<PAGE>
As filed with the Securities and Exchange Commission on May 1, 2000
Registration No. 333-15075
____________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM S-6
Post-Effective Amendment
No. 3 to
Registration Statement Under
THE SECURITIES ACT OF 1933
-----------------
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
(Exact name of trust)
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
(Name of depositor)
JOHN HANCOCK PLACE
BOSTON, MASSACHUSETTS 02117
(Complete address of depositor's principal executive offices)
-----------------
RONALD J. BOCAGE, ESQ.
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
JOHN HANCOCK PLACE, BOSTON, 02117
(Name and complete address of agent for service)
-----------------
Copy to:
THOMAS C. LAUERMAN, ESQ.
Freedman, Levy, Kroll & Simonds
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036
-----------------
It is proposed that this filing become effective(check appropriate box)
/ / immediately upon filing pursuant to paragraph (b) of Rule 485
--
/X/ on May 1, 2000 pursuant to paragraph (b) of Rule 485
--
/ / 60 days after filing pursuant to paragraph (a)(1) of Rule 485
--
/ / on (date) pursuant to paragraph (a)(1) of Rule 485
--
If appropriate check the following box
/ / this post-effective amendment designates a new effective date for a
--
previously filed amendment
Pursuant to the provisions of Rule 24f-2, Registrant has registered an
indefinite amount of the securities under the Securities Act of 1933.
<PAGE>
PROSPECTUS DATED MAY 1, 2000
MAJESTIC VARIABLE UNIVERSAL LIFE
a flexible premium variable life 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>
VARIABLE INVESTMENT OPTION MANAGED BY
- -------------------------- ----------
- ------------------------------------------------------------------------------------------------------------------
<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.
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.
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.
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.
Templeton International Securities. . . . . . . . . . . . Templeton Investment Counsel, Inc.
International Equity Index . . . . . . . . . . . . . . . . Independence International Associates, Inc.
International Opportunities . . . . . . . . . . . . . . . . Rowe Price-Fleming International, Inc.
Morgan Stanley Dean Witter Investment
Emerging Markets Equity . . . . . . . . . . . . . . . . . Management, Inc.
Short-Term Bond . . . . . Independence Investment Associates, Inc.
Bond Index . . . . . . . . Mellon Bond Associates, LLP
Active Bond . . . . . . . . . . . . . . . . . . . . . . . John Hancock Advisers, Inc.
Global Bond . . . . . . . . . . . . . . . . . . . . . . . J.P. Morgan Investment Management, Inc.
High Yield Bond . . . . . Wellington Management Company, LLP
Money Market. . . . . . . John Hancock Life Insurance Company
Brandes International Equity. . . . . . . . . . . . . . . Brandes Investment Partners, L.P.
Turner Core Growth. . . . Turner Investment Partners, Inc.
Frontier Capital Appreciation. . . . . . . . . . . . . . . Frontier Capital Management Company, LLC
Clifton Enhanced U.S. Equity. . . . . . . . . . . . . . . The Clifton Group
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
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 MFS
Variable Insurance Trust, and the M Fund, Inc. (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
-----------------------------
Express Delivery U.S. Mail
---------------- ---------
529 Main Street (X-4) P.O. Box 111
Charlestown, MA 02129 Boston, MA 02117
Phone: 1-800-521-1234
Fax: 1-617-572-6956
2
<PAGE>
GUIDE TO THIS PROSPECTUS
This prospectus contains information that you should know before you buy a
policy or exercise any of your rights under the policy. However, please keep in
mind that this is a prospectus - - it is not the policy. The prospectus
---
simplifies many policy provisions to better communicate the policy's essential
features. Your rights and obligations under the policy will be determined by the
language of the policy itself. When you receive your policy, read it carefully.
This prospectus is arranged in the following way:
. The section which follows is called "Basic Information". It is in a
question and answer format. We suggest you read the Basic Information
section before reading any other section of the prospectus.
. Behind the Basic Information section are illustrations of
hypothetical policy benefits that help clarify how the policy works.
These start on page 21.
. Behind the illustrations is a section called "Additional Information"
that gives more details about the policy. It generally does not
---
repeat information that is in the Basic Information section. A table
of contents for the Additional Information section appears on page
32.
. Behind the Additional Information section are the financial
statements for JHVLICO and Separate Account S. These start on page
46.
. Finally, there is an Alphabetical Index of Key Words and Phrases at
the back of the prospectus on page 94.
After the Alphabetical Index of Key Words and Phrases, this prospectus ends and
the prospectuses for the Trusts begin.
* * * * * * * * * * * *
3
<PAGE>
BASIC INFORMATION
This part of the prospectus provides answers to commonly asked questions about
the policy.
Here are the page numbers where the questions and answers appear:
<TABLE>
<CAPTION>
<S> <C>
Question Beginning on page
- --------
.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?. . . . 6
.How will the value of my investment in the policy change 8
over time?. . . . . . . . . . . . . . . . . . . .
.What charges will JHVLICO deduct from my investment in 9
the policy?. . . . . . . . . . . . . . . . . . .
.What charges will the Trusts deduct from my investment in 10
the policy?. . . . . . . . . . . . . . . . . . .
.What other charges could JHVLICO impose in the future? 12
.How can I change my policy's investment allocations? 13
.How can I access my investment in the policy?. . 13
.How much will JHVLICO pay when the insured person dies? 15
.How can I change my policy's insurance coverage? 16
.Can I cancel my policy after it's issued?. . . . 17
.Can I choose the form in which JHVLICO pays out policy 17
proceeds?. . . . . . . . . . . . . . . . . . . .
.To what extent can JHVLICO vary the terms and conditions
of its policies in particular cases?. . . . . . 18
.How will my policy be treated for income tax purposes? 19
.How do I communicate with JHVLICO?. . . . . . . 19
</TABLE>
4
<PAGE>
WHAT IS THE POLICY?
The policy's primary purpose is to provide lifetime protection against
economic loss due to the death of the insured person. The value of the amount
you have invested under the policy may increase or decrease daily based upon the
investment results of the variable investment options that you choose. The
amount we pay to the policy's beneficiary if the insured person dies (we call
this the "death benefit") may be similarly affected.
While the insured person is alive, you will have a number of options under the
policy. Here are some major ones:
. Determine when and how much you invest in the various investment
options
. Borrow or withdraw amounts you have in the investment options
. Change the beneficiary who will receive the death benefit
. Change the amount of insurance
. Turn in (i.e., "surrender") the policy for the full amount of its
surrender value
. Choose the form in which we will pay out the death benefit or other
proceeds
Most of these options are subject to limits that are explained later in this
prospectus.
WHO OWNS THE POLICY?
That's up to the person who applies for the policy. The owner of the policy is
the person who can exercise most of the rights under the policy, such as the
right to choose the investment options or the right to surrender the policy. In
many cases, the person buying the policy is also the person who will be the
owner. However, the application for a policy can name another person or entity
(such as a trust) as owner. Whenever we've used the term "you" in this
prospectus, we've assumed that the reader is the person who has whatever right
or privilege is being discussed. There may be tax consequences if the owner and
the insured person are different, so you should discuss this issue with your tax
adviser.
HOW CAN I INVEST MONEY IN THE POLICY?
Premium Payments
We call the investments you make in the policy "premiums" or "premium
payments". The amount we require as your first premium depends upon the
-----
specifics of your policy and the insured person. Except as noted below, you can
make any other premium payments you wish at any time. That's why the policy is
called a "flexible premium" policy.
Minimum premium payment
Each premium payment must be at least $100.
5
<PAGE>
Maximum premium payments
Federal tax law limits the amount of premium payments you can make relative to
the amount of your policy's insurance coverage. We will not knowingly accept any
amount by which a premium payment exceeds the maximum. If you exceed certain
other limits, the law may impose a penalty on amounts you take out of your
policy. We'll monitor your premium payments and let you know if you're about to
exceed this limit. More discussion of these tax law requirements begins on page
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 person doesn't provide us with adequate evidence that he
or she continues to meet our requirements for issuing insurance.
In no event, however, will we refuse to accept any premium necessary to prevent
the policy or the guaranteed minimum death benefit feature from terminating. We
reserve the right to limit premium payments above the amount of cumulative
Guaranteed Minimum Death Benefit Premiums (whether or not the guaranteed minimum
death benefit feature described on page 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, or
. if we agree to it, through a salary deduction plan with your
employer.
You can obtain information on these other methods of premium payment by
contacting your JHVLICO representative or by contacting the JHVLICO Life
Servicing Office.
IS THERE A MINIMUM AMOUNT I MUST INVEST?
Planned Premiums
The Policy Specifications page of your policy will show the "Planned Premium"
for the policy. You choose this amount in the policy application. The premium
reminder notice we send you is based on this amount. You will also choose how
often to pay premiums-- annually, semi-annually, quarterly or monthly. The date
on which such a payment is "due" is referred to in the policy as a "modal
processing date." However, payment of Planned Premiums is not necessarily
required. You need only invest enough to keep the policy in force (see "Lapse
and reinstatement" and "Guaranteed minimum death benefit feature" below).
6
<PAGE>
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,
---
if the policy's surrender value is not sufficient to pay the charges on a
monthly deduction date, we will notify you of how much you will need to pay to
keep any Additional Sum Insured or the policy in force. You will have a 61 day
"grace period" to make that payment. If you don't pay at least the required
amount by the end of the grace period, the Additional Sum Insured or your policy
will lapse. If your policy lapses, all coverage under the policy will cease.
Even if the policy or the Additional Sum Insured terminates in this way, you can
still reactivate (i.e., "reinstate") it within 1 year from the beginning of the
grace period. You will have to provide evidence that the insured person still
meets our requirements for issuing coverage. You will also have to pay a minimum
amount of premium and be subject to the other terms and conditions applicable to
reinstatements, as specified in the policy. If the guaranteed minimum death
benefit is not in effect and the insured person dies during the grace period, we
will deduct any unpaid monthly charges from the death benefit. During such a
grace period, you cannot make a partial withdrawal or policy loan.
Guaranteed minimum death benefit feature
This feature is available only if the insured person meets certain
underwriting requirements. The feature guarantees that your Basic Sum Insured
will not lapse during the first 10 policy years, regardless of adverse
investment performance, if on each policy anniversary during that 10 year period
the amount of cumulative premiums you have paid accumulated at 4% (less all
withdrawals from the policy accumulated at 4%) equals or exceeds the sum of all
Guaranteed Minimum Death Benefit Premiums due to date accumulated at 4%. The
Guaranteed Minimum Death Benefit Premium (or "GMDB Premium) is defined in the
policy and is "due" on each policy anniversary. On the application for the
policy, you may elect for this feature to extend beyond the tenth policy year.
If you so elect, we will impose a special charge for this feature after the
tenth policy year. You may revoke the election at any time.
No GMDB Premium will ever be greater than the so-called "guideline premium"
for the policy as defined in Section 7702 of the Internal Revenue Code. Also,
the GMDB Premiums may change in the event of any change in the Additional Sum
Insured of the policy or any change in the death benefit option (see "How much
will JHVLICO pay when the insured person dies?" on page 15).
If the guaranteed minimum death benefit test is not satisfied on any policy
anniversary, 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 policy anniversary on
which default occurred. If it is reinstated more than 1 year after such policy
anniversary, we will require evidence that the insured person still meets our
requirements for issuing coverage. We may refuse to reinstate the feature more
than once during the life of the policy.
7
<PAGE>
The guaranteed minimum death benefit feature applies only to the Basic Sum
Insured. It does not apply to any amount of Additional Sum Insured (see "How
---
much will JHVLICO pay when the insured person dies?" on page 15).
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" beginning on page 36.)
Over time, the amount you've invested in any variable investment option will
increase or decrease the same as if you had invested the same amount directly in
the corresponding fund of one of the Trusts and had reinvested all fund
dividends and distributions in additional fund shares; except that we will
deduct certain additional charges which will reduce your account value. We
describe these charges under "What charges will JHVLICO deduct from my
investment in the policy?" below.
The amount you've invested in the fixed investment option will earn interest
at a rate we declare from time to time. We guarantee that this rate will be at
least 4%. If you want to know what the current declared rate is, just call or
write to us. The current declared rate will also appear in the annual statement
we will send you. Amounts you invest in the fixed investment option will not be
---
subject to the mortality and expense risk charge described on page 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 beginning on page 14.
8
<PAGE>
WHAT CHARGES WILL JHVLICO DEDUCT FROM MY INVESTMENT IN THE POLICY?
Deductions from premium payments
. Premium tax charge - A charge to cover state premium taxes we currently
--------------------
expect to pay, on average. This charge is currently 2.35% of each premium.
. DAC tax charge - A charge to cover the increased Federal income tax
----------------
burden that we currently expect will result from receipt of premiums. This
charge is currently 1.25% of each premium.
. Premium processing charge - A charge to help defray our administrative
---------------------------
costs. This charge is 1.25% of each premium.
. Sales charge - A charge to help defray our sales costs. The charge is 30%
--------------
of premiums paid in the first policy year up to the Target Premium, 10% of
premiums paid in each of policy years 2 through 10 up to the Target
Premium, 4% of premiums paid in each policy year after policy year 10 up
to the Target Premium, and 3.5% of premiums paid in any policy year in
excess of the Target Premium. 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 imposed if you elect
-------------------------------------------
this rider. It is deducted only from premiums received in the first policy
year. The charge is 2% of premiums paid in the first policy year up to the
Target Premium.
Deductions from account value
. Issue charge - A monthly charge to help defray our administrative costs.
------------
This is a charge per $1,000 of Basic Sum Insured at issue that varies by
age and that is deducted only during the first ten policy years. The
charge will appear in the "Policy Specifications" section of the policy.
As an example, the monthly charge for a 45 year old is 10c per $1,000 of
Basic Sum Insured. The monthly charge will be at least $5 and is
guaranteed not to exceed $200.
. Administrative charge - A monthly charge to help defray our
-----------------------
administrative costs. This is a flat dollar charge of up to $10 (currently
$5).
. Insurance charge - A monthly charge for the cost of insurance. To
------------------
determine the charge, we multiply the amount of insurance for which we are
at risk by a cost of insurance rate. The rate is derived from an actuarial
table. The table in your policy will show the maximum cost of insurance
-------
rates. The cost of insurance rates that we currently apply are generally
less than the maximum rates. We will review the cost of insurance rates at
least every 5 years and may change them from time to time. However, those
rates will never be more than the maximum rates shown in the policy. The
table of rates we use will depend on the insurance risk characteristics
and (usually) gender of the insured person, the Total Sum Insured and the
length of time the policy has been in effect. Regardless of the table
used, cost of insurance rates generally increase each year that you own
your policy, as the insured person's attained age increases. (The insured
person's "attained age" on any date is his or her age on the birthday
nearest that date.) Higher current insurance rates are generally
applicable to policies issued on a "guaranteed issue" basis, where only
very limited underwriting
9
<PAGE>
information is obtained. This is often the case with policies issued to
trustees, employers and similar entities.
. Extra mortality charge - A monthly charge specified in your policy for
------------------------
additional mortality risk if the insured person is subject to certain
types of special insurance risk.
. M &E charge - A daily charge for mortality and expense risks we assume.
-------------
This charge is deducted from the variable investment options. It does not
apply to the fixed investment option. The current charge is at an
effective annual rate of .35% of the value of the assets in each variable
investment option. We guarantee that this charge will never exceed an
effective annual rate of .60%.
. Guaranteed minimum death benefit charge - A monthly charge beginning in
-----------------------------------------
the eleventh policy year if the guaranteed minimum death benefit feature
is elected to extend beyond the first ten policy years. This charge is
currently 1c per $1,000 of Basic Sum Insured and is guaranteed not to
exceed 3c per $1,000 of Basic Sum Insured. Because policies of this type
were first offered in 1997, this charge is not yet applicable to any
policy at the current rate.
. Optional benefits charge - Monthly charges for any optional insurance
--------------------------
benefits added to the policy by means of a rider (other than the optional
enhanced cash value 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.
<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%
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%
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%
MFS VARIABLE INSURANCE TRUST
(NOTE 4):
MFS New Discovery . . . . . . . . . . . 0.90% N/A 0.17% 1.07% 1.59%
M FUND, INC. (NOTE 5):
Brandes International Equity . . . . . 0.96% N/A 0.25% 1.21% 0.97%
Turner Core Growth . . . . . . . . . . 0.45% N/A 0.25% 0.70% 0.95%
Frontier Capital Appreciation . . . . . 0.90% N/A 0.25% 1.15% 0.57%
Clifton Enhanced U.S. Equity** . . . . 0.55% N/A 0.25% 0.80% 1.08%
</TABLE>
10
<PAGE>
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).
* 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
11
<PAGE>
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) 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.
(5) M Fund, Inc. funds' percentages reflect the investment management fees
currently payable and other fund expenses allocated in 1999. M Financial
Advisers, Inc. reimburses a fund when the fund's other operating expenses
exceed 0.25% of that fund's average daily net assets.
** Clifton Enhanced U.S. Equity was formerly "Enhanced U.S. Equity".
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.
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.
12
<PAGE>
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 a year and only during the 31 day
period following your policy anniversary.
. We must receive the request for such a transfer during the period
beginning 60 days prior to the policy anniversary and ending 30 days after
it.
. The most you can transfer at any one time is the greater of $500 or 20%
of the assets in your fixed investment option.
We reserve the right to impose a minimum amount limit on transfers out of the
fixed investment option. We also reserve the right to impose limits on the
number and frequency of transfers out of the variable investment options.
HOW CAN I ACCESS MY INVESTMENT IN THE POLICY?
Full surrender
You may surrender your policy in full at any time. If you do, we will pay you
the account value less any policy loans. 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. 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 9). We also reserve the right to refuse
any partial withdrawal that would cause the policy's Total Sum Insured to fall
below $250,000. Any partial withdrawal (other than a Terminated ASI Withdrawal
Amount, as described below) will reduce your death
13
<PAGE>
benefit under any of the death benefit options (see "How much will JHVLICO pay
when the insured person dies?" on page 15) and under the guaranteed death
benefit feature (see page 7). Under Option A or Option M, such a partial
withdrawal will reduce the Total Sum Insured. Under Option B, such a partial
withdrawal will reduce your account value. Under the guaranteed death benefit
feature, such a partial withdrawal will reduce the Basic Sum Insured. A
"Terminated ASI Withdrawal Amount" is any partial withdrawal made while there is
an Additional Sum Insured under the policy that later lapses as described on
page 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
determined as follows:
. We first determine the account value of your policy.
. We then subtract an amount equal to 12 times the monthly charges then
being deducted from account value.
. We then multiply the resulting amount by .75% in policy years 1
through 20 and .25% thereafter.
. We then subtract the third item above from the second item above.
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 20 policy years and 4.25%
thereafter. Accrued interest will be added to the loan daily and will bear
interest at the same rate as the original loan amount. The amount of the loan is
deducted from the investment options in the same proportion as the account value
is then allocated among them and is placed in a special loan account. This
special loan account will earn interest at an effective annual rate of 4.0%.
However, if we determine that a loan will be treated as a taxable distribution
because of the differential between the loan interest rate and the rate being
credited on the special loan account, we reserve the right to decrease the rate
credited on the special loan account to a rate that would, in our reasonable
judgement, result in the transaction being treated as a loan under Federal tax
law.
You can repay all or part of a loan at any time. Each repayment will be
allocated among the investment options as follows:
. The same proportionate part of the loan as was borrowed from the
fixed investment option will be repaid to the fixed investment
option.
. The remainder of the repayment will be allocated among the investment
options in the same way a new premium payment would be allocated.
14
<PAGE>
If you want a payment to be used as a loan repayment, you must include
instructions to that effect. Otherwise, all payments will be assumed to be
premium payments.
HOW MUCH WILL JHVLICO PAY WHEN THE INSURED PERSON DIES?
In your application for the policy, you will tell us how much life insurance
coverage you want on the life of the insured person. This is called the "Total
Sum Insured." Total Sum Insured is composed of the Basic Sum Insured and any
Additional Sum Insured you elect. The only limitation on how much Additional Sum
Insured you can have is that it cannot exceed 400% of the Basic Sum Insured.
There are a number of factors you should consider in determining whether to
elect coverage in the form of Basic Sum Insured or in the form of Additional Sum
Insured. These factors are discussed under "Basic Sum Insured vs. Additional Sum
Insured" on page 35.
When the insured person dies, we will pay the death benefit minus any
outstanding loans. There are three ways of calculating the death benefit. You
choose which one you want in the application. The three death benefit options
are:
. Option A - The death benefit will equal the greater of (1) the Total
Sum Insured, or (2) the minimum insurance amount (as described
below).
. Option B -The death benefit will equal the greater of (1) the Total
Sum Insured plus your policy's account value on the date of death, or
(2) the minimum insurance amount.
. Option M - The death benefit will equal the greater of (1) the Total
Sum Insured plus any optional extra death benefit (as described
below), or (2) the minimum insurance amount.
For the same premium payments, the death benefit under Option B will tend to
be higher than the death benefit under Option A or Option M. On the other hand,
the monthly insurance charge will be higher under Option B to compensate us for
the additional insurance risk. Because of that, the account value will tend to
be higher under Option A or Option M than under Option B for the same premium
payments.
Optional extra death benefit feature
The optional extra death benefit is determined as follows:
. First, we multiply your account value by a factor specified in the
policy. The factor is based on the insured person's age on the date
of calculation.
. We will then subtract your Total Sum Insured.
If you change the way in which the minimum insurance amount is calculated (see
below), we may have to change the factors described above (perhaps
retroactively) in order to maintain qualification of the policy as life
insurance under Federal tax law. This feature may result in the
15
<PAGE>
Option M death benefit being higher than the minimum insurance amount. Although
there is no special charge for this feature, your monthly insurance charge will
be based on that higher death benefit amount. Election of this feature must be
made in the application for the policy.
The minimum insurance amount
In order for a policy to qualify as life insurance under Federal tax law,
there has to be a minimum amount of insurance in relation to account value.
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. 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 "required additional death benefit factor"
applicable on that date. In this case, the death benefit factors are derived by
applying the guideline premium and cash value corridor test. The death benefit
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. 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 death benefit factor applicable on that
date. In this case, the death benefit factors are derived by applying the cash
value accumulation test. The death benefit factor decreases as attained age
increases. Regardless of the test you elect, a table showing the required
additional death benefit factor for each age will appear in the policy.
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.
Enhanced cash value rider
In the application for the policy, you may elect to purchase the enhanced cash
value rider. This rider provides an enhanced cash value benefit (in addition to
the surrender value) if you surrender the policy within the first nine policy
years. The amount of the benefit will be shown in the "Policy Specifications"
section of the policy. The benefit is also included in the account value when
calculating the death benefit. Election of this rider could increase your
insurance charge since it affects our amount at risk under the policy. The
amount available for partial withdrawals and loans are based on the surrender
value and will in no way be increased due to this 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. However, you will have to provide us with evidence that the insured
person still meets our requirements for issuing
16
<PAGE>
insurance coverage. As to when an approved increase would take effect, see
"Effective date of other policy transactions" on page 37.
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, 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 37.
Change of death benefit option
At any time, you may request to change your coverage from death benefit Option
B to Option A. Our administrative systems do not currently permit any other
change of death benefit option. Such changes may be permitted in the 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 after you receive it
(this period may be longer in some states). 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.
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 Trusts 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:
17
<PAGE>
. 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.
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.
18
<PAGE>
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 38. 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.
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
19
<PAGE>
. 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 the
insured person's death and related documentation to the JHVLICO Life Servicing
Office. We don't consider that we've "received" any communication until such
time as it has arrived at the proper place and in the proper and complete form.
We have special forms that should be used for a number of the requests
mentioned above. You can obtain these forms from the JHVLICO Life Servicing
Office or your JHVLICO representative. Each communication to us must include
your name, your policy number and the name of the insured person. We cannot
process any request that doesn't include this required information. Any
communication that arrives after the close of our business day, or on a day that
is not a business day, will be considered "received" by us on the next following
business day. 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 1-800-521-1234 or by faxing us at 1-617-572-6956.
Any fax request should include your name, daytime telephone number, policy
number and, in the case of transfers and changes of allocation, the names of the
investment options involved. We will honor telephone instructions from anyone
who provides the correct identifying information, so there is a risk of loss to
you if this service is used by an unauthorized person. However, you will receive
written confirmation of all telephone transactions. There is also a risk that
you will be unable to place your request due to equipment malfunction or heavy
phone line usage. If this occurs, you should submit your request in writing.
The policies are not designed for professional market timing organizations or
other 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.
20
<PAGE>
ILLUSTRATION OF DEATH BENEFITS, ACCOUNT VALUES, SURRENDER VALUES AND
ACCUMULATED PREMIUMS
The following tables illustrate the changes in death benefit, account value
and surrender value of the policy under certain hypothetical circumstances that
we assume solely for this purpose. Each table separately illustrates the
operation of a policy for a specified issue age, premium payment schedule and
Total Sum Insured. The amounts shown are for the end of each policy year and
assume that all of the account value is invested in funds that achieve
investment returns at constant annual rates of 0%, 6% and 12% (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 -.79%, 5.16% and 11.12%. (Investment return
reflects investment income and all realized and unrealized capital gains and
losses.) The tables assume annual Planned Premiums that are paid at the
beginning of each policy year for an insured person who is a 45 year old male
standard non-smoker underwriting risk when the policy is issued.
Tables are provided for each of the two death benefit options. The tables
headed "Current Charges" assume that the current rates for all charges deducted
by JHVLICO will apply in each year illustrated. The tables headed "Maximum
Charges" are the same, except that the maximum permitted rates for all years are
used for all charges. The tables do not reflect any charge that we reserve the
right to make but are not currently making.
With respect to fees and expenses deducted from 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 .13%.
These rates are the arithmetic average for all funds of the Trusts. 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 10. 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 your proposed insured person's issue age, sex and underwriting risk
classification, and the Total Sum Insured and annual Planned Premium amount
requested.
21
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE $250,000 TOTAL SUM INSURED MALE, ISSUE AGE
45, FULLY UNDERWRITTEN NONSMOKER UNDERWRITING CLASS OPTION A DEATH BENEFIT
CASH VALUE ACCUMULATION TEST NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH
POLICY YEAR PLANNED PREMIUM: $4,530* 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 $ 4,757 $250,000 $250,000 $ 250,000 $ 2,133 $ 2,283 $ 2,434
2 9,751 250,000 250,000 250,000 5,082 5,569 6,073
3 14,995 250,000 250,000 250,000 7,945 8,959 10,051
4 20,501 250,000 250,000 250,000 10,783 12,521 14,465
5 26,283 250,000 250,000 250,000 13,584 16,252 19,354
6 32,353 250,000 250,000 250,000 16,356 20,167 24,775
7 38,727 250,000 250,000 250,000 19,104 24,281 30,794
8 45,420 250,000 250,000 250,000 21,832 28,607 37,479
9 52,448 250,000 250,000 250,000 24,530 33,146 44,893
10 59,827 250,000 250,000 250,000 27,195 37,906 53,113
11 67,575 250,000 250,000 250,000 30,382 43,478 62,835
12 75,710 250,000 250,000 250,000 33,488 49,281 73,582
13 84,252 250,000 250,000 250,000 36,479 55,296 85,437
14 93,221 250,000 250,000 250,000 39,354 61,535 98,535
15 102,638 250,000 250,000 250,000 42,116 68,013 113,022
16 112,527 250,000 250,000 250,000 44,770 74,751 129,070
17 122,910 250,000 250,000 268,243 47,309 81,760 146,830
18 133,812 250,000 250,000 296,469 49,723 89,051 166,388
19 145,259 250,000 250,000 326,734 52,013 96,644 187,918
20 157,278 250,000 250,000 359,236 54,169 104,555 211,614
25 227,014 250,000 250,000 561,755 61,823 149,013 369,795
30 316,016 250,000 282,676 859,427 64,696 205,120 623,632
35 429,609 250,000 347,140 1,307,610 58,549 272,544 1,026,623
</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.
22
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE $250,000 TOTAL SUM INSURED MALE, ISSUE AGE
45, FULLY UNDERWRITTEN NONSMOKER UNDERWRITING CLASS OPTION A DEATH BENEFIT
CASH VALUE ACCUMULATION TEST NO GUARANTEED MINIMUM DEATH BENEFIT OPTION
TENTH POLICY YEAR PLANNED PREMIUM: $4,530* USING MAXIMUM CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
---------------------------- --------------------------
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at ---------------------------- --------------------------
Year 5% annual interest 0% 6% 12% 0% 6% 12%
- ------- ------------------ -------- -------- -------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 4,757 $250,000 $250,000 $250,000 $ 1,375 $ 1,501 $ 1,627
2 9,751 250,000 250,000 250,000 3,545 3,935 4,343
3 14,995 250,000 250,000 250,000 5,599 6,392 7,253
4 20,501 250,000 250,000 250,000 7,533 8,871 10,379
5 26,283 250,000 250,000 250,000 9,340 11,361 13,733
6 32,353 250,000 250,000 250,000 11,014 13,859 17,338
7 38,727 250,000 250,000 250,000 12,537 16,345 21,202
8 45,420 250,000 250,000 250,000 13,894 18,807 25,343
9 52,448 250,000 250,000 250,000 15,069 21,224 29,778
10 59,827 250,000 250,000 250,000 16,039 23,574 34,524
11 67,575 250,000 250,000 250,000 17,363 26,440 40,233
12 75,710 250,000 250,000 250,000 18,455 29,241 46,388
13 84,252 250,000 250,000 250,000 19,306 31,971 53,047
14 93,221 250,000 250,000 250,000 19,903 34,615 60,268
15 102,638 250,000 250,000 250,000 20,228 37,155 68,121
16 112,527 250,000 250,000 250,000 20,251 39,564 76,677
17 122,910 250,000 250,000 250,000 19,938 41,806 86,018
18 133,812 250,000 250,000 250,000 19,240 43,836 96,240
19 145,259 250,000 250,000 250,000 18,101 45,601 107,454
20 157,278 250,000 250,000 250,000 16,464 47,042 119,801
25 227,014 ** 250,000 309,216 ** 47,243 203,552
30 316,016 ** 250,000 450,227 ** 24,468 326,701
35 429,609 ** ** 636,295 ** ** 499,564
</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.
23
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE $250,000 TOTAL SUM INSURED MALE, ISSUE AGE
45, FULLY UNDERWRITTEN NONSMOKER UNDERWRITING CLASS OPTION B DEATH BENEFIT
CASH VALUE ACCUMULATION TEST NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH
POLICY YEAR PLANNED PREMIUM: $4,530* 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 $ 4,757 $252,129 $252,279 $ 252,429 $ 2,129 $ 2,279 $ 2,429
2 9,751 255,067 255,552 256,055 5,067 5,552 6,055
3 14,995 257,912 258,921 260,007 7,912 8,921 10,007
4 20,501 260,724 262,452 264,384 10,724 12,452 14,384
5 26,283 263,495 266,142 269,219 13,495 16,142 19,219
6 32,353 266,229 270,004 274,568 16,229 20,004 24,568
7 38,727 268,934 274,054 280,493 18,934 24,054 30,493
8 45,420 271,614 278,303 287,060 21,614 28,303 37,060
9 52,448 274,258 282,752 294,326 24,258 32,752 44,326
10 59,827 276,862 287,403 302,361 26,862 37,403 52,361
11 67,575 279,978 292,845 311,850 29,978 42,845 61,850
12 75,710 282,999 298,487 322,293 32,999 48,487 72,293
13 84,252 285,882 304,291 333,747 35,882 54,291 83,747
14 93,221 288,624 310,264 346,315 38,624 60,264 96,315
15 102,638 291,226 316,411 360,116 41,226 66,411 110,116
16 112,527 293,692 322,743 375,284 43,692 72,743 125,284
17 122,910 296,010 329,255 391,953 46,010 79,255 141,953
18 133,812 298,167 335,942 410,267 48,167 85,942 160,267
19 145,259 300,161 342,805 430,398 50,161 92,805 180,398
20 157,278 301,977 349,838 452,524 51,977 99,838 202,524
25 227,014 306,867 386,013 599,333 56,867 136,013 349,333
30 316,016 305,221 424,574 835,522 55,221 174,574 585,522
35 429,609 291,894 459,823 1,226,720 41,894 209,823 963,115
</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.
24
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE $250,000 TOTAL SUM INSURED MALE, ISSUE AGE
45, FULLY UNDERWRITTEN NONSMOKER UNDERWRITING CLASS OPTION B DEATH BENEFIT
CASH VALUE ACCUMULATION TEST NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH
POLICY YEAR PLANNED PREMIUM: $4,530* USING MAXIMUM CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
---------------------------- --------------------------
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at ---------------------------- --------------------------
Year 5% annual interest 0% 6% 12% 0% 6% 12%
- ------- ------------------ -------- -------- -------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 4,757 $251,366 $251,491 $251,617 $ 1,366 $ 1,491 $ 1,617
2 9,751 253,515 253,901 254,305 3,515 3,901 4,305
3 14,995 255,535 256,319 257,169 5,535 6,319 7,169
4 20,501 257,422 258,738 260,221 7,422 8,738 10,221
5 26,283 259,167 261,146 263,468 9,167 11,146 13,468
6 32,353 260,763 263,534 266,922 10,763 13,534 16,922
7 38,727 262,190 265,879 270,580 12,190 15,879 20,580
8 45,420 263,433 268,161 274,446 13,433 18,161 24,446
9 52,448 264,472 270,353 278,517 14,472 20,353 28,517
10 59,827 265,284 272,426 282,788 15,284 22,426 32,788
11 67,575 266,425 274,950 287,880 16,425 24,950 37,880
12 75,710 267,302 277,332 293,242 17,302 27,332 43,242
13 84,252 267,909 279,557 298,890 17,909 29,557 48,890
14 93,221 268,233 281,599 304,835 18,233 31,599 54,835
15 102,638 268,257 283,428 311,087 18,257 33,428 61,087
16 112,527 267,951 285,000 317,643 17,951 35,000 67,643
17 122,910 267,283 286,265 324,493 17,283 36,265 74,493
18 133,812 266,209 287,159 331,618 16,209 37,159 81,618
19 145,259 264,679 287,607 338,987 14,679 37,607 88,987
20 157,278 262,645 287,534 346,566 12,645 37,534 96,566
25 227,014 ** 276,738 386,592 ** 26,738 136,592
30 316,016 ** ** 423,368 ** ** 173,368
35 429,609 ** ** 434,478 ** ** 184,478
</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.
25
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE $250,000 TOTAL SUM INSURED MALE, ISSUE AGE
45, FULLY UNDERWRITTEN NONSMOKER UNDERWRITING CLASS OPTION M DEATH BENEFIT
CASH VALUE ACCUMULATION TEST NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH
POLICY YEAR PLANNED PREMIUM: $4,530* 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 $ 4,757 $250,000 $250,000 $ 250,000 $ 2,133 $ 2,283 $ 2,434
2 9,751 250,000 250,000 250,000 5,082 5,569 6,073
3 14,995 250,000 250,000 250,000 7,945 8,959 10,051
4 20,501 250,000 250,000 250,000 10,783 12,521 14,465
5 26,283 250,000 250,000 250,000 13,584 16,252 19,354
6 32,353 250,000 250,000 250,000 16,356 20,167 24,775
7 38,727 250,000 250,000 250,000 19,104 24,281 30,794
8 45,420 250,000 250,000 250,000 21,832 28,607 37,479
9 52,448 250,000 250,000 250,000 24,530 33,146 44,893
10 59,827 250,000 250,000 250,000 27,195 37,906 53,113
11 67,575 250,000 250,000 250,000 30,382 43,478 62,835
12 75,710 250,000 250,000 278,381 33,488 49,281 73,539
13 84,252 250,000 250,000 309,200 36,479 55,296 85,245
14 93,221 250,000 250,000 340,895 39,354 61,535 98,043
15 102,638 250,000 250,000 373,559 42,116 68,013 112,032
16 112,527 250,000 250,000 407,319 44,770 74,751 127,327
17 122,910 250,000 251,036 442,256 47,309 81,760 144,038
18 133,812 250,000 262,418 478,457 49,723 89,007 162,282
19 145,259 250,000 273,296 516,095 52,013 96,482 182,198
20 157,278 250,000 283,704 555,289 54,169 104,188 203,925
25 227,014 250,000 327,919 774,686 61,823 145,360 343,404
30 316,016 250,000 365,059 1,054,091 64,696 192,684 556,366
35 429,609 250,000 396,947 1,415,280 58,549 245,347 874,764
</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 $250,000 TOTAL SUM INSURED MALE, ISSUE AGE
45, FULLY UNDERWRITTEN NONSMOKER UNDERWRITING CLASS OPTION M DEATH BENEFIT
CASH VALUE ACCUMULATION TEST NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH
POLICY YEAR PLANNED PREMIUM: $4,530* USING MAXIMUM CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
---------------------------- --------------------------
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at ---------------------------- --------------------------
Year 5% annual interest 0% 6% 12% 0% 6% 12%
- ------- ------------------ -------- -------- -------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 4,757 $250,000 $250,000 $250,000 $ 1,375 $ 1,501 $ 1,627
2 9,751 250,000 250,000 250,000 3,545 3,935 4,343
3 14,995 250,000 250,000 250,000 5,599 6,392 7,253
4 20,501 250,000 250,000 250,000 7,533 8,871 10,379
5 26,283 250,000 250,000 250,000 9,340 11,361 13,733
6 32,353 250,000 250,000 250,000 11,014 13,859 17,338
7 38,727 250,000 250,000 250,000 12,537 16,345 21,202
8 45,420 250,000 250,000 250,000 13,894 18,807 25,343
9 52,448 250,000 250,000 250,000 15,069 21,224 29,778
10 59,827 250,000 250,000 250,000 16,039 23,574 34,524
11 67,575 250,000 250,000 250,000 17,363 26,440 40,233
12 75,710 250,000 250,000 250,000 18,455 29,241 46,388
13 84,252 250,000 250,000 250,000 19,306 31,971 53,047
14 93,221 250,000 250,000 250,000 19,903 34,615 60,268
15 102,638 250,000 250,000 250,000 20,228 37,155 68,121
16 112,527 250,000 250,000 250,000 20,251 39,564 76,677
17 122,910 250,000 250,000 263,804 19,938 41,806 85,919
18 133,812 250,000 250,000 282,027 19,240 43,836 95,657
19 145,259 250,000 250,000 299,928 18,101 45,601 105,884
20 157,278 250,000 250,000 317,486 16,464 47,042 116,594
25 227,014 ** 250,000 400,592 ** 47,243 177,575
30 316,016 ** 250,000 474,396 ** 24,468 250,394
35 429,609 ** ** 537,186 ** ** 332,027
</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 $250,000 TOTAL SUM INSURED MALE, ISSUE AGE
45, FULLY UNDERWRITTEN NONSMOKER UNDERWRITING CLASS OPTION A DEATH BENEFIT
GUIDELINE PREMIUM AND CASH VALUE CORRIDOR TEST NO GUARANTEED MINIMUM DEATH
BENEFIT AFTER TENTH POLICY YEAR PLANNED PREMIUM: $4,530* 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 $ 4,757 $250,000 $250,000 $ 250,000 $ 2,133 $ 2,283 $ 2,434
2 9,751 250,000 250,000 250,000 5,082 5,569 6,073
3 14,995 250,000 250,000 250,000 7,945 8,959 10,051
4 20,501 250,000 250,000 250,000 10,783 12,521 14,465
5 26,283 250,000 250,000 250,000 13,584 16,252 19,354
6 32,353 250,000 250,000 250,000 16,356 20,167 24,775
7 38,727 250,000 250,000 250,000 19,104 24,281 30,794
8 45,420 250,000 250,000 250,000 21,832 28,607 37,479
9 52,448 250,000 250,000 250,000 24,530 33,146 44,893
10 59,827 250,000 250,000 250,000 27,195 37,906 53,113
11 67,575 250,000 250,000 250,000 30,382 43,478 62,835
12 75,710 250,000 250,000 250,000 33,488 49,281 73,582
13 84,252 250,000 250,000 250,000 36,479 55,296 85,437
14 93,221 250,000 250,000 250,000 39,354 61,535 98,535
15 102,638 250,000 250,000 250,000 42,116 68,013 113,022
16 112,527 250,000 250,000 250,000 44,770 74,751 129,070
17 122,910 250,000 250,000 250,000 47,309 81,760 146,861
18 133,812 250,000 250,000 250,000 49,723 89,051 166,605
19 145,259 250,000 250,000 250,000 52,013 96,644 188,544
20 157,278 250,000 250,000 259,787 54,169 104,555 212,940
25 227,014 250,000 250,000 439,827 61,823 149,013 379,161
30 316,016 250,000 250,000 699,758 64,696 205,984 653,980
35 429,609 250,000 295,406 1,165,269 58,549 281,340 1,109,780
</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.
28
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE $250,000 TOTAL SUM INSURED MALE, ISSUE AGE
45, FULLY UNDERWRITTEN NONSMOKER UNDERWRITING CLASS OPTION A DEATH BENEFIT
GUIDELINE PREMIUM AND CASH VALUE CORRIDOR TEST NO GUARANTEED MINIMUM DEATH
BENEFIT AFTER TENTH POLICY YEAR PLANNED PREMIUM: $4,530* USING MAXIMUM
CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
---------------------------- --------------------------
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at ---------------------------- --------------------------
Year 5% annual interest 0% 6% 12% 0% 6% 12%
- ------- ------------------ -------- -------- -------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 4,757 $250,000 $250,000 $250,000 $ 1,375 $ 1,501 $ 1,627
2 9,751 250,000 250,000 250,000 3,545 3,935 4,343
3 14,995 250,000 250,000 250,000 5,599 6,392 7,253
4 20,501 250,000 250,000 250,000 7,533 8,871 10,379
5 26,283 250,000 250,000 250,000 9,340 11,361 13,733
6 32,353 250,000 250,000 250,000 11,014 13,859 17,338
7 38,727 250,000 250,000 250,000 12,537 16,345 21,202
8 45,420 250,000 250,000 250,000 13,894 18,807 25,343
9 52,448 250,000 250,000 250,000 15,069 21,224 29,778
10 59,827 250,000 250,000 250,000 16,039 23,574 34,524
11 67,575 250,000 250,000 250,000 17,363 26,440 40,233
12 75,710 250,000 250,000 250,000 18,455 29,241 46,388
13 84,252 250,000 250,000 250,000 19,306 31,971 53,047
14 93,221 250,000 250,000 250,000 19,903 34,615 60,268
15 102,638 250,000 250,000 250,000 20,228 37,155 68,121
16 112,527 250,000 250,000 250,000 20,251 39,564 76,677
17 122,910 250,000 250,000 250,000 19,938 41,806 86,018
18 133,812 250,000 250,000 250,000 19,240 43,836 96,240
19 145,259 250,000 250,000 250,000 18,101 45,601 107,454
20 157,278 250,000 250,000 250,000 16,464 47,042 119,801
25 227,014 ** 250,000 250,000 ** 47,243 206,501
30 316,016 ** 250,000 382,471 ** 24,468 357,450
35 429,609 ** ** 632,960 ** ** 602,819
</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.
29
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE $250,000 TOTAL SUM INSURED MALE, ISSUE AGE
45, FULLY UNDERWRITTEN NONSMOKER UNDERWRITING CLASS OPTION B DEATH BENEFIT
GUIDELINE PREMIUM AND CASH VALUE CORRIDOR TEST NO GUARANTEED MINIMUM DEATH
BENEFIT AFTER TENTH POLICY YEAR PLANNED PREMIUM: $4,530* 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 $ 4,757 $252,129 $252,279 $ 252,429 $ 2,129 $ 2,279 $ 2,429
2 9,751 255,067 255,552 256,055 5,067 5,552 6,055
3 14,995 257,912 258,921 260,007 7,912 8,921 10,007
4 20,501 260,724 262,452 264,384 10,724 12,452 14,384
5 26,283 263,495 266,142 269,219 13,495 16,142 19,219
6 32,353 266,229 270,004 274,568 16,229 20,004 24,568
7 38,727 268,934 274,054 280,493 18,934 24,054 30,493
8 45,420 271,614 278,303 287,060 21,614 28,303 37,060
9 52,448 274,258 282,752 294,326 24,258 32,752 44,326
10 59,827 276,862 287,403 302,361 26,862 37,403 52,361
11 67,575 279,978 292,845 311,850 29,978 42,845 61,850
12 75,710 282,999 298,487 322,293 32,999 48,487 72,293
13 84,252 285,882 304,291 333,747 35,882 54,291 83,747
14 93,221 288,624 310,264 346,315 38,624 60,264 96,315
15 102,638 291,226 316,411 360,116 41,226 66,411 110,116
16 112,527 293,692 322,743 375,284 43,692 72,743 125,284
17 122,910 296,010 329,255 391,953 46,010 79,255 141,953
18 133,812 298,167 335,942 410,267 48,167 85,942 160,267
19 145,259 300,161 342,805 430,398 50,161 92,805 180,398
20 157,278 301,977 349,838 452,524 51,977 99,838 202,524
25 227,014 306,867 386,013 599,333 56,867 136,013 349,333
30 316,016 305,221 424,574 835,522 55,221 174,574 585,522
35 429,609 291,894 459,823 1,213,240 41,894 209,823 963,240
</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 $250,000 TOTAL SUM INSURED MALE, ISSUE AGE
45, FULLY UNDERWRITTEN NONSMOKER UNDERWRITING CLASS OPTION B DEATH BENEFIT
GUIDELINE PREMIUM AND CASH VALUE CORRIDOR TEST NO GUARANTEED MINIMUM DEATH
BENEFIT AFTER TENTH POLICY YEAR PLANNED PREMIUM: $4,530* USING MAXIMUM
CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
---------------------------- --------------------------
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at ---------------------------- --------------------------
Year 5% annual interest 0% 6% 12% 0% 6% 12%
- ------- ------------------ -------- -------- -------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 4,757 $251,366 $251,491 $251,617 $ 1,366 $ 1,491 $ 1,617
2 9,751 253,515 253,901 254,305 3,515 3,901 4,305
3 14,995 255,535 256,319 257,169 5,535 6,319 7,169
4 20,501 257,422 258,738 260,221 7,422 8,738 10,221
5 26,283 259,167 261,146 263,468 9,167 11,146 13,468
6 32,353 260,763 263,534 266,922 10,763 13,534 16,922
7 38,727 262,190 265,879 270,580 12,190 15,879 20,580
8 45,420 263,433 268,161 274,446 13,433 18,161 24,446
9 52,448 264,472 270,353 278,517 14,472 20,353 28,517
10 59,827 265,284 272,426 282,788 15,284 22,426 32,788
11 67,575 266,425 274,950 287,880 16,425 24,950 37,880
12 75,710 267,302 277,332 293,242 17,302 27,332 43,242
13 84,252 267,909 279,557 298,890 17,909 29,557 48,890
14 93,221 268,233 281,599 304,835 18,233 31,599 54,835
15 102,638 268,257 283,428 311,087 18,257 33,428 61,087
16 112,527 267,951 285,000 317,643 17,951 35,000 67,643
17 122,910 267,283 286,265 324,493 17,283 36,265 74,493
18 133,812 266,209 287,159 331,618 16,209 37,159 81,618
19 145,259 264,679 287,607 338,987 14,679 37,607 88,987
20 157,278 262,645 287,534 346,566 12,645 37,534 96,566
25 227,014 ** 276,738 386,592 ** 26,738 136,592
30 316,016 ** ** 423,368 ** ** 173,368
35 429,609 ** ** 434,478 ** ** 184,478
</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>
ADDITIONAL INFORMATION
This section of the prospectus provides additional detailed information that
is not contained in the Basic Information section on pages 4 through 20.
<TABLE>
<CAPTION>
CONTENTS OF THIS SECTION BEGINNING ON PAGE
- ------------------------ -----------------
<S> <C>
Description of JHVLICO ...................... 33
How we support the policy and investment options 33
Procedures for issuance of a policy......... 34
Basic Sum Insured vs. Additional Sum Insured 35
Commencement of investment performance...... 36
How we process certain policy transactions.. 36
Effects of policy loans..................... 37
Additional information about how certain policy charges 38
work........................................
How we market the policies.................. 39
Tax considerations.......................... 40
Reports that you will receive............... 41
Voting privileges that you will have........ 42
Changes that JHVLICO can make as to your policy 42
Adjustments we make to death benefits....... 43
When we pay policy proceeds................. 43
Other details about exercising rights and paying benefits 43
Legal matters............................... 44
Registration statement filed with the SEC... 44
Accounting and actuarial experts............ 44
Financial statements of JHVLICO and the Account 44
List of Directors and Executive Officers of JHVLICO 45
</TABLE>
32
<PAGE>
DESCRIPTION OF JHVLICO
We are JHVLICO, a stock life insurance company chartered in 1979 under
Massachusetts law. We are authorized to transact a life insurance and annuity
business in all states other than New York and in the District of Columbia. We
began selling variable life insurance policies in 1980.
We are regulated and supervised by the Massachusetts Commissioner of
Insurance, who periodically examines our affairs. We also are subject to the
applicable insurance laws and regulations of all jurisdictions in which we are
authorized to do business. We are required to submit annual statements of our
operations, including financial statements, to the insurance departments of the
various jurisdictions in which we do business for purposes of determining
solvency and compliance with local insurance laws and regulations. The
regulation to which we are subject, however, does not provide a guarantee as to
such matters.
We are a wholly-owned subsidiary of John Hancock 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
33
<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 $100,000. At the time of
issue, the insured person must have an attained age of at least 20 and no more
than 85. All insured persons must meet certain health and other insurance risk
criteria called "underwriting standards".
Policies issued in Montana or in connection with certain employee plans will
not directly reflect the sex of the insured person in either the premium rates
or the charges or values under the policy. The illustrations set forth in this
prospectus are sex-distinct and, therefore, may not reflect the rates, charges,
or values that would apply to such policies.
Minimum Initial Premium
The Minimum Initial Premium must be received by us at our Life Servicing
Office in order for the policy to be in full force and effect. There is no grace
period for the payment of the Minimum Initial Premium. The Minimum Initial
Premium is determined by us based on the characteristics of the insured person,
the Total Sum Insured at issue, and the policy options you have selected.
Commencement of insurance coverage
After you apply for a policy, it can sometimes take up to several weeks for us
to gather and evaluate all the information we need to decide whether to issue a
policy to you and, if so, what the insured person's rate class should be. After
we approve an application for a policy and assign an appropriate insurance rate
class, we will prepare the policy for delivery. We will not pay a death benefit
under a policy unless the policy is in effect when the insured person dies
(except for the circumstances described under "Temporary insurance coverage
prior to policy delivery" on page 35).
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.
34
<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 the insured person, we can
designate a date of issue that is up to 60 days earlier than the date that would
otherwise apply. This is referred to as "backdating" and is allowed under state
insurance laws. Backdating can also be used in certain corporate-owned life
insurance cases involving multiple policies to retain a common monthly deduction
date.
The conditions for coverage described above under "Commencement of insurance
coverage" must still be satisfied, but in a backdating situation the policy
always takes effect retroactively. Backdating results in a lower insurance
charge (because of the insured person's younger age at issue), but monthly
charges begin earlier than would otherwise be the case. Those monthly charges
will be deducted as soon as we receive premiums sufficient to pay them.
Temporary coverage prior to policy delivery
If a specified amount of premium is paid with the application for a policy and
other conditions are met, we will provide temporary term life insurance coverage
on the insured person for a period prior to the time coverage under the policy
takes effect. Such temporary term coverage will be subject to the terms and
conditions described in the application for the policy, including limits on
amount and duration of coverage.
Monthly deduction dates
Each charge that we deduct monthly is assessed against your account value or
the subaccounts at the close of business on the date of issue and at the close
of the first business day in each subsequent policy month.
BASIC SUM INSURED VS. ADDITIONAL SUM INSURED
As noted earlier in this prospectus, you should consider a number of factors
in determining whether to elect coverage in the form of Basic Sum Insured or in
the form of Additional Sum Insured.
The amount of sales charge deducted from premiums and from account value and
the amount of compensation paid to the selling insurance agent will be less if
coverage is included as Additional Sum Insured, rather than as Basic Sum
Insured. On the other hand, the amount of any Additional Sum Insured is not
included in the guaranteed minimum death benefit feature. Therefore, if the
policy's surrender value is insufficient to pay the monthly charges as they fall
due (including the charges for the Additional Sum Insured), the Additional Sum
Insured coverage will lapse, even if the Basic Sum Insured stays in effect
pursuant to the guaranteed minimum death benefit feature.
Generally, you will incur lower sales charges and have more flexible coverage
with respect to the Additional Sum Insured than with respect to the Basic Sum
Insured. If this is your priority, you may wish to maximize the proportion of
the Additional Sum Insured. However, if your priority is to take advantage of
the guaranteed minimum death benefit feature, the proportion of the Policy's
Total Sum Insured that is guaranteed can be increased by taking out more
coverage as Basic Sum Insured at the time of policy issuance.
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
35
<PAGE>
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 the insured person's continued insurability only after we have
received such evidence and found it satisfactory to us.
(4) If we receive any premium payment that 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 a variable investment option will be effective at the end of the business
day in which we receive at our Life Servicing Office notice satisfactory to us.
If received on or before the policy anniversary, requests for transfer out of
the fixed investment option will be processed on the policy anniversary (or the
next business day if the policy anniversary does not occur on a business day).
If received after the policy anniversary, such a request will be processed
36
<PAGE>
at the end of the business day in which we receive the request at our Life
Servicing Office. If you request a transfer out of the fixed investment option
61 days or more prior to the policy anniversary, we will not process that
portion of the reallocation, and your confirmation statement will not reflect a
transfer out of the fixed investment option as to such request. Currently, there
is no minimum amount limit on transfers into the fixed investment option, but we
reserve the right to impose such a limit in the future. We have the right to
defer transfers of amounts out of the fixed investment option for up to six
months.
Telephone transfers and policy loans
Once you have completed a written authorization, you may request a transfer or
policy loan by telephone or by fax. If the fax request option becomes
unavailable, another means of telecommunication will be substituted.
If you authorize telephone transactions, you will be liable for any loss,
expense or cost arising out of any unauthorized or fraudulent telephone
instructions which we reasonably believe to be genuine, unless such loss,
expense or cost is the result of our mistake or negligence. We employ procedures
which provide safeguards against the execution of unauthorized transactions, and
which are reasonably designed to confirm that instructions received by telephone
are genuine. These procedures include requiring personal identification, tape
recording calls, and providing written confirmation to the owner. If we do not
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine, we may be liable for any loss due to unauthorized or
fraudulent instructions.
Effective date of other policy transactions
The following transactions take effect on the 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
. Any other change of death benefit option, when and if permitted by our
administrative rules (see "Change of death benefit option" on page 17)
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 such request or repayment.
EFFECTS OF POLICY LOANS
The account value, the surrender value, and any death benefit above the Total
Sum Insured are permanently affected by any loan, whether or not it is repaid in
whole or in part. This is because the amount of the loan is deducted from the
investment options and placed in a special loan account. The investment options
and the special loan account will generally have different rates of investment
return.
The amount of the outstanding loan (which includes accrued and unpaid
interest) is subtracted from the amount otherwise payable when the policy
proceeds become payable.
Whenever the outstanding loan equals or exceeds the account value, the policy
will terminate 31 days after we have mailed notice of termination to you (and to
any assignee of record at such assignee's last known address) specifying the
minimum amount that must be paid to avoid termination, unless a repayment of at
least the amount specified is made within that period.
37
<PAGE>
ADDITIONAL INFORMATION ABOUT HOW CERTAIN POLICY CHARGES WORK
Sales expenses and related charges
The sales charges help to compensate us for the cost of selling our policies.
(See "What charges will JHVLICO deduct from my investment in the policy?" in the
Basic Information section of this prospectus.) The amount of the charges in any
policy year does not specifically correspond to sales expenses for that year. We
expect to recover our total sales expenses over the life of the policies. To the
extent that the sales charges do not cover total sales expenses, the sales
expenses may be recovered from other sources, including gains from the charge
for mortality and expense risks and other gains with respect to the policies, or
from our general assets. (See "How we market the policies" on page 39.)
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 $12,000. 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
$8,750. 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 insured person dies during the policy grace period, the amount of
unpaid monthly charges is deducted from the death benefit otherwise payable.
Reduced charges for eligible classes
The charges otherwise applicable (including the M&E charge) may be reduced
with respect to policies issued to a class of associated individuals or to a
trustee, employer or similar entity where we anticipate that the sales to the
members of the class will result in lower than normal sales or administrative
expenses, lower taxes or lower risks to us. We will make these reductions in
accordance with our rules in effect at the time of the application for a policy.
The factors we consider in determining the eligibility of a particular group for
reduced charges, and the level of the reduction, are as follows: the nature of
the association and its organizational framework; the method by which sales will
be made to the members of the class; the facility with which premiums will be
collected from the associated individuals and the association's capabilities
with respect to administrative tasks; the anticipated lapse and surrender rates
of the policies; the size of the class of associated individuals and the number
of years it has been in existence; the aggregate amount of premiums paid; and
any other such circumstances which result in a reduction in sales or
administrative
38
<PAGE>
expenses, lower taxes or lower risks. Any reduction in charges will be
reasonable and will apply uniformly to all prospective policy purchasers in the
class and will not unfairly discriminate against any owner.
HOW WE MARKET THE POLICIES
Signator Investors, Inc. ("Signator"), an indirect wholly-owned subsidiary of
John Hancock located at 197 Clarendon Street, Boston, MA 02117, is registered as
a broker-dealer under the Securities Exchange Act of 1934 and is a member of the
National Association of Securities Dealers, Inc. and the Securities Investor
Protection Corporation. Signator acts as principal underwriter and principal
distributor of the policies pursuant to a sales agreement among John Hancock,
Signator, JHVLICO, and the Account. Signator also serves as principal
underwriter for John Hancock Variable Annuity Accounts U, I and V, John Hancock
Mutual Variable Life Insurance Account UV and John Hancock Variable Life
Accounts U and V, all of which are registered under the 1940 Act. Signator is
also the principal underwriter for John Hancock Variable Series Trust I.
Applications for policies are solicited by agents who are licensed by state
insurance authorities to sell JHVLICO's policies and who are also registered
representatives ("representatives") of Signator or other broker-dealer firms, as
discussed below. John Hancock (on behalf of JHVLICO) performs insurance
underwriting and determines whether to accept or reject the application for a
policy and each insured person's risk classification. JHVLICO will make the
appropriate refund if a policy ultimately is not issued or is returned under the
"free look" provision. Officers and employees of John Hancock and JHVLICO are
covered by a blanket bond by a commercial carrier in the amount of $25 million.
Signator's representatives are compensated for sales of the policies on a
commission and service fee basis by Signator, and JHVLICO reimburses Signator
for such compensation and for other direct and indirect expenses (including
agency expense allowances, general agent, district manager and supervisor's
compensation, agent's training allowances, deferred compensation and insurance
benefits of agents, general agents, district managers and supervisors, agency
office clerical expenses and advertising) actually incurred in connection with
the marketing and sale of the policies.
The maximum commission payable to a Signator representative for selling a
policy is 65% of the Target Premium paid in the first policy year, 10% of the
Target Premium paid in the second through tenth policy years, and 3% of the
Target Premium paid in each policy year thereafter. The maximum commission on
any premium paid in any policy year in excess of the Target Premium is 3%.
Representatives with less than four years of service with Signator and those
compensated on salary plus bonus or level commission programs may be paid on a
different basis. Representatives who meet certain productivity and persistency
standards with respect to the sale of policies issued by JHVLICO and John
Hancock will be eligible for additional compensation.
The policies are also sold through other registered broker-dealers that have
entered into selling agreements with Signator and whose representatives are
authorized by applicable law to sell variable life insurance policies. The
commissions which will be paid by such broker-dealers to their representatives
will be in accordance with their established rules. The commission rates may be
more or less than those set forth above for Signator's representatives. In
addition, their qualified registered representatives may be reimbursed by the
broker-dealers under expense reimbursement allowance programs in any year for
approved voucherable expenses incurred. Signator will compensate the
broker-dealers as provided in the selling agreements, and JHVLICO will reimburse
Signator for such amounts and for certain other direct expenses in connection
with marketing the policies through other broker-dealers.
39
<PAGE>
Representatives of Signator and the other broker-dealers mentioned above may
also earn "credits" toward qualification for attendance at certain business
meetings sponsored by John Hancock.
The offering of the policies is intended to be continuous, but neither JHVLICO
nor Signator is obligated to sell any particular amount of policies.
TAX CONSIDERATIONS
This description of federal income tax consequences is only a brief summary
and is not intended as tax advice. Tax consequences will vary based on your own
particular circumstances, and for further information you should consult a
qualified tax advisor. Federal, state and local tax laws, regulations and
interpretations can change from time to time. As a result, the tax consequences
to you and the beneficiary may be altered, in some cases retroactively.
Policy proceeds
We believe the policy will receive the same federal income and estate tax
treatment as fixed benefit life insurance policies. Section 7702 of the Internal
Revenue Code (the "Code") defines life insurance for federal tax purposes. If
certain standards are met at issue and over the life of the policy, the policy
will satisfy that definition. We will monitor compliance with these standards.
If the policy complies with the definition of life insurance, we believe the
death benefit under the policy will be excludable from the beneficiary's gross
income under the Code. In addition, increases in account value as a result of
interest or investment experience will not be subject to federal income tax
unless and until values are actually received through distributions.
Distributions for tax purposes can include amounts received upon surrender or
partial withdrawals. You may also be deemed to have received a distribution for
tax purposes if you assign all or part of your policy rights or change your
policy's ownership.
In general, the owner will be taxed on the amount of distributions that exceed
the premiums paid under the policy. But under certain circumstances within the
first 15 policy years, the owner may be taxed on a distribution even if total
withdrawals do not exceed total premiums paid. Any taxable distribution will be
ordinary income to the owner (rather than capital gains).
We also believe that, except as noted below, loans received under the policy
will be treated as indebtedness of an owner and that no part of any loan will
constitute income to the owner. However, the amount of any outstanding loan that
was not previously considered income (as discussed below) will be treated as if
it had been distributed to the owner if the policy terminates for any reason.
It is possible that, despite our monitoring, a policy might fail to qualify as
life insurance under Section 7702 of the Code. This could happen, for example,
if we inadvertently failed to return to you any premium payments that were in
excess of permitted amounts, or if a 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,
40
<PAGE>
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 591/2.
Furthermore, any time there is a "material change" in a policy (such as an
increase in Additional Sum Insured, the addition of certain other policy
benefits after issue, a change in death benefit option, or reinstatement of a
lapsed policy), the policy will have a new 7-pay limit as if it were a
newly-issued policy. If a prescribed portion of the policy's then account value,
plus all other premiums paid within 7 years after the material change, at any
time exceed the new 7-pay limit, the policy will become a modified endowment.
Moreover, if benefits under a policy are reduced (such as a reduction in the
Total Sum Insured or death benefit or the reduction or cancellation of certain
rider benefits) during the 7 years in which a 7-pay test is being applied, the
7-pay limit will be recalculated based on the reduced benefits. If the premiums
paid to date are greater than the recalculated 7-pay limit, the policy will
become a modified endowment.
All modified endowments issued by the same insurer (or its affiliates) to the
owner during any calendar year generally will be treated as one contract for the
purpose of applying the modified endowment rules. A policy received in exchange
for a modified endowment will itself also be a modified endowment. You should
consult your tax advisor if you have questions regarding the possible impact of
the 7-pay limit on your policy.
Corporate and H.R. 10 plans
The policy may be acquired in connection with the funding of retirement plans
satisfying the qualification requirements of Section 401 of the Code. If so, the
Code provisions relating to such plans and life insurance benefits thereunder
should be carefully scrutinized. We are not responsible for compliance with the
terms of any such plan or with the requirements of applicable provisions of the
Code.
REPORTS THAT YOU WILL RECEIVE
At least annually, we will send you a statement setting forth the following
information as of the end of the most recent reporting period: the amount of the
death benefit, the Basic Sum Insured and the Additional Sum Insured, the account
value, the portion of the account value in each investment
41
<PAGE>
option, the surrender value, premiums received and charges deducted from
premiums since the last report, and any outstanding policy loan (and interest
charged for the preceding policy year). Moreover, you also will receive
confirmations of premium payments, transfers among investment options, policy
loans, partial withdrawals and certain other policy transactions.
Semiannually we will send you a report containing the financial statements of
each 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 Trusts. We will vote the shares of each of the
funds of the Trusts which are deemed attributable to variable life insurance
policies at regular and special meetings of the Trusts' shareholders in
accordance with instructions received from owners of such policies. Shares of
the Trusts 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 Trust's meeting. Owners of
policies may give instructions regarding the election of the Board of Trustees
or Board of Directors 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 a 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
42
<PAGE>
and is in compliance with any changes in Federal or state tax laws.
In our policies, we reserve the right to make certain changes if they would
serve the best interests of policy owners or would be appropriate in carrying
out the purposes of the policies. Such changes include the following:
. Changes necessary to comply with or obtain or continue exemptions under
the federal securities laws
. Combining or removing investment options
. Changes in the form of organization of any separate account
Any such changes will be made only to the extent permitted by applicable laws
and only in the manner permitted by such laws. When required by law, we will
obtain your approval of the changes and the approval of any appropriate
regulatory authority.
ADJUSTMENTS WE MAKE TO DEATH BENEFITS
If the insured person commits suicide within certain time periods, the amount
of death benefit we pay will be limited as described in the policy. Also, if an
application misstated the age or gender of the insured person, we will adjust
the amount of any death benefit as described in the policy.
WHEN WE PAY POLICY PROCEEDS
General
We will pay any death benefit, withdrawal, surrender value or loan within 7
days after we receive the last required form or request (and, with respect to
the death benefit, any other documentation that may be required). If we don't
have information about the desired manner of payment within 7 days after the
date we receive notification of the insured person's death, we will pay the
proceeds as a single sum, normally within 7 days thereafter.
Delay to challenge coverage
We may challenge the validity of your insurance policy based on any material
misstatements made to us in the application for the policy. We cannot make such
a challenge, however, beyond certain time limits that are specified in the
policy.
Delay for check clearance
We reserve the right to defer payment of that portion of your account value
that is attributable to a premium payment made by check for a reasonable period
of time (not to exceed 15 days) to allow the check to clear the banking system.
Delay of separate account proceeds
We reserve the right to defer payment of any death benefit, loan or other
distribution that is derived from a variable investment option if (a) the New
York Stock Exchange is closed (other than customary weekend and holiday
closings) or trading on the New York Stock Exchange is restricted; (b) an
emergency exists, as a result of which disposal of securities is not reasonably
practicable or it is not reasonably practicable to fairly determine the account
value; or (c) the SEC by order permits the delay for the protection of owners.
Transfers and allocations of account value among the investment options may also
be postponed under these circumstances. If we need to defer calculation of
separate account values for any of the foregoing reasons, all delayed
transactions will be processed at the next values that we do compute.
OTHER DETAILS ABOUT EXERCISING RIGHTS AND PAYING BENEFITS
Joint ownership
If more than one person owns a policy, all owners must join in most requests
to exercise rights under the policy.
43
<PAGE>
Assigning your policy
You may assign your rights in the policy to someone else as collateral for a
loan or for some other reason. Assignments do not require the consent of any
revocable beneficiary. A copy of the assignment must be forwarded to us. We are
not responsible for any payment we make or any action we take before we receive
notice of the assignment in good order. Nor are we responsible for the validity
of the assignment. An absolute assignment is a change of ownership. All
collateral assignees of record must consent to any full surrender, partial
withdrawal or loan from the policy.
Your beneficiary
You name your beneficiary when you apply for the policy. The beneficiary is
entitled to the proceeds we pay following the insured person's death. You may
change the beneficiary during the insured person's lifetime. Such a change
requires the consent of any irrevocable named beneficiary. A new beneficiary
designation is effective as of the date you sign it, but will not affect any
payments we make before we receive it. If no beneficiary is living when the
insured person dies, we will pay the insurance proceeds to the owner or the
owner's estate.
LEGAL MATTERS
The legal validity of the policies described in this prospectus has been
passed on by Ronald J. Bocage, Vice President and Counsel for JHVLICO. Messrs.
Freedman, Levy, Kroll & Simonds, Washington, D.C., have advised us on certain
Federal securities law matters in connection with the policies.
REGISTRATION STATEMENT FILED WITH THE SEC
This prospectus omits certain information contained in the Registration
Statement which has been filed with the SEC. More details may be obtained from
the SEC upon payment of the prescribed fee.
ACCOUNTING AND ACTUARIAL EXPERTS
The financial statements of JHVLICO included in this prospectus have been
audited by Ernst & Young LLP, independent auditors, for the periods indicated in
their report thereon which appears elsewhere herein and has been included in
reliance on their report given on their authority as experts in accounting and
auditing. Actuarial matters included in this prospectus have been examined by
Deborah A. Poppel, F.S.A., an Actuary of JHVLICO 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.
44
<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 Principal Occupations
- ----------------------- ---------------------
Officers
- --------
<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.
45
<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
46
<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.
47
<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>
INCOME
Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . $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.
48
<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>
Cash flows from operating activities:
Insurance premiums . . . . . . . . . . . . . .
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
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.
49
<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
50
<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.
51
<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
52
<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 41/2% for policies issued on or thereafter. Reserves for
single premium policies are determined by the net single premium method using
the 1958 CSO mortality table, with an assumed interest rate of 4%. Reserves for
universal life policies issued prior to 1985 are equal to the gross account
value which at all times exceeds minimum statutory requirements. Reserves for
universal life policies issued from 1985 through 1988 are maintained at the
greater of the Commissioner's Reserve Valuation Method (CRVM) using the 1958 CSO
mortality table, with 41/2% interest or the cash surrender value. Reserves for
universal life policies issued after 1988 and for flexible variable policies are
maintained using the greater of the cash surrender value or the CRVM method with
the 1980 CSO mortality table and 51/2% interest for policies issued from 1988
through 1992; 5% interest for policies issued in 1993 and 1994; and 41/2%
interest for policies issued in 1995 through 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
53
<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.
54
<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>
<S> <C> <C>
1999 1998
------ ------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
(IN MILLIONS)
</TABLE>
<TABLE>
<CAPTION>
<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>
55
<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>
<S> <C> <C>
1999 1998
------ ------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
(IN MILLIONS)
</TABLE>
<TABLE>
<CAPTION>
<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>
<S> <C> <C>
1999 1998
------ ------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
(IN MILLIONS)
</TABLE>
<TABLE>
<CAPTION>
<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>
56
<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.
57
<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>
<S> <C> <C> <C> <C>
-------------- -------------- --------------- ---------
(IN MILLIONS)
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 . . . . .
======== ===== ====== ========
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 . . . . . 15.1
======== ===== ====== ========
</TABLE>
58
<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>
<S> <C> <C>
FAIR
VALUE VALUE
-------- ---------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
(IN MILLIONS)
</TABLE>
<TABLE>
<CAPTION>
<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
======== =========
</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.
59
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
GEOGRAPHIC
PROPERTY TYPE CONCENTRATION
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.
60
<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>
<S> <C> <C> <C> <S> <C> <C>
NUMBER OF CONTRACTS/ ASSETS (LIABILITIES)
------------------
NOTIONAL AMOUNTS 1999 1998
FAIR VALUE
---------
------- ------- --------- --------- ---------
(IN MILLIONS)
Futures contracts to $ (0.5)
sell securities 362.0 947.0 $0.6 $0.6 $(0.5)
Interest rate swap (17.7)
agreements $965.0 $365.0 -- 11.5 --
Interest rate cap
agreements 239.4 89.4 5.6 5.6 3.1
Currency rate swap (3.3)
agreements 15.8 15.8 -- (1.6) --
</TABLE>
61
<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>
<S> <C> <C>
DECEMBER 31, 1999 PERCENT
---------------- ------
(IN MILLIONS)
</TABLE>
<TABLE>
<CAPTION>
<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 287.1 10.7
at book value (without adjustment) . . . . .
Not subject to discretionary withdrawal--general
account. . . . . . . . . . . . . . . . . . . . 15.4 0.6
--------
Total annuity reserves and deposit liabilities $2,673.4 100.0%
========
</TABLE>
62
<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.
63
<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>
<S> <C>
DECEMBER 31,
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
--------------- ---------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
---------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
(IN MILLIONS)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
ASSETS
Bonds--Note 6. . . . .
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.
64
<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.
65
<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
66
<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 Varidable
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.
67
<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> <C> <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> <C> <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.
68
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1999
<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.
69
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SMALL/ MID
CAP CORE HIGH
BOND SUBACCOUNT YIELD
INDEX ---------- BOND
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.
70
<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
(loss) . . . . . . . 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 . 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.
71
<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
(loss) . . . . . . . 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 . 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 . 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 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.
72
<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.
73
<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.
74
<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.
75
<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).
76
<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.
77
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
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.
78
<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.
79
<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 $ 96,407,275 $ 47,996,192
============ =========== =========== ============= ============ ============
</TABLE>
See accompanying notes.
80
<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 27,490,588 12,911,228
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.
81
<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
-----------------------------------------------------
1999 1998 1997
------------------------- ------------- ------------
<S> <C> <C> <C>
Increase (decrease) in
net assets from
operations:
Net investment income $ 5,503,450 $ 1,211,729 $ 378,697
Net realized gains
(losses). . . . . . 7,681,081 691,270 901,978
Net unrealized
appreciation
(depreciation)
during the period . 4,678,509 6,098,919 392,256
------------------------ ------------ -----------
Net increase
(decrease) in net
assets resulting from
operations . . . . . 17,863,040 8,001,918 1,672,931
From policyholder
transactions:
Net premiums from
policyholders . . . 225,994,914 60,690,933 23,412,687
Net benefits to
policyholders . . . (147,909,470) (31,166,123) (9,622,006)
------------------------ ------------ -----------
Net increase in net
assets resulting from
policyholder
transactions . . . . 78,085,444 29,524,810 13,790,681
------------------------ ------------ -----------
Net increase in net
assets . . . . . . . 95,948,484 37,526,728 15,463,612
Net assets at
beginning of period 53,964,647 16,437,919 974,307
------------------------ ------------ -----------
Net assets at end of
period . . . . . . . $ 149,913,131 $ 53,964,647 $16,437,919
======================== ============ ===========
<CAPTION>
GLOBAL BOND SUBACCOUNT
--------------------------------------------------
1999 1998 1997
------------------------ ------------ -------------
<S> <C> <C> <C>
Increase (decrease) in
net assets from
operations:
Net investment income $ 424,767 $ 283,651 $ 71,030
Net realized gains (204,675) 81,659 8,335
(losses). . . . . .
Net unrealized
appreciation (433,526) 43,608 (11,727)
(depreciation) ----------------------- ----------- ----------
during the period .
Net increase (213,434) 408,918 67,638
(decrease) in net
assets resulting from
operations . . . . .
From policyholder
transactions:
Net premiums from 11,387,398 9,258,713 1,828,179
policyholders . . .
Net benefits to
policyholders . . . (10,615,019) (3,008,341) (534,164)
----------------------- ----------- ----------
Net increase in net
assets resulting from 772,379 6,250,372 1,294,015
policyholder ----------------------- ----------- ----------
transactions . . . .
Net increase in net 558,945 6,659,290 1,361,653
assets . . . . . . .
Net assets at
beginning of period 8,279,571 1,620,281 258,628
----------------------- ----------- ----------
Net assets at end of
period . . . . . . . $ 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.
82
<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
SUBACCOUNT
--------------------------------------------------------------------
1999 1998 1997
----------------------------------------- ------------ ------------
<S> <C> <C> <C>
Increase (decrease) in
net assets from
operations:
Net investment income $ 449,994 $ 9,897 $ 118,150
Net realized gains
(losses). . . . . . 624,068 (445,752) 614,358
Net unrealized
appreciation
(depreciation)
during the period . 3,431,408 432,064 (368,570)
---------------------------------------- ----------- -----------
Net increase
(decrease) in net
assets resulting from
operations . . . . . 4,505,470 (3,791) 363,938
From policyholder
transactions:
Net premiums from
policyholders . . . 25,135,447 13,982,031 10,030,418
Net benefits to
policyholders . . . (22,331,613) (9,695,520) (5,969,436)
---------------------------------------- ----------- -----------
Net increase in net
assets resulting from
policyholder
transactions . . . . 2,803,834 4,286,511 4,060,982
---------------------------------------- ----------- -----------
Net increase in net
assets . . . . . . . 7,309,304 4,282,720 4,424,920
Net assets at
beginning of period 9,675,718 5,392,998 968,078
---------------------------------------- ----------- -----------
Net assets at end of
period . . . . . . . $ 16,985,022 $ 9,675,718 $ 5,392,998
======================================== =========== ===========
<CAPTION>
ENHANCED U.S.
EQUITY SUBACCOUNT
---------------------------------------------------------
1999 1998 1997*
-------------------------------- ------------ ------------
<S> <C> <C> <C>
Increase (decrease) in
net assets from
operations:
Net investment income $ 518,137 $ 68,233 $ 14,857
Net realized gains 264,436 87,723 4,177
(losses). . . . . .
Net unrealized
appreciation 151,562 89,677 6,844
(depreciation) ------------------------------- ----------- ---------
during the period .
Net increase 934,135 245,633 25,878
(decrease) in net
assets resulting from
operations . . . . .
From policyholder
transactions:
Net premiums from 6,480,741 3,031,309 475,503
policyholders . . .
Net benefits to
policyholders . . . (3,151,279) (1,299,530) (4,176)
------------------------------- ----------- ---------
Net increase in net
assets resulting from 3,329,462 1,731,779 471,327
policyholder ------------------------------- ----------- ---------
transactions . . . .
Net increase in net 4,263,597 1,977,412 497,205
assets . . . . . . .
Net assets at
beginning of period 2,474,617 497,205 0
------------------------------- ----------- ---------
Net assets at end of
period . . . . . . . $ 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) (2,613,505) (2,191,135) (2,358,694) (124,467)
------------ ----------- ----------- ----------- ----------- ----------
Net increase in net assets resulting from
policyholder 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.
83
<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.
84
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
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.
85
<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.
86
<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>
87
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Purchases, including reinvestment of dividend distributions, and proceeds from
sales of shares in the Portfolios of the Fund and of M Fund 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>
88
<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>
89
<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>
90
<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>
91
<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 . . . . 15,710 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>
92
<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>
93
<PAGE>
ALPHABETICAL INDEX OF KEY WORDS AND PHRASES
This index should help you locate more information about many of the important
concepts in this prospectus.
<TABLE>
<CAPTION>
KEY WORD OR PHRASE PAGE KEY WORD OR PHRASE PAGE
<S> <C> <C> <C>
Account . . . . . . . 33 monthly deduction date.....................30
account value . . . . 8 mortality and expense risk charge..........10
Additional Sum Insured 15 optional benefits..........................10
attained age. . . . . 9 options for death benefit..................14
Basic Sum Insured . . 15 owner.......................................5
beneficiary . . . . . 44 partial withdrawal.........................13
business day. . . . . 34 partial withdrawal charge..................10
changing Option A or B 17 payment options............................16
changing the Total Sum Planned Premium.............................6
Insured . . . . . . 16 policy anniversary.........................30
charges . . . . . . . 9 policy year................................30
Code. . . . . . . . . 40 premium; premium payment....................5
cost of insurance prospectus..................................3
rates. . . . . . . . 9 receive; receipt...........................19
date of issue . . . . 35 reinstate; reinstatement....................7
death benefit . . . . 5 sales charges...............................9
deductions. . . . . . 9 SEC.........................................2
enhanced cash value Separate Account...........................28
rider. . . . . . . . 16 Servicing Office............................2
expenses of the Trusts 10 special loan account.......................14
fixed investment subaccount.................................28
option . . . . . . . 34 surrender..................................13
full surrender. . . . 13 surrender value............................13
fund. . . . . . . . . 2 Target Premium..............................9
grace period. . . . . 7 tax considerations.........................35
guaranteed minimum telephone transfers........................19
death benefit . . . 7 Total Sum Insured..........................14
Guaranteed Minimum transfers of account value.................12
Death Benefit Premium 7 Trust.......................................2
insurance charge. . . 9 variable investment options.................1
insured person. . . . 5 we; us.....................................28
investment options. . 1 withdrawal.................................13
JHVLICO . . . . . . . 33 withdrawal charges.........................10
lapse . . . . . . . . 7 you; your...................................5
loan. . . . . . . . . 14
loan interest . . . . 14
maximum premiums. . . 6
Minimum Initial
Premium. . . . . . . 34
minimum insurance
amount . . . . . . . 16
minimum premiums. . . 5
modified endowment
contract . . . . . . 41
</TABLE>
94
<PAGE>
PROSPECTUS DATED MAY 1, 2000
MAJESTIC VARIABLE UNIVERSAL LIFE 98
a flexible premium variable life 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>
VARIABLE INVESTMENT OPTION MANAGED BY
- -------------------------- ----------
- ------------------------------------------------------------------------------------------------------------------
<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.
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.
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.
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.
Templeton International Securities. . . . . . . . . . . . Templeton Investment Counsel, Inc.
International Equity Index . . . . . . . . . . . . . . . . Independence International Associates, Inc.
International Opportunities . . . . . . . . . . . . . . . . Rowe Price-Fleming International, Inc.
Morgan Stanley Dean Witter Investment
Emerging Markets Equity . . . . . . . . . . . . . . . . . Management, Inc.
Short-Term Bond . . . . . Independence Investment Associates, Inc.
Bond Index . . . . . . . . Mellon Bond Associates, LLP
Active Bond . . . . . . . . . . . . . . . . . . . . . . . John Hancock Advisers, Inc.
Global Bond . . . . . . . . . . . . . . . . . . . . . . . J.P. Morgan Investment Management, Inc.
High Yield Bond . . . . . Wellington Management Company, LLP
Money Market. . . . . . . John Hancock Life Insurance Company
Brandes International Equity. . . . . . . . . . . . . . . Brandes Investment Partners, L.P.
Turner Core Growth. . . . Turner Investment Partners, Inc.
Frontier Capital Appreciation. . . . . . . . . . . . . . . Frontier Capital Management Company, LLC
Clifton Enhanced U.S. Equity. . . . . . . . . . . . . . . The Clifton Group
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
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 MFS
Variable Insurance Trust, and the M Fund, Inc. (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
-----------------------------
Express Delivery U.S. Mail
---------------- ---------
529 Main Street (X-4) P.O. Box 111
Charlestown, MA 02129 Boston, MA 02117
Phone: 1-800-521-1234
Fax: 1-617-572-6956
2
<PAGE>
GUIDE TO THIS PROSPECTUS
This prospectus contains information that you should know before you buy a
policy or exercise any of your rights under the policy. However, please keep in
mind that this is a prospectus - - it is not the policy. The prospectus
---
simplifies many policy provisions to better communicate the policy's essential
features. Your rights and obligations under the policy will be determined by the
language of the policy itself. When you receive your policy, read it carefully.
This prospectus is arranged in the following way:
. The section which follows is called "Basic Information". It is in a
question and answer format. We suggest you read the Basic Information
section before reading any other section of the prospectus.
. Behind the Basic Information section are illustrations of
hypothetical policy benefits that help clarify how the policy works.
These start on page 21.
. Behind the illustrations is a section called "Additional Information"
that gives more details about the policy. It generally does not
---
repeat information that is in the Basic Information section. A table
of contents for the Additional Information section appears on page
32.
. Behind the Additional Information section are the financial
statements for JHVLICO and Separate Account S. These start on page
46.
. Finally, there is an Alphabetical Index of Key Words and Phrases at
the back of the prospectus on page 94.
After the Alphabetical Index of Key Words and Phrases, this prospectus ends and
the prospectuses for the Trusts begin.
* * * * * * * * * * * *
3
<PAGE>
BASIC INFORMATION
This part of the prospectus provides answers to commonly asked questions about
the policy. Here are the page numbers where the questions and answers appear:
<TABLE>
<CAPTION>
<S> <C>
Question Beginning on page
- --------
.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?. . . . 6
.How will the value of my investment in the policy change 8
over time?. . . . . . . . . . . . . . . . . . . .
.What charges will JHVLICO deduct from my investment in 9
the policy?. . . . . . . . . . . . . . . . . . .
.What charges will the Trusts deduct from my investment in 10
the policy?. . . . . . . . . . . . . . . . . . .
.What other charges could JHVLICO impose in the future? 12
.How can I change my policy's investment allocations? 13
.How can I access my investment in the policy?. . 13
.How much will JHVLICO pay when the insured person dies? 15
.How can I change my policy's insurance coverage? 16
.Can I cancel my policy after it's issued?. . . . 17
.Can I choose the form in which JHVLICO pays out policy 17
proceeds?. . . . . . . . . . . . . . . . . . . .
.To what extent can JHVLICO vary the terms and conditions
of its policies in particular cases?. . . . . . 18
.How will my policy be treated for income tax purposes? 19
.How do I communicate with JHVLICO?. . . . . . . 19
</TABLE>
4
<PAGE>
WHAT IS THE POLICY?
The policy's primary purpose is to provide lifetime protection against
economic loss due to the death of the insured person. The value of the amount
you have invested under the policy may increase or decrease daily based upon the
investment results of the variable investment options that you choose. The
amount we pay to the policy's beneficiary if the insured person dies (we call
this the "death benefit") may be similarly affected.
While the insured person is alive, you will have a number of options under the
policy. Here are some major ones:
. Determine when and how much you invest in the various investment
options
. Borrow or withdraw amounts you have in the investment options
. Change the beneficiary who will receive the death benefit
. Change the amount of insurance
. Turn in (i.e., "surrender") the policy for the full amount of its
surrender value
. Choose the form in which we will pay out the death benefit or other
proceeds
Most of these options are subject to limits that are explained later in this
prospectus.
WHO OWNS THE POLICY?
That's up to the person who applies for the policy. The owner of the policy is
the person who can exercise most of the rights under the policy, such as the
right to choose the investment options or the right to surrender the policy. In
many cases, the person buying the policy is also the person who will be the
owner. However, the application for a policy can name another person or entity
(such as a trust) as owner. Whenever we've used the term "you" in this
prospectus, we've assumed that the reader is the person who has whatever right
or privilege is being discussed. There may be tax consequences if the owner and
the insured person are different, so you should discuss this issue with your tax
adviser.
HOW CAN I INVEST MONEY IN THE POLICY?
Premium Payments
We call the investments you make in the policy "premiums" or "premium
payments". The amount we require as your first premium depends upon the
-----
specifics of your policy and the insured person. Except as noted below, you can
make any other premium payments you wish at any time. That's why the policy is
called a "flexible premium" policy.
Minimum premium payment
Each premium payment must be at least $100.
5
<PAGE>
Maximum premium payments
Federal tax law limits the amount of premium payments you can make relative to
the amount of your policy's insurance coverage. We will not knowingly accept any
amount by which a premium payment exceeds the maximum. If you exceed certain
other limits, the law may impose a penalty on amounts you take out of your
policy. We'll monitor your premium payments and let you know if you're about to
exceed this limit. More discussion of these tax law requirements begins on page
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 person doesn't provide us with adequate evidence that he
or she continues to meet our requirements for issuing insurance.
In no event, however, will we refuse to accept any premium necessary to prevent
the policy or the guaranteed minimum death benefit feature from terminating. We
reserve the right to limit premium payments above the amount of cumulative
Guaranteed Minimum Death Benefit Premiums (whether or not the guaranteed minimum
death benefit feature described on page 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, or
. if we agree to it, through a salary deduction plan with your
employer.
You can obtain information on these other methods of premium payment by
contacting your JHVLICO representative or by contacting the JHVLICO Life
Servicing Office.
IS THERE A MINIMUM AMOUNT I MUST INVEST?
Planned Premiums
The Policy Specifications page of your policy will show the "Planned Premium"
for the policy. You choose this amount in the policy application. The premium
reminder notice we send you is based on this amount. You will also choose how
often to pay premiums-- annually, semi-annually, quarterly or monthly. The date
on which such a payment is "due" is referred to in the policy as a "modal
processing date." However, payment of Planned Premiums is not necessarily
required. You need only invest enough to keep the policy in force (see "Lapse
and reinstatement" and "Guaranteed minimum death benefit feature" below).
6
<PAGE>
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,
---
if the policy's surrender value is not sufficient to pay the charges on a
monthly deduction date, we will notify you of how much you will need to pay to
keep any Additional Sum Insured or the policy in force. You will have a 61 day
"grace period" to make that payment. If you don't pay at least the required
amount by the end of the grace period, the Additional Sum Insured or your policy
will lapse. If your policy lapses, all coverage under the policy will cease.
Even if the policy or the Additional Sum Insured terminates in this way, you can
still reactivate (i.e., "reinstate") it within 1 year from the beginning of the
grace period. You will have to provide evidence that the insured person still
meets our requirements for issuing coverage. You will also have to pay a minimum
amount of premium and be subject to the other terms and conditions applicable to
reinstatements, as specified in the policy. If the guaranteed minimum death
benefit is not in effect and the insured person dies during the grace period, we
will deduct any unpaid monthly charges from the death benefit. During such a
grace period, you cannot make a partial withdrawal or policy loan.
Guaranteed minimum death benefit feature
This feature is available only if the insured person meets certain
underwriting requirements. The feature guarantees that your Basic Sum Insured
will not lapse during the first 10 policy years, regardless of adverse
investment performance, if on each policy anniversary during that 10 year period
the amount of cumulative premiums you have paid accumulated at 4% (less all
withdrawals from the policy accumulated at 4%) equals or exceeds the sum of all
Guaranteed Minimum Death Benefit Premiums due to date accumulated at 4%. The
Guaranteed Minimum Death Benefit Premium (or "GMDB Premium) is defined in the
policy and is "due" on each policy anniversary. On the application for the
policy, you may elect for this feature to extend beyond the tenth policy year.
If you so elect, we will impose a special charge for this feature after the
tenth policy year. You may revoke the election at any time.
No GMDB Premium will ever be greater than the so-called "guideline premium"
for the policy as defined in Section 7702 of the Internal Revenue Code. Also,
the GMDB Premiums may change in the event of any change in the Additional Sum
Insured of the policy or any change in the death benefit option (see "How much
will JHVLICO pay when the insured person dies?" on page 15).
If the guaranteed minimum death benefit test is not satisfied on any policy
anniversary, 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 policy anniversary on
which default occurred. If it is reinstated more than 1 year after such policy
anniversary, we will require evidence that the insured person still meets our
requirements for issuing coverage. We may refuse to reinstate the feature more
than once during the life of the policy.
7
<PAGE>
The guaranteed minimum death benefit feature applies only to the Basic Sum
Insured. It does not apply to any amount of Additional Sum Insured (see "How
---
much will JHVLICO pay when the insured person dies?" on page 15).
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" beginning on page 36.)
Over time, the amount you've invested in any variable investment option will
increase or decrease the same as if you had invested the same amount directly in
the corresponding fund of one of the Trusts and had reinvested all fund
dividends and distributions in additional fund shares; except that we will
deduct certain additional charges which will reduce your account value. We
describe these charges under "What charges will JHVLICO deduct from my
investment in the policy?" below.
The amount you've invested in the fixed investment option will earn interest
at a rate we declare from time to time. We guarantee that this rate will be at
least 4%. If you want to know what the current declared rate is, just call or
write to us. The current declared rate will also appear in the annual statement
we will send you. Amounts you invest in the fixed investment option will not be
---
subject to the mortality and expense risk charge described on page 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 beginning on page 14.
8
<PAGE>
WHAT CHARGES WILL JHVLICO DEDUCT FROM MY INVESTMENT IN THE POLICY?
Deductions from premium payments
. Premium tax charge - A charge to cover state premium taxes we currently
--------------------
expect to pay, on average. This charge is currently 2.35% of each premium.
. DAC tax charge - A charge to cover the increased Federal income tax
----------------
burden that we currently expect will result from receipt of premiums. This
charge is currently 1.25% of each premium.
. Premium processing charge - A charge to help defray our administrative
---------------------------
costs. This charge is 1.25% of each premium.
. Sales charge - A charge to help defray our sales costs. The charge is 30%
--------------
of premiums paid in the first policy year up to the Target Premium, 10% of
premiums received in each of policy years 2 through 10 up to the Target
Premium, 4% of premiums received in each policy year after policy year 10
up to the Target Premium, and 3.5% of premiums received in any policy year
in excess of the Target Premium. If premium received in the first policy
year is less than the Target Premium, then premium received in the second
policy year will be treated as if received in the first policy year until
first year premiums equal the Target Premium. 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 imposed if you elect
-------------------------------------------
this rider. It is deducted only from premiums received in the first two
policy years. The charge is 2% of premiums received in the first two
policy years until the total charges deducted equal 2% of one year's
Target Premium.
Deductions from account value
. Issue charge - A monthly charge to help defray our administrative costs.
------------
This is a charge per $1,000 of Basic Sum Insured at issue that varies by
age and that is deducted only during the first ten policy years. The
charge will appear in the "Policy Specifications" section of the policy.
As an example, the monthly charge for a 45 year old is 10c per $1,000 of
Basic Sum Insured. The monthly charge will be at least $5 and is
guaranteed not to exceed $200.
. Administrative charge - A monthly charge to help defray our
-----------------------
administrative costs. This is a flat dollar charge of up to $10 (currently
$5).
. Insurance charge - A monthly charge for the cost of insurance. To
------------------
determine the charge, we multiply the amount of insurance for which we are
at risk by a cost of insurance rate. The rate is derived from an actuarial
table. The table in your policy will show the maximum cost of insurance
-------
rates. The cost of insurance rates that we currently apply are generally
less than the maximum rates. We will review the cost of insurance rates at
least every 5 years and may change them from time to time. However, those
rates will never be more than the maximum rates shown in the policy. The
table of rates we use will depend on the insurance risk characteristics
and (usually) gender of the insured person, the Total Sum Insured and the
length of time the policy has been in effect. Regardless of the table
used, cost of insurance rates generally
9
<PAGE>
increase each year that you own your policy, as the insured person's
attained age increases. (The insured person's "attained age" on any date
is his or her age on the birthday nearest that date.) Higher current
insurance rates are generally applicable to policies issued on a
"guaranteed issue" basis, where only very limited underwriting information
is obtained. This is often the case with policies issued to trustees,
employers and similar entities.
. Extra mortality charge - A monthly charge specified in your policy for
------------------------
additional mortality risk if the insured person is subject to certain
types of special insurance risk.
. M &E charge - A daily charge for mortality and expense risks we assume.
-------------
This charge is deducted from the variable investment options. It does not
apply to the fixed investment option. The current charge is at an
effective annual rate of .35% of the value of the assets in each variable
investment option. We guarantee that this charge will never exceed an
effective annual rate of .60%.
. Guaranteed minimum death benefit charge - A monthly charge beginning in
-----------------------------------------
the eleventh policy year if the guaranteed minimum death benefit feature
is elected to extend beyond the first ten policy years. This charge is
currently 1c per $1,000 of Basic Sum Insured and is guaranteed not to
exceed 3c per $1,000 of Basic Sum Insured. Because policies of this type
were first offered in 1998, this charge is not yet applicable to any
policy at the current rate.
. Optional benefits charge - Monthly charges for any optional insurance
--------------------------
benefits added to the policy by means of a rider (other than the optional
enhanced cash value 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.
<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%
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%
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%
MFS VARIABLE INSURANCE TRUST
(NOTE 4):
MFS New Discovery . . . . . . . . . . . 0.90% N/A 0.17% 1.07% 1.59%
M FUND, INC. (NOTE 5):
Brandes International Equity . . . . . 0.96% N/A 0.25% 1.21% 0.97%
Turner Core Growth . . . . . . . . . . 0.45% N/A 0.25% 0.70% 0.95%
Frontier Capital Appreciation . . . . . 0.90% N/A 0.25% 1.15% 0.57%
Clifton Enhanced U.S. Equity** . . . . 0.55% N/A 0.25% 0.80% 1.08%
</TABLE>
10
<PAGE>
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).
* Global Balanced was formerly "International Balanced" and Active Bond
was formerly "Sovereign Bond".
11
<PAGE>
(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) 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.
(5) M Fund, Inc. funds' percentages reflect the investment management fees
currently payable and other fund expenses allocated in 1999. M Financial
Advisers, Inc. reimburses a fund when the fund's other operating expenses
exceed 0.25% of that fund's average daily net assets.
** Clifton Enhanced U.S. Equity was formerly "Enhanced U.S. Equity".
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.
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.
12
<PAGE>
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 a year and only during the 31 day
period following your policy anniversary.
. We must receive the request for such a transfer during the period
beginning 60 days prior to the policy anniversary and ending 30 days after
it.
. The most you can transfer at any one time is the greater of $500 or 20%
of the assets in your fixed investment option.
We reserve the right to impose a minimum amount limit on transfers out of the
fixed investment option. We also reserve the right to impose limits on the
number and frequency of transfers out of the variable investment options.
HOW CAN I ACCESS MY INVESTMENT IN THE POLICY?
Full surrender
You may surrender your policy in full at any time. If you do, we will pay you
the account value less any policy loans. 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. 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 9). We also reserve the right to refuse
any partial withdrawal that would cause the policy's Total Sum Insured to fall
below $250,000. Any partial withdrawal (other than a Terminated ASI Withdrawal
Amount, as described below) will reduce your death
13
<PAGE>
benefit under any of the death benefit options (see "How much will JHVLICO pay
when the insured person dies?" on page 15) and under the guaranteed death
benefit feature (see page 7). Under Option A or Option M, such a partial
withdrawal will reduce the Total Sum Insured. Under Option B, such a partial
withdrawal will reduce your account value. Under the guaranteed death benefit
feature, such a partial withdrawal will reduce the Basic Sum Insured. A
"Terminated ASI Withdrawal Amount" is any partial withdrawal made while there is
an Additional Sum Insured under the policy that later lapses as described on
page 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
determined as follows:
. We first determine the account value of your policy.
. We then subtract an amount equal to 12 times the monthly charges then
being deducted from account value.
. We then multiply the resulting amount by .75% in policy years 1
through 20 and .25% thereafter.
. We then subtract the third item above from the second item above.
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 20 policy years and 4.25%
thereafter. Accrued interest will be added to the loan daily and will bear
interest at the same rate as the original loan amount. The amount of the loan is
deducted from the investment options in the same proportion as the account value
is then allocated among them and is placed in a special loan account. This
special loan account will earn interest at an effective annual rate of 4.0%.
However, if we determine that a loan will be treated as a taxable distribution
because of the differential between the loan interest rate and the rate being
credited on the special loan account, we reserve the right to decrease the rate
credited on the special loan account to a rate that would, in our reasonable
judgement, result in the transaction being treated as a loan under Federal tax
law.
You can repay all or part of a loan at any time. Each repayment will be
allocated among the investment options as follows:
. The same proportionate part of the loan as was borrowed from the
fixed investment option will be repaid to the fixed investment
option.
. The remainder of the repayment will be allocated among the investment
options in the same way a new premium payment would be allocated.
14
<PAGE>
If you want a payment to be used as a loan repayment, you must include
instructions to that effect. Otherwise, all payments will be assumed to be
premium payments.
HOW MUCH WILL JHVLICO PAY WHEN THE INSURED PERSON DIES?
In your application for the policy, you will tell us how much life insurance
coverage you want on the life of the insured person. This is called the "Total
Sum Insured." Total Sum Insured is composed of the Basic Sum Insured and any
Additional Sum Insured you elect. The only limitation on how much Additional Sum
Insured you can have is that it cannot exceed 400% of the Basic Sum Insured.
There are a number of factors you should consider in determining whether to
elect coverage in the form of Basic Sum Insured or in the form of Additional Sum
Insured. These factors are discussed under "Basic Sum Insured vs. Additional Sum
Insured" on page 35.
When the insured person dies, we will pay the death benefit minus any
outstanding loans. There are three ways of calculating the death benefit. You
choose which one you want in the application. The three death benefit options
are:
. Option A - The death benefit will equal the greater of (1) the Total
Sum Insured, or (2) the minimum insurance amount (as described
below).
. Option B -The death benefit will equal the greater of (1) the Total
Sum Insured plus your policy's account value on the date of death, or
(2) the minimum insurance amount.
. Option M - The death benefit will equal the greater of (1) the Total
Sum Insured plus any optional extra death benefit (as described
below), or (2) the minimum insurance amount.
For the same premium payments, the death benefit under Option B will tend to
be higher than the death benefit under Option A or Option M. On the other hand,
the monthly insurance charge will be higher under Option B to compensate us for
the additional insurance risk. Because of that, the account value will tend to
be higher under Option A or Option M than under Option B for the same premium
payments.
Optional extra death benefit feature
The optional extra death benefit is determined as follows:
. First, we multiply your account value by a factor specified in the
policy. The factor is based on the insured person's age on the date
of calculation.
. We will then subtract your Total Sum Insured.
If you change the way in which the minimum insurance amount is calculated (see
below), we may have to change the factors described above (perhaps
retroactively) in order to maintain qualification of the policy as life
insurance under Federal tax law. This feature may result in the
15
<PAGE>
Option M death benefit being higher than the minimum insurance amount. Although
there is no special charge for this feature, your monthly insurance charge will
be based on that higher death benefit amount. Election of this feature must be
made in the application for the policy.
The minimum insurance amount
In order for a policy to qualify as life insurance under Federal tax law,
there has to be a minimum amount of insurance in relation to account value.
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. 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 "required additional death benefit factor"
applicable on that date. In this case, the death benefit factors are derived by
applying the guideline premium and cash value corridor test. The death benefit
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. 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 death benefit factor applicable on that
date. In this case, the death benefit factors are derived by applying the cash
value accumulation test. The death benefit factor decreases as attained age
increases. Regardless of which tesy you elect, a table showing the required
additional death benefit factor for each age will appear in the policy.
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.
Enhanced cash value rider
In the application for the policy, you may elect to purchase the enhanced cash
value rider. This rider provides an enhanced cash value benefit (in addition to
the surrender value) if you surrender the policy within the first nine policy
years. The amount of the benefit will be shown in the "Policy Specifications"
section of the policy. The benefit is also included in the account value when
calculating the death benefit. Election of this rider could increase your
insurance charge since it affects our amount at risk under the policy. The
amount available for partial withdrawals and loans are based on the surrender
value and will in no way be increased due to this 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 insured
person still meets our requirements
16
<PAGE>
for issuing insurance coverage. As to when an approved increase would take
effect, see "Effective date of other policy transactions" on page 37.
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 37.
Change of death benefit option
At any time, you may request to change your coverage from death benefit Option
B to Option A. Our administrative systems do not currently permit any other
change of death benefit option. Such changes may be permitted in the 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 after you receive it
(this period may be longer in some states). 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.
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 Trusts 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:
17
<PAGE>
. 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.
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.
18
<PAGE>
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 38. 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.
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
19
<PAGE>
. 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 the
insured person's death and related documentation to the JHVLICO Life Servicing
Office. We don't consider that we've "received" any communication until such
time as it has arrived at the proper place and in the proper and complete form.
We have special forms that should be used for a number of the requests
mentioned above. You can obtain these forms from the JHVLICO Life Servicing
Office or your JHVLICO representative. Each communication to us must include
your name, your policy number and the name of the insured person. We cannot
process any request that doesn't include this required information. Any
communication that arrives after the close of our business day, or on a day that
is not a business day, will be considered "received" by us on the next following
business day. 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 1-800-521-1234 or by faxing us at 1-617-572-6956.
Any fax request should include your name, daytime telephone number, policy
number and, in the case of transfers and changes of allocation, the names of the
investment options involved. We will honor telephone instructions from anyone
who provides the correct identifying information, so there is a risk of loss to
you if this service is used by an unauthorized person. However, you will receive
written confirmation of all telephone transactions. There is also a risk that
you will be unable to place your request due to equipment malfunction or heavy
phone line usage. If this occurs, you should submit your request in writing.
The policies are not designed for professional market timing organizations or
other entities that use programmed and frequent transfers among investment
options. For reasons such as that, we reserve the right to change our telephone
transaction policies or procedures at any time. We also reserve the right to
suspend or terminate the privilege altogether.
20
<PAGE>
ILLUSTRATION OF DEATH BENEFITS, ACCOUNT VALUES, SURRENDER VALUES AND
ACCUMULATED PREMIUMS
The following tables illustrate the changes in death benefit, account value
and surrender value of the policy under certain hypothetical circumstances that
we assume solely for this purpose. Each table separately illustrates the
operation of a policy for a specified issue age, premium payment schedule and
Total Sum Insured. The amounts shown are for the end of each policy year and
assume that all of the account value is invested in funds that achieve
investment returns at constant annual rates of 0%, 6% and 12% (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 -.79%, 5.16% and 11.12%. (Investment return
reflects investment income and all realized and unrealized capital gains and
losses.) The tables assume annual Planned Premiums that are paid at the
beginning of each policy year for an insured person who is a 45 year old male
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.
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 .13%.
These rates are the arithmetic average for all funds of the Trusts. 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 10. 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 your proposed insured person's issue age, sex and underwriting risk
classification, and the Total Sum Insured and annual Planned Premium amount
requested.
21
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE $250,000 TOTAL SUM INSURED MALE, ISSUE AGE
45, FULLY UNDERWRITTEN PREFERRED UNDERWRITING CLASS OPTION A DEATH BENEFIT
CASH VALUE ACCUMULATION TEST NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH
POLICY YEAR PLANNED PREMIUM: $4,530* 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 $ 4,757 $250,000 $250,000 $ 250,000 $ 2,185 $ 2,336 $ 2,488
2 9,751 250,000 250,000 250,000 5,203 5,697 6,209
3 14,995 250,000 250,000 250,000 8,157 9,188 10,298
4 20,501 250,000 250,000 250,000 11,065 12,836 14,816
5 26,283 250,000 250,000 250,000 13,944 16,665 19,827
6 32,353 250,000 250,000 250,000 16,795 20,685 25,385
7 38,727 250,000 250,000 250,000 19,624 24,910 31,557
8 45,420 250,000 250,000 250,000 22,428 29,350 38,407
9 52,448 250,000 250,000 250,000 25,208 34,013 46,008
10 59,827 250,000 250,000 250,000 27,957 38,905 54,436
11 67,575 250,000 250,000 250,000 31,230 44,619 64,390
12 75,710 250,000 250,000 250,000 34,428 50,575 75,394
13 84,252 250,000 250,000 250,000 37,522 56,761 87,544
14 93,221 250,000 250,000 250,000 40,510 63,188 100,970
15 102,638 250,000 250,000 250,000 43,396 69,874 115,826
16 112,527 250,000 250,000 250,000 46,179 76,832 132,277
17 122,910 250,000 250,000 274,882 48,854 84,078 150,463
18 133,812 250,000 250,000 303,799 51,417 91,625 170,501
19 145,259 250,000 250,000 334,827 53,861 99,489 192,573
20 157,278 250,000 250,000 368,178 56,182 107,690 216,882
25 227,014 250,000 250,000 576,428 64,802 153,889 379,453
30 316,016 250,000 292,219 884,023 69,261 212,045 641,480
35 429,609 250,000 359,282 1,349,445 65,857 282,077 1,059,469
</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.
22
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE $250,000 TOTAL SUM INSURED MALE, ISSUE AGE
45, FULLY UNDERWRITTEN PREFERRED UNDERWRITING CLASS OPTION A DEATH BENEFIT
CASH VALUE ACCUMULATION TEST NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH
POLICY YEAR PLANNED PREMIUM: $4,530* USING MAXIMUM CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
---------------------------- --------------------------
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at ---------------------------- --------------------------
Year 5% annual interest 0% 6% 12% 0% 6% 12%
- ------- ------------------ -------- -------- -------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 4,757 $250,000 $250,000 $250,000 $ 1,375 $ 1,501 $ 1,627
2 9,751 250,000 250,000 250,000 3,545 3,935 4,343
3 14,995 250,000 250,000 250,000 5,599 6,392 7,253
4 20,501 250,000 250,000 250,000 7,533 8,871 10,379
5 26,283 250,000 250,000 250,000 9,340 11,361 13,733
6 32,353 250,000 250,000 250,000 11,014 13,859 17,338
7 38,727 250,000 250,000 250,000 12,537 16,345 21,202
8 45,420 250,000 250,000 250,000 13,894 18,807 25,343
9 52,448 250,000 250,000 250,000 15,069 21,224 29,778
10 59,827 250,000 250,000 250,000 16,039 23,574 34,524
11 67,575 250,000 250,000 250,000 17,363 26,440 40,233
12 75,710 250,000 250,000 250,000 18,455 29,241 46,388
13 84,252 250,000 250,000 250,000 19,306 31,971 53,047
14 93,221 250,000 250,000 250,000 19,903 34,615 60,268
15 102,638 250,000 250,000 250,000 20,228 37,155 68,121
16 112,527 250,000 250,000 250,000 20,251 39,564 76,677
17 122,910 250,000 250,000 250,000 19,938 41,806 86,018
18 133,812 250,000 250,000 250,000 19,240 43,836 96,240
19 145,259 250,000 250,000 250,000 18,101 45,601 107,454
20 157,278 250,000 250,000 250,000 16,464 47,042 119,801
25 227,014 ** 250,000 309,216 ** 47,243 203,552
30 316,016 ** 250,000 450,227 ** 24,468 326,701
35 429,609 ** ** 636,295 ** ** 499,564
</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.
23
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE $250,000 TOTAL SUM INSURED MALE, ISSUE AGE
45, FULLY UNDERWRITTEN PREFERRED UNDERWRITING CLASS OPTION B DEATH BENEFIT
CASH VALUE ACCUMULATION TEST NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH
POLICY YEAR PLANNED PREMIUM: $4,530* 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 $ 4,757 $252,181 $252,332 $ 252,484 $ 2,181 $ 2,332 $ 2,484
2 9,751 255,190 255,682 256,193 5,190 5,682 6,193
3 14,995 258,128 259,155 260,260 8,128 9,155 10,260
4 20,501 261,015 262,777 264,746 11,015 12,777 14,746
5 26,283 263,867 266,569 269,709 13,867 16,569 19,709
6 32,353 266,686 270,544 275,206 16,686 20,544 25,206
7 38,727 269,477 274,714 281,297 19,477 24,714 31,297
8 45,420 272,240 279,087 288,045 22,240 29,087 38,045
9 52,448 274,973 283,673 295,519 24,973 33,673 45,519
10 59,827 277,671 288,474 303,791 27,671 38,474 53,791
11 67,575 280,885 294,078 313,546 30,885 44,078 63,546
12 75,710 284,010 299,896 324,293 34,010 49,896 74,293
13 84,252 287,012 305,904 336,101 37,012 55,904 86,101
14 93,221 289,886 312,104 349,076 39,886 62,104 99,076
15 102,638 292,635 318,505 363,344 42,635 68,505 113,344
16 112,527 295,254 325,112 379,039 45,254 75,112 129,039
17 122,910 297,735 331,925 396,303 47,735 81,925 146,303
18 133,812 300,072 338,945 415,296 50,072 88,945 165,296
19 145,259 302,253 346,168 436,189 52,253 96,168 186,189
20 157,278 304,269 353,595 459,175 54,269 103,595 209,175
25 227,014 310,315 392,240 612,104 60,315 142,240 362,104
30 316,016 310,527 434,804 859,491 60,527 184,804 609,491
35 429,609 300,081 476,411 1,282,381 50,081 226,411 1,006,816
</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.
24
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE $250,000 TOTAL SUM INSURED MALE, ISSUE AGE
45, FULLY UNDERWRITTEN PREFERRED UNDERWRITING CLASS OPTION B DEATH BENEFIT
CASH VALUE ACCUMULATION TEST NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH
POLICY YEAR PLANNED PREMIUM: $4,530* USING MAXIMUM CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
---------------------------- --------------------------
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at ---------------------------- --------------------------
Year 5% annual interest 0% 6% 12% 0% 6% 12%
- ------- ------------------ -------- -------- -------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 4,757 $251,366 $251,491 $251,617 $ 1,366 $ 1,491 $ 1,617
2 9,751 253,515 253,901 254,305 3,515 3,901 4,305
3 14,995 255,535 256,319 257,169 5,535 6,319 7,169
4 20,501 257,422 258,738 260,221 7,422 8,738 10,221
5 26,283 259,167 261,146 263,468 9,167 11,146 13,468
6 32,353 260,763 263,534 266,922 10,763 13,534 16,922
7 38,727 262,190 265,879 270,580 12,190 15,879 20,580
8 45,420 263,433 268,161 274,446 13,433 18,161 24,446
9 52,448 264,472 270,353 278,517 14,472 20,353 28,517
10 59,827 265,284 272,426 282,788 15,284 22,426 32,788
11 67,575 266,425 274,950 287,880 16,425 24,950 37,880
12 75,710 267,302 277,332 293,242 17,302 27,332 43,242
13 84,252 267,909 279,557 298,890 17,909 29,557 48,890
14 93,221 268,233 281,599 304,835 18,233 31,599 54,835
15 102,638 268,257 283,428 311,087 18,257 33,428 61,087
16 112,527 267,951 285,000 317,643 17,951 35,000 67,643
17 122,910 267,283 286,265 324,493 17,283 36,265 74,493
18 133,812 266,209 287,159 331,618 16,209 37,159 81,618
19 145,259 264,679 287,607 338,987 14,679 37,607 88,987
20 157,278 262,645 287,534 346,566 12,645 37,534 96,566
25 227,014 ** 276,738 386,592 ** 26,738 136,592
30 316,016 ** ** 423,368 ** ** 173,368
35 429,609 ** ** 434,478 ** ** 184,478
</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.
25
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE $250,000 TOTAL SUM INSURED MALE, ISSUE AGE
45, FULLY UNDERWRITTEN PREFERRED UNDERWRITING CLASS OPTION M DEATH BENEFIT
CASH VALUE ACCUMULATION TEST NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH
POLICY YEAR PLANNED PREMIUM: $4,530* 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 $ 4,757 $250,000 $250,000 $ 250,000 $ 2,185 $ 2,336 $ 2,488
2 9,751 250,000 250,000 250,000 5,203 5,697 6,209
3 14,995 250,000 250,000 250,000 8,157 9,188 10,298
4 20,501 250,000 250,000 250,000 11,065 12,836 14,816
5 26,283 250,000 250,000 250,000 13,944 16,665 19,827
6 32,353 250,000 250,000 250,000 16,795 20,685 25,385
7 38,727 250,000 250,000 250,000 19,624 24,910 31,557
8 45,420 250,000 250,000 250,000 22,428 29,350 38,407
9 52,448 250,000 250,000 250,000 25,208 34,013 46,008
10 59,827 250,000 250,000 250,000 27,957 38,905 54,436
11 67,575 250,000 250,000 254,510 31,230 44,619 64,389
12 75,710 250,000 250,000 285,210 34,428 50,575 75,343
13 84,252 250,000 250,000 316,829 37,522 56,761 87,348
14 93,221 250,000 250,000 349,426 40,510 63,188 100,496
15 102,638 250,000 250,000 383,118 43,396 69,874 114,899
16 112,527 250,000 250,000 418,002 46,179 76,832 130,667
17 122,910 250,000 258,105 454,184 48,854 84,062 147,923
18 133,812 250,000 269,880 491,776 51,417 91,537 166,800
19 145,259 250,000 281,161 530,929 53,861 99,259 187,435
20 157,278 250,000 291,992 571,791 56,182 107,232 209,986
25 227,014 250,000 338,402 801,747 64,802 150,008 355,400
30 316,016 250,000 378,478 1,098,408 69,261 199,767 579,757
35 429,609 250,000 413,937 1,486,664 65,857 255,848 918,885
</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 $250,000 TOTAL SUM INSURED MALE, ISSUE AGE
45, FULLY UNDERWRITTEN PREFERRED UNDERWRITING CLASS OPTION M DEATH BENEFIT
CASH VALUE ACCUMULATION TEST NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH
POLICY YEAR PLANNED PREMIUM: $4,530* USING MAXIMUM CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
---------------------------- --------------------------
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at ---------------------------- --------------------------
Year 5% annual interest 0% 6% 12% 0% 6% 12%
- ------- ------------------ -------- -------- -------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 4,757 $250,000 $250,000 $250,000 $ 1,375 $ 1,501 $ 1,627
2 9,751 250,000 250,000 250,000 3,545 3,935 4,343
3 14,995 250,000 250,000 250,000 5,599 6,392 7,253
4 20,501 250,000 250,000 250,000 7,533 8,871 10,379
5 26,283 250,000 250,000 250,000 9,340 11,361 13,733
6 32,353 250,000 250,000 250,000 11,014 13,859 17,338
7 38,727 250,000 250,000 250,000 12,537 16,345 21,202
8 45,420 250,000 250,000 250,000 13,894 18,807 25,343
9 52,448 250,000 250,000 250,000 15,069 21,224 29,778
10 59,827 250,000 250,000 250,000 16,039 23,574 34,524
11 67,575 250,000 250,000 250,000 17,363 26,440 40,233
12 75,710 250,000 250,000 250,000 18,455 29,241 46,388
13 84,252 250,000 250,000 250,000 19,306 31,971 53,047
14 93,221 250,000 250,000 250,000 19,903 34,615 60,268
15 102,638 250,000 250,000 250,000 20,228 37,155 68,121
16 112,527 250,000 250,000 250,000 20,251 39,564 76,677
17 122,910 250,000 250,000 263,804 19,938 41,806 85,919
18 133,812 250,000 250,000 282,027 19,240 43,836 95,657
19 145,259 250,000 250,000 299,928 18,101 45,601 105,884
20 157,278 250,000 250,000 317,486 16,464 47,042 116,594
25 227,014 ** 250,000 400,592 ** 47,243 177,575
30 316,016 ** 250,000 474,396 ** 24,468 250,394
35 429,609 ** ** 537,186 ** ** 332,027
</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 $250,000 TOTAL SUM INSURED MALE, ISSUE AGE
45, FULLY UNDERWRITTEN 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: $4,530* 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 $ 4,757 $250,000 $250,000 $ 250,000 $ 2,185 $ 2,336 $ 2,488
2 9,751 250,000 250,000 250,000 5,203 5,697 6,209
3 14,995 250,000 250,000 250,000 8,157 9,188 10,298
4 20,501 250,000 250,000 250,000 11,065 12,836 14,816
5 26,283 250,000 250,000 250,000 13,944 16,665 19,827
6 32,353 250,000 250,000 250,000 16,795 20,685 25,385
7 38,727 250,000 250,000 250,000 19,624 24,910 31,557
8 45,420 250,000 250,000 250,000 22,428 29,350 38,407
9 52,448 250,000 250,000 250,000 25,208 34,013 46,008
10 59,827 250,000 250,000 250,000 27,957 38,905 54,436
11 67,575 250,000 250,000 250,000 31,230 44,619 64,390
12 75,710 250,000 250,000 250,000 34,428 50,575 75,394
13 84,252 250,000 250,000 250,000 37,522 56,761 87,544
14 93,221 250,000 250,000 250,000 40,510 63,188 100,970
15 102,638 250,000 250,000 250,000 43,396 69,874 115,826
16 112,527 250,000 250,000 250,000 46,179 76,832 132,277
17 122,910 250,000 250,000 250,000 48,854 84,078 150,513
18 133,812 250,000 250,000 250,000 51,417 91,625 170,745
19 145,259 250,000 250,000 250,000 53,861 99,489 193,216
20 157,278 250,000 250,000 266,169 56,182 107,690 218,171
25 227,014 250,000 250,000 450,255 64,802 153,889 388,151
30 316,016 250,000 250,000 716,278 69,261 213,263 669,418
35 429,609 250,000 305,666 1,192,863 65,857 291,111 1,136,060
</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.
28
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE $250,000 TOTAL SUM INSURED MALE, ISSUE AGE
45, FULLY UNDERWRITTEN 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: $4,530* USING MAXIMUM
CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
---------------------------- --------------------------
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at ---------------------------- --------------------------
Year 5% annual interest 0% 6% 12% 0% 6% 12%
- ------- ------------------ -------- -------- -------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 4,757 $250,000 $250,000 $250,000 $ 1,375 $ 1,501 $ 1,627
2 9,751 250,000 250,000 250,000 3,545 3,935 4,343
3 14,995 250,000 250,000 250,000 5,599 6,392 7,253
4 20,501 250,000 250,000 250,000 7,533 8,871 10,379
5 26,283 250,000 250,000 250,000 9,340 11,361 13,733
6 32,353 250,000 250,000 250,000 11,014 13,859 17,338
7 38,727 250,000 250,000 250,000 12,537 16,345 21,202
8 45,420 250,000 250,000 250,000 13,894 18,807 25,343
9 52,448 250,000 250,000 250,000 15,069 21,224 29,778
10 59,827 250,000 250,000 250,000 16,039 23,574 34,524
11 67,575 250,000 250,000 250,000 17,363 26,440 40,233
12 75,710 250,000 250,000 250,000 18,455 29,241 46,388
13 84,252 250,000 250,000 250,000 19,306 31,971 53,047
14 93,221 250,000 250,000 250,000 19,903 34,615 60,268
15 102,638 250,000 250,000 250,000 20,228 37,155 68,121
16 112,527 250,000 250,000 250,000 20,251 39,564 76,677
17 122,910 250,000 250,000 250,000 19,938 41,806 86,018
18 133,812 250,000 250,000 250,000 19,240 43,836 96,240
19 145,259 250,000 250,000 250,000 18,101 45,601 107,454
20 157,278 250,000 250,000 250,000 16,464 47,042 119,801
25 227,014 ** 250,000 250,000 ** 47,243 206,501
30 316,016 ** 250,000 382,471 ** 24,468 357,450
35 429,609 ** ** 632,960 ** ** 602,819
</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.
29
<PAGE>
PLAN: FLEXIBLE PREMIUM VARIABLE LIFE $250,000 TOTAL SUM INSURED MALE, ISSUE AGE
45, FULLY UNDERWRITTEN 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: $4,530* 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 $ 4,757 $252,181 $252,332 $ 252,484 $ 2,181 $ 2,332 $ 2,484
2 9,751 255,190 255,682 256,193 5,190 5,682 6,193
3 14,995 258,128 259,155 260,260 8,128 9,155 10,260
4 20,501 261,015 262,777 264,746 11,015 12,777 14,746
5 26,283 263,867 266,569 269,709 13,867 16,569 19,709
6 32,353 266,686 270,544 275,206 16,686 20,544 25,206
7 38,727 269,477 274,714 281,297 19,477 24,714 31,297
8 45,420 272,240 279,087 288,045 22,240 29,087 38,045
9 52,448 274,973 283,673 295,519 24,973 33,673 45,519
10 59,827 277,671 288,474 303,791 27,671 38,474 53,791
11 67,575 280,885 294,078 313,546 30,885 44,078 63,546
12 75,710 284,010 299,896 324,293 34,010 49,896 74,293
13 84,252 287,012 305,904 336,101 37,012 55,904 86,101
14 93,221 289,886 312,104 349,076 39,886 62,104 99,076
15 102,638 292,635 318,505 363,344 42,635 68,505 113,344
16 112,527 295,254 325,112 379,039 45,254 75,112 129,039
17 122,910 297,735 331,925 396,303 47,735 81,925 146,303
18 133,812 300,072 338,945 415,296 50,072 88,945 165,296
19 145,259 302,253 346,168 436,189 52,253 96,168 186,189
20 157,278 304,269 353,595 459,175 54,269 103,595 209,175
25 227,014 310,315 392,240 612,104 60,315 142,240 362,104
30 316,016 310,527 434,804 859,491 60,527 184,804 609,491
35 429,609 300,081 476,411 1,257,340 50,081 226,411 1,007,340
</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 $250,000 TOTAL SUM INSURED MALE, ISSUE AGE
45, FULLY UNDERWRITTEN 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: $4,530* USING MAXIMUM
CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
---------------------------- --------------------------
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at ---------------------------- --------------------------
Year 5% annual interest 0% 6% 12% 0% 6% 12%
- ------- ------------------ -------- -------- -------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 4,757 $251,366 $251,491 $251,617 $ 1,366 $ 1,491 $ 1,617
2 9,751 253,515 253,901 254,305 3,515 3,901 4,305
3 14,995 255,535 256,319 257,169 5,535 6,319 7,169
4 20,501 257,422 258,738 260,221 7,422 8,738 10,221
5 26,283 259,167 261,146 263,468 9,167 11,146 13,468
6 32,353 260,763 263,534 266,922 10,763 13,534 16,922
7 38,727 262,190 265,879 270,580 12,190 15,879 20,580
8 45,420 263,433 268,161 274,446 13,433 18,161 24,446
9 52,448 264,472 270,353 278,517 14,472 20,353 28,517
10 59,827 265,284 272,426 282,788 15,284 22,426 32,788
11 67,575 266,425 274,950 287,880 16,425 24,950 37,880
12 75,710 267,302 277,332 293,242 17,302 27,332 43,242
13 84,252 267,909 279,557 298,890 17,909 29,557 48,890
14 93,221 268,233 281,599 304,835 18,233 31,599 54,835
15 102,638 268,257 283,428 311,087 18,257 33,428 61,087
16 112,527 267,951 285,000 317,643 17,951 35,000 67,643
17 122,910 267,283 286,265 324,493 17,283 36,265 74,493
18 133,812 266,209 287,159 331,618 16,209 37,159 81,618
19 145,259 264,679 287,607 338,987 14,679 37,607 88,987
20 157,278 262,645 287,534 346,566 12,645 37,534 96,566
25 227,014 ** 276,738 386,592 ** 26,738 136,592
30 316,016 ** ** 423,368 ** ** 173,368
35 429,609 ** ** 434,478 ** ** 184,478
</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>
ADDITIONAL INFORMATION
This section of the prospectus provides additional detailed information that
is not contained in the Basic Information section on pages 4 through 20.
<TABLE>
<CAPTION>
CONTENTS OF THIS SECTION BEGINNING ON PAGE
- ------------------------ -----------------
<S> <C>
Description of JHVLICO ................................... 33
How we support the policy and investment options 33
Procedures for issuance of a policy....................... 34
Basic Sum Insured vs. Additional Sum Insured.............. 35
Commencement of investment performance.................... 36
How we process certain policy transactions................ 36
Effects of policy loans................................... 37
Additional information about how certain policy charges 37
work......................................................
How we market the policies................................ 39
Tax considerations........................................ 40
Reports that you will receive............................. 41
Voting privileges that you will have...................... 42
Changes that JHVLICO can make as to your policy 42
Adjustments we make to death benefits..................... 43
When we pay policy proceeds............................... 43
Other details about exercising rights and paying benefits. 43
Legal matters............................................. 44
Registration statement filed with the SEC................. 44
Accounting and actuarial experts.......................... 44
Financial statements of JHVLICO and the Account 44
List of Directors and Executive Officers of JHVLICO 45
</TABLE>
32
<PAGE>
DESCRIPTION OF JHVLICO
We are JHVLICO, a stock life insurance company chartered in 1979 under
Massachusetts law. We are authorized to transact a life insurance and annuity
business in all states other than New York and in the District of Columbia. We
began selling variable life insurance policies in 1980.
We are regulated and supervised by the Massachusetts Commissioner of
Insurance, who periodically examines our affairs. We also are subject to the
applicable insurance laws and regulations of all jurisdictions in which we are
authorized to do business. We are required to submit annual statements of our
operations, including financial statements, to the insurance departments of the
various jurisdictions in which we do business for purposes of determining
solvency and compliance with local insurance laws and regulations. The
regulation to which we are subject, however, does not provide a guarantee as to
such matters.
We are a wholly-owned subsidiary of John Hancock 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
33
<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 $100,000. At the time of
issue, the insured person must have an attained age of no more than 85. All
insured persons must meet certain health and other insurance risk criteria
called "underwriting standards".
Policies issued in Montana or in connection with certain employee plans will
not directly reflect the sex of the insured person in either the premium rates
or the charges or values under the policy. The illustrations set forth in this
prospectus are sex-distinct and, therefore, may not reflect the rates, charges,
or values that would apply to such policies.
Minimum Initial Premium
The Minimum Initial Premium must be received by us at our Life Servicing
Office in order for the policy to be in full force and effect. There is no grace
period for the payment of the Minimum Initial Premium. The Minimum Initial
Premium is determined by us based on the characteristics of the insured person,
the Total Sum Insured at issue, and the policy options you have selected.
Commencement of insurance coverage
After you apply for a policy, it can sometimes take up to several weeks for us
to gather and evaluate all the information we need to decide whether to issue a
policy to you and, if so, what the insured person's rate class should be. After
we approve an application for a policy and assign an appropriate insurance rate
class, we will prepare the policy for delivery. We will not pay a death benefit
under a policy unless the policy is in effect when the insured person dies
(except for the circumstances described under "Temporary insurance coverage
prior to policy delivery" on page 35).
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.
34
<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 the insured person, we can
designate a date of issue that is up to 60 days earlier than the date that would
otherwise apply. This is referred to as "backdating" and is allowed under state
insurance laws. Backdating can also be used in certain corporate-owned life
insurance cases involving multiple policies to retain a common monthly deduction
date.
The conditions for coverage described above under "Commencement of insurance
coverage" must still be satisfied, but in a backdating situation the policy
always takes effect retroactively. Backdating results in a lower insurance
charge (because of the insured person's younger age at issue), but monthly
charges begin earlier than would otherwise be the case. Those monthly charges
will be deducted as soon as we receive premiums sufficient to pay them.
Temporary coverage prior to policy delivery
If a specified amount of premium is paid with the application for a policy and
other conditions are met, we will provide temporary term life insurance coverage
on the insured person for a period prior to the time coverage under the policy
takes effect. Such temporary term coverage will be subject to the terms and
conditions described in the application for the policy, including limits on
amount and duration of coverage.
Monthly deduction dates
Each charge that we deduct monthly is assessed against your account value or
the subaccounts at the close of business on the date of issue and at the close
of the first business day in each subsequent policy month.
BASIC SUM INSURED VS. ADDITIONAL SUM INSURED
As noted earlier in this prospectus, you should consider a number of factors
in determining whether to elect coverage in the form of Basic Sum Insured or in
the form of Additional Sum Insured.
The amount of sales charge deducted from premiums and from account value and
the amount of compensation paid to the selling insurance agent will be less if
coverage is included as Additional Sum Insured, rather than as Basic Sum
Insured. On the other hand, the amount of any Additional Sum Insured is not
included in the guaranteed minimum death benefit feature. Therefore, if the
policy's surrender value is insufficient to pay the monthly charges as they fall
due (including the charges for the Additional Sum Insured), the Additional Sum
Insured coverage will lapse, even if the Basic Sum Insured stays in effect
pursuant to the guaranteed minimum death benefit feature.
Generally, you will incur lower sales charges and have more flexible coverage
with respect to the Additional Sum Insured than with respect to the Basic Sum
Insured. If this is your priority, you may wish to maximize the proportion of
the Additional Sum Insured. However, if your priority is to take advantage of
the guaranteed minimum death benefit feature, the proportion of the Policy's
Total Sum Insured that is guaranteed can be increased by taking out more
coverage as Basic Sum Insured at the time of policy issuance.
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
35
<PAGE>
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 the insured person's continued insurability only after we have
received such evidence and found it satisfactory to us.
(4) If we receive any premium payment that 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 a variable investment option will be effective at the end of the business
day in which we receive at our Life Servicing Office notice satisfactory to us.
If received on or before the policy anniversary, requests for transfer out of
the fixed investment option will be processed on the policy anniversary (or the
next business day if the policy anniversary does not occur on a business day).
If received after the policy anniversary, such a request will be processed
36
<PAGE>
at the end of the business day in which we receive the request at our Life
Servicing Office. If you request a transfer out of the fixed investment option
61 days or more prior to the policy anniversary, we will not process that
portion of the reallocation, and your confirmation statement will not reflect a
transfer out of the fixed investment option as to such request. Currently, there
is no minimum amount limit on transfers into the fixed investment option, but we
reserve the right to impose such a limit in the future. We have the right to
defer transfers of amounts out of the fixed investment option for up to six
months.
Telephone transfers and policy loans
Once you have completed a written authorization, you may request a transfer or
policy loan by telephone or by fax. If the fax request option becomes
unavailable, another means of telecommunication will be substituted.
If you authorize telephone transactions, you will be liable for any loss,
expense or cost arising out of any unauthorized or fraudulent telephone
instructions which we reasonably believe to be genuine, unless such loss,
expense or cost is the result of our mistake or negligence. We employ procedures
which provide safeguards against the execution of unauthorized transactions, and
which are reasonably designed to confirm that instructions received by telephone
are genuine. These procedures include requiring personal identification, tape
recording calls, and providing written confirmation to the owner. If we do not
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine, we may be liable for any loss due to unauthorized or
fraudulent instructions.
Effective date of other policy transactions
The following transactions take effect on the 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
. Any other change of death benefit option, when and if permitted by our
administrative rules (see "Change of death benefit option" on page 17)
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 such request or repayment.
EFFECTS OF POLICY LOANS
The account value, the surrender value, and any death benefit above the Total
Sum Insured are permanently affected by any loan, whether or not it is repaid in
whole or in part. This is because the amount of the loan is deducted from the
investment options and placed in a special loan account. The investment options
and the special loan account will generally have different rates of investment
return.
The amount of the outstanding loan (which includes accrued and unpaid
interest) is subtracted from the amount otherwise payable when the policy
proceeds become payable.
Whenever the outstanding loan equals or exceeds the account value, the policy
will terminate 31 days after we have mailed notice of termination to you (and to
any assignee of record at such assignee's last known address) specifying the
amount you must pay 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
37
<PAGE>
JHVLICO deduct from my investment in the policy?" in the Basic Information
section of this prospectus.) The amount of the charges in any policy year does
not specifically correspond to sales expenses for that year. We expect to
recover our total sales expenses over the life of the policies. To the extent
that the sales charges do not cover total sales expenses, the sales expenses may
be recovered from other sources, including gains from the charge for mortality
and expense risks and other gains with respect to the policies, or from our
general assets. (See "How we market the policies" on page 39.)
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 $12,000. 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
$8,750. 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 insured person dies during the policy grace period, the amount of
unpaid monthly charges is deducted from the death benefit otherwise payable.
Reduced charges for eligible classes
The charges otherwise applicable (including the M&E charge) may be reduced
with respect to policies issued to a class of associated individuals or to a
trustee, employer or similar entity where we anticipate that the sales to the
members of the class will result in lower than normal sales or administrative
expenses, lower taxes or lower risks to us. We will make these reductions in
accordance with our rules in effect at the time of the application for a policy.
The factors we consider in determining the eligibility of a particular group for
reduced charges, and the level of the reduction, are as follows: the nature of
the association and its organizational framework; the method by which sales will
be made to the members of the class; the facility with which premiums will be
collected from the associated individuals and the association's capabilities
with respect to administrative tasks; the anticipated lapse and surrender rates
of the policies; the size of the class of associated individuals and the number
of years it has been in existence; the aggregate amount of premiums paid; and
any other such circumstances which result in a reduction in sales or
administrative expenses, lower taxes or lower risks. Any reduction in charges
will be reasonable and will apply uniformly to all prospective policy purchasers
in the
38
<PAGE>
class and will not unfairly discriminate against any owner.
HOW WE MARKET THE POLICIES
Signator Investors, Inc. ("Signator"), an indirect wholly-owned subsidiary of
John Hancock located at 197 Clarendon Street, Boston, MA 02117, is registered as
a broker-dealer under the Securities Exchange Act of 1934 and is a member of the
National Association of Securities Dealers, Inc. and the Securities Investor
Protection Corporation. Signator acts as principal underwriter and principal
distributor of the policies pursuant to a sales agreement among John Hancock,
Signator, JHVLICO, and the Account. Signator also serves as principal
underwriter for John Hancock Variable Annuity Accounts U, I and V, John Hancock
Mutual Variable Life Insurance Account UV and John Hancock Variable Life
Accounts U and V, all of which are registered under the 1940 Act. Signator is
also the principal underwriter for John Hancock Variable Series Trust I.
Applications for policies are solicited by agents who are licensed by state
insurance authorities to sell JHVLICO's policies and who are also registered
representatives ("representatives") of Signator or other broker-dealer firms, as
discussed below. John Hancock (on behalf of JHVLICO) performs insurance
underwriting and determines whether to accept or reject the application for a
policy and each insured person's risk classification. JHVLICO will make the
appropriate refund if a policy ultimately is not issued or is returned under the
"free look" provision. Officers and employees of John Hancock and JHVLICO are
covered by a blanket bond by a commercial carrier in the amount of $25 million.
Signator's representatives are compensated for sales of the policies on a
commission and service fee basis by Signator, and JHVLICO reimburses Signator
for such compensation and for other direct and indirect expenses (including
agency expense allowances, general agent, district manager and supervisor's
compensation, agent's training allowances, deferred compensation and insurance
benefits of agents, general agents, district managers and supervisors, agency
office clerical expenses and advertising) actually incurred in connection with
the marketing and sale of the policies.
The maximum commission payable to a Signator representative for selling a
policy is 65% of the Target Premium paid in the first policy year, 10% of the
Target Premium paid in the second through tenth policy years, and 3% of the
Target Premium paid in each policy year thereafter. The maximum commission on
any premium paid in any policy year in excess of the Target Premium is 3%.
Representatives with less than four years of service with Signator and those
compensated on salary plus bonus or level commission programs may be paid on a
different basis. Representatives who meet certain productivity and persistency
standards with respect to the sale of policies issued by JHVLICO and John
Hancock will be eligible for additional compensation.
The policies are also sold through other registered broker-dealers that have
entered into selling agreements with Signator and whose representatives are
authorized by applicable law to sell variable life insurance policies. The
commissions which will be paid by such broker-dealers to their representatives
will be in accordance with their established rules. The commission rates may be
more or less than those set forth above for Signator's representatives. In
addition, their qualified registered representatives may be reimbursed by the
broker-dealers under expense reimbursement allowance programs in any year for
approved voucherable expenses incurred. Signator will compensate the
broker-dealers as provided in the selling agreements, and JHVLICO will reimburse
Signator for such amounts and for certain other direct expenses in connection
with marketing the policies through other broker-dealers.
Representatives of Signator and the other broker-dealers mentioned above may
also earn "credits"
39
<PAGE>
toward qualification for attendance at certain business meetings sponsored by
John Hancock.
The offering of the policies is intended to be continuous, but neither JHVLICO
nor Signator is obligated to sell any particular amount of policies.
TAX CONSIDERATIONS
This description of federal income tax consequences is only a brief summary
and is not intended as tax advice. Tax consequences will vary based on your own
particular circumstances, and for further information you should consult a
qualified tax advisor. Federal, state and local tax laws, regulations and
interpretations can change from time to time. As a result, the tax consequences
to you and the beneficiary may be altered, in some cases retroactively.
Policy proceeds
We believe the policy will receive the same federal income and estate tax
treatment as fixed benefit life insurance policies. Section 7702 of the Internal
Revenue Code (the "Code") defines life insurance for federal tax purposes. If
certain standards are met at issue and over the life of the policy, the policy
will satisfy that definition. We will monitor compliance with these standards.
If the policy complies with the definition of life insurance, we believe the
death benefit under the policy will be excludable from the beneficiary's gross
income under the Code. In addition, increases in account value as a result of
interest or investment experience will not be subject to federal income tax
unless and until values are actually received through distributions.
Distributions for tax purposes can include amounts received upon surrender or
partial withdrawals. You may also be deemed to have received a distribution for
tax purposes if you assign all or part of your policy rights or change your
policy's ownership.
In general, the owner will be taxed on the amount of distributions that exceed
the premiums paid under the policy. But under certain circumstances within the
first 15 policy years, the owner may be taxed on a distribution even if total
withdrawals do not exceed total premiums paid. Any taxable distribution will be
ordinary income to the owner (rather than capital gains).
We also believe that, except as noted below, loans received under the policy
will be treated as indebtedness of an owner and that no part of any loan will
constitute income to the owner. However, the amount of any outstanding loan that
was not previously considered income (as discussed below) will be treated as if
it had been distributed to the owner if the policy terminates for any reason.
It is possible that, despite our monitoring, a policy might fail to qualify as
life insurance under Section 7702 of the Code. This could happen, for example,
if we inadvertently failed to return to you any premium payments that were in
excess of permitted amounts, or if a 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.
40
<PAGE>
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 591/2.
Furthermore, any time there is a "material change" in a policy (such as an
increase in Additional Sum Insured, the addition of certain other policy
benefits after issue, a change in death benefit option, or reinstatement of a
lapsed policy), the policy will have a new 7-pay limit as if it were a
newly-issued policy. If a prescribed portion of the policy's then account value,
plus all other premiums paid within 7 years after the material change, at any
time exceed the new 7-pay limit, the policy will become a modified endowment.
Moreover, if benefits under a policy are reduced (such as a reduction in the
Total Sum Insured or death benefit or the reduction or cancellation of certain
rider benefits) during the 7 years in which a 7-pay test is being applied, the
7-pay limit will be recalculated based on the reduced benefits. If the premiums
paid to date are greater than the recalculated 7-pay limit, the policy will
become a modified endowment.
All modified endowments issued by the same insurer (or its affiliates) to the
owner during any calendar year generally will be treated as one contract for the
purpose of applying the modified endowment rules. A policy received in exchange
for a modified endowment will itself also be a modified endowment. You should
consult your tax advisor if you have questions regarding the possible impact of
the 7-pay limit on your policy.
Corporate and H.R. 10 plans
The policy may be acquired in connection with the funding of retirement plans
satisfying the qualification requirements of Section 401 of the Code. If so, the
Code provisions relating to such plans and life insurance benefits thereunder
should be carefully scrutinized. We are not responsible for compliance with the
terms of any such plan or with the requirements of applicable provisions of the
Code.
REPORTS THAT YOU WILL RECEIVE
At least annually, we will send you a statement setting forth the following
information as of the end of the most recent reporting period: the amount of the
death benefit, the Basic Sum Insured and the Additional Sum Insured, the account
value, the portion of the account value in each investment option, the surrender
value, premiums received and charges deducted from premiums since the last
report, and any outstanding policy loan (and interest
41
<PAGE>
charged for the preceding policy year). Moreover, you also will receive
confirmations of premium payments, transfers among investment options, policy
loans, partial withdrawals and certain other policy transactions.
Semiannually we will send you a report containing the financial statements of
each 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 Trusts. We will vote the shares of each of the
funds of the Trusts which are deemed attributable to variable life insurance
policies at regular and special meetings of the Trusts' shareholders in
accordance with instructions received from owners of such policies. Shares of
the Trusts 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 Trust's meeting. Owners of
policies may give instructions regarding the election of the Board of Trustees
or Board of Directors 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 a 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.
42
<PAGE>
In our policies, we reserve the right to make certain changes if they would
serve the best interests of policy owners or would be appropriate in carrying
out the purposes of the policies. Such changes include the following:
. Changes necessary to comply with or obtain or continue exemptions under
the federal securities laws
. Combining or removing investment options
. Changes in the form of organization of any separate account
Any such changes will be made only to the extent permitted by applicable laws
and only in the manner permitted by such laws. When required by law, we will
obtain your approval of the changes and the approval of any appropriate
regulatory authority.
ADJUSTMENTS WE MAKE TO DEATH BENEFITS
If the insured person commits suicide within certain time periods, the amount
of death benefit we pay will be limited as described in the policy. Also, if an
application misstated the age or gender of the insured person, we will adjust
the amount of any death benefit as described in the policy.
WHEN WE PAY POLICY PROCEEDS
General
We will pay any death benefit, withdrawal, surrender value or loan within 7
days after we receive the last required form or request (and, with respect to
the death benefit, any other documentation that may be required). If we don't
have information about the desired manner of payment within 7 days after the
date we receive notification of the insured person's death, we will pay the
proceeds as a single sum, normally within 7 days thereafter.
Delay to challenge coverage
We may challenge the validity of your insurance policy based on any material
misstatements made to us in the application for the policy. We cannot make such
a challenge, however, beyond certain time limits that are specified in the
policy.
Delay for check clearance
We reserve the right to defer payment of that portion of your account value
that is attributable to a premium payment made by check for a reasonable period
of time (not to exceed 15 days) to allow the check to clear the banking system.
Delay of separate account proceeds
We reserve the right to defer payment of any death benefit, loan or other
distribution that is derived from a variable investment option if (a) the New
York Stock Exchange is closed (other than customary weekend and holiday
closings) or trading on the New York Stock Exchange is restricted; (b) an
emergency exists, as a result of which disposal of securities is not reasonably
practicable or it is not reasonably practicable to fairly determine the account
value; or (c) the SEC by order permits the delay for the protection of owners.
Transfers and allocations of account value among the investment options may also
be postponed under these circumstances. If we need to defer calculation of
separate account values for any of the foregoing reasons, all delayed
transactions will be processed at the next values that we do compute.
OTHER DETAILS ABOUT EXERCISING RIGHTS AND PAYING BENEFITS
Joint ownership
If more than one person owns a policy, all owners must join in most requests
to exercise rights under the policy.
Assigning your policy
You may assign your rights in the policy to someone else as collateral for a
loan or for some other reason. Assignments do not require the consent of any
revocable beneficiary. A copy of the assignment must be forwarded to us. We are
not responsible for
43
<PAGE>
any payment we make or any action we take before we receive notice of the
assignment in good order. Nor are we responsible for the validity of the
assignment. An absolute assignment is a change of ownership. All collateral
assignees of record must consent to any full surrender, partial withdrawal or
loan from the policy.
Your beneficiary
You name your beneficiary when you apply for the policy. The beneficiary is
entitled to the proceeds we pay following the insured person's death. You may
change the beneficiary during the insured person's lifetime. Such a change
requires the consent of any irrevocable named beneficiary. A new beneficiary
designation is effective as of the date you sign it, but will not affect any
payments we make before we receive it. If no beneficiary is living when the
insured person dies, we will pay the insurance proceeds to the owner or the
owner's estate.
LEGAL MATTERS
The legal validity of the policies described in this prospectus has been
passed on by Ronald J. Bocage, Vice President and Counsel for JHVLICO. Messrs.
Freedman, Levy, Kroll & Simonds, Washington, D.C., have advised us on certain
Federal securities law matters in connection with the policies.
REGISTRATION STATEMENT FILED WITH THE SEC
This prospectus omits certain information contained in the Registration
Statement which has been filed with the SEC. More details may be obtained from
the SEC upon payment of the prescribed fee.
ACCOUNTING AND ACTUARIAL EXPERTS
The financial statements of JHVLICO included in this prospectus have been
audited by Ernst & Young LLP, independent auditors, for the periods indicated in
their report thereon which appears elsewhere herein and has been included in
reliance on their report given on their authority as experts in accounting and
auditing. Actuarial matters included in this prospectus have been examined by
Deborah A. Poppel, F.S.A., an Actuary of JHVLICO 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.
44
<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 Principal Occupations
- ----------------------- ---------------------
Officers
- --------
<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.
45
<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
46
<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.
47
<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>
INCOME
Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . $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.
48
<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>
Cash flows from operating activities:
Insurance premiums . . . . . . . . . . . . . .
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
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.
49
<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
50
<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.
51
<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
52
<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 41/2% for policies issued on or thereafter. Reserves for
single premium policies are determined by the net single premium method using
the 1958 CSO mortality table, with an assumed interest rate of 4%. Reserves for
universal life policies issued prior to 1985 are equal to the gross account
value which at all times exceeds minimum statutory requirements. Reserves for
universal life policies issued from 1985 through 1988 are maintained at the
greater of the Commissioner's Reserve Valuation Method (CRVM) using the 1958 CSO
mortality table, with 41/2% interest or the cash surrender value. Reserves for
universal life policies issued after 1988 and for flexible variable policies are
maintained using the greater of the cash surrender value or the CRVM method with
the 1980 CSO mortality table and 51/2% interest for policies issued from 1988
through 1992; 5% interest for policies issued in 1993 and 1994; and 41/2%
interest for policies issued in 1995 through 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
53
<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.
54
<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>
<S> <C> <C>
1999 1998
------ ------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
(IN MILLIONS)
</TABLE>
<TABLE>
<CAPTION>
<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>
55
<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>
<S> <C> <C>
1999 1998
------ ------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
(IN MILLIONS)
</TABLE>
<TABLE>
<CAPTION>
<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>
<S> <C> <C>
1999 1998
------ ------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
(IN MILLIONS)
</TABLE>
<TABLE>
<CAPTION>
<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>
56
<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.
57
<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>
<S> <C> <C> <C> <C>
-------------- -------------- --------------- ---------
(IN MILLIONS)
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 . . . . .
======== ===== ====== ========
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 . . . . . 15.1
======== ===== ====== ========
</TABLE>
58
<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>
<S> <C> <C>
FAIR
VALUE VALUE
-------- ---------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
(IN MILLIONS)
</TABLE>
<TABLE>
<CAPTION>
<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
======== =========
</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.
59
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
GEOGRAPHIC
PROPERTY TYPE CONCENTRATION
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.
60
<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>
<S> <C> <C> <C> <S> <C> <C>
NUMBER OF CONTRACTS/ ASSETS (LIABILITIES)
------------------
NOTIONAL AMOUNTS 1999 1998
FAIR VALUE
---------
------- ------- --------- --------- ---------
(IN MILLIONS)
Futures contracts to $ (0.5)
sell securities 362.0 947.0 $0.6 $0.6 $(0.5)
Interest rate swap (17.7)
agreements $965.0 $365.0 -- 11.5 --
Interest rate cap
agreements 239.4 89.4 5.6 5.6 3.1
Currency rate swap (3.3)
agreements 15.8 15.8 -- (1.6) --
</TABLE>
61
<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>
<S> <C> <C>
DECEMBER 31, 1999 PERCENT
---------------- ------
(IN MILLIONS)
</TABLE>
<TABLE>
<CAPTION>
<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 287.1 10.7
at book value (without adjustment) . . . . .
Not subject to discretionary withdrawal--general
account. . . . . . . . . . . . . . . . . . . . 15.4 0.6
--------
Total annuity reserves and deposit liabilities $2,673.4 100.0%
========
</TABLE>
62
<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.
63
<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>
<S> <C>
DECEMBER 31,
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
--------------- ---------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
---------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
(IN MILLIONS)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
ASSETS
Bonds--Note 6. . . . .
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.
64
<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.
65
<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
66
<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 Varidable
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.
67
<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> <C> <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> <C> <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.
68
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1999
<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.
69
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SMALL/ MID
CAP CORE HIGH
BOND SUBACCOUNT YIELD
INDEX ---------- BOND
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.
70
<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
(loss) . . . . . . . 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 . 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.
71
<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
(loss) . . . . . . . 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 . 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 . 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 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.
72
<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.
73
<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.
74
<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.
75
<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).
76
<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.
77
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
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.
78
<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.
79
<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 $ 96,407,275 $ 47,996,192
============ =========== =========== ============= ============ ============
</TABLE>
See accompanying notes.
80
<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 27,490,588 12,911,228
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.
81
<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
-----------------------------------------------------
1999 1998 1997
------------------------- ------------- ------------
<S> <C> <C> <C>
Increase (decrease) in
net assets from
operations:
Net investment income $ 5,503,450 $ 1,211,729 $ 378,697
Net realized gains
(losses). . . . . . 7,681,081 691,270 901,978
Net unrealized
appreciation
(depreciation)
during the period . 4,678,509 6,098,919 392,256
------------------------ ------------ -----------
Net increase
(decrease) in net
assets resulting from
operations . . . . . 17,863,040 8,001,918 1,672,931
From policyholder
transactions:
Net premiums from
policyholders . . . 225,994,914 60,690,933 23,412,687
Net benefits to
policyholders . . . (147,909,470) (31,166,123) (9,622,006)
------------------------ ------------ -----------
Net increase in net
assets resulting from
policyholder
transactions . . . . 78,085,444 29,524,810 13,790,681
------------------------ ------------ -----------
Net increase in net
assets . . . . . . . 95,948,484 37,526,728 15,463,612
Net assets at
beginning of period 53,964,647 16,437,919 974,307
------------------------ ------------ -----------
Net assets at end of
period . . . . . . . $ 149,913,131 $ 53,964,647 $16,437,919
======================== ============ ===========
<CAPTION>
GLOBAL BOND SUBACCOUNT
--------------------------------------------------
1999 1998 1997
------------------------ ------------ -------------
<S> <C> <C> <C>
Increase (decrease) in
net assets from
operations:
Net investment income $ 424,767 $ 283,651 $ 71,030
Net realized gains (204,675) 81,659 8,335
(losses). . . . . .
Net unrealized
appreciation (433,526) 43,608 (11,727)
(depreciation) ----------------------- ----------- ----------
during the period .
Net increase (213,434) 408,918 67,638
(decrease) in net
assets resulting from
operations . . . . .
From policyholder
transactions:
Net premiums from 11,387,398 9,258,713 1,828,179
policyholders . . .
Net benefits to
policyholders . . . (10,615,019) (3,008,341) (534,164)
----------------------- ----------- ----------
Net increase in net
assets resulting from 772,379 6,250,372 1,294,015
policyholder ----------------------- ----------- ----------
transactions . . . .
Net increase in net 558,945 6,659,290 1,361,653
assets . . . . . . .
Net assets at
beginning of period 8,279,571 1,620,281 258,628
----------------------- ----------- ----------
Net assets at end of
period . . . . . . . $ 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.
82
<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
SUBACCOUNT
--------------------------------------------------------------------
1999 1998 1997
----------------------------------------- ------------ ------------
<S> <C> <C> <C>
Increase (decrease) in
net assets from
operations:
Net investment income $ 449,994 $ 9,897 $ 118,150
Net realized gains
(losses). . . . . . 624,068 (445,752) 614,358
Net unrealized
appreciation
(depreciation)
during the period . 3,431,408 432,064 (368,570)
---------------------------------------- ----------- -----------
Net increase
(decrease) in net
assets resulting from
operations . . . . . 4,505,470 (3,791) 363,938
From policyholder
transactions:
Net premiums from
policyholders . . . 25,135,447 13,982,031 10,030,418
Net benefits to
policyholders . . . (22,331,613) (9,695,520) (5,969,436)
---------------------------------------- ----------- -----------
Net increase in net
assets resulting from
policyholder
transactions . . . . 2,803,834 4,286,511 4,060,982
---------------------------------------- ----------- -----------
Net increase in net
assets . . . . . . . 7,309,304 4,282,720 4,424,920
Net assets at
beginning of period 9,675,718 5,392,998 968,078
---------------------------------------- ----------- -----------
Net assets at end of
period . . . . . . . $ 16,985,022 $ 9,675,718 $ 5,392,998
======================================== =========== ===========
<CAPTION>
ENHANCED U.S.
EQUITY SUBACCOUNT
---------------------------------------------------------
1999 1998 1997*
-------------------------------- ------------ ------------
<S> <C> <C> <C>
Increase (decrease) in
net assets from
operations:
Net investment income $ 518,137 $ 68,233 $ 14,857
Net realized gains 264,436 87,723 4,177
(losses). . . . . .
Net unrealized
appreciation 151,562 89,677 6,844
(depreciation) ------------------------------- ----------- ---------
during the period .
Net increase 934,135 245,633 25,878
(decrease) in net
assets resulting from
operations . . . . .
From policyholder
transactions:
Net premiums from 6,480,741 3,031,309 475,503
policyholders . . .
Net benefits to
policyholders . . . (3,151,279) (1,299,530) (4,176)
------------------------------- ----------- ---------
Net increase in net
assets resulting from 3,329,462 1,731,779 471,327
policyholder ------------------------------- ----------- ---------
transactions . . . .
Net increase in net 4,263,597 1,977,412 497,205
assets . . . . . . .
Net assets at
beginning of period 2,474,617 497,205 0
------------------------------- ----------- ---------
Net assets at end of
period . . . . . . . $ 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) (2,613,505) (2,191,135) (2,358,694) (124,467)
------------ ----------- ----------- ----------- ----------- ----------
Net increase in net assets resulting from
policyholder 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.
83
<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.
84
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
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.
85
<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.
86
<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>
87
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT S
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Purchases, including reinvestment of dividend distributions, and proceeds from
sales of shares in the Portfolios of the Fund and of M Fund 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>
88
<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>
89
<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>
90
<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>
91
<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 . . . . 15,710 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>
92
<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>
93
<PAGE>
ALPHABETICAL INDEX OF KEY WORDS AND PHRASES
This index should help you locate more information about many of the important
concepts in this prospectus.
<TABLE>
<CAPTION>
KEY WORD OR PHRASE PAGE KEY WORD OR PHRASE PAGE
<S> <C> <C> <C>
Account . . . . . . . 33 monthly deduction date. . . . . . . 30
account value . . . . 8 mortality and expense risk charge . 10
Additional Sum Insured 15 optional benefits . . . . . . . . . 10
attained age. . . . . 9 options for death benefit . . . . . 14
Basic Sum Insured . . 15 owner . . . . . . . . . . . . . . . 5
beneficiary . . . . . 44 partial withdrawal. . . . . . . . . 13
business day. . . . . 34 partial withdrawal charge . . . . . 10
changing Option A or B 17 payment options . . . . . . . . . . 16
changing the Total Sum Planned Premium . . . . . . . . . . 6
Insured . . . . . . 16 policy anniversary. . . . . . . . . 30
charges . . . . . . . 9 policy year . . . . . . . . . . . . 30
Code. . . . . . . . . 40 premium; premium payment. . . . . . 5
cost of insurance prospectus. . . . . . . . . . . . . 3
rates. . . . . . . . 9 receive; receipt. . . . . . . . . . 19
date of issue . . . . 35 reinstate; reinstatement. . . . . . 7
death benefit . . . . 5 sales charges . . . . . . . . . . . 9
deductions. . . . . . 9 SEC . . . . . . . . . . . . . . . . 2
enhanced cash value Separate Account. . . . . . . . . . 28
rider. . . . . . . . 16 Servicing Office. . . . . . . . . . 2
expenses of the Trusts 10 special loan account. . . . . . . . 14
fixed investment subaccount. . . . . . . . . . . . . 28
option . . . . . . . 34 surrender . . . . . . . . . . . . . 13
full surrender. . . . 13 surrender value . . . . . . . . . . 13
fund. . . . . . . . . 2 Target Premium. . . . . . . . . . . 9
grace period. . . . . 7 tax considerations. . . . . . . . . 35
guaranteed minimum telephone transfers . . . . . . . . 19
death benefit . . . 7 Total Sum Insured . . . . . . . . . 14
Guaranteed Minimum transfers of account value. . . . . 12
Death Benefit Premium 7 Trust . . . . . . . . . . . . . . . 2
insurance charge. . . 9 variable investment options . . . . 1
insured person. . . . 5 we; us. . . . . . . . . . . . . . . 28
investment options. . 1 withdrawal. . . . . . . . . . . . . 13
JHVLICO . . . . . . . 33 withdrawal charges. . . . . . . . . 10
lapse . . . . . . . . 7 you; your . . . . . . . . . . . . . 5
loan. . . . . . . . . 14
loan interest . . . . 14
maximum premiums. . . 6
Minimum Initial
Premium. . . . . . . 34
minimum insurance
amount . . . . . . . 16
minimum premiums. . . 5
modified endowment
contract . . . . . . 41
</TABLE>
94
<PAGE>
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that Section.
John Hancock Variable Life Insurance Company represents that the fees and
charges deducted under the Policies, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred, and the
risks assumed by the insurance company.
UNDERTAKING REGARDING INDEMNIFICATION
Pursuant to Section X of JHVLICO's Bylaws and Section 67 of the
Massachusetts Business Corporation Law, JHVLICO indemnifies each director,
former director, officer, and former officer, and his heirs and legal
representatives from liability incurred or imposed in connection with any legal
action in which he may be involved by reason of any alleged act or omission as
an officer or a director of JHVLICO.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following Papers and Documents:
The facing sheet.
Cross-Reference Table.
The prospectuses consisting of __ and __ pages, respectively.
The undertaking regarding indemnification.
The undertaking to file reports.
The signatures.
The following exhibits:
<PAGE>
1.A. (1) JHVLICO Board Resolution establishing the separate account,
previously filed electronically on October 30, 1996.
(2) Not Applicable.
(3) (a) Form of Distribution and Servicing Agreement by and among
John Hancock Distributors, Inc., John Mutual Life Insurance
Company, and John Hancock Variable Life Insurance Company,
previously filed electronically on April 23, 1997.
(b) Specimen Variable Contracts Selling Agreement between John
Hancock Mutual Life Insurance Company and selling broker-
dealers, previously filed electronically on April 23, 1997.
(c) Schedule of sales commissions included in the text under the
heading "Distribution of Policies" in the prospectus.
(4) Not Applicable.
(5) Form of flexible premium variable life insurance policy,
previously filed electronically on April 3, 1997.
(6) (a) JHVLICO Certificate of Incorporation, previously filed
electronically on October 30, 1996.
(b) JHVLICO By-laws, previously filed electronically on October
30, 1996.
(7) Not Applicable.
(8) (a) Participation Agreement Among Templeton Variable Products Series
Fund, Franklin Templeton distributors, Inc. and John Hancock Life
Insurance Company, John Hancock Variable Life Insurance company,
and Investors Partner Life Insurance Company, filed in Post-
Effective Amendment No. 1 to file No. 333-81127, contemporaneously
herewith.
(b) Participation Agreement Among Variable Insurance Products Fund II,
Fidelity Distributors Corporation and John Hancock Mutual Life
Insurance Company, filed in Post-Effective Amendment No. 1 to file
No. 333-81127, contemporaneously herewith.
(c) Participation Agreement Among Variable Insurance Products Fund,
Fidelity Distributors Corporation and John Hancock Mutual Life
Insurance Company, filed in Post-Effective Amendment No. 1 to file
No. 333-81127, contemporaneously herewith.
(d) Participation Agreement Among MFS Variable Insurance Trust, John
Hancock Mutual Life Insurance Company and Massachusetts Financial
Services Company, filed in Post-Effective Amendment No. 1 to file
No. 333-81127, contemporaneously herewith.
(e) Participation Agreement By And Among AIM Variable Insurance Funds,
Inc., AIM Distributors, Inc., John Hancock Mutual Life Insurance
Company and Certain Of Its Affiliated Insurance Companies, Each On
Behalf Of Itself And Its Separate Accounts, And John Hancock
Funds, Inc., filed in Post-Effective Amendment No. 1 to file No.
333-81127, contemporaneously herewith.
(9) Not Applicable.
(10) Forms of individual and master applications for Policy, previously
filed electronically on October 30, 1996.
(11) Not Applicable. The Registrant invests only in shares of open-end
Funds.
<PAGE>
2. Included as exhibit 1.A(5) above.
3. Opinion and consent of counsel as to securities being registered,
previously filed electronically on April 3, 1997.
4. Not Applicable
5. Not Applicable
6. Opinion and consent of actuary.
7. Consent of independent auditors (Filed herewith).
8. Memorandum describing JHVLICO's issuance, transfer and redemption
procedures for the flexible premium policy pursuant to Rule
6e-3(T)(b)(12)(iii), previously filed electronically on April 3, 1997.
9. Powers of attorney for Tomlinson, D'Alessandro, Shaw, Luddy, Lee, Reitano,
Van Leer and Paster, previously filed electronically on October 30, 1996.
Power of attorney for Ronald J. Bocage, incorporated by reference from Form
10-K annual report for John Hancock Variable Life Insurance Company (File
No. 33-62895), filed March 28, 1997. Powers of Attorney for Bruce M. Jones
and Paul Strong, incorporated by reference from the Post-Effective
Amendment No. 2 to File No. 333-81127, Filed contemporaneously herewith.
10. Opinion of Counsel as to eligibility of this Post-Effective Amendment for
filing pursuant to Rule 485(b)(Filed herewith).
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the John
Hancock Variable Life Insurance Company has duly caused this amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunder
duly authorized, and its seal to be hereunto fixed and attested, all in the City
of Boston and Commonwealth of Massachusetts on the 1st day of May, 2000.
JOHN HANCOCK VARIABLE LIFE
INSURANCE COMPANY
(SEAL)
By /s/ MICHELE G. VAN LEER
-----------------------
Michele G. Van Leer
President
Attest: /s/ PETER H. SCAVONGELLI
------------------------
Peter H. Scavongelli
Secretary
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment to the Registration Statement has been signed below by the
following persons in the capacities with John Hancock Variable Life Insurance
Company and on the dates indicated.
Signatures Title Date
- ---------- ----- ----
/s/ PATRICK F. SMITH
- --------------------
Patrick F. Smith Controller (Principal Accounting May 1, 2000
Officer and Acting Principal
Financial Officer)
/s/ MICHELE G. VAN LEER
- -----------------------
Michele G. Van Leer Vice Chairman of the Board
for herself and as and President(Acting Principal
Attorney-in-Fact Executive Officer) May 1, 2000
For: David F. D'Alessandro Chairman of the Board
Robert S. Paster Director
Thomas J. Lee Director
Barbara L. Luddy Director
Ronald J. Bocage Director
Robert R. Reitano Director
Bruce M. Jones Director
Paul Strong Director
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, certifies that it meets all of the requirements for effectiveness of
this Registration Statement pursuant to Rule 485(b) under the Securities Act of
1933 and has duly caused this Post-Effective Amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, and its seal to be hereunto fixed and attested, all in the City of
Boston and Commonwealth of Massachusetts on the 1st day of May, 2000.
On behalf of the Registrant
By John Hancock Variable Life Insurance Company
(Depositor)
(SEAL)
By /s/ Michele G. Van Leer
-----------------------
Michele G. Van Leer
President
Attest /s/ PETER H. SCAVONGELLI
------------------------
Peter H. Scavongelli
Secretary
<PAGE>
EXHIBIT 6
[John Hancock Life Insurance Company Letterhead]
May 1, 2000
Board of Directors of the John Hancock Variable Life Insurance Company
Re: Actuarial Opinion:
Members of the Board:
This opinion is furnished in connection with the filing the Amendment
to the Registration Statement on Form S-6 in which this opinion is being filed
as an exhibit, pursuant to the Securities Act of 1933, as amended, with respect
to variable life insurance policies under which amounts will be allocated to one
or more of the subaccounts of one or more variable life insurance separate
accounts. The policies described in the prospectus(es) in said Amendment.
The policy form was reviewed under my direction, and I am familiar with
the amended Registration Statement and exhibits. In my opinion, the
illustrations of policy benefits, values, and accumulated premiums shown in the
prospectus(es) (or appendix thereto) included in the Amendment, based on the
assumptions stated with the illustrations, are consistent with the provisions of
the policies Such assumptions, including, to the extent applicable, the current
cost of insurance rates, current scheduled rates of other charges, current
dividend scales, and any other currently scheduled credits, are reasonable. The
policies have not been designed so as to make the relationship between premiums
and benefits, as shown in the illustrations, appear disproportionately more
favorable to a prospective purchaser of a policy for an insured person(s) with
the characteristics illustrated than to a prospective purchaser of a policy for
an insured person(s) with other characteristics; nor have the particular
examples set forth in the illustrations been selected for the purpose of making
this relationship appear more favorable.
I hereby consent to the filing of this opinion as an exhibit to the
amended Registration Statement and to the use of my name under the heading
"Experts" or "Accounting and Actuarial Experts" in the propectus(es).
Deborah A. Poppel, FSA
Second Vice President
<PAGE>
EXHIBIT 7
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Accounting and
actuarial experts" in the Prospectus and to the inclusion of our reports dated
February 11, 2000, with respect to the financial statements included in the
Annual Report of John Hancock Variable Life Account S and dated March 10, 2000
with respect to the financial statements included in the Annual Report of John
Hancock Variable Life Insurance Company, included in this Post-Effective
Amendment No. 3 to the Registration Statement (Form S-6, No. 333-15075).
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Boston, Massachusetts
April 26, 2000
<PAGE>
EXHIBIT 10
[LETTERHEAD OF JOHN HANCOCK LIFE INSURANCE COMPANY]
May 1, 2000
United States Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
John Hancock Variable Life Account S
File Nos. 333-15075 and 811-7782
Commissioners:
This opinion is being furnished with respect to the filing of
Post-Effective Amendment No. 3 under the Securities Act of 1933 on the Form S-6
Registration Statement of John Hancock Variable Life Account S as required by
Rule 485 under the 1933 Act.
We have acted as counsel to Registrant for the purpose of preparing
this Post-Effective Amendment which is being filed pursuant to paragraph (b) of
Rule 485 and hereby represent to the Commission that in our opinion this Post-
Effective Amendment does not contain disclosures which would render it
ineligible to become effective pursuant to paragraph (b).
We hereby consent to the filing of this opinion with and as a part of
this Post-Effective Amendment to Registrant's Registration Statement with the
Commission.
Very truly yours,
/s/ RONALD J. BOCAGE
--------------------
Ronald J. Bocage
Counsel
