A 0.10% 0.90% 0.16%
Small Cap Growth ...................... 0.75% N/A 0.10% 0.85% 0.14%
Global Balanced * ..................... 0.85% N/A 0.10% 0.95% 0.46%
International Equity Index ............ 0.16% N/A 0.10% 0.26% 0.22%
International Opportunities ........... 0.87% N/A 0.10% 0.97% 0.29%
Emerging Markets Equity ............... 1.27% N/A 0.10% 1.37% 2.17%
Short-Term Bond ....................... 0.30% N/A 0.10% 0.40% 0.13%
Bond Index ............................ 0.15% N/A 0.10% 0.25% 0.20%
Active Bond * ......................... 0.25% N/A 0.03% 0.28% 0.03%
Core Bond ............................. 0.70% N/A 0.10% 0.80% N/A
Global Bond ........................... 0.69% N/A 0.10% 0.79% 0.15%
High Yield Bond ....................... 0.65% N/A 0.10% 0.75% 0.39%
Money Market .......................... 0.25% N/A 0.06% 0.31% 0.06%
AIM VARIABLE INSURANCE FUNDS, INC.:
AIM V.I. Value ........................ 0.61% N/A 0.15% 0.76% 0.15%
VARIABLE INSURANCE PRODUCTS FUND -
SERVICE CLASS (NOTE 2):
Fidelity VIP Growth ................... 0.58% 0.10% 0.07% 0.75% 0.09%
VARIABLE INSURANCE PRODUCTS FUND II -
SERVICE CLASS (NOTE 2):
Fidelity VIP Contrafund(R) ............ 0.58% 0.10% 0.07% 0.75% 0.10%
FRANKLIN TEMPLETON VARIABLE INSURANCE
PRODUCTS TRUST - CLASS 2 SHARES (NOTE
3):
Templeton International Securities .... 0.69% 0.25% 0.19% 1.13% 0.19%
JANUS ASPEN SERIES - SERVICE SHARES
CLASS (NOTE 4):
Janus Aspen Global Technology ......... 0.65% 0.25% 0.13% 1.03% 0.13%
Janus Aspen Worldwide Growth .......... 0.65% 0.25% 0.05% 0.95% 0.05%
MFS VARIABLE INSURANCE TRUST
(NOTE 5):
MFS New Discovery ..................... 0.90% N/A 0.17% 1.07% 1.59%
</TABLE>
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Notes to Fund Expense Table
(1) John Hancock Variable Series Trust I funds' percentages reflect
management fees and other fund expenses based on the allocation
methodology and expense reimbursement policy adopted April 23, 1999.
Under the policy, John Hancock Life Insurance Company voluntarily
reimburses a fund when the fund's "other fund expenses" exceed 0.10%
of the fund's average daily net assets (0.00% for Equity Index). The
percentages for the American Leaders Large Cap Value Fund and the Core
Bond Fund are estimates because the funds were not in operation prior
to the date of this prospectus.
* Global Balanced was formerly "International Balanced" and Active Bond
was formerly "Sovereign Bond".
(2) A portion of the brokerage commissions that certain of the Fidelity
VIP funds pay was used to reduce fund expenses. In addition, through
arrangements with certain funds' custodian, credits realized as a
result of uninvested cash balances were used to reduce a portion of
each applicable fund's expenses. Without these reductions, the
operating expenses of the funds would have been higher, as shown in
the last column of this table.
(3) On February 8, 2000, shareholders of each fund approved a merger and
reorganization that combined the Templeton International Equity Fund
with the Templeton International Securities Fund, effective May 1,
2000. Shareholders of the Templeton International Securities Fund had
approved new management fees, which apply to the combined funds
effective May 1, 2000. The table shows restated total expenses for the
fund based on the new fees and the assets, as of December 31, 1999, of
the Templeton International Securities Fund. However, if the table
reflected both the new fees and the combined assets of the Templeton
International Equity Fund and the Templeton International Securities
Fund, the estimated expenses for the two funds combined after May 1,
2000 would be: Management Fees 0.65%, Distribution and Service Fees
0.25%, Other Expenses 0.20%, and Total Fund Operating Expenses 1.10%.
(4) The percentages for the new Service Shares Class of the Janus Aspen
Global Technology Fund and the Janus Aspen Worldwide Growth Fund are
estimates because the Service Shares Class was not in operation in
1999. All such estimates have been made without regard to the effect
of any expense offset arrangements.
(5) MFS Variable Insurance Trust funds have an expense offset arrangement
which reduces each fund's custodian fee based upon the amount of cash
maintained by the fund with its custodian and dividend disbursing
agent. Each fund may enter into other such arrangements and directed
brokerage arrangements, which would also have the effect of reducing
the fund's expenses. Expenses do not take into account these expense
reductions, and are therefore higher than the actual expenses of the
fund. MFS Investment Management(R) (also doing business as
Massachusetts Financial Services Company) has contractually agreed to
bear expense for the New Discovery Fund, subject to reimbursement by
the fund, such that such fund's "other fund expenses" shall not exceed
0.15% of the average daily net assets of the fund during the current
fiscal year.
What other charges could JHVLICO impose in the future?
Except for the DAC tax charge, we currently make no charge for our Federal
income taxes. However, if we incur, or expect to incur, additional income taxes
attributable to any subaccount of the Account or this class of policies in
future years, we reserve the right to make a charge for such taxes. Any such
charge would reduce what you earn on any affected investment options. However,
we expect that no such charge will be necessary.
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<PAGE>
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.
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.
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
total 100%.
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 in each policy year.
. 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 limits on:
. the minimum amount of each transfer out of the fixed investment option;
. the maximum amount of any transfer into the fixed investment option after
the second policy year; and
. the number and frequency of transfers out of the variable investment
options.
Dollar cost averaging
This is a program of automatic monthly transfers out of the Money Market
investment option into one or more of the other variable investment options. You
choose the investment options and the dollar amount and timing of the transfers.
The program is designed to reduce the risks that result from market
fluctuations. It does this by spreading out the allocation of your money to
investment options over a longer period of time. This allows you to reduce the
risk of investing most of your money at a time when market prices are high.
Obviously, the success of this strategy depends on market trends and is not
guaranteed.
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<PAGE>
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. This is called your "surrender
value." You must return your policy when you request a full surrender.
Partial withdrawals
You may make a partial withdrawal of your surrender value at any time.
Generally, 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 10). We also
reserve the right to refuse any partial withdrawal that would cause the policy's
Total Sum Insured to fall below $250,000 or the policy's Basic Sum Insured to
fall below $250,000. 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 last
insured person dies?" on page 16) and under the guaranteed minimum death benefit
feature (see page 7). Under Option A, 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 7. 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 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 7). The maximum amount you
can borrow is 90% of your surrender value.
The minimum amount of each loan is $1,000. The interest charged on any loan
is an effective annual rate of 4.75% in the first 10 policy years, 4.50% in
policy years 11 through 20, 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
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<PAGE>
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.
. 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 last 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 persons. This is called
the "Total Sum Insured." Total Sum Insured is composed of the Basic Sum Insured
and any Additional Sum Insured you elect. We reserve the right to impose
underwriting restrictions on the proportions of Additional Sum Insured and Basic
Sum Insured based upon the anticipated frequency of premium payments and other
factors. However, even in the absence of such underwriting restrictions, the
Additional Sum Insured generally 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 36.
When the last of the two insured persons dies, we will pay the death
benefit minus any outstanding loans. There are two ways of calculating the death
benefit. You choose which one you want in the application. The two death benefit
options are:
. Option A - The death benefit will equal the greater of (1) the Total
Sum Insured plus any optional extra death benefit, if elected (as
described below), 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 of
the last surviving insured person, 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. 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 than under Option B for the same premium payments.
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<PAGE>
Optional extra death benefit feature
If you elect the Option A death benefit, you may also elect this optional
extra death benefit feature. (This feature is sometimes referred to as "Option
M".) The optional extra death benefit is determined on each annual processing
date as follows:
. First, we multiply your account value by a factor specified in the
policy. The factor is based on the age of the younger insured person.
. We will then subtract your Total Sum Insured.
Any excess is the optional extra death benefit for the remainder of that
policy year. This feature may result in the Option A 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. If you elect this feature, you must elect the "cash value accumulation
test" for purposes of determining the minimum insurance amount (see below). You
may revoke your election of this feature at any time, but there may be adverse
tax consequences if you do. An "annual processing date" is the first business
day of a policy year.
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.
There are two tests that can be applied under Federal tax law -- the "guideline
premium and cash value corridor test" and the "cash value accumulation test."
When you elect the death benefit option, you must also elect which test you wish
to have applied. As indicated above, the guideline premium and cash value
corridor test is not available if the optional extra death benefit feature is
elected. Under the guideline premium and cash value corridor test, we compute
the minimum insurance amount each business day by multiplying the account value
on that date by the so-called "corridor factor" applicable on that date. The
corridor factors are derived by applying the guideline premium and cash value
corridor test. The corridor factor starts out at 2.50 for ages at or below 40
and decreases as attained age increases, reaching a low of 1.0 at age 95. A
table showing the factor for each policy year will appear in the policy. Under
the cash value accumulation test, we compute the minimum insurance amount each
business day by multiplying the account value on that date by the so-called
"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 policy
year will appear in the policy. Regardless of which test is applied, the
appropriate factor will be referred to in the policy as the "Required Additional
Death Benefit Factor."
As noted above, you have to elect which test will be applied when you elect
the death benefit option. The cash value accumulation test may be preferable if
you want an increasing death benefit in later policy years and/or want to fund
the policy at the "7 pay" limit for the full 7 years (see "Tax Considerations"
beginning on page 40). The guideline premium and cash value corridor test may be
preferable if you want the account value under the policy to increase without
increasing the death benefit as quickly as might otherwise be required.
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<PAGE>
Policy split option
At the time of policy issue, you may elect a rider that will permit the
Total Sum Insured to be evenly split into two separate policies, one for each
insured person, but only if the insured persons get divorced or certain Federal
tax law changes occur. The rider may be cancelled at any time, but it will
automatically terminate on the date of death of the first insured person to die
or on the policy anniversary nearest the older insured person's 80th birthday,
whichever is earlier. A policy split could have adverse tax consequences, so
check with your tax adviser before electing this rider.
When the younger insured person reaches 100
If the policy is still in effect on the policy anniversary nearest the
100th birthday of the younger of the two insured persons, certain things will
happen whether or not the younger insured person is actually alive on that
policy anniversary. What happens depends upon whether the age 100 waiver of
charges rider is in effect on that policy anniversary.
If you elected the rider at the time of application for the policy and the
rider is still in effect, the only thing that will happen is that we will stop
deducting any monthly charges (other than the asset-based risk charge) and will
stop accepting premium payments.
If you did not elect the rider at the time of application for the policy
(or if you did elect it and it is no longer in effect), then the following will
happen:
. We will stop deducting any monthly charges (other than the asset-based
risk charge) and will stop accepting any premium payments.
. The death benefit will become equal to the account value on the date
of death. Death benefit Options A and B (as described above) and the
guaranteed minimum death benefit feature will all cease to apply.
What optional rider benefits can I choose?
Optional enhanced cash value rider
If you surrender the policy at any time during the first 4 policy years and
this rider is then in effect, we will pay an Enhanced Cash Value Benefit. The
Benefit is paid in addition to the policy surrender value. The Benefit is equal
to a percentage of first year premiums paid up to the Target Premium. The
percentage will be specified in the policy. Also, if you die during the first 4
policy years and the rider is in effect, we will increase the policy's account
value by the amount of the Benefit in determining the death benefit payable.
Since the rider increases the amount of insurance for which we are at risk, it
increases the amount of the insurance charge described on page 10. The maximum
amount you may borrow from the policy or withdraw from the policy through
partial withdrawals is not effected by this rider. This rider can only be
elected at the time of application for the policy.
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<PAGE>
Other riders
We currently offer a number of other optional riders, such as the four year
level term rider.
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
surviving insured persons still meet our requirements for issuing insurance
coverage. As to when an approved increase would take effect, see "Effective date
of other policy transactions" on page 38.
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 $250,000, 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. As to when an approved decrease would take effect, see
"Effective date of other policy transactions" on page 38.
Change of death benefit option
Changes of death benefit option are not permitted under our current
administrative rules. We expect to be able to allow a change from Option B to
Option A in the near future, but that is not guaranteed.
Tax consequences
Please read "Tax considerations" starting on page 40 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 10 days (or longer in some
states) after you receive it. 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 2, or to the JHVLICO representative who
delivered the policy to you.
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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 Trust 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
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.
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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 of your insurance
coverage may vary from the terms and conditions described in this prospectus,
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 39. 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 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 on page 40.
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 2.
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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 2. You should also send notice
of an 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. 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
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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 persons or entities that use programmed or 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.
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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 specified issue ages, 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 gross annual rates of 0%, 6% and 12% (i.e.,
before any fees or expenses deducted from Trust assets). After the deduction of
average fees and expenses at the Trust level (as described below), the
corresponding net annual rates of return would be -.77%, 5.18% and 11.14%.
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 a male insured person who is 55
years old and a preferred underwriting risk when the policy is issued and for a
female insured person who is 50 years old and a preferred 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. The tables assume that the
guaranteed minimum death benefit has not been elected beyond the tenth policy
year and that no Additional Sum Insured or optional rider benefits have been
elected.
With respect to fees and expenses deducted from Trust assets, the amounts
shown in all tables reflect (1) investment management fees equivalent to an
effective annual rate of .66%, and (2) an assumed average asset charge for all
other Trust operating expenses equivalent to an effective annual rate of .11%.
These rates are the arithmetic average for all funds of the Trust. 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 charge shown above for all other
Trust operating expenses reflects reimbursements to certain funds as described
in the footnotes to the table beginning on page 12. We currently expect those
reimbursement arrangements to continue indefinitely, but that is not guaranteed.
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 the issue age, sex and underwriting risk classification of each of
your proposed insured persons, and the Total Sum Insured and annual Planned
Premium amount requested.
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PLAN: FLEXIBLE PREMIUM VARIABLE LIFE SURVIVORSHIP
$500,000 TOTAL SUM INSURED
MALE, ISSUE AGE 55, PREFERRED UNDERWRITING CLASS
FEMALE, ISSUE AGE 50, PREFERRED UNDERWRITING CLASS
OPTION A DEATH BENEFIT
GUIDELINE PREMIUM AND CASH VALUE CORRIDOR TEST
NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH POLICY YEAR
PLANNED PREMIUM: $8,156*
USING CURRENT CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
------------------------------ -------------------------------
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at ------------------------------ -------------------------------
Year 5% annual interest 0% 6% 12% 0% 6% 12%
------- ------------------ -------- -------- ---------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 8,564 $500,000 $500,000 $ 500,000 $ 4,286 $ 4,569 $ 4,853
2 17,556 500,000 500,000 500,000 10,102 11,006 11,946
3 26,998 500,000 500,000 500,000 15,019 16,889 18,908
4 36,912 500,000 500,000 500,000 20,378 23,574 27,159
5 47,322 500,000 500,000 500,000 25,651 30,548 36,254
6 58,252 500,000 500,000 500,000 31,900 38,929 47,431
7 69,728 500,000 500,000 500,000 38,048 47,669 59,750
8 81,779 500,000 500,000 500,000 44,092 56,781 73,325
9 94,432 500,000 500,000 500,000 50,032 66,279 88,282
10 107,717 500,000 500,000 500,000 55,864 76,175 104,760
11 121,667 500,000 500,000 500,000 62,234 87,165 123,630
12 136,314 500,000 500,000 500,000 68,478 98,608 144,412
13 151,694 500,000 500,000 500,000 74,590 110,516 167,300
14 167,843 500,000 500,000 500,000 80,562 122,901 192,504
15 184,799 500,000 500,000 500,000 86,384 135,774 220,258
16 202,603 500,000 500,000 500,000 92,507 149,899 252,089
17 221,297 500,000 500,000 500,000 98,473 164,637 287,328
18 240,926 500,000 500,000 500,000 104,260 180,005 326,352
19 261,536 500,000 500,000 500,000 109,843 196,020 369,589
20 283,177 500,000 500,000 500,000 115,191 212,697 417,526
25 408,735 500,000 500,000 786,005 138,474 308,447 748,576
30 568,983 500,000 500,000 1,364,582 149,194 427,745 1,299,602
35 773,504 500,000 611,446 2,320,178 134,980 582,329 2,209,693
</TABLE>
* The illustrations assume that Planned Premiums equal to the Target Premium are
paid at the start of each Policy Year. The Death Benefit and Surrender Value
will differ if premiums are paid in different amounts or frequencies, if
policy loans are taken, or if Additional Sum Insured, Guaranteed Minimum Death
Benefit after the tenth Policy Year, or optional rider benefits are elected.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY THE OWNER. THE
DEATH BENEFIT AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT RETURN AVERAGE 0%, 6%, OR 12% OVER
A PERIOD OF YEARS, BUT ALSO FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
25
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE SURVIVORSHIP
$500,000 TOTAL SUM INSURED
MALE, ISSUE AGE 55, PREFERRED UNDERWRITING CLASS
FEMALE, ISSUE AGE 50, PREFERRED UNDERWRITING CLASS
OPTION B DEATH BENEFIT
GUIDELINE PREMIUM AND CASH VALUE CORRIDOR TEST
NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH POLICY YEAR
PLANNED PREMIUM: $8,156*
USING CURRENT CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
------------------------------ -------------------------------
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at ------------------------------ -------------------------------
Year 5% annual interest 0% 6% 12% 0% 6% 12%
------- ------------------ -------- -------- ---------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 8,564 $504,285 $504,569 $ 504,853 $ 4,285 $ 4,569 $ 4,853
2 17,556 509,694 510,597 511,537 10,102 11,005 11,945
3 26,998 515,017 516,887 518,906 15,017 16,887 18,906
4 36,912 520,374 523,571 527,155 20,374 23,571 27,155
5 47,322 525,646 530,542 536,247 25,646 30,542 36,247
6 58,252 531,893 538,919 547,419 31,893 38,919 47,419
7 69,728 538,037 547,655 559,731 38,037 47,655 59,731
8 81,779 544,077 556,760 573,296 44,077 56,760 73,296
9 94,432 550,010 566,248 588,239 50,010 66,248 88,239
10 107,717 555,833 576,130 604,696 55,833 76,130 104,696
11 121,667 562,194 587,105 623,539 62,194 87,105 123,539
12 136,314 568,424 598,524 644,281 68,424 98,524 144,281
13 151,694 574,515 610,396 667,106 74,515 110,396 167,106
14 167,843 580,455 622,725 692,210 80,455 122,725 192,210
15 184,799 586,230 635,514 719,811 86,230 135,514 219,811
16 202,603 592,285 649,513 751,405 92,285 149,513 251,405
17 221,297 598,155 664,070 786,285 98,155 164,070 286,285
18 240,926 603,810 679,176 824,772 103,810 179,176 324,772
19 261,536 609,212 694,819 867,213 109,212 194,819 367,213
20 283,177 614,315 710,974 913,985 114,315 210,974 413,985
25 408,735 634,777 799,719 1,230,517 134,777 299,719 730,517
30 568,983 637,442 893,168 1,737,505 137,442 393,168 1,237,505
35 773,504 605,515 972,242 2,539,325 105,515 472,242 2,039,325
</TABLE>
* The illustrations assume that Planned Premiums equal to the Target Premium are
paid at the start of each Policy Year. The Death Benefit and Surrender Value
will differ if premiums are paid in different amounts or frequencies, if
policy loans are taken, or if Additional Sum Insured, Guaranteed Minimum Death
Benefit after the tenth Policy Year, or optional rider benefits are elected.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY THE OWNER. THE
DEATH BENEFIT AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT RETURN AVERAGE 0%, 6%, OR 12% OVER
A PERIOD OF YEARS, BUT ALSO FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
26
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE SURVIVORSHIP
$500,000 TOTAL SUM INSURED
MALE, ISSUE AGE 55, PREFERRED UNDERWRITING CLASS
FEMALE, ISSUE AGE 50, PREFERRED UNDERWRITING CLASS
OPTION A DEATH BENEFIT
GUIDELINE PREMIUM AND CASH VALUE CORRIDOR TEST
NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH POLICY YEAR
PLANNED PREMIUM: $8,156*
USING CURRENT CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
------------------------------ -------------------------------
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at ------------------------------ -------------------------------
Year 5% annual interest 0% 6% 12% 0% 6% 12%
------- ------------------ -------- -------- ---------- ------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 8,564 $500,000 $500,000 $ 500,000 $ 4,132 $ 4,410 $ 4,689
2 17,556 500,000 500,000 500,000 9,769 10,652 11,570
3 26,998 500,000 500,000 500,000 14,459 16,279 18,245
4 36,912 500,000 500,000 500,000 19,535 22,636 26,114
5 47,322 500,000 500,000 500,000 24,461 29,194 34,714
6 58,252 500,000 500,000 500,000 30,288 37,057 45,257
7 69,728 500,000 500,000 500,000 35,924 45,160 56,778
8 81,779 500,000 500,000 500,000 41,355 53,497 69,361
9 94,432 500,000 500,000 500,000 46,569 62,062 83,103
10 107,717 500,000 500,000 500,000 51,544 70,846 98,107
11 121,667 500,000 500,000 500,000 56,741 80,345 115,026
12 136,314 500,000 500,000 500,000 61,643 90,055 133,503
13 151,694 500,000 500,000 500,000 66,214 99,952 153,680
14 167,843 500,000 500,000 500,000 70,409 110,004 175,717
15 184,799 500,000 500,000 500,000 74,173 120,174 199,794
16 202,603 500,000 500,000 500,000 77,448 130,422 226,125
17 221,297 500,000 500,000 500,000 80,141 140,680 254,944
18 240,926 500,000 500,000 500,000 82,226 150,945 286,582
19 261,536 500,000 500,000 500,000 83,601 161,148 321,390
20 283,177 500,000 500,000 500,000 84,167 171,235 359,807
25 408,735 500,000 500,000 654,790 69,852 217,510 623,610
30 568,983 ** 500,000 1,100,141 ** 243,712 1,047,754
35 773,504 ** 500,000 1,795,136 ** 216,276 1,709,653
</TABLE>
* The illustrations assume that Planned Premiums equal to the Target Premium
are paid at the start of each Policy Year. The Death Benefit and Surrender
Value will differ if premiums are paid in different amounts or frequencies,
if policy loans are taken, or if Additional Sum Insured, Guaranteed Minimum
Death Benefit after the tenth Policy Year, or optional rider benefits are
elected.
** Policy lapses unless additional premium payments are made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY THE OWNER. THE
DEATH BENEFIT AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT RETURN AVERAGE 0%, 6%, OR 12% OVER
A PERIOD OF YEARS, BUT ALSO FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
27
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE SURVIVORSHIP
$500,000 TOTAL SUM INSURED
MALE, ISSUE AGE 55, PREFERRED UNDERWRITING CLASS
FEMALE, ISSUE AGE 50, PREFERRED UNDERWRITING CLASS
OPTION B DEATH BENEFIT
GUIDELINE PREMIUM AND CASH VALUE CORRIDOR TEST
NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH POLICY YEAR
PLANNED PREMIUM: $8,156*
USING CURRENT CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
------------------------------ -------------------------------
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at ------------------------------ -------------------------------
Year 5% annual interest 0% 6% 12% 0% 6% 12%
------- ------------------ -------- -------- ---------- ------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 8,564 $504,132 $504,410 $ 504,689 $ 4,132 $ 4,410 $ 4,689
2 17,556 509,360 510,243 511,161 9,768 10,651 11,569
3 26,998 514,455 516,274 518,240 14,455 16,274 18,240
4 36,912 519,525 522,623 526,100 19,525 22,623 26,100
5 47,322 524,439 529,167 534,681 24,439 29,167 34,681
6 58,252 530,246 537,005 545,192 30,246 37,005 45,192
7 69,728 535,852 545,067 556,657 35,852 45,067 56,657
8 81,779 541,238 553,340 569,150 41,238 53,340 69,150
9 94,432 546,387 561,810 582,753 46,387 61,810 82,753
10 107,717 551,274 570,457 597,546 51,274 70,457 97,546
11 121,667 556,349 579,762 614,155 56,349 79,762 114,155
12 136,314 561,089 589,201 632,180 61,089 89,201 132,180
13 151,694 565,447 598,728 651,712 65,447 98,728 151,712
14 167,843 569,364 608,277 672,831 69,364 108,277 172,831
15 184,799 572,772 617,772 695,619 72,772 117,772 195,619
16 202,603 575,595 627,125 720,157 75,595 127,125 220,157
17 221,297 577,718 636,199 746,487 77,718 136,199 246,487
18 240,926 579,107 644,936 774,745 79,107 144,936 274,745
19 261,536 579,636 653,180 804,978 79,636 153,180 304,978
20 283,177 579,193 660,777 837,251 79,193 160,777 337,251
25 408,735 557,008 681,651 1,030,286 57,008 181,651 530,286
30 568,983 ** 640,757 1,267,039 ** 140,757 767,039
35 773,504 ** ** 1,518,588 ** ** 1,018,588
</TABLE>
* The illustrations assume that Planned Premiums equal to the Target Premium
are paid at the start of each Policy Year. The Death Benefit and Surrender
Value will differ if premiums are paid in different amounts or frequencies,
if policy loans are taken, or if Additional Sum Insured, Guaranteed Minimum
Death Benefit after the tenth Policy Year, or optional rider benefits are
elected.
** Policy lapses unless additional premium payments are made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY THE OWNER. THE
DEATH BENEFIT AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT RETURN AVERAGE 0%, 6%, OR 12% OVER
A PERIOD OF YEARS, BUT ALSO FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
28
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE SURVIVORSHIP
$500,000 TOTAL SUM INSURED
MALE, ISSUE AGE 55, PREFERRED UNDERWRITING CLASS
FEMALE, ISSUE AGE 50, PREFERRED UNDERWRITING CLASS
OPTION A DEATH BENEFIT
CASH VALUE ACCUMULATION TEST
NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH POLICY YEAR
PLANNED PREMIUM: $8,156*
USING CURRENT CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
------------------------------ --------------------------------
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at ------------------------------ --------------------------------
Year 5% annual interest 0% 6% 12% 0% 6% 12%
------- ------------------ -------- -------- ---------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 8,564 $500,000 $500,000 $ 500,000 $ 4,286 $ 4,569 $ 4,853
2 17,556 500,000 500,000 500,000 10,102 11,006 11,946
3 26,998 500,000 500,000 500,000 15,019 16,889 18,908
4 36,912 500,000 500,000 500,000 20,378 23,574 27,159
5 47,322 500,000 500,000 500,000 25,651 30,548 36,254
6 58,252 500,000 500,000 500,000 31,900 38,929 47,431
7 69,728 500,000 500,000 500,000 38,048 47,669 59,750
8 81,779 500,000 500,000 500,000 44,092 56,781 73,325
9 94,432 500,000 500,000 500,000 50,032 66,279 88,282
10 107,717 500,000 500,000 500,000 55,864 76,175 104,760
11 121,667 500,000 500,000 500,000 62,234 87,165 123,630
12 136,314 500,000 500,000 500,000 68,478 98,608 144,412
13 151,694 500,000 500,000 500,000 74,590 110,516 167,300
14 167,843 500,000 500,000 500,000 80,562 122,901 192,504
15 184,799 500,000 500,000 500,000 86,384 135,774 220,258
16 202,603 500,000 500,000 500,000 92,507 149,899 252,089
17 221,297 500,000 500,000 534,344 98,473 164,637 287,303
18 240,926 500,000 500,000 587,641 104,260 180,005 326,220
19 261,536 500,000 500,000 644,679 109,843 196,020 369,207
20 283,177 500,000 500,000 705,822 115,191 212,697 416,664
25 408,735 500,000 500,000 1,091,944 138,474 308,447 739,441
30 568,983 500,000 563,895 1,667,910 149,194 425,856 1,259,614
35 773,504 500,000 689,397 2,542,924 134,980 564,955 2,083,904
</TABLE>
* The illustrations assume that Planned Premiums equal to the Target Premium are
paid at the start of each Policy Year. The Death Benefit and Surrender Value
will differ if premiums are paid in different amounts or frequencies, if
policy loans are taken, or if Additional Sum Insured, Guaranteed Minimum Death
Benefit after the tenth Policy Year, or optional rider benefits are elected.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY THE OWNER. THE
DEATH BENEFIT AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT RETURN AVERAGE 0%, 6%, OR 12% OVER
A PERIOD OF YEARS, BUT ALSO FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
29
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE SURVIVORSHIP
$500,000 TOTAL SUM INSURED
MALE, ISSUE AGE 55, PREFERRED UNDERWRITING CLASS
FEMALE, ISSUE AGE 50, PREFERRED UNDERWRITING CLASS
OPTION B DEATH BENEFIT
CASH VALUE ACCUMULATION TEST
NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH POLICY YEAR
PLANNED PREMIUM: $8,156*
USING CURRENT CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
------------------------------ --------------------------------
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at ------------------------------ --------------------------------
Year 5% annual interest 0% 6% 12% 0% 6% 12%
------- ------------------ -------- -------- ---------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 8,564 $504,285 $504,569 $ 504,853 $ 4,285 $ 4,569 $ 4,853
2 17,556 509,694 510,597 511,537 10,102 11,005 11,945
3 26,998 515,017 516,887 518,906 15,017 16,887 18,906
4 36,912 520,374 523,571 527,155 20,374 23,571 27,155
5 47,322 525,646 530,542 536,247 25,646 30,542 36,247
6 58,252 531,893 538,919 547,419 31,893 38,919 47,419
7 69,728 538,037 547,655 559,731 38,037 47,655 59,731
8 81,779 544,077 556,760 573,296 44,077 56,760 73,296
9 94,432 550,010 566,248 588,239 50,010 66,248 88,239
10 107,717 555,833 576,130 604,696 55,833 76,130 104,696
11 121,667 562,194 587,105 623,539 62,194 87,105 123,539
12 136,314 568,424 598,524 644,281 68,424 98,524 144,281
13 151,694 574,515 610,396 667,106 74,515 110,396 167,106
14 167,843 580,455 622,725 692,210 80,455 122,725 192,210
15 184,799 586,230 635,514 719,811 86,230 135,514 219,811
16 202,603 592,285 649,513 751,405 92,285 149,513 251,405
17 221,297 598,155 664,070 786,285 98,155 164,070 286,285
18 240,926 603,810 679,176 824,772 103,810 179,176 324,772
19 261,536 609,212 694,819 867,213 109,212 194,819 367,213
20 283,177 614,315 710,974 913,985 114,315 210,974 413,985
25 408,735 634,777 799,719 1,230,517 134,777 299,719 730,517
30 568,983 637,442 893,168 1,737,505 137,442 393,168 1,237,505
35 773,504 605,515 972,242 2,539,325 105,515 472,242 2,039,325
</TABLE>
* The illustrations assume that Planned Premiums equal to the Target Premium are
paid at the start of each Policy Year. The Death Benefit and Surrender Value
will differ if premiums are paid in different amounts or frequencies, if
policy loans are taken, or if Additional Sum Insured, Guaranteed Minimum Death
Benefit after the tenth Policy Year, or optional rider benefits are elected.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY THE OWNER. THE
DEATH BENEFIT AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT RETURN AVERAGE 0%, 6%, OR 12% OVER
A PERIOD OF YEARS, BUT ALSO FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
30
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE SURVIVORSHIP
$500,000 TOTAL SUM INSURED
MALE, ISSUE AGE 55, PREFERRED UNDERWRITING CLASS
FEMALE, ISSUE AGE 50, PREFERRED UNDERWRITING CLASS
OPTION A DEATH BENEFIT
CASH VALUE ACCUMULATION TEST
NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH POLICY YEAR
PLANNED PREMIUM: $8,156*
USING CURRENT CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
------------------------------ ------------------------------
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at ------------------------------ ------------------------------
Year 5% annual interest 0% 6% 12% 0% 6% 12%
------- ------------------ -------- -------- ---------- ------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 8,564 $500,000 $500,000 $ 500,000 $ 4,132 $ 4,410 $ 4,689
2 17,556 500,000 500,000 500,000 9,769 10,652 11,570
3 26,998 500,000 500,000 500,000 14,459 16,279 18,245
4 36,912 500,000 500,000 500,000 19,535 22,636 26,114
5 47,322 500,000 500,000 500,000 24,461 29,194 34,714
6 58,252 500,000 500,000 500,000 30,288 37,057 45,257
7 69,728 500,000 500,000 500,000 35,924 45,160 56,778
8 81,779 500,000 500,000 500,000 41,355 53,497 69,361
9 94,432 500,000 500,000 500,000 46,569 62,062 83,103
10 107,717 500,000 500,000 500,000 51,544 70,846 98,107
11 121,667 500,000 500,000 500,000 56,741 80,345 115,026
12 136,314 500,000 500,000 500,000 61,643 90,055 133,503
13 151,694 500,000 500,000 500,000 66,214 99,952 153,680
14 167,843 500,000 500,000 500,000 70,409 110,004 175,717
15 184,799 500,000 500,000 500,000 74,173 120,174 199,794
16 202,603 500,000 500,000 500,000 77,448 130,422 226,125
17 221,297 500,000 500,000 500,000 80,141 140,680 254,944
18 240,926 500,000 500,000 516,055 82,226 150,945 286,480
19 261,536 500,000 500,000 559,978 83,601 161,148 320,699
20 283,177 500,000 500,000 606,039 84,167 171,235 357,760
25 408,735 500,000 500,000 874,477 69,852 217,510 592,177
30 568,983 ** 500,000 1,221,502 ** 243,712 922,485
35 773,504 ** 500,000 1,674,585 ** 216,276 1,372,308
</TABLE>
* The illustrations assume that Planned Premiums equal to the Target Premium
are paid at the start of each Policy Year. The Death Benefit and Surrender
Value will differ if premiums are paid in different amounts or frequencies,
if policy loans are taken, or if Additional Sum Insured, Guaranteed Minimum
Death Benefit after the tenth Policy Year, or optional rider benefits are
elected.
** Policy lapses unless additional premium payments are made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY THE OWNER. THE
DEATH BENEFIT AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT RETURN AVERAGE 0%, 6%, OR 12% OVER
A PERIOD OF YEARS, BUT ALSO FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
31
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE SURVIVORSHIP
$500,000 TOTAL SUM INSURED
MALE, ISSUE AGE 55, PREFERRED UNDERWRITING CLASS
FEMALE, ISSUE AGE 50, PREFERRED UNDERWRITING CLASS
OPTION B DEATH BENEFIT
CASH VALUE ACCUMULATION TEST
NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH POLICY YEAR
PLANNED PREMIUM: $8,156*
USING CURRENT CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
------------------------------ ------------------------------
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at ------------------------------ ------------------------------
Year 5% annual interest 0% 6% 12% 0% 6% 12%
------- ------------------ -------- -------- ---------- ------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 8,564 $504,132 $504,410 $ 504,689 $ 4,132 $ 4,410 $ 4,689
2 17,556 509,360 510,243 511,161 9,768 10,651 11,569
3 26,998 514,455 516,274 518,240 14,455 16,274 18,240
4 36,912 519,525 522,623 526,100 19,525 22,623 26,100
5 47,322 524,439 529,167 534,681 24,439 29,167 34,681
6 58,252 530,246 537,005 545,192 30,246 37,005 45,192
7 69,728 535,852 545,067 556,657 35,852 45,067 56,657
8 81,779 541,238 553,340 569,150 41,238 53,340 69,150
9 94,432 546,387 561,810 582,753 46,387 61,810 82,753
10 107,717 551,274 570,457 597,546 51,274 70,457 97,546
11 121,667 556,349 579,762 614,155 56,349 79,762 114,155
12 136,314 561,089 589,201 632,180 61,089 89,201 132,180
13 151,694 565,447 598,728 651,712 65,447 98,728 151,712
14 167,843 569,364 608,277 672,831 69,364 108,277 172,831
15 184,799 572,772 617,772 695,619 72,772 117,772 195,619
16 202,603 575,595 627,125 720,157 75,595 127,125 220,157
17 221,297 577,718 636,199 746,487 77,718 136,199 246,487
18 240,926 579,107 644,936 774,745 79,107 144,936 274,745
19 261,536 579,636 653,180 804,978 79,636 153,180 304,978
20 283,177 579,193 660,777 837,251 79,193 160,777 337,251
25 408,735 557,008 681,651 1,030,286 57,008 181,651 530,286
30 568,983 ** 640,757 1,267,039 ** 140,757 767,039
35 773,504 ** ** 1,518,588 ** ** 1,018,588
</TABLE>
* The illustrations assume that Planned Premiums equal to the Target Premium
are paid at the start of each Policy Year. The Death Benefit and Surrender
Value will differ if premiums are paid in different amounts or frequencies,
if policy loans are taken, or if Additional Sum Insured, Guaranteed Minimum
Death Benefit after the tenth Policy Year, or optional rider benefits are
elected.
** Policy lapses unless additional premium payments are made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY THE OWNER. THE
DEATH BENEFIT AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT RETURN AVERAGE 0%, 6%, OR 12% OVER
A PERIOD OF YEARS, BUT ALSO FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
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ADDITIONAL INFORMATION
This section of the prospectus provides additional detailed information that
is not contained in the Basic Information section on pages 4 through 23.
<TABLE>
<CAPTION>
CONTENTS OF THIS SECTION BEGINNING ON PAGE
------------------------ -----------------
<S> <C>
Description of JHVLICO..................................... 34
How we support the policy and investment options........... 34
Procedures for issuance of a policy........................ 35
Basic Sum Insured vs. Additional Sum Insured............... 36
Commencement of investment performance..................... 37
How we process certain policy transactions................. 37
Effects of policy loans.................................... 38
Additional information about how certain policy charges
work....................................................... 39
How we market the policies................................. 40
Tax considerations......................................... 40
Reports that you will receive.............................. 42
Voting privileges that you will have....................... 42
Changes that JHVLICO can make as to your policy............ 43
Adjustments we make to death benefits...................... 43
When we pay policy proceeds................................ 43
Other details about exercising rights and paying benefits.. 44
Legal matters.............................................. 44
Registration statement filed with the SEC.................. 45
Accounting and actuarial experts........................... 45
Financial statements of JHVLICO and the Account............ 45
List of Directors and Executive Officers of JHVLICO........ 46
</TABLE>
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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 Life Insurance Company ("John
Hancock"), a Massachusetts stock life insurance company. On February 1, 2000,
John Hancock Mutual Life Insurance Company (which was chartered in Massachusetts
in 1862) converted to a stock company by "demutualizing" and changed its name to
John Hancock Life Insurance Company. As part of the demutualization process,
John Hancock became a subsidiary of John Hancock Financial Services, Inc., a
newly formed publicly-traded corporation. John Hancock's home office is at John
Hancock Place, Boston, Massachusetts 02117. As of December 31, 1999, John
Hancock's assets were approximately $71 billion and it had invested
approximately $575 million in JHVLICO in connection with JHVLICO's 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 Trusts. New subaccounts may be added as new funds are added to the Trusts
and made available to policy owners. Existing subaccounts may be deleted if
existing funds are deleted from the Trusts.
We will purchase and redeem Trust shares for the Account at their net asset
value without any sales or redemption charges. Shares of a Trust represent an
interest in one of the funds of the Trust 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
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<PAGE>
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).
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 $250,000 and a minimum Basic Sum Insured at issue of $250,000. At the time of
issue, each 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 persons 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 each of the insured
persons, 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 persons' rate classes 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 last surviving
insured person dies (except for the circumstances described under "Temporary
coverage prior to policy delivery" on page 36).
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.
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<PAGE>
. 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.
Backdating
In order to preserve a younger age at issue for one or both of the insured
persons, 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
always takes effect retroactively. Backdating results in a lower insurance
charge (because of an 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 survivorship term life
insurance coverage on the insured persons 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 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.
36
<PAGE>
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 have significant tax consequences (see "Tax Considerations"
beginning on page 40).
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 later of the date such payment is received or the twentieth day following
the date of issue, the portion of the Money Market investment option
attributable to such payment 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 an 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 we think 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 any investment option will be effective at the
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end of the business day in which we receive at our Life Servicing Office notice
satisfactory to us.
We have the right to defer transfers of amounts out of the fixed investment
option for up to six months.
Dollar cost averaging
Scheduled transfers under this option may be made from the Money Market
investment option to not more than nine other variable investment options.
However, the amount transferred to any one investment option must be at least
$100.
Once we receive the election in form satisfactory to us at our Life Servicing
Office, transfers will begin on the second monthly deduction date following its
receipt. If you have any questions with respect to this provision, call
1-800-732-5543.
Once elected, the scheduled monthly transfer option will remain in effect for
so long as you have at least $2,500 of your account value in the Money Market
investment option, or until we receive written notice from you of cancellation
of the option or notice of the death of the last surviving insured person. We
reserve the right to modify, terminate or suspend the dollar cost averaging
program at any time.
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 policy anniversary on or next
following the date we approve the request:
. Total Sum Insured decreases
. Additional Sum Insured increases
. Change of death benefit option from Option B to Option A, when and if
permitted by our administrative rules (see "Change of death benefit
option" on page 19)
Reinstatements of lapsed policies take effect on the monthly deduction date on
or next following the date we approve the request for reinstatement.
We process loans, surrenders, partial withdrawals and loan repayments as of
the day we receive the 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 exceeds 90% of your account value, the policy
will terminate 31 days
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<PAGE>
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
asset-based risk charge and other gains with respect to the policies, or from
our general assets. (See "How we market the policies" on page 40.)
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 $14,000. 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
$9,750. 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 40.)
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 last surviving 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 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
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<PAGE>
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
John Hancock Funds, Inc. ("JHFI"), an indirect wholly-owned subsidiary of John
Hancock located at 101 Huntington Avenue, Boston, MA 02199, 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. JHFI acts as principal
underwriter and principal distributor of the policies sold through the use of
this prospectus. JHFI also serves as principal underwriter for John Hancock
Variable Annuity Accounts H and JF, John Hancock Mutual Variable Life Insurance
Account UV, John Hancock Variable Life Account U and Investors Partner Life
Insurance Account L, all of which are registered under the 1940 Act.
The policies may be purchased through broker-dealers and certain financial
institutions who have entered into selling agreements with JHFI and JHVLICO, and
whose representatives are authorized by applicable law to sell variable life
insurance policies.Gross first year commissions plus any expense allowance
payments paid to such broker-dealers and financial institutions is not expected
to exceed 80% of premiums paid up to the Target Premium plus 3% of any excess
premium payments. Gross renewal commissions (i.e., after the first year) are not
expected to exceed 3% of total premiums paid in policy years 2 through 5 plus
0.15% of account value less loans in policy years 2 and thereafter. In some
situations where the broker dealer provides some or all of the marketing
services required, we may pay an additional gross first year commission of up to
20% of premiums paid up to the Target Premium. In such instances, we may also
pay an additional gross renewal commission. The additional gross renewal
commission would not be expected to exceed 0.10% of account value less loans in
policy years 2 and thereafter.
We reimburse JHFI for direct and indirect expenses actually incurred in
connection with the marketing and sale of the policies.
The offering of the policies is intended to be continuous, but neither JHVLICO
nor JHFI 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.
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
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<PAGE>
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 the Trust 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" 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 59 1/2.
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Furthermore, any time there is a "material change" in a policy (such as an
increase in Additional Sum Insured, the addition of certain other policy
benefits after issue, 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
the Trust, 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 Trust. We will vote the shares of each of the
funds of the Trust which are deemed attributable to variable life insurance
policies at regular and special meetings of the Trust's shareholders in
accordance with instructions received from owners of such policies. Shares of
the Trust held in the Account which are not attributable 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
42
<PAGE>
Trust's meeting. Owners of policies may give instructions regarding the election
of the Board of Trustees of the Trust, ratification of the selection of
independent auditors, approval of Trust 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 the Trust 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, John Hancock or an affiliate of either, (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 either insured person commits suicide within certain time periods, the
amount of death benefit we pay will be limited as described in the policy. Also,
if an application misstated the age or gender of either 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
43
<PAGE>
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 death of the last
surviving insured person, 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 death of the last surviving
insured person. You may change the beneficiary during that 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 last surviving insured person dies, we will pay
the insurance proceeds to the owner or the owner's estate.
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.
44
<PAGE>
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
Certain of 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 reports thereon which appear elsewhere herein
and have been included in reliance on their reports given on their authority as
experts in accounting and auditing. Actuarial matters included in this
prospectus have been examined by Todd G. Engelsen, F.S.A., an Actuary of JHVLICO
and Second Vice President of John Hancock.
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.
In addition to those financial statements of JHVLICO and the Account included
herein that have been audited by Ernst & Young LLP, this prospectus also
contains unaudited financial statements of both JHVLICO and the Account for a
period subsequent to the audited financial statements.
45
<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 and Executive Officers Principal Occupations
-------------------------------- ---------------------
<S> <C>
David F. D'Alessandro........................ Chairman of the Board and Chief Executive Officer of JHVLICO; President,
Chief Operations Officer and Chief Executive Officer-Elect, John Hancock
Life Insurance Company.
Michele G. Van Leer.......................... Vice Chairman of the Board and President of JHVLICO; Senior Vice
President, John Hancock Life Insurance Company.
Ronald J. Bocage............................. Director, Vice President and Counsel of JHVLICO; Vice President and
Counsel, John Hancock Life Insurance Company.
Bruce M. Jones............................... Director and Vice President of JHVLICO; Vice President, John Hancock
Life Insurance Company.
Thomas J. Lee................................ Director and Vice President of JHVLICO; Vice President, John Hancock
Life Insurance Company.
Barbara L. Luddy............................. Director, Vice President and Actuary of JHVLICO; Senior Vice President,
John Hancock Life Insurance Company.
Robert S. Paster............................. Director and Vice President of JHVLICO; Vice President, John Hancock
Life Insurance Company.
Robert R. Reitano............................ Director and Vice President of JHVLICO; Vice President, John Hancock
Life Insurance Company.
Paul Strong.................................. Director and Vice President of JHVLICO; Vice President, John Hancock
Life Insurance Company.
Daniel L. Ouellette.......................... Vice President, Marketing, of JHVLICO; Senior Vice President, John
Hancock Life Insurance Company.
Edward P. Dowd............................... Vice President, Investments, of JHVLICO; Senior Vice President, John
Hancock Life Insurance Company
Roger G. Nastou.............................. Vice President, Investments, of JHVLICO; Vice President, John Hancock
Life Insurance Company
Todd G. Engelsen............................. Vice President and Illustration Actuary of JHVLICO; Second Vice
President, John Hancock Life Insurance Company
Julie H. Indge............................... Treasurer of JHVLICO; Financial Officer, John Hancock Life Insurance
Company
Patrick F. Smith............................. Controller of JHVLICO; Senior Associate Controller, John Hancock Life
Insurance Company.
Peter H. Scavongelli......................... Secretary of JHVLICO; State Compliance Officer, John Hancock Life
Insurance Company
</TABLE>
The business address of all Directors and officers of JHVLICO is John Hancock
Place, Boston, Massachusetts 02117.
46
<PAGE>
UNAUDITED FINANCIAL STATEMENTS
FOR
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
FIRST QUARTER 2000
47
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
(Unaudited)
March 31 December 31
2000 1999
---------- ------------
(In millions)
<S> <C> <C>
ASSETS
Bonds.............................................. $ 1,276.6 $ 1,216.3
Preferred stocks................................. 35.6 35.9
Common stocks.................................... 1.7 3.2
Investment in affiliates......................... 81.3 80.7
Mortgage loans on real estate...................... 429.0 433.1
Real estate........................................ 24.8 25.0
Policy loans....................................... 181.8 172.1
Cash Items:
Cash in banks.................................... (3.3) 27.2
Temporary cash investments....................... 309.4 222.9
--------- ---------
306.1 250.1
Premiums due and deferred.......................... 23.1 29.9
Investment income due and accrued.................. 35.7 33.2
Other general account assets....................... 52.3 65.3
Assets held in separate accounts................... 8,597.7 8,268.2
--------- ---------
TOTAL ASSETS....................................... $11,045.7 $10,613.0
========= =========
OBLIGATIONS AND STOCKHOLDER'S EQUITY
OBLIGATIONS
Policy reserves.................................. $ 1,945.6 $ 1,866.6
Federal income and other taxes payable........... 73.6 67.3
Other general account obligations................ 232.1 219.0
Transfers from separate account, net............. (225.7) (221.6)
Asset valuation reserve.......................... 18.8 23.1
Obligations related to separate accounts......... 8,590.9 8,261.6
--------- ---------
TOTAL OBLIGATIONS.................................. 10,635.3 10,216.0
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.................................. 572.4 572.4
Unassigned deficit............................... (164.5) (177.9)
--------- ---------
TOTAL STOCKHOLDER'S EQUITY......................... 410.4 397.0
--------- ---------
TOTAL OBLIGATIONS AND STOCKHOLDER'S EQUITY......... $11,045.7 $10,613.0
========= =========
</TABLE>
See condensed notes to the financial statements (unaudited).
48
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND UNASSIGNED DEFICIT
<TABLE>
<CAPTION>
(Unaudited)
Three months ended
March 31
-------------------
2000 1999
-------- --------
(In millions)
<S> <C> <C>
INCOME
Premiums............................................. $ 231.3 $223.6
Net investment income................................ 39.6 32.5
Other, net........................................... 132.4 145.3
------- ------
403.3 401.4
BENEFITS AND EXPENSES
Payments to policyholders and beneficiaries.......... 89.2 80.3
Additions to reserves to provide for future payments
to policyholders and beneficiaries.................. 216.3 238.2
Expenses of providing service to policyholders and
obtaining new insurance............................ 73.5 75.7
State and miscellaneous taxes........................ 7.6 2.8
------- ------
386.6 397.0
------- ------
GAIN FROM OPERATIONS BEFORE FEDERAL INCOME TAXES
AND NET REALIZED CAPITAL GAINS (LOSSES).......... 16.7 4.4
Federal income taxes................................... 4.7 1.0
------- ------
GAIN FROM OPERATIONS BEFORE NET REALIZED CAPITAL
GAINS (LOSSES)................................... 12.0 3.4
Net realized capital gains (losses).................... 0.4 (1.5)
------- ------
NET INCOME........................................ 12.4 1.9
Unassigned deficit at beginning of period.............. (177.9) (49.2)
Net unrealized capital gains (losses) and other
adjustments........................................... 1.1 0.3
Other reserves and adjustments......................... (0.1) (4.2)
------- ------
UNASSIGNED DEFICIT AT END OF PERIOD.................... $(164.5) $(51.2)
======= ======
</TABLE>
See condensed notes to the financial statements (unaudited).
49
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(Unaudited)
Three months ended
March 31
-------------------
2000 1999
-------- --------
(In millions)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Insurance premiums.................................. $ 241.4 $ 225.3
Net investment income............................... 37.2 29.9
Benefits to policyholders and beneficiaries......... (79.6) (70.8)
Dividends paid to policyholders..................... (6.4) (6.1)
Insurance expenses and taxes........................ (91.9) (107.8)
Net transfers to separate accounts.................. (141.4) (182.0)
Other, net.......................................... 134.4 175.7
------- -------
NET CASH PROVIDED FROM OPERATIONS................ 93.7 64.2
------- -------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Bond purchases...................................... (157.5) (71.3)
Bond sales.......................................... 73.5 8.7
Bond maturities and scheduled redemptions........... 18.9 18.8
Bond prepayments.................................... 2.6 3.2
Stock purchases..................................... (0.4) (0.2)
Proceeds from stock sales........................... 1.2 1.5
Real estate purchases............................... (0.1) (0.9)
Real estate sales................................... 0.0 10.4
Other invested assets purchases..................... (0.1) 0.0
Proceeds from the sale of other invested assets..... 0.0 0.0
Mortgage loans issued............................... (4.3) (23.4)
Mortgage loan repayments............................ 8.4 5.2
Other, net.......................................... 20.1 (2.8)
------- -------
NET CASH USED IN INVESTING ACTIVITIES............ (37.7) (50.8)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in short-term note payable.. (0.0) (32.3)
------- -------
NET CASH PROVIDED FROM FINANCING ACTIVITIES...... (0.0) (32.3)
------- -------
INCREASE (DECREASE) IN CASH AND TEMPORARY CASH
INVESTMENTS.......................................... 56.0 (18.9)
Cash and temporary cash investments at beginning of
year................................................. 250.1 19.9
------- -------
CASH AND TEMPORARY CASH INVESTMENTS AT THE END OF
PERIOD............................................... $ 306.1 $ 1.0
======= =======
</TABLE>
See condensed notes to the financial statements (unaudited).
50
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
Common Paid-in Unassigned
Stock Capital Deficit Total
------ ------- ---------- -------
(In millions)
<S> <C> <C> <C> <C>
For the three months ended March 31, 1999 (unaudited)
Balance at January 1, 1999....................................... $2.5 $377.5 $ (49.2) $330.8
1999 Transactions:
Capital contribution...........................................
Net gain....................................................... 1.9 1.9
Net unrealized capital gains and other adjustments............. 0.3 0.3
Other reserves and adjustments................................. (4.2) (4.2)
---- ------ ------- ------
Balance at March 31, 1999........................................ $2.5 $377.5 $ (51.2) $328.8
==== ====== ======= ======
For the three months ended March 31, 2000 (unaudited)
Balance at January 1, 2000....................................... $2.5 $572.4 $(177.9) $397.0
2000 Transactions:
Capital contribution...........................................
Net gain....................................................... 12.4 12.4
Net unrealized capital gains and other adjustments............. 1.1 1.1
Provision for Litigation Reserve...............................
Other reserves and adjustments................................. (0.1) (0.1)
---- ------ ------- ------
Balance at March 31, 2000........................................ $2.5 $572.4 $(164.5) $410.4
==== ====== ======= ======
</TABLE>
See condensed notes to the financial statements (unaudited).
51
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1--BASIS OF PRESENTATION
The accompanying unaudited interim financial statements have been prepared on
the basis of accounting practices prescribed or permitted by the Commonwealth of
Massachusetts Division of Insurance and in conformity with the practices of the
National Association of Insurance Commissioners, which practices differ from
generally accepted accounting principles (GAAP). Pursuant to Financial
Accounting Standard Board Interpretation 40, "Applicability of General Accepted
Accounting Principles to Mutual Life Insurance and Other Enterprises" (FIN 40),
as amended which was effective for 1996 financial statements, financial
statements based on statutory accounting practices can no longer be described as
prepared in conformity with GAAP.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three months period ended March 31, 2000 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2000.
52
<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, 1999
and 1998, 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 auditing standards generally
accepted in the United States. 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 accounting principles generally accepted in the United
States. The variances between such practices and accounting principles generally
accepted in the United States 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 accounting principles generally accepted in the
United States, the financial position of John Hancock Variable Life Insurance
Company at December 31, 1999 and 1998, or the results of its operations or its
cash flows for the years then ended.
However, 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, 1999 and 1998, 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
March 10, 2000
53
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1999 1998
-------- --------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Bonds--Note 6............................................................ $ 1,216.3 $1,185.8
Preferred stocks......................................................... 35.9 36.5
Common stocks............................................................ 3.2 3.1
Investment in affiliates................................................. 80.7 81.7
Mortgage loans on real estate--Note 6.................................... 433.1 388.1
Real estate.............................................................. 25.0 41.0
Policy loans............................................................. 172.1 137.7
Cash items:
Cash in banks......................................................... 27.2 11.4
Temporary cash investments............................................ 222.9 8.5
--------- --------
250.1 19.9
Premiums due and deferred................................................ 29.9 32.7
Investment income due and accrued........................................ 33.2 29.8
Other general account assets............................................. 65.3 47.5
Assets held in separate accounts......................................... 8,268.2 6,595.2
--------- --------
TOTAL ASSETS................................................... $10,613.0 $8,599.0
========= ========
OBLIGATIONS AND STOCKHOLDER'S EQUITY
OBLIGATIONS
Policy reserves........................................................ $ 1,866.6 $1,652.0
Federal income and other taxes payable--Note 1......................... 67.3 44.3
Other general account obligations...................................... 219.0 150.9
Transfers from separate accounts, net.................................. (221.6) (190.3)
Asset valuation reserve--Note 1........................................ 23.1 21.9
Obligations related to separate accounts............................... 8,261.6 6,589.4
--------- --------
TOTAL OBLIGATIONS 10,216.0 8,268.2
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........................................................ 572.4 377.5
Unassigned deficit--Note 10............................................ (177.9) (49.2)
--------- --------
TOTAL STOCKHOLDER'S EQUITY............................................. 397.0 330.8
--------- --------
TOTAL OBLIGATIONS AND STOCKHOLDER'S EQUITY..................... $10,613.0 $8,599.0
========= ========
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
54
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF OPERATIONS AND UNASSIGNED DEFICIT
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998
-------- --------
(IN MILLIONS)
<S> <C> <C>
INCOME
Premiums.............................................................. $ 950.8 $1,272.3
Net investment income--Note 3......................................... 136.0 122.8
Other, net............................................................ 605.4 618.1
-------- --------
1,692.2 2,013.2
BENEFITS AND EXPENSES
Payments to policyholders and beneficiaries........................... 349.9 301.4
Additions to reserves to provide for future payments to
policyholders and beneficiaries.................................... 888.8 1,360.2
Expenses of providing service to policyholders and
obtaining new insurance--Note 5...................................... 314.4 274.2
State and miscellaneous taxes......................................... 20.5 28.1
-------- --------
1,573.6 1,963.9
-------- --------
Gain from operations before federal income
taxes and net realized capital losses.............................. 118.6 49.3
Federal income taxes--Note 1.......................................... 42.9 33.1
-------- --------
Gain from operations before net realized capital losses.............. 75.7 16.2
Net realized capital losses--Note 4................................... (1.7) (0.6)
-------- --------
Net income........................................................ 74.0 15.6
Unassigned deficit at beginning of year............................... (49.2) (58.3)
Net unrealized capital losses and other adjustments--Note 4........... (3.8) (6.0)
Other reserves and adjustments--Note 10............................... (198.9) (0.5)
-------- --------
Unassigned deficit at end of year................................. $ (177.9) $ (49.2)
======== ========
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
55
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1999 1998
-------- --------
(IN MILLIONS)
<S> <C> <C>
Cash flows from operating activities:
Insurance premiums................................................... $ 958.5 $1,275.3
Net investment income................................................ 134.2 118.2
Benefits to policyholders and beneficiaries.......................... (321.6) (275.5)
Dividends paid to policyholders......................................... (25.6) (22.3)
Insurance expenses and taxes............................................ (344.8) (296.9)
Net transfers to separate accounts...................................... (705.3) (874.4)
Other, net........................................................... 540.6 551.3
-------- --------
Net cash provided from operations............................... 236.0 475.7
-------- --------
Cash flows used in investing activities:
Bond purchases....................................................... (240.7) (618.8)
Bond sales........................................................... 108.3 340.7
Bond maturities and scheduled redemptions............................ 78.4 111.8
Bond prepayments..................................................... 18.7 76.5
Stock purchases...................................................... (3.9) (23.4)
Proceeds from stock sales............................................ 3.6 1.9
Real estate purchases................................................ (2.2) (4.2)
Real estate sales.................................................... 17.8 2.1
Other invested assets purchases...................................... (4.5) 0.0
Mortgage loans issued................................................ (70.7) (145.5)
Mortgage loan repayments............................................. 25.3 33.2
Other, net........................................................... (68.9) (435.2)
-------- --------
Net cash used in investing activities........................... (138.8) (660.9)
-------- --------
Cash flows from financing activities:
Capital contribution................................................. 194.9
Net (decrease) increase in short-term note payable................... (61.9) 61.9
-------- --------
Net cash provided from financing activities..................... 133.0 61.9
-------- --------
Increase (decrease) in cash and temporary cash investments...... 230.2 (123.3)
Cash and temporary cash investments at beginning of year................ 19.9 143.2
-------- --------
Cash and temporary cash investments at end of year.............. $ 250.1 $ 19.9
======== ========
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
56
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES
John Hancock Variable Life Insurance Company (the Company) is a wholly-
owned subsidiary of John Hancock Life Insurance Company (formerly 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, Signator Insurance Agency, which includes a career agency
system composed of Company-supported independent general agencies and a direct
brokerage system that markets directly to external independent brokers. 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 in
relation to future estimated gross profits; (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 codified statutory accounting
principles ("Codification") effective January 1, 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 Commonwealth of
Massachusetts must adopt Codification as the prescribed basis of accounting on
which domestic insurers must report their statutory-basis results to the
Division
57
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
of Insurance. At this time, it is anticipated that the Commonwealth of
Massachusetts will adopt Codification effective January 1, 2001. 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.
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 $1.9 million in 1999 and $3.0 million in
1998.
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.
58
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
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, 1999, the IMR, net of 1999 amortization of $2.3 million, amounted to $7.4
million, which is included in policy reserves. The corresponding 1998 amounts
were $2.4 million and $10.7 million, respectively.
Goodwill
The excess of cost over the statutory book value of the net assets of life
insurance business acquired was $8.9 million and $11.4 million at December 31,
1999 and 1998, respectively, and generally is amortized over a ten-year period
using a straight-line method.
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
59
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
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 loan 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 engaged 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, 1999.
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.
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 1999.
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
60
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
taxes of the Company are allocated on a separate return basis with certain
adjustments. The Company made federal income tax payments of $10.6 million in
1999 and $38.2 million in 1998.
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. No such refinements were made during 1999 or 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.
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 the
final contingent payment to CPAL of $1.5 million during 1998.
61
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
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 Insurance Company (IPL) on March 5, 1998. IPL manages the business assumed
from Charter and began marketing term life and variable universal life products
through brokers in 1999. Summarized financial information for IPL for 1999 and
1998 is as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
(IN MILLIONS)
<S> <C> <C>
Total assets......................................... $ 570.7 $ 587.8
Total liabilities.................................... 498.9 517.5
Total revenue........................................ 35.6 38.8
Net income........................................... 3.5 3.8
</TABLE>
3. NET INVESTMENT INCOME
Investment income has been reduced by the following amounts:
<TABLE>
<CAPTION>
1999 1998
-------- --------
(IN MILLIONS)
<S> <C> <C>
Investment expenses.................................. $ 9.5 $ 8.3
Interest expense..................................... 1.7 2.4
Depreciation expense................................. 0.6 0.8
Investment taxes..................................... 0.3 0.7
------- -------
$ 12.1 $ 12.2
======= =======
</TABLE>
62
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
4. NET CAPITAL GAINS (LOSSES) AND OTHER ADJUSTMENTS
Net realized capital gains (losses) consist of the following items:
<TABLE>
<CAPTION>
1999 1998
-------- --------
(IN MILLIONS)
<S> <C> <C>
Net gains from asset sales............................ $ (2.8) $ 7.6
Capital gains tax..................................... 0.2 (2.9)
Net capital gains transferred to IMR.................. 0.9 (5.3)
------ ------
Net realized capital losses........................... $ (1.7) $ (0.6)
====== ======
</TABLE>
Net unrealized capital gains (losses) and other adjustments consist of the
following items:
<TABLE>
<CAPTION>
1999 1998
-------- --------
(IN MILLIONS)
<S> <C> <C>
Net losses from changes in security values and book
value adjustments................................ $ (2.6) $ (2.7)
Increase in asset valuation reserve................... (1.2) (3.3)
------ ------
Net unrealized capital losses and other adjustments... $ (3.8) $ (6.0)
====== ======
</TABLE>
63
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(continued)
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 1999 and 1998 to reflect continuing changes in
the Company's operations. The amount of the service fee charged to the Company
was $188.3 million and $157.5 million in 1999 and 1998, 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 $0.2 million
and $0.7 million in 1999 and 1998, 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 1999 issues of flexible premium variable life
insurance and scheduled premium variable life insurance policies. In connection
with this agreement, John Hancock transferred $44.5 million and $4.9 million of
cash for tax, commission, and expense allowances to the Company, which increased
the Company's net gain from operations by $20.6 million and $22.2 million in
1999 and 1998, respectively.
Effective January 1, 1996, the Company entered into a modified coinsurance
agreement with John Hancock to reinsure 50% of the 1995 inforce block and 50% of
1996 and all future issue years of certain variable annuity contracts
(Independence Preferred, Declaration, Independence 2000, MarketPlace, and
Revolution). In connection with this agreement, the Company received a net cash
payment of $40.0 million and $12.7 million in 1999 and 1998, respectively, for
surrender benefits, tax, reserve increase, commission, expense allowances and
premium, This agreement increased the Company's net gain from operations by
$26.9 million and $8.4 million in 1999 and 1998, 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 1999 and 1998 for all policies that are not reinsured under
any other indemnity agreement. In connection with the agreement, John Hancock
received $0.8 million and 1.0 million in 1999 and 1998, respectively, for
mortality claims to the Company. This agreement decreased the Company's net gain
from operations in both 1999 and 1998 by $0.5 million.
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 was
part of a revolving line of credit and was repaid in 1999. Interest paid in 1999
and 1998 was $1.7 million and $2.9 million, respectively. The note is included
in other general account obligations at December 31, 1998.
64
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(continued)
6. Investments
The statement value and fair value of bonds are shown below:
<TABLE>
<CAPTION>
Gross Unrealized Gross Unrealized
Statement Value Gains Losses Fair Value
------------------- ---------------- ---------------- -----------------
(In millions)
<S> <C> <C> <C> <C>
December 31, 1999
U.S. Treasury securities and obligations of U.S.
government corporations and agencies.................. $ 5.9 $ 0.0 $ 0.1 $ 5.8
Obligations of states and political subdivisions........ 2.2 0.1 0.1 2.2
Debit securities issued by foreign governments.......... 13.9 0.8 0.1 14.6
Corporate securities.................................... 964.9 13.0 59.4 918.5
Mortgage-backed securities.............................. 229.4 0.5 7.8 222.1
------------ ---------- ---------- ------------
Total bonds............................................. $ 1,216.3 $ 14.4 $ 67.5 $ 1,163.2
============ ========== ========== ============
December 31, 1998
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>
65
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(continued)
The statement value and fair value of bonds at December 31, 1999, 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.......................................... $ 58.5 $ 58.2
Due after one year through five years............................ 286.8 282.0
Due after five years through ten years........................... 425.4 405.6
Due after ten years.............................................. 216.2 195.3
--------- --------
986.9 941.1
Mortgage-backed securities....................................... 229.4 222.1
--------- --------
$ 1,216.3 $1,163.2
========= ========
</TABLE>
Gross gains of $0.3 million in 1999 and $3.4 million in 1998 and gross
losses of $4.0 million in 1999 and $0.7 million in 1998 were realized from the
sale of bonds.
At December 31, 1999, bonds with an admitted asset value of $9.1 million
were on deposit with state insurance departments to satisfy regulatory
requirements.
The cost of common stocks was $3.1 million and $2.1 million at December 31,
1999 and 1998, respectively. At December 31, 1999, gross unrealized appreciation
on common stocks totaled $1.2 million, and gross unrealized depreciation totaled
$1.1 million. The fair value of preferred stock totaled $35.9 million at
December 31, 1999 and $36.5 million at December 31, 1998.
Bonds with amortized cost of $0.4 million were non-income producing for the
twelve months ended December 31, 1999.
At December 31, 1999, 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.
66
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(continued)
<TABLE>
<CAPTION>
Statement Geographic Statement
Property Type Value Concentration Value
(In millions) (In millions)
<S> <C> <C> <C>
Apartments.......................................... $ 112.1 East North Central $ 71.3
Hotels.............................................. 11.3 East South Central 7.4
Industrial.......................................... 66.0 Middle Atlantic 28.5
Office buildings.................................... 86.4 Mountain 21.0
Retail.............................................. 25.5 New England 37.5
Agricultural........................................ 99.6 Pacific 111.1
Other............................................... 32.2 South Atlantic 87.6
West North Central 16.6
West South Central 48.6
Other 3.5
-------- --------
$ 433.1 $ 433.1
======== ========
</TABLE>
At December 31, 1999, the fair values of the commercial and agricultural
mortgage loans portfolios were $323.5 million and $98.2 million, respectively.
The corresponding amounts as of December 31, 1998 were approximately $331.3
million and $70.0 million, respectively.
The maximum and minimum lending rates for mortgage loans during 1999 were
14.24% and 6.84% for agricultural loans, 7.45% and 7.00% 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.
67
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(continued)
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 1999 were $594.9 million, $132.8 million, and $13.6
million, respectively. The corresponding amounts in 1998 were $590.2 million,
$63.2 million, and $8.2 million, respectively.
Reinsurance ceded contracts do not relieve the Company from its obligations
to policyholders. The Company remains liable to its policyholders for the
portion reinsured to the extent that any reinsurer does not meet its obligations
for reinsurance ceded to it under the reinsurance agreements. Failure of the
reinsurers to honor their obligations could result in losses to the Company;
consequently, estimates are established for amounts deemed or estimated to be
uncollectible. To minimize its exposure to significant losses from reinsurance
insolvencies, the Company evaluates the financial condition of its reinsurers
and monitors concentration of credit risk arising from similar characteristics
of the reinsurer.
Neither the Company, nor any of its related parties, control, either
directly or indirectly, any external reinsurers with which the Company conducts
business. No policies issued by the Company have been reinsured with a foreign
company which is controlled, either directly or indirectly, by a party not
primarily engaged in the business of insurance.
The Company has not entered into any reinsurance agreement 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, 1999 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.
8. Financial Instruments with Off-Balance-Sheet Risk
The notional amounts, carrying values and estimated fail values of the
Company's derivative instruments were as follows at December 31:
<TABLE>
<CAPTION>
Number of Contracts/ Assets (Liabilities)
----------------------------------------------------
Notional Amounts 1999 1998
Carrying Carrying
1999 1998 Value Fair Value Value Fair Value
------- -------- ------------ ---------- ---------- ------------
(In millions)
<S> <C> <C> <C> <C> <C> <C>
Futures contracts to sell securities 362.0 947.0 $ 0.6 $ 0.6 $ (0.5) $ (0.5)
Interest rate swap agreements $ 965.0 $ 365.0 -- 11.5 -- (17.7)
Interest rate cap agreements 239.4 89.4 5.6 5.6 3.1 3.1
Currency rate swap agreements 15.8 15.8 -- (1.6) -- (3.3)
</TABLE>
68
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(continued)
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 2000. The interest rate swap agreements
expire in 2000 to 2011. The interest rate cap agreements expire in 2006 to 2008.
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.
9. Policy Reserves Policyholders' and Benificiaries' Funds and Obligations
Related to Separate Accounts
The Company' annuity reserves and deposit fund liabilities that are subject
to discretionary withdrawal, with and without adjustment, are summarized as
follows.
<TABLE>
<CAPTION>
December 31, 1999 Percent
----------------- -------
(In millions)
<S> <C> <C>
Subject to discretionary withdrawal (with adjustment)
With market value adjustment............................................ $ 3.8 0.1%
At book value less surrender charge 40.5 1.5
At market value......................................................... 2,326.6 87.1
----------- -----
Total with adjustment................................................. 2,370.9 88.7
Subject to discretionary withdrawal
at book value (without adjustment).................................... 287.1 10.7
Not subject to discretionary withdrawal--general account................ 15.4 0.6
----------- -----
Total annuity reserves and deposit liabilities.......................... $ 2,673.4 100.0%
=========== =====
</TABLE>
69
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(continued)
10. Commitments and Contingencies
The Company has extended commitments to purchase long-term bonds and issue
real estate mortgages totaling $15.4 million and $3.5 million, respectively, at
December 31, 1999. The Company monitors the creditworthiness of borrowers under
long-term bonds 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 $19.4 million at December 31, 1999. The majority of these commitments
expire in 2000.
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, 1999. 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.
During 1997, John Hancock entered into a court-approved settlement relating
to a class action lawsuit involving certain individual life insurance policies
sold from 1979 through 1996. In entering into the settlement, John Hancock
specifically denied any wrongdoing. During 1999, the Company recorded a $194.9
million reserve, through a direct charge to its unassigned deficit, representing
the Company's share of the settlement and John Hancock contributed $194.9
million of capital to the Company. The reserve held at December 31, 1999
amounted to $136.5 million and is based on a number of factors, including the
estimated number of claims, the expected type of relief to be sought by class
members (general relief or alternative dispute resolution), the estimated cost
per claim and the estimated costs to administer the claims.
Given the uncertainties associated with estimating the reserve, it is
reasonably possible that the final cost of the settlement could differ
materially from the amounts presently provided for by the Company. John Hancock
and the Company will continue to update their estimate of the final cost of the
settlement as claims are processed and more specific information is developed,
particularly as the actual cost of the claims subject to alternative dispute
resolution becomes available. However, based on information available at this
time, and the uncertainties associated with the final claim processing and
alternative dispute resolution, the range of any additional costs related to the
settlement cannot be reasonably estimated. If the Company's share of the
settlement increases, John Hancock will contribute additional capital to the
Company so that the Company's total stockholder's equity would not be impacted.
70
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(continued)
11. Fair Value of Financial Instruments
The following table presents the carrying amounts and fair values of the
Company's financial instruments:
<TABLE>
<CAPTION>
December 31,
1999 1998
------------------------- ---------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------------ ---------- ------------ -----------
(In millions)
<S> <C> <C> <C> <C>
Assets
Bonds--Note 6 $1,216.3 $1,163.2 $1,185.8 $1,231.5
Preferred stocks--Note 6 35.9 35.9 36.5 36.5
Common stocks--Note 6 3.2 3.2 3.1 3.1
Mortgage loans on real estate--Note 6 433.1 421.7 388.1 401.3
Policy loans--Note 1 172.1 172.1 137.7 137.7
Cash items--Note 1 250.1 250.1 19.9 19.9
Derivatives assets (liabilities) relating
to:-- Note 8
Futures contracts 0.6 0.6 (0.5) (0.5)
Interest rate swaps -- 11.5 -- (17.7)
Currency rate swaps -- (1.6) -- (3.3)
Interest rate caps 5.6 5.6 3.1 3.1
Liabilities
Commitments--Note 10 -- 19.4 -- 32.1
</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.
12. Subsequent Events
Reorganization and Initial Public Offering
Pursuant to a Plan of Reorganization approved by the policyholders of John
Hancock and the Commonwealth of Massachusetts Division of Insurance, effective
February 1, 2000, John Hancock converted from a mutual life insurance company to
a stock life insurance company (i.e., demutualized) and became a wholly owned
subsidiary of John Hancock Financial Services, Inc., which is a holding company.
In connection with the reorganization, John Hancock changed its name to John
Hancock Life Insurance Company. In addition, on February 1, 2000, John Hancock
Financial Services, Inc. completed its initial public offering and 102 million
shares of common stock were issued at an initial public offering price of $17
per share.
71
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENT--(continued)
13. Impact of Year 2000 (Unaudited)
The Company participated in the Year 2000 remediation project of its
parent, John Hancock. By late 1999, John Hancock and the Company completed their
Year 2000 readiness plan to address issues that could result from computer
programs written using two digits to define the applicable year rather than four
to define the applicable year and century. As a result, John Hancock and the
Company were prepared for the transition to the Year 2000 and did not experience
any significant Year 2000 problems with respect to mission critical information
technology ("IT") or non-IT systems, applications or infrastructure. During
the date rollover to the year 2000, John Hancock and the Company implemented and
monitored their millennium rollover plan and conducted business as usual on
Monday, January 3, 2000.
Since January 3, 2000, the information systems, including mission critical
systems, which in the event of a Year 2000 failure would have the greatest
impact on operations, have functioned properly. In addition, neither John
Hancock nor the Company have experienced any significant Year 2000 issues
related to interactions with material business partners. No disruptions have
occurred which impact John Hancock or the Company's ability to process claims,
update customer accounts, process financial transactions, or report accurate
data to management and no business interruptions due to Year 2000 issues have
been experienced. While John Hancock and the Company continue to monitor their
systems, and those of material business partners, closely to ensure that no
unexpected Year 2000 issues develop, neither John Hancock nor the Company have
reason to expect any such issues.
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, 1999, John Hancock has incurred and
expensed approximately $20.8 million in related payroll costs for internal IT
personnel on the project. The estimated remaining IT personnel costs of the
project are approximately $1.0 million. Through December 31, 1999, John Hancock
has incurred and expensed approximately $47.0 million in external costs for the
project. John Hancock's estimated remaining external cost of the project is
approximately $2.0 million. The total costs of the Year 2000 project to John
Hancock, based on management's best estimates, include approximately $21.7
million in internal IT personnel, $14.6 million in the external modification of
software, $18.3 million for external solution providers, $9.1 million in
replacement costs of non-compliant IT systems and $6.9 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 $70 to $72.5 million. John Hancock's total Year 2000 project costs
include the estimated impact of external solution providers based on presently
available information.
72
<PAGE>
UNAUDITED FINANCIAL STATEMENTS
FOR
JOHN HANCOCK VARIABLE LIFE ACCOUNTS
FIRST QUARTER 2000
73
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENT OF ASSETS AND LIABILITIES (Unaudited)
March 31, 2000
<TABLE>
<CAPTION>
International
Large Cap Sovereign Equity Small Cap
Growth Bond Index Growth
Subaccount Subaccount Subaccount Subaccount
------------ ----------- ------------- ----------
<S> <C> <C> <C> <C>
Assets
Cash..................................................................... $ -- $ -- $ -- $ --
Investments in shares of portfolios of John Hancock Variable Series Trust
I, at value............................................................ 138,526,150 34,068,646 35,829,658 39,276,504
Investments in shares of portfolios of M Fund Inc., at value............. -- -- -- --
Receivable from:
John Hancock Variable Series Trust I................................... 44,917 202,525 59,623 --
M Fund Inc............................................................. -- -- -- --
------------ ----------- ----------- ------------
Total assets............................................................. 138,571,067 34,271,171 35,889,281 39,276,504
Liabilities
Payable to:
John Hancock Variable Life Insurance Company........................... -- -- -- --
M Fund Inc............................................................. -- -- -- --
Asset charges payable.................................................... 1,390 284 378 437
------------ ----------- ----------- ------------
Total liabilities........................................................ 1,390 284 378 437
------------ ----------- ----------- ------------
Net assets............................................................... $138,569,677 $34,270,887 $35,888,903 $ 39,276,067
============ =========== =========== ============
<CAPTION>
International Mid Cap Large Cap Money
Balanced Growth Value Market
Subaccount Subaccount Subaccount Subaccount
------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Assets
Cash..................................................................... $ -- -- -- --
Investments in shares of portfolios of John Hancock Variable Series Trust
I, at value............................................................ 4,253,445 76,843,249 30,278,966 69,664,696
Investments in shares of portfolios of M Fund Inc., at value............. -- -- -- --
Receivable from:
John Hancock Variable Series Trust I................................... 10,559 -- 59,377 32,506
M Fund Inc............................................................. -- -- -- --
------------ ----------- ----------- -----------
Total assets............................................................. 4,264,004 76,843,249 30,338,343 69,697,202
Liabilities
Payable to:
John Hancock Variable Life Insurance Company........................... -- -- -- --
M Fund Inc............................................................. -- -- -- --
Asset charges payable.................................................... 43 798 295 2,517
------------ ----------- ----------- -----------
Total liabilities........................................................ 43 798 295 2,517
------------ ----------- ----------- -----------
Net assets............................................................... $ 4,263,961 $76,842,451 $30,338,048 $69,694,685
============ =========== =========== ===========
See accompany notes.
</TABLE>
74
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENT OF ASSETS AND LIABILITIES (Unaudited) (continued)
March 31, 2000
<TABLE>
<CAPTION>
Mid Cap Small/Mid Cap Real Estate Growth &
Value Growth Equity Income
Subaccount Subaccount Subaccount Subaccount
---------- ---------- ---------- ----------
<S> <S> <C> <C> <C>
Assets
Cash.......................................................... $ -- $ -- $ -- $ --
Investments in shares of portfolios of John Hancock
Variable Series Trust I, at value.......................... 21,554,510 9,607,284 10,188,124 212,753,886
Investments in shares of portfolios of M Fund Inc., at value.. -- -- -- --
Receivable from:
John Hancock Variable Series Trust I....................... -- -- 94,477 199,984
M Fund Inc................................................. -- -- -- --
------------ ----------- ----------- ------------
Total assets.................................................. 21,554,510 9,607,284 10,282,601 212,953,870
Liabilities
Payable to:
John Hancock Variable Life Insurance Company............... --
M Fund Inc................................................. -- -- -- --
Asset charges payable......................................... 240 109 98 2,577
------------ ----------- ----------- ------------
Total liabilities............................................. 240 109 98 2,577
------------ ----------- ----------- ------------
Net assets.................................................... $ 21,554,270 $ 9,607,175 $10,282,503 $212,951,293
============ =========== =========== ============
</TABLE>
<TABLE>
<CAPTION>
Short-Term Small Cap International
Managed Bond Value Opportunities
Subaccount Subaccount Subaccount Subaccount
---------- ---------- ---------- ----------
<S> <S> <C> <C> <C>
Assets
Cash.......................................................... $ -- $ -- $ -- $ --
Investments in shares of portfolios of John Hancock
Variable Series Trust I, at value.......................... 128,065,080 14,256,150 21,734,702 37,871,091
Investments in shares of portfolios of M Fund Inc., at value.. -- -- -- --
Receivable from:
John Hancock Variable Series Trust I....................... 315,897 74,555 26,141 --
M Fund Inc................................................. -- -- -- --
------------ ----------- ----------- ------------
Total assets.................................................. 128,380,977 14,330,705 21,760,843 37,871,091
Liabilities
Payable to:
John Hancock Variable Life Insurance Company...............
M Fund Inc................................................. -- -- -- --
Asset charges payable......................................... 1,930 114 249 419
------------ ----------- ----------- ------------
Total liabilities............................................. 1,930 114 249 419
------------ ----------- ----------- ------------
Net assets.................................................... $128,379,047 $14,330,591 $21,760,594 $ 37,870,672
============ =========== =========== ============
</TABLE>
See accompanying notes.
75
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENT OF ASSETS AND LIABILITIES (Unaudited) (continued)
March 31, 2000
<TABLE>
<CAPTION>
Turner Brandes
Equity Global Core International
Index Bond Growth Equity
Subaccount Subaccount Subaccount Subaccount
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Assets
Cash.......................................................... $ -- $ -- $ -- $ --
Investments in shares of portfolios of John Hancock
Variable Series Trust I, at value.......................... 166,904,694 6,665,704 26,408,892 20,618,593
Investments in shares of portfolios of M Fund Inc., at value.. -- -- -- --
Receivable from:
John Hancock Variable Series Trust I....................... 148,551 24,942 -- --
M Fund Inc................................................. -- -- -- --
------------ ----------- ----------- ------------
Total assets.................................................. 167,053,245 6,690,646 26,408,892 20,618,593
Liabilities
Payable to:
John Hancock Variable Life Insurance Company............... -- -- -- --
M Fund Inc................................................. -- -- -- --
Asset charges payable......................................... 1,756 84 252 177
------------ ----------- ----------- ------------
Total liabilities............................................. 1,756 84 252 177
------------ ----------- ----------- ------------
Net assets.................................................... $167,051,489 $ 6,690,562 $26,408,640 $ 20,618,416
============ =========== =========== ============
</TABLE>
<TABLE>
<CAPTION>
Frontier Emerging
Capital Enhanced Markets Global
Appreciation U.S. Equity Equity Equity
Subaccount Subaccount Subaccount Subaccount
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Assets
Cash.......................................................... $ -- $ -- $ -- $ --
Investments in shares of portfolios of John Hancock
Variable Series Trust I, at value.......................... 25,267,062 7,638,154 6,551,090 1,455,275
Investments in shares of portfolios of M Fund Inc., at value.. -- -- -- --
Receivable from:
John Hancock Variable Series Trust I....................... -- -- -- --
M Fund Inc................................................. -- -- -- --
------------ ----------- ----------- ------------
Total assets.................................................. 25,267,062 7,638,154 6,551,090 1,455,275
Liabilities
Payable to:
John Hancock Variable Life Insurance Company............... -- -- -- --
M Fund Inc................................................. -- -- -- --
Asset charges payable......................................... 225 71 85 21
------------ ----------- ----------- ------------
Total liabilities............................................. 225 71 85 21
------------ ----------- ----------- ------------
Net assets.................................................... $ 25,266,837 $ 7,638,083 $ 6,551,005 $ 1,455,254
============ =========== =========== ============
</TABLE>
See accompanying notes.
76
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENT OF ASSETS AND LIABILITIES (Unaudited) (continued)
March 31, 2000
<TABLE>
<CAPTION>
High
Bond Small/Mid Yield
Index Cap CORE Bond
Subaccount Subaccount Subaccount
---------- ---------- ----------
<S> <C> <C> <C>
Assets
Cash.......................................................... $ -- $ -- $ --
Investments in shares of portfolios of John Hancock
Variable Series Trust I, at value.......................... 5,742,766 941,401 3,455,998
Investments in shares of portfolios of M Fund Inc., at value.. -- -- --
Receivable from:
John Hancock Variable Series Trust I....................... 31,284 -- 23,811
M Fund Inc................................................. -- -- --
---------- -------- ----------
Total assets.................................................. 5,774,050 941,401 3,479,809
Liabilities
Payable to:
John Hancock Variable Life Insurance Company............... -- -- --
M Fund Inc................................................. -- -- --
Asset charges payable......................................... 73 11 40
---------- -------- ----------
Total liabilities............................................. 73 11 40
---------- -------- ----------
Net assets.................................................... $5,773,977 $941,390 $3,479,769
========== ======== ==========
</TABLE>
See accompanying notes.
77
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF OPERATIONS (UNAUDITED)
YEARS AND PERIODS ENDED MARCH 31,
<TABLE>
<CAPTION>
Large Cap Growth Subaccount Sovereign Bond Subaccount
--------------------------------------- --------------------------------------
2000 1999 1998 2000 1999 1998
---------- ------------ ----------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I........ $ 100,009 $ 17,558,034 $ 6,312,073 $ 450,283 $ 2,851,613 $ 2,190,901
M Fund Inc.................................. -- -- -- -- -- --
---------- ------------ ----------- --------- ----------- -----------
Total investment income....................... 100,009 17,558,034 6,312,073 450,283 2,851,613 2,190,901
Expenses:
Mortality and expense risks................. 109,487 324,595 168,652 27,938 126,407 93,556
---------- ------------ ----------- --------- ----------- -----------
Net investment income (loss).................. (9,478) 17,233,439 6,143,421 422,345 2,725,206 2,097,345
Net realized and unrealized gain (loss) on
investments:
Net realized gains (losses)................. 1,487,863 5,003,007 1,750,881 (796,838) (1,391,910) 185,230
Net unrealized appreciation (depreciation)
during the period.......................... 8,093,756 (2,053,672) 8,041,022 921,253 (1,837,190) (378,058)
---------- ------------ ----------- --------- ----------- -----------
Net realized and unrealized gain (loss) on
investments................................. 9,581,619 2,949,335 9,791,903 124,415 (3,229,100) (192,828)
---------- ------------ ----------- --------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations................... $9,572,141 $ 20,182,774 $15,935,324 $ 546,760 $ (503,894) $ 1,904,517
========== ============ =========== ========= =========== ===========
</TABLE>
<TABLE>
<CAPTION>
International Equity Index Subaccount Small Cap Growth Subaccount
----------------------------------------- --------------------------------------
2000 1999 1998 2000 1999 1998
---------- ------------ ------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I....... $ 83,362 $ 936,475 $ 1,930,710 $ -- $ 3,697,955 $ --
M Fund Inc................................. -- -- -- -- -- --
--------- ----------- ------------- ---------- ----------- ----------
Total investment income...................... 83,362 936,475 1,930,710 -- 3,697,955 --
Expenses:
Mortality and expense risks................ 32,246 81,058 45,651 39,242 60,221 22,593
--------- ----------- ------------- ---------- ----------- ----------
Net investment income (loss)................. 51,116 855,417 1,885,059 (39,242) 3,637,734 (22,593)
Net realized and unrealized gain (loss) on
investments:
Net realized gains......................... 703,499 753,750 152,030 2,556,750 2,548,944 58,729
Net unrealized appreciation (depreciation)
during the period........................ (708,302) 4,871,167 78,480 2,295,972 3,920,455 1,070,805
--------- ----------- ------------- ---------- ----------- ----------
Net realized and unrealized gain (loss) on
investments................................ (4,803) 5,624,917 230,510 4,852,722 6,469,399 1,129,534
--------- ----------- ------------- ---------- ----------- ----------
Net increase in net assets resulting from
operations................................. $ 46,313 $ 6,480,334 $ 2,115,569 $4,813,480 $10,107,133 $1,106,941
========= =========== ============= ========== =========== ==========
</TABLE>
See accompanying notes.
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF OPERATIONS (Unaudited) (continued)
Years and periods ended March 31,
<TABLE>
<CAPTION>
International Balanced Subaccount Mid Cap Growth Subaccount
------------------------------------------ --------------------------------------
2000 1999 1998 2000 1999 1998
----------- ----------- ------------ ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I........ $ 27,773 $ 372,766 $ 185,760 $ -- $ 6,491,783 $1,114,374
M Fund Inc.................................. -- -- -- -- -- --
---------- ---------- ----------- ----------- ----------- ----------
Total investment income....................... 27,773 372,766 185,760 -- 6,491,783 1,114,374
Expenses:
Mortality and expense risks................. 3,846 13,792 9,687 76,226 102,248 26,123
---------- ---------- ----------- ----------- ----------- ----------
Net investment income (loss).................. 23,927 358,974 176,073 (76,226) 6,389,535 1,088,251
Net realized and unrealized gain (loss) on
investments:
Net realized gains (losses)................. (39,660) 15,640 24,206 1,185,070 5,188,018 599,619
Net unrealized appreciation (depreciation)
during the period......................... (121,758) (173,912) 147,461 (706,164) 15,078,681 1,184,263
---------- ---------- ----------- ----------- ----------- ----------
Net realized and unrealized gain (loss)
on investments.............................. (161,418) (158,272) 171,667 478,906 20,266,699 1,783,882
---------- ---------- ----------- ----------- ----------- ----------
Net increase (decrease) in net assets
resulting from operations.................... $ (137,491) $ 200,702 $ 347,740 $ 402,680 $26,656,234 $2,872,133
========== ========== =========== =========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
Large Cap Value Subaccount Money Market Subaccount
--------------------------------------- -------------------------------------
2000 1999 1998 2000 1999 1998
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I........ $ 168,440 $ 1,809,072 $ 797,874 $ 943,328 $ 3,279,928 $ 1,854,829
M Fund Inc.................................. -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total investment income....................... 168,440 1,809,072 797,874 943,328 3,279,928 1,854,829
Expenses:
Mortality and expense risks................. 23,961 88,877 41,415 74,486 291,398 167,813
----------- ----------- ----------- ----------- ----------- -----------
Net investment income (loss).................. 144,479 1,720,195 756,459 868,842 2,988,530 1,687,016
Net realized and unrealized gain (loss) on
investments:
Net realized gains (losses)................. (117,101) 705,454 330,827 -- -- --
Net unrealized appreciation (depreciation)
during the period......................... (612,964) (2,181,112) 145,355 -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Net realized and unrealized gain (loss)
on investments.............................. (730,065) (1,475,658) 476,182 -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations.................... $ (585,586) $ 244,537 $ 1,232,641 $ 868,842 $ 2,988,530 $ 1,687,016
=========== =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes.
79
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF OPERATIONS (Unaudited) (continued)
Years and periods ended March 31,
<TABLE>
<CAPTION>
Mid Cap Value Subaccount Small/Mid Cap Growth Subaccount
---------------------------------------- ------------------------------------
2000 1999 1998 2000 1999 1998
---------- ----------- ----------- ---------- ----------- --------
Investment income:
<S> <C> <C> <C> <C> <C> <C>
Distributions received from:
John Hancock Variable Series Trust I........ $ -- $ 110,190 $ 120,469 $ -- $ 1,421,656 $ 142,469
M Fund Inc.................................. -- -- -- -- -- --
---------- ----------- ----------- ---------- ----------- --------
Total investment income....................... -- 110,190 120,469 -- 1,421,656 142,469
Expenses:
Mortality and expense risks................. 19,514 68,611 45,020 9,470 32,995 34,432
----------- ----------- ----------- ---------- ----------- ---------
Net investment income (loss).................. (19,514) 41,579 75,449 (9,470) 1,388,661 108,037
Net realized and unrealized gain (loss) on
investments:
Net realized gains (losses)................. 402,063 (860,332) (538,516) (289,736) 13,375 232,246
Net unrealized appreciation (depreciation)
during the period......................... 1,245,582 1,757,919 (830,390) 892,135 (1,001,208) 236,333
----------- ----------- ----------- ---------- ----------- ---------
Net realized and unrealized gain (loss)
on investments.............................. 1,647,645 897,587 (1,368,906) 602,399 (987,833) 468,579
----------- ----------- ----------- ---------- ----------- ---------
Net increase (decrease) in net assets
resulting from operations.................... $1,628,131 $ 939,166 $(1,293,457) $ 592,929 $ 400,828 $ 576,616
========== =========== =========== ========== =========== =========
</TABLE>
<TABLE>
<CAPTION>
Real Estate Equity Subaccount Growth & Income Subaccount
---------------------------------- --------------------------------------
2000 1999 1998 2000 1999 1998
---------- --------- ----------- ---------- ------------ ------------
Investment income:
<S> <C> <C> <C> <C> <C> <C>
Distributions received from:
John Hancock Variable Series Trust I............... $ 205,861 $ 544,845 $ 305,783 $ 512,693 $ 23,565,679 $ 9,266,175
M Fund Inc......................................... -- -- -- -- -- --
---------- --------- ----------- ---------- ------------ ------------
Total investment income.............................. 205,861 544,845 305,783 512,693 23,565,679 9,266,175
Expenses:
Mortality and expense risks........................ 8,329 29,468 22,716 222,841 715,377 290,361
---------- --------- ----------- ---------- ------------ ------------
Net investment income................................ 197,532 515,377 283,067 289,852 22,850,302 8,975,814
Net realized and unrealized gain (loss) on investments:
Net realized gains (losses)........................ (213,163) (735,504) (454,979) 563,798 6,207,253 2,061,212
Net unrealized appreciation (depreciation)
during the period................................ 349,789 80,925 (698,676) 2,749,417 (5,814,839) 7,759,307
---------- --------- ----------- ---------- ------------ ------------
Net realized and unrealized gain (loss) on
investments........................................ 136,626 (654,579) (1,153,655) 3,313,215 392,414 9,820,519
---------- --------- ----------- ---------- ------------ ------------
Net increase (decrease) in net assets resulting
from operations.................................... $ 334,158 $(139,202) $ (870,588) $3,603,067 $ 23,242,716 $ 18,796,333
========== ========= =========== ========== ============ ============
</TABLE>
See accompanying notes.
80
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF OPERATIONS (Unaudited) (continued)
Years and periods ended March 31,
<TABLE>
<CAPTION>
Managed Subaccount Short-Term Bond Subaccount
----------------------------------- --------------------------------
2000 1999 1998 2000 1999 1998
---------- ----------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I..................... $ 979,108 $11,251,980 $3,606,186 $ 213,418 $ 957,614 $ 977,164
M Fund Inc............................................... -- -- -- -- -- --
---------- ----------- ---------- --------- ---------- ---------
Total investment income.................................... 979,108 11,251,980 3,606,186 213,418 957,614 977,164
Expenses:
Mortality and expense risks.............................. 168,685 495,544 121,905 9,907 50,128 50,947
---------- ----------- ---------- --------- ---------- ---------
Net investment income...................................... 810,423 10,756,436 3,484,281 203,511 907,486 926,217
Net realized and unrealized gain (loss) on investments:
Net realized gains (losses)............................. (51,990) 2,233,258 278,186 (112,846) (441,667) 24,740
Net unrealized appreciation (depreciation)
during the period.................................... 1,363,763 (6,419,069) 1,791,231 68,551 (85,754) (136,999)
---------- ----------- ---------- --------- ---------- ---------
Net realized and unrealized gain (loss) on
investments............................................. 1,311,773 (4,185,811) 2,069,417 (44,295) (527,421) (112,259)
---------- ----------- ---------- --------- ---------- ---------
Net increase in net assets resulting from
operations.............................................. $2,122,196 $ 6,570,625 $5,553,698 $ 159,216 $ 380,065 $ 813,958
========== =========== ========== ========= ========== =========
<CAPTION>
International Opportunities
Small Cap Value Subaccount Subaccount
----------------------------------- ---------------------------------
2000 1999 1998 2000 1999 1998
---------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income
Distributions received from:
John Hancock Variable Series Trust I..................... $ 93,270 $ 409,324 $ 47,350 $ -- $2,096,195 $ 103,399
M Fund Inc............................................... -- -- -- -- -- --
--------- --------- --------- ----------- ---------- ----------
Total investment income.................................... 93,270 409,324 47,350 -- 2,096,195 103,399
Expenses:
Mortality and expense risks.............................. 20,424 64,613 33,335 34,751 90,191 50,003
--------- --------- --------- ----------- ---------- ----------
Net investment income (loss)............................... 72,486 344,711 14,015 (34,751) 2,006,004 53,396
Net realized and unrealized gain (loss) on investments:
Net realized gains (losses).............................. 54,419 (979,002) (9,919) 1,363,359 1,907,809 191,495
Net unrealized appreciation (depreciation)
during the period..................................... (47,196) 325,684 (523,693) (1,275,014) 3,818,953 1,108,416
--------- --------- --------- ----------- ---------- ----------
Net realized and unrealized gain (loss) on
investments........................................... 7,223 (653,318) (533,612) 88,345 5,726,762 1,299,911
--------- --------- --------- ----------- ---------- ----------
Net increase (decrease) in net assets resulting from
operations............................................ $ 79,709 $(308,607) $(519,597) $ 53,594 $7,732,766 $1,353,307
========= ========= ========= =========== ========== ==========
</TABLE>
See accompanying notes.
81
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF OPERATIONS (Unaudited) (continued)
Years and periods ended March 31,
<TABLE>
<CAPTION>
Equity Index Subaccount Global Bond Subaccount
----------------------------------- ---------------------------------
2000 1999 1998 2000 1999 1998
---------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I.................... $ 459,796 $ 5,839,023 $1,337,750 $ 26,843 $ 460,088 $303,545
M Fund Inc.............................................. -- -- -- -- -- --
---------- ----------- ---------- ---------- ---------- --------
Total investment income................................... 459,796 5,839,023 1,337,750 26,843 460,088 303,545
Expenses:
Mortality and expense risks............................. 144,695 335,573 126,021 8,730 35,321 19,894
---------- ----------- ---------- ---------- ---------- --------
Net investment income..................................... 315,101 5,503,450 1,211,729 18,113 424,767 283,651
Net realized and unrealized gain (loss) on investments:
Net realized gains (losses)............................. 1,407,391 7,681,081 691,270 (240,729) (204,675) 81,659
Net unrealized appreciation (depreciation) during
the period............................................ 2,436,887 4,678,509 6,098,919 363,167 (433,526) 43,608
---------- ----------- ---------- ---------- ---------- --------
Net realized and unrealized gain (loss)
on investments.......................................... 3,844,278 12,359,590 6,790,189 122,438 (638,201) 125,267
---------- ----------- ---------- ---------- ---------- --------
Net increase (decrease) in net assets resulting from
operation............................................... $4,159,379 $17,863,040 $8,001,918 $ 140,551 $ (213,434) $408,918
========== =========== ========== ========== ========== ========
<CAPTION>
Brandes International
Turner Core Growth Subaccount Equity Subaccount
----------------------------------- ---------------------------------
2000 1999 1998 2000 1999 1998
---------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I.................... $ -- $1,349,358 $ -- $ -- $ 549,978 $ --
M Fund Inc.............................................. -- -- 84,940 -- -- 358,080
---------- ----------- ---------- --------- ---------- --------
Total investment income................................... -- 1,349,358 84,940 -- 549,978 358,080
Expenses:
Mortality and expense risks............................. 22,143 33,920 7,737 14,102 34,297 14,434
---------- ----------- ---------- --------- ---------- --------
Net investment income (loss).............................. (22,143) 1,315,438 77,203 (14,102) 515,681 343,646
Net realized and unrealized gain (loss) on investments:
Net realized gains...................................... 868,800 1,038,462 156,278 52,962 507,727 89,337
Net unrealized appreciation (depreciation) during
the period............................................ 1,770,438 1,626,646 562,620 (506,321) 3,486,097 91,915
---------- ----------- ---------- --------- ---------- --------
Net realized and unrealized gain (loss)
on investments.......................................... 2,639,238 2,665,108 718,898 (453,359) 3,993,824 181,252
---------- ----------- ---------- --------- ---------- --------
Net increase (decrease) in net assets resulting
from operations......................................... $2,617,095 $3,980,546 $796,101 (467,461) $4,509,505 $524,898
========== =========== ========== ========= ========== ========
</TABLE>
See accompanying notes.
82
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF OPERATIONS (Unaudited) (continued)
Years and periods ended March 31,
<TABLE>
<CAPTION>
Frontier Capital Appreciation Enhanced U.S. Equity
Subaccount Subaccount
------------------------------------ -----------------------------------
2000 1999 1998 2000 1999 1998
----------- ----------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I............. $ -- $ 487,465 $ -- $ -- $ 532,067 $ --
M Fund Inc....................................... -- -- 34,738 -- -- 72,302
----------- ----------- --------- -------- --------- ---------
Total investment income............................. -- 487,465 34,738 -- 532,067 72,302
Expenses:
Mortality and expense risks...................... 17,350 37,471 24,841 5,830 13,930 4,069
----------- ----------- --------- -------- --------- ---------
Net investment income (loss)........................ (17,350) 449,994 9,897 5,830 518,137 68,233
Net realized and unrealized gain (loss)
on investments:
Net realized gains (losses)...................... 466,929 624,068 (445,752) 55,792 264,436 87,723
Net unrealized appreciation during the period.... 2,840,905 3,431,408 432,064 31,920 151,562 89,677
----------- ----------- --------- -------- --------- ---------
Net realized and unrealized gain (loss) on
investments......................................... 3,307,834 4,055,476 (13,688) 87,712 415,998 177,400
----------- ----------- --------- -------- --------- ---------
Net increase (decrease) in net assets
resulting from operations........................... $ 3,290,484 $ 4,505,470 $ (3,791) $ 81,882 $ 934,135 $ 245,633
=========== =========== ========= ======= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Emerging
Markets Equity Global Equity
Subaccount Subaccount
------------------------------------ -----------------------------------
2000 1999 1998* 2000 1999 1998*
----------- ----------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I............ $ -- $ 137,724 $ 522 $ -- $ 6,063 $ 491
M Fund Inc...................................... -- -- -- -- -- --
----------- ----------- --------- -------- --------- ---------
Total investment income............................ -- 137,724 522 -- 6,063 491
Expenses:
Mortality and expense risks..................... 6,661 5,465 387 1,101 1,859 339
----------- ----------- --------- -------- --------- ---------
Net investment income (loss)....................... (6,661) 132,259 135 (1,101) 4,204 152
Net realized and unrealized gain (loss) on
investments:
Net realized gains (losses)..................... 841,365 663,998 (45,975) 27,715 82,873 (21,835)
Net unrealized appreciation (depreciation)
during the period............................ (423,198) 432,248 2,289 2,640 47,295 4,812
----------- ----------- --------- -------- --------- ---------
Net realized and unrealized gain (loss) on
investments.................................. 418,167 1,096,246 (43,686) 30,355 130,168 (17,023)
----------- ---------- --------- -------- --------- ---------
Net increase (decrease) in net assets resulting
from operations.............................. $411,506 $1,228,505 $ (43,551) $ 29,254 $134,372 $(16,871)
=========== ========== ========= ======== ========= =========
</TABLE>
------------------------------
* From May 1, 1998 (commencement of operations)
See accompanying notes.
83
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF OPERATIONS (Unaudited) (continued)
Years and periods ended March 31,
<TABLE>
<CAPTION>
Small/Mid
Bond Index Cap CORE
Subaccount Subaccount
------------------------------------ -----------------------------------
2000 1999 1998* 2000 1999 1998*
----------- ----------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I............ $ 98,655 $ 140,772 $ 23,842 $ 124 $ 54,784 $ --
M Fund Inc...................................... -- -- -- -- -- --
----------- ----------- --------- --------- --------- -----------
Total investment income............................ 98,655 140,772 23,842 124 54,784 --
Expenses:
Mortality and expense risks..................... 6,322 10,636 937 1,222 2,073 535
----------- ----------- --------- --------- --------- -----------
Net investment income (loss)....................... 92,333 130,136 22,905 (1,098) 52,711 (535)
Net realized and unrealized gain (loss) on
investments:
Net realized gains (losses)..................... (5,117) (104,174) 1,002 106,765 65,733 (25,196)
Net unrealized appreciation (depreciation)
during the period............................ 48,121 (78,192) (10,217) (19,659 (10,735) 18,718
----------- ----------- --------- --------- --------- -----------
Net realized and unrealized gain (loss) on
investments.................................. 43,004 (182,366) (9,215) 87,106 54,998 (6,478)
----------- ----------- --------- --------- --------- -----------
Net increase (decrease) in net assets resulting
from operations.............................. $135,337 $ (52,230) $ 13,690 $ 86,008 $107,709 $ (7,013)
=========== =========== ========= ========= ========= ===========
</TABLE>
<TABLE>
<CAPTION>
High Yield
Bond
Subaccount
-----------------------------------
2000 1999 1998*
--------- --------- -----------
<S> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I.................................................... $ 85,793 $ 352,641 $ 88,721
M Fund Inc.............................................................................. -- -- --
--------- --------- ----------
Total investment income.................................................................... 85,793 352,641 88,721
Expenses:
Mortality and expense risks............................................................. 3,851 12,206 1,962
--------- --------- ----------
Net investment income (loss)............................................................... 81,942 340,435 86,759
Net realized and unrealized gain (loss) on
investments:
Net realized gains (losses)............................................................. (16,585) 42,365 64,824
Net unrealized appreciation (depreciation)
during the period.................................................................... (189,115) (139,659) 149,416
--------- --------- ----------
Net realized and unrealized gain (loss) on
investments.......................................................................... (205,700) (97,294) 214,240
--------- --------- ----------
Net increase (decrease) in net assets resulting
from operations...................................................................... $ 243,141 $300,999 $(123,758)
========= ========= =========
</TABLE>
------------------------------
* From May 1, 1998 (commencement of operations)
See accompanying notes.
84
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)
Years and periods ended March 31,
<TABLE>
<CAPTION>
Large Cap Growth Subaccount Sovereign Bond Subaccount
----------------------------------------- -----------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss)............. $ (9,478) $ 17,233,439 $ 6,143,421 $ 422,895 $ 2,725,206 $ 2,097,345
Net realized gains (losses).............. 1,487,863 5,003,007 1,750,881 (796,838) (1,391,910) 185,230
Net unrealized appreciation
(depreciation) during the
period................................ 8,093,756 (2,053,672) 8,041,022 921,253 (1,837,190) (378,058)
------------ ------------ ------------ ------------ ------------ -------------
Net increase (decrease) in net assets
resulting from operations................ 9,572,141 20,182,774 15,935,324 547,310 (503,894) 1,904,517
From policyholder transactions:
Net premiums from
policyholders......................... 26,306,668 75,667,981 29,859,648 11,781,689 74,595,720 38,567,292
Net benefits to policyholders............ (12,830,683) (45,347,424) (13,281,028) (16,379,586) (68,312,320) (27,391,317)
------------ ------------ ------------ ------------ ------------ -------------
Net increase (decrease) in net assets
resulting from policyholder
transactions............................. 13,475,985 30,320,557 16,578,620 (4,597,897) 6,283,400 11,175,975
Net increase (decrease) in net
assets................................... 23,048,126 50,503,331 32,513,944 (4,050,587) 5,779,506 13,080,492
Net assets at beginning of period.......... 115,521,551 65,018,220 32,504,276 38,321,474 32,541,967 19,461,475
------------ ------------ ------------ ------------ ------------ -------------
Net assets at end of period................ $138,569,677 $115,521,551 $ 65,018,220 $ 34,270,887 $ 38,321,473 $ 32,541,967
============ ============ ============ ============ ============ =============
</TABLE>
<TABLE>
<CAPTION>
International Equity Index Subaccount Small Cap Growth Subaccount
----------------------------------------- -----------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss)............. $ 51,116 $ 855,417 $ 1,885,059 $ (39,242) $ 3,637,734 $ (22,593)
Net realized gains....................... 703,499 753,750 152,030 2,556,750 2,548,944 58,729
Net unrealized appreciation
(depreciation) during the
period................................ (708,302) 4,871,167 78,480 2,295,972 3,920,455 1,070,805
------------ ------------ ------------ ------------ ------------ -------------
Net increase in net assets resulting
from operations.......................... 46,313 6,480,334 2,115,569 4,813,480 10,107,133 1,106,941
From policyholder transactions:
Net premiums from
policyholders......................... 13,045,026 53,332,374 10,034,119 30,086,736 52,637,861 12,088,047
Net benefits to policyholders............ (10,401,110) (39,209,664) (8,344,107) (26,646,977) (40,800,272) (6,621,834)
------------ ------------ ------------ ------------ ------------ -------------
Net increase in net assets resulting
from policyholder transactions........... 2,643,916 14,122,710 1,690,012 3,493,759 11,837,589 5,466,213
------------ ------------ ------------ ------------ ------------ -------------
Net increase in net assets................. 2,690,229 20,603,044 3,805,581 8,253,239 21,944,722 6,573,154
Net assets at beginning of period.......... 33,198,674 12,595,630 8,790,049 31,022,828 9,078,106 2,504,952
------------ ------------ ------------ ------------ ------------ -------------
Net assets at end of period................ $ 35,888,903 $ 33,198,674 $ 12,595,630 $ 39,276,067 $ 31,022,828 $ 9,078,106
============ ============ ============ ============ ============ =============
</TABLE>
See accompanying notes.
85
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF CHANGES IN NET ASSETS (Unaudited) (continued)
Years and periods ended March 31,
<TABLE>
<CAPTION>
International Balanced Subaccount Mid Cap Growth Subaccount
----------------------------------------- -----------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss)............... $ 23,927 $ 358,974 $ 176,073 $ (76,226) $ 6,389,535 $ 1,088,251
Net realized gains (losses)................ (39,660) 15,640 24,206 1,185,070 5,188,018 599,619
Net unrealized appreciation (depreciation)
during the period......................... (121,758) (173,912) 147,461 (706,164) 15,078,681 1,184,263
------------ ------------ ------------ ------------ ------------ -------------
Net increase (decrease) in net assets
resulting from operations.................. (137,491) 200,702 347,740 402,680 26,656,234 2,872,133
From policyholder transactions:
Net premiums from policyholders............ 845,554 6,295,052 3,163,316 26,745,210 65,183,285 11,323,614
Net benefits to policyholders.............. (1,035,960) (5,007,225) (1,882,974) (13,805,055) (41,018,347) (5,132,055)
------------ ------------ ------------ ------------ ------------ -------------
Net increase (decrease) in net assets
resulting from policyholder
transactions............................... (190,406) 1,287,827 1,280,342 12,940,155 24,164,938 6,191,559
------------ ------------ ------------ ------------ ------------ -------------
Net increase (decrease) in net assets........ (327,897) 1,488,529 1,628,082 13,342,835 50,821,172 9,063,692
Net assets at beginning of period............ 4,591,858 3,103,327 1,475,245 63,499,616 12,678,444 3,614,752
------------ ------------ ------------ ------------ ------------ -------------
Net assets at end of period.................. $ 4,263,961 $ 4,591,856 $ 3,103,327 $ 76,842,451 $ 63,499,616 $ 12,678,444
============ ============ ============ ============ ============ =============
</TABLE>
<TABLE>
<CAPTION>
Large Cap Value Subaccount Money Market Subaccount
----------------------------------------- -----------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income ..................... $ 144,479 $ 1,720,195 $ 756,459 $ 868,842 $ 2,988,530 $ 1,687,016
Net realized gains (losses)................ (117,101) 705,454 330,827 -- -- --
Net unrealized appreciation (depreciation)
during the period...................... (612,964) (2,181,112) 145,355 -- -- --
------------ ------------ ------------ ------------- ------------ -------------
Net increase (decreases) in net assets
resulting from operations.................. (585,586) 244,537 1,232,641 868,842 2,988,530 1,687,016
From policyholder transactions:
Net premiums from
policyholders........................... 9,161,994 37,432,039 15,144,316 217,361,930 890,376,545 340,377,358
Net benefits to policyholders.............. (5,345,277) (27,199,179) (4,937,583) (209,542,856) (918,869,964) (269,723,839)
------------ ------------ ------------ ------------- ------------ -------------
Net increase (decreases) in net assets
resulting from policyholder transactions... 3,816,717 10,232,860 10,206,733 7,819,074 (28,493,419) 70,653,519
------------ ------------ ------------ ------------- ------------ -------------
Net increase (decreases) in net assets....... 3,231,131 10,477,397 11,439,374 8,687,916 (25,504,889) 72,340,535
Net assets at beginning of period............ 27,106,917 16,629,520 5,190,146 61,006,769 86,511,658 14,171,123
------------- ------------- ------------- ------------- ------------- -------------
Net assets at end of period.................. $ 30,338,048 $ 27,106,917 $ 16,629,520 $ 69,694,685 $ 61,006,769 $ 86,511,658
============= ============= ============= ============= ============= =============
</TABLE>
See accompanying notes.
86
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF CHANGES IN NET ASSETS (Unaudited) (continued)
Years and periods ended March 31,
<TABLE>
<CAPTION>
Mid Cap Value Subaccount Small/Mid Cap Growth Subaccount
--------------------------------------- -----------------------------------------
2000 1999 1998 2000 1999 1998
----------- ---------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss).............. $ (19,514) $ 41,579 $ 75,449 $ (9,470) $ 1,388,661 $ 108,037
Net realized gains (losses)............... 402,063 (860,332) (538,516) (289,736) 13,375 232,246
Net unrealized appreciation
(depreciation) during
the period.............................. 1,245,582 1,757,919 (830,390) 892,135 (1,001,208) 236,333
----------- ----------- ------------ ------------ ------------ -----------
Net increase (decrease) in net assets
resulting from operations............... 1,628,131 939,166 (1,293,457) 592,929 400,828 576,616
From policyholder transactions:
Net premiums from policyholders........... 6,813,614 32,024,751 18,837,112 1,722,182 11,809,133 4,563,154
Net benefits to policyholders............. (6,026,008 (29,579,995) (7,855,945) (2,633,767) (9,775,543) (6,481,542)
----------- ----------- ------------ ------------ ------------ -----------
Net increase (decrease) in net assets
resulting from policyholder
transactions.............................. 787,606 2,444,756 10,981,167 (911,585) 2,033,590 (1,918,388)
----------- ----------- ------------ ------------ ------------ -----------
Net increase (decrease) in net assets....... 2,415,737 3,383,922 9,687,710 (318,656) 2,434,418 (1,341,772)
Net assets at beginning of period........... 19,138,533 15,754,611 6,066,901 9,925,831 7,491,413 8,833,185
----------- ----------- ------------ ------------ ------------ -----------
Net assets at end of period................. $21,554,270 $19,138,533 $ 15,754,611 $ 9,607,175 $ 9,925,831 $ 7,491,413
=========== =========== ============ ============ ============ ===========
</TABLE>
<TABLE>
<CAPTION>
Real Estate Equity Subaccount Growth & Income Subaccount
--------------------------------------- -----------------------------------------
2000 1999 1998 2000 1999 1998
----------- ----------- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income..................... $ 197,532 $ 515,377 $ 283,067 $ 289,852 $ 22,850,302 $ 8,975,814
Net realized gains (losses)............... (213,163) (735,504) (454,979) 563,798 6,207,253 2,061,212
Net unrealized appreciation
(depreciation) during
the period.............................. 349,789 80,925 (698,676) 2,749,417 (5,814,839) 7,759,307
----------- ------------ ------------ ------------ ------------- ------------
Net increase (decrease) in net assets
resulting from operations................. 334,158 (139,202) (870,588) 3,603,067 23,242,716 18,796,333
From policyholder transactions:
Net premiums from policyholders........... 5,164,186 22,699,314 6,964,604 20,391,023 196,639,863 60,975,616
Net benefits to policyholders............. (4,454,487 (18,093,640) (5,513,221) (20,568,695) (106,763,955) (31,360,866)
----------- ------------ ------------ ------------ ------------- ------------
Net increase in net assets resulting
from policyholder transactions............ 709,699 4,605,674 1,451,383 (177,672) 89,875,908 29,614,750
----------- ------------ ------------ ------------ ------------- ------------
Net increase (decrease) in net assets....... 1,043,857 4,466,472 580,795 3,425,395 113,118,624 48,411,083
Net assets at beginning of period........... 9,238,646 4,772,174 4,191,379 209,525,898 96,407,275 47,996,192
----------- ------------ ------------ ------------ ------------- ------------
Net assets at end of period................. $10,282,503 $ 9,238,646 $ 4,772,174 $212,951,293 $ 209,525,899 $ 96,407,275
=========== ============ ============ ============ ============= ============
</TABLE>
See accompanying notes.
87
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF CHANGES IN NET ASSETS (Unaudited) (continued)
Years and periods ended March 31,
<TABLE>
<CAPTION>
Managed Subaccount Short-Term Bond Subaccount
------------------------------------------- ---------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------- ------------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income.................... $ 810,423 $ 10,756,436 $ 3,484,281 $ 203,511 $ 907,486 $ 926,217
Net realized gains (losses).............. (51,990) 2,233,258 278,186 (112,846) (441,667) 24,740
Net unrealized appreciation
(depreciation) during
the period............................. 1,363,763 (6,419,069) 1,791,231 68,551 (85,754) (136,999)
------------ ------------- ------------ ----------- ----------- -----------
Net increase in net assets resulting
from operations.......................... 2,122,196 6,570,625 5,553,698 159,216 380,065 813,958
From policyholder transactions:
Net premiums from policyholders.......... 5,409,063 113,292,872 21,019,273 7,974,976 41,259,110 27,490,588
Net benefits to policyholders............ (4,863,022) (34,219,380) (8,281,600) (5,532,589) (49,156,693) (21,534,195)
------------ ------------- ------------ ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from policyholder
transactions............................. 546,041 79,073,492 12,737,673 2,442,387 (7,897,583 5,956,393
------------ ------------- ------------ ----------- ----------- -----------
Net increase (decrease) in net assets...... 2,668,237 85,644,117 18,291,371 2,601,603 (7,517,518 6,770,351
Net assets at beginning of period.......... 125,710,810 40,066,692 21,775,321 11,728,988 19,246,506 12,476,155
------------ ------------- ------------ ----------- ----------- -----------
Net assets at end of period................ $128,379,047 $ 125,710,809 $ 40,066,692 $14,330,591 $11,728,988 $19,246,506
============ ============= ============ =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Small Cap Value Subaccount International Operations Subaccount
------------------------------------------ ------------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss).............. $ 72,846 $ 344,711 $ 14,015 $ (34,751) $ 2,006,004 $ 53,396
Net realized gains (losses)............... 54,419 (979,002) (9,919) 1,363,359 1,907,809 191,495
Net unrealized appreciation
(depreciation) during
the period.............................. (47,196) 325,684 (523,693) (1,275,014) 3,818,953 1,108,416
------------ ------------- ------------ ------------ ------------ -----------
Net increase (decrease) in net assets
resulting from operations................. 80,069 (308,607) (519,597) 53,594 7,732,766 1,353,307
From policyholder transactions:
Net premiums from policyholders........... 6,820,059 39,172,672 11,420,833 19,896,505 43,216,216 23,844,756
Net benefits to policyholders............. (3,922,931) (30,591,417) (4,363,378) (13,614,477 (38,372,463) (12,275,087)
------------ ------------- ------------ ------------ ------------ -----------
Net increase in net assets resulting
from policyholder transactions............ 2,897,128 8,581,255 7,057,455 6,282,028 4,843,753 11,569,669
------------ ------------- ------------ ------------ ------------ -----------
Net increase in net assets.................. 2,977,197 8,272,648 6,537,858 6,335,622 12,576,519 12,922,976
Net assets at beginning of period........... 18,783,397 10,510,748 3,972,890 31,535,050 18,958,530 6,035,554
------------ ------------- ------------ ------------ ------------ -----------
Net assets at end of period................. $ 21,760,594 $ 18,783,396 $ 10,510,748 $ 37,870,672 $ 31,535,049 $18,958,530
============ ============= ============ ============ ============ ===========
</TABLE>
See accompanying notes.
88
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF CHANGES IN NET ASSETS (Unaudited) (continued)
Years and periods ended March 31,
<TABLE>
<CAPTION>
Equity Index Subaccount Global Bond Subaccount
------------------------------------------ ----------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income.................... $ 315,101 $ 5,503,450 $ 1,211,729 $ 18,113 $ 424,767 $ 283,651
Net realized gains (losses).............. 1,407,391 7,681,081 691,270 (240,729) (204,675) 81,659
Net unrealized appreciation
(depreciation) during
the period............................. 2,436,887 4,678,509 6,098,919 363,167 (433,526) 43,608
------------ ------------- ----------- ----------- ------------ ------------
Net increase (decrease) in net assets
resulting from operations................ 4,159,379 17,863,040 8,001,918 140,551 (213,434) 408,918
From policyholder transactions:
Net premiums from policyholders.......... 30,486,120 225,994,914 60,690,933 2,169,780 11,387,398 9,258,713
Net benefits to policyholders............ (17,507,140) (147,909,470) (31,166,123) (4,458,286) (10,615,019) (3,008,341)
------------ ------------- ----------- ----------- ------------ ------------
Net increase (decrease) in net assets
resulting from policyholder
transactions............................. 12,978,980 78,085,444 29,524,810 (2,288,506) 772,379 6,250,372
------------ ------------- ----------- ----------- ------------ ------------
Net increase (decrease) in net assets...... 17,138,359 95,948,484 37,526,728 (2,147,955) 558,945 6,659,290
Net assets at beginning of period.......... 149,913,130 53,964,647 16,437,919 8,838,517 8,279,571 1,620,281
------------ ------------- ----------- ----------- ------------ ------------
Net assets at end of period................ $167,051,489 $ 49,913,131 $53,964,647 $ 6,690,562 $ 8,838,516 $ 8,279,571
============ ============= =========== =========== ============ ============
</TABLE>
<TABLE>
<CAPTION>
Turner Core Growth Subaccount Brandes International Equity Subaccount
----------------------------------------- -----------------------------------------
2000 1999 1998 2000 1999 1998
----------- ------------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss)............. (22,143) $ 1,315,438 $ 77,203 (14,102) $ 515,681 $ 343,646
Net realized gains....................... 868,800 1,038,462 156,278 52,962 507,727 89,337
Net unrealized appreciation
(depreciation) during
the period............................. 1,770,438 1,626,646 562,620 (506,321) 3,486,097 91,915
----------- ------------- ----------- ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations................ 2,617,095 3,980,546 796,101 (467,461) 4,509,505 524,898
From policyholder transactions:
Net premiums from policyholders.......... 7,163,231 23,098,524 4,779,974 5,406,790 12,134,533 5,520,633
Net benefits to policyholders............ (6,042,692) (9,308,254) (1,690,860) (1,736,210) (5,569,496 (2,041,375)
----------- ------------- ----------- ------------ ------------ ------------
Net increase in net assets resulting
from policyholder transactions........... 1,120,539 13,790,270 3,089,114 3,670,580 6,565,037 3,479,258
----------- ------------- ----------- ------------ ------------ ------------
Net increase in net assets................. 3,737,634 17,770,816 3,885,215 3,203,119 11,074,542 4,004,156
Net assets at beginning of period.......... 22,671,006 4,900,189 1,014,974 17,415,297 6,340,754 2,336,598
----------- ------------- ----------- ------------ ------------ ------------
Net assets at end of period................ $26,408,640 $ 22,671,005 $ 4,900,189 $ 20,618,416 $ 17,415,296 $ 6,340,754
=========== ============= =========== ============ ============ ============
</TABLE>
See accompanying notes.
89
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF CHANGES IN NET ASSETS (Unaudited) (continued)
Years and periods ended March 31,
<TABLE>
<CAPTION>
Frontier Capital Appreciation Subaccount Enhanced U.S. Equity Subaccount
------------------------------------------ --------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss)................ $ (17,350) $ 449,994 $ 9,897 $ (5,830) $ 518,137 $ 68,233
Net realized gains (losses)................. 466,929 624,068 (445,752) 55,792 264,436 87,723
Net unrealized appreciation during
the period................................ 2,840,905 3,431,408 432,064 31,920 151,562 89,677
------------ ------------ ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations................... 3,290,484 4,505,470 (3,791) 81,882 934,135 245,633
From policyholder transactions:
Net premiums from policyholders............. 8,319,565 25,135,447 13,982,031 3,512,323 6,480,741 3,031,309
Net benefits to policyholders............... (3,328,234) (22,331,613) (9,695,520 (2,694,336) (3,151,279) (1,299,530)
------------ ------------ ----------- ----------- ----------- -----------
Net increase in net assets resulting from
policyholder transactions................... 4,991,331 2,803,834 4,286,511 817,987 3,329,462 1,731,779
------------ ------------ ----------- ----------- ----------- -----------
Net increase in net assets.................... 8,281,815 7,309,304 4,282,720 899,869 4,263,597 1,977,412
Net assets at beginning of period............. 16,985,022 9,675,718 5,392,998 6,738,214 2,474,617 497,205
------------ ------------ ----------- ----------- ----------- -----------
Net assets at end of period................... $ 25,266,837 $ 16,985,022 $ 9,675,718 $ 7,638,083 $ 6,738,214 $ 2,474,617
============ ============ =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Global Equity
Emerging Markets Equity Subaccount Subaccount
------------------------------------------ -------------------------------------
2000 1999 1998* 2000 1999 1998*
------------ ------------ ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss)................ $ (6,661) $ 132,259 $ 135 $ (1,101) $ 4,204 $ 152
Net realized gains (losses)................. 841,365 663,998 (45,975) 27,715 82,873 (21,835)
Net unrealized appreciation (depreciation)
during the period......................... (423,198) 432,248 2,289 2,640 47,295 4,812
------------ ------------ ----------- ----------- ---------- ----------
Net increase (decrease) in net assets
resulting from operations................... 411,506 1,228,505 (43,551) 29,254 134,372 (16,871)
From policyholder transactions:
Net premiums from policyholders............. 18,848,748 18,579,194 2,434,226 1,111,909 3,151,983 2,372,034
Net benefits to policyholders............... (16,434,122) (16,271,324) (2,203,670 (522,788) (2,613,505) (2,191,135)
------------ ------------ ----------- ----------- ---------- ----------
Net increase in net assets resulting from
policyholder transactions................... 2,414,626 2,307,870 230,556 589,121 538,478 180,899
------------ ------------ ----------- ----------- ---------- ----------
Net increase in net assets.................... 2,826,132 3,536,375 187,005 618,375 672,850 164,028
Net assets at beginning of period............. 3,724,873 187,005 0 836,879 164,028 0
------------ ------------ ----------- ----------- ---------- ----------
Net assets at end of period................... $ 6,551,005 $ 3,723,380 $ 187,005 $ 1,455,254 $ 836,878 $ 164,028
============ ============ =========== =========== ========== ==========
</TABLE>
________________
*From May 1, 1998 (commencement of operations).
See accompanying notes.
90
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF CHANGES IN NET ASSETS (Unaudited) (continued)
Years and periods ended March 31,
<TABLE>
<CAPTION>
Bond Index
Subaccount Small/Mid Cap CORE Subaccount
----------------------------------- ------------------------------------
2000 1999 1998* 2000 1999 1998*
---------- ----------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income (loss)....................... $ 92,333 $ 130,136 $ 22,905 $ (1,098) $ 52,711 $ (535)
Net realized gains (losses)........................ (5,117) (104,174) 1,002 106,765 65,733 (25,196)
Net unrealized appreciation (depreciation)
during the period................................ 48,121 (78,192) (10,217) (19,659) (10,735) 18,718
---------- ----------- ---------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting from
operations......................................... 135,337 (52,230) 13,690 86,008 107,709 (7,013)
From policyholder transactions:
Net premiums from policyholders..................... 1,414,394 6,471,518 1,176,234 6,028,335 5,817,483 1,089,030
Net benefits to policyholders....................... (901,805) (2,358,694) (124,467) (5,789,766) (5,611,532) (778,864)
---------- ----------- ---------- ----------- ----------- -----------
Net increase in net assets resulting from
policyholder transactions........................... 512,589 4,112,824 1,051,767 238,569 205,951 310,166
---------- ----------- ---------- ----------- ----------- -----------
Net increase in net assets........................... 647,926 4,060,594 1,065,457 324,577 313,660 303,153
Net assets at beginning of period.................... 5,126,051 1,065,457 0 616,813 303,153 0
---------- ----------- ---------- ----------- ----------- -----------
Net assets at end of period.......................... $5,773,977 $ 5,126,051 $1,065,457 $ 941,390 $ 616,813 $ 303,153
========== =========== ========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
High Yield Bond
Subaccount
-----------------------------------
2000 1999 1998*
----------- ------------ -----------
<S> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income........................................................... $ 81,942 $ 340,435 $ 86,759
Net realized gains (losses)..................................................... (16,585) 42,365 64,824
Net unrealized appreciation (depreciation) during the period.................... (189,115) (139,659) 149,416
----------- ------------ -----------
Net increase (decrease) in net assets resulting from operations................... (123,758) 243,141 300,999
From policyholder transactions:
Net premiums from policyholders................................................. 1,581,720 19,870,990 6,683,673
Net benefits to policyholders................................................... (2,251,407) (20,368,501) (2,457,088)
----------- ------------ -----------
Net increase (decrease) in net assets resulting from policyholder transactions.... (669,687) (497,511) 4,226,585
----------- ------------ -----------
Net increase (decrease) in net assets............................................. (793,445) (254,370) 4,527,584
Net assets at beginning of period................................................. 4,273,214 4,527,584 0
----------- ------------ -----------
Net assets at end of period....................................................... $ 3,479,769 $ 4,273,214 $ 4,527,584
=========== ============ ===========
</TABLE>
____________
*From May 1, 1998 (commencement of operations).
See accompanying notes.
91
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
NOTES TO FINANCIAL STATEMENTS (Unaudited)
March 31, 2000
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, Small Cap
Growth, International Balanced, Mid Cap Growth, Large Cap Value, Money Market,
Mid Cap Value, Small/Mid Cap Growth (formerly, Diversified Mid Cap Growth), Real
Estate Equity, Growth & Income, Managed, Short-Term Bond, Small Cap Value,
International Opportunities, Equity Index, Global Bond (formerly, Strategic
Bond), Turner Core Growth, Brandes 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.
92
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
NOTES TO FINANCIAL STATEMENTS (Unaudited) (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 March 31, 2000, 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.
93
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
NOTES TO FINANCIAL STATEMENTS (Unaudited) (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 March 31, 2000 were as follows:
<TABLE>
<CAPTION>
Portfolio Shares Owned Cost Value
--------- ------------ ---- -----
<S> <C> <C> <C>
Large Cap Growth............... 4,725,708 $129,759,928 $138,569,677
Sovereign Bond................. 3,720,404 54,957,680 34,270,887
International Equity
Index.......................... 1,828,860 42,194,387 35,888,903
Small Cap Growth............... 1,783,544 44,638,874 39,276,067
International Balanced......... 411,770 5,792,382 4,263,961
Mid Cap Growth................. 2,559,283 61,055,048 76,842,451
Large Cap Value................ 2,322,131 36,125,073 30,338,048
Money Market................... 6,966,470 137,421,592 69,694,685
Mid Cap Value.................. 1,556,021 25,731,991 21,554,270
Small/Mid Cap Growth........... 639,205 13,859,500 9,607,175
Real Estate Equity............. 878,277 15,150,096 10,282,503
Growth & Income................ 10,470,973 216,940,978 212,951,293
Managed........................ 8,209,595 135,063,985 128,379,047
Short-Term Bond................ 1,472,374 22,331,767 14,330,591
Small Cap Value................ 2,002,962 25,350,551 21,760,594
International
Opportunities.................. 2,498,318 47,315,632 37,870,672
Equity Index................... 8,004,018 158,931,331 167,051,489
Global Bond.................... 668,397 14,205,761 6,690,562
Turner Core Growth............. 1,042,593 29,103,994 26,408,640
Brandes International
Equity......................... 1,374,582 17,355,048 20,618,416
Frontier Capital
Appreciation................... 999,103 21,184,263 25,266,837
Enhanced U.S. Equity........... 362,858 8,235,003 7,638,083
Emerging Markets
Equity......................... 498,382 18,281,972 6,551,005
Global Equity.................. 115,407 2,131,686 1,455,254
Bond Index..................... 611,908 6,074,464 5,773,977
Small/Mid Cap CORE............. 89,127 2,920,766 941,390
High Yield Bond................ 405,962 6,265,268 3,479,769
</TABLE>
94
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Purchases, including reinvestment of dividend distributions, and proceeds
from sales of shares in the Portfolios of the Fund and of M Fund during 1999
were as follows:
<TABLE>
<CAPTION>
Portfolio Purchases Sales
--------- ------------ ------------
<S> <C> <C>
Large Cap Growth................................... $ 62,265,535 $ 14,711,539
Sovereign Bond..................................... 38,288,617 29,280,010
International Equity Index......................... 32,519,440 17,541,313
Small Cap Growth................................... 27,757,302 12,281,978
International Balanced............................. 3,415,587 1,768,784
Mid Cap Growth..................................... 45,338,211 14,783,738
Large Cap Value.................................... 22,257,609 10,304,554
Money Market....................................... 304,141,849 329,646,739
Mid Cap Value...................................... 15,413,952 12,927,617
Small/Mid Cap Growth............................... 8,759,614 5,337,363
Real Estate Equity................................. 13,375,520 8,254,469
Growth & Income.................................... 144,949,345 32,223,136
Managed............................................ 111,633,323 21,803,394
Short-Term Bond.................................... 17,352,671 24,342,768
Small Cap Value.................................... 16,062,747 7,136,780
International Opportunities........................ 24,767,973 17,918,215
Equity Index....................................... 124,086,502 40,497,607
Global Bond........................................ 10,322,531 9,125,384
Turner Core Growth................................. 20,980,047 5,874,338
Brandes International Equity....................... 10,664,333 3,583,615
Frontier Capital Appreciation...................... 13,387,462 10,133,633
Enhanced U.S. Equity............................... 5,925,334 2,077,734
Emerging Markets Equity............................ 9,682,573 7,242,444
Global Equity...................................... 2,167,637 1,624,954
Bond Index......................................... 5,900,997 1,658,038
Small/Mid Cap CORE................................. 3,312,578 3,053,916
High Yield Bond.................................... 11,898,171 12,055,248
</TABLE>
95
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
5. Net Assets
Accumulation shares attributable to net assets of policyholders and
accumulation share values for each portfolio at March 31, 2000 were as follows:
<TABLE>
<CAPTION>
VEP Class #1 VEP Class #2 VEP Class #3
--------------------------- --------------------------- ---------------------------
Accumulation Accumulation Accumulation Accumulation Accumulation Accumulation
Portfolio Shares Share Values Shares Share Values Shares Share Values
--------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Large Cap Growth 501,219 36.64 452,200 36.75 211,942 36.87
Sovereign Bond 225,529 14.01 160,910 14.05 34,047 14.10
International Equity Index 241,826 17.49 177,419 17.55 5,314 17.60
Small Cap Growth 187,881 24.93 186,116 24.98 34,022 25.03
International Balanced 18,384 12.87 25,851 12.90 15,065 12.93
Mid Cap Growth 244,467 36.47 184,426 36.54 60,720 36.61
Large Cap Value 195,113 15.68 139,786 15.71 24,929 15.74
Money Market 587,473 13.25 1,124,720 13.29 419,434 13.33
Mid Cap Value 120,750 15.21 49,381 15.24 3,276 15.27
Small/Mid Cap Growth 88,999 21.14 89,441 21.20 0 21.26
Real Estate Equity 95,604 14.85 55,305 14.89 19,250 14.94
Growth & Income 996,212 31.41 591,014 31.51 179,428 31.60
Managed 550,878 21.22 284,687 21.29 39,917 21.35
Short-Term Bond 84,327 13.10 94,761 13.14 9,722 13.18
Small Cap Value 117,863 12.27 89,562 12.29 22,744 12.32
International Opportunities 140,734 16.48 191,629 16.51 6,658 16.54
Equity Index 546,625 23.54 605,346 23.58 211,658 23.63
Global Bond 55,879 12.37 48,921 12.39 18,599 12.41
Turner Core Growth 31,801 31.21 15,389 31.28 0 31.34
Brandes International Equity 22,721 16.32 33,499 16.35 0 16.39
Frontier Capital Appreciation 26,137 27.20 13,250 27.26 0 27.31
Enhanced U.S. Equity 4,387 17.51 0 17.54 0 17.56
Emerging Markets Equity 61,060 13.69 160,303 13.70 13,962 13.71
Global Equity 27,243 12.68 27,262 12.69 2,252 12.70
Bond Index 100,226 10.59 99,922 10.60 63,929 10.60
Small/Mid Cap CORE 18,057 11.56 12,509 11.57 4,270 11.58
High Yield Bond 45,997 9.76 41,613 9.77 2,141 9.78
</TABLE>
96
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
<TABLE>
<CAPTION>
V Coli Class #4 V Coli Class #5 V Coli Class #6
--------------------------- --------------------------- ---------------------------
Accumulation Accumulation Accumulation Accumulation Accumulation Accumulation
Portfolio Shares Share Values Shares Share Values Shares Share Values
--------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Large Cap Growth 624,782 36.96 302,096 37.00 273,725 37.04
Sovereign Bond 14,891 14.89 610,911 14.91 449,306 14.92
International Equity Index 39,735 16.23 160,610 16.25 232,734 16.27
Small Cap Growth 66,214 25.38 39,775 25.39 46,461 25.42
International Balanced 40,176 13.10 10,196 13.11 54,443 13.12
Mid Cap Growth 151,297 37.12 135,265 37.15 63,453 37.17
Large Cap Value 168,223 15.96 160,487 15.97 419,835 15.98
Money Market 173,689 13.19 290,988 13.20 159,826 13.22
Mid Cap Value 81,017 15.48 17,842 15.49 240,521 15.50
Small/Mid Cap Growth 25,267 21.17 378 21.19 29,661 21.21
Real Estate Equity 57,478 15.40 5,284 15.42 199,999 15.43
Growth & Income 581,341 31.39 528,494 31.42 25,701 31.45
Managed 144,003 22.01 118,971 22.04 128,144 22.06
Short-Term Bond 185,563 13.36 424,715 13.38 0 0
Small Cap Value 32,369 12.49 50,061 12.50 278,886 12.50
International Opportunities 219,385 16.77 180,790 16.78 104,577 16.79
Equity Index 336,797 23.96 64,760 23.98 558,737 23.99
Global Bond 49,441 12.59 5,046 12.60 0 12.61
Turner Core Growth 9,891 31.81 20,258 31.83 0 31.86
Brandes International Equity 107,998 16.63 108,224 16.65 39,650 16.66
Frontier Capital Appreciation 90,714 27.72 67,224 27.74 0 27.77
Enhanced U.S. Equity 18,732 17.74 6,871 17.74 0 17.67
Emerging Markets Equity 0 13.81 39,505 13.81 0 13.81
Global Equity 0 12.80 0 12.80 0 12.80
Bond Index 2,500 10.68 19,774 10.68 0 10.68
Small/Mid Cap CORE 0 11.67 0 11.67 0 11.67
High Yield Bond 1,565 9.98 0 0.98 8,654 9.85
</TABLE>
97
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
<TABLE>
<CAPTION>
Medallion Executive VLI Class #7 MVEP Class #8 MVEP Class #9
-------------------------------- --------------------------- ---------------------------
Accumulation Accumulation Accumulation Accumulation Accumulation Accumulation
Portfolio Shares Share Values Shares Share Values Shares Share Values
--------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Large Cap Growth 112,264 85.40 799,241 26.61 346,876 23.70
Sovereign Bond 56,595 24.06 302,433 12.64 338,834 11.90
International Equity Index 146,837 27.50 777,766 15.04 220,189 15.52
Small Cap Growth 181,468 24.96 309,201 25.20 209,297 28.33
International Balanced 58,124 12.89 42,203 13.01 36,194 12.47
Mid Cap Growth 181,012 36.51 411,691 36.87 120,647 40.88
Large Cap Value 340,696 15.69 144,765 15.85 120,405 13.55
Money Market 351,729 18.33 681,051 12.10 410,096 11.58
Mid Cap Value 484,280 15.22 236,146 15.38 58,151 12.99
Small/Mid Cap Growth 5,968 21.17 263,530 13.51 34,027 13.75
Real Estate Equity 42,675 22.83 146,961 12.66 42,185 9.75
Growth & Income 833,145 69.25 1,328,327 22.26 456,665 19.45
Managed 2,310,154 40.30 226,876 17.09 120,259 15.63
Short-Term Bond 90,405 13.12 44,158 12.06 95,975 11.56
Small Cap Value 619,523 12.28 321,868 12.40 92,320 11.77
International Opportunities 631,815 16.50 248,891 16.65 454,435 15.94
Equity Index 602,588 23.56 1,254,544 23.79 666,253 20.30
Global Bond 167,161 12.38 61,755 12.50 64,901 11.80
Turner Core Growth 0 29.04 211,545 28.32 69,350 27.22
Brandes International
Equity 0 16.55 542,598 15.97 59,761 17.06
Frontier Capital
Appreciation 0 25.24 453,530 23.01 87,539 22.27
Enhanced U.S. Equity 0 13.28 149,272 17.65 163,219 17.65
Emerging Markets Equity 43,842 13.69 79,087 13.76 40,699 13.76
Global Equity 25,141 12.69 24,262 12.75 852 12.75
Bond Index 27,803 10.59 19,951 10.64 180 10.64
Small/Mid Cap CORE 174 11.57 18,128 11.62 706 11.62
High Yield Bond 21,279 9.76 86,249 9.81 83,050 9.81
</TABLE>
98
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
<TABLE>
<CAPTION>
MVUL 98 Class #10 MVEP 98 Class #11 MEVL II Class #12
--------------------------- --------------------------- ---------------------------
Accumulation Accumulation Accumulation Accumulation Accumulation Accumulation
Portfolio Shares Share Values Shares Share Values Shares Share Values
--------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Large Cap Growth 257,292 23.70 225,326 26.61 4,496 87.48
Sovereign Bond 132,915 11.90 121,516 12.64 0 28.75
International Equity Index 50,283 15.52 94,430 15.04 1,229 29.08
Small Cap Growth 178,252 28.33 75,478 25.20 0 25.55
International Balanced 24,342 12.47 5,498 13.01 0 13.19
Mid Cap Growth 325,412 40.88 155,427 36.87 4,597 37.36
Large Cap Value 82,162 13.55 148,074 15.85 0 16.07
Money Market 913,953 11.58 249,610 12.10 0 13.26
Mid Cap Value 70,658 12.99 63,590 15.38 0 15.59
Small/Mid Cap Growth 15,647 13.75 21,186 13.51 0 0
Real Estate Equity 15,207 9.84 23,604 12.66 0 23.94
Growth & Income 1,057,563 19.45 214,058 22.26 2,544 82.96
Managed 82,529 15.63 51,746 17.09 2,049 47.71
Short-Term Bond 34,938 11.56 32,271 12.06 5,208 13.60
Small Cap Value 33,605 11.77 107,429 12.40 0 12.57
International Opportunities 55,230 15.94 65,769 16.65 0 16.88
Equity Index 2,032,606 20.30 537,822 23.79 9,694 24.12
Global Bond 42,596 11.80 29,112 12.50 0 12.67
Turner Core Growth 345,860 27.22 235,445 28.32 0 32.04
Brandes International Equity 123,322 17.06 228,923 15.97 0 16.75
Frontier Capital Appreciation 240,310 22.27 91,600 23.01 0 26.83
Enhanced U.S. Equity 51,190 17.65 38,188 17.65 0 17.82
Emerging Markets Equity 24,399 13.76 14,489 13.76 0 13.85
Global Equity 5,262 12.75 2,275 12.75 0 12.83
Bond Index 140,959 10.64 68,555 10.64 0 10.71
Small/Mid Cap CORE 12,671 11.62 14,654 11.62 0 11.70
High Yield Bond 18,929 9.81 45,739 9.81 0 9.88
</TABLE>
99
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
<TABLE>
<CAPTION>
VEP Class #13
---------------------------
Accumulation Accumulation
Portfolio Shares Share Values
--------- ------------ ------------
<S> <C> <C>
Large Cap Growth 502 87.48
Sovereign Bond 0 28.75
International Equity Index 879 29.08
Small Cap Growth 588 25.55
International Balanced 0 13.19
Mid Cap Growth 877 37.36
Large Cap Value 13 16.07
Money Market 7,184 13.26
Mid Cap Value 0 15.59
Small/Mid Cap Growth 0 21.94
Real Estate Equity 0 23.94
Growth & Income 307 82.96
Managed 372 47.71
Short-Term Bond 0 13.60
Small Cap Value 0 12.57
International Opportunities 1,226 16.88
Equity Index 1,481 24.12
Global Bond 0 12.67
Turner Core Growth 0 32.04
Brandes International Equity 0 16.75
Frontier Capital Appreciation 0 26.83
Enhanced U.S. Equity 0 17.82
Emerging Markets Equity 717 13.85
Global Equity 0 12.83
Bond Index 0 10.71
Small/Mid Cap CORE 0 11.70
High Yield Bond 0 9.88
</TABLE>
100
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Policyholders of
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, Small Cap
Growth, International Balanced, Mid Cap Growth, Large Cap Value, Money Market,
Mid Cap Value, Small/Mid Cap Growth (formerly, Diversified Mid Cap Growth), Real
Estate Equity, Growth & Income, Managed, Short-Term Bond, Small Cap Value,
International Opportunities, Equity Index, Global Bond (formerly, Strategic
Bond), Turner Core Growth, Brandes International Equity, 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,
1999, and the related statements of operations and changes in net assets for
each of the periods indicated therein. These financial statements are the
responsibility of the Account's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of each of the respective
subaccounts constituting John Hancock Variable Life Account S at December 31,
1999, the results of their operations and the changes in their net assets for
each of the periods indicated, in conformity with accounting principles
generally accepted in the United States.
ERNST & YOUNG LLP
Boston, Massachusetts
February 11, 2000
101
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<CAPTION>
International
Large Cap Sovereign Equity Small Cap
Growth Bond Index Growth
Subaccount Subaccount Subaccount Subaccount
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Assets
Cash.......................................................... $ 8,016 $ 2,380 $ 2,435 $ 2,357
Investments in shares of portfolios of John Hancock
Variable Series Trust I, at value.......................... 115,521,551 38,321,474 33,198,674 31,022,828
Investments in shares of portfolios of M Fund Inc., at value.. -- -- -- --
Receivable from:
John Hancock Variable Series Trust I....................... 21,617 12,536 419 208,513
M Fund Inc................................................. -- -- -- --
------------ ----------- ----------- -----------
Total assets.................................................. 115,551,184 38,336,390 33,201,528 31,233,698
Liabilities
Payable to:
John Hancock Variable Life Insurance Company............... 20,467 12,194 75 208,172
M Fund Inc................................................. -- -- -- --
Asset charges payable......................................... 9,166 2,723 2,779 2,698
------------ ----------- ----------- -----------
Total liabilities............................................. 29,633 14,917 2,854 210,870
------------ ----------- ----------- -----------
Net assets.................................................... $115,521,551 $38,321,473 $33,198,674 $31,022,828
============ =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
International Mid Cap Large Cap Money
Balanced Growth Value Market
Subaccount Subaccount Subaccount Subaccount
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Assets
Cash.......................................................... $ 304 $ 4,698 $ 1,803 $ 3,061
Investments in shares of portfolios of John Hancock
Variable Series Trust I, at value.......................... 4,591,857 63,499,616 27,106,918 61,006,769
Investments in shares of portfolios of M Fund Inc., at value.. -- -- -- --
Receivable from:
John Hancock Variable Series Trust I....................... 52 27,659 12,738 1,396,082
M Fund Inc................................................. -- -- -- --
------------ ----------- ----------- -----------
Total assets.................................................. 4,592,213 63,531,973 27,121,459 62,405,912
Liabilities
Payable to:
John Hancock Variable Life Insurance Company............... 9 26,980 12,479 1,395,329
M Fund Inc................................................. -- -- -- --
Asset charges payable......................................... 348 5,377 2,063 3,814
------------ ----------- ----------- -----------
Total liabilities............................................. 357 32,357 14,542 1,399,143
------------ ----------- ----------- -----------
Net assets.................................................... $ 4,591,856 $63,499,616 $27,106,917 $61,006,769
============ =========== =========== ===========
</TABLE>
See accompanying notes.
102
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENT OF ASSETS AND LIABILITIES (continued)
December 31, 1999
<TABLE>
<CAPTION>
Mid Cap Small/Mid Cap Real Estate Growth &
Value Growth Equity Income
Subaccount Subaccount Subaccount Subaccount
---------- ---------- ---------- ----------
<S> <S> <C> <C> <C>
Assets
Cash.......................................................... $ 1,422 $ 701 $ 611 $ 17,877
Investments in shares of portfolios of John Hancock
Variable Series Trust I, at value.......................... 19,138,533 9,925,831 9,238,646 209,525,898
Investments in shares of portfolios of M Fund Inc., at value.. -- -- -- --
Receivable from:
John Hancock Variable Series Trust I....................... 38,609 580,155 88 330,982
M Fund Inc................................................. -- -- -- --
------------ ----------- ----------- ------------
Total assets.................................................. 19,178,564 10,506,687 9,239,345 209,874,757
Liabilities
Payable to:
John Hancock Variable Life Insurance Company............... 38,404 580,049 -- 328,424
M Fund Inc................................................. -- -- -- --
Asset charges payable......................................... 1,627 807 699 20,434
------------ ----------- ----------- ------------
Total liabilities............................................. 40,031 580,856 699 348,858
------------ ----------- ----------- ------------
Net assets.................................................... $ 19,138,533 $ 9,925,831 $ 9,238,646 $209,525,899
============ =========== =========== ============
</TABLE>
<TABLE>
<CAPTION>
Short-Term Small Cap International
Managed Bond Value Opportunities
Subaccount Subaccount Subaccount Subaccount
---------- ---------- ---------- ----------
<S> <S> <C> <C> <C>
Assets
Cash.......................................................... $ 13,307 $ 731 $ 1,430 $ 2,454
Investments in shares of portfolios of John Hancock
Variable Series Trust I, at value.......................... 125,710,809 11,728,988 18,783,397 31,535,050
Investments in shares of portfolios of M Fund Inc., at value.. -- -- -- --
Receivable from:
John Hancock Variable Series Trust I....................... 34,311 215 189,514 1,308
M Fund Inc................................................. -- -- -- --
------------ ----------- ----------- ------------
Total assets.................................................. 125,758,427 11,729,934 18,974,341 31,538,812
Liabilities
Payable to:
John Hancock Variable Life Insurance Company............... 32,402 114 189,306 955
M Fund Inc................................................. -- -- -- --
Asset charges payable......................................... 15,216 832 1,639 2,808
------------ ----------- ----------- ------------
Total liabilities............................................. 47,618 946 190,945 3,763
------------ ----------- ----------- ------------
Net assets.................................................... $125,710,809 $11,728,988 $18,783,396 $ 31,535,049
============ =========== =========== ============
</TABLE>
See accompanying notes.
103
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENT OF ASSETS AND LIABILITIES (continued)
March 31, 2000
<TABLE>
<CAPTION>
Turner Brandes
Equity Global Core International
Index Bond Growth Equity
Subaccount Subaccount Subaccount Subaccount
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Assets
Cash.......................................................... $ 10,574 $ 734 $ 1,535 $ 1,016
Investments in shares of portfolios of John Hancock
Variable Series Trust I, at value.......................... 149,913,130 8,838,516 -- --
Investments in shares of portfolios of M Fund Inc., at value.. -- -- 22,671,006 17,415,296
Receivable from:
John Hancock Variable Series Trust I....................... 126,680 766,077 222 271
M Fund Inc................................................. -- -- -- --
------------ ----------- ----------- ------------
Total assets.................................................. 150,050,384 9,605,327 22,672,763 17,416,583
Liabilities
Payable to:
John Hancock Variable Life Insurance Company............... 125,115 765,972 -- 122
M Fund Inc................................................. -- -- -- --
Asset charges payable......................................... 12,138 839 1,758 1,165
------------ ----------- ----------- ------------
Total liabilities............................................. 137,253 766,811 1,758 1,287
------------ ----------- ----------- ------------
Net assets.................................................... $149,913,131 $ 8,838,516 $22,671,005 $ 17,415,296
============ =========== =========== ============
</TABLE>
<TABLE>
<CAPTION>
Frontier Emerging
Capital Enhanced Markets Global
Appreciation U.S. Equity Equity Equity
Subaccount Subaccount Subaccount Subaccount
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Assets
Cash.......................................................... $ 1,031 $ 437 $ 370 $ 71
Investments in shares of portfolios of John Hancock
Variable Series Trust I, at value.......................... -- -- 3,723,380 836,878
Investments in shares of portfolios of M Fund Inc., at value.. 16,985,022 6,738,214 -- --
Receivable from:
John Hancock Variable Series Trust I....................... 771 63 254 24
M Fund Inc................................................. -- -- -- --
------------ ----------- ----------- ------------
Total assets.................................................. 16,986,824 6,738,714 3,724,004 836,973
Liabilities
Payable to:
John Hancock Variable Life Insurance Company............... 620 -- 204 13
M Fund Inc................................................. -- -- -- --
Asset charges payable......................................... 1,182 500 420 82
------------ ----------- ----------- ------------
Total liabilities............................................. 1,802 500 624 95
------------ ----------- ----------- ------------
Net assets.................................................... $ 16,985,022 $ 6,738,214 $ 3,723,380 $ 836,878
============ =========== =========== ============
</TABLE>
See accompanying notes.
104
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENT OF ASSETS AND LIABILITIES (continued)
December 31, 1999
<TABLE>
<CAPTION>
High
Bond Small/Mid Yield
Index Cap CORE Bond
Subaccount Subaccount Subaccount
---------- ---------- ----------
<S> <C> <C> <C>
Assets
Cash.......................................................... $ 374 $ 56 $ 310
Investments in shares of portfolios of John Hancock
Variable Series Trust I, at value.......................... 5,126,051 616,813 4,273,214
Investments in shares of portfolios of M Fund Inc., at value.. -- -- --
Receivable from:
John Hancock Variable Series Trust I....................... 87 7 906,251
M Fund Inc................................................. -- -- --
---------- -------- ----------
Total assets.................................................. 5,126,512 616,876 5,179,775
Liabilities
Payable to:
John Hancock Variable Life Insurance Company............... 20 -- 906,193
M Fund Inc................................................. -- -- --
Asset charges payable......................................... 441 63 368
---------- -------- ----------
Total liabilities............................................. 461 63 906,561
---------- -------- ----------
Net assets.................................................... $5,126,051 $616,813 $4,273,214
========== ======== ==========
</TABLE>
See accompanying notes.
105
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENT OF OPERATIONS
Years and periods ended December 31,
<TABLE>
<CAPTION>
Large Cap Growth Subaccount Sovereign Bond Subaccount
------------------------------------- -------------------------------------
1999 1998 1997 1999 1998 1997
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I.......... $17,558,034 $ 6,312,073 $ 2,884,498 $ 2,851,613 $ 2,190,901 $ 855,742
M Fund Inc.................................... -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total investment income.......................... 17,558,034 6,312,073 2,884,498 2,851,613 2,190,901 855,742
Expenses:
Mortality and expense risks................... 324,595 168,652 91,256 126,407 93,556 39,184
----------- ----------- ----------- ----------- ----------- -----------
Net investment income............................ 17,233,439 6,143,421 2,793,242 2,725,206 2,097,345 816,558
Net realized and unrealized gain (loss) on
investments:
Net realized gains (losses)................... 5,003,007 1,750,881 619,721 (1,391,910) 185,230 80,538
Net unrealized appreciation (depreciation)
during the period........................... (2,053,672) 8,041,022 2,301,920 (1,837,190) (378,058) 63,687
----------- ----------- ----------- ----------- ----------- -----------
Net realized and unrealized gain (loss) on
investments................................... 2,949,335 9,791,903 2,921,641 (3,229,100) (192,828) 144,225
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting
from operations............................... $20,182,774 $15,935,324 $ 5,714,883 $ (503,894) $ 1,904,517 $ 960,783
=========== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
International Equity Index Subaccount Small Cap Growth Subaccount
------------------------------------- -------------------------------------
1999 1998 1997 1999 1998 1997
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I.......... $ 936,475 $ 1,930,710 $ 422,913 $ 3,697,955 $ -- $ 473
M Fund Inc.................................... -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total investment income.......................... 936,475 1,930,710 422,913 3,697,955 -- 473
Expenses:
Mortality and expense risks................... 81,058 45,651 33,893 60,221 22,593 6,547
Net investment income............................ 855,417 1,885,059 389,020 3,637,734 (22,593) (6,074)
Net realized and unrealized gain (loss) on
investments:
Net realized gains (losses)................... 753,750 152,030 244,810 2,548,944 58,729 21,707
Net unrealized appreciation (depreciation)
during the period........................... 4,871,167 78,480 (1,219,540) 3,920,455 1,070,805 126,699
----------- ----------- ----------- ----------- ----------- -----------
Net realized and unrealized gain (loss) on
investments................................... 5,624,917 230,510 (974,730) 6,469,399 1,129,534 148,406
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting
from operations............................... $ 6,480,334 $ 2,115,569 $ (585,710) $10,107,133 $ 1,106,941 $ 142,332
=========== =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes.
106
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENT OF OPERATIONS (continued)
Years and periods ended December 31,
<TABLE>
<CAPTION>
International Balanced Subaccount Mid Cap Growth Subaccount
------------------------------------- -------------------------------------
1999 1998 1997 1999 1998 1997
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I.......... $ 372,766 $ 185,760 $ 61,249 $ 6,491,783 $ 1,114,374 $ --
M Fund Inc.................................... -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total investment income.......................... 372,766 185,760 61,249 6,491,783 1,114,374 --
Expenses:
Mortality and expense risks................... 13,792 9,687 4,443 102,248 26,123 8,287
----------- ----------- ----------- ----------- ----------- -----------
Net investment income............................ 358,974 176,073 56,806 6,389,535 1,088,251 (8,287)
Net realized and unrealized gain (loss) on
investments:
Net realized gains (losses)................... 15,640 24,206 8,667 5,188,018 599,619 1,235
Net unrealized appreciation (depreciation)
during the period........................... (173,912) 147,461 (67,714) 15,078,681 1,184,263 486,186
----------- ----------- ----------- ----------- ----------- -----------
Net realized and unrealized gain (loss) on
investments................................... (158,272) 171,667 (59,047) 20,266,699 1,783,882 487,421
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting
from operations............................... $ 200,702 $ 347,740 $ (2,241) $26,656,234 $ 2,872,133 $ 479,134
=========== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Large Cap Value Subaccount Money Market Subaccount
------------------------------------- -------------------------------------
1999 1998 1997 1999 1998 1997
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I.......... $ 1,809,072 $ 797,874 $ 194,199 $ 3,279,928 $ 1,854,829 $ 758,434
M Fund Inc.................................... -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total investment income.......................... 1,809,072 797,874 194,199 3,279,928 1,854,829 758,434
Expenses:
Mortality and expense risks................... 88,877 41,415 11,163 291,398 167,813 66,882
----------- ----------- ----------- ----------- ----------- -----------
Net investment income............................ 1,720,195 756,459 183,036 2,988,530 1,687,016 691,552
Net realized and unrealized gain (loss) on
investments:
Net realized gains (losses)................... 705,454 330,827 164,821 -- -- --
Net unrealized appreciation (depreciation)
during the period........................... (2,181,112) 145,355 279,449 -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Net realized and unrealized gain (loss) on
investments................................... (1,475,658) 476,182 444,270 -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting
from operations............................... $ 244,537 $ 1,232,641 $ 627,306 $ 2,988,530 $ 1,687,016 $ 691,552
=========== =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes.
107
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENT OF OPERATIONS (continued)
Years and periods ended December 31,
<TABLE>
<CAPTION>
Mid Cap Value Subaccount Small/Mid Cap Growth Subaccount
------------------------------------- -------------------------------------
1999 1998 1997 1999 1998 1997
------------ ----------- --------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I............. $ 110,190 $ 120,469 $ 446,081 $ 1,421,656 $ 142,469 $ 878,600
M Fund Inc....................................... -- -- -- -- -- --
------------ ----------- ---------- ----------- ---------- ----------
Total investment income............................ 110,190 120,469 446,081 1,421,656 142,469 878,600
Expenses:
Mortality and expense risks...................... 68,611 45,020 11,421 32,995 34,432 35,934
------------ ----------- ---------- ----------- ---------- ----------
Net investment income.............................. 41,579 75,449 434,660 1,388,661 108,037 842,666
Net realized and unrealized gain (loss) on
investments:
Net realized gains (losses)...................... (860,332) (538,516) 101,787 13,375 232,246 297,666
Net unrealized appreciation (depreciation) during
the period..................................... 1,757,919 (830,390) (39,717) (1,001,208) 236,333 (730,748)
------------ ----------- ---------- ----------- ---------- ----------
Net realized and unrealized gain (loss) on
investments...................................... 897,587 (1,368,906) 62,070 (987,833) 468,579 (433,082)
------------ ----------- ---------- ----------- ---------- ----------
Net increase (decrease) in net assets resulting
from operations.................................. $ 939,166 $(1,293,457) $ 496,730 $ 400,828 $ 576,616 $ 409,584
============ =========== ========== =========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Real Estate Equity Subaccount Growth & Income Subaccount
--------------------------------- ----------------------------------------
1999 1998 1997 1999 1998 1997
--------- ---------- --------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I.............. $ 544,845 $ 305,783 $ 246,677 $23,565,679 $ 9,266,175 $ 5,917,063
M Fund Inc........................................ -- -- -- -- -- --
--------- ---------- --------- ----------- ------------ -----------
Total investment income............................. 544,845 305,783 246,677 23,565,679 9,266,175 5,917,063
Expenses:
Mortality and expense risks....................... 29,468 22,716 13,879 715,377 290,361 169,135
--------- ---------- --------- ----------- ------------ -----------
Net investment income............................... 515,377 283,067 232,798 22,850,302 8,975,814 5,747,928
Net realized and unrealized gain (loss) on
investments:
Net realized gains (losses)....................... (735,504) (454,979) 252,095 6,207,253 2,061,212 2,390,414
Net unrealized appreciation (depreciation) during
the period...................................... 80,925 (698,676) (13,488) (5,814,839) 7,759,307 435,778
--------- ---------- --------- ----------- ------------ -----------
Net realized and unrealized gain (loss) on
investments....................................... (654,579) (1,153,655) 238,607 392,414 9,820,519 2,826,192
--------- ---------- --------- ----------- ------------ -----------
Net increase (decrease) in net assets resulting
from operations................................... $(139,202) $ (870,588) $ 471,405 $23,242,716 $ 18,796,333 $ 8,574,120
========= ========== ========= =========== ============ ===========
</TABLE>
See accompanying notes.
108
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENT OF OPERATIONS (continued)
Years and periods ended December 31,
<TABLE>
<CAPTION>
Managed Subaccount Short-Term Bond Subaccount
--------------------------------------- ---------------------------------
1999 1998 1997 1999 1998 1997
----------- ----------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I.............. $11,251,980 $3,606,186 $1,879,954 $ 957,614 $ 977,164 $ 415,542
M Fund Inc........................................ -- -- -- -- -- --
----------- ---------- ---------- ---------- --------- ---------
Total investment income............................. 11,251,980 3,606,186 1,879,954 957,614 977,164 415,542
Expenses:
Mortality and expense risks....................... 495,544 121,905 65,383 50,128 50,947 20,551
----------- ---------- ---------- ---------- --------- ---------
Net investment income............................... 10,756,436 3,484,281 1,814,571 907,486 926,217 394,991
Net realized and unrealized gain (loss) on
investments:
Net realized gains (losses)....................... 2,233,258 278,186 171,318 (441,667) 24,740 35,294
Net unrealized appreciation (depreciation)
during the period............................... (6,419,069) 1,791,231 715,231 (85,754) (136,999) (25,976)
----------- ---------- ---------- ---------- --------- ---------
Net realized and unrealized gain (loss) on
investments....................................... (4,185,811) 2,069,417 886,549 (527,421 (112,259) 9,318
----------- ---------- ---------- ---------- --------- ---------
Net increase in net assets resulting from
operations........................................ $ 6,570,625 $5,553,698 $2,701,120 $ 380,065 $ 813,958 $ 404,309
=========== ========== ========== ========== ========= =========
</TABLE>
<TABLE>
<CAPTION>
International Opportunities
Small Cap Value Subaccount Subaccount
---------------------------------- -------------------------------------
1999 1998 1997 1999 1998 1997
---------- --------- --------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I............. $ 409,324 $ 47,350 $ 299,278 $ 2,096,195 $ 103,399 $ 69,078
M Fund Inc....................................... -- -- -- -- -- --
---------- --------- --------- ----------- ---------- -----------
Total investment income............................ 409,324 47,350 299,278 2,096,195 103,399 69,078
Expenses:
Mortality and expense risks...................... 64,613 33,335 8,494 90,191 50,003 13,177
---------- --------- --------- ----------- ---------- -----------
Net investment income.............................. 344,711 14,015 290,784 2,006,004 53,396 55,901
Net realized and unrealized gain (loss) on
investments:
Net realized gains (losses)...................... (979,002) (9,919) 75,149 1,907,809 191,495 80,782
Net unrealized appreciation (depreciation)
during the period.............................. 325,684 (523,693) (18,626) 3,818,953 1,108,416 (260,664)
---------- --------- --------- ----------- ---------- -----------
Net realized and unrealized gain (loss) on
investments...................................... (653,318) (533,612) 56,523 5,726,762 1,299,911 (179,882)
---------- --------- --------- ----------- ---------- -----------
Net increase (decrease) in net assets resulting
from operations.................................. $ (308,607) $(519,597) $ 347,307 $ 7,732,766 $ 1,353,307 $ (123,981)
========== ========= ========= =========== ========== ===========
</TABLE>
See accompanying notes.
109
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENT OF OPERATIONS (continued)
Years and periods ended December 31,
<TABLE>
<CAPTION>
Equity Index Subaccount Global Bond Subaccount
----------------------------------- ------------------------------
1999 1998 1997 1999 1998 1997
----------- ---------- ---------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I................... $ 5,839,023 $1,337,750 $ 409,920 $ 460,088 $303,545 $ 74,850
M Fund Inc............................................. -- -- -- -- -- --
----------- ---------- ---------- --------- -------- --------
Total investment income.................................. 5,839,023 1,337,750 409,920 460,088 303,545 74,850
Expenses:
Mortality and expense risks............................ 335,573 126,021 31,223 35,321 19,894 3,820
----------- ---------- ---------- --------- -------- --------
Net investment income.................................... 5,503,450 1,211,729 378,697 424,767 283,651 71,030
Net realized and unrealized gain (loss) on investments:
Net realized gains (losses)............................ 7,681,081 691,270 901,978 (204,675) 81,659 8,335
Net unrealized appreciation (depreciation) during the
period............................................... 4,678,509 6,098,919 392,256 (433,526) 43,608 (11,727)
----------- ---------- ---------- --------- -------- --------
Net realized and unrealized gain (loss) on investments... 12,359,590 6,790,189 1,294,234 (638,201) 125,267 (3,392)
----------- ---------- ---------- --------- -------- --------
Net increase (decrease) in net assets resulting from
operations........................................... $17,863,040 $8,001,918 $1,672,931 $(213,434) $408,918 $ 67,638
=========== ========== ========== ========= ======== ========
</TABLE>
<TABLE>
<CAPTION>
Brandes International
Turner Core Growth Subaccount Equity Subaccount
---------------------------------- --------------------------------
1999 1998 1997 1999 1998 1997
---------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I................... $1,349,358 $ -- $ -- $ 549,978 $ -- $ --
M Fund Inc............................................. -- 84,940 91,360 -- 358,080 32,677
---------- ---------- ---------- ---------- -------- --------
Total investment income.................................. 1,349,358 84,940 91,360 549,978 358,080 32,677
Expenses:
Mortality and expense risks............................ 33,920 7,737 4,071 34,297 14,434 7,502
---------- ---------- ---------- ---------- -------- --------
Net investment income.................................... 1,315,438 77,203 87,289 515,681 343,646 25,175
Net realized and unrealized gain (loss) on investments:..
Net realized gains..................................... 1,038,462 156,278 76,711 507,727 89,337 12,541
Net unrealized appreciation (depreciation) during the
period................................................ 1,626,646 562,620 32,626 3,486,097 91,915 (26,022)
---------- ---------- ---------- ---------- -------- --------
Net realized and unrealized gain (loss) on investments... 2,665,108 718,898 109,337 3,993,824 181,252 (13,481)
---------- ---------- ---------- ---------- -------- --------
Net increase in net assets resulting from operations..... $3,980,546 $ 796,101 $ 196,626 $4,509,505 $524,898 $ 11,694
========== ========== ========== ========== ======== ========
</TABLE>
See accompanying notes.
110
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENT OF OPERATIONS (continued)
Years and periods ended December 31,
<TABLE>
<CAPTION>
Frontier Capital Appreciation
Subaccount Enhanced U.S. Equity Subaccount
-------------------------------- -------------------------------
1999 1998 1997 1999 1998 1997*
---------- --------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I...................... $ 487,465 $ -- $ -- $532,067 $ -- $ --
M Fund Inc................................................ -- 34,738 128,190 -- 72,302 15,335
---------- --------- --------- -------- -------- --------
Total investment income..................................... 487,465 34,738 128,190 532,067 72,302 15,335
Expenses:
Mortality and expense risks............................... 37,471 24,841 10,040 13,930 4,069 478
---------- --------- --------- -------- -------- --------
Net investment income....................................... 449,994 9,897 118,150 518,137 68,233 14,857
Net realized and unrealized gain (loss) on investments:
Net realized gains (losses)............................... 624,068 (445,752) 614,358 264,436 87,723 4,177
Net unrealized appreciation (depreciation)
during the period....................................... 3,431,408 432,064 (368,570) 151,562 89,677 6,844
---------- --------- --------- -------- -------- --------
Net realized and unrealized gain (loss) on investments...... 4,055,476 (13,688) 245,788 415,998 177,400 11,021
---------- --------- --------- -------- -------- --------
Net increase (decrease) in net assets resulting from
operations................................................ $4,505,470 $ (3,791) $ 363,938 $934,135 $245,633 $ 25,878
========== ========= ========= ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Emerging
Markets Equity Global Equity Bond Index
Subaccount Subaccount Subaccount
--------------------- -------------------- --------------------
1999 1998** 1999 1998** 1999 1998**
---------- --------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I $ 137,724 $ 522 $ 6,063 $ 491 $140,772 $ 23,842
M Fund Inc -- -- -- -- -- --
---------- --------- --------- -------- -------- ---------
Total investment income 137,724 522 6,063 491 140,772 23,842
Expenses:
Mortality and expense risks 5,465 387 1,859 339 10,636 937
---------- --------- --------- -------- -------- ---------
Net investment income 132,259 135 4,204 152 130,136 22,905
Net realized and unrealized gain (loss) on investments:
Net realized gains (losses) 663,998 (45,975) 82,873 (21,835) (104,174) 1,002
Net unrealized appreciation (depreciation)
during the period 432,248 2,289 47,295 4,812 (78,192) (10,217)
---------- --------- --------- -------- -------- ---------
Net realized and unrealized gain (loss) on investments 1,096,246 (43,686) 130,168 (17,023) (182,366) (9,215)
---------- --------- --------- -------- -------- ---------
Net increase (decrease) in net assets resulting from
operations $1,228,505 $ (43,551) $ 134,372 $(16,871) $(52,230) $ 13,690
========== ========= ========= ======== ======== =========
</TABLE>
---------------
* From July 1, 1997 (commencement of operations).
** From May 1, 1998 (commencement of operations).
111
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENT OF OPERATIONS (continued)
Years and periods ended December 31,
<TABLE>
<CAPTION>
Small/Mid High Yield
Cap CORE Bond
Subaccount Subaccount
-------------------- ----------------------
1999 1998** 1999 1998**
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I................................ $ 54,784 $ -- $ 352,641 $ 88,721
M Fund Inc.......................................................... -- -- -- --
-------- --------- --------- ---------
Total investment income............................................... 54,784 -- 352,641 88,721
Expenses:
Mortality and expense risks......................................... 2,073 535 12,206 1,962
-------- --------- --------- ---------
Net investment income (loss).......................................... 52,711 (535) 340,435 86,759
Net realized and unrealized gain (loss) on investments:
Net realized gains (losses)......................................... 65,733 (25,196) 42,365 64,824
Net unrealized appreciation (depreciation) during the period........ (10,735) 18,718 (139,659) 149,416
-------- --------- --------- ---------
Net realized and unrealized gain (loss) on investments................ 54,998 (6,478) (97,294) 214,240
-------- --------- --------- ---------
Net increase (decrease) in net assets resulting from operations....... $107,709 $ (7,013) $ 243,141 $ 300,999
======== ========= ========= =========
</TABLE>
-----------
** From May 1, 1998 (commencement of operations).
See accompanying notes.
112
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNTS
STATEMENTS OF CHANGES IN NET ASSETS
Years and periods ended December 31,
<TABLE>
<CAPTION>
Large Cap Growth Subaccount Sovereign Bond Subaccount
-------------------------------------- ----------------------------------
1999 1998 1997 1999 1998 1997
------------- ------------ ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income ............................. $ 17,233,439 $ 6,143,421 $ 2,793,242 $ 2,725,206 $ 2,097,345 $ 816,558
Net realized gains (losses)........................ 5,003,007 1,750,881 619,721 (1,391,910) 185,230 80,538
Net unrealized appreciation (depreciation) during
the period........................................ (2,053,672) 8,041,022 2,301,920 (1,837,190) (378,058) 63,687
------------ ------------ ----------- ------------ ----------- -----------
Net increase (decrease) in net assets resulting
from operations.................................... 20,182,774 15,935,324 5,714,883 (503,894) 1,904,517 960,783
From policyholder transactions:
Net premiums from policyholders................... 75,667,981 29,859,648 20,264,849 74,595,720 38,567,292 21,324,560
Net benefits to policyholders .................... (45,347,424) (13,281,028) (10,390,849) (68,312,320) (27,391,317) (8,009,615)
------------ ------------ ----------- ------------ ----------- -----------
Net increase in net assets resulting from
policyholder transactions ........................ 30,320,557 16,578,620 9,874,000 6,283,400 11,175,975 13,314,945
------------ ------------ ----------- ------------ ----------- -----------
Net increase in net assets ......................... 50,503,331 32,513,944 15,588,883 5,779,506 13,080,492 14,275,728
Net assets at beginning of period................... 65,018,220 32,504,276 16,915,393 32,541,967 19,461,475 5,185,747
------------ ------------ ----------- ------------ ----------- -----------
Net assets at end of period ........................ $115,521,551 $ 65,018,220 $32,504,276 $ 38,321,473 $32,541,967 $19,461,475
============ =========== =========== ============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
International Equity Small Cap
Index Subaccount Growth Subaccount
-----------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997
------------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ 855,417 $ 1,885,059 $ 389,020 $ 3,637,734 $ (22,593) $ (6,074)
Net realized gains 753,750 152,030 244,810 2,548,944 58,729 21,707
Net unrealized appreciation (depreciation)
during the period 4,871,167 78,480 (1,219,540 3,920,455 1,070,805 126,699
------------ ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting
from operations 6,480,334 2,115,569 (585,710) 10,107,133 1,106,941 142,332
From policyholder transactions:
Net premiums from policyholders 53,332,374 10,034,119 8,150,400 52,637,861 12,088,047 2,870,481
Net benefits to policyholders (39,209,664) (8,344,107) (4,505,840 (40,800,272) (6,621,834) (1,005,386)
------------ ----------- ----------- ----------- ----------- -----------
Net increase in net assets resulting from
policyholder transactions 14,122,710 1,690,012 3,644,560 11,837,589 5,466,213 1,865,095
------------ ----------- ----------- ----------- ----------- -----------
Net increase in net assets 20,603,044 3,805,581 3,058,850 21,944,722 6,573,154 2,007,427
Net assets at beginning of period 12,595,630 8,790,049 5,731,199 9,078,106 2,504,952 497,525
------------ ----------- ----------- ----------- ----------- -----------
Net assets at end of period $ 33,198,674 $12,595,630 $ 8,790,049 $31,022,828 $ 9,078,106 $ 2,504,952
============ =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes.
113
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF CHANGES IN NET ASSETS (continued)
Years and periods ended December 31,
<TABLE>
<CAPTION>
International Balanced
Subaccount Mid Cap Growth Subaccount
---------------------------------- --------------------------------------
1999 1998 1997 1999 1998 1997
---------- ---------- ---------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income (loss)....................... $ 358,974 $ 176,073 $ 56,806 $ 6,389,535 $ 1,088,251 $ (8,287)
Net realized gains................................. 15,640 24,206 8,667 5,188,018 599,619 1,235
Net unrealized appreciation (depreciation) during
the period....................................... (173,912) 147,461 (67,714) 15,078,681 1,184,263 486,186
---------- ---------- ---------- ----------- ----------- ------------
Net increase (decrease) in net assets resulting
from operations.................................. 200,702 347,740 (2,241) 26,656,234 2,872,133 479,134
From policyholder transactions:
Net premiums from policyholders.................... 6,295,052 3,163,316 1,608,069 65,183,285 11,323,614 3,212,754
Net benefits to policyholders...................... (5,007,225) (1,882,974) (282,878) (41,018,347) (5,132,055) (915,459)
---------- ---------- ---------- ----------- ----------- ------------
Net increase in net assets resulting from
policyholder transactions........................ 1,287,827 1,280,342 1,325,191 24,164,938 6,191,559 2,297,295
---------- ---------- ---------- ----------- ----------- ------------
Net increase in net assets........................... 1,488,529 1,628,082 1,322,950 50,821,172 9,063,692 2,776,429
Net assets at beginning of period.................... 3,103,327 1,475,245 152,295 12,678,444 3,614,752 838,323
---------- ---------- ---------- ----------- ----------- ------------
Net assets at end of period.......................... $4,591,856 $3,103,327 $1,475,245 $63,499,616 $12,678,444 $ 3,614,752
========== ========== ========== =========== =========== ============
</TABLE>
<TABLE>
<CAPTION>
Large Cap Value Subaccount Money Market Subaccount
---------------------------------- --------------------------------------
1999 1998 1997 1999 1998 1997
----------- ----------- ---------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income.............................. $ 1,720,195 $ 756,459 $ 183,036 $ 2,988,530 $ 1,687,016 $ 691,552
Net realized gains................................. 705,454 330,827 164,821 -- -- --
Net unrealized appreciation (depreciation) during
the period....................................... (2,181,112) 145,355 279,449 -- -- --
----------- ----------- ---------- ----------- ----------- ------------
Net increase in net assets resulting from operations 244,537 1,232,641 627,306 2,988,530 1,687,016 691,552
From policyholder transactions:
Net premiums from policyholders.................... 37,432,039 15,144,316 5,421,062 890,376,545 340,377,358 103,737,470
Net benefits to policyholders...................... (27,199,179) (4,937,583) (1,620,578) (918,869,964)(269,723,839) (100,296,756)
----------- ----------- ---------- ----------- ----------- ------------
Net increase (decrease) in net assets resulting from
policyholder transactions........................ 10,232,860 10,206,733 3,800,484 (28,493,419) 70,653,519 3,440,714
----------- ----------- ---------- ----------- ----------- ------------
Net increase (decrease) in net assets................ 10,477,397 11,439,374 4,427,790 (25,504,889) 72,340,535 4,132,266
Net assets at beginning of period.................... 16,629,520 5,190,146 762,356 86,511,658 14,171,123 10,038,857
----------- ----------- ---------- ----------- ----------- ------------
Net assets at end of period.......................... $27,106,917 $16,629,520 $5,190,146 $61,006,769 $86,511,658 $ 14,171,123
=========== =========== ========== =========== =========== ============
</TABLE>
See accompanying notes.
114
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF CHANGES IN NET ASSETS (continued)
Years and periods ended December 31,
<TABLE>
<CAPTION>
Small/Mid Cap
Mid Cap Value Subaccount Growth Subaccount
-------------------------------------- -------------------------------------
1999 1998 1997 1999 1998 1997
------------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase in net assets from operations:
Net investment income.............................. $ 41,579 $ 75,449 $ 434,660 $ 1,388,661 $ 108,037 $ 842,666
Net realized gains (losses)........................ (860,332) (538,516) 101,787 13,375 232,246 297,666
Net unrealized appreciation (depreciation) during
the period....................................... 1,757,919 (830,390) (39,717) (1,001,208 236,333 (730,748)
------------ ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting from
operations....................................... 939,166 (1,293,457) 496,730 400,828 576,616 409,584
From policyholder transactions:
Net premiums from policyholders.................... 32,024,751 18,837,112 6,323,061 11,809,133 4,563,154 8,511,081
Net benefits to policyholders...................... (29,579,995) (7,855,945) (1,089,206) (9,775,543) (6,481,542) (6,274,668)
------------ ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting from
policyholder transactions........................ 2,444,756 10,981,167 5,233,855 2,033,590 (1,918,388) 2,236,413
------------ ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets................ 3,383,922 9,687,710 5,730,585 2,434,418 (1,341,772) 2,645,997
Net assets at beginning of period.................... 15,754,611 6,066,901 336,316 7,491,413 8,833,185 6,187,188
------------ ----------- ----------- ----------- ----------- -----------
Net assets at end of period.......................... $ 19,138,533 $15,754,611 $ 6,066,901 $ 9,925,831 $ 7,491,413 $ 8,833,185
============ =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Real Estate Equity Subaccount Growth & Income Subaccount
-------------------------------------- -------------------------------------
1999 1998 1997 1999 1998 1997
------------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase in net assets from operations:
Net investment income.............................. $ 515,377 $ 283,067 $ 232,798 $22,850,302 $ 8,975,814 $ 5,747,928
Net realized gains (losses)........................ (735,504) (454,979) 252,095 6,207,253 2,061,212 2,390,414
Net unrealized appreciation (depreciation) during
the period...................................... 80,925 (698,676) (13,488) (5,814,839) 7,759,307 435,778
------------ ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting from
operations...................................... (139,202) (870,588) 471,405 23,242,716 18,796,333 8,574,120
From policyholder transactions:
Net premiums from policyholders.................... 22,699,314 6,964,604 4,833,914 196,639,863 60,975,616 35,535,599
Net benefits to policyholders...................... (18,093,640) (5,513,221) (2,393,463 (106,763,955) (31,360,866) (21,776,809)
------------ ----------- ----------- ----------- ----------- -----------
Net increase in net assets resulting from
policyholder transactions........................ 4,605,674 1,451,383 2,440,451 89,875,908 29,614,750 13,758,790
------------ ----------- ----------- ----------- ----------- -----------
Net increase in net assets........................... 4,466,472 580,795 2,911,856 113,118,624 48,411,083 22,332,910
Net assets at beginning of period.................... 4,772,174 4,191,379 1,279,523 96,407,275 47,996,192 25,663,282
------------ ----------- ----------- ----------- ----------- -----------
Net assets at end of period.......................... $ 9,238,646 $ 4,772,174 $ 4,191,379 $209,525,899 $ 96,407,27 $47,996,192
============ =========== =========== ============ =========== ===========
</TABLE>
See accompanying notes.
115
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF CHANGES IN NET ASSETS (continued)
Years and periods ended December 31,
<TABLE>
<CAPTION>
Short-Term Bond
Managed Subaccount Subaccount
-------------------------------------- -------------------------------------
1999 1998 1997 1999 1998 1997
------------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income............................. $10,756,436 $ 3,484,281 $ 1,814,571 $ 907,486 $ 926,217 $ 394,991
Net realized gains (losses)....................... 2,233,258 278,186 171,318 (441,667) 24,740 35,294
Net unrealized appreciation (depreciation) during
the period...................................... (6,419,069) 1,791,231 715,231 (85,754) (136,999) (25,976)
------------ ----------- ----------- ----------- ----------- -----------
Net increase in net assets resulting from
operations...................................... 6,570,625 5,553,698 2,701,120 380,065 813,958 404,309
From policyholder transactions:
Net premiums from policyholders................... 113,292,872 21,019,273 16,914,475 41,259,110 27,490,581 2,911,228
Net benefits to policyholders..................... (34,219,380) (8,281,600) (9,357,535) (49,156,693) (21,534,195) (4,234,624)
------------ ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting
from policyholder transactions.................. 79,073,492 12,737,673 7,556,940 (7,897,583) 5,956,393 8,676,604
------------ ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets............... 85,644,117 18,291,371 10,258,060 (7,517,518) 6,770,351 9,080,913
Net assets at beginning of period................... 40,066,692 21,775,321 11,517,261 19,246,506 12,476,155 3,395,242
------------ ----------- ----------- ----------- ----------- -----------
Net assets at end of period......................... $125,710,809 $40,066,692 $21,775,321 $11,728,988 $19,246,506 $12,476,155
============ =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
International Opportunities
Small Cap Value Subaccount Subaccount
-------------------------------------- -------------------------------------
1999 1998 1997 1999 1998 1997
------------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income............................. $ 344,711 $ 14,015 $ 290,784 $ 2,006,004 $ 53,396 $ 55,901
Net realized gains (losses)....................... (979,002) (9,919) 75,149 1,907,809 191,495 80,782
Net unrealized appreciation (depreciation) during
the period...................................... 325,684 (523,693) (18,626) 3,818,953 1,108,416 (260,664)
------------ ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting
from operations................................. (308,607) (519,597) 347,307 7,732,766 1,353,307 (123,981)
From policyholder transactions:
Net premiums from policyholders................... 39,172,672 11,420,833 4,182,527 43,216,216 23,844,756 8,906,153
Net benefits to policyholders..................... (30,591,417) (4,363,378) (897,951) (38,372,463) (12,275,087) (3,655,731)
------------ ----------- ----------- ----------- ----------- -----------
Net increase in net assets resulting from
policyholder transactions....................... 8,581,255 7,057,455 3,284,576 4,843,753 11,569,669 5,250,422
------------ ----------- ----------- ----------- ----------- -----------
Net increase in net assets.......................... 8,272,648 6,537,858 3,631,883 12,576,519 12,922,976 5,126,441
Net assets at beginning of period................... 10,510,748 3,972,890 341,007 18,958,530 6,035,554 909,113
------------ ----------- ----------- ----------- ----------- -----------
Net assets at end of period......................... $ 18,783,396 $10,510,748 $ 3,972,890 $ 31,535,049 $ 18,958,530 $ 6,035,554
============ =========== =========== ============ ============ ===========
</TABLE>
See accompanying notes.
116
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF CHANGES IN NET ASSETS (continued)
Years and periods ended December 31,
<TABLE>
<CAPTION>
Equity Index Subaccount Global Bond Subaccount
----------------------- ----------------------
1999 1998 1997 1999 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income...................... $ 5,503,450 $ 1,211,729 $ 378,697 $ 424,767 $ 283,651 $ 71,030
Net realized gains (losses)................ 7,681,081 691,270 901,978 (204,675) 81,659 8,335
Net unrealized appreciation
(depreciation) during the period......... 4,678,509 6,098,919 392,256 (433,526) 43,608 (11,727)
------------- ------------- ------------ ------------ ----------- -----------
Net increase (decrease) in net assets
resulting from operations.................. 17,863,040 8,001,918 1,672,931 (213,434) 408,918 67,638
From policyholder transactions:
Net premiums from policyholders............ 225,994,914 60,690,933 23,412,687 11,387,398 9,258,713 1,828,179
Net benefits to policyholders.............. (147,909,470) (31,166,123) (9,622,006) (10,615,019) (3,008,341) (534,164)
------------- ------------- ------------ ------------ ----------- -----------
Net increase in net assets resulting from
policyholder transactions.................. 78,085,444 29,524,810 13,790,681 772,379 6,250,372 1,294,015
------------- ------------- ------------ ------------ ----------- -----------
Net increase in net assets................... 95,948,484 37,526,728 15,463,612 558,945 6,659,290 1,361,653
Net assets at beginning of period............ 53,964,647 16,437,919 974,307 8,279,571 1,620,281 258,628
------------- ------------- ------------ ------------ ----------- -----------
Net assets at end of period.................. $ 149,913,131 $ 53,964,647 $ 16,437,919 $ 8,838,516 $ 8,279,571 $ 1,620,281
============= ============= ============ ============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Brandes International
Turner Core Growth Subaccount Equity Subaccount
----------------------------- -----------------
1999 1998 1997 1999 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income...................... $ 1,315,438 $ 77,203 $ 87,289 $ 515,681 $ 343,646 $ 25,175
Net realized gains......................... 1,038,462 156,278 76,711 507,727 89,337 12,541
Net unrealized appreciation
(depreciation) during the period......... 1,626,646 562,620 32,626 3,486,097 91,915 (26,022)
------------ ------------ ------------ ------------ ----------- -----------
Net increase in net assets resulting from
operations................................. 3,980,546 796,101 196,626 4,509,505 524,898 11,694
From policyholder transactions:
Net premiums from policyholders............ 23,098,524 4,779,974 743,622 12,134,533 5,520,633 2,484,010
Net benefits to policyholders.............. (9,308,254) (1,690,860) (580,027) (5,569,496) (2,041,375) (1,088,249)
------------ ------------ ------------ ------------ ----------- -----------
Net increase in net assets resulting from
policyholder transactions.................. 13,790,270 3,089,114 163,595 6,565,037 3,479,258 1,395,761
------------ ------------ ------------ ------------ ----------- -----------
Net increase in net assets................... 17,770,816 3,885,215 360,221 11,074,542 4,004,156 1,407,455
Net assets at beginning of period............ 4,900,189 1,014,974 654,753 6,340,754 2,336,598 929,143
------------ ------------ ------------ ------------ ----------- -----------
Net assets at end of period.................. $ 22,671,005 $ 4,900,189 $ 1,014,974 $ 17,415,296 $ 6,340,754 $ 2,336,598
============ ============ ============ ============ =========== ===========
</TABLE>
See accompanying notes.
117
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF CHANGES IN NET ASSETS (continued)
Years and periods ended December 31,
<TABLE>
<CAPTION>
Frontier Capital Appreciation Enhanced U.S.
Subaccount Equity Subaccount
-------------------------------- -----------------------------------
1999 1998 1997 1999 1998 1997*
---------- --------- -------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income...................... $ 449,994 $ 9,897 $ 118,150 $ 518,137 $ 68,233 $ 14,857
Net realized gains (losses)................ 624,068 (445,752) 614,358 264,436 87,723 4,177
Net unrealized appreciation
(depreciation) during the
period..................................... 3,431,408 432,064 (368,570) 151,562 89,677 6,844
------------ ----------- ---------- ---------- ----------- ---------
Net increase (decrease) in net assets resulting
from operations................................. 4,505,470 (3,791) 363,938 934,135 245,633 25,878
From policyholder transactions:
Net premiums from policyholders............ 25,135,447 13,982,031 10,030,418 6,480,741 3,031,309 475,503
Net benefits to policyholders.............. (22,331,613) (9,695,520) (5,969,436) (3,151,279) (1,299,530) (4,176)
------------ ----------- ---------- ---------- ---------- ---------
Net increase in net assets resulting from policy
holder transactions............................. 2,803,834 4,286,511 4,060,982 3,329,462 1,731,779 471,327
------------ ----------- ---------- ---------- ---------- ---------
Net increase in net assets......................... 7,309,304 4,282,720 4,424,920 4,263,597 1,977,412 497,205
Net assets at beginning of period.................. 9,675,718 5,392,998 968,078 2,474,617 497,205 0
------------ ----------- ---------- ---------- ---------- ---------
Net assets at end of period........................ $ 16,985,022 $ 9,675,718 $5,392,998 6,738,214 $2,474,617 $ 497,205
============ =========== =========== ========== =========== =========
</TABLE>
<TABLE>
<CAPTION>
Emerging Markets Global Equity Bond Index
Equity Subaccount Subaccount Subaccount
---------------------- ---------------------- ------------------------
1999 1998** 1999 1998** 1999 1998**
------- --------- ------- --------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income...................... $ 132,259 $ 135 $ 4,204 $ 152 $ 130,136 $ 22,905
Net realized gains (losses)................ 663,998 (45,975) 82,873 (21,835) (104,174) 1,002
Net unrealized appreciation
(depreciation) during the
period..................................... 432,248 2,289 47,295 4,812 (78,192) (10,217)
------------ ----------- ---------- ----------- ----------- ---------
Net increase (decrease) in net assets resulting
from operations................................. 1,228,505 (43,551) 134,372 (16,871) (52,230) 13,690
From policyholder transactions:
Net premiums from policyholders............ 18,579,194 2,434,226 3,151,983 2,372,034 6,471,518 1,176,234
Net benefits to policyholders.............. (16,271,324) (2,203,670) (2,613,50) (2,191,135) (2,358,694) (124,467)
------------ ----------- ---------- ----------- ----------- ---------
Net increase in net assets resulting from
policy holder transactions......................... 2,307,870 230,556 538,478 180,899 4,112,824 1,051,767
------------ ----------- ---------- ----------- ----------- ---------
Net increase in net assets......................... 3,536,375 187,005 672,850 164,028 4,060,594 1,065,457
Net assets at beginning of period.................. 187,005 0 164,028 0 1,065,457 0
------------ ----------- ---------- ----------- ----------- ---------
Net assets at end of period........................ $ 3,723,380 $ 187,005 $ 836,878 $ 164,028 $ 5,126,051 $1,065,457
============ =========== ========== =========== =========== ==========
</TABLE>
___________________________
* From July 1, 1997 (commencement of operations).
** From May 1, 1998 (commencement of operations).
See accompanying notes.
118
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENTS OF CHANGES IN NET ASSETS (continued)
Years and periods ended December 31,
<TABLE>
<CAPTION>
Small/Mid Cap CORE High Yield Bond
Subaccount Subaccount
-------------------------- ------------------------
1999 1998** 1999 1998**
--------- ----------- --------- --------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income (loss)...................................... $ 52,711 $ (535) $ 340,435 $ 86,759
Net realized gains (losses)....................................... 65,733 (25,196) 42,365 64,824
Net unrealized appreciation (depreciation) during the period........ (10,735) 18,718 (139,659) 149,416
------------ ---------- ------------- ------------
Net increase (decrease) in net assets resulting from operations..... 107,709 (7,013) 243,141 300,999
From policyholder transactions:
Net premiums from policyholders................................... 5,817,483 1,089,030 19,870,990 6,683,673
------------ ---------- ------------- ------------
Net benefits to policyholders..................................... (5,611,532) (778,864) (20,368,501) (2,457,088)
Net increase (decrease) in net assets resulting from policyholder
transactions...................................................... 205,951 310,166 (497,511) 4,226,585
------------ ---------- ------------- ------------
Net increase (decrease) in net assets............................... 313,660 303,153 (254,370) 4,527,584
Net assets at beginning of period................................... 303,153 0 4,527,584 0
------------ ---------- ------------- ------------
Net assets at end of period......................................... $ 616,813 $ 303,153 $ 4,273,214 $ 4,527,584
============ ========== ============= ============
</TABLE>
____________
** From May 1, 1998 (commencement of operations).
See accompanying notes.
119
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
1. Organization
John Hancock Variable Life Accounts (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, Small Cap Growth, International
Balanced, Mid Cap Growth, Large Cap Value, Money Market, Mid Cap Value,
Small/Mid Cap Growth (formerly, Diversified Mid Cap Growth), Real Estate Equity,
Growth & Income, Managed, Short-Term Bond, Small Cap Value, International
Opportunities, Equity Index, Global Bond (formerly, Strategic Bond), Turner Core
Growth, Brandes 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.
120
<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, 1999, 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.
121
<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, 1999 were as follows:
<TABLE>
<CAPTION>
Portfolio Shares Owned Cost Value
--------- ------------ ---- -----
<S> <C> <C> <C>
Large Cap Growth........................................ 4,226,550 $ 108,181,136 $ 115,521,551
Sovereign Bond.......................................... 4,200,440 40,512,273 38,321,473
International Equity Index.............................. 1,689,937 29,224,059 33,198,674
Small Cap Growth........................................ 1,622,919 25,907,535 31,022,828
International Balanced.................................. 428,930 4,680,715 4,591,856
Mid Cap Growth.......................................... 2,172,468 46,744,046 63,499,616
Large Cap Value......................................... 2,009,306 28,839,671 27,106,917
Money Market............................................ 6,100,677 61,006,768 61,006,769
Mid Cap Value........................................... 1,497,913 18,236,811 19,138,533
Small/Mid Cap Growth.................................... 707,222 10,888,164 9,925,831
Real Estate Equity...................................... 805,182 9,643,804 9,238,646
Growth & Income......................................... 10,470,370 207,387,033 209,525,899
Managed................................................. 8,137,552 130,087,567 125,710,809
Short-Term Bond......................................... 1,206,452 11,963,663 11,728,988
Small Cap Value......................................... 1,720,546 18,985,985 18,783,396
International Opportunities............................. 2,078,452 26,831,679 31,535,049
Equity Index............................................ 7,327,855 138,687,664 149,913,131
Global Bond............................................. 900,154 9,240,752 8,838,516
Turner Core Growth...................................... 988,705 20,433,059 22,671,005
Brandes International Equity............................ 1,122,129 13,875,593 17,415,296
Frontier Capital Appreciation........................... 804,225 13,485,020 16,985,022
Enhanced U.S. Equity.................................... 321,327 6,490,133 6,738,214
Emerging Markets Equity................................. 303,646 3,288,843 3,723,380
Global Equity........................................... 68,965 784,773 836,878
Bond Index.............................................. 550,115 5,214,459 5,126,051
Small/Mid Cap CORE...................................... 62,841 608,830 616,813
High Yield Bond......................................... 475,514 4,263,457 4,273,214
</TABLE>
122
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Purchases, including reinvestment of dividend distributions, and proceeds
from sales of shares in the Portfolios of the Fund and of M Fund during 1999
were as follows:
<TABLE>
<CAPTION>
Portfolio Purchases Sales
------------- -------------- -------------
<S> <C> <C>
Large Cap Growth.................................................. $ 62,265,535 $ 14,711,539
Sovereign Bond.................................................... 38,288,617 29,280,010
International Equity Index........................................ 32,519,440 17,541,313
Small Cap Growth.................................................. 27,757,302 12,281,978
International Balanced............................................ 3,415,587 1,768,784
Mid Cap Growth.................................................... 45,338,211 14,783,738
Large Cap Value................................................... 22,257,609 10,304,554
Money Market...................................................... 304,141,849 329,646,739
Mid Cap Value..................................................... 15,413,952 12,927,617
Small/Mid Cap Growth.............................................. 8,759,614 5,337,363
Real Estate Equity................................................ 13,375,520 8,254,469
Growth & Income................................................... 144,949,345 32,223,136
Managed........................................................... 111,633,323 21,803,394
Short-Term Bond................................................... 17,352,671 24,342,768
Small Cap Value................................................... 16,062,747 7,136,780
International Opportunities....................................... 24,767,973 17,918,215
Equity Index...................................................... 124,086,502 40,497,607
Global Bond....................................................... 10,322,531 9,125,384
Turner Core Growth................................................ 20,980,047 5,874,338
Brandes International Equity...................................... 10,664,333 3,583,615
Frontier Capital Appreciation..................................... 13,387,462 10,133,633
Enhanced U.S. Equity.............................................. 5,925,334 2,077,734
Emerging Markets Equity........................................... 9,682,573 7,242,444
Global Equity..................................................... 2,167,637 1,624,954
Bond Index........................................................ 5,900,997 1,658,038
Small/Mid Cap CORE................................................ 3,312,578 3,053,916
High Yield Bond................................................... 11,898,171 12,055,248
</TABLE>
123
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
NOTES TO FINANCIAL STATEMENTS--(continued)
5. Net Assets
Accumulation shares attributable to net assets of policyholders and
accumulation share values for each subaccount at December 31, 1999 were as
follows:
<TABLE>
<CAPTION>
VEP Class #1 VEP Class #2 VEP Class #3
-------------------------- ------------------------- --------------------------
Accumulation Accumulation Accumulation Accumulation Accumulation Accumulation
Portfolio Shares Share Values Shares Share Values Shares Share Values
------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Large Cap Growth.................................. 432,627 $34.19 442,008 $34.29 156,934 $34.39
Sovereign Bond.................................... 226,496 13.80 170,995 13.84 28,389 13.88
International Equity Index........................ 205,346 17.52 163,712 17.58 4,631 17.63
Small Cap Growth.................................. 151,029 21.68 131,551 21.71 42,832 21.76
International Balanced............................ 21,487 13.28 25,817 13.30 12,453 13.33
Mid Cap Growth.................................... 202,405 35.56 145,034 35.62 45,513 35.69
Large Cap Value................................... 191,629 16.15 140,376 16.18 4,476 16.21
Money Market...................................... 613,611 13.08 1,102,161 13.12 347,735 13.15
Mid Cap Value..................................... 106,938 14.05 45,955 14.08 2,990 14.10
Small/Mid Cap Growth.............................. 83,852 19.77 90,674 19.83 41,701 19.88
Real Estate Equity................................ 94,768 14.40 68,355 14.44 2,732 14.49
Growth & Income................................... 945,411 30.90 579,234 31.00 212,540 31.09
Managed........................................... 554,374 20.88 279,936 20.94 23,988 21.00
Short-Term Bond................................... 94,078 12.97 84,892 13.00 7,712 13.04
Small Cap Value................................... 114,641 12.30 82,461 12.33 55,278 12.35
International Opportunities....................... 115,902 16.52 159,219 16.55 2,521 16.58
Equity Index...................................... 442,683 23.06 565,394 23.10 189,577 23.14
Global Bond....................................... 55,090 12.15 48,036 12.17 16,751 12.19
Turner Core Growth................................ 31,697 28.29 15,337 28.36 -- --
Brandes International Equity...................... 18,319 16.91 33,342 16.94 -- --
Frontier Capital Appreciation..................... 20,409 22.75 13,182 22.80 -- --
Enhanced U.S. Equity.............................. 3,102 17.47 -- 17.50 -- --
Emerging Markets Equity........................... 31,332 12.77 114,481 12.78 4,803 12.79
Global Equity..................................... 11,223 12.22 15,873 12.23 777 12.24
Bond Index........................................ 99,617 10.34 99,264 10.34 64,039 10.35
Small/Mid Cap CORE................................ 12,833 10.76 3,271 10.77 4,416 10.78
High Yield Bond................................... 51,021 10.09 40,169 10.10 -- --
</TABLE>
124
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
NOTES TO FINANCIAL STATEMENTS--(continued)
<TABLE>
<CAPTION>
V Coli Class #4 V Coli Class #5 V Coli Class #6
-------------------------- --------------------------- ----------------------------
Accumulation Accumulation Accumulation Accumulation Accumulation Accumulation
Portfolio Shares Share Values Shares Share Values Shares Share Values
--------- ------------ ------------ ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Large Cap Growth ................... 646,018 $34.50 282,553 $34.49 252,596 $34.52
Sovereign Bond ..................... 17,426 14.64 538,047 14.66 335,449 14.67
International Equity Index ......... 63,956 16.24 130,903 16.26 235,165 16.28
Small Cap Growth ................... 90,088 22.04 39,929 22.05 38,804 22.07
International Balanced ............. 68,220 13.50 6,065 13.51 54,964 13.52
Mid Cap Growth ..................... 146,264 36.15 124,116 36.18 5,992 36.19
Large Cap Value .................... 151,753 16.42 133,066 16.43 416,273 16.44
Money Market ....................... 218,714 13.01 5,906 13.02 136,140 13.04
Mid Cap Value ...................... 69,726 14.29 24,485 14.30 281,375 14.30
Small/Mid Cap Growth ............... 27,983 19.77 958 19.79 42,902 19.81
Real Estate Equity ................. 58,475 14.92 4,323 14.93 203,728 14.95
Growth & Income .................... 641,268 30.84 447,326 30.87 16,723 30.91
Managed ............................ 162,478 21.64 83,071 21.66 150,514 21.68
Short-Term Bond .................... 99,163 13.21 351,710 13.22 -- --
Small Cap Value .................... 32,245 12.51 49,419 12.52 281,896 12.53
International Opportunities ........ 203,225 16.80 157,727 16.80 74,340 16.81
Equity Index ....................... 324,024 23.44 37,253 23.46 533,298 23.47
Global Bond ........................ 54,500 12.35 9,809 12.36 -- --
Turner Core Growth ................. 7,772 28.80 12,496 28.83 -- --
Brandes International Equity ....... 104,626 17.21 81,372 17.23 42,458 17.25
Frontier Capital Appreciation ...... 74,553 23.16 62,806 23.18 -- --
Enhanced U.S. Equity ............... 13,962 17.68 1 17.68 -- --
Emerging Markets Equity ............ -- -- 24,692 12.87 -- --
Global Equity ...................... -- -- -- 12.32 -- --
Bond Index ......................... 2,519 10.42 10,132 10.42 -- --
Small/Mid Cap CORE ................. -- -- -- 10.84 -- --
High Yield Bond .................... 1,998 10.18 310 10.18 85,180 10.18
</TABLE>
125
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
NOTES TO FINANCIAL STATEMENTS--(continued)
<TABLE>
<CAPTION>
Medallion Executive VLI Class #7 MVEP Class #8 MVUL Class #9
-------------------------------- ------------------------- -------------------------
Accumulation Accumulation Accumulation Accumulation Accumulation Accumulation
Portfolio Shares Share Values Shares Share Values Shares Share Values
--------- ------------ ----------------- ------------ ------------ -------------------------
<S> <C> <C> <C> <C> <C> <C>
Large Cap Growth ............... 92,840 $79.68 781,223 $24.82 213,207 $22.10
Sovereign Bond ................. 57,389 23.69 765,173 12.44 500,049 11.71
International Equity Index ..... 113,572 27.55 780,218 15.05 200,089 15.54
Small Cap Growth ............... 193,672 21.70 298,417 21.90 197,401 24.61
International Balanced ......... 52,288 13.29 41,158 13.41 36,634 12.85
Mid Cap Growth ................. 168,579 35.59 383,762 35.92 103,210 39.83
Large Cap Value ................ 269,931 16.17 125,284 16.31 115,052 13.95
Money Market ................... 280,073 18.10 339,940 11.94 435,648 11.42
Mid Cap Value .................. 412,439 14.06 242,213 14.19 70,954 12.00
Small/Mid Cap Growth ........... 3,416 19.80 257,950 12.63 33,652 12.85
Real Estate Equity ............. 39,901 22.14 116,040 12.27 38,147 9.54
Growth & Income ................ 828,857 68.13 1,383,220 21.88 552,475 19.13
Managed ........................ 2,321,332 39.65 236,592 16.81 102,294 15.37
Short-Term Bond ................ 63,598 12.99 63,326 11.93 95,428 11.43
Small Cap Value ................ 473,526 12.32 281,097 12.43 87,362 11.80
International Opportunities .... 559,454 16.54 227,841 16.68 335,763 15.97
Equity Index ................... 477,728 23.08 1,251,427 23.29 598,377 19.87
Global Bond .................... 146,786 12.16 62,185 12.27 258,673 11.58
Turner Core Growth ............. -- -- 229,705 25.66 76,087 24.67
Brandes International
Equity ....................... -- -- 495,542 16.53 58,572 17.67
Frontier Capital
Appreciation ................. -- -- 405,890 19.23 119,967 18.62
Enhanced U.S. Equity ........... -- -- 145,784 17.59 139,459 17.59
Emerging Markets Equity ........ 45,954 12.77 18,062 12.82 40,257 12.82
Global Equity .................. 2,967 12.23 4,588 12.28 29,228 12.28
Bond Index ..................... 18,855 10.34 12,439 10.38 185 10.38
Small/Mid Cap CORE ............. -- -- 16,742 10.81 477 10.81
High Yield Bond ................ 34,470 10.10 82,547 10.14 72,026 10.14
</TABLE>
126
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
NOTES TO FINANCIAL STATEMENTS--(continued)
<TABLE>
<CAPTION>
MVUL 98 Class #10 MVEP 98 Class #11 MEVL II Class #12
--------------------------- ------------------------ ----------------------------
Accumulation Accumulation Accumulation Accumulation Accumulation Accumulation
Portfolio Shares Share Values Shares Share Values Shares Share Values
--------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Large Cap Growth.............................. 221,057 $ 22.10 133,186 $ 24.82 -- --
Sovereign Bond ............................... 122,492 11.71 96,742 12.44 -- --
International Equity Index.................... 40,197 15.54 68,833 15.05 -- --
Small Cap Growth.............................. 158,068 24.61 34,357 21.90 -- --
International Balanced........................ 22,819 12.85 3,040 13.41 -- --
Mid Cap Growth................................ 291,628 39.83 111,636 35.92 -- --
Large Cap Value............................... 66,485 13.95 73,993 16.31 -- --
Money Market................................. 575,670 11.42 718,107 11.94 -- --
Mid Cap Value................................ 62,352 11.99 52,021 14.19 -- --
Small/Mid Cap Growth......................... 5,710 12.85 20,460 12.63 -- --
Real Estate Equity........................... 10,691 9.54 7,405 12.27 -- --
Growth & Income.............................. 1,047,922 19.13 196,321 21.88 -- --
Managed...................................... 55,779 15.37 43,618 16.81 -- --
Short-Term Bond.............................. 26,887 11.43 31,697 11.93 -- --
Small Cap Value.............................. 22,247 11.80 40,374 12.43 -- --
International Opportunities.................. 39,238 15.97 35,379 16.68 -- --
Equity Index................................. 1,960,860 19.87 440,030 23.29 -- --
Global Bond.................................. 35,346 11.58 51,458 12.27 -- --
Turner Core Growth........................... 377,311 24.67 142,883 25.66 -- --
Brandes International Equity................. 82,135 17.67 116,504 16.53 -- --
Frontier Capital Appreciation................ 90,807 18.62 69,320 20.00 -- --
Enhanced U.S. Equity......................... 48,887 17.59 30,852 17.59 -- --
Emerging Markets Equity...................... 7,584 12.82 3,832 12.82 -- --
Global Equity................................ 1,070 12.28 2,561 12.28 -- --
Bond Index................................... 137,733 10.38 46,924 10.38 -- --
Small/Mid Cap CORE........................... 10,536 10.81 8,881 10.81 -- --
High Yield Bond.............................. 15,036 10.14 38,875 10.14 -- --
</TABLE>
127
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
NOTES TO FINANCIAL STATEMENTS--(continued)
<TABLE>
<CAPTION>
VEP Class #13
-------------------------------
Accumulation Accumulation
Portfolio Shares Share Values
--------- ------------- ---------------
<S> <C> <C>
Large Cap Growth...................... -- --
Sovereign Bond........................ -- --
International Equity Index............ -- --
Small Cap Growth...................... -- --
International Balanced................ -- --
Mid Cap Growth........................ -- --
Large Cap Value....................... -- --
Money Market.......................... -- --
Mid Cap Value......................... -- --
Small/Mid Cap Growth.................. -- --
Real Estate Equity.................... -- --
Growth & Income....................... -- --
Managed............................... -- --
Short-Term Bond....................... -- --
Small Cap Value....................... -- --
International Opportunities........... -- --
Equity Index.......................... -- --
Global Bond........................... -- --
Turner Core Growth.................... -- --
Brandes International Equity.......... -- --
Frontier Capital Appreciation......... -- --
Enhanced U.S. Equity.................. -- --
Emerging Markets Equity............... -- --
Global Equity......................... -- --
Bond Index............................ -- --
Small/Mid Cap CORE.................... -- --
High Yield Bond....................... -- --
</TABLE>
128
<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
<S> <C>
Account............................................ 34
account value...................................... 9
Additional Sum Insured............................. 16
annual processing date............................. 17
asset-based risk charge............................ 10
attained age....................................... 10
Basic Sum Insured.................................. 16
beneficiary........................................ 44
business day....................................... 35
changing Option A or B............................. 19
changing the Total Sum Insured..................... 19
charges............................................ 9
Code............................................... 40
cost of insurance rates............................ 10
date of issue...................................... 36
death benefit...................................... 5
deductions......................................... 9
dollar cost averaging.............................. 14
expenses of the Trusts............................. 11
fixed investment option............................ 35
full surrender..................................... 15
fund............................................... 2
grace period....................................... 7
guaranteed minimum death benefit................... 7
Guaranteed Minimum Death Benefit Premium........... 8
insurance charge................................... 10
insured person..................................... 5
investment options................................. 1
JHVLICO............................................ 34
lapse.............................................. 7
loan............................................... 15
loan interest...................................... 15
maximum premiums................................... 6
Minimum Initial Premium............................ 35
minimum insurance amount........................... 17
minimum premiums................................... 6
modified endowment................................. 41
monthly deduction date............................. 36
Option A; Option B................................. 16
optional rider benefits............................ 18
optional extra death benefit feature............... 17
owner.............................................. 5
partial withdrawal................................. 15
partial withdrawal charge.......................... 11
payment options.................................... 20
Planned Premium.................................... 7
policy anniversary................................. 36
policy split option................................ 18
policy year........................................ 36
premium; premium payment........................... 5
prospectus......................................... 3
receive; receipt................................... 22
reinstate; reinstatement........................... 7
sales charges...................................... 9
SEC................................................ 2
Separate Account S................................. 34
Servicing Office................................... 2
special loan account............................... 15
subaccount......................................... 34
surrender.......................................... 15
surrender value.................................... 15
Target Premium..................................... 10
tax considerations................................. 40
telephone transfers................................ 22
Total Sum Insured.................................. 16
transfers of account value......................... 14
Trusts............................................. 2
variable investment options........................ 1
we; us............................................. 34
withdrawal......................................... 15
withdrawal charges................................. 11
you; your.......................................... 5
</TABLE>
123
