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File Nos. 333-16949 and 811-8696
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[_]
PRE-EFFECTIVE AMENDMENT NO. 1 [X]
[_]
POST-EFFECTIVE AMENDMENT NO.
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[X]
AMENDMENT NO. 5
(CHECK APPROPRIATE BOX OR BOXES.)
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT I
(EXACT NAME OF REGISTRANT)
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
(NAME OF DEPOSITOR)
JOHN HANCOCK PLACE, BOSTON, MA 02117
(ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
DEPOSITOR'S TELEPHONE NUMBER, INCLUDING AREA CODE: (617) 572-5060
SANDRA M. DaDALT, ESQUIRE
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
JOHN HANCOCK PLACE
BOSTON, MA 02117
(NAME AND ADDRESS OF AGENT FOR SERVICE)
Approximate date of proposed public offering: as soon as practicable after the
effective date of this Registration Statement.
An indefinite amount of the Registrant's securities has been registered pursuant
to a declaration under Rule 24f-2, under the Investment Company Act of 1940, set
out in a previously filed Form N-4 Registration Statement of Registrant and
Registrant's Depositor (File No. 33-82648). Registrant filed its Rule 24f-2
Notice for the December 31, 1996 fiscal year on February 26, 1996.
Title and amount of securities being registered: interests under flexible
premium deferred variable annuity contracts.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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JOHN HANCOCK VARIABLE ANNUITY ACCOUNT I
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
FORM N-4 ITEM NO. SECTION IN PROSPECTUS
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<C> <S> <C>
1. Cover Page................... Cover Page
2. Definitions.................. Special Terms; Variable Account Valuation
Procedures
3. Synopsis or Highlights....... Summary Information
4. Condensed Financial
Information................. Not Available
5. General Description of
Registrant, Depositor JHVLICO, John Hancock, The Account and the
and Portfolio Companies..... Series Fund; Voting Privileges
6. Deductions................... Charges Variable Annuity Contracts
7. General Description of
Variable Annuity Contracts.. The Contracts; The Accumulation Period; The
Annuity Period; Miscellaneous Provisions;
Changes in Applicable Law-Funding and
Otherwise
8. Annuity Period............... The Annuity Period
9. Death Benefit................ The Accumulation Period; The Annuity Period
10. Purchases and Contract The Contracts; The Accumulation Period;
Values...................... Variable Account Valuation Procedures;
Performance
11. Redemptions.................. The Accumulation Period; Miscellaneous
Provisions
12. Taxes........................ Federal Income Taxes
13. Legal Proceedings............ Not Applicable
14. Table of Contents of
Statement of Additional Table of Contents of Statement of
Information................. Additional Information
</TABLE>
<PAGE>
[LOGO OF JOHN HANCOCK APPEARS HERE]
Variable Life
Insurance Company
INDIVIDUAL COMBINATION FIXED/VARIABLE ANNUITY CONTRACTS
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT I
P.O. Box 9116
Boston, Massachusetts 02205-8654
TELEPHONE 800-741-8184
FAX 617-572-1571
PROSPECTUS MAY 1, 1997
The individual deferred annuity contracts ("Contracts") described in this
prospectus can be funded, at the discretion of the Owner by, at any one time,
up to ten of the eighteen subaccounts of John Hancock Variable Annuity Account
I ("Account"), a fixed annuity account (the "Fixed Account"), or a combination
of the Fixed Account and up to nine of the subaccounts. The assets of each
subaccount will be invested in a corresponding Portfolio of John Hancock
Variable Series Trust I ("Fund"), a "series type" mutual fund advised by John
Hancock Mutual Life Insurance Company ("John Hancock"). The Fixed Account is a
part of the general account of John Hancock Variable Life Insurance Company
("JHVLICO").
This prospectus sets forth concisely information about the Account that a
prospective investor ought to know before investing. A statement of additional
information for the Account, dated May 1, 1997, has been filed with the
Securities and Exchange Commission ("Commission") and is incorporated herein
by reference. This statement, the table of contents of which appears at page
18 of this prospectus, is available upon request and without charge from
JHVLICO at the address above or at 888-742-6262.
Only the variable features of the Contracts are described in this
prospectus. For a summary of the fixed features, see "Appendix--The Fixed
Account and Fixed Account Value".
For additional information pertaining to the purchase of a Contract as an
Individual Retirement Annuity, see "Appendix--Variable Annuity Information for
Individual Retirement Annuities".
The prospectus for the Fund, which is attached to this prospectus, describes
the investment objectives, policies and risks of investing in the Portfolios
of the Fund: Managed, Growth & Income, Equity Index, Large Cap Value, Large
Cap Growth, Mid Cap Value, Mid Cap Growth, Special Opportunities, Real Estate
Equity, Small Cap Value, Small Cap Growth, International Balanced,
International Equities, International Opportunities, Short-Term U.S.
Government, Sovereign Bond, Strategic Bond, and Money Market.
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
IT IS NOT VALID UNLESS ATTACHED TO A CURRENT PROSPECTUS FOR THE FUND.
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
<S> <C>
SYNOPSIS OF EXPENSE INFORMATION............................................ 4
SPECIAL TERMS.............................................................. 5
SUMMARY INFORMATION........................................................ 5
THE VARIABLE ANNUITY....................................................... 7
JHVLICO, JOHN HANCOCK, THE ACCOUNT AND THE SERIES FUND..................... 7
CHARGES UNDER VARIABLE ANNUITY CONTRACTS................................... 10
Charges For Mortality And Expense Risks.................................. 10
Charges for Administrative Services...................................... 10
Variations in Charges.................................................... 10
Premium or Similar Taxes................................................. 10
THE CONTRACTS.............................................................. 11
Purchase of Contracts.................................................... 11
Annuity Direct Deposit Program........................................... 11
THE ACCUMULATION PERIOD.................................................... 11
Allocation of Purchase Payments (Accumulation Shares).................... 11
Value of Accumulation Shares............................................. 11
Transfers Among Subaccounts.............................................. 11
Dollar-Cost Averaging.................................................... 12
Surrender of Contract; Partial Withdrawals............................... 12
Systematic Withdrawal.................................................... 12
Death Benefit Before Date of Maturity.................................... 13
THE ANNUITY PERIOD......................................................... 13
Variable Monthly Annuity Payments........................................ 14
Assumed Investment Rate.................................................. 14
Calculation of Annuity Units............................................. 14
Annuity Options.......................................................... 14
Option A: Life Annuity with Five, Ten or Twenty Years Certain............ 14
Option B: Life Annuity Without Refund.................................... 14
Other Conditions......................................................... 14
VARIABLE ACCOUNT VALUATION PROCEDURES...................................... 15
MISCELLANEOUS PROVISIONS................................................... 15
Restriction on Assignment................................................ 15
Deferment of Payment..................................................... 15
Reservation of Rights.................................................... 15
Owner and Beneficiary.................................................... 15
FEDERAL INCOME TAXES....................................................... 16
The Account and JHVLICO.................................................. 16
Contracts Purchased Other Than to Fund a Tax Qualified Plan.............. 16
Diversification Requirements............................................. 16
Contracts Purchased Under Individual Retirement Annuity Plans (IRAs)..... 17
Withholding of Taxes..................................................... 17
See Your Own Tax Adviser................................................. 17
PERFORMANCE................................................................ 17
STATE REGULATION........................................................... 18
REPORTS.................................................................... 18
VOTING PRIVILEGES.......................................................... 18
CHANGES IN APPLICABLE LAW--FUNDING AND OTHERWISE........................... 18
LEGAL MATTERS.............................................................. 18
</TABLE>
2
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<TABLE>
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Page
<S> <C>
DISTRIBUTION OF THE CONTRACTS............................................. 18
REGISTRATION STATEMENT.................................................... 18
EXPERTS................................................................... 18
FINANCIAL STATEMENTS...................................................... 19
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION.................. 19
APPENDIX--THE FIXED ACCOUNT AND FIXED ACCOUNT VALUE....................... 20
APPENDIX--VARIABLE ANNUITY INFORMATION FOR INDIVIDUAL RETIREMENT
ANNUITIES................................................................ 22
APPENDIX--ILLUSTRATIVE ACCUMULATED VALUE AND ANNUITY PAYMENT TABLES....... 23
</TABLE>
THE CONTRACTS OFFERED BY THIS PROSPECTUS MAY NOT BE AVAILABLE IN ALL STATES.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, SECURITIES IN ANY STATE TO ANY PERSON TO WHOM IT IS UNLAWFUL TO
MAKE OR SOLICIT AN OFFER IN THAT STATE.
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SYNOPSIS OF EXPENSE INFORMATION
The purpose of this synopsis is to assist the Owner in understanding the
various costs and expenses that an Owner will bear directly or indirectly.
This synopsis includes expenses of the Account as well as those of the Fund.
This synopsis does not include any premium taxes that may be applicable. For a
more complete description of the Account charges, see "Charges under Variable
Annuity Contracts." For a more complete description of the investment advisory
fee charged each Portfolio and the annual operating expenses of each
Portfolio, see the prospectus for the Fund.
CONTRACT EXPENSES
<TABLE>
<S> <C>
Sales Load................................................................ None
Annual Contract Fee (Deducted only on Contracts having an Accumulated
Value of $10,000 or less)/1/............................................. $30
</TABLE>
SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of average account value)
<TABLE>
<S> <C>
Mortality and Expense Risk Charge......................................... 0.75%
Administrative Services Charge............................................ 0.25%
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Total Separate Account Annual Expenses.................................... 1.00%
</TABLE>
ANNUAL FUND OPERATING EXPENSES (as a percentage of average daily net assets)
The figures in the following chart reflect the investment management fees
currently payable and the 1996 non-advisory expenses that would have been
allocated to the Fund under the allocation rules currently in effect.
<TABLE>
<CAPTION>
OTHER FUND OTHER FUND
EXPENSES EXPENSES
AFTER TOTAL ABSENT
MANAGE- EXPENSE FUND EXPENSE
MENT REIMBURSE- OPERATING REIMBURSE-
FUND NAME FEE MENT EXPENSES MENT/2/
--------- ------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Managed................................. 0.34% 0.03% 0.37% N/A
Growth & Income......................... 0.25% 0.03% 0.28% N/A
Equity Index............................ 0.20% 0.25% 0.45% 1.61%
Large Cap Value......................... 0.75% 0.25% 1.00% 1.89%
Large Cap Growth........................ 0.40% 0.05% 0.45% N/A
Mid Cap Value........................... 0.80% 0.25% 1.05% 2.15%
Mid Cap Growth.......................... 0.85% 0.25% 1.10% 2.34%
Special Opportunities................... 0.75% 0.12% 0.87% N/A
Real Estate Equity...................... 0.60% 0.11% 0.71% N/A
Small Cap Value......................... 0.80% 0.25% 1.05% 2.06%
Small Cap Growth........................ 0.75% 0.25% 1.00% 1.55%
International Balanced.................. 0.85% 0.25% 1.10% 1.44%
International Equities.................. 0.60% 0.18% 0.78% N/A
International Opportunities............. 1.00% 0.25% 1.25% 2.76%
Short-Term U.S. Government.............. 0.30% 0.25% 0.55% 0.79%
Sovereign Bond.......................... 0.25% 0.06% 0.31% N/A
Strategic Bond.......................... 0.75% 0.25% 1.00% 1.57%
Money Market............................ 0.25% 0.07% 0.32% N/A
</TABLE>
The following examples should not be considered representations of past or
future expenses; actual expenses may be greater than or less than those shown
above.
EXAMPLES
If you surrender or annuitize your Contract at the end of the applicable
time period, you would pay the following current expenses on a $1,000 invest-
ment, assuming 5% annual return on assets:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
MANAGED......................................... 15 45 78 171
GROWTH & INCOME................................. 14 42 73 161
EQUITY INDEX.................................... 15 48 82 180
LARGE CAP VALUE................................. 21 65 111 239
LARGE CAP GROWTH................................ 15 48 82 180
MID CAP VALUE................................... 21 66 113 244
MID CAP GROWTH.................................. 22 68 116 249
SPECIAL OPPORTUNITIES........................... 20 61 104 225
REAL ESTATE EQUITY.............................. 18 56 96 208
SMALL CAP VALUE................................. 21 66 113 244
SMALL CAP GROWTH................................ 21 65 111 239
INTERNATIONAL BALANCED.......................... 22 68 116 249
INTERNATIONAL EQUITIES.......................... 19 58 100 216
INTERNATIONAL OPPORTUNITIES..................... 23 72 124 265
SHORT-TERM US GOVERNMENT........................ 16 51 88 191
SOVEREIGN BOND.................................. 14 43 75 165
STRATEGIC BOND.................................. 21 65 111 239
MONEY MARKET.................................... 14 44 76 166
</TABLE>
/1/ The annual contract fee is deducted only on Contracts having an Accumu-
lated Value of less than $10,000. The contract fee is deducted at the begin-
ning of each Contract year after the first and at a full surrender during a
Contract Year. The contract fee is assessed only during the Accumulation Peri-
od. In the preceding Examples, the annual contract fee has been expressed as
an annual percentage of assets based on past experience concerning Contract
fees collected on other variable annuity contracts using the same Contract fee
provision. The Company reserves the right to increase the annual Contract Fee
up to $50, subject to applicable state regulations.
/2/ John Hancock reimburses a Portfolio when the Portfolio's Other Expenses
exceed 0.25% of its average daily net asset value.
4
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SPECIAL TERMS
As used in this prospectus, the following terms have the indicated meanings:
ACCUMULATION SHARE: a unit of measurement used in determining the value of a
Contract prior to the commencement of annuity payments or, if earlier,
contract lapse. The value of an Accumulation Share for each subaccount will
reflect the investment performance of that subaccount and will vary in dollar
amount.
ACCUMULATED VALUE OF A CONTRACT: total value of the Accumulation Shares in
that Contract plus the Fixed Account Value of that Contract, if any.
ANNUITANT: the person on whose life the Contract is issued.
ANNUITY OPTION: the provisions under which a series of annuity payments is
made to the Annuitant or other payee, such as the Life Annuity with Ten Years
Certain.
ANNUITY UNIT: a unit of measurement used in determining the amount of each
variable annuity payment. The value of an Annuity Unit for each subaccount
will depend upon the assumed investment rate and the investment performance of
that subaccount and will vary in dollar amount.
ANNUITY DIRECT DEPOSIT PROGRAM: a program pursuant to which purchase payments
are automatically paid from the Owner's checking account on a specified day
each month.
BENEFICIARY: the person who receives the proceeds in the event of the death of
the Owner or the Annuitant.
CODE: The Internal Revenue Code of 1986, as amended.
CONTRACT YEAR: a period between anniversaries of the date of issue of the
Contract.
FIXED ACCOUNT: an account that is part of JHVLICO's general account in which
all or a part of the Accumulated Value may be held for accumulation at fixed
rates of interest (not less than 3%) declared by JHVLICO periodically at its
discretion.
OWNER: the person or entity, usually the one to whom the Contract is issued,
who has the sole right to exercise all rights and privileges under the
Contract except as otherwise provided in the Contract.
DATE OF MATURITY OF A CONTRACT: the date elected by the Owner (or, if no
election is made, Annuitant's 85th birthday) as of which annuity payments will
commence. The election is subject to certain conditions described in "The
Annuity Period".
MINIMUM DEATH BENEFIT: the undertaking of JHVLICO under a Contract to make a
payment on the death of the Annuitant at any time before the date of maturity
equal to the greater of (a) the Accumulated Value of the Contract next
determined following JHVLICO's receipt of due proof of death, and (b) the
aggregate amount of the purchase payments made under the Contract (reduced to
reflect partial withdrawals). See "The Accumulation Period--Death Benefit
Before Date of Maturity".
NET PURCHASE PAYMENT: the amount of any purchase payment reduced by applicable
taxes, if any, based on the amount of the purchase payment.
SURRENDER VALUE: a cash payment made prior to a Contract's maturity, equal to
all or part of the Accumulation Shares credited to the Contract, less any
contract fee.
SERVICE CENTER: P.O. Box 9116, Boston, MA 02205-8654; telephone 800-741-8184.
SUMMARY INFORMATION
The Contracts are designed both for purchase by individuals doing their own
retirement planning, including plans and trusts that do not qualify for
special tax treatment under the Internal Revenue Code of 1986, as amended
("Code") and for purchase for persons participating in individual retirement
annuity plans satisfying the requirements of Section 408 of the Code.
THE CONTRACTS
The Contracts offered are deferred annuity Contracts under which purchase
payments may be made in a lump sum or at intervals until the date of maturity
of the Contract, at which time annuity payments by JHVLICO will begin, if so
elected by the Owner.
An application for a Contract is available by calling 888-742-6262. Upon
completion, it is transmitted along with the purchase payment to JHVLICO's
Service Center for review. See "Purchase of Contracts."
JHVLICO also issues variable life insurance policies. These policies are
offered by means of other prospectuses, but use the same underlying Fund.
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT I
The Account is a separate investment account of JHVLICO, operated as a unit
investment trust, which supports benefits payable under its Contracts. There
are currently eighteen subaccounts within the Account: Managed, Growth &
Income, Equity Index, Large Cap Value, Large Cap Growth, Mid Cap Value, Mid
Cap Growth, Special Opportunities, Real Estate Equity, Small Cap Value, Small
Cap Growth, International Balanced, International Equities, International
Opportunities, Short-Term U.S. Government, Sovereign Bond, Strategic Bond, and
Money Market. The assets of each subaccount is invested in a corresponding
Portfolio of the Fund.
5
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Each Portfolio has a different investment objective. As stated below, John
Hancock receives a fee from the Fund for providing investment management
services. Independence Investment Associates, Inc. ("IIA"), provides sub-
investment management services with respect to the Managed, Growth & Income,
Large Cap Growth, Real Estate Equity, and Short-Term U.S. Government.
John Hancock Advisers, Inc., and John Hancock Advisers International Limited
provide sub-investment management services for the International Equities
Portfolio. John Hancock Advisers provides sub-investment management services
for the Special Opportunities, Small Cap Growth, and Sovereign Bond
Portfolios. T. Rowe Price Associates, Inc., provides sub-investment advice to
the Large Cap Value Portfolio and its subsidiary, Rowe Price-Fleming
International, Inc., provides sub-investment advice with respect to the
International Opportunities Portfolio.
State Street Bank & Trust, N.A., provides sub-investment management services
for the Equity Index Portfolio. INVESCO Management & Research is the sub-
investment adviser to the Small Cap Value Portfolio. Janus Capital Corporation
is the sub-investment adviser to the Mid Cap Growth Portfolio. Neuberger &
Berman, LLC, provides sub-investment advice with respect to the Mid Cap Value
Portfolio. J.P. Morgan Investment Management Inc., provides sub-investment
advice with respect to the Strategic Bond Portfolio and Brinson Partners,
Inc., does likewise with respect to the International Balanced Portfolio.
Each sub-investment manager receives an annual percentage fee from John
Hancock for these services which in no way increases the costs borne by the
Fund, the Account, or Owners. For a full description of the Fund, see the
prospectus for the Fund following at the end of this prospectus.
PRINCIPAL UNDERWRITER OF THE ACCOUNT
John Hancock Distributors, Inc., a wholly-owned subsidiary of John Hancock
and a registered broker-dealer since 1968, makes Contracts available through
its registered representatives licensed to sell life insurance policies and
annuity contracts.
PURCHASE PAYMENTS
Purchase payments received under Contracts, after deduction of premium or
similar taxes, if applicable, are allocated by JHVLICO to one or more of the
variable subaccounts and the Fixed Account, as directed by the Owner.
Purchase payments should be mailed to the Service Center, P.O. Box 9116,
Boston, MA 02205-8654.
The initial purchase payment under a Contract must be at least $5,000
($2,000 for individual retirement accounts) or $1,000 if made pursuant to an
Annuity Direct Deposit program; thereafter any payment must be at least $50.
The maximum amount that can be deposited into a Contract per Contract Year
is $500,000. The maximum amount that can be deposited into any one subaccount
per Contract Year is $500,000 less any amount previously transferred to such
subaccount in such Contract Year. The maximum amount that can be deposited
into the Fixed Account per Contract Year (exclusive of the initial deposit) is
$100,000 less any amount previously transferred to the Fixed Account in such
Contract Year. The initial deposit into the Fixed Account can be as large as
$500,000. Deposits in or transfers to the Fixed Account can only be made
during the first 10 Contract Years. No new deposits may be made after
Annuitant's 85th birthday. These limits may be waived by JHVLICO.
There are also limitations on amounts transferred into the subaccounts and
the Fixed Account. See "Transfers Among Subaccounts" and "Appendix--The Fixed
Account and Fixed Account Value," respectively.
CHARGES AND DEDUCTIONS
JHVLICO does not make any deductions for sales load from purchase payments.
Certain charges will be deducted from a Contract as described below.
MORTALITY AND EXPENSE RISK CHARGES
JHVLICO makes a daily charge to the Account for mortality and expense risks
equal to 0.75% per annum of the average daily net assets of the Account (0.45%
on an annual basis for mortality risks and 0.30% on an annual basis for
expense risks). See "Charges for Mortality and Expense Risks."
ADMINISTRATIVE SERVICES CHARGE
JHVLICO makes a daily charge to the Account for administrative services
equal to 0.25% per annum of the daily net assets of the Account. During the
Accumulation Period, JHVLICO also assesses an annual Contract fee of $30 on
Contracts having an Accumulated Value of less than $10,000. JHVLICO reserves
the right to increase the Contract fee up to $50, subject to state
regulations. See "Charges for Administrative Services."
PREMIUM TAX CHARGE
Deductions are made on any applicable taxes based on the amount of purchase
payment; currently such state taxes range from 0% to 5% of each purchase
payment. See "Premium or Similar Taxes."
FUND EXPENSES
Investment management fees at annual rates ranging from 0.25% to 1.00% of
average daily net assets are paid by the Portfolios to John Hancock. The
Portfolios also incur charges for other expenses incurred in their operations.
Investment management fees and other expenses are reflected in the net
6
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asset value of each Portfolio's shares. For a description of these charges and
expenses, see the prospectus for the Series Trust.
WITHDRAWAL PRIOR TO MATURITY
At any time before annuity payments begin, if the Annuitant is living, a
Contract may be surrendered in full for its Surrender Value or a portion of
the value of the Contract may be withdrawn, subject to certain limits. See
"Surrender of Contract; Partial Withdrawals." A 10% penalty tax may be
applicable to the taxable portion (earnings) withdrawn before the Owner
attains age 59 1/2.
SYSTEMATIC WITHDRAWALS
The Owner may pre-authorize a periodic withdrawal plan. Payments may be
monthly, quarterly, semi-annual, or annual, and may be for a level dollar
amount. A minimum Accumulated Value of $25,000 is required to start the
program. See "Systematic Withdrawals."
DOLLAR-COST AVERAGING
The Owner may elect to have amounts transferred automatically from any
variable subaccount into one or more of the other variable subaccounts.
Transfers may be made monthly, quarterly, semi-annually, or annually for a
minimum of $250. A minimum Accumulated Value of $20,000 is required to start
the program. See "Dollar-Cost Averaging."
GUARANTEED MINIMUM DEATH BENEFIT
Contracts include a death benefit payable on the death of the Annuitant
prior to annuitization that is the greater of (a) the Accumulated Value of the
Contract, and (b) the purchase payments made under the Contract, adjusted for
any prior partial withdrawals. See "Death Benefit Before Date of Maturity."
FREE-LOOK PROVISION
An Owner may surrender the Contract for any reason during the "free-look
period" and receive the following in cash: (1) the gross payments made if the
Contract is an individual retirement annuity or the Contract is issued in
Idaho, Nebraska, North Carolina, Oklahoma, South Carolina, Washington, West
Virginia, or Utah, or (2) the Accumulated Value of the Contract plus any
deductions previously made from purchase payments for premium or similar taxes
if the Contract is issued in any other state and is not an individual
retirement annuity. In most cases, the "free-look period" is 10 days after the
Contract's receipt, but there are exceptions. If the Contract is issued in
Idaho, or North Dakota, the free-look period is 20 days. If the Contract is
issued in South Carolina and is a replacement for a life insurance contract or
another annuity, the free-look period is also 20 days. Finally, if the
Contract is issued in California to an Owner 60 years of age or older, the
Owner may surrender the Contract within 30 days after its receipt, and, in
that event, the gross purchase payments made will be refunded to the Owner.
THE VARIABLE ANNUITY
A variable annuity is significantly different from a fixed annuity in that
it is the Owner and Annuitant under a variable annuity who assume the risk of
investment gain or loss rather than the insurance company. While under a fixed
annuity the insurance company guarantees a specified interest rate for a
period of time and specified monthly annuity payments, the amounts of annuity
payments under a variable annuity are not guaranteed and will vary with the
investment performance of the portfolio securities in the underlying Fund.
Based upon the Owner's investment objective, the Owner directs the
allocation of purchase payments and Accumulated Values among the subaccounts
on a continuing basis. There can be no assurance that these investment
objectives will be achieved.
JHVLICO, JOHN HANCOCK, THE ACCOUNT AND THE SERIES FUND
JHVLICO AND JOHN HANCOCK
JHVLICO, a stock life insurance company chartered in 1979 under
Massachusetts law, is authorized to transact a life insurance and annuity
business in Massachusetts and all other states, except New York. JHVLICO began
selling variable life insurance policies in 1980.
JHVLICO is a wholly-owned subsidiary of John Hancock, a mutual life
insurance company chartered in Massachusetts in 1862. Its Home Office is at
200 Clarendon Street, Boston, Massachusetts 02117. It conducts a conventional
life insurance business in all of the United States, the District of Columbia
and Puerto Rico. John Hancock sells insurance policies and annuity contracts
directly to customers or through a career agency system, banks, or
broker/dealers. It is anticipated that John Hancock will from time to time
make additional capital contributions to JHVLICO to enable it to meet its
reserve requirements and expenses in connection with its business and John
Hancock is committed to make additional capital contributions if necessary to
ensure that JHVLICO maintains a positive net worth.
THE ACCOUNT
The Account is a separate account established under Massachusetts law on
June 15, 1994. The Account, although an integral part of JHVLICO, meets the
definition of a "separate account" under the Federal securities laws and is
registered as a unit investment trust under the Investment Company Act of
1940, as amended ("1940 Act").
The Account's assets are the property of JHVLICO and the obligations under
the Contracts are the obligations of JHVLICO. Each Contract provides that the
portion of the Account's assets equal to the reserves and other liabilities
under the Contract with respect to the Account shall not be chargeable with
liabilities arising out of any other business JHVLICO may
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conduct. In addition to the net assets and other liabilities for Contracts,
the Account's assets include assets derived from charges made by JHVLICO and,
possibly, funds contributed by JHVLICO to commence operation of the
subaccounts or their predecessors. From time to time these additional assets
may be transferred in cash by JHVLICO to its general account. Before making
any such transfer, JHVLICO will consider any possible adverse impact the
transfer might have on any subaccount.
Income, gains and losses, whether or not realized, from assets allocated to
the Account are, in accordance with the Contracts, credited to or charged
against the Account without regard to other income, gains or losses of
JHVLICO.
There currently are eighteen subaccounts in the Account: Managed, Growth &
Income, Equity Index, Large Cap Value, Large Cap Growth, Mid Cap Value, Mid
Cap Growth, Special Opportunities, Real Estate Equity, Small Cap Value, Small
Cap Growth, International Balanced, International Equities, International
Opportunities, Short-Term U.S. Government, Sovereign Bond, Strategic Bond, and
Money Market. The assets in each are invested in a separate class of shares
issued by the Fund, but the assets of one subaccount are not necessarily
legally insulated from liabilities associated with another subaccount. New
subaccounts may be added and made available to Owners.
THE SERIES FUND
The Fund is a "series" type of mutual fund which is registered under the
1940 Act as an open-end diversified management investment company and
organized as a Massachusetts business trust. The Fund serves as the investment
medium for the Account and other unit investment trust separate accounts
established by John Hancock and by JHVLICO for variable life insurance
policies and variable annuity contracts. A full description of the Fund, its
investment objectives, policies and restrictions, its charges and expenses,
and all other aspects of its operation is contained in the attached prospectus
(which should be read carefully before investing) and the statement of
additional information referred to therein, which should be read together with
this prospectus. Among other items, note the description of the need to
monitor events on the part of the Fund's Board of Trustees for possible
conflicts between separate accounts and other consequences.
The following is a brief summary of the investment objectives of each
Portfolio.
Managed Portfolio
The investment objective of this Portfolio is to achieve maximum long-term
total return consistent with prudent investment risk. Investments will be made
in common stocks, convertibles and other equity investments, in bonds and
other fixed income securities and in money market instruments.
Growth & Income Portfolio
The investment objective of this Portfolio is to achieve intermediate and
long-term growth of capital, with income as a secondary consideration. This
objective will be pursued by investments principally in common stocks (and
securities convertible into or with rights to purchase common stocks) of
companies believed to offer growth potential over both the intermediate and
the long term.
Equity Index Portfolio
The investment objective of this Portfolio is to provide investment results
that correspond to the total return of the U.S. market as represented by the
S&P 500 utilizing common stocks that are publicly traded in the United States.
Large Cap Value Portfolio
The investment objective of this Portfolio is to provide substantial
dividend income, as well as long-term capital appreciation, through
investments in the common stocks of established companies believed to offer
favorable prospects for increasing dividends and capital appreciation.
Large Cap Growth Portfolio
The investment objective of this Portfolio is to achieve above-average
capital appreciation through the ownership of common stocks (and securities
convertible into or with rights to purchase common stocks) of companies
believed to offer above-average capital appreciation opportunities. Current
income is not an objective of the Portfolio.
Mid Cap Value Portfolio
The investment objective of this Portfolio is to provide long-term growth of
capital primarily through investment in the common stocks of medium
capitalization companies believed to sell at a discount to their intrinsic
value.
Mid Cap Growth Portfolio
The investment objective of this Portfolio is to provide long-term growth of
capital through a non-diversified portfolio investing primarily in common
stocks of medium capitalization companies.
Special Opportunities Portfolio
The investment objective of this Portfolio is to achieve long-term capital
appreciation by emphasizing investments in equity securities of issuers in
various economic sectors.
Real Estate Equity Portfolio
The investment objective of this Portfolio is to provide above-average
income and long-term growth of capital by investment principally in equity
securities of companies in the real estate and related industries.
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Small Cap Value Portfolio
The investment objective of this Portfolio is to provide long-term growth of
capital by investing in a well diversified portfolio of equity securities of
small capitalization companies exhibiting value characteristics.
Small Cap Growth Portfolio
The investment objective of this Portfolio is to provide long-term growth of
capital through a diversified portfolio investing primarily in common stocks
of small capitalization emerging growth companies.
International Balanced Portfolio
The investment objective of this Portfolio is to maximize total U.S. dollar
return, consisting of capital appreciation and current income, through
investment in non-U.S. equity and fixed income securities.
International Equities Portfolio
The investment objective of this Portfolio is to achieve long-term growth of
capital by investing primarily in foreign equity securities.
International Opportunities Portfolio
The investment objective of this Portfolio is to provide capital
appreciation through investment in common stocks of primarily well-
established, non-United States companies.
Short-Term U.S. Government Portfolio
The investment objective of this Portfolio is to provide a high level of
current income consistent with the maintenance of principal, through
investment in a portfolio of short-term U.S. Treasury securities and U.S.
Government agency securities.
Sovereign Bond Portfolio
The investment objective of this Portfolio is to provide as high a level of
long-term total rate of return as is consistent with prudent investment risk,
through investment primarily in a diversified portfolio of freely marketable
debt securities. Total rate of return consists of current income, including
interest and discount accruals, and capital appreciation. Although the
Sovereign Bond Portfolio does not have a significant portion of its assets in
high yield securities, further information in this regard may be found under
"Investment Objectives and Policies" in the Fund prospectus.
Strategic Bond Portfolio
The investment objective of this Portfolio is to provide a high total return
consistent with moderate risk of capital and maintenance of liquidity, from a
portfolio of domestic and international fixed income securities.
Money Market Portfolio
The investment objective of this Portfolio is to provide maximum current
income consistent with capital preservation and liquidity. It seeks to achieve
this objective by investing in a managed portfolio of high quality money
market instruments.
John Hancock acts as the investment manager for the Fund. Independence
Investment Associates, Inc. ("IIA"), an indirectly-owned subsidiary of John
Hancock with its principal place of business at 53 State Street, Boston, MA
02109, provides sub-investment advice with respect to the Managed, Growth &
Income, Large Cap Growth, Real Estate Equity, and Short-Term U.S. Government.
John Hancock Advisers, Inc., another directly-owned subsidiary, located at
101 Huntington Avenue, Boston, MA 02199, and its subsidiary, John Hancock
Advisers International, Limited, located at 34 Dover Street, London, England,
provide sub-investment advice with respect to the International Equities
Portfolio. John Hancock Advisers provides sub-investment advice with respect
to the Special Opportunities, Small Cap Growth, and Sovereign Bond Portfolios.
T. Rowe Price Associates, Inc., located at 100 East Pratt St., Baltimore, MD
21202, provides sub-investment advice with respect to the Large Cap Value
Portfolio and, its subsidiary, Rowe Price-Fleming International, Inc., also
located at 100 East Pratt St., Baltimore, MD 21202, provides sub-investment
advice with respect to the International Opportunities Portfolio.
State Street Bank & Trust, N.A., at Two International Place, Boston, MA
02110, is the sub-investment adviser to the Equity Index Portfolio. INVESCO
Management & Research located at 101 Federal Street, Boston, MA 02110, is the
sub-investment adviser to the Small Cap Value Portfolio. Janus Capital
Corporation, with its principal place of business at 100 Filmore Street,
Denver, CO 80206, is the sub-investment adviser to the Mid Cap Growth
Portfolio. Neuberger & Berman, LLC, of 605 Third Avenue, New York, NY 10158,
provides sub-investment advice to the Mid Cap Value Portfolio. J.P. Morgan
Investment Management Inc., located at 522 Fifth Avenue, New York, NY 10036,
provides sub-investment advice with respect to the Strategic Bond Portfolio
and Brinson Partners, Inc., of 209 South LaSalle Street, Chicago, IL 60604,
does likewise with respect to the International Balanced Portfolio.
JHVLICO will purchase and redeem Fund shares for the Account at their net
asset value without any sales or redemption charges. Shares of the Fund
represent an interest in one of the Portfolios of the Fund which corresponds
to the subaccount of the Account. Any dividend or capital gains distributions
received by the Account will be reinvested in Fund shares at their net asset
value as of the dates paid. Any such distribution will result in a reduction
in the value of the Fund shares of the Portfolio from which the distribution
was made. The total net asset value of the Account will not change because of
such distribution, however.
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On each Valuation Date, shares of each Portfolio are purchased or redeemed
by JHVLICO for each subaccount based on, among other things, the amount of net
purchase payments allocated to the subaccount, dividends and distributions
reinvested, transfers to, from and among subaccounts, all to be effected as of
that date. Such purchases and redemptions are effected at the net asset value
per Fund share for each Portfolio determined on that same Valuation Date.
CHARGES UNDER VARIABLE ANNUITY CONTRACTS
CHARGES FOR MORTALITY AND EXPENSE RISKS
While the variable annuity payments to Annuitants will vary in accordance
with the investment performance of the Account, the amount of such payments
will not be decreased because of adverse mortality experience of Annuitants as
a class or because of an increase in actual expenses of JHVLICO over the
expense charges provided for in the Contracts. JHVLICO assumes the risk that
Annuitants as a class may live longer than expected (necessitating a greater
number of annuity payments) and that its expenses may be higher than the
deductions for such expenses. JHVLICO also provides a minimum death benefit
upon the death of the Annuitant.
In return for the assumption of these mortality and expense risks, JHVLICO
charges the Account daily 0.001233% (0.45% on an annual basis) of the current
value of Account net assets for mortality risks and 0.000822% (0.30% on an
annual basis) for expense risks. JHVLICO reserves the right to revise the
proportionate amounts of the charge as between mortality risks and expense
risks, should estimates change. Nevertheless, the aggregate charge will not
exceed 0.75% on an annual basis.
CHARGES FOR ADMINISTRATIVE SERVICES
JHVLICO maintains an account for each Owner and Annuitant and makes all
disbursements of benefits. JHVLICO also furnishes such administrative and
clerical services, including the calculation of Accumulation Share values and
the values and interests determined thereby, as are required for each
subaccount. JHVLICO makes disbursements from Account funds to pay obligations
chargeable to the Account and maintains the accounts, records, and other
documents relating to the business of the Account required by regulatory
authorities.
For these and other administrative services, JHVLICO makes a daily charge to
the Account of 0.000685% (0.25% on an annual basis) of the current value of
its net assets and assesses, during the Accumulation Period, a contract fee of
$30 on Contracts having an Accumulated Value of less than $10,000. The
contract fee will be deducted at the beginning of each Contract Year after the
first and at a full surrender during a Contract Year. JHVLICO reserves the
right to increase this fee up to a maximum of $50 subject to state
regulations. The contract fee will be deducted from each subaccount and the
Fixed Account in the same proportion that the Accumulated Value of the
Contract in that subaccount or Fixed Account bears to the full Accumulated
Value of the Contract. However, the portion of the contract fee allocated to
the Fixed Account will not be deducted from the Fixed Account to the extent it
would result in an accumulation of purchase payments or other amounts
allocated to the Fixed Account at less than the guaranteed minimum rate of 3
percent. In such cases, the unpaid portion of the contract fee allocable to
the Fixed Account will be deducted proportionally from the subaccounts, if
any.
The administrative services charges were not designed, nor are they
expected, to exceed JHVLICO's cost in providing these services.
VARIATIONS IN CHARGES
In the future, JHVLICO may allow a reduction in or the elimination of the
charges for mortality and expense risks, the administrative services charge,
or the annual contract fee assessed on Contracts sold to groups or classes of
individuals in a manner resulting in a reduction in the expenses associated
with the sale of such Contracts or the costs associated with administering or
maintaining such Contracts.
The entitlement to such a reduction in or elimination of charges and fees
will be determined by JHVLICO based upon factors such as the following: (1)
the size of the initial purchase payment, (2) the size of the group or class,
(3) the total amount of purchase payments expected to be received from the
group or class and the manner in which purchase payments are remitted, (4) the
nature of the group or class for which the Contracts are being purchased and
the persistency expected from that group or class as well as the mortality
risks associated with that group or class, or (5) the purpose for which the
Contracts are being purchased and whether that purpose makes it likely that
costs and expenses will be reduced.
JHVLICO will make any reduction in charges or fees according to its own
rules in effect at the time an application for a Contract is approved. JHVLICO
reserves the right to change these rules from time to time. Any variation in
charges or fees will reflect differences in costs and services, will apply
uniformly to all prospective Contract purchasers in the group or class, and
will not be unfairly discriminatory to the interests of any Owner.
PREMIUM OR SIMILAR TAXES
Several states and local governments impose a premium or similar tax on
annuities. Currently, such taxes range from 0% to 5% of the Accumulated Value
applied to an Annuity Option. Ordinarily, any state-imposed premium or similar
tax will be deducted from the Accumulated Value of the Contract only at the
time of annuitization.
For Contracts issued in South Dakota and Kentucky, however, JHVLICO pays a
tax on each premium payment at the time it is made. JHVLICO will deduct a
charge for these taxes from the Accumulated Value of the Contract at the time
of annuitization, death, surrender, or withdrawal. Such a charge is
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equal to the applicable premium tax percentage stated above times the amount
of Accumulated Value that is applied to an Annuity Option, surrendered,
withdrawn, or at death. The net economic effect of this procedure is not
significantly different than if JHVLICO deducted the premium tax from each
premium payment when received.
The charges described above (exclusive of taxes) and the Contracts' annuity
purchase rates will apply for the duration of each Contract and, except as
noted above, will not be increased by JHVLICO. However, these charges do not
include all of the expenses which may be incurred for the account of Owners
and Annuitants. Additional charges will be made directly to the Account for
taxes, if any, based on the income of, capital gains of, assets in, or the
existence of, the Account and interest on funds borrowed. In addition, JHVLICO
reserves the right to deduct premium taxes from premiums when paid. Moreover,
the Account purchases and redeems shares of the Fund at net asset value, a
value which reflects the deduction from the assets of the Fund of its
investment management fee and of certain operating expenses described briefly
under "Summary Information."
THE CONTRACTS
The descriptions herein are based on certain provisions of the Contracts
offered by this Prospectus. Reference should be made to the actual Contracts
and to the terms and limitations of any tax qualified plan which is to be
funded by such Contracts. Tax qualified plans are subject to several
requirements and limitations which may affect the terms of any particular
Contract or the advisability of taking certain action permitted thereby.
PURCHASE OF CONTRACTS
Any person wishing to purchase a Contract may submit an application and an
initial purchase payment to JHVLICO, as well as any other form or information
that JHVLICO may require. If the application is complete and the Contract
applied for is suitable, the Contract will be issued and thereafter delivered
directly to the Owner. If the completed application is received in proper
order, the initial purchase payment accompanying the completed application is
applied within two business days after receipt. If an initial purchase payment
is not applied within five business days after receipt, it will be refunded
unless JHVLICO has received the consent of the applicant to retain the
purchase payment until receipt of information necessary to complete the
issuance of the Contract.
The initial purchase payment must be at least $5,000 ($2,000 for individual
retirement accounts) or $1,000 if made pursuant to an annuity direct deposit
program and subsequent payments must be at least $50 in amount, except where
otherwise permitted by JHVLICO. Maximum payments to any one subaccount in a
single Contract Year are $500,000 less any amount previously transferred into
such subaccount in such year. Maximum payments to the Fixed Account in a
single Contract Year, exclusive of the initial premium, is $100,000 less any
amount previously transferred into the Fixed Account in such year. Increases
in purchase payments beyond the foregoing limits may be made only with
JHVLICO's written consent. While the Annuitant is living and the Contract is
in force, purchase payments may be made at any time before maturity, except
that no new purchase payments may be made after the Annuitant's 85th birthday.
These limits may be waived by JHVLICO.
ANNUITY DIRECT DEPOSIT PROGRAM
The Annuity Direct Deposit ("ADD") Program is a program pursuant to which
purchase payments are automatically paid from the Owner's checking account on
a specified day each month. The minimum monthly payment for the ADD program is
$50. The Owner has the right to change the monthly payment amount or
discontinue the service at any time by telephoning JHVLICO at 800-741-8184.
THE ACCUMULATION PERIOD
ALLOCATION OF PURCHASE PAYMENTS (ACCUMULATION SHARES)
Net purchase payments are allocated by JHVLICO to any one or more of the
subaccounts or the Fixed Account or allocated among the subaccounts and the
Fixed Account in the proportion specified in the application for the Contract
or as directed by the Owner from time to time. Any change in the election will
be effective as to purchase payments made after the receipt by JHVLICO at its
Service Center of notice in form satisfactory to JHVLICO.
Each net purchase payment allocated to a subaccount purchases Accumulation
Shares of that subaccount at the value of such shares next determined after
the receipt of such net purchase payment at the Service Center of JHVLICO. See
"Variable Account Valuation Procedures." The number of Accumulation Shares of
a subaccount purchased with a specific purchase payment will be determined by
dividing the net purchase payment by the value of an Accumulation Share in
that subaccount when the net purchase payment is applied. The value of the
Accumulation Shares so purchased will vary in amount thereafter, depending
upon the investment performance of the subaccount and the charges and
deductions made against the subaccount.
VALUE OF ACCUMULATION SHARES
At any date prior to a Contract's maturity date, the total value of the
Accumulation Shares in a subaccount which have been credited to a Contract can
be computed by multiplying the number of such Accumulation Shares by the
appropriate Accumulation Share Value in effect for such date.
TRANSFERS AMONG SUBACCOUNTS
Not more often than twelve times in each Contract Year, without JHVLICO's
prior approval, and not on or within 30
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days prior to the date of maturity, the Owner may elect to transfer all or any
part of the Accumulation Shares or Annuity Units credited to a Contract from
one subaccount to another. Maximum transfers into any one subaccount in a
single Contract Year is $500,000 less premiums previously deposited into such
subaccount in such Contract Year. Any such transfer will result in the
redemption and purchase of Accumulation Shares or Annuity Units, whichever is
applicable, on the basis of the respective values next determined after
receipt of notice satisfactory to JHVLICO at its Service Center. (For Fixed
Account transfers, see "Appendix--Fixed Account and Fixed Account Value.") A
transfer pursuant to the dollar-cost averaging feature discussed below counts
toward the twelve transfers per year.
An Owner may request a transfer in writing or, once a written telephone
transfer authorization form is completed by the Owner, the Owner may request a
transfer by telephoning JHVLICO at 800-741-8184 or sending a written request
via the JHVLICO fax machine at 617-572-1571. Any written request should
include the Owner's name, daytime telephone number, and Contract number as
well as the names of the subaccounts from which and to which money will be
transferred. JHVLICO reserves the right to modify, suspend, or terminate
telephone transfers at any time without notice to the Owners. If the fax
request option becomes unavailable, another means of telecommunication will be
substituted.
An Owner who authorizes telephone transfers will be liable for any loss,
expense or cost arising out of any unauthorized or fraudulent telephone
transfer instructions which JHVLICO reasonably believes to be genuine, unless
such loss, expense or cost is the result of JHVLICO's mistake or negligence.
JHVLICO employs procedures which provide safeguards against the execution of
unauthorized transfers, and which are reasonably designed to confirm that
transfer instructions received by telephone are genuine. These procedures
include requiring personal identification, tape recording calls, and providing
written confirmation to the Owner. If JHVLICO does not employ reasonable
procedures to confirm that instructions communicated by telephone are genuine,
it may be liable for any loss due to unauthorized or fraudulent instructions.
DOLLAR-COST AVERAGING
The Owner may elect to have automatically transferred on a monthly,
quarterly, semi-annual or annual basis, at no cost, part of the Accumulation
Shares credited to any variable subaccount into one or more of the other
variable subaccounts. The minimum amount of each transfer is $250. Automatic
transfers into the Fixed Account are not permitted. To begin the program, the
Accumulated Value of the Contract must be at least $20,000. The program
continues until the earlier of 12, 24, or 36 (as chosen by the Owner) months
and full liquidation of the variable subaccount from which the monies are
being transferred. Transfers may be made via telephone or facsimile machine
provided a telephone authorization form has been completed by the Owner.
JHVLICO reserves the right to terminate the Dollar-Cost Averaging program at
any time.
SURRENDER OF CONTRACT; PARTIAL WITHDRAWALS
Prior to its date of maturity, if the Annuitant is living, a Contract may be
surrendered for a cash payment representing all or part of the total
Accumulated Value of the Contract. The appropriate number of Accumulation
Shares will be redeemed at their value next determined after the receipt by
JHVLICO at its Service Center of notice in form satisfactory to JHVLICO.
Unless directed otherwise by the Owner, that portion of the Accumulated Value
of the Contract redeemed in a partial withdrawal will be redeemed in each
subaccount and in the Fixed Account in the same proportion as the Accumulated
Value of the Contract is then allocated among the subaccounts and the Fixed
Account. The redemption value may be more or less than the net purchase
payments applied under the Contract to purchase the Accumulation Shares,
depending upon the market value of the Fund shares held in the subaccount at
the time, minus any unpaid contract fees. The resulting cash payment will be
made in a single sum, ordinarily within seven days after receipt of such
notice. As described under "Miscellaneous Provisions--Deferment of Payment,"
however, redemption and payment may be delayed under certain circumstances.
See "Federal Income Taxes" for possible adverse tax consequences of certain
surrenders and partial withdrawals.
Any request for a surrender or partial withdrawal should be mailed to the
Service Center, P.O. Box 9116, Boston, MA 02205-8654.
A partial withdrawal is not permitted in an amount less than $100 or if the
total Accumulated Value of a Contract remaining after the withdrawal would be
less than $1,000. A partial withdrawal is not a loan and, once made, cannot be
repaid.
In the event the Accumulated Value of the Contract becomes zero, the
Contract will terminate.
SYSTEMATIC WITHDRAWAL
The Owner may elect to participate in a systematic withdrawal plan, which
enables the Owner to pre-authorize a periodic exercise of the contractual
withdrawal rights described above. Owners entering into such a plan instruct
JHVLICO to withdraw a level dollar amount from the Contract on a monthly,
quarterly, semi-annual, or annual basis. The amount deducted will result in
the cancellation of Accumulation Shares from each applicable subaccount in the
ratio that the value of each subaccount bears to the total Accumulated Value.
Currently, systematic withdrawal is available to Owners who have a Contract
Value of $25,000 or more. The Company reserves the right to modify the
eligibility rules or other terms and conditions of this program at any time,
without notice. The minimum withdrawal is $100. The systematic withdrawal will
terminate upon cancellation by the Owner or in the event that
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the Accumulated Value of the Contract becomes $5,000 or less. Systematic
withdrawal is not available to Contracts participating in the Dollar-Cost
Averaging program. There may be tax consequences associated with the
systematic withdrawal plan. (See "Federal Income Taxes.")
DEATH BENEFIT BEFORE DATE OF MATURITY
If the Annuitant dies before the date of maturity or the surrender or
termination of a Contract, a death benefit is payable. The death benefit will
be the greater of (a) the Accumulated Value of the Contract next determined
following receipt at the Service Center of JHVLICO of due proof of death,
together with any required instructions as to method of settlement and (b) the
amount of the purchase payments made under the Contract reduced by all prior
partial withdrawals.
Payment of the death benefit will be made in a single sum to the beneficiary
designated by the Owner prior to the Annuitant's death unless an optional
method of settlement has been elected by the Owner. If an optional method of
settlement has not been elected by the Owner, the beneficiary may elect an
optional method of settlement in lieu of a single sum. No deduction is made
for sales or other expenses upon such election. Payment will be made in a
single sum in any event if the death benefit is less than $5,000. See "Annuity
Period--Annuity Options." If there is no surviving beneficiary, the Owner, or
his or her estate is the beneficiary.
The Code requires certain distribution provisions to be included in any
Contract used to fund other than a tax qualified plan (See "Federal Income
Taxes"). Failure to include the required distribution provisions results in
the Contract not being treated as an annuity for Federal tax purposes. The
Code imposes comparable distribution requirements for Contracts used to fund
tax qualified plans. These required provisions for tax qualified plans will be
reflected by means of separate disclosures and endorsements furnished by
JHVLICO to Owners.
The Code distribution requirements are expected to present no practical
problems when the Annuitant and Owner are the same person. Nevertheless, all
Owners of Contracts not used to fund a tax qualified plan and IRA Contract
Owners should be aware that the following distribution requirements are
applicable notwithstanding any provision to the contrary in the Contract (or
in this prospectus) relating to payment of the death benefit or death of the
Annuitant.
If the Owner dies on or after annuity payments have begun, any remaining
benefit must be paid out at least as rapidly as under the method of making
annuity payments then in effect. If the Owner dies before annuity payments
have begun: (a) if the beneficiary is the surviving spouse of the Owner, the
beneficiary may continue the Contract in force as Owner; or (b) if the
beneficiary is not the surviving spouse of the Owner, or if the beneficiary is
the surviving spouse of the Owner but does not choose to continue the
Contract, the entire interest in the Contract on the date of death of the
Owner must be: (i) paid out in full within 5 years of the Owner's death, or
(ii) applied in full towards the purchase of a life annuity on the beneficiary
with payments commencing within 1 year of the Owner's death.
The Code imposes comparable distribution requirements on tax qualified
plans.
If the Owner is not the Annuitant, "the entire interest in the Contract on
the date of death of the Owner" is equal to the Surrender Value if paid out in
full within five years of the Owner's death, or is equal to the Accumulated
Value if applied in full towards the purchase of a life annuity on the
beneficiary with payments commencing within one year of the Owner's death.
Note that "the entire interest in the Contract on the date of death of the
Owner" which is payable if the Owner dies before annuity payments have begun
may be an amount less than the death benefit which would have been payable if
the Annuitant had died instead. Note also that notice should be furnished
promptly to JHVLICO upon the death of the Owner.
THE ANNUITY PERIOD
During the annuity period, the total value of any one Contract must be
allocated among no more than four "accounts" (i.e., the subaccounts and/or the
Fixed Account). Amounts allocated to the Fixed Account will provide annuity
payments on a fixed basis; amounts allocated to the subaccounts will provide
annuity payments on a variable basis. If more than four accounts are being
used on the maturity date, JHVLICO will divide the total Accumulated Value of
the Contract proportionately among the four accounts with the largest
Accumulated Values. Only variable annuity payments are described in this
prospectus.
Annuity payments will commence on the date of maturity of the Contract if
the Annuitant is then living and the Contract is then in force. Each Contract
will provide at the time of its issuance for a Life Annuity with Ten Years
Certain. Under this form of annuity, variable annuity payments are made
monthly to the Annuitant for life and, if the Annuitant dies within ten years
after the date of maturity of the Contract, the payments remaining in the ten-
year period will be made to the contingent payee, subject to the terms of any
supplementary agreement issued. (NOTE: The terminology used in a supplementary
agreement may differ from that used in a Contract. For example, in a
supplementary agreement, the term "payee" may be used to refer to the
Annuitant or to some other person named by the Annuitant or the Owner to
receive payments under the supplementary agreement in the event of the
Annuitant's death, and the term "contingent payee" may be used to refer to the
beneficiary.) A different form of annuity may be elected by the Owner, as
described in "Annuity Options," prior to the date of maturity of the Contract.
Once a given form of annuity takes effect, it may not be changed.
If the initial monthly annuity payment under a Contract would be less than
$50, JHVLICO may make a single sum
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payment equal to the total Surrender Value of the Contract on the date the
initial payment would be payable, in place of all other benefits, or, if
agreed to by the Owner, make periodic payments at quarterly, semi-annual or
annual intervals in place of monthly payments.
Each Contract specifies the date of maturity at the time of its issuance as
the Annuitant's 85th birthday. The Owner may subsequently elect a different
date of maturity, however. Unless otherwise permitted by JHVLICO, such
subsequently elected date may be no earlier than twelve months after the date
the first payment is applied to the Contract, nor later than the Annuitant's
85th birthday. The election is made by written notice received by JHVLICO at
its Service Center before the provisional date of maturity and at least 31
days prior to the date of maturity. Particular care should be taken in
electing the date of maturity of Contracts issued under individual retirement
annuity contract plans. (See "Federal Income Taxes.")
VARIABLE MONTHLY ANNUITY PAYMENTS
Variable monthly annuity payments under a Contract are determined by
converting each subaccount's Accumulation Shares credited to the Contract
(less any applicable premium tax) into the respective Annuity Units of each
subaccount on the date of maturity of the Contract or some other date elected
for commencement of variable annuity payments. See "Calculation of Annuity
Units."
The amount of each annuity payment after the first payment will depend on
the investment performance of the subaccounts being used. If the actual net
investment return (after deducting all charges) of a subaccount during the
period between the dates for determining two monthly payments based on that
subaccount exceeds the "assumed investment rate" (explained below), the latter
monthly payment will be larger than the former. On the other hand, if the
actual net investment return is less than the assumed investment rate, the
latter monthly payment will be smaller than the former.
ASSUMED INVESTMENT RATE
The assumed investment rate for all Contracts will be 3 1/2% per year except
as provided below. The assumed investment rate is significant in determining
the amount of the initial variable monthly annuity payment and the amount by
which subsequent variable monthly payments are more or less than the initial
variable monthly payment.
Where applicable state law so provides, an Owner may elect a variable
annuity option with a different assumed investment rate, not in excess of 6%,
if such a rate is made available by JHVLICO in the Owner's state. Election of
a higher assumed investment rate produces a larger initial annuity payment but
also means that eventually the monthly annuity payments would be smaller than
if a lower assumed investment rate had been elected.
CALCULATION OF ANNUITY UNITS
Accumulation Shares are converted into Annuity Units by first multiplying
the number of each subaccount's Accumulation Shares credited to the Contract
on the date of conversion by the appropriate Accumulation Share Value as of
ten calendar days prior to the date the initial variable monthly annuity
payment is due. For each subaccount the resulting value (less any applicable
premium tax) is then multiplied by the applicable annuity purchase rate, which
reflects the age and possibly sex of the Annuitant and the assumed investment
rate, specified in the Contract. This computation determines the amount of
each subaccount's initial monthly variable annuity payment to the Annuitant.
The number of each subaccount's Annuity Units to be credited to the Contract
is then determined by dividing the amount of each subaccount's initial
variable monthly annuity payment by each subaccount's Annuity Unit Value as of
ten calendar days prior to the date the initial payment is due.
ANNUITY OPTIONS
The Owner may elect an Annuity Option during the lifetime of the Annuitant
by written notice received by JHVLICO at its Service Center prior to the date
of maturity of the Contract. If no option is selected, Option A with Ten Years
Certain will be used. A beneficiary entitled to payment of a death benefit in
a single sum may, if no election has been made by the Owner prior to the
Annuitant's death, elect an Annuity Option by written notice received by
JHVLICO at its Service Center prior to the date the proceeds become payable.
The Owner may also elect that the Surrender Value be applied to an Annuity
Option at the time of a full surrender of a Contract that has been outstanding
for at least 6 months. No option may be elected if the Accumulated Value of
the Contract to be applied is less than $5,000 or the amount of the first
monthly payment would be less than $50. Among the options available are the
following two basic Annuity Options.
OPTION A: LIFE ANNUITY WITH FIVE, TEN OR TWENTY YEARS CERTAIN
Variable monthly payments will be made for a designated period of 5, 10 or
20 years and thereafter as long as the payee lives, with the guarantee that if
the payee dies prior to the end of the 5, 10 or 20 year period, whichever is
applicable, payments will continue for the remainder of the guaranteed period
to a contingent payee, subject to the terms of any supplementary agreement
issued.
OPTION B: LIFE ANNUITY WITHOUT REFUND
Variable monthly payments will be made to the payee as long as he lives. No
minimum number of payments is guaranteed.
OTHER CONDITIONS
JHVLICO reserves the right at its sole discretion to make available to
Owners and other payees optional methods of
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payment in addition to the Annuity Options described in this Prospectus and
the applicable Contract.
Federal income tax requirements currently applicable to individual
retirement annuity plans provide that the period of years guaranteed under
Option A cannot be any greater than the joint life expectancies of the payee
and his or her designated beneficiary.
If the Owner dies on or after annuity payments have begun, any remaining
benefit must be paid out at least as rapidly as under the method of making
annuity payments then in effect.
VARIABLE ACCOUNT VALUATION PROCEDURES
VALUATION DATE--A Valuation Date is any date on which the New York Stock
Exchange is open for trading and on which the Fund values its shares. On any
date other than a Valuation Date, the Accumulation Share Value or Annuity Unit
Value will be the same as that on the next following Valuation Date.
VALUATION PERIOD--A Valuation Period is that period of time from the beginning
of the day following a Valuation Date to the end of the next following
Valuation Date.
ACCUMULATION SHARE VALUE--The Accumulation Share Value is calculated
separately for each subaccount. The value of one Accumulation Share on any
Valuation Date is determined for each subaccount by multiplying the
immediately preceding Accumulation Share Value by the applicable Net
Investment Factor for the Valuation Period ending on such Valuation Date.
ANNUITY UNIT VALUE--The Annuity Unit Value is calculated separately for each
subaccount. The value of one Annuity Unit on any Valuation Date is determined
for each subaccount by first multiplying the immediately preceding Annuity
Unit Value by the applicable Net Investment Factor for the Valuation Period
ending on such date and then multiplying this product by an adjustment factor
which will neutralize the assumed investment rate used in determining the
amounts of annuity payable. The adjustment factor for a Valuation Period of
one day for Contracts with an assumed investment rate of 3 1/2% per year is
.99990575. The assumed investment rate is neutralized by applying the
adjustment factor so that the variable annuity payments will increase only if
the actual net investment rate of the subaccount exceeds 3 1/2% per year and
will decrease only if it is less than 3 1/2% per year.
NET INVESTMENT FACTOR--The Net Investment Factor for each subaccount for any
Valuation Period is equal to 1 plus the applicable net investment rate for
such Valuation Period. A Net Investment Factor may be more or less than 1. The
net investment rate for each subaccount for any Valuation Period is equal to
(a) the accrued investment income and capital gains and losses, whether
realized or unrealized, of the subaccount for such Valuation Period less (b)
the sum of a deduction for any applicable income taxes and, for each calendar
day in the Valuation Period, a deduction of 0.002740% of the value of each
subaccount at the beginning of the Valuation Period, the result then being
divided by (c) the value of the total net assets of each subaccount at the
beginning of the Valuation Period.
ADJUSTMENT OF UNITS AND VALUES--JHVLICO reserves the right to change the
number and value of the Accumulation Shares or Annuity Units or both credited
to any Contract, without the consent of the Owner or any other person,
provided strict equity is preserved and the change does not otherwise affect
the benefits, provisions or investment return of the Contract.
MISCELLANEOUS PROVISIONS
RESTRICTION ON ASSIGNMENT
In order to qualify for favorable tax treatment, certain Contracts may not
be sold, assigned, discounted or pledged as collateral for a loan or as
security for the performance of an obligation or for any other purpose, to any
person, unless the Owner is the trustee of a trust described in Section 401(a)
of the Code. Because an assignment, pledge or other transfer may be a taxable
event an Owner should consult a competent tax adviser before taking any such
action.
DEFERMENT OF PAYMENT
Payment of the value of any Accumulation Shares in a single sum upon a
surrender or partial withdrawal will ordinarily be made within seven days
after receipt of the written request therefor by JHVLICO at its Service
Center. However, redemption may be suspended and payment may be postponed at
times (a) when the New York Stock Exchange is closed, other than customary
weekend and holiday closings, (b) when trading on that Exchange is restricted,
(c) when an emergency exists as a result of which disposal of securities in a
subaccount is not reasonably practicable or it is not reasonably practicable
to determine the value of the net assets of a subaccount or (d) when a
governmental body having jurisdiction over the Account by order permits such
suspension. Rules and regulations of the Securities and Exchange Commission,
if any are applicable, will govern as to whether conditions described in (b)
or (c) exist.
RESERVATION OF RIGHTS
JHVLICO reserves the right to add or delete subaccounts, to change the
underlying investments of any subaccount, to operate the Account in any form
permitted by law and to terminate the Account's registration under the 1940
Act if such registration should no longer be legally required. Certain changes
may, under applicable laws and regulations, require notice to or approval of
Owners. Otherwise, changes do not require such notice or approval.
OWNER AND BENEFICIARY
The Owner has the sole and absolute power to exercise all rights and
privileges under the Contract, except as otherwise
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provided by the Contract or by written notice of the Owner. The Owner and the
beneficiary are designated in the application and may be changed by the Owner,
effective upon receipt of written notice at the Service Center, subject to the
rights of any assignee of record, any action taken prior to receipt of the
notice and certain other conditions. While the Annuitant is alive, the Owner
may be changed by written notice. The beneficiary may be changed by written
notice no later than receipt of due proof of the death of the Annuitant. The
change will take effect whether or not the Owner or the Annuitant is then
alive.
FEDERAL INCOME TAXES
THE ACCOUNT AND JHVLICO
JHVLICO is taxed as a life insurance company under the Code. The Account is
part of JHVLICO's total operations and is not taxed separately as a "regulated
investment company" or otherwise.
The Contracts permit JHVLICO to charge against the Account any taxes, or
provisions for taxes, attributable to the operation or existence of the
Contracts or the Account. No specific charge is currently made against the
Account for any such taxes. JHVLICO pays such taxes out of its general account
assets which may consist of, among other things, proceeds derived from
mortality and expense risk charges deducted from the Account. Currently,
JHVLICO does not anticipate making a separate charge for income and other
taxes because of the level of such taxes. If the level of current tax is
increased, or is expected to increase in the future, JHVLICO reserves the
right to make such a charge in the future.
JHVLICO assumes no responsibility for determining whether a particular
retirement plan satisfies the applicable requirements of the Code.
CONTRACTS PURCHASED OTHER THAN TO FUND A TAX QUALIFIED PLAN
THE OWNER OR OTHER PAYEE
The Contracts are considered annuity contracts under Section 72 of the Code.
Currently no Federal income tax is payable on increases in Contract Value
until payments are made to the Owner or other payee under such Contract.
However, a Contract owned other than by a natural person is not generally an
annuity for tax purposes and any increase in value thereunder is taxable as
ordinary income as accrued.
When payments under a Contract are made in the form of an annuity, the
amount of each payment is taxed to the Owner or other payee as ordinary income
to the extent that such payment exceeds an allocable portion of the Owner's
"investment in the contract" (as defined in the Code). In general, an Owner's
"investment in the contract" is the aggregate amount of purchase payments made
by the Owner, reduced by any amounts previously distributed from the Contract
that were not subject to tax. The portion of each variable annuity payment to
be excluded from income is determined by dividing the "investment in the
contract," adjusted by any refund feature, by the number of periodic payments
anticipated during the time that periodic payments are to be made. In the case
of a fixed annuity payment, the amount to be excluded in each year is
determined by dividing the "investment in the contract," adjusted by any
refund feature, by the amount of "expected return" during the time that
periodic payments are to be made, and then multiplying by the amount of the
payment."
When a payment under a Contract is made in a single sum, the amount of the
payment is taxed as ordinary income to the Owner or other payee to the extent
it exceeds the Owner's "investment in the contract."
PARTIAL WITHDRAWALS BEFORE ANNUITY STARTING DATE
When a payment under a Contract, including a payment under a systematic
withdrawal plan, is less than the amount that would be paid upon the
Contract's complete surrender and such payment is made prior to the
commencement of annuity payments under the Contract, part or all of the
payment (the partial withdrawal) may be taxed to the Owner or other payee as
ordinary income.
On the date of the partial withdrawal, if the cash value of the Contract is
greater than the investment in the Contract, any part of such excess value so
withdrawn is subject to tax as ordinary income.
If an individual assigns or pledges any part of the value of a Contract, the
value so pledged or assigned is taxed as ordinary income to the same extent as
a partial withdrawal.
PENALTY FOR PREMATURE WITHDRAWALS
In addition to being included in ordinary income, the taxable portion of any
withdrawal may be subject to a 10-percent penalty tax. The penalty tax does
not apply to payments made to the Owner or other payee after the Owner attains
age 59 1/2, or on account of the Owner's death or disability. If the
withdrawal is made in substantially equal periodic payments over the life of
the Annuitant or other payee or over the joint lives of the Annuitant and the
Annuitant's beneficiary the penalty will also not apply.
DIVERSIFICATION REQUIREMENTS
Each of the Portfolios of the Fund intends to qualify as a regulated
investment company under Subchapter M of the Code and will have to meet the
investment diversification tests of Section 817(h) of the Code and the
underlying regulations. The Treasury Department and the Internal Revenue
Service may, at some future time, issue a ruling or a regulation presenting
situations in which it will deem "investor control" to be present over the
assets of the underlying Portfolios, causing the Owner to be taxed currently
on income credited to the Contracts. In such a case, JHVLICO reserves the
right to amend the Contract or the choice of underlying Portfolios to avoid
current taxation to the Owners.
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CONTRACTS PURCHASED UNDER INDIVIDUAL RETIREMENT ANNUITY PLANS (IRA)
In general, the maximum amount of purchase payments deductible each year
with respect to an individual retirement annuity contract (as defined in
Section 408 of the Code) issued on the life of an eligible purchaser is the
lesser of $2,000 or 100% of compensation includible in gross income. A person
may also purchase a contract for the benefit of his or her spouse (including
for example a homemaker who does not work outside the home). Where an
individual elects to deduct amounts contributed on his or her own behalf and
on behalf of a spouse, the maximum amount of purchase payments deductible is
$2,000 for each spouse if their combined compensation is at least equal to the
contributed amount. However, not more than $2,000 can be allocated to either
person's account. If an individual or his or her spouse is an active
participant in an employer-sponsored retirement plan, the individual is
permitted to make a deductible purchase payment only if the adjusted gross
incomes of the individual and his or her spouse are below certain amounts.
No deduction is allowed for purchase payments made in or after the taxable
year in which the Owner has attained the age of 70 1/2 years nor is a
deduction allowed for a "rollover contribution" as defined in the Code.
When payments under a Contract are made in the form of an annuity, or in a
single sum such as on surrender of the Contract or by partial withdrawal, the
payment is taxed as ordinary income.
IRS required minimum distributions must begin no later than April 1 of the
year following the year in which the Owner attains age 70 1/2. The Owner may
incur adverse tax consequences if a distribution on surrender of the Contract
or by partial withdrawal is made prior to his attaining age 59 1/2, except in
the event of his death or total disability or certain other circumstances.
Certain tax laws require 20% withholding on certain distributions from
individual retirement annuity contract plans. An Owner wishing to rollover his
entire distribution should have it paid directly to the successor plan.
Otherwise, the Owner's distribution may be reduced by the 20% mandatory income
tax. Consult a qualified tax adviser before taking such a distribution.
WITHHOLDING OF TAXES
JHVLICO is obligated to withhold taxes from certain payments unless the
recipient elects otherwise. The withholding rate varies depending upon the
nature and the amount of the distribution. JHVLICO will notify the Owner or
other payee in advance of the first payment of his or her right to elect out
of withholding and furnish a form on which the election may be made. Any
election must be received by JHVLICO in advance of the payment in order to
avoid withholding.
SEE YOUR OWN TAX ADVISER
The above description of Federal income tax consequences of owning a
Contract is only a brief summary and is not intended as tax advice. Nor does
it include a discussion of Federal estate and gift tax or state tax
consequences. Tax laws and regulations are subject to change and such changes
may be retroactive. Anything less than full compliance with the applicable
rules can have adverse tax consequences. For example, premature withdrawals
are generally subject to a 10-percent penalty tax. The taxation of an
Annuitant or other payee has become so complex and confusing that great care
must be taken to avoid pitfalls. For further information a prospective
purchaser should consult a qualified tax adviser.
PERFORMANCE
The Account may, from time to time, advertise certain performance
information with respect to its subaccounts. THE PERFORMANCE INFORMATION IS
BASED ON HISTORICAL INVESTMENT EXPERIENCE OF THE SUBACCOUNTS AND DOES NOT
INDICATE OR REPRESENT FUTURE PERFORMANCE.
The subaccounts may include total return in advertisements. When a
subaccount advertises its total return, it will usually be calculated for one
year, five years, and ten years or for the life of the applicable portfolio.
Total return is the percentage change between the value of a hypothetical
investment in the subaccount at the beginning of the relevant period to the
value of the investment at the end of the period. Total return at the Account
level reflects all Contract charges (other than premium tax charges)--
mortality and expense risk charges, administrative service charge, and the
annual contract fee--and is therefore lower than total return at the Fund
level where no comparable charges have been deducted. Because the Contracts
have not yet been offered, a total return figure does not necessarily
correspond to the total return actually earned by any Contract Owner.
The Money Market Subaccount may advertise "current yield" and "effective
yield." Current yield refers to the income earned by the subaccount over a
seven-day period and then annualized; i.e., the income earned in the period is
assumed to be earned every seven days over a 52-week period and stated as a
percentage of the investment. Effective yield is calculated similarly but,
when annualized, the income earned by the investment is assumed to be
reinvested in the subaccount and thus compounded in the course of a 52-week
period. The effective yield will be slightly higher than the current yield
because of this compounding effect of the assumed reinvestment.
The other subaccounts may also advertise current yield. For these
subaccounts, the current yield will be calculated by dividing the
annualization of the income earned by the subaccount during a recent thirty-
day period by the maximum offering price per unit at the end of such period.
In all cases, current yield and effective yield reflect the recurring charges
on
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the Account level including the annual contract fee but do not reflect any
premium tax charge.
Performance information for the subaccounts may be compared to other
variable annuity separate accounts or other investment products surveyed by
Lipper Analytical Services, Inc., an independent service which monitors and
ranks the performance of investment companies, or tracked by other rating
services, companies, publications, or persons who independently monitor and
rank investment company performance. Performance figures are calculated in
accordance with standardized methods established by each reporting service.
STATE REGULATION
JHVLICO is subject to the provisions of the Massachusetts insurance laws
applicable to stock life insurance companies and to regulation and supervision
by the Massachusetts Commissioner of Insurance. JHVLICO is also subject to the
applicable insurance laws of all the other states and jurisdictions in which
it does an insurance business.
REPORTS
Reports will be furnished at least annually to an Owner showing the number
and value of Accumulation Shares credited to the variable annuity contract and
containing the financial statements of the Fund.
VOTING PRIVILEGES
All of the assets in the subaccounts of the Account are invested in shares
of the corresponding Portfolios of the Fund. JHVLICO will vote the shares of
each of the Portfolios of the Fund which are deemed attributable to qualifying
variable annuity contracts and variable life insurance policies at meetings of
the Fund's shareholders in accordance with instructions received from owners
of such contracts or policies. Shares of the Fund held in the Account which
are not attributable to such contracts or policies and those for which
instructions from owners are not received will be represented by JHVLICO at
the meeting and will be voted for and against each matter in the same
proportion as the votes based upon the instructions received from the owners
of all such contracts and policies.
The number of Fund shares held in each subaccount deemed attributable to
each owner is determined by dividing a Contract's Accumulation Share Value (or
for a Contract under which annuity payments have commenced, the equivalent) in
the subaccount by the net asset value of one share in the corresponding Fund
Portfolio in which the assets of that subaccount are invested. Fractional
votes will be counted. The number of shares as to which the owner may give
instructions will be determined as of the record date for the Fund's meeting.
Owners of Contracts may give instructions regarding the election of the
Board of Trustees of the Fund, ratification of the selection of independent
auditors, approval of the Fund's investment management agreement and other
matters requiring a vote under the 1940 Act. Owners will be furnished
information and forms by JHVLICO in order that voting instructions may be
given.
CHANGES IN APPLICABLE LAW--FUNDING AND OTHERWISE
The voting privileges described in this prospectus are afforded based on
JHVLICO's understanding of applicable Federal securities law requirements. To
the extent that applicable law, regulations or interpretations change to
eliminate or restrict the need for such voting privileges, JHVLICO reserves
the right to proceed in accordance with any such revised requirements. JHVLICO
also reserves the right, subject to compliance with applicable law, including
approval of Owners if so required, to transfer assets determined by JHVLICO to
be associated with the class of contracts to which the Contracts belong from
the Account to another separate account or subaccount by withdrawing the same
percentage of each investment in the Account with appropriate adjustments to
avoid odd lots and fractions.
LEGAL MATTERS
Legal matters in connection with the Contracts and Federal laws and
regulations relating to their issue and sale have been passed upon by Sandra
M. DaDalt, Counsel for JHVLICO.
DISTRIBUTION OF THE CONTRACTS
John Hancock Distributors, Inc. ("Distributors"), a wholly owned subsidiary
of John Hancock located at 197 Clarendon Street, Boston, MA 02117, is
registered as a broker-dealer with the Commission under the Securities
Exchange Act of 1934 and is a member of the National Association of Securities
Dealers, Inc. Distributors is the principal underwriter and distributor of the
Contracts, pursuant to a distribution agreement it has entered into with John
Hancock and JHVLICO.
REGISTRATION STATEMENT
This Prospectus omits certain information contained in the Registration
Statement which has been filed with the Securities and Exchange Commission.
More details may be obtained from the Commission upon payment of the
prescribed fee.
EXPERTS
The financial statements of JHVLICO and the Account included in the
Statement of Additional Information have been audited by Ernst & Young LLP,
independent auditors, whose
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reports thereon appear in the Statement of Additional Information and have been
so included in reliance on their reports given on their authority as experts in
accounting and auditing.
FINANCIAL STATEMENTS
Financial statements of JHVLICO and the Account may be found in the Statement
of Additional Information. The financial statements of JHVLICO should be dis-
tinguished from the financial statements of the Account and should be consid-
ered only as bearing upon the ability of JHVLICO to meet its obligations under
the Contracts.
TABLE OF CONTENTS OF STATEMENT
OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
CROSS REFERENCE TO
PAGE PAGE IN PROSPECTUS
---- ------------------
<S> <C> <C>
Business History........................................ 1 7
Distribution Agreement and Other Services............... 1 18,9
Distribution Agreement.................................. 1 18
Investment Advisory Agreement........................... 1 9
Custodian Agreement..................................... 2 --
Independent Auditors.................................... 2 18
Calculation of Performance Data......................... 3 17
Calculation of Annuity Payments......................... 4 14
Financial Statements.................................... 6 18
</TABLE>
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Because of exemptive and exclusionary provisions, interests in JHVLICO's
general account have not been registered under the Securities Act of 1933 and
the general account has not been registered as an investment company under the
1940 Act. Accordingly, neither the general account nor any interests therein
are subject to the provisions of these Acts, and JHVLICO has been advised that
the staff of the Commission has not reviewed the disclosure in this Prospectus
relating to the Fixed Account. Disclosure regarding the Fixed Account may,
however, be subject to certain generally-applicable provisions of the Federal
securities laws relating to accuracy and completeness of statements made in
prospectuses.
APPENDIX--THE FIXED ACCOUNT AND FIXED ACCOUNT VALUE
INVESTMENTS IN THE FIXED ACCOUNT
Net purchase payments will be allocated to the Fixed Account in accordance
with the selection made by the Owner in the application. The Owner may change
such selection by notice satisfactory to JHVLICO at its Service Center. Any
selection must specify what percentage of the purchase payment is to be
allocated to the Fixed Account. The percentage must be a whole number.
The Value in the Fixed Account, at any time prior to annuitization, is equal
to:
(a) net purchase payments allocated to the Fixed Account; plus
(b) Variable Account Value (amounts held in the subaccounts of the
Variable Account) transferred to the Fixed Account; plus
(c) interest credited on amounts held in the Fixed Account; less
(d) any prior partial withdrawals from the Fixed Account; less
(e) amounts transferred out of the Fixed Account to the Variable Account;
less
(f) any applicable charges deducted from the Fixed Account.
INTEREST TO BE CREDITED
Prior to annuitization, JHVLICO will credit interest (calculated on a
compound basis) to purchase payments allocated to the Fixed Account at rates
declared by JHVLICO, subject to a minimum rate of 3%. For purposes of this
section, Variable Account Value transferred to the Fixed Account shall be
treated as a purchase payment.
Under current practice, the interest rate credited to amounts held in the
Fixed Account will be based on the size of the initial payment to the
Contract. If the initial payment was $10,000 or more, a higher interest rate
will be credited. The rate of interest credited on each amount may vary based
upon when that amount was first allocated to the Fixed Account.
TRANSFER AND REDUCTIONS OF FIXED ACCOUNT VALUE
The Owner may transfer Fixed Account Value to one or more subaccounts of the
Variable Account or may transfer Variable Account Value into the Fixed
Account. The maximum amount that may be transferred into the Fixed Account in
a Contract Year is $100,000, less any premiums previously deposited into the
Fixed Account in such Contract Year (exclusive of any initial deposit made to
the Fixed Account at the time the Contract is issued); such initial deposit
may be as large as $500,000. After the tenth Contract Year, no deposits or
transfers may be made into the Fixed Account. JHVLICO may waive these limits.
Sums on deposit in the subaccounts may be transferred into the Fixed Account
up to twelve times within a Contract Year during the accumulation period, but
not within six months of a transfer out of the Fixed Account. Transfers out of
the Fixed Account may be made only once in a Contract Year and only on or
within 30 days after a Contract anniversary. No more than the greater of 20%
of the Fixed Account Value or $500 may be transferred out of the Fixed Account
per Contract Year without our prior approval. After annuitization, the amount
of any fixed annuity allocation may not be changed.
Transfers will be made after receipt of notice satisfactory to JHVLICO at
its Service Center. Transfer requests received by JHVLICO before 4:00 p.m.
Eastern Time on a business day will be valued as of the close of that day. Any
requests received after 4:00 p.m. or on a non-business day will be valued as
of the close of the next business day.
An Owner may request a transfer in writing or, once a written telephone
transfer authorization form is completed by the Owner, the Owner may request a
transfer by telephoning JHVLICO at 800 741-8184 or by sending a written
request via the JHVLICO fax machine at 617-572-1571. Any written request
should include the Owner's name, daytime telephone number, and contract number
as well as the names of the subaccounts or Fixed Account from which and to
which money will be transferred. JHVLICO reserves the right to modify,
suspend, or terminate telephone transfers at any time without notice to the
Owners. If the fax request option becomes unavailable, another means of
telecommunication will be substituted.
An Owner who authorizes telephone transfers will be liable for any loss,
expense or cost arising out of any unauthorized or fraudulent telephone
transfer instructions which JHVLICO reasonably believes to be genuine, unless
such loss, expense or cost is the result of JHVLICO's mistake or negligence.
JHVLICO employs procedures which provide safeguards against the execution of
unauthorized transfers, and which are reasonably designed to confirm that
transfer
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instructions received by telephone are genuine. These procedures include
requiring personal identification, tape recording calls, and providing written
confirmation to the Owner. If JHVLICO does not employ reasonable procedures to
confirm that instructions communicated by telephone are genuine, it may be
liable for any loss due to unauthorized or fraudulent instructions.
FIXED ANNUITY PAYMENT VALUES
The dollar amount of each fixed annuity payment will be determined by
dividing the amount applied under the fixed annuity option (net of any
applicable premium taxes) by $1,000 and multiplying the result by the greater
of: (a) the applicable factor shown in the appropriate table in the Contract;
or (b) the factor currently offered by JHVLICO at the time of annuitization.
This current factor may be based on the sex of the payee unless prohibited by
law.
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APPENDIX--VARIABLE ANNUITY INFORMATION FOR INDIVIDUAL RETIREMENT ANNUITIES
To help you understand your purchase of this Contract as an Individual
Retirement Annuity (IRA), we are providing the following summary.
I. Accumulation Shares--Each net purchase payment you make into your
Contract is allocated to the subaccounts you select, and Accumulation Shares
are purchased. This is the unit of measurement used to determine the value of
your Contract. The number of shares purchased in any subaccount is based on
the share value of that subaccount next determined after receipt of the
payment at our Service Center. The values of shares fluctuate with the daily
investment performance of the corresponding subaccount. The growth in the
value of your Contract, to the extent invested in the Separate Account, is
neither guaranteed nor projected and varies with the investment Portfolio you
have selected. Each net purchase payment allocated to the Fixed Account will
be credited interest, as determined by JHVLICO. The minimum guarantee rate is
3%. More details appear under "Accumulation Shares" in this Prospectus and in
the "Appendix--The Fixed Account and Fixed Account Value."
II. Separate Account and Series Fund Charges--The assets of the Separate
Account are charged for services and guarantees. The annualized charge equals
1.00%. Fees varying by Portfolio are charged against the Series Fund for
investment management and advisory services. Details appear under "Charges
Under the Annuity Contracts" in this Prospectus and "Management of the Fund"
in the accompanying Series Fund prospectus.
III. Deductions from the Contract--The full amount of each deposit is
applied to the Contract. At or after the purchase date, one or more of the
following charges may be made, depending on circumstances.
1. CONTRACT FEE--JHVLICO currently deducts $30 from the Accumulated Value
of the Contract as a contract fee if the Accumulated Value is less than
$10,000. This occurs annually or at the time of surrender. Please refer to
"Charges for Administrative Services" in this Prospectus.
2. STATE PREMIUM TAX--Some states and local governments impose a premium or
similar tax on annuities. JHVLICO only deducts this tax when required to do
so. Please refer to "Premium or Similar Taxes" in this Prospectus.
22
<PAGE>
APPENDIX--ILLUSTRATIVE ACCUMULATED VALUE AND ANNUITY PAYMENT TABLES
The following Tables present illustrative periodic Accumulated Values and
annuity payments that would have resulted under a Contract described in this
prospectus had such values and payments been based exclusively upon the
investment experience of the seven specified subaccounts, assuming investment
by each of those subaccounts in the related Portfolio in the Fund and its
predecessors during the periods shown. The other subaccounts are not
illustrated, because of the limited time that they and their related Fund
Portfolios have been available. The Contracts described in this prospectus
will be first offered in 1997.
For years ended December 31, 1986, and prior thereto, values have been
calculated based upon the actual investment results of the three corresponding
variable life insurance managed separate accounts which were the predecessors
to the Growth & Income, Sovereign Bond, and Money Market Portfolios, as if the
Fund had been in existence prior to March 28, 1986, the date of its
reorganization.
The Tables assume investment of a single purchase payment of $10,000, net of
any deductions from purchase payments, and that charges under the Contracts
have been made at an annual rate of 1.00% for mortality and expense risks and
administrative services. The tables also reflect actual investment management
fees and other portfolio expenses for the periods illustrated. Absent expense
reimbursements by John Hancock to certain of the Portfolios for some periods,
the values illustrated would have been lower.
WHAT THE TABLES ILLUSTRATE
Subject to the foregoing, each Table I presents for the periods shown the
illustrative periodic Accumulated Values for each Account which would have
resulted at yearly intervals under a Contract where a net single purchase
payment of $10,000 was made, based upon the investment performance of the
applicable funding medium.
Subject to the foregoing, each Table II indicates, at annual intervals,
illustrative monthly variable annuity payments for each subaccount which would
have been received by an Annuitant or other payee, assuming that an initial
annuity payment of $100 was received in the month and year indicated in the
respective Tables. The form of annuity illustrated is a life annuity with
payments guaranteed for 10 years.
The results shown should not be considered a representation of the future. A
program of the type illustrated in the Tables does not assure a profit or
protect against depreciation in declining markets.
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT I
ILLUSTRATIVE PERIODIC ACCUMULATED VALUES AND ANNUITY PAYMENTS
MANAGED SUBACCOUNT
TABLE I--ACCUMULATION PERIOD--ILLUSTRATIVE ACCUMULATED VALUES WHICH WOULD HAVE
RESULTED IF A $10,000 NET PURCHASE PAYMENT HAD BEEN ISSUED NOVEMBER 9, 1987
<TABLE>
<CAPTION>
ACCUMULATED VALUE
ON DECEMBER 31
CONTRACT YEAR COMMENCING OF THE SAME YEAR
- ------------------------ -----------------
<S> <C>
November 1987................................................ 10,232.70
November 1988................................................ 11,334.40
November 1989................................................ 13,393.61
November 1990................................................ 13,801.73
November 1991................................................ 16,668.31
November 1992................................................ 17,775.86
November 1993................................................ 19,642.61
November 1994................................................ 19,013.90
November 1995................................................ 23,925.00
November 1996................................................ 26,225.50
</TABLE>
TABLE II--ANNUITY PERIOD--ILLUSTRATIVE MONTHLY VARIABLE ANNUITY PAYMENTS--
MANAGED SUBACCOUNT
This Table shows, at annual intervals, the illustrative monthly variable
annuity payments an Annuitant would have received assuming the Annuitant
received a first annuity payment of $100 in November 1987.
<TABLE>
<CAPTION>
PAYMENT
MONTH FOR MONTH
- ----- ---------
<S> <C>
November 1987......................................................... 100.00
November 1988......................................................... 110.31
November 1989......................................................... 122.50
November 1990......................................................... 116.05
November 1991......................................................... 138.17
November 1992......................................................... 144.89
November 1993......................................................... 159.95
November 1994......................................................... 150.56
November 1995......................................................... 174.25
November 1996......................................................... 187.53
</TABLE>
The amounts shown are based on the investment performance of the Managed
Subaccount and the Managed Portfolio. All amounts reflect the provisions of
the Contracts described in this Prospectus, including annuity tables based on
the standard assumed investment rate of 3 1/2% per annum. The amounts shown do
not reflect the deduction for any applicable premium tax. See text preceding
the Tables.
23
<PAGE>
GROWTH & INCOME SUBACCOUNT
TABLE I--ACCUMULATION PERIOD--ILLUSTRATIVE ACCUMULATED VALUES WHICH WOULD HAVE
RESULTED IF A $10,000 NET PURCHASE PAYMENT CONTRACT HAD BEEN ISSUED JANUARY 2,
1975
<TABLE>
<CAPTION>
ACCUMULATED VALUE
ON DECEMBER 31
CONTRACT YEAR COMMENCING OF THE SAME YEAR
- ------------------------ -----------------
<S> <C>
January 1975................................................. 12,819.53
January 1976................................................. 14,966.77
January 1977................................................. 13,228.08
January 1978................................................. 13,894.65
January 1979................................................. 15,986.35
January 1980................................................. 20,643.34
January 1981................................................. 20,623.76
January 1982................................................. 26,146.28
January 1983................................................. 31,543.15
January 1984................................................. 32,710.95
January 1985................................................. 43,647.01
January 1986................................................. 50,007.66
January 1987................................................. 51,890.42
January 1988................................................. 59,612.93
January 1989................................................. 76,444.82
January 1990................................................. 77,614.59
January 1991................................................. 96,797.31
January 1992................................................. 104,360.17
January 1993................................................. 117,099.32
January 1994................................................. 115,292.09
January 1995................................................. 153,196.34
January 1996................................................. 182,154.80
</TABLE>
TABLE II--ANNUITY PERIOD--ILLUSTRATIVE MONTHLY VARIABLE ANNUITY PAYMENTS--
GROWTH & INCOME SUBACCOUNT
This Table shows, at annual intervals, the illustrative monthly variable an-
nuity payments an Annuitant would have received assuming the Annuitant re-
ceived a first annuity payment of $100 in January 1975.
<TABLE>
<CAPTION>
PAYMENT
MONTH FOR MONTH
- ----- ---------
<S> <C>
January 1975.......................................................... 100.00
January 1976.......................................................... 126.56
January 1977.......................................................... 141.12
January 1978.......................................................... 123.05
January 1979.......................................................... 125.58
January 1980.......................................................... 139.22
January 1981.......................................................... 172.58
January 1982.......................................................... 167.75
January 1983.......................................................... 204.49
January 1984.......................................................... 235.65
January 1985.......................................................... 237.41
January 1986.......................................................... 307.45
January 1987.......................................................... 348.17
January 1988.......................................................... 347.67
January 1989.......................................................... 384.54
January 1990.......................................................... 456.19
January 1991.......................................................... 462.96
January 1992.......................................................... 530.83
January 1993.......................................................... 583.54
January 1994.......................................................... 631.13
January 1995.......................................................... 602.56
January 1996.......................................................... 768.39
January 1997.......................................................... 888.58
</TABLE>
The amounts shown are based on the investment performance of the Growth &
Income Subaccount, the Growth & Income Portfolio, and its predecessors. All
amounts reflect the provisions of the Contracts described in this Prospectus,
including annuity tables based on the standard assumed investment rate of 3
1/2% per annum. The amounts shown do not reflect the deduction for any
applicable premium tax. See text preceding these Tables.
24
<PAGE>
LARGE CAP GROWTH SUBACCOUNT
TABLE I--ACCUMULATION PERIOD--ILLUSTRATIVE ACCUMULATED VALUES WHICH WOULD HAVE
RESULTED IF A $10,000 NET PURCHASE PAYMENT HAD BEEN ISSUED NOVEMBER 24, 1987
<TABLE>
<CAPTION>
ACCUMULATED VALUE
ON DECEMBER 31
CONTRACT YEAR COMMENCING OF THE SAME YEAR
- ------------------------ -----------------
<S> <C>
November 1987................................................ 10,243.86
November 1988................................................ 11,672.16
November 1989................................................ 14,984.57
November 1990................................................ 15,863.60
November 1991................................................ 19,703.88
November 1992................................................ 21,447.52
November 1993................................................ 24,167.30
November 1994................................................ 23,693.18
November 1995................................................ 30,879.50
November 1996................................................ 36,157.66
</TABLE>
TABLE II--ANNUITY PERIOD--ILLUSTRATIVE MONTHLY VARIABLE ANNUITY PAYMENTS--
LARGE CAP GROWTH SUBACCOUNT
This Table shows, at annual intervals, the illustrative monthly variable
annuity payments an Annuitant would have received assuming the Annuitant
received a first annuity payment of $100 in November 1987.
<TABLE>
<CAPTION>
PAYMENT
MONTH FOR MONTH
- ----- ---------
<S> <C>
November 1987......................................................... 100.00
November 1988......................................................... 110.03
November 1989......................................................... 136.28
November 1990......................................................... 137.37
November 1991......................................................... 142.37
November 1992......................................................... 172.31
November 1993......................................................... 194.04
November 1994......................................................... 187.98
November 1995......................................................... 225.72
November 1996......................................................... 262.63
</TABLE>
The amounts shown are based on the investment performance of the Large Cap
Growth Subaccount and the Large Cap Growth Portfolio. All amounts reflect the
provisions of the Contracts described in this Prospectus, including annuity
tables based on the standard assumed investment rate of 3 1/2% per annum. The
amounts shown do not reflect the deduction for any applicable premium tax. See
text preceding the Tables.
REAL ESTATE EQUITY SUBACCOUNT
TABLE I--ACCUMULATION PERIOD--ILLUSTRATIVE ACCUMULATED VALUES WHICH WOULD HAVE
RESULTED IF A $10,000 NET PURCHASE PAYMENT HAD BEEN ISSUED FEBRUARY 14, 1989
<TABLE>
<CAPTION>
ACCUMULATED VALUE
ON DECEMBER 31
CONTRACT YEAR COMMENCING OF THE SAME YEAR
- ------------------------ -----------------
<S> <C>
February 1989................................................ 10,411.79
February 1990................................................ 8,096.26
February 1991................................................ 10,702.17
February 1992................................................ 12,292.77
February 1993................................................ 14,276.57
February 1994................................................ 14,539.51
February 1995................................................ 16,166.74
February 1996................................................ 21,298.75
</TABLE>
TABLE II--ANNUITY PERIOD--ILLUSTRATIVE MONTHLY VARIABLE ANNUITY PAYMENTS--REAL
ESTATE EQUITY SUBACCOUNT
This Table shows, at annual intervals, the illustrative monthly variable
annuity payments an Annuitant would have received assuming the Annuitant
received a first annuity payment of $100 in February 1989.
<TABLE>
<CAPTION>
PAYMENT
MONTH FOR MONTH
- ----- ---------
<S> <C>
February 1989......................................................... 100.00
February 1990......................................................... 96.30
February 1991......................................................... 86.16
February 1992......................................................... 101.00
February 1993......................................................... 117.29
February 1994......................................................... 121.19
February 1995......................................................... 115.20
February 1996......................................................... 128.27
February 1997......................................................... 163.25
</TABLE>
The amounts shown are based on the investment performance of the Real Estate
Equity Subaccount and the Real Estate Equity Portfolio. All amounts reflect
the provisions of the Contracts described in this Prospectus, including
annuity tables based on the standard assumed investment rate of 3 1/2% per
annum. The amounts shown do not reflect the deduction for any applicable
premium tax. See text preceding the Tables.
25
<PAGE>
INTERNATIONAL EQUITIES SUBACCOUNT
TABLE I--ACCUMULATION PERIOD--ILLUSTRATIVE ACCUMULATED VALUES WHICH WOULD HAVE
RESULTED IF A $10,000 NET PURCHASE PAYMENT HAD BEEN ISSUED FEBRUARY 10, 1989
<TABLE>
<CAPTION>
ACCUMULATED VALUE
ON DECEMBER 31
CONTRACT YEAR COMMENCING OF THE SAME YEAR
- ------------------------ -----------------
<S> <C>
February 1989................................................ 11,110.62
February 1990................................................ 10,127.48
February 1991................................................ 12,370.78
February 1992................................................ 12,046.28
February 1993................................................ 15,754.61
February 1994................................................ 14,645.35
February 1995................................................ 15,661.96
February 1996................................................ 16,931.02
</TABLE>
TABLE II--ANNUITY PERIOD--ILLUSTRATIVE MONTHLY VARIABLE ANNUITY PAYMENTS--
INTERNATIONAL EQUITIES SUBACCOUNT
This Table shows, at annual intervals, the illustrative monthly variable
annuity payments an Annuitant would have received assuming the Annuitant
received a first annuity payment of $100 in February 1989.
<TABLE>
<CAPTION>
PAYMENT
MONTH FOR MONTH
- ----- ---------
<S> <C>
February 1989......................................................... 100.00
February 1990......................................................... 97.16
February 1991......................................................... 90.62
February 1992......................................................... 105.09
February 1993......................................................... 99.92
February 1994......................................................... 126.30
February 1995......................................................... 106.20
February 1996......................................................... 118.06
February 1997......................................................... 119.29
</TABLE>
The amounts shown are based on the investment performance of the
International Equities Subaccount and the International Equities Portfolio.
All amounts reflect the provisions of the Contracts described in this
Prospectus, including annuity tables based on the standard assumed investment
rate of 3 1/2% per annum. The amounts shown do not reflect the deduction for
any applicable premium tax. See text preceding the Tables.
SOVEREIGN BOND SUBACCOUNT
TABLE I--ACCUMULATION PERIOD--ILLUSTRATIVE ACCUMULATED VALUES WHICH WOULD HAVE
RESULTED IF A $10,000 NET PURCHASE PAYMENT CONTRACT HAD BEEN ISSUED JUNE 2,
1980
<TABLE>
<CAPTION>
ACCUMULATED VALUE
ON DECEMBER 31
CONTRACT YEAR COMMENCING OF THE SAME YEAR
- ------------------------ -----------------
<S> <C>
June 1980.................................................... 10,253.83
June 1981.................................................... 10,562.69
June 1982.................................................... 13,469.69
June 1983.................................................... 14,149.83
June 1984.................................................... 16,041.33
June 1985.................................................... 19,306.75
June 1986.................................................... 21,698.31
June 1987.................................................... 22,052.03
June 1988.................................................... 23,615.71
June 1989.................................................... 26,354.41
June 1990.................................................... 28,015.98
June 1991.................................................... 32,360.46
June 1992.................................................... 34,492.94
June 1993.................................................... 37,828.50
June 1994.................................................... 36,490.86
June 1995.................................................... 43,187.99
June 1996.................................................... 44,514.03
</TABLE>
TABLE II--ANNUITY PERIOD--ILLUSTRATIVE MONTHLY VARIABLE ANNUITY PAYMENTS--
SOVEREIGN BOND SUBACCOUNT
This Table shows, at annual intervals, the illustrative monthly variable
annuity payments an Annuitant would have received assuming the Annuitant
received a first annuity payment of $100 in June 1980.
<TABLE>
<CAPTION>
PAYMENT
MONTH FOR MONTH
- ----- ---------
<S> <C>
June 1980............................................................. 100.00
June 1981............................................................. 96.41
June 1982............................................................. 105.17
June 1983............................................................. 126.21
June 1984............................................................. 120.98
June 1985............................................................. 145.80
June 1986............................................................. 165.31
June 1987............................................................. 166.02
June 1988............................................................. 172.28
June 1989............................................................. 181.81
June 1990............................................................. 187.02
June 1991............................................................. 200.83
June 1992............................................................. 215.21
June 1993............................................................. 230.96
June 1994............................................................. 224.68
June 1995............................................................. 238.43
June 1996............................................................. 243.64
</TABLE>
The amounts shown are based on the investment performance of the Sovereign
Bond Subaccount, the Sovereign Bond Portfolio, and its predecessors. All
amounts reflect the provisions of the Contracts described in this Prospectus,
including annuity tables based on the standard assumed investment rate of 3
1/2% per annum. The amounts shown do not reflect the deduction for any
applicable premium tax. See text preceding these Tables.
26
<PAGE>
MONEY MARKET SUBACCOUNT
TABLE I--ACCUMULATION PERIOD--ILLUSTRATIVE ACCUMULATED VALUES WHICH WOULD HAVE
RESULTED IF A $10,000 NET PURCHASE PAYMENT CONTRACT HAD BEEN ISSUED MAY 13,
1982
<TABLE>
<CAPTION>
ACCUMULATED VALUE
ON DECEMBER 31
CONTRACT YEAR COMMENCING OF THE SAME YEAR
- ------------------------ -----------------
<S> <C>
May 1982..................................................... 10,482.07
May 1983..................................................... 11,284.20
May 1984..................................................... 12,347.06
May 1985..................................................... 13,220.56
May 1986..................................................... 13,966.07
May 1987..................................................... 14,753.06
May 1988..................................................... 15,728.09
May 1989..................................................... 17,018.29
May 1990..................................................... 18,236.49
May 1991..................................................... 19,134.06
May 1992..................................................... 19,633.91
May 1993..................................................... 20,033.99
May 1994..................................................... 20,646.91
May 1995..................................................... 21,624.80
May 1996..................................................... 22,551.18
</TABLE>
TABLE II--ANNUITY PERIOD--ILLUSTRATIVE MONTHLY VARIABLE ANNUITY PAYMENTS--MONEY
MARKET SUBACCOUNT
This Table shows, at annual intervals, the illustrative monthly variable
annuity payments an Annuitant would have received assuming that Annuitant
received a first annuity payment of $100 in May 1982.
<TABLE>
<CAPTION>
PAYMENT
MONTH FOR MONTH
- ----- ---------
<S> <C>
May 1982.............................................................. 100.00
May 1983.............................................................. 103.76
May 1984.............................................................. 108.45
May 1985.............................................................. 114.21
May 1986.............................................................. 117.81
May 1987.............................................................. 119.65
May 1988.............................................................. 122.42
May 1989.............................................................. 127.07
May 1990.............................................................. 132.40
May 1991.............................................................. 136.49
May 1992.............................................................. 137.10
May 1993.............................................................. 135.53
May 1994.............................................................. 133.62
May 1995.............................................................. 134.22
May 1996.............................................................. 135.58
</TABLE>
The amounts shown are based on the investment performance of the Money Market
Subaccount, the Money Market Portfolio, and its predecessors. All amounts
reflect the provisions of the Contracts described in this Prospectus, including
annuity tables based on the standard assumed investment rate of 3 1/2% per
annum. The amounts shown do not reflect the deduction for any applicable
premium tax. See text preceding these Tables.
27
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT I
CROSS REFERENCE SHEET
----------------
<TABLE>
<CAPTION>
SECTION IN STATEMENT OF
FORM N-4 ITEM NO. ADDITIONAL INFORMATION
----------------- -----------------------
<C> <S> <C>
15. Cover Page............................ Cover Page
16. Table of Contents..................... Table of Contents
17. General Information and History....... Business History
Distribution Agreement and
18. Services.............................. Other Services
19. Purchase of Securities Being Offered.. Not Applicable (relevant
information in prospectus)
Distribution Agreement and
20. Underwriters.......................... Other Services
21. Calculation of Yield Quotations of Calculation of Performance
Money Market Subaccounts............. Data
Calculation of Annuity
22. Annuity Payments...................... Payments
23. Financial Statements.................. Financial Statements
</TABLE>
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
INDIVIDUAL COMBINATION VARIABLE/FIXED
ANNUITY CONTRACTS
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT I
STATEMENT OF ADDITIONAL INFORMATION
----------------
This statement of additional information is not a prospectus. It is intended
that this statement of additional information be read in conjunction with the
prospectus of John Hancock Variable Annuity Account I, dated May 1, 1997. A
copy of the prospectus may be obtained from John Hancock Variable Life
Insurance Company's Service Center, P.O. Box 9116, Boston, MA 02205-8654,
telephone number (888-742-6262), Fax (888-553-4732).
This statement of additional information is dated May 1, 1997.
<PAGE>
TABLE OF CONTENTS
----------------
<TABLE>
<CAPTION>
CROSS REFERENCE TO
PAGE PAGE IN PROSPECTUS
---- -------------------
<S> <C> <C>
Business History....................................... 1 7
Distribution Agreement and Other Services.............. 1 18, 9
Distribution Agreement............................... 1 18
Investment Advisory Agreement........................ 1 9
Custodian Agreement.................................. 2 --
Independent Auditors................................. 2 18
Calculation of Performance Data........................ 3 17
Calculation of Annuity Payments........................ 4 14
Financial Statements................................... 6 18
</TABLE>
<PAGE>
BUSINESS HISTORY
John Hancock Variable Annuity Account I (the "Account") is a separate
account of John Hancock Variable Life Insurance Company ("JHVLICO"),
established under the laws of the Commonwealth of Massachusetts. The Account
is organized as a unit investment trust and registered with the Securities and
Exchange Commission under the Investment Company Act of 1940 (the "Act") and
the Securities Act of 1933. The Account has eighteen separate subaccounts
(Growth & Income, Sovereign Bond, Money Market, Large Cap Growth, Managed,
Real Estate Equity, International Equities, Short-Term U.S. Government,
Special Opportunities, Equity Index, Large Cap Value, Mid Cap Growth, Mid Cap
Value, Small Cap Growth, Small Cap Value, Strategic Bond, International
Opportunities, and International Balanced) through which JHVLICO's individual
combination fixed/variable annuity contracts are funded, at the discretion of
the individual contract owner (the "Owner"). The assets of each subaccount
are, in turn, invested in a corresponding Portfolio of John Hancock Variable
Series Trust I (the "Fund"), a registered open-end diversified management
investment company advised by John Hancock Mutual Life Insurance Company
("John Hancock").
DISTRIBUTION AGREEMENT AND OTHER SERVICES
DISTRIBUTION AGREEMENT
Pursuant to a Distribution Agreement, dated May 1, 1997, John Hancock
Distributors, Inc., ("Distributors"), a registered broker-dealer, acts as
"principal underwriter" for the Account. Distributors is a member of the
National Association of Securities Dealers, Inc., and a member of the
Securities Investors Protection Corporation. Distributors' major
responsibility as underwriter is to perform all sales and marketing functions
relating to the Contracts. The offering of the Account's interests is
continuous, but Distributors is not obligated to sell any particular amount of
the Account's interests.
INVESTMENT ADVISORY AGREEMENT
The Fund, in which the Contracts are invested, has contracted with John
Hancock for investment advisory services. Pursuant to four Investment
Management Agreements (two dated April 12, 1988, one dated April 15, 1994, and
one dated March 14, 1996), as amended, John Hancock, a registered investment
adviser under the Investment Advisers Act of 1940, advises the Fund in
connection with policy decisions; provides administration of day-to-day
operations; provides personnel, office space, equipment, and supplies for the
Fund; maintains records required by the Act; values assets and liabilities of
the Fund; computes income, net asset value, and yield of each Portfolio; and
supervises activities of the sub-investment managers referred to below.
John Hancock has day-to-day responsibility for making investment decisions
and placing investment orders for the Money Market Portfolio. However, with
respect to the other Portfolios, John Hancock has contracted with the
following registered investment advisors to perform these and certain other
recordkeeping functions as sub-investment manager pursuant to sub-investment
agreements dated as indicated:
<TABLE>
<C> <S> <C>
Managed Independence Investment Associates, Inc. 4/15/88
Growth & Income Independence Investment Associates, Inc. 4/15/88
Equity Index State Street Bank & Trust, N.A. 3/18/97
Large Cap Value T. Rowe Price Associates, Inc. 3/29/96
Large Cap Growth Independence Investment Associates, Inc. 4/15/88
Mid Cap Value Neuberger & Berman L.P. 5/01/96
Mid Cap Growth Janus Capital Corporation 3/29/96
Special Opportunities John Hancock Advisers, Inc. 4/15/94
Real Estate Equity Independence Investment Associates, Inc. 4/15/94
</TABLE>
1
<PAGE>
<TABLE>
<C> <S> <C>
INVESCO
Management and
Small Cap Value Research 3/22/96
John Hancock
Small Cap Growth Advisers, Inc. 3/29/96
Brinson
International Balanced Partners, Inc. 3/29/96
John Hancock 4/15/88
International Equities Advisers, Inc.
John Hancock 4/15/88
Advisers
International,
Inc.
T. Rowe Price
Associates,
International Opportunities Inc. 3/29/96
Rowe Price-
Fleming
International,
Inc. 3/29/96
Independence
Investment
Associates,
Short-Term U.S. Government Inc. 4/15/94
John Hancock
Sovereign Bond Advisers, Inc. 5/01/95
J.P. Morgan
Investment
Management,
Strategic Bond Inc. 3/29/96
</TABLE>
John Hancock pays the sub-investment management fees pursuant to the
Agreements and, therefore, the sub-investment management arrangements result
in no additional charge or expense to the Fund or to contractholders. A more
complete description of the Fund's management and the investment advisory fees
is included under "Management of the Fund" in the Fund's Prospectus and under
"Investment Advisory and Other Services" in the Fund's Statement of Additional
Information.
CUSTODIAN AGREEMENT
The Fund's custodian with respect to the Growth & Income, Large Cap Growth,
Real Estate Equity, Short-Term U.S. Government, and Money Market Portfolios is
Chemical Banking Corporation of 4 New York Plaza, New York, New York, pursuant
to a Custodian Agreement, dated January 15, 1986 and amended April, 1988. The
Fund's custodian with respect to the Sovereign Bond Portfolio is Investors
Bank and Trust Company, 24 Federal Street, Boston, pursuant to a Custodian
Agreement dated May 2, 1995. The Fund's custodian with respect to the other
Portfolios is State Street Bank and Trust, 225 Franklin Street, Boston,
Massachusetts, pursuant to a Custodian Agreement, dated January 30, 1995 and
amended March 18, 1996. The custodian's duties include safeguarding and
controlling the Fund's cash investments, handling the receipt and delivery of
securities, and collecting interest and dividends on the Fund's investments.
INDEPENDENT AUDITORS
Ernst & Young LLP, 200 Clarendon Street, Boston, Massachusetts, has been
selected as the independent auditors of the Account. The firm is responsible
for auditing the financial statements of the Account and JHVLICO.
2
<PAGE>
CALCULATION OF PERFORMANCE DATA
The Account will show the average annual total return for each subaccount,
according to the following formula prescribed by the Securities and Exchange
Commission:
P(1 + T)n = ERV
<TABLE>
<C> <C> <C> <S>
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment,
made at the beginning of a period (or fractional portion
thereof)
</TABLE>
Average annual total return is the annual compounded rate of return that
would have produced the cash redemption value under a Contract had the
subaccount been invested in a specified Portfolio of the Fund (or its
predecessor) over the stated period and had the performance remained constant
throughout. The calculation assumes a single $1,000 payment made at the
beginning of the period and full redemption at the end of the period. It
reflects adjustments for all Fund and Contract level charges except premium
taxes, if any.
On that basis, the following table shows the average annual total return for
each subaccount for the periods ended December 31, 1996:
<TABLE>
<CAPTION>
AVERAGE ANNUALIZED
-------------------------------
YEAR TO DATE OF
SUBACCOUNT*** DATE 1 YEAR 5 YEAR* 10 YEAR* INCEPTION**
------------- ------- ------ ------- -------- -----------
<S> <C> <C> <C> <C> <C>
Managed............................. 9.5% 9.5% 9.4% 11.0% 11/09/87
Growth & Income..................... 18.8% 18.8% 13.4% 13.7% 04/03/72
Equity Index........................ 13.5% N/A N/A N/A 04/30/96
Large Cap Value..................... 13.2% N/A N/A N/A 04/30/96
Large Cap Growth.................... 17.0% 17.0% 12.8% 15.0% 11/24/87
Mid Cap Value....................... 15.4% N/A N/A N/A 04/30/96
Mid Cap Growth...................... 2.0% N/A N/A N/A 04/30/96
Special Opportunities............... 28.9% 28.9% 27.0% N/A 09/23/94
Real Estate Equity.................. 31.6% 31.6% 14.7% 10.0% 02/01/89
Small Cap Value..................... 9.6% N/A N/A N/A 04/30/96
Small Cap Growth.................... -1.1% N/A N/A N/A 04/30/96
International Balanced.............. 6.0% N/A N/A N/A 04/30/96
International Equities.............. 8.0% 8.0% 6.4% 6.8% 02/01/89
International Opportunities......... 6.0% N/A N/A N/A 04/30/96
Short-Term U.S. Government.......... 2.5% 2.5% 5.2% N/A 09/23/94
Sovereign Bond...................... 3.0% 3.0% 6.5% 7.4% 06/02/80
Strategic Bond...................... 6.0% N/A N/A N/A 04/30/96
Money Market........................ 4.2% 4.2% 3.3% 4.8 05/13/82
</TABLE>
- --------
* or since inception of the applicable Portfolio or its predecessor.
** of the Portfolio or its predecessor.
*** Absent expense reimbursements from John Hancock to certain Portfolios for
some periods, total return figures for the related subaccounts would have
been lower.
The Account will show current yield and effective yield figures for the
Money Market Subaccount. The current yield of the Money Market Subaccount for
a seven-day period (the "base period") will be computed by determining the
"net change in value" (calculated as set forth below) of a hypothetical
account having a balance of one share at the beginning of the period, dividing
the net change in account sales by the value of the account at the beginning
of the base period to obtain the base period return, and multiplying the base
period return by
3
<PAGE>
365/7 with the resulting yield figure carried to the nearest hundredth of one
percent. Net changes in value of a hypothetical account will include net
investment income of the account (accrued daily dividends as declared by the
Money Market Portfolio, less daily expense charges of the Account) for the
period, but will not include realized gains or losses or unrealized
appreciation or depreciation on the underlying fund shares. Mortality and
expense risk and administrative charges are reflected, but any charge for
premium taxes are not.
The effective yield reflects the effects of compounding and represents an
annualization of the current return with all dividends reinvested. The formula
for effective yield, as prescribed by the SEC, is:
Effective yield = [(Base period return + 1)/365/7/] - 1
For the 7-day period ending December 31, 1996, the Money Market Subaccount's
current yield was 3.88% and its effective yield was 3.96%.
The Account will calculate current yield for each of the other Subaccounts
according to the following formula prescribed by the SEC:
Yield = 2 [([(a - b)/cd] + 1)/6/ - 1]
----------
<TABLE>
<C> <C> <C> <S>
where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the
period that were entitled to received dividends
d = the maximum offering price per share on the last day of the
period.
</TABLE>
According to this formula, yield is determined by dividing the net
investment income per Accumulation Share earned during the period (minus the
deduction for mortality and expense risk charge, contract fee, administrative
services charge) by the Accumulation Share Value on the last day of the period
and annualizing the resulting figure. The calculation is based on specified
30-day periods identified in the advertisement.
CALCULATION OF ANNUITY PAYMENTS
The variable monthly annuity payment to an Annuitant under a Contract is
equal to the sum of the products of the number of each subaccount's "Annuity
Units" credited to the Contract multiplied by the applicable "Annuity Unit
Value," as these terms are defined under "Special Terms" and "Variable Account
Valuation Procedures," respectively, in the Account's prospectus. The number
of each subaccount's Annuity Units credited to the Contract is multiplied by
the applicable Annuity Unit Value as of ten calendar days prior to the date
the payment is due. The value of the Annuity Units varies from day to day,
depending on the investment performance of the subaccount, the deductions made
against the subaccount, and the assumed investment rate used in computing
Annuity Unit Values. Thus, the variable monthly annuity payments vary in
amount from month to month.
The amount of the initial variable monthly payment is determined on the
assumption that the actual net investment rate of each subaccount used in
calculating the Net Investment Factor (as described under "Variable Account
Valuation Procedures--Net Investment Factor" in the Account's prospectus) will
be equal on an annual basis to the assumed investment rate. If the actual net
investment rate between the dates for determining two monthly annuity payments
is greater than the assumed investment rate, the latter monthly payment will
be larger in amount than the former. On the other hand, if the actual net
investment rate between the dates for determining two monthly annuity payments
is less than the assumed investment rate, the latter monthly payment will be
smaller in amount than the former.
The mortality tables used as a basis for the annuity purchase rates are the
1983a Mortality Tables, with projections of mortality improvements and with
certain age adjustments based on the Contract Year of
4
<PAGE>
annuitization. The mortality table used in a Contract purchased in connection
with certain employer-related plans and used in all Contracts issued in
Montana and Massachusetts will be the Female Annuity Table of the 1983a
Mortality Tables. The impact of this change will be lower benefits (5% to 15%)
from a male's viewpoint than would otherwise be the case.
An illustration of the method of calculation of variable monthly annuity
payments and the number of Annuity Units under deferred Contracts is shown in
the outline that follows.
A. GENERAL FORMULAE TO DETERMINE ACCUMULATION SHARE VALUES AND ANNUITY UNIT
VALUES
Net Investment Rate =
<TABLE>
<S> <C> <C> <C> <C>
Subaccount Charges (0.002740%
per Day of the Value of the
Investment Capital Capital Taxes Subaccount at the Beginning
Income + Gains - Losses - (if any) - of the Valuation Period)
</TABLE>
- -------------------------------------------------------------------------------
Value of the Subaccount at the Beginning of the Valuation Period
<TABLE>
<S> <C> <C> <C> <C>
Net Investment
Factor = 1.00000000 + Net Investment Rate
Accumulation Accumulation Share Value on Net Investment
Share Value = Preceding Valuation Date X Factor
Annuity Unit Net Factor to Neutralize
Annuity Unit Value on Preceding Investment the Assumed
Value = Valuation Date X Factor X Investment Rate
</TABLE>
B. HYPOTHETICAL EXAMPLE ILLUSTRATING THE CALCULATION OF ACCUMULATION SHARE
VALUES AND ANNUITY UNIT VALUES
Assume at the beginning of the Valuation Period being considered, the value
of the Subaccount was $4,000,000. Investment income during the Valuation
Period totaled $2000 while capital gains were $3000 and capital losses were
$1000. No taxes accrued. Charges against the beginning value of the Subaccount
amount to $164.40 assuming a one day Valuation Period. The $109.60 was
computed by multiplying the beginning Subaccount value of $4,000,000 by the
factor 0.00002740. By substituting in the first formula above, the net
investment rate is equal to $3890.40 ($2000 + $3000 - $1000 - $109.60) divided
by $4,000,000 or 0.0009726. The Net Investment Factor would then be 1.0009726.
Assume further that each Accumulation Share had a value of $11.250000 on the
previous Valuation Date, and the value of an Annuity Unit on such date was
$1.0850000. Based upon the experience of the Subaccount during the Valuation
Period, the value of an Accumulation Share at the end of the Valuation Period
would be $11.260942 ($11.250000 x 1.0009726). The value of an Annuity Unit at
the end of the Valuation Period would be $1.085953 ($1.0850000 x 1.0009726 x
.99990575). The final figure, .99990575, neutralizes the effect of a 3 1/2%
assumed investment rate so that the Annuity Unit recognizes only the actual
investment experience.
5
<PAGE>
C. GENERAL FORMULAE TO DETERMINE AMOUNT OF MONTHLY VARIABLE ANNUITY PAYMENTS
AND NUMBER OF ANNUITY UNITS FOR DEFERRED CONTRACTS
Amount of the First Variable Annuity Payment =
<TABLE>
<S> <C> <C> <C> <C>
First
Monthly
Number of Annuity
Accumulation Accumulation Share Value Payment
Shares Applied X 10 Days Before Maturity Date X Factor
</TABLE>
- ----------------------------------------------------------------
$1,000
<TABLE>
<S> <C> <C>
Number of
Annuity Units = Amount of First Variable Annuity Payment
--------------------------------------------------------
Annuity Unit Value 10 Days Before Maturity Date
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Amount of Annuity Unit
Subsequent Variable Value 10 Days Before
Annuity Payment = Number of Annuity Units X Payment Date
</TABLE>
D. HYPOTHETICAL EXAMPLE ILLUSTRATING THE CALCULATION OF THE AMOUNT OF MONTHLY
VARIABLE ANNUITY PAYMENT FOR DEFERRED CONTRACTS
Assume that 10 days before the date of maturity a Contract has credited to
it 4000.000 Accumulation Shares each having a value of $12.000000. The
appropriate annuity purchase rate in the Contract for an assumed investment
rate of 3 1/2% is $5.47 per $1000 of proceeds for the Annuity Option elected.
The Annuitant's first monthly payment would then be $262.56.
<TABLE>
<S> <C> <C> <C> <C>
4000.000 X $12.000000 X 5.47
---------------------------------------------
$1000
</TABLE>
If the value of an Annuity Unit 10 days before the date of maturity was
$1.4000000, the number of Annuity Units represented by the first and
subsequent payments would be $187.543 ($262.56/$1.4000000). If the Annuity
Unit Value 10 days before the due date of the second monthly payment was
$1.405000, the amount of the second payment would be $263.50 (187.543 x
$1.405000).
FINANCIAL STATEMENTS
Include on following page.
6
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT I
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
LARGE CAP SOVEREIGN INTERNATIONAL SMALL CAP INTERNATIONAL MID CAP LARGE CAP MONEY MID CAP
GROWTH BOND EQUITIES GROWTH BALANCED GROWTH VALUE MARKET VALUE
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ----------- ------------- ---------- ------------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investment in
shares of
portfolios of
John Hancock
Variable Series
Trust I, at
value........... $43,320,792 $32,888,901 $11,310,436 $6,352,085 $2,455,434 $6,515,769 $7,916,262 $34,215,131 $3,034,857
Receivable from
John Hancock
Variable Series
Trust I......... 92,496 126,401 58,119 45,628 38,862 56,553 91,178 653,275 27,732
----------- ----------- ----------- ---------- ---------- ---------- ---------- ----------- ----------
Total assets.... 43,413,288 33,015,302 11,368,555 6,397,713 2,494,296 6,572,322 8,007,440 34,868,406 3,062,589
LIABILITIES
Payable to John
Hancock Variable
Life Insurance
Company......... 90,705 125,052 57,660 45,373 38,763 56,291 90,853 651,900 27,609
Assets charges
payable......... 1,791 1,349 459 255 99 262 325 1,375 123
----------- ----------- ----------- ---------- ---------- ---------- ---------- ----------- ----------
Total
liabilities..... 92,496 126,401 58,119 45,628 38,862 56,553 91,178 653,275 27,732
----------- ----------- ----------- ---------- ---------- ---------- ---------- ----------- ----------
Net assets...... $43,320,792 $32,888,901 $11,310,436 $6,352,085 $2,455,434 $6,515,769 $7,916,262 $34,215,131 $3,034,857
=========== =========== =========== ========== ========== ========== ========== =========== ==========
</TABLE>
See accompanying notes.
7
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT I
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
SHORT-TERM
SPECIAL REAL ESTATE GROWTH & U.S. SMALL CAP INTERNATIONAL EQUITY STRATEGIC
OPPORTUNITIES EQUITY INCOME MANAGED GOVERNMENT VALUE OPPORTUNITIES INDEX BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------- ----------- ------------ ------------ ----------- ---------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investment in
shares of
portfolios of
John Hancock
Variable Series
Trust I, at
value........... $53,548,769 $7,855,538 $109,642,677 $168,841,593 $12,374,727 $3,453,343 $3,506,957 $5,099,509 $4,104,368
Receivable from
John Hancock
Variable Series
Trust I......... 201,963 55,572 686,049 392,996 47,769 55,910 22,189 24,912 36,856
----------- ---------- ------------ ------------ ----------- ---------- ---------- ---------- ----------
Total assets.... 53,750,732 7,911,110 110,328,726 169,234,589 12,422,496 3,509,253 3,529,146 5,124,421 4,141,224
LIABILITIES
Payable to John
Hancock Variable
Life Insurance
Company......... 199,780 55,255 681,511 386,018 47,262 55,772 22,047 24,701 36,689
Assets charges
payable......... 2,183 317 4,538 6,978 507 138 142 211 167
----------- ---------- ------------ ------------ ----------- ---------- ---------- ---------- ----------
Total
liabilities..... 201,963 55,572 686,049 392,996 47,769 55,910 22,189 24,912 36,856
----------- ---------- ------------ ------------ ----------- ---------- ---------- ---------- ----------
Net assets...... $53,548,769 $7,855,538 $109,642,677 $168,841,593 $12,374,727 $3,453,343 $3,506,957 $5,099,509 $4,104,368
=========== ========== ============ ============ =========== ========== ========== ========== ==========
</TABLE>
See accompanying notes.
8
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT I
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
LARGE CAP SOVEREIGN INTERNATIONAL SMALL CAP INTERNATIONAL MID CAP LARGE CAP MONEY MID CAP
GROWTH BOND EQUITIES GROWTH BALANCED GROWTH VALUE MARKET VALUE
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT* SUBACCOUNT* SUBACCOUNT* SUBACCOUNT* SUBACCOUNT SUBACCOUNT*
----------- ---------- ------------- ----------- ------------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment
income:
Distributions
received from
the portfolios
of John Hancock
Variable Series
Trust I......... $ 6,235,377 $1,691,372 $ 91,388 $ 2,385 $ 33,662 $17,661 $151,634 $1,110,361 $ 62,336
Expenses:
Mortality and
expense risks... 382,802 305,785 108,177 26,391 10,281 26,407 30,911 320,346 10,808
----------- ---------- -------- --------- -------- ------- -------- ---------- --------
Net investment
income (loss).... 5,852,575 1,385,587 (16,789) (24,006) 23,381 (8,746) 120,723 790,015 51,528
Net realized and
unrealized gain
(loss) on
investments:
Net realized
gain (loss)..... 134,575 (13,677) 39,238 (4,702) 1,726 (2,072) 9,223 -- 1,514
Net unrealized
appreciation
(depreciation)
during the year. (1,771,929) (351,203) 487,991 (158,014) 79,450 86,688 349,805 -- 194,847
----------- ---------- -------- --------- -------- ------- -------- ---------- --------
Net realized and
unrealized gain
(loss) on
investments...... (1,637,354) (364,880) 527,229 (162,716) 81,176 84,616 359,028 -- 196,361
----------- ---------- -------- --------- -------- ------- -------- ---------- --------
Net increase
(decrease) in net
assets resulting
from operations.. $ 4,215,221 $1,020,707 $510,440 $(186,722) $104,557 $75,870 $479,751 $ 790,015 $247,889
=========== ========== ======== ========= ======== ======= ======== ========== ========
</TABLE>
* From May 1, 1996 (commencement of operations).
See accompanying notes.
9
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT I
STATEMENT OF OPERATIONS (CONTINUED)
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
SHORT-TERM
SPECIAL REAL ESTATE GROWTH & U.S. SMALL CAP INTERNATIONAL EQUITY STRATEGIC
OPPORTUNITIES EQUITY INCOME MANAGED GOVERNMENT VALUE OPPORTUNITIES INDEX BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT* SUBACCOUNT* SUBACCOUNT* SUBACCOUNT*
------------- ----------- ----------- ----------- ---------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment
income:
Distributions
received from
the portfolios
of John Hancock
Variable Series
Trust I......... $2,056,928 $ 255,411 $12,913,053 $18,617,198 $448,039 $ 82,927 $ 9,935 $115,771 $133,556
Expenses:
Mortality and
expense risks... 411,163 53,964 946,308 1,566,339 121,176 13,935 14,049 21,689 17,262
---------- ---------- ----------- ----------- -------- -------- -------- -------- --------
Net investment
income (loss).... 1,645,765 201,447 11,966,745 17,050,859 326,863 68,992 (4,114) 94,082 116,294
Net realized and
unrealized gain
(loss) on
investments:
Net realized
gain............ 286,748 29,463 16,783 79,881 8,565 844 2,851 4,980 120
Net unrealized
appreciation
(depreciation)
during the year. 4,480,284 1,127,858 881,743 (6,379,961) (91,939) 151,732 147,562 253,706 3,262
---------- ---------- ----------- ----------- -------- -------- -------- -------- --------
Net realized and
unrealized gain
(loss) on
investments...... 4,767,032 1,157,321 898,526 (6,300,080) (83,374) 152,576 150,413 258,686 3,382
---------- ---------- ----------- ----------- -------- -------- -------- -------- --------
Net increase in
net assets
resulting from
operations....... $6,412,797 $1,358,768 $12,865,271 $10,750,778 $243,489 $221,568 $146,299 $352,768 $119,676
========== ========== =========== =========== ======== ======== ======== ======== ========
</TABLE>
* From May 1, 1996 (commencement of operations).
See accompanying notes.
10
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT I
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
SMALL CAP INTERNATIONAL
LARGE CAP GROWTH SOVEREIGN BOND INTERNATIONAL EQUITIES GROWTH BALANCED
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------------ ----------------------- ----------------------- ---------- -------------
1996 1995** 1996 1995** 1996 1995** 1996* 1996*
----------- ----------- ----------- ---------- ----------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase
(decrease) in net
assets:
From operations:
Net investment
income (loss)... $ 5,852,575 $ 694,884 $ 1,385,587 $ 246,891 $ (16,789) $ (8,075) $ (24,006) $ 23,381
Net realized
gain (loss)..... 134,575 11,293 (13,677) 6,338 39,238 13,734 (4,702) 1,726
Net unrealized
appreciation
(depreciation)
during the year. (1,771,929) 88,865 (351,203) 134,015 487,991 43,772 (158,014) 79,450
----------- ----------- ----------- ---------- ----------- ---------- ---------- ----------
Net increase
(decrease) in net
assets resulting
from operations.. 4,215,221 795,042 1,020,707 387,244 510,440 49,431 (186,722) 104,557
From
contractowner
transactions:
Net
contributions
from
contractowners.. 31,163,064 10,396,210 27,557,895 8,307,701 9,211,941 3,099,590 6,856,133 2,506,215
Net benefits to
contractowners.. (3,141,097) (107,648) (4,175,981) (208,665) (1,488,436) (72,530) (317,326) (155,338)
----------- ----------- ----------- ---------- ----------- ---------- ---------- ----------
Net increase in
net assets from
contractowner
transactions..... 28,021,967 10,288,562 23,381,914 8,099,036 7,723,505 3,027,060 6,538,807 2,350,877
----------- ----------- ----------- ---------- ----------- ---------- ---------- ----------
Net increase in
net assets....... 32,237,188 11,083,604 24,402,621 8,486,280 8,233,945 3,076,491 6,352,085 2,455,434
Net assets at
beginning of
year............. 11,083,604 -- 8,486,280 -- 3,076,491 -- -- --
----------- ----------- ----------- ---------- ----------- ---------- ---------- ----------
Net assets at end
of year.......... $43,320,792 $11,083,604 $32,888,901 $8,486,280 $11,310,436 $3,076,491 $6,352,085 $2,455,434
=========== =========== =========== ========== =========== ========== ========== ==========
<CAPTION>
MID CAP
GROWTH
SUBACCOUNT
-----------
1996*
-----------
<S> <C>
Increase
(decrease) in net
assets:
From operations:
Net investment
income (loss)... $ (8,746)
Net realized
gain (loss)..... (2,072)
Net unrealized
appreciation
(depreciation)
during the year. 86,688
-----------
Net increase
(decrease) in net
assets resulting
from operations.. 75,870
From
contractowner
transactions:
Net
contributions
from
contractowners.. 6,652,263
Net benefits to
contractowners.. (212,364)
-----------
Net increase in
net assets from
contractowner
transactions..... 6,439,899
-----------
Net increase in
net assets....... 6,515,769
Net assets at
beginning of
year............. --
-----------
Net assets at end
of year.......... $6,515,769
===========
</TABLE>
* From May 1, 1996 (commencement of operations).
** From January 26, 1995 (commencement of operations).
See accompanying notes.
11
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT I
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
LARGE CAP MID CAP
VALUE MONEY MARKET VALUE SPECIAL OPPORTUNITIES REAL ESTATE EQUITY
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ------------------------- ---------- ----------------------- ----------------------
1996* 1996 1995** 1996* 1996 1995** 1996 1995**
---------- ------------ ----------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase
(decrease) in net
assets:
From operations:
Net investment
income.......... $ 120,723 $ 790,015 $ 150,601 $ 51,528 $ 1,645,765 $ 156,812 $ 201,447 $ 40,045
Net realized
gain............ 9,223 -- -- 1,514 286,748 15,263 29,463 4,898
Net unrealized
appreciation
(depreciation)
during the year. 349,805 -- -- 194,847 4,480,284 551,403 1,127,858 54,247
---------- ------------ ----------- ---------- ----------- ---------- ---------- ----------
Net increase in
net assets
resulting from
operations....... 479,751 790,015 150,601 247,889 6,412,797 723,478 1,358,768 99,190
From
contractowner
transactions:
Net
contributions
from
contractowners.. 7,781,378 47,867,152 15,875,093 2,823,812 42,302,080 7,575,238 5,214,852 1,570,268
Net benefits to
contractowners.. (344,867) (25,658,629) (4,809,101) (36,844) (3,413,493) (51,331) (325,484) (62,056)
---------- ------------ ----------- ---------- ----------- ---------- ---------- ----------
Net increase in
net assets from
contractowner
transactions..... 7,436,511 22,208,523 11,065,992 2,786,968 38,888,587 7,523,907 4,889,368 1,508,212
---------- ------------ ----------- ---------- ----------- ---------- ---------- ----------
Net increase in
net assets....... 7,916,262 22,998,538 11,216,593 3,034,857 45,301,384 8,247,385 6,248,136 1,607,402
Net assets at
beginning of
year............. -- 11,216,593 -- -- 8,257,385 -- 1,607,402 --
---------- ------------ ----------- ---------- ----------- ---------- ---------- ----------
Net assets at end
of year.......... $7,916,262 $ 34,215,131 $11,216,593 $3,034,857 $53,548,769 $8,247,385 $7,855,538 $1,607,402
========== ============ =========== ========== =========== ========== ========== ==========
<CAPTION>
GROWTH & INCOME
SUBACCOUNT
--------------------------
1996 1995**
------------- ------------
<S> <C> <C>
Increase
(decrease) in net
assets:
From operations:
Net investment
income.......... $ 11,966,745 $ 2,037,733
Net realized
gain............ 16,783 1,626
Net unrealized
appreciation
(depreciation)
during the year. 881,743 (33,926)
------------- ------------
Net increase in
net assets
resulting from
operations....... 12,865,271 2,005,433
From
contractowner
transactions:
Net
contributions
from
contractowners.. 74,748,036 25,246,577
Net benefits to
contractowners.. (4,938,961) (283,679)
------------- ------------
Net increase in
net assets from
contractowner
transactions..... 69,809,075 24,962,898
------------- ------------
Net increase in
net assets....... 82,674,346 26,968,331
Net assets at
beginning of
year............. 26,968,331 --
------------- ------------
Net assets at end
of year.......... $109,642,677 $26,968,331
============= ============
</TABLE>
* From May 1, 1996 (commencement of operations).
** From January 25, 1995 (commencement of operations).
See accompanying notes.
12
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT I
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
SHORT-TERM SMALL CAP INTERNATIONAL EQUITY STRATEGIC
MANAGED U.S. GOVERNMENT VALUE OPPORTUNITIES INDEX BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------------- ----------------------- ---------- ------------- ---------- ----------
1996 1995** 1996 1995** 1996* 1996* 1996* 1996*
------------ ----------- ----------- ---------- ---------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets:
From operations:
Net investment income
(loss)................ $ 17,050,859 $ 2,864,123 $ 326,863 $ 63,448 $ 68,992 $ (4,114) $ 94,082 $ 116,294
Net realized gain..... 79,880 6,021 8,565 1,104 844 2,851 4,980 120
Net unrealized
appreciation
(depreciation) during
the year.............. (6,379,961) (322,585) (91,939) 31,002 151,732 147,562 253,706 3,262
------------ ----------- ----------- ---------- ---------- ---------- ---------- ----------
Net increase in net
assets resulting from
operations............. 10,750,778 2,547,559 243,489 95,554 221,568 146,299 352,768 119,676
From contractowner
transactions:
Net contributions from
contractowners........ 123,808,732 41,819,048 10,894,534 4,082,122 3,448,584 3,570,213 4,850,832 4,111,264
Net benefits to
contractowners........ (9,552,488) (532,036) (2,831,934) (109,038) (216,809) (209,555) (104,091) (126,572)
------------ ----------- ----------- ---------- ---------- ---------- ---------- ----------
Net increase in net
assets from
contractowner
transactions........... 114,256,244 41,287,012 8,062,600 3,973,084 3,231,775 3,360,658 4,746,741 3,984,692
------------ ----------- ----------- ---------- ---------- ---------- ---------- ----------
Net increase in net
assets................. 125,007,022 43,834,571 8,306,089 4,068,638 3,453,343 3,506,957 5,099,509 4,104,368
Net assets at beginning
of year................ 43,834,571 -- 4,068,638 -- -- -- -- --
------------ ----------- ----------- ---------- ---------- ---------- ---------- ----------
Net assets at end of
year................... $168,841,593 $43,834,571 $12,374,727 $4,068,638 $3,453,343 $3,506,957 $5,099,509 $4,104,368
============ =========== =========== ========== ========== ========== ========== ==========
</TABLE>
* From May 1, 1996 (commencement of operations).
** From January 26, 1995 (commencement of operations).
See accompanying notes.
13
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT I
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. ORGANIZATION
John Hancock Variable Annuity Account I (the Account) is a separate
investment account of John Hancock Mutual Life Insurance Company (JHMLICO or
John Hancock). The Account was created on June 15, 1994. The Account commenced
operations on January 26, 1995 with the receipt of purchase payments. The
Account was formed to fund variable annuity contracts (Contracts) issued by
JHMLICO. The Account is operated as a unit investment trust registered under
the Investment Company Act of 1940, as amended, and currently consists of
eighteen subaccounts. The assets of each subaccount are invested exclusively
in shares of a corresponding Portfolio of John Hancock Variable Series Trust I
(the Fund). New subaccounts may be added as new Portfolios are added to the
Fund or as other investment options are developed and made available to
contractowners. The eighteen Portfolios of the Fund which are currently
available are: Large Cap Growth, Sovereign Bond, International Equities, Small
Cap Growth, International Balanced, Mid Cap Growth, Large Cap Value, Money
Market, Mid Cap Value, Special Opportunities, Real Estate Equity, Growth &
Income, Managed, Short-Term U.S. Government, Small Cap Value, International
Opportunities, Equity Index and Strategic Bond. Each Portfolio has a different
investment objective.
The assets of the Account are the property of JHMLICO. The portion of the
Account's assets applicable to the Contracts may not be charged with
liabilities arising out of any other business JHMLICO 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 are valued at the reported net asset values
of the respective Portfolios. Investment transactions are recorded on the
trade date. Dividend income is recognized on the ex-dividend date. Realized
gains and losses on sales of Fund shares are determined on the basis of
identified cost.
Federal Income Taxes
The operations of the Account are included in the federal income tax return
of JHMLICO, which is taxed as a life insurance company under the Internal
Revenue Code. JHMLICO 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 Contracts funded in the Account. Currently, John
Hancock does not make a charge for income or other taxes. JHMLICO retains the
right to charge the Account for any federal income taxes arising from changes
in the tax law. Charges for state and local taxes, if any, attributable to the
Account may also be made.
Expenses
JHMLICO assumes mortality and expense risks of the Contracts and provides
administrative services to the Account for which asset charges are deducted at
an annual rate of 1.5% of net assets of the Account.
JHMLICO makes certain other deductions from contractowner payments for
premium taxes and sales and withdrawal charges, which are accounted for as a
reduction of net assets resulting from contractowner transactions.
14
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT I
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. DETAILS OF INVESTMENTS
The details of the shares owned and cost and value of investments in the
Portfolios of the Fund at December 31, 1996 were as follows:
<TABLE>
<CAPTION>
SHARES
PORTFOLIO OWNED COST VALUE
--------- ---------- ------------ ------------
<S> <C> <C> <C>
Large Cap Growth..................... 2,476,644 $ 45,003,857 $ 43,320,792
Sovereign Bond....................... 3,366,073 33,106,088 32,888,901
International Equities............... 672,000 10,778,674 11,310,436
Small Cap Growth..................... 639,409 6,510,099 6,352,085
International Balanced............... 236,256 2,375,984 2,455,434
Mid Cap Growth....................... 637,406 6,429,081 6,515,769
Large Cap Value...................... 713,855 7,566,457 7,916,262
Money Market......................... 3,421,513 34,215,131 34,215,131
Mid Cap Value........................ 267,423 2,840,010 3,034,857
Special Opportunities................ 3,241,076 48,517,081 53,548,769
Real Estate Equity................... 536,752 6,673,433 7,855,538
Growth & Income...................... 7,481,894 110,490,495 109,642,677
Managed.............................. 12,645,124 175,544,138 168,841,593
Short-Term U.S. Government........... 1,231,684 12,435,664 12,374,727
Small Cap Value...................... 321,837 3,301,611 3,453,343
International Opportunities.......... 330,935 3,359,395 3,506,957
Equity Index......................... 459,537 4,845,803 5,099,509
Strategic Bond....................... 404,038 4,101,106 4,104,368
</TABLE>
Purchases, including reinvestment of dividend distributions and proceeds
from sales of shares in the Portfolios of the Fund during 1996, were as
follows:
<TABLE>
<CAPTION>
PORTFOLIO PURCHASES SALES
--------- ------------ -----------
<S> <C> <C>
Large Cap Growth................................. $ 34,532,544 $ 658,001
Sovereign Bond................................... 26,676,562 1,909,061
International Equities........................... 8,541,613 834,896
Small Cap Growth................................. 6,716,464 201,663
International Balanced........................... 2,645,957 271,699
Mid Cap Growth................................... 6,514,639 83,487
Large Cap Value.................................. 7,714,900 157,665
Money Market..................................... 35,753,964 12,755,425
Mid Cap Value.................................... 2,888,273 49,777
Special Opportunities............................ 41,544,185 1,009,833
Real Estate Equity............................... 5,463,924 373,109
Growth & Income.................................. 83,558,294 86,839
Managed.......................................... 132,040,222 733,120
Short-term U.S. Government....................... 10,200,294 1,810,831
Small Cap Value.................................. 3,359,869 59,102
International Opportunities...................... 3,564,680 208,135
Equity Index..................................... 5,016,013 175,190
Strategic Bond................................... 4,191,037 90,050
</TABLE>
15
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT I
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. NET ASSETS
Accumulation shares attributable to net assets of contractowners and
accumulation share values for each subaccount at December 31, 1996 were as
follows:
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION
PORTFOLIO SHARES SHARE VALUES
--------- ------------ ------------
<S> <C> <C>
Large Cap Growth................................. 2,911,076 14.881
Sovereign Bond................................... 2,750,678 11.957
International Equities........................... 947,816 11.936
Small Cap Growth................................. 644,827 9.851
International Balanced........................... 232,388 10.566
Mid Cap Growth................................... 640,918 10.166
Large Cap Value.................................. 701,999 11.277
Money Market..................................... 3,168,756 10.798
Mid Cap Value.................................... 263,857 11.502
Special Opportunities............................ 3,137,620 17.067
Real Estate Equity............................... 528,458 14.865
Growth & Income.................................. 7,102,432 15.437
Managed.......................................... 12,509,325 13.497
Short-Term U.S. Government....................... 1,112,035 11.128
Small Cap Value.................................. 316,146 10.923
International Opportunities...................... 331,927 10.565
Equity Index..................................... 450,914 11.309
Strategic Bond................................... 388,491 10.565
</TABLE>
5. TRANSACTIONS 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 JHMLICO or the Fund.
16
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Contractowners
John Hancock Variable Annuity Account I
of John Hancock Mutual Life Insurance Company
We have audited the accompanying statement of assets and liabilities of John
Hancock Variable Annuity Account I (the Account) (comprising, respectively,
the Large Cap Growth, Sovereign Bond, International Equities, Small Cap
Growth, International Balanced, Mid Cap Growth, Large Cap Value, Money Market,
Mid Cap Value, Special Opportunities, Real Estate Equity, Growth & Income,
Managed, Short-Term U.S. Government, Small Cap Value, International
Opportunities, Equity Index, and Strategic Bond Subaccounts) as of December
31, 1996, and the related statement of operations for the year then ended, and
the statements of changes in net assets for each of the periods indicated
therein. These financial statements are the responsibility of the Account's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of each of the respective
subaccounts constituting John Hancock Variable Annuity Account I at December
31, 1996, and the results of their operations for the year then ended, and the
changes in their net assets for each of the periods indicated, in conformity
with generally accepted accounting principles.
Ernst & Young LLP
Boston, Massachusetts
February 7, 1997
17
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
John Hancock Variable Life Insurance Company
We have audited the accompanying statutory-basis statements of financial
position of John Hancock Variable Life Insurance Company as of December 31,
1996 and 1995, and the related statutory-basis statements of operations and
unassigned deficit and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
As described in Note 1 to the financial statements, the Company presents its
financial statements in conformity with accounting practices prescribed or
permitted by the Commonwealth of Massachusetts Division of Insurance, which
practices differ from generally accepted accounting principles. The variances
between such practices and generally accepted accounting principles also are
described in Note 1. The effects on the financial statements of these variances
are not reasonably determinable but are presumed to be material.
In our report dated February 7, 1996, we expressed an opinion that the 1995
financial statements of the Company fairly present, in all material respects,
the Company's financial position, results of operations, and cash flows in
conformity with generally accepted accounting principles for a stock life
insurance company wholly-owned by a mutual life insurance company and with
reporting practices prescribed or permitted by the Commonwealth of
Massachusetts Division of Insurance. As described in Note 1, the accompanying
statutory-basis financial statements are no longer considered to be prepared in
conformity with generally accepted accounting principles. Accordingly, our
present opinion on the 1995 financial statements, as presented in the following
paragraph, is different from that expressed in our previous report.
In our opinion, because of the effects of the matter described in the second
preceding paragraph, the financial statements referred to above do not present
fairly, in conformity with generally accepted accounting principles, the
financial position of John Hancock Variable Life Insurance Company at December
31, 1996 and 1995, or the results of its operations or its cash flows for the
years then ended.
Also, in our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of John Hancock
Variable Life Insurance Company at December 31, 1996 and 1995, and the results
of its operations and its cash flows for the years then ended in conformity
with accounting practices prescribed or permitted by the Commonwealth of
Massachusetts Division of Insurance.
Ernst & Young LLP
Boston, Massachusetts
February 14, 1997
18
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
December 31
------------------
1996 1995
---- ----
(In millions)
<S> <C> <C>
Assets
Bonds--Note 7.............................................. $ 753.5 $ 552.8
Preferred stocks........................................... 9.6 5.0
Common stocks.............................................. 1.4 1.7
Investment in affiliates................................... 72.0 65.3
Mortgage loans on real estate--Note 7...................... 212.1 146.7
Real estate................................................ 38.8 36.4
Policy loans............................................... 80.8 61.8
Cash items:
Cash in banks............................................ 26.7 11.6
Temporary cash investments............................... 5.2 65.0
-------- --------
31.9 76.6
Premiums due and deferred.................................. 36.8 39.6
Investment income due and accrued.......................... 22.6 18.6
Other general account assets............................... 17.8 20.8
Assets held in separate accounts........................... 3,290.5 2,421.0
-------- --------
TOTAL ASSETS............................................... $4,567.8 $3,446.3
======== ========
Obligations and Stockholder's Equity
OBLIGATIONS
Policy reserves.......................................... $ 877.8 $ 612.3
Federal income and other taxes payable--Note 1........... 29.4 14.2
Other accrued expenses................................... 75.1 138.7
Asset valuation reserve--Note 1.......................... 16.6 15.4
Obligations related to separate accounts................. 3,285.8 2,417.0
-------- --------
TOTAL OBLIGATIONS.......................................... 4,284.7 3,197.6
Stockholder's Equity--Notes 2 and 6
Common Stock, $50 par value; authorized 50,000 shares;
issued and
outstanding 50,000 shares............................... 2.5 2.5
Paid-in capital.......................................... 377.5 377.5
Unassigned deficit......................................... (96.9) (131.3)
-------- --------
TOTAL STOCKHOLDER'S EQUITY................................. 283.1 248.7
-------- --------
TOTAL OBLIGATIONS AND STOCKHOLDER'S EQUITY................. $4,567.8 $3,446.3
======== ========
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
19
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF OPERATIONS AND UNASSIGNED DEFICIT
<TABLE>
<CAPTION>
Year ended December 31
------------------------
1996 1995
---- ----
(In millions)
<S> <C> <C>
Income
Premiums............................................ $ 820.6 $ 570.9
Net investment income--Note 4....................... 76.1 62.1
Other, net.......................................... 406.0 85.7
----------- ----------
1,302.7 718.7
Benefits and Expenses
Payments to policyholders and beneficiaries......... 236.1 213.4
Additions to reserves to provide for future payments
to policyholders and beneficiaries................. 790.1 282.4
Expenses of providing service to policyholders and
obtaining new insurance--Note 6.................... 183.8 150.7
State and miscellaneous taxes....................... 17.3 12.7
----------- ----------
1,227.3 659.2
----------- ----------
GAIN FROM OPERATIONS BEFORE FEDERAL INCOME TAXES
AND NET REALIZED CAPITAL GAINS (LOSSES).......... 75.4 59.5
Federal income taxes--Note 1.......................... 38.6 28.4
----------- ----------
GAIN FROM OPERATIONS BEFORE NET REALIZED CAPITAL
GAINS (LOSSES)................................... 36.8 31.1
Net realized capital gains (losses)--Note 5........... (1.5) 0.5
----------- ----------
NET INCOME........................................ 35.3 31.6
Unassigned deficit at beginning of year............... (131.3) (162.1)
Net unrealized capital gains (losses) and other
adjustments--Note 5.................................. 2.5 (3.0)
Other reserves and adjustments........................ (3.4) 2.2
----------- ----------
UNASSIGNED DEFICIT AT END OF YEAR................. $ (96.9) $ (131.3)
=========== ==========
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
20
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31
----------------------
1996 1995
---- ----
(In millions)
<S> <C> <C>
Cash flows from operating activities:
Insurance premiums................................. $ 824.2 $ 574.0
Net investment income.............................. 73.4 59.2
Benefits to policyholders and beneficiaries........ (212.7) (198.3)
Dividends paid to policyholders.................... (15.7) (13.2)
Insurance expenses and taxes....................... (196.6) (161.5)
Net transfers to separate accounts................. (524.2) (257.4)
Other, net......................................... 386.7 55.1
----------- -----------
NET CASH PROVIDED FROM OPERATIONS.............. 335.1 57.9
----------- -----------
Cash flows used in investing activities:
Bond purchases..................................... (489.9) (172.5)
Bond sales......................................... 228.3 18.9
Bond maturities and scheduled redemptions.......... 27.8 36.0
Bond prepayments................................... 31.9 20.6
Stock purchases.................................... (6.5) (1.7)
Proceeds from stock sales.......................... 0.4 1.4
Real estate purchases.............................. (10.5) (16.2)
Real estate sales.................................. 8.5 9.3
Other invested assets purchases.................... 0.0 (0.4)
Proceeds from the sale of other invested assets.... 1.5 0.3
Mortgage loans issued.............................. (84.4) (19.8)
Mortgage loan repayments........................... 17.7 21.1
Other, net......................................... (104.6) 45.7
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES.......... (379.8) (57.3)
----------- -----------
INCREASE (DECREASE) IN CASH AND TEMPORARY CASH IN-
VESTMENTS........................................... (44.7) 0.6
Cash and temporary cash investments at beginning of
year................................................ 76.6 76.0
----------- -----------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF YEAR... $ 31.9 $ 76.6
=========== ===========
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
21
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES
John Hancock Variable Life Insurance Company (the Company) is a wholly-owned
subsidiary of John Hancock Mutual Life Insurance Company (John Hancock). The
Company, domiciled in the Commonwealth of Massachusetts, principally writes
variable and universal life insurance policies. Those policies primarily are
marketed through John Hancock's sales organization, which includes a career
agency system composed of company-owned, unionized branch offices and
independent general agencies. Policies also are sold through various
unaffiliated securities broker-dealers and certain other financial
institutions. Currently, the Company writes business in all states except New
York.
The preparation of the financial statements requires management to make
estimates and assumptions that affect amounts reported in the financial
statements and accompanying notes. Such estimates and assumptions could change
in the future as more information becomes known, which could impact the
amounts reported and disclosed herein.
Basis of Presentation: The financial statements have been prepared using
accounting practices prescribed or permitted by the Commonwealth of
Massachusetts Division of Insurance and in conformity with the practices of
the National Association of Insurance Commissioners (NAIC), which practices
differ from generally accepted accounting principles (GAAP). The 1995
financial statements presented for comparative purposes were previously
described as being prepared in accordance with GAAP for stock life insurance
companies wholly-owned by a mutual life insurance company. Pursuant to
Financial Accounting Standards Board Interpretation 40, "Applicability of
Generally Accepted Accounting Principles to Mutual Life Insurance and Other
Enterprises" (FIN 40), as amended, which is effective for 1996 financial
statements, financial statements based on statutory accounting practices can
no longer be described as prepared in conformity with GAAP. Furthermore,
financial statements prepared in conformity with statutory accounting
practices for periods prior to the effective date of FIN 40 are not considered
GAAP presentations when presented in comparative form with financial
statements for periods subsequent to the effective date. Accordingly, the 1995
financial statements are no longer considered to be presented in conformity
with GAAP.
The significant differences from GAAP include: (1) policy acquisition costs
are charged to expense as incurred rather than deferred and amortized over the
related premium-paying period; (2) policy reserves are based on statutory
mortality, morbidity, and interest requirements without consideration of
withdrawals and Company experience; (3) certain assets designated as
"nonadmitted assets" are excluded from the balance sheet by direct charges to
surplus; (4) reinsurance recoverables are netted against reserves and claim
liabilities rather than reflected as an asset; (5) bonds held as available for
sale are recorded at amortized cost or market value as determined by the NAIC
rather than at fair value; (6) an Asset Valuation Reserve and Interest
Maintenance Reserve as prescribed by the NAIC are not calculated under GAAP.
Under GAAP, realized capital gains and losses are reported in the income
statement on a pretax basis as incurred and investment valuation allowances
are provided when there has been a decline in value deemed other than
temporary; (7) investments in affiliates are carried at their net equity value
with changes in value being recorded directly to unassigned deficit rather
than consolidated in the financial statements; and (8) no provision is made
for the deferred income tax effects of temporary differences between book and
tax basis reporting. The effects of the foregoing variances from GAAP have not
been determined but are presumed to be material.
The significant accounting practices of the Company are as follows:
Pending Statutory Standards: The NAIC currently is in the process of
recodifying statutory accounting practices, the result of which is expected to
constitute the only source of prescribed statutory accounting practices.
Accordingly, that project, which is expected to be completed in 1999 will
likely change, to some
22
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
extent, prescribed statutory accounting practices, and may result in changes
to the accounting practices that the Company uses to prepare its statutory-
basis financial statements. The impact of any such changes on the Company's
unassigned deficit cannot be determined at this time and could be material.
Revenues and Expenses: Premium revenues are recognized over the premium-paying
period of the policies whereas expenses, including the acquisition costs of
new business, are charged to operations as incurred and policyholder dividends
are provided as paid or accrued.
Cash and Temporary Cash Investments: Cash includes currency on hand and demand
deposits with financial institutions. Temporary cash investments are short-
term, highly-liquid investments both readily convertible to known amounts of
cash and so near maturity that there is insignificant risk of changes in value
because of changes in interest rates.
Valuation of Assets: General account investments are carried at amounts
determined on the following bases:
Bond and stock values are carried as prescribed by the NAIC; bonds
generally at amortized amounts or cost, preferred stocks generally at cost
and common stocks at market. The discount or premium on bonds is amortized
using the interest method.
Investments in affiliates are included on the statutory equity method.
Goodwill is amortized on a straight-line basis over a ten year period.
Mortgage loans are carried at outstanding principal balance or amortized
cost.
Investment real estate is carried at depreciated cost, less encumbrances.
Depreciation on investment real estate is recorded on a straight-line
basis. Accumulated depreciation amounted to $1.2 million in 1996 and $0.5
million in 1995.
Real estate acquired in satisfaction of debt and held for sale is carried
at the lower of cost or market as of the date of foreclosure.
Policy loans are carried at outstanding principal balance, not in excess of
policy cash surrender value.
Asset Valuation and Interest Maintenance Reserves: The Asset Valuation Reserve
(AVR) is computed in accordance with the prescribed NAIC formula and
represents a provision for possible fluctuations in the value of bonds, equity
securities, mortgage loans, real estate and other invested assets. Changes to
the AVR are charged or credited directly to the unassigned deficit.
The Company also records the NAIC prescribed Interest Maintenance Reserve
(IMR) that represents that portion of the after tax net accumulated
unamortized realized capital gains and losses on sales of fixed income
securities,
principally bonds and mortgage loans, attributable to changes in the general
level of interest rates. Such gains and losses are deferred and amortized into
income over the remaining expected lives of the investments sold. At December
31, 1996, the IMR, net of 1996 amortization of $1.2 million, amounted to $5.9
million, which is included in policy reserves. The corresponding 1995 amounts
were $1.2 million and $6.9 million, respectively.
Separate Accounts: Separate account assets and liabilities reported in the
accompanying statements of financial position represent funds that are
separately administered and for which the contractholder, rather than the
Company, generally bears the investment risk. Separate account contractholders
have no claim against the assets of the general account of the Company.
Separate account assets are reported at market value. The operations of the
separate accounts are not included in the summary of operations; however,
income earned on amounts initially invested by the Company in the formation of
new separate accounts is included in other income.
23
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
Fair Values of Financial Instruments: Statement of Financial Accounting
Standards (SFAS) No. 107, "Disclosure about Fair Value of Financial
Instruments," requires disclosure of fair value information about financial
instruments, whether or not recognized in the statement of financial position,
for which it is practicable to estimate the value. In situations where quoted
market prices are not available, fair values are based on estimates using
present value or other valuation techniques. SFAS No. 107 excludes certain
financial instruments and all nonfinancial instruments from its disclosure
requirements. Therefore, the aggregate fair value amounts presented do not
represent the underlying value of the Company.
The methods and assumptions utilized by the Company in estimating its fair
value disclosures for financial instruments are as follows:
The carrying amounts reported in the statement of financial position for
cash and temporary cash investments approximate their fair values.
Fair values for public bonds are obtained from an independent pricing
service. Fair values for private placement securities and publicly traded
bonds not provided by the independent pricing service are estimated by the
Company by discounting expected future cash flows using current market
rates applicable to the yield, credit quality and maturity of the
investments. The fair values for common and preferred stocks, other than
its subsidiary investments, which are carried at equity values, are based
on quoted market prices.
The fair value of interest rate swaps and currency rate swaps is estimated
using a discounted cash flow method adjusted for the difference between the
rate of the existing swap and the current swap market rate. Discounted cash
flows in foreign currencies are converted to U.S. dollars using current
exchange rates.
The fair value for mortgage loans is estimated using discounted cash flow
analyses using interest rates adjusted to reflect the credit
characteristics of the underlying loans. Mortgage loans with similar
characteristics and credit risks are aggregated into qualitative categories
for purposes of the fair value calculations.
The carrying amount in the statement of financial position for policy loans
approximates their fair value.
The fair value for outstanding commitments to purchase long-term bonds and
issue real estate mortgages is estimated using a discounted cash flow
method incorporating adjustments for the difference in the level of
interest rates between the dates the commitments were made and December 31,
1996. The fair value for commitments to purchase real estate approximates
the amount of the initial commitment.
Capital Gains and Losses: Realized capital gains and losses are determined
using the specific identification basis. Realized capital gains and losses,
net of taxes and amounts transferred to the IMR, are included in net gain or
loss. Unrealized gains and losses, which consist of market value and book
value adjustments, are shown as adjustments to the unassigned deficit.
Policy Reserves: Life reserves are developed by actuarial methods and are
determined based on published tables using statutorily specified interest
rates and valuation methods that will provide, in the aggregate, reserves that
are greater than or equal to the minimum or guaranteed policy cash values or
the amounts required by the Commonwealth of Massachusetts Division of
Insurance. Reserves for variable life insurance policies are maintained
principally on the modified preliminary term method using the 1958 and 1980
Commissioner's Standard Ordinary (CSO) mortality tables, with an assumed
interest rate of 4% for policies issued prior to May 1, 1983 and 4 1/2% for
policies issued on or thereafter. Reserves for single premium policies are
determined by the net single premium method using the 1958 CSO mortality
table, with an assumed interest rate of 4%. Reserves for universal life
policies issued prior to 1985 are equal to the gross account value which at
all times
24
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
exceeds minimum statutory requirements. Reserves for universal life policies
issued from 1985 through 1988 are maintained at the greater of the
Commissioner's Reserve Valuation Method (CRVM) using the 1958 CSO mortality
table, with 4 1/2% interest or the cash surrender value. Reserves for
universal life policies issued after 1988 and for flexible variable policies
are maintained using the greater of the cash surrender value or the CRVM
method with the 1980 CSO mortality table and 5 1/2% interest for policies
issued from 1988 through 1992; 5% interest for policies issued in 1993 and
1994; and 4 1/2% interest for policies issued in 1995 and 1996.
Federal Income Taxes: Federal income taxes are reported in the financial
statements based on amounts determined to be payable as a result of operations
within the current accounting period. The operations of the Company are
consolidated with John Hancock in filing a consolidated federal income tax
return for the affiliated group. The federal income taxes of the Company are
allocated on a separate return basis with certain adjustments. The Company
made payments of $33.5 million in 1996 and $32.2 million in 1995.
Income before taxes differs from taxable income principally due to tax-exempt
investment income, the limitation placed on the tax deductibility of
policyholder dividends, accelerated depreciation, differences in policy
reserves for tax return and financial statement purposes, capitalization of
policy acquisition expenses for tax purposes and other adjustments prescribed
by the Internal Revenue Code.
No provision is generally recognized for temporary differences that may exist
between financial reporting and taxable income or loss.
Reinsurance: Premiums, commissions, expense reimbursements, benefits and
reserves related to reinsured business are accounted for on bases consistent
with those used in accounting for the original policies issued and the terms
of the reinsurance contracts. Premiums ceded to other companies have been
reported as a reduction of premium income. Amounts applicable to reinsurance
ceded for future policy benefits, unearned premium reserves and claim
liabilities have been reported as reductions of these items.
Reclassifications: Certain 1995 amounts have been reclassified to permit
comparison with the corresponding 1996 amounts.
NOTE 2--CAPITALIZATION
In prior years, the Company received capital contributions from John Hancock,
with a portion of the contributed capital being credited to common stock,
although no additional shares were issued. This practice, which is acceptable
to statutory authorities, has the effect of stating the carrying value of
issued shares of common stock at amounts other than $50 per share par value
with the offset reflected in paid-in capital.
At December 31, 1994, the Company had 50,000 shares authorized with 20,000
shares issued and outstanding. On February 16, 1995, the Company issued the
remaining 30,000 shares to John Hancock and transferred $22.5 million from
common stock to paid-in capital. The par value per share is $50.
NOTE 3--ACQUISITION
On June 23, 1993, the Company acquired all of the outstanding shares of stock
of Colonial Penn Annuity and Life Insurance Company (CPAL) from Colonial Penn
Life Insurance Company for an aggregate purchase price of approximately $42.5
million. At the date of acquisition, assets of CPAL were approximately $648.5
million, consisting principally of cash and temporary cash investments and
liabilities were approximately $635.2 million,
25
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 3--ACQUISITION--CONTINUED
consisting principally of reserves related to a block of interest sensitive
single-premium whole life insurance business assumed by CPAL from Charter
National Life Insurance Company (Charter). The purchase price includes
contingent payments of up to approximately $7.3 million payable between 1994
and 1998 based on the actual lapse experience of the business in force on June
23, 1993. The Company made contingent payments to CPAL of $1.5 million during
each of 1996 and 1995. Unamortized goodwill at December 31, 1996 was $15.2
million and is being amortized over ten years on a straight-line basis.
On June 24, 1993, the Company contributed $24.6 million in additional capital
to CPAL. CPAL was renamed John Hancock Life Insurance Company of America
(JHLICOA) on July 7, 1993. JHLICOA manages the business assumed from Charter
and does not currently issue new business.
NOTE 4--NET INVESTMENT INCOME
Investment income has been reduced by the following amounts:
<TABLE>
<CAPTION>
1996 1995
---- ----
(In millions)
<S> <C> <C>
Investment expenses............................................... $ 7.0 $ 5.1
Depreciation expense.............................................. 0.9 1.0
Investment taxes.................................................. 0.5 0.5
------ ------
$ 8.4 $ 6.6
====== ======
</TABLE>
NOTE 5--NET CAPITAL GAINS (LOSSES) AND OTHER ADJUSTMENTS
Net realized capital gains (losses) consist of the following items:
<TABLE>
<CAPTION>
1996 1995
---- ----
(In millions)
<S> <C> <C>
Net gains (losses) from asset sales............................. $ (0.2) $ 4.0
Capital gains tax............................................... (1.0) (2.5)
Net capital gains transferred to IMR............................ (0.3) (1.0)
------ ------
Realized Capital Gains (Losses)............................... $ (1.5) $ 0.5
====== ======
</TABLE>
Net unrealized capital gains (losses) and other adjustments consist of the
following items:
<TABLE>
<CAPTION>
1996 1995
---- ----
(In millions)
<S> <C> <C>
Net gains (losses) from changes in security values and book
value adjustments.............................................. $ 3.7 $ (0.2)
Increase in asset valuation reserve............................. (1.2) (2.8)
------ ------
Net Unrealized Capital Gains (Losses) and Other Adjustments... $ 2.5 $ (3.0)
====== ======
</TABLE>
NOTE 6--TRANSACTIONS WITH PARENT
The Company's Parent provides the Company with personnel, property and
facilities in carrying out certain of its corporate functions. The Parent
annually determines a fee for these services and facilities based on a number
of criteria which were revised in 1996 and 1995 to reflect continuing changes
in the Company's operations. The amount of the service fee charged to the
Company was $111.7 million and $97.9 million in 1996 and 1995,
26
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 6--TRANSACTIONS WITH PARENT--CONTINUED
respectively, which has been included in insurance and investment expenses.
The Parent has guaranteed that, if necessary, it will make additional capital
contributions to prevent the Company's stockholder's equity from declining
below $1.0 million.
The service fee charged to the Company by the Parent includes $1.6 million and
$1.8 million in 1996 and 1995, respectively, representing the portion of the
provision for retiree benefit plans determined under the accrual method,
including a provision for the 1993 transition liability which is being
amortized over twenty years, that was allocated to the Company.
Effective January 1, 1994, the Company entered into a modified coinsurance
agreement with John Hancock to reinsure 50% of 1996, 1995 and 1994 issues of
flexible premium variable life insurance and scheduled premium variable life
insurance policies. In connection with this agreement, John Hancock
transferred $24.5 million and $32.7 million of cash for tax, commission, and
expense allowances to the Company, which increased the Company's net gain from
operations by $15.7 million and $20.3 million in 1996 and 1995, respectively.
Effective January 1, 1996, the Company entered into a modified coinsurance
agreement with John Hancock to reinsure 50% of 1995 and 1996 issues of retail
annuity contracts (Independence Preferred and Declaration). In connection with
this agreement, John Hancock transferred $23.2 million of cash for surrender
benefits, tax, reserve increase, commission, expense allowances and premium to
the Company, which increased the Company's net gain from operations by $15.1
million in 1996.
NOTE 7--INVESTMENTS
The statement value and fair value of bonds are shown below:
<TABLE>
<CAPTION>
Gross Gross
Statement Unrealized Unrealized Fair
YEAR ENDED DECEMBER 31, 1996 Value Gains Losses Value
---------------------------- --------- ---------- ---------- -----
(In millions)
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations
of U.S. government corporations and
agencies............................... $ 44.4 $ 0.2 $0.2 $ 44.4
Obligations of states and political
subdivisions........................... 12.6 0.4 0.0 13.0
Debt securities issued by foreign
governments............................ 0.8 0.1 0.0 0.9
Corporate securities.................... 623.2 29.8 3.4 649.6
Mortgage-backed securities.............. 72.5 10.2 0.1 82.6
------ ----- ---- ------
Total bonds........................... $753.5 $40.7 $3.7 $790.5
====== ===== ==== ======
<CAPTION>
Gross Gross
Statement Unrealized Unrealized Fair
YEAR ENDED DECEMBER 31, 1995 Value Gains Losses Value
---------------------------- --------- ---------- ---------- -----
(In millions)
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations
of U.S. government corporations and
agencies............................... $ 89.0 $ 0.5 $0.0 $ 89.5
Obligations of states and political
subdivisions........................... 11.4 1.1 0.0 12.5
Debt securities issued by foreign
governments............................ 1.3 0.2 0.0 1.5
Corporate securities.................... 445.6 44.1 1.6 488.1
Mortgage-backed securities.............. 5.5 0.3 0.1 5.7
------ ----- ---- ------
Total bonds............................. $552.8 $46.2 $1.7 $597.3
====== ===== ==== ======
</TABLE>
27
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 7--INVESTMENTS--CONTINUED
The statement value and fair value of bonds at December 31, 1996, by
contractual maturity, are shown below. Maturities will differ from contractual
maturities because eligible borrowers may exercise their right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Statement Fair
Value Value
--------- -----
(In millions)
<S> <C> <C>
Due in one year or less....................................... $ 51.6 $ 52.9
Due after one year through five years......................... 260.8 267.7
Due after five years through ten years........................ 244.3 253.7
Due after ten years........................................... 124.3 133.6
------ ------
681.0 707.9
Mortgage-backed securities.................................... 72.5 82.6
------ ------
$753.5 $790.5
====== ======
</TABLE>
Proceeds from sales of bonds during 1996 and 1995 were $228.3 million and
$18.9 million, respectively. Gross gains of $1.3 million in 1996 and $0.2
million in 1995 and gross losses of $2.1 million in 1996 and $0.1 million in
1995 were realized on these transactions.
The cost of common stocks was $0.0 million and $0.1 million at December 31,
1996 and 1995, respectively. Gross unrealized appreciation on common stocks
totaled $1.4 million, and gross unrealized depreciation totaled $0.0 million
at December 31, 1996. The fair value of preferred stock totaled $9.6 million
at December 31, 1996 and $5.2 million at December 31, 1995.
Bonds with amortized cost of $11.3 million were nonincome producing for the
twelve months ended December 31, 1996.
At December 31, 1996, the mortgage loan portfolio was diversified by
geographic region and specific collateral property type as displayed below.
The Company controls credit risk through credit approvals, limits and
monitoring procedures.
<TABLE>
<CAPTION>
Statement
PROPERTY TYPE Value
------------- ---------
(IN MILLIONS)
<S> <C>
Apartments.............. $ 96.0
Industrial.............. 35.0
Office buildings........ 11.3
Retail.................. 29.0
Agricultural............ 28.9
Other................... 11.9
------
$212.1
======
</TABLE>
<TABLE>
<CAPTION>
GEOGRAPHIC Statement
CONCENTRATION Value
------------- ---------
(IN MILLIONS)
<S> <C>
East North Central...... $ 31.1
Middle Atlantic......... 11.5
Mountain................ 7.6
New England............. 27.6
Pacific................. 49.9
South Atlantic.......... 58.8
West South Central...... 25.6
------
$212.1
======
</TABLE>
At December 31, 1996, the fair values of the commercial and agricultural
mortgage loans portfolios were $189.0 million and $30.4 million, respectively.
The corresponding amounts as of December 31, 1995 were approximately $132.1
million and $22.2 million, respectively.
28
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 7--INVESTMENTS--CONTINUED
The maximum and minimum lending rates for mortgage loans during 1996 were
8.69% and 7.04% for agricultural loans and 8.5% and 7.2% for other properties.
Generally, the maximum percentage of any loan to the value of security at the
time of the loan, exclusive of insured or guaranteed or purchase money
mortgages, is 75%. For city mortgages, fire insurance is carried on all
commercial and residential properties at least equal to the excess of the loan
over the maximum loan which would be permitted by law on the land without the
building, except as permitted by regulations of the Federal Housing Commission
on loans fully insured under the provisions of the National Housing Act. For
agricultural mortgage loans, fire insurance is not normally required on land
based loans except in those instances where a building is critical to the
farming operation. Fire insurance is required on all agri-business facilities
in an aggregate amount equal to the loan balance.
NOTE 8--REINSURANCE
The Company cedes business to reinsurers to share risks under variable life,
universal life and flexible variable life insurance policies for the purpose
of reducing exposure to large losses. Premiums, benefits and reserves ceded to
reinsurers in 1996 were $384.3 million, $9.9 million, and $12.1 million,
respectively. The corresponding amounts in 1995 were $72.4 million, $8.7
million, and $12.1 million, respectively.
To the extent that an assuming reinsurance company is unable to meet its
obligations under a reinsurance agreement, the Company remains liable as the
direct insurer on all risks reinsured.
NOTE 9--FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Company enters into interest rate swap contracts for the purpose of
converting the interest rate characteristics (fixed or variable) of certain
investments to match those of related insurance liabilities. Maturities of
current agreements range through 2011. These swaps involve, to varying
degrees, interest rate risk in excess of amounts recognized in the statement
of financial position.
The Company enters into currency rate swap agreements to manage exposure to
foreign exchange rate fluctuations. Maturities of current agreements range
through 2006. Should the counterparty fail to meet the terms of the contract,
the Company's market risk is limited to the currency rate differential.
The Company enters into interest rate cap contracts to manage exposure on
underlying security values due to a rise in interest rates. Maturities of
current agreements range through 2006.
The Company also uses financial futures contracts to hedge public bonds
intended for future sale in order to lock in the market value at the date of
contract. The Company is subject to the risks associated with changes in the
value of the underlying securities; however, such changes in value generally
are offset by changes in the value of the hedged items. The contract or
notional amounts of the contracts represent the extent of the Company's
involvement but not in the future cash requirements, as the Company intends to
close the open positions prior to settlement.
The contract or notional amount of the foregoing financial instruments, which
indicates the Company's involvement and in certain instances, maximum credit
risk related to those instruments, is as follows:
<TABLE>
<CAPTION>
December 31
-------------
1996 1995
---- ----
(In millions)
<S> <C> <C>
Futures contracts to sell securities............................ $ 73.0 $ 0.0
======= =====
Notional amount of interest rate swaps, currency rate swaps, and
interest rate caps to:
Receive variable rates........................................ $ 215.9 $ 0.0
======= =====
Receive fixed rates........................................... $ 26.6 $ 5.0
======= =====
</TABLE>
29
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 9--FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK--CONTINUED
The Company continually monitors its positions and the credit ratings of the
counterparties to these financial instruments. The Company believes the risk
of incurring losses due to the nonperformance by its counterparties is remote
and that any such losses would be immaterial.
Based on the market rates in effect at December 31, 1996, the Company's
interest rate swaps, currency rate swaps and interest rate caps represented
(assets) liabilities to the Company with fair values of $2.3 million, $(8.2)
million and $(2.0) million, respectively. The corresponding amounts as of
December 31, 1995 were $0.0 million.
NOTE 10--POLICYHOLDERS' RESERVES AND BENEFICIARIES' FUND
The Company's annuity reserves and deposit fund liabilities that are subject
to discretionary withdrawal and subject to discretionary withdrawal (without
adjustment) are summarized as follows:
<TABLE>
<CAPTION>
December 31, 1996 Percent
----------------- -------
(IN MILLIONS)
<S> <C> <C>
Subject to discretionary withdrawal at book value
less surrender charge............................... $441.9 89.3%
Subject to discretionary withdrawal at book value
(without adjustment)................................ 53.0 10.7
------ -----
Total annuity reserves and deposit liabilities....... $494.9 100.0%
====== =====
</TABLE>
NOTE 11--COMMITMENTS AND CONTINGENCIES
The Company has extended commitments to purchase long-term bonds and real
estate and issue real estate mortgages totalling $42.1 million, $0.1 million,
and $33.5 million, respectively, at December 31, 1996. The Company monitors
the creditworthiness of borrowers under long-term bond commitments and
requires collateral as deemed necessary. If funded, loans related to real
estate mortgages would be fully collateralized by the related properties. The
fair value of the commitments described above is $76.2 million at December 31,
1996. The majority of these commitments expire in 1997.
In the normal course of its business operations, the Company is involved in
litigation from time to time with claimants, beneficiaries and others, and a
number of litigation matters were pending as of December 31, 1996. It is the
opinion of management, after consultation with counsel, that the ultimate
liability with respect to these claims, if any, will not materially affect the
financial position of the Company.
30
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 12--FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and fair values of the
Company's financial instruments:
<TABLE>
<CAPTION>
Year ended December 31
--------------------------------
1996 1995
--------------- ---------------
CARRYING Fair CARRYING Fair
AMOUNT Value AMOUNT Value
-------- ------ -------- ------
(In millions)
<S> <C> <C> <C> <C>
Assets
Bonds--Note 7............................... $753.5 $790.5 $552.8 $597.3
Preferred stocks--Note 7.................... 9.6 9.6 5.0 5.2
Common stocks--Note 7....................... 1.4 1.4 1.7 1.7
Mortgage loans on real estate--Note 7....... 212.1 219.4 146.7 154.3
Policy loans--Note 1........................ 80.8 80.8 61.8 61.8
Cash and cash equivalents--Note 1........... 31.9 31.9 76.6 76.6
Derivatives liabilities relating to:--Note 9
Interest rate swaps......................... -- 2.3 -- 0.0
Currency rate swaps......................... -- (8.2) -- 0.0
Interest rate caps.......................... -- (2.0) -- 0.0
Liabilities
Commitments--Note 11........................ -- 76.2 -- 23.8
</TABLE>
The carrying amounts in the table are included in the statutory-basis
statements of financial position. The method and assumptions utilized by the
Company in estimating its fair value disclosures are described in Note 1.
31
<PAGE>
CONTRACTS ISSUED BY JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
200 CLARENDON STREET, BOSTON, MASSACHUSETTS 02117
[STOCK NO.] 5/97
<PAGE>
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS
<TABLE>
<C> <S>
1. Statement of Assets and Liabilities, John Hancock Variable Annuity
Account I, at December 31, 1996. (Part B)
2. Statement of Operations, John Hancock Variable Annuity Account I, for
the period ended December 31, 1996. (Part B)
3. Statement of Changes in Net Assets, John Hancock Variable Annuity I,
for the period ended December 31, 1996. (Part B)
4. Notes to Financial Statements, John Hancock Variable Annuity Account I.
(Part B)
5. Statement of Financial Position, John Hancock Variable Life Insurance
Company, at December 31, 1996 and December 31, 1995. (Part B)
6. Summary of Operations and Unassigned Deficit, John Hancock Variable
Life Insurance Company, for each of the two years in the period ended
December 31, 1996. (Part B)
7. Statement of Cash Flows, John Hancock Variable Life Insurance Company,
for each of the two years in the period ended December 31, 1996. (Part
B)
8. Notes to Financial Statements, John Hancock Variable Life Insurance
Company. (Part B)
(B) EXHIBITS:
1. JHVLICO Board Resolution establishing John Hancock Variable Annuity
Account I, dated June 15, 1994, previously filed electronically on
November 27, 1996.
2. Not Applicable.
3.(a) Form of Distribution and Servicing Agreement by and among John Hancock
Distributors, Inc., John Hancock Mutual Life Insurance Company, and John
Hancock Variable Life Insurance Company, incorporated by reference from
Pre-Effective Amendment No. 2 to Form S-6 Registration Statement of John
Hancock Variable Life Account S (File No. 333-15075) filed April 18,
1997.
(b) Specimen Variable Contracts Selling Agreement Between John Hancock
Distributors, Inc., and selling broker-dealers, incorporated by
reference from Pre-Effective Amendment No. 2 to Form S-6 Registration
Statement of John Hancock Variable Life Account S (File No. 333-15075)
filed April 18, 1997.
4. Form of periodic payment deferred annuity contract, previously filed
electronically on November 27, 1996.
5. Form of annuity contract application.
6.(a) Certificate of Incorporation of John Hancock Variable Life
Insurance Company, previously filed electronically on
November 27, 1996.
6.(b) By-Laws of John Hancock Variable Life Insurance Company, previously
filed electronically on November 27, 1996.
</TABLE>
C-1
<PAGE>
<TABLE>
<C> <S>
7. Not Applicable.
8. Not Applicable.
9. Opinion and Consent of Counsel as to legality of interests being
offered previously filed electronically on November 27, 1996.
10.(a) Consent of Independent Auditors.
11. Not Applicable.
12. Not Applicable.
13. Diagram of Subsidiaries of John Hancock Mutual Life Insurance Company,
incorporated by reference from Post-Effective Amendment No. 13 to Form
N-1A Registration Statement of John Hancock Variable Series Trust I
(File No. 33-2081) filed April 24, 1996.
14. Power of Attorney for Ronald J. Bocage, incorporated by reference from
Form 10-K annual report of John Hancock Variable Life Insurance Company
(File No. 33-62895) filed March 28, 1997. Copies of Powers of attorney
for all other directors, incorporated by reference from Post-Effective
Amendment No. 1 to Form N-4 Registration Statement of John Hancock
Variable Annuity Account I (File No. 33-82648), filed April 25, 1995.
</TABLE>
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
DIRECTORS
<TABLE>
<CAPTION>
NAME POSITION WITH DEPOSITOR
---- -----------------------
<S> <C>
David F. D'Alessandro............... Chairman of the Board and President
Henry D. Shaw....................... Vice Chairman of the Board and President
Thomas J. Lee....................... Director
Robert R. Reitano................... Director
Ronald J. Bocage.................... Director, Vice President, and Counsel
Joseph A. Tomlinson................. Director and Vice President
Michele G. VanLeer.................. Director
John M. DeCiccio.................... Director
Barbara L. Luddy.................... Director and Actuary
Robert S. Paster.................... Director
EXECUTIVE OFFICERS OTHER THAN DIRECTORS
Daniel L. Ouellette................. Vice President, Marketing
Patrick F. Smith.................... Controller
</TABLE>
All of the above-named officers and directors can be contacted at the
following business address: John Hancock Variable Life Insurance Company, John
Hancock Place, P.O. Box 111, Boston, MA 02117.
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Registrant is a separate account of JHVLICO, operated as a unit investment
trust. Registrant supports benefits payable under JHVLICO's variable annuity
contracts by investing in shares of John Hancock Variable Series Trust I (the
"Fund") a "series" type of mutual fund, registered under the Investment
Company Act of 1940 (the "Act") as an open-end management investment company.
The Registrant and other separate accounts of John Hancock and JHVLICO own all
of the Fund's outstanding shares. The purchasers of variable annuity and
variable life insurance contracts, in connection with which the Fund is used,
will have the opportunity to instruct John Hancock and JHVLICO with respect to
the voting of the shares of the Series Fund held by Registrant as to certain
matters. Subject to the voting instructions, JHVLICO directly controls
Registrant.
A diagram of the subsidiaries of John Hancock is incorporated by reference
from Exhibit 17 to Post-Effective Amendment No. 13 to Form N-1A Registration
Statement of John Hancock Variable Series Trust I (File No. 33-2081) filed
April 24, 1996.
C-2
<PAGE>
ITEM 27. NUMBER OF CONTRACT OWNERS
Because no Contracts have yet been sold, there are no Contract Owners.
ITEM 28. INDEMNIFICATION
Article X of the By-Laws of JHVLICO provides indemnification to each present
and former trustee, officer, and employee of JHVLICO against litigation
expenses and liabilities incurred while acting as such, subject to limitations
of law, including under the Act. No indemnification shall be paid if a
director or officer is finally adjudicated not to have acted in good faith in
the reasonable belief that his action was in the best interest of JHVLICO.
JHVLICO may pay expenses incurred in defending an action or claim in advance
of its final disposition, but only upon receipt of an undertaking by the
person indemnified to repay such amounts if he or she should be determined not
be entitled to indemnification.
Reference is made to Article VI of the ByLaws of the Fund, filed as Exhibit
2 to Post Effective Amendment No. 2 to the Fund's Registration Statement (File
No. 33-2081) dated April 12, 1988, which provides that the Fund shall
indemnify or advance any expenses to the trustees, shareholders, officers, or
employees of the Fund to the extent set forth in the Declaration of Trust.
Sections 6.3 through 6.17 of the Declaration of Trust, included as Exhibit 1
to the Fund's Post Effective Amendment No. 2, relate to the indemnification of
trustees, shareholders, officers, and employees. It is provided that the
Registrant shall indemnify any trustee made a party to any proceeding by
reason of service in that capacity if the trustee (a) acted in good faith and
(b) reasonably believed, (1) in the case of conduct in the trustee's official
capacity with the Fund, that the conduct was in the best interest of the Fund
and (2) in all other cases, that the conduct was at least not opposed to the
best interests of the Fund, and (c) in the case of any criminal proceeding,
the Fund shall indemnify the trustee if the trustee acted in good faith and
had no reasonable cause to believe that the conduct was unlawful.
Indemnification may not be made by the Fund unless authorized in each case by
a determination by the Board of Trustees or by special legal counsel or by the
shareholders. Neither indemnification nor advancement of expenses may be made
if the trustee or officer has incurred liability by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of duties
involved in the conduct of his office ("Disabling Conduct"). The means for
determining whether indemnification shall be made shall be (1) a final
decision on the merits by a court or other body before whom the proceeding was
brought that the person to be indemnified was not liable by reason of
Disabling Conduct or (2) in the absence of such a decision, a reasonable
determination, based upon a review of the facts, that such person was not
liable by reason of Disabling Conduct. Such latter determination may be made
either (a) by the vote of a majority of a quorum of Trustees of the Fund who
are neither "interested" persons of the Fund (as defined in the Act) nor
parties to the proceeding or (b) by an independent legal counsel in a written
opinion. The advancement of legal expenses may not occur unless the trustee or
officer agrees to repay the advance (unless it is ultimately determined that
he is entitled to indemnification) and at least one of three conditions is
satisfied: (1) he provides security for his agreement to repay, (2) the Fund
is insured against loss by reason of lawful advances, or (3) a majority of a
quorum of the Trustees of the Fund who are not interested persons and are not
parties to the proceedings, or independent counsel in a written opinion,
determine that there is reason to believe that the trustees or officer will be
found entitled to indemnification.
Similar types of provisions dealing with the indemnification of the Fund's
officers and trustees are hereby incorporated by reference from documents
previously filed with the Commission, specifically, Section 14 of the
Investment Management Agreement by and between John Hancock Variable Series
Trust I and John Hancock Mutual Life Insurance Company (Exhibit 5.f. to Post-
Effective Amendment No. 4 to the Registration Statement of the Fund (File No.
33-2081) dated April, 1989), Section 14 of the Investment Management Agreement
by and between John Hancock Variable Series Trust I and John Hancock Mutual Life
Insurance Company (Exhibit 5.a. to the Fund's Registration Statement (File No.
33-2081) dated December 11, 1985), Section 14 of the Investment Management
Agreement by and between John Hancock Variable Series Trust and John Hancock
Mutual Life Insurance Company (Exhibit 5.g. to Post-Effective Amendment No. 9 to
the Fund's Registration Statement (File No. 33-2081) dated March 2, 1994),
Section 14 of the Investment Management Agreement By and Between John Hancock
Variable Series Trust I and John Hancock Mutual Life Insurance Company (Exhibit
5.k. to Post-Effective Amendment No. 13 to the Fund's Registration Statement
(File No. 33-2081) dated April 30, 1996), Section 7 of the Underwriting and
Administrative Services Agreement by
C-3
<PAGE>
and between John Hancock Variable Series Trust I and John Hancock Mutual Life
Insurance Company (Exhibit 6 to Post-Effective Amendment No. 4 to the
Registration Statement of the Fund (File No. 33-2081) dated April, 1986,
Section 15 of the Transfer Agency Agreement by and between John Hancock
Variable Series Trust I and John Hancock Mutual Life Insurance Company
(Exhibit 9 to Pre-Effective Amendment No. 1 to the Registration Statement of
the Fund (File No. 33-2081) dated March 13, 1986), and Section 6 of the
Underwriting and Indemnity Agreement By and Among John Hancock Series Trust I,
John Hancock Distributors, Inc., and John Hancock Mutual Life Insurance Company
(Exhibit 6.b. to Post-Effective Amendment No. 14 to Form N-1A Registration
Statement of the Fund (File No. 33-2081) filed February 28, 1997).
Insofar as indemnification for liabilities 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 that 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 a
controlling precedent, submit to a court of appropriate jurisdiction the
question of whether indemnification by it is against public policy as
expressed in that Act and will be governed by the final adjudication of such
issue.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) John Hancock Distributors, Inc., is the principal underwriter for the
Fund, John Hancock Variable Annuity Accounts U and V, and John Hancock
Variable Life Accounts U, V, and S, and John Hancock Mutual Variable Life
Insurance Account UV.
(b) In response to this item, the response to Item 25 is hereby
incorporated by reference.
(c) The information under "Distribution Agreements and Other Services--
Distribution Agreement" in the statement of additional information forming
a part of this registration statement is incorporated herein by reference.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The following entities prepare, maintain, and preserve the records required
by Section 31(a) of the Act for the Registrant and the Fund (as indicated
below) through written agreements between the parties to the effect that such
services will be provided to the Registrant and/or the Fund for such periods
prescribed by the Rules and Regulations of the Commission under the Act and
such records will be surrendered promptly on request:
John Hancock Distributors, Inc. ("Distributors"), John Hancock Place,
Boston, Massachusetts 02117, serves as Registrant's distributor and principal
underwriter and, in such capacities, keeps records regarding shareholders
account records, cancelled stock certificates. JHVLICO (at the same address),
in its capacity as Registrant's depositor, and John Hancock (at the same
address), in its capacities as Registrant's investment adviser and transfer
agent, keep all other records required by Section 31(a) of the Act.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
(a) Registrant hereby undertakes to file a post-effective amendment to
this Registration Statement as frequently as is necessary to ensure that
the audited financial statements in the registration statement are never
more than 16 months old for so long as payments under the variable annuity
contracts may be accepted.
C-4
<PAGE>
(b) Registrant hereby undertakes to include as part of any application to
purchase a contract offered by the prospectus a space that an applicant can
check to request a Statement of Additional Information.
(c) Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available
under Form N-4 promptly upon written or oral request.
(d) Registrant represents that the fees and charges deducted under the
Contracts, 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.
(e) John Hancock Variable Life Insurance Company represents that the fees
and charges deducted under the Contracts, 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.
C-5
<PAGE>
SIGNATURES
AS REQUIRED BY THE SECURITIES ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF
1940, REGISTRANT HAS CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF, IN THE CITY OF BOSTON AND THE COMMONWEALTH OF MASSACHUSETTS ON THIS
17th DAY OF APRIL, 1997.
John Hancock Variable Annuity
Account I (Registrant)
By John Hancock Variable Life
Insurance Company
/s/ Henry D. Shaw
By __________________________________
HENRY D. SHAW
VICE CHAIRMAN OF THE
BOARD AND PRESIDENT
John Hancock Variable Life Insurance
Company (Depositor)
/s/ Henry D. Shaw
By __________________________________
HENRY D. SHAW
VICE CHAIRMAN OF THE
BOARD AND PRESIDENT
AS REQUIRED BY THE SECURITIES ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF
1940, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN
THEIR CAPACITIES WITH JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY AND ON THE
DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Patick F. Smith Controller April 16, 1997
- -------------------------------------
PATRICK F. SMITH (Principal
Accounting Officer)
/s/ Robert R. Reitano Director April 16, 1997
- ------------------------------------
ROBERT R. REITANO (Principal Financial
Officer)
/s/ Henry D. Shaw Vice Chairman of the April 17, 1997
- -------------------------------------
HENRY D. SHAW Board and President
FOR HIMSELF AND AS (Principal
ATTORNEY-IN-FACT Executive Officer)
FOR: David F. D'Alessandro Chairman of the Board
Thomas J. Lee Director
Ronald J. Bocage Director
Michele G. Van Leer Director
Barbara L. Luddy Director
C-6
<PAGE>
INDEX TO EXHIBITS
FORM N-4
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT I
<TABLE>
<CAPTION>
EXHIBITS
--------
<C> <S>
5. Form of Annuity Contract Application
10.(a) Consent of Independent Auditors
27. Financial Data Schedule
</TABLE>
C-7
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> LARGE CAP GROWTH
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 45,003,857
<INVESTMENTS-AT-VALUE> 43,320,792
<RECEIVABLES> 0
<ASSETS-OTHER> 92,496
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 43,413,288
<PAYABLE-FOR-SECURITIES> 1,791
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 90,705
<TOTAL-LIABILITIES> 92,496
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 43,320,792
<DIVIDEND-INCOME> 6,235,377
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 382,802
<NET-INVESTMENT-INCOME> 5,852,575
<REALIZED-GAINS-CURRENT> 134,575
<APPREC-INCREASE-CURRENT> (1,771,929)
<NET-CHANGE-FROM-OPS> 4,215,221
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 34,532,544
<NUMBER-OF-SHARES-REDEEMED> 658,001
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 32,237,189
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 382,802
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> SOVEREIGN BOND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 33,106,088
<INVESTMENTS-AT-VALUE> 32,888,901
<RECEIVABLES> 0
<ASSETS-OTHER> 126,401
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 33,015,302
<PAYABLE-FOR-SECURITIES> 1,349
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 125,052
<TOTAL-LIABILITIES> 126,401
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 32,888,901
<DIVIDEND-INCOME> 1,691,372
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 305,785
<NET-INVESTMENT-INCOME> 1,385,587
<REALIZED-GAINS-CURRENT> (13,677)
<APPREC-INCREASE-CURRENT> (351,203)
<NET-CHANGE-FROM-OPS> 1,020,707
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 26,676,562
<NUMBER-OF-SHARES-REDEEMED> 1,909,061
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 24,402,621
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 305,785
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> INTERNATIONAL EQUITIES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 10,778,674
<INVESTMENTS-AT-VALUE> 11,310,436
<RECEIVABLES> 0
<ASSETS-OTHER> 58,119
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 11,368,555
<PAYABLE-FOR-SECURITIES> 459
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 57,660
<TOTAL-LIABILITIES> 58,119
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 11,310,436
<DIVIDEND-INCOME> 91,388
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 108,177
<NET-INVESTMENT-INCOME> (16,789)
<REALIZED-GAINS-CURRENT> 39,238
<APPREC-INCREASE-CURRENT> 487,991
<NET-CHANGE-FROM-OPS> 510,440
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,541,613
<NUMBER-OF-SHARES-REDEEMED> 834,896
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 8,233,945
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 108,177
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> SMALL CAP GROWTH
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 6,510,099
<INVESTMENTS-AT-VALUE> 6,352,085
<RECEIVABLES> 0
<ASSETS-OTHER> 45,628
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6,397,713
<PAYABLE-FOR-SECURITIES> 255
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 45,373
<TOTAL-LIABILITIES> 45,628
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 6,352,085
<DIVIDEND-INCOME> 2,385
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 26,391
<NET-INVESTMENT-INCOME> (24,006)
<REALIZED-GAINS-CURRENT> (4,702)
<APPREC-INCREASE-CURRENT> (158,014)
<NET-CHANGE-FROM-OPS> (186,722)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,716,464
<NUMBER-OF-SHARES-REDEEMED> 201,663
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 6,352,085
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 26,391
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> INTERNATIONAL BALANCED
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 2,375,984
<INVESTMENTS-AT-VALUE> 2,455,434
<RECEIVABLES> 0
<ASSETS-OTHER> 38,862
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,494,296
<PAYABLE-FOR-SECURITIES> 99
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 38,763
<TOTAL-LIABILITIES> 38,862
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,455,434
<DIVIDEND-INCOME> 33,662
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 10,281
<NET-INVESTMENT-INCOME> 23,381
<REALIZED-GAINS-CURRENT> 1,726
<APPREC-INCREASE-CURRENT> 79,450
<NET-CHANGE-FROM-OPS> 104,557
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,645,957
<NUMBER-OF-SHARES-REDEEMED> 271,699
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2,455,434
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10,281
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> MID CAP GROWTH
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 6,429,081
<INVESTMENTS-AT-VALUE> 6,515,769
<RECEIVABLES> 0
<ASSETS-OTHER> 56,553
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6,572,322
<PAYABLE-FOR-SECURITIES> 262
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 56,291
<TOTAL-LIABILITIES> 56,553
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 6,515,769
<DIVIDEND-INCOME> 17,661
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 26,407
<NET-INVESTMENT-INCOME> (8,746)
<REALIZED-GAINS-CURRENT> (2,072)
<APPREC-INCREASE-CURRENT> 86,688
<NET-CHANGE-FROM-OPS> 75,870
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,514,639
<NUMBER-OF-SHARES-REDEEMED> 83,487
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 6,515,769
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 26,407
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> LARGE CAP VALUE
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 7,566,457
<INVESTMENTS-AT-VALUE> 7,916,262
<RECEIVABLES> 0
<ASSETS-OTHER> 91,178
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 8,007,440
<PAYABLE-FOR-SECURITIES> 325
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 90,853
<TOTAL-LIABILITIES> 91,178
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 8
<NAME> MONEY MARKET
<S> <C>
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<PERIOD-START> JAN-01-1996
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 9
<NAME> MID CAP VALUE
<S> <C>
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<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 3,034,857
<DIVIDEND-INCOME> 62,336
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<EXPENSES-NET> 10,808
<NET-INVESTMENT-INCOME> 51,528
<REALIZED-GAINS-CURRENT> 1,514
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<NUMBER-OF-SHARES-SOLD> 2,888,273
<NUMBER-OF-SHARES-REDEEMED> 49,777
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 3,034,857
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 10
<NAME> SPECIAL OPPORTUNITIES
<S> <C>
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<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
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<NET-INVESTMENT-INCOME> 1,645,765
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> REAL ESTATE EQUITY
<S> <C>
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<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
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<SENIOR-LONG-TERM-DEBT> 0
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<TOTAL-LIABILITIES> 55,572
<SENIOR-EQUITY> 0
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<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 7,855,538
<DIVIDEND-INCOME> 255,411
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 53,964
<NET-INVESTMENT-INCOME> 201,447
<REALIZED-GAINS-CURRENT> 29,463
<APPREC-INCREASE-CURRENT> 1,127,858
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<NUMBER-OF-SHARES-SOLD> 5,463,924
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<SHARES-REINVESTED> 0
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 12
<NAME> GROWTH & INCOME
<S> <C>
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<PERIOD-START> JAN-01-1996
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 13
<NAME> MANAGED
<S> <C>
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 14
<NAME> SHORT-TERM U.S. GOVERNMENT
<S> <C>
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 15
<NAME> SMALL CAP VALUE
<S> <C>
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 16
<NAME> INTERNATIONAL OPPORTUNITIES
<S> <C>
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<APPREC-INCREASE-CURRENT> 147,562
<NET-CHANGE-FROM-OPS> 146,299
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,564,680
<NUMBER-OF-SHARES-REDEEMED> 208,135
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 3,506,957
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 14,049
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 17
<NAME> EQUITY INDEX
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 4,845,803
<INVESTMENTS-AT-VALUE> 5,099,509
<RECEIVABLES> 0
<ASSETS-OTHER> 24,912
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5,124,421
<PAYABLE-FOR-SECURITIES> 211
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 24,701
<TOTAL-LIABILITIES> 24,912
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 5,099,509
<DIVIDEND-INCOME> 115,771
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 21,689
<NET-INVESTMENT-INCOME> 94,082
<REALIZED-GAINS-CURRENT> 4,980
<APPREC-INCREASE-CURRENT> 253,706
<NET-CHANGE-FROM-OPS> 352,768
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,016,013
<NUMBER-OF-SHARES-REDEEMED> 175,190
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 5,099,509
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 21,689
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 18
<NAME> STRATEGIC BOND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 4,101,106
<INVESTMENTS-AT-VALUE> 4,104,368
<RECEIVABLES> 0
<ASSETS-OTHER> 36,856
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,141,224
<PAYABLE-FOR-SECURITIES> 167
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 36,689
<TOTAL-LIABILITIES> 36,856
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 4,104,368
<DIVIDEND-INCOME> 133,556
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 17,261
<NET-INVESTMENT-INCOME> 116,294
<REALIZED-GAINS-CURRENT> 120
<APPREC-INCREASE-CURRENT> 3,262
<NET-CHANGE-FROM-OPS> 119,676
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,191,037
<NUMBER-OF-SHARES-REDEEMED> 90,050
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 4,104,368
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 17,261
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
EXHIBIT 5
- ---------------
MARKETPLACE Variable Annuity Application
- --------------- Application to John Hancock Mutual Life Insurance
John Hancock Company for an Individual Flexible Premium
Deferred Variable Annuity
Complete this application and mail to:
John Hancock Mutual Life Insurance Company
Life & Annuity Services
P.O Box 111
Boston, MA 02117
For help with this application, or for more information,
call us at 1-800-555-1440
================================================================================
1 Who is the Owner?
- --------------------------------------------------------------------------------
Name Male Female Social Security # or Tax I.D.#
[_] [_]
- --------------------------------------------------------------------------------
Street Address City State Zip
- --------------------------------------------------------------------------------
Home Telephone Business Telephone Date of Birth
================================================================================
================================================================================
2 Who is the Joint Owner? (Please complete if there is a Joint Owner)
- --------------------------------------------------------------------------------
Name Male Female Social Security # or Tax I.D.#
[_] [_]
- --------------------------------------------------------------------------------
Street Address City State Zip
- --------------------------------------------------------------------------------
Home Telephone Business Telephone Date of Birth
================================================================================
================================================================================
3 Who is the Proposed Annuitant? (Please complete if the Proposed Annuitant is
not the Owner)
- --------------------------------------------------------------------------------
Name Male Female Social Security # or Tax I.D.#
[_] [_]
- --------------------------------------------------------------------------------
Street Address City State Zip
- --------------------------------------------------------------------------------
Home Telephone Business Telephone Date of Birth
================================================================================
================================================================================
4 Who will be the Beneficiary(ies) of the Contract?
- --------------------------------------------------------------------------------
Primary Beneficiary(ies) Relationship to Annuitant
- --------------------------------------------------------------------------------
Secondary Beneficiary(ies) Relationship to Annuitant
================================================================================
================================================================================
5 What type of Annuity are you Purchasing? (Please complete the Special Forms
Required for IRAs and 1035 Exchanges)
- --------------------------------------------------------------------------------
[_] Non-Qualified [_] IRA(Tax Year___) [_] IRA Rollover
[_] IRA Transfer [_] 1035 Exchange
================================================================================
================================================================================
6 Method of Payment (Special tax rules apply to IRA contributions)
- --------------------------------------------------------------------------------
Initial Payment: The initial payment of $__________ will be paid by:
[_] Check payable to John Hancock Mutual Life Insurance Company
[_] Automatic Bank Deduction from Checking Account (Please attach voided check)
Financial Institution Account Number
-------------------------------------- -------------------------------
[_] Wire Transfer
[_] Other
-----------------------------------------------------------------
Subsequent Payments: (Please attach voided check)
[_] I elect Annuity Direct Deposit (ADD). I authorize John Hancock to begin
making automatic monthly withdrawals from my account at the financial
institution indicated below. I understand that this authorization does not
affect the terms of my annuity contract.
Amount Financial Institution Account Number
--------------- ----------------------------- ---------------------------
================================================================================
Form 156-DVA-96
Not for use in [AZ, CT, FL, KS, MD, NJ, NY, OK, OR, PA, TX,or VA]
<PAGE>
- --------------------------------------------------------------------------------
7. Will this Annuity Replace or Change Any Existing Annuity or Life Insurance?
[_] Yes [_] No If yes, please provide the information below.
- --------------------------------------------------------------------------------
Company Name Contract Type Contract#
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
8. How would you like your Investment Allocated?
Please allocate in whole percentages. Total Must Equal 100%. You may select up
to 10 accounts (funds).
<TABLE>
<S> <C>
Large Cap Stocks: International Equities:
____% Managed ____% International Balanced
____% Growth & Income ____% International Equities
____% Equity Index ____% International Opportunities
____% Large Cap Value
____% Large Cap Growth Bonds:
____% Short Term US Government
Mid Cap/Small Cap Stocks: ____% Sovereign Bond
____% Mid Cap Value ____% Strategic Bond
____% Mid Cap Growth
____% Special Opportunities Cash Equivalents:
____% Real Estate Equity ____% Money Market
____% Small Cap Value
____% Small Cap Growth Fixed Account:
____% Fixed Account
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
9. Do you want to elect the Telephone Transfer Option?
[_] Yes [_] No I direct the Company to act upon telephone instructions from the
Owner (a trustee, if the Owner is a trust) to change future
payment allocations and/or transfer existing funds among the
investment options subject to the provisions of the contract.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10.Special Requests
- --------------------------------------------------------------------------------
11. Please Read Carefully and Sign Below
The following applies to each of the undersigned: To the best of my knowledge
and belief, all statements and answers in this application are true and
complete. I acknowledge that all telephone instructions given pursuant to the
Telephone Transfer Option are subject to the conditions set forth in the
prospectus. I further acknowledge that John Hancock will not be liable for any
loss in acting on any written or telephone instructions that are reasonably
believed to be authentic. The annuity contract will take effect as of its date
of issue if the Annuitant is living on that date and the required minimum
premium has been made. Any check tendered is received subject to collection
only. I have received and reviewed the prospectuses that describe the contract
and the underlying funds. A Statement of Additional Information will be
provided upon request. I understand that all accumulated values and annuity
payments provided by the contract will vary as to dollar amount to the extent
that they are based on the investment experience of the selected portfolios. No
minimum cash surrender value is guaranteed. I believe that the contract will
help me meet my financial objectives. Any person who, with intent to defraud or
knowing that he is facilitating a fraud against an insurer, submits an
application or files a claim containing a false or deceptive statement is guilty
of insurance fraud.
Signature of Owner/Applicant Date
---------------------------------------- -------------------------------
Signature of Joint Owner (if Applicable) City, State
---------------------------------------- -------------------------------
Signature of Annuitant (if other than Owner)
----------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Home Office Use
- --------------------------------------------------------------------------------
Not for use in [AZ, CT, FL, KS, MD, NJ, NY, OK, OR, PA, TX, OR VA]
Form 156-DVA-96
<PAGE>
EXHIBIT 10(A)
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Experts" in the
Prospectus and "Independent Auditors" in the Statement of Additional
Information in Pre-Effective Amendment Number 1 to the Registration Statement
(Form N-4, No. 333-16949) of John Hancock Variable Annuity Account I.
We also consent to the incorporation of our reports dated February 7, 1997
on the financial statements included in the Annual Report of the John Hancock
Variable Annuity Account I, and February 14, 1997 on the financial statements
included in the Annual Report of the John Hancock Mutual Life Insurance Company
for the year ended December 31, 1996.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
Boston, Massachusetts
April 28, 1997
