<PAGE>

PROSPECTUS

                 JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

                     MODIFIED GUARANTEED ANNUITY CONTRACTS

                             200 CLARENDON STREET
                             BOSTON, MASSACHUSETTS
                                     02117

  This Prospectus describes certain deferred annuity Contracts offered by John
Hancock Variable Life Insurance Company ("JHVLICO"). The Contracts, issued on
a group basis or as individual contracts, are designed to provide retirement
benefits for eligible individuals. With respect to a Contract issued on a
group basis, eligible individuals include persons who have established
accounts with certain broker-dealers and other financial institutions that
have entered into a distribution agreement to offer interests in the
Contracts, and members of other eligible groups. (See "Distribution of the
Contracts," page 13.) Contracts issued on an individual basis are offered in
certain states.

  An interest in a group Contract will be separately accounted for by the
issuance of a Certificate evidencing the individual Participant's interest
under the Contract. An interest in an individual Contract is evidenced by the
issuance of an individual Contract. The Certificate and individual Contract
are hereinafter referred to as the "Contract."

  A minimum single premium payment of at least $5,000 must accompany the
application for a Contract. JHVLICO reserves the right to limit the maximum
single premium payment amount. No additional payment is permitted on a
Contract, although eligible individuals may purchase more than one Contract if
JHVLICO then is still offering the Contracts for sale. (See "The Application
Process," page 5.) Individuals interested in purchasing additional Contracts
may obtain a current copy of this prospectus containing, if appropriate,
updated financial and other information about JHVLICO. Prospectuses may be
obtained by writing to Life and Annuity Services at the above address.

  Premium payments become part of the general assets of JHVLICO.

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

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

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

  MUTUAL FUNDS, ANNUITIES AND INSURANCE PRODUCTS ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED BY ANY BANK, NOR ARE THEY INSURED BY THE FDIC;
THEY ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL
AMOUNT INVESTED.

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

               The date of this Prospectus is May 1, 1998.
<PAGE>

                        PUBLICLY-AVAILABLE INFORMATION

  JHVLICO is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "1934 Act"), as amended, and in accordance therewith
files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports and other information can be
inspected and copied at the public reference facilities of the Commission at
Room 1024, 450 Fifth Street, N. W., Washington, D. C.

  JHVLICO intends to deliver to holders of outstanding Contracts annual
account statements and such other periodic reports as may be required by law,
but it is not anticipated that any such reports will include periodic
financial statements or information concerning JHVLICO.

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
SUMMARY INFORMATION.......................................................    1
SPECIAL TERMS.............................................................    3
DESCRIPTION OF CONTRACTS..................................................    5
 The Application Process..................................................    5
 Accumulation Period......................................................    5
 Guarantee Periods........................................................    5
 Guarantee Rates and Current Rates........................................    7
 Guarantee Period Exchange Option.........................................    7
 Surrenders and Withdrawals...............................................    8
 Market Value Adjustment..................................................    9
 Systematic Withdrawals...................................................    9
 Premium Taxes............................................................   10
 Death Benefit............................................................   10
 Payment Upon Surrender...................................................   10
 Annuity Period...........................................................   11
 Date of Maturity and Form of Annuity.....................................   11
 Annuity Options..........................................................   11
 Other Conditions.........................................................   12
INVESTMENTS ..............................................................   12
PARTICIPANT AND BENEFICIARY RIGHTS AND PRIVILEGES.........................   13
AMENDMENT OF THE CONTRACTS................................................   13
DISTRIBUTION OF THE CONTRACTS.............................................   13
FEDERAL INCOME TAXES......................................................   14
THE COMPANY ..............................................................   16
 Business of JHVLICO......................................................   16
 Selected Financial Data..................................................   16
 Management's Discussion and Analysis of Financial Condition and Results
  of Operations...........................................................   17
 Competition..............................................................   22
 Employees and Facilities.................................................   22
 Transactions with JHMLICO................................................   23
 Regulation...............................................................   23
 Directors and Executive Officers.........................................   24
 Executive Compensation...................................................   25
REGISTRATION STATEMENT....................................................   25
EXPERTS...................................................................   25
APPENDIX A: MARKET VALUE ADJUSTMENT.......................................   26
FINANCIAL STATEMENTS......................................................  F-1
</TABLE>

                                       i
<PAGE>

                              SUMMARY INFORMATION

  Upon application or purchase order, an initial Guarantee Period is selected
by the Participant from among those then offered by JHVLICO. (See "Guarantee
Periods," page 5, and "Guarantee Rates and Current Rates," page 7.) At the
time of this Prospectus, JHVLICO offers initial and subsequent Guarantee
Periods of 3, 5, 6, 7, 8, 9, and 10 years. JHVLICO reserves the right to
change the duration of the Guarantee Periods offered for any initial or
subsequent Guarantee Period. The premium payment (less withdrawals and any
applicable premium taxes and contract fees) will earn interest at the Initial
Guarantee Rate for the Guarantee Period chosen. The Initial Guarantee Rate is
an effective annual rate reflecting the daily compounding of interest.

  At the end of each Guarantee Period, a subsequent Guarantee Period of the
same duration will begin unless, (a) within the 30 day period prior to the end
of such Guarantee Period, a different duration is elected by the Participant
from among those offered by JHVLICO at that time or (b) the annuity payments
begin or the Contract is surrendered at that time. Without JHVLICO's prior
approval, subsequent Guarantee Periods may not extend beyond the Annuitant's
85th birthday.

  The Accumulated Value as of the first day of each subsequent Guarantee
Period will earn interest at the Subsequent Guarantee Rate for the Guarantee
Period chosen. JHVLICO'S MANAGEMENT WILL MAKE THE FINAL DETERMINATION AS TO
GUARANTEE RATES TO BE DECLARED. JHVLICO CANNOT PREDICT NOR CAN JHVLICO
GUARANTEE FUTURE GUARANTEE RATES. (See "Guarantee Periods," page 5, and
"Guarantee Rates and Current Rates," page 7.)

  Subject to certain restrictions, withdrawals and surrenders are permitted.
However, prior to payment of the surrender or withdrawal, such withdrawals and
surrenders made prior to the end of a Guarantee Period may be subject to an
early withdrawal charge and/or a Market Value Adjustment. Except as described
below, the early withdrawal charge will be deducted from any such withdrawal
or surrender made before the end of the seventh Contract Year. The early
withdrawal charge will be equal to seven percent of the amount withdrawn or
surrendered, in excess of the Free Withdrawal Value, in the first Contract
Year, and will be reduced by one percentage point for each of the next six
Contract Years. FOR A SURRENDER MADE AT THE END OF A GUARANTEE PERIOD, NO
EARLY WITHDRAWAL CHARGE OR MARKET VALUE ADJUSTMENT WILL BE APPLIED, PROVIDED
THAT A REQUEST IN WRITING FOR SURRENDER AT THE END OF THE GUARANTEE PERIOD IS
RECEIVED BY JHVLICO WITHIN THE 30 DAYS PRECEDING THE END OF THE GUARANTEE
PERIOD.

  No early withdrawal charge will be applicable if the Accumulated Value is
used to purchase an annuity on the Date of Maturity. A Market Value
Adjustment, however, will be applied if the Date of Maturity is not at the end
of a Guarantee Period. To elect an Annuity Option the Participant must notify
JHVLICO at least 30 days before the Date of Maturity.

  If the Participant so requests In Writing, JHVLICO will, for each Contract
Year, send the Participant an amount (the Free Withdrawal Value) totaling 10%
of the Accumulated Value calculated as of the first day of the Contract Year.
No early withdrawal charge or Market Value Adjustment will be imposed on such
amount. Any such distribution is deemed a withdrawal, however, and, as such,
may be subject to tax. (See "Surrenders and Withdrawals," page 8, and "Federal
Income Taxes," page 14.)

  The Market Value Adjustment reflects the relationship between the Current
Rate for the duration remaining in the Guarantee Period at the time the
surrender or withdrawal is requested
<PAGE>

and the then applicable Guarantee Rate for the Contract. Since Current Rates
are based in part upon the investment yields available to JHVLICO (see
"Investments," page 12), the effect of the Market Value Adjustment will be
closely related to the levels of such yields. It is possible, therefore, that,
should such yields increase significantly from the time a Contract is
purchased, the amount received upon a surrender of the Contract may be less
than the original premium payment. If such yields should decrease
significantly, the amount received upon a surrender may be more than the
original premium payment.

  JHVLICO may defer payment of any surrender for a period not exceeding 6
months from the date of JHVLICO's receipt of a written request for surrender.
If JHVLICO defers payment on a surrender for more than 30 days, JHVLICO will
pay interest on the Surrender Value at a rate equal to the greater of the rate
required by state law and the rate declared by JHVLICO. (See "Payment Upon
Surrender," page 10.)

  If the Surrender Value or Death Benefit has not been paid prior to the Date
of Maturity specified by the Participant or otherwise determined pursuant to
the Contract, JHVLICO will make a lump sum payment or start to pay a series of
payments based on an Annuity Option on such Date of Maturity. The Annuity
Option is selected by the Participant or, if the Participant has not made a
selection, is a life annuity with payments guaranteed for 10 years. (See
"Annuity Period," page 11.)

  The Contract provides for a Death Benefit. Upon the death of the Annuitant
or the Participant before the Date of Maturity, the Death Benefit will be
payable to the Beneficiary as determined under the Contract provisions.
Written notification and due proof of death at the offices of JHVLICO are
required to process the Death Benefit. With regard to Joint Participants, at
the death of the first Joint Participant prior to the Date of Maturity, the
Beneficiary will be the surviving Participant notwithstanding that the
designated Beneficiary may be different.

  The Death Benefit will equal the Accumulated Value as of the date of death.
In the event of the Participant's death where the named Beneficiary is the
spouse of the Participant and the Annuitant is living, the spouse may elect,
in lieu of receiving the Death Benefit, to become the Participant and continue
the Contract. (See "Death Benefit," page 10.)

  A deduction will be made for premium taxes for Contracts sold in certain
states. Currently such taxes range up to 5% of the Accumulated Value applied
to an Annuity Option. Usually premium taxes are deducted from the Accumulated
Value of the Contract at the time of annuitization. For exceptions to the
normal rule, see "Premium Taxes," page 10.

                                       2
<PAGE>

                                 SPECIAL TERMS

  As used in this Prospectus, the following terms have the indicated
  meanings:

ACCUMULATED VALUE

  During the initial Guarantee Period, Accumulated Value means the premium
  payment plus earned interest, less any withdrawals and applicable deduction
  for contract fees and any applicable deductions for premium taxes or
  similar taxes. During any subsequent Guarantee Period, Accumulated Value is
  equal to the Accumulated Value as of the last day of the immediately
  preceding Guarantee Period, including any Market Value Adjustments made
  under the guarantee period exchange option, plus earned interest, less any
  withdrawals and applicable deduction for contract fees and any deduction
  for premium taxes or similar taxes during such subsequent Guarantee Period.

ANNUITANT

  The individual designated as such in the Contract.

BENEFICIARY

  The person entitled to receive benefits per the terms of the Contract in
  case of the death of the Annuitant or the Participant, or the Joint
  Participant, as applicable.

CONTRACT YEAR

  For any given Contract, the 12 month period following the Date of Issue and
  each 12 month period thereafter.

CURRENT RATE

  The applicable interest rate contained in a schedule of rates established
  by JHVLICO from time to time for various durations.

DATE OF ISSUE

  The effective date of the Certificate issued under the group annuity
  Contract, or the date of issue of an individual annuity Contract.

DATE OF MATURITY

  The date on which annuity payments are to start, which can be no later than
  the Annuitant's 85th birthdate without JHVLICO's prior approval.

FREE WITHDRAWAL VALUE

  An amount totaling 10 percent of the Accumulated Value, calculated as of
  the first day of the Contract Year, reduced by any prior withdrawals made
  during the Contract Year.

GUARANTEE PERIOD

  The period for which an Initial or Subsequent Guarantee Rate is credited.

GUARANTEE RATE

  The Guarantee Rate refers to either the Initial Guarantee Rate or the
  Subsequent Guarantee Rate.

INITIAL GUARANTEE RATE

  The rate of interest credited and compounded annually during the initial
  Guarantee Period.

                                       3
<PAGE>

IN WRITING

  A written form satisfactory to JHVLICO and received at its offices
  addressed to: Life and Annuity Services, 200 Clarendon Street, P. O. Box
  111, Boston, Massachusetts 02117.

PARTICIPANT

  With respect to a Group Contract, Participant refers to a person or persons
  who has or have been issued a Certificate; with respect to an individual
  Contract, Participant refers to a person or persons who has or have been
  issued an individual annuity Contract. Where there are joint Participants,
  each must join in making any request or election or taking any action
  pursuant to the Contract.

SUBSEQUENT GUARANTEE RATE

  The rate of interest established by JHVLICO for the applicable subsequent
  Guarantee Period.

SURRENDER VALUE

  The Accumulated Value of the Contract, less, if applicable, any contract
  fees, any income taxes withheld, any deduction for premium taxes or similar
  taxes, and any early withdrawal charge, and adjusted by any then applicable
  Market Value Adjustment.

WITHDRAWAL

  The amount withdrawn prior to any deductions or adjustments.

                                       4
<PAGE>

                           DESCRIPTION OF CONTRACTS

THE APPLICATION PROCESS

  A prospective Participant must complete an application form or an order to
purchase. This application or order must be submitted to JHVLICO for approval
along with the premium payment. The minimum premium payment is $5,000. JHVLICO
retains the right to limit the amount of the maximum premium payment.

  Contracts are issued within a reasonable time after receipt of the
application or order and the premium payment. JHVLICO reserves the right to
reject an application or order and, in such case, any premium payment will be
returned without interest. Additional premium payments may not be contributed
to an existing Contract. However, additional Contracts may be purchased by
eligible individuals at the then prevailing Guarantee Rates and terms.

  If the application or order is properly completed and accepted by JHVLICO,
the premium payment becomes part of JHVLICO's general assets and is credited
to an account established for the Participant. We will confirm the crediting
of the premium payment in writing within five business days of receipt of the
payment and of a properly completed application or order. Interest on an
account will be accrued beginning on the date the premium payment is credited.

  The premium payment will not be applied in the event that an application or
an order to purchase is not properly completed. JHVLICO will attempt to
contact the Participant in writing or by telephone. JHVLICO will return the
premium payment without interest three weeks after receiving it, if the
application or an order to purchase has not, by that time, been properly
completed.

ACCUMULATION PERIOD

 Guarantee Periods

  In the application or order, the Participant will select the duration of the
initial Guarantee Period from among those durations offered by JHVLICO. The
duration selected will determine the Initial Guarantee Rate. The premium
payment (less withdrawals and any applicable premium taxes and contract fees)
will earn interest at the Initial Guarantee Rate, which is an annual effective
rate for the Guarantee Period selected reflecting the daily compounding of
interest.

  Only one Guarantee Period may be in use under a single Contract at any one
time. Set forth below is an illustration of how interest will be credited to
the Accumulated Value during each Guarantee Period.

  Note: The following example assumes no withdrawals of any amount during the
entire five year period. If the Participant were to make a withdrawal or
surrender at any time, taxes and, in some cases, tax penalties, would be
payable. (See "Federal Income Taxes," page 14.) Also, if the withdrawal or
surrender occurs at any time other than the end of the Guarantee Period, an
early withdrawal charge applies, and a Market Value Adjustment may apply. (See
"Surrenders and Withdrawals," page 8.) The hypothetical interest rate shown
below is illustrative only and is not intended to predict future interest
rates to be declared under the Contract. Actual interest rates declared for
any given time may be more or less than those shown.

             EXAMPLE OF COMPOUNDING AT THE INITIAL GUARANTEE RATE

<TABLE>
<S>                          <C>
         Premium Payment:    $20,000
         Guarantee Period:   7 years
         Guarantee Rate:     6.00% per annum
         (1+Guarantee Rate)  1.06
</TABLE>

                                       5

<PAGE>

                      Premium Payment = $20,000.00

Accumulated Value at end of Contract Year 1 = $21,200.00 ($20,000.00 X 1.06)

Accumulated Value at end of Contract Year 2 = $22,472.00 ($21,200.00 X 1.06)

Accumulated Value at end of Contract Year 3 = $23,820.32 ($22,472.00 X 1.06)

Accumulated Value at end of Contract Year 4 = $25,249.54 ($23,820.32 X 1.06)

Accumulated Value at end of Contract Year 5 = $26,764.51 ($25,249.54 X 1.06)

Accumulated Value at end of Contract Year 6 = $28,370.38 ($26,764.51 X 1.06)

Accumulated Value at end of Guarantee Period = $30,072.61

<TABLE>
<S>                               <C>
Total Interest Credited in
 Guarantee Period:                           $30,072.61 - $20,000 = $10,072.61
Accumulated Value at end of
 Guarantee Period:                        $20,000.00 + $10,072.61 = $30,072.61
Accumulated Value after 150 days
 from the Contract Date:          $20,000.00 X (1.06) to the power of (150/365) = $20,484.70
</TABLE>

  Unless the Participant elects to make a surrender (see "Surrenders and
Withdrawals", page 8), a subsequent Guarantee Period generally will commence
at the end of a Guarantee Period. Each subsequent Guarantee Period will be the
same duration as the previous Guarantee Period (if available), unless the
Participant elects, within the 30 day period prior to the end of such
Guarantee Period, from among those Guarantee Periods currently being offered
by JHVLICO, a new Guarantee Period of a different duration.

  In no event may subsequent Guarantee Periods extend beyond the Annuitant's
85th birthday, or any later date that JHVLICO may have permitted the
Participant to elect as a Date of Maturity. For example, if the Annuitant is
age 81 upon the expiration of a 5 year Guarantee Period, JHVLICO will provide
the subsequent Guarantee Period expiring closest to, without exceeding, the
Annuitant's 85th birthday (assuming no such later Date of Maturity has been
agreed to), if such subsequent Guarantee Period is available and the
Participant has not duly elected a shorter subsequent Guarantee Period. The
Accumulated Value will then earn interest at a Subsequent Guarantee Rate
declared by JHVLICO for that duration. The Subsequent Guarantee Rate for the
Guarantee Period automatically applied in these circumstances may be higher or
lower than the Subsequent Guarantee Rate for longer durations. If all
subsequent Guarantee Periods available would extend beyond the Annuitant's
85th birthday (or any later Date of Maturity that has been duly elected), the
Date of Maturity will automatically become the end of the expiring Guarantee
Period. In such case, JHVLICO will provide an annuity payable to the Annuitant
beginning on such Date of Maturity for a guaranteed period of 10 years and as
long thereafter as the Annuitant lives (or a lump sum payment if the
Accumulated Value is insufficient to support an Annuity Option, as described
under "Annuity Options," page 11). Also, the Participant may choose to elect
any other optional form of payment available.

  The Accumulated Value at the beginning of any subsequent Guarantee Period
will be equal to the Accumulated Value at the end of the Guarantee Period just
ending, including any Market Value Adjustments made under the guarantee period
exchange option. (See "Guarantee Period Exchange Option, page 7".) This
Accumulated Value will earn interest at the applicable Subsequent Guarantee
Rate, which is an annual effective rate reflecting the daily compounding of
interest.

  Within 30 days prior to the end of a Guarantee Period, JHVLICO will notify
the Participant of the expiration of such Guarantee Period.


                                       6

<PAGE>

 Guarantee Rates and Current Rates

  The Initial Guarantee Rate for the initial Guarantee Period will be
established at the time the Contract is purchased. From time to time, for
customers of certain broker-dealers and financial institutions, JHVLICO may
credit Guarantee Rates that are higher than those which are otherwise
applicable. Otherwise, except as described in the following paragraph,
however, the Initial and Subsequent Guarantee Rates that are being offered to
Participants or prospective Participants at any given time will be the same
with respect to Guarantee Periods of the same durations.

  Prior to the commencement of a subsequent Guarantee Period, a Participant
may elect to receive a Subsequent Guarantee Rate that is higher than that
which JHVLICO would otherwise provide. This option is, however, not guaranteed
and may be terminated at any time by JHVLICO both as to new and as to
outstanding Contracts. This option will be available to Participants with
Contracts having an Accumulated Value of at least $5,000. This election must
be In Writing within 30 days prior to the end of the Participant's expiring
Guarantee Period. If the Participant makes such an election for a higher
Subsequent Guarantee Rate, the existing Contract must be surrendered, and a
new Contract will be issued. In such case, JHVLICO will waive the early
withdrawal change under the existing Contract, but the early withdrawal
charges under the new Contract will restart and, in accordance with the
procedures described under "Early Withdrawal Charge," page 8, will be measured
from the Date of Issue of the new Contract. JHVLICO believes an exchange of
Contracts will not be taxable for Federal Income Tax purposes. See "Federal
Income Taxes--Certain Exchanges."

  JHVLICO's schedule of Current Rates is used to determine the amount of any
Market Value Adjustment at any time. If JHVLICO is currently offering a
Guarantee Period of a given duration, the Current Rate for that duration will
be the same as JHVLICO's basic Guarantee Rates that are then in effect for
that duration. For any durations as to which Guarantee Periods are not then
being offered, the Current Rate will be established by JHVLICO on a basis
consistent with the Current Rates for the Guarantee Periods that are being
offered.

  Subject to the discussion in the foregoing paragraphs, JHVLICO will
determine Current Rates and Guarantee Rates periodically at its sole
discretion. JHVLICO has no specific formula for determining the rate of
interest that it will declare as future Current Rates or future Guarantee
Rates. The determination of Current Rates and Guarantee Rates will reflect
interest rates available on the types of debt instruments in which JHVLICO
intends to invest the proceeds attributable to the Contracts. (See
"Investments", page 12.) In addition, JHVLICO's management may also consider
various other factors in determining Current Rates and Guarantee Rates for a
given period, including regulatory and tax requirements, sales commissions and
administrative expenses, general economic trends, and competitive factors.
JHVLICO's management will make the final determination as to Current and
Guarantee Rates to be declared. JHVLICO cannot predict nor guarantee future
Current Rates or future Guarantee Rates.

 Guarantee Period Exchange Option

  Once each Contract Year, the Participant may elect In Writing, from those
Guarantee Periods currently offered, a new Guarantee Period of a different
duration, provided that the Accumulated Value after such election is at least
$4,000. A Market Value Adjustment will be applied to the current Accumulated
Value at the time of transfer. There will be no early withdrawal charge for
this transfer. However, early withdrawal charges will continue to be measured
from the Date of Issue of the original Contract. JHVLICO reserves the right to
charge a contract fee of up to $50 for such transfers, but JHVLICO does not
impose a contract fee as of the date of this Prospectus.

                                       7

<PAGE>

 Surrenders and Withdrawals

  General

  Surrenders may be made under a Contract at any time. In the case of all
surrenders that exceed the Free Withdrawal Value, (except surrenders requested
at the end of a Guarantee Period), the Participant will receive the
Accumulated Value to date reduced by any applicable early withdrawal charge
and adjusted by any applicable Market Value Adjustment.

  Withdrawals may only be made if the withdrawal is at least $500 and the
remaining Accumulated Value after the withdrawal has been deducted is at least
$4,000. However, a Free Withdrawal Value less than $500 may be withdrawn, but
only in its entirety.

  For all withdrawals in excess of the Free Withdrawal Value, except
withdrawals requested at the end of a Guarantee Period, the Participant will
receive the withdrawal amount requested reduced by any applicable early
withdrawal charge and adjusted by any applicable Market Value Adjustment.

  No early withdrawal charges or Market Value Adjustments are applied to
surrenders or withdrawals requested at the end of a Guarantee Period if
JHVLICO receives the request In Writing within the 30 days preceding such
date. The effective date of any withdrawal or surrender, other than one
requested at the end of the Guarantee Period, is the date of receipt of the
request In Writing for such surrender or withdrawal.

  Any withdrawal or surrender may be subject to tax (See "Federal Income
Taxes," page 14) and any unpaid premium taxes.

  JHVLICO will, upon request, inform the Participant of the amount payable
upon a surrender or withdrawal.

  Early Withdrawal Charge

  No deduction for a sales charge is made from the premium payment when
received. An early withdrawal charge, however, may be deducted from
withdrawals or surrenders, in excess of the Free Withdrawal Value, made before
the end of the seventh Contract Year. The amount of any early withdrawal
charge is computed as a percentage of the amount withdrawn or surrendered
prior to the deduction of any other applicable charges or deductions. The
chart below indicates the percentage charge applied during the specified
Contract Year:

<TABLE>
<CAPTION>
                         YEARS FROM DATE OF ISSUE                     EARLY
                          TO DATE OF WITHDRAWAL                     WITHDRAWAL
                               OR SURRENDER                          CHARGES
                         ------------------------                   ----------
       <S>                                                          <C>
       7 or more................................................... No Charge
       6 but less than 7...........................................     1%
       5 but less than 6...........................................     2%
       4 but less than 5...........................................     3%
       3 but less than 4...........................................     4%
       2 but less than 3...........................................     5%
       1 but less than 2...........................................     6%
       less than 1 year............................................     7%
</TABLE>

  No early withdrawal charge will be made for surrenders or withdrawals after
Contract Year 7, surrenders or withdrawals effective at the end of a Guarantee
Period, or any Free Withdrawal Value. For purposes of the Free Withdrawal
Value, withdrawals will be deemed to be taken first from the Free Withdrawal
Value, then from the remaining Accumulated Value.

                                       8

<PAGE>

 Market Value Adjustment

  The amount payable on withdrawals or surrenders may be adjusted up or down
by the application of the Market Value Adjustment. Where applicable, the
Market Value Adjustment is applied to the amount withdrawn or surrendered, net
of any early withdrawal charge or other charges or deductions. The Market
Value Adjustment will not be applied to any Free Withdrawal Value. For this
purpose, withdrawals will be deemed to be taken first from the Free Withdrawal
Value, then from the remaining Accumulated Value.

  In the case of either a withdrawal or surrender, any Market Value Adjustment
that is applicable will reflect the relationship between the Current Rate for
the duration remaining in the Guarantee Period at the time the withdrawal or
surrender is requested, and the Guarantee Rate then applicable to the
Contract.

  If the Guarantee Rate is higher than the applicable Current Rate, the Market
Value Adjustment, if applicable, will generally result in a higher payment
upon surrender or withdrawal.

  If the Guarantee Rate is lower than the applicable Current Rate, then the
Market Value Adjustment, if applicable, will result in a lower payment upon
surrender or withdrawal.

  For example, assume a Participant purchases a Contract and selects an
initial Guarantee Period of 7 years and the Guarantee Rate in effect for that
duration is 6% per annum. Assume at the end of 2 years the Participant makes a
withdrawal. If the 5 year Current Rate is then 5%, the amount payable upon
withdrawal will increase after the application of the Market Value Adjustment.
On the other hand, if such Current Rate is higher than the Guarantee Rate, for
example, 7%, the application of the Market Value Adjustment will cause a
decrease in the amount payable to the Participant upon this withdrawal.

  Since Current Rates are based in part upon the investment yields available
to JHVLICO (see "Investments" page 12), the effect of the Market Value
Adjustment will be closely related to the levels of such yields. It is
possible, therefore, that, should such yields increase significantly from the
time the Contract is purchased and should the early withdrawal charges be
taken, the amount received upon a surrender of the Contract could be less than
the original premium payment.

  The formula for calculating the Market Value Adjustment is set forth in
Appendix A to this Prospectus, which also contains an additional illustration
of the application of the Market Value Adjustment.

 Systematic Withdrawals

  The Participant may elect In Writing to participate in a systematic
withdrawal plan, which enables the Participant to pre-authorize a periodic
exercise of the contractual withdrawal rights described above. Participants
entering into such a plan instruct JHVLICO to withdraw a percentage or a level
dollar amount up to the Free Withdrawal Value from the total Accumulated Value
of the Contract on a monthly, quarterly, semi-annual, or annual basis. JHVLICO
reserves the right to modify the eligibility rules or other terms and
conditions of this program at any time, without advance notice. In addition,
JHVLICO reserves the right to terminate the program at any time with
appropriate notice to the Participant. The total systematic withdrawal in a
Contract Year is limited to 10% of the Accumulated Value of the Contract as of
the beginning of the Contract Year. The minimum withdrawal is $100. Systematic
withdrawals may be subject to the early withdrawal charge or Market Value
Adjustment described above. The systematic withdrawal plan will terminate upon
cancellation In Writing by the Participant or in the event that the payment of
the amount withdrawn will reduce the Accumulated Value of the Contract to less
than $4,000, or the minimum withdrawal amount drops below $100. There may be
adverse tax

                                       9

<PAGE>

consequences associated with the systematic withdrawal plan. (See "Federal
Income Taxes," page 14.)

 Premium Taxes

  Several states and local governments impose a premium or similar tax on
annuities. Currently, such taxes range up 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, however, JHVLICO pays a tax on the
premium payment at the time it is made. At the time of annuitization, death,
surrender, or withdrawal, JHVLICO will deduct a charge for these taxes from
the Accumulated Value of the Contract or the amount withdrawn or surrendered.
Such a charge is equal to the applicable premium tax percentage times the
amount of Accumulated Value that is applied to an Annuity Option, surrendered,
withdrawn, or remaining at death.

 Death Benefit

  Upon the death of the Annuitant or the Participant before the Date of
Maturity, the Death Benefit will be payable to the Beneficiary as determined
under the Contract provisions. With regard to Joint Participants, at the first
death of a Joint Participant prior to the Date of Maturity, the Death Benefit
will be paid to the surviving Participant as Beneficiary notwithstanding that
the designated Beneficiary may be different. The Death Benefit is calculated
as of the date of death. The Death Benefit will equal the Accumulated Value.
No early withdrawal charge or Market Value Adjustment will be imposed, and
JHVLICO will pay interest from the date of death to the date of payment as
provided in the Contract.

  The Death Benefit may be taken in one sum, to be paid within six months
after the date JHVLICO receives due proof of death, or under any of the
Annuity Options available under the Contract, provided, however, that if any
Participant dies prior to the Date of Maturity, any Annuity Option elected
must provide that any amount payable as a Death Benefit will be distributed
within 5 years of the date of death, or, if the benefit is payable over a
period not extending beyond the life expectancy of the Beneficiary or over the
life of the Beneficiary, such distribution must commence within one year of
the date of death. Payment will be made in a single sum in any event if the
Death Benefit is less than $5000 or if each periodic payment under the Annuity
Option chosen would be less than $50. Notwithstanding the foregoing, in the
event of the Participant's death where the designated Beneficiary is the
spouse of the Participant and the Annuitant is living, such spouse may elect,
in lieu of receiving the Death Benefit, to continue the Contract as the
Participant. This does not, however, alter the requirement for an IRA that
distributions must begin no later than April 1 of the year following the year
in which the deceased Participant would have attained age 70 1/2.

 Payment Upon Surrender

  JHVLICO may defer payment of any surrender for a period not exceeding 6
months from date of its receipt of a request for surrender. Only under highly
unusual circumstances will a surrender payment be deferred more than 30 days,
and if payment is deferred for more than 30 days, JHVLICO will pay interest on
the Surrender Value at a rate equal to the greater of the rate required by
state law and the rate declared by JHVLICO. While all circumstances under
which JHVLICO could defer payment upon surrender may not be foreseeable at
this time, such circumstances could include, for example, a time of an
unusually high surrender rate among Participants, accompanied by a radical
shift in interest rates. If payment is withheld for more than 30 days, the

                                      10

<PAGE>

Participant will be notified in writing. JHVLICO will not, however, defer
payment for more than 30 days for any surrender which is to be effective at
the end of any Guarantee Period.

ANNUITY PERIOD

 Date of Maturity and Form of Annuity

  The Participant may elect, In Writing within the 30 days prior to the Date
of Maturity, to have all or a portion of the Surrender Value paid in a lump
sum on the Date of Maturity. Alternatively, or with respect to any portion of
the Surrender Value not paid in a lump sum, the Participant may elect, In
Writing at least 30 days prior to the Date of Maturity, to have the
Accumulated Value with a Market Value Adjustment (less applicable premium
taxes, if any) applied on the Date of Maturity under any of the Annuity
Options described below.

  If the Participant has not duly elected an Annuity Option or lump sum
distribution as of the Date of Maturity, the Date of Maturity will be
disregarded and subsequent Guarantee Periods will continue to be provided
until (a) no subsequent Guarantee Period is available that would not extend
beyond the Annuitant's 85th birthday (or later Date of Maturity that JHVLICO
has approved), at which time a lump sum payment or Annuity Option will be
provided as described under "Guarantee Periods," page 5, or (b) the
Participant duly elects another Date of Maturity and duly elects a lump sum
distribution or the commencement of an Annuity Option as of that Date of
Maturity.

  Each Contract will provide at the time of its issuance for a Life Annuity
with Ten Years Certain. Under this form of annuity, 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 Participant 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 Participant, as described in
"Annuity Options," prior to the Date of Maturity of the Contract. Once annuity
payments have begun, the form of annuity cannot be changed and the annuity
benefits cannot be surrendered for the purpose of receiving a lump sum benefit
in lieu thereof.

  Each Participant selects a provisional Date of Maturity at the time of
application for a Contract. The provisional Date of Maturity may be no earlier
than six months after the date the premium payment is credited to the
Contract. The provisional Date of Maturity is stated in the Contract. The
Participant may subsequently elect a different Date of Maturity which may not
exceed age 85, absent JHVLICO's approval, or be earlier than six months after
the date the premium payment is credited to the Contract. The election for a
different Date of Maturity must be made In Writing before the provisional Date
of Maturity and at least 31 days prior to the Date of Maturity. If a Date of
Maturity different from the provisional Date of Maturity is not elected by the
Participant, the provisional Date of Maturity shall be the Date of Maturity of
the Contract. If, however, a Guarantee Period becomes effective that causes
the Contract to continue beyond the provisional Date of Maturity, then the
provisional Date of Maturity becomes the Annuitant's 85th birthday. Additional
requirements apply to the timing of distributions under IRAs. (See "Contracts
Purchased Under Rollover Individual Retirement Annuity (IRA) Plans," page 15.)

 Annuity Options

  The Participant may elect an Annuity Option during the lifetime of the
Annuitant In Writing at least 30 days prior to the Date of Maturity of the
Contract. If no option is selected, Option A

                                      11

<PAGE>

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
Participant prior to the Participant's or Annuitant's death, elect an Annuity
Option In Writing prior to the date the proceeds become payable. No option may
be elected if the Accumulated Value of the Contract to be applied is less than
$5000 or the periodic payment would be less than $50, in which case, JHVLICO
will make a lump sum distribution of the Surrender Value or, upon the death of
an Annuitant or Participant, the amount of any Death Benefit. Among the
options available are the following two basic Annuity Options.

  Option A: Life Annuity with Five, Ten Or Twenty Years Certain

    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

    Monthly payments will be made to the payee as long as he lives.

  The Life Annuity with Five Years Certain and the Life Annuity Without Refund
are not available without prior approval by JHVLICO for an Annuitant older
than age 85.

  The guaranteed minimum monthly annuity payment rates are set forth in the
Contract. The actual rates applied will be the greater of these minimum rates
and the current rates that JHVLICO has in effect at the time annuity payments
begin. Information concerning current rates is available upon request.

 Other Conditions

  JHVLICO reserves the right at its sole discretion to make available to
Participants and other payees optional methods of payment in addition to the
Annuity Options described in this Prospectus and the applicable Contract.

  If the Participant dies on or after the Date of Maturity, any remaining
interest in the Contract will be paid at least as rapidly as under the method
of distribution in effect at the time of death.

  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.

                                  INVESTMENTS

  Premium payments received under the Contracts and allocated to the Guarantee
Periods will be invested by JHVLICO under the laws of Massachusetts. Contract
owners have no priority claims on, or participation in the performance of,
such assets. All such assets are the property of JHVLICO and are available to
meet the guarantees under the Contracts and the general obligations of
JHVLICO.

  The assets of JHVLICO will be invested in accordance with the requirements
established by applicable state laws regarding the nature and quality of
investments that may be made by life insurance companies and the percentage of
their assets that may be committed to any particular type of investment. In
general, these laws permit investments, within specified limits and subject

                                      12

<PAGE>

to certain qualifications, in federal, state, and municipal obligations,
corporate bonds, preferred and common stocks, real estate mortgages, and
certain other investments.

  JHVLICO has no specific formula for establishing the Guarantee Rates for the
Guarantee Periods. JHVLICO expects the rates to be influenced by, but not
necessarily correspond to the yields on the fixed income securities to be
acquired with amounts that are allocated to the Guarantee Periods at the time
that the Guaranteed Rates are established.

  JHVLICO's current plans are to invest such amounts, according to its
detailed investment policy and guidelines, in fixed income obligations,
including corporate bonds, mortgages, mortgage-backed and asset-backed
securities and government and agency issues having durations in the aggregate
consistent with those of the Guarantee Periods. JHVLICO intends to invest
proceeds from the Contracts primarily in domestic investment-grade securities.
In addition, derivative contracts will be used only for hedging purposes, to
reduce the ordinary business risk of Contracts associated with changes in
interest rates, and not for speculating on future changes in the financial
markets.

               PARTICIPANT AND BENEFICIARY RIGHTS AND PRIVILEGES

  The Participant has the sole and absolute power to exercise all rights and
privileges under the Contract, except as otherwise provided by the Contract or
by notice of the Participant In Writing. The Participant and the Beneficiary
are designated in the application or order for a Contract and may be changed
by the Participant, by notice In Writing, subject to the rights of any
assignee of record, any action taken prior to receipt of the notice, and
certain other conditions. The change will take effect when the notice is
signed, if JHVLICO acknowledges receipt of such notice. While the Annuitant is
alive, the Participant may be changed by notice In Writing. The Beneficiary
may be changed by notice In Writing no later than receipt of due proof of the
death of the Annuitant. The change will take effect whether or not the
Participant or Annuitant is then alive.

  The Contracts (other than IRAs) may be assigned at any time before the Date
of Maturity and for any purpose other than as collateral or security for a
loan. JHVLICO will not be bound by an assignment unless and until notice of
such assignment In Writing is received. JHVLICO assumes no responsibility for
the validity or effect of any assignment. In some cases, an assignment or
change of Participant may have adverse tax consequences. An IRA may not be
assigned. The Participant should consult a tax adviser regarding the
consequences of an assignment.

                          AMENDMENT OF THE CONTRACTS

  JHVLICO reserves the right to amend the Contracts to meet the requirements
of applicable state or federal laws or regulations. JHVLICO will notify the
Participant in writing of any such amendments.

                         DISTRIBUTION OF THE CONTRACTS

  John Hancock Distributors, Inc. ("Distributors") a wholly-owned subsidiary
of John Hancock Mutual Life Insurance Company 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 acts as underwriter and
distributor of the Contracts, pursuant to a distribution agreement it has
entered into with JHVLICO.

  In turn, Distributors and JHVLICO have entered into agreements to distribute
the Contracts (the "Distribution Agreements") with broker-dealers as well as
certain financial institutions whose

                                      13

<PAGE>


representatives are authorized by applicable law to sell annuity products.
Pursuant to the Distribution Agreements, Distributors or JHVLICO will pay
compensation to such broker-dealers and institutions with respect to each
Contract that is issued, based on the dollar amount applied to that Contract.
Generally, the total commissions so paid will be at a higher rate if that
amount is applied for a longer duration than for a shorter one. The maximum
rate of such total commissions is generally 7%. In some cases, additional
compensation may be paid by Distributors and JHVLICO at times subsequent to
the Contacts' issuance. The Distribution Agreements require that compensation
paid with respect to Contracts that are cancelled or surrendered within one
year after the Date of Issue must be refunded to Distributors or JHVLICO.
Broker-dealers and financial institutions engaged in the offer and sale of the
Contracts are solely responsible for the compensation of their representatives
engaged in those activities.

                             FEDERAL INCOME TAXES

JHVLICO

  JHVLICO is taxed as a life insurance company under the Internal Revenue Code
of 1986 (the "Code"). The assets underlying the Contracts will be owned by
JHVLICO. The income earned on such assets will be JHVLICO's income.

  JHVLICO assumes no responsibility for determining whether a particular
individual retirement annuity plan satisfies the applicable requirements of
the Code or whether a particular Participant is eligible for such a plan.

THE PARTICIPANT 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 the value of the
Contract until payments are made to the Participant 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 Participant or other payee as ordinary
income to the extent that such payment exceeds that portion of the
Participant's "investment in the contract" (as defined in the Code) allocated
to that payment. In general, the Participant's "investment in the contract" is
the aggregate amount of premium payments made by him or her reduced by any
amounts previously distributed under the Contract that were not previously
subject to tax. The portion of each annuity payment to be excluded from income
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." The balance of the payment is taxable. After the entire "investment
in the contract" has been distributed, any remaining payment is fully taxable.
For purposes of determining the amount of taxable income resulting from
distributions, all Contracts and other annuity contracts issued by JHVLICO or
its affiliates to the Participant within the same calendar year will be
treated as if they were a single Contract.

  When a payment under a Contract is made in a single sum, the amount of the
payment is taxed as ordinary income to the Participant or other payee to the
extent it exceeds the Participant's "investment in the contract."

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 surrender and such payment is

                                      14

<PAGE>

made prior to the commencement of annuity payments under the Contract, part or
all of the payment (the withdrawal) may be taxed to the Participant or other
payee as ordinary income. On the date of the 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 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% penalty tax. The penalty tax does not apply
to, among other things, payments made to the Participant or other payee after
the Participant attains age 59 1/2, or on account of the Participant'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.

CONTRACTS PURCHASED UNDER ROLLOVER INDIVIDUAL RETIREMENT ANNUITY (IRA) PLANS

  No deduction is allowed for purchase payments made in or after the taxable
year in which the Participant 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 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 Participant attains age 70 1/2. The
Participant may incur adverse tax consequences if a distribution on surrender
of the Contract or by withdrawal is made prior to his attaining age 59 1/2,
except in the event of his or her death or total disability.

 Withholding on Eligible Rollover Distributions

  Recent legislation requires 20% withholding on certain distributions from
tax qualified plans. A Participant wishing to rollover his entire distribution
should have it paid directly to the successor plan. Otherwise, the
Participant's distribution will 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 Participant
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.

CERTAIN EXCHANGES

  Section 1035 of the Code provides generally that no gain or loss will be
recognized under the exchange of a life insurance or annuity contract for an
annuity contract. Thus, a properly completed exchange from one of these types
of products into a Contract pursuant to the special annuity contract exchange
form JHVLICO provides for this purpose is not generally a taxable event under
the Code, and the Participant's investment in the Contract will be the same as
his or her investment in the exchanged product.

                                      15

<PAGE>

  Because of the complexity of these and other tax aspects in connection with
an exchange, a tax adviser should be consulted before any exchange is made.

SEE YOUR OWN TAX ADVISER

  The above description of Federal income tax consequences of owning a
Contract and of the individual retirement plans which may be funded by the
Contracts 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 changes may
be retroactive. The rules governing the provisions of tax qualified plans are
extremely complex and often difficult to understand. Anything less than full
compliance with the applicable rules, all of which are subject to change from
time to time, can have adverse tax consequences. For example, premature
withdrawals are generally subject to a 10% penalty tax. The taxation of an
Annuitant or other payee has become so complex and confusing that great care
must be taken to avoid adverse tax consequences. For further information a
prospective purchaser should consult a qualified tax adviser.

                                  THE COMPANY

BUSINESS OF JHVLICO

  JHVLICO was organized under the laws of the Commonwealth of Massachusetts in
1979 and commenced insurance operations in 1980. It is a wholly-owned
subsidiary of John Hancock Mutual Life Insurance Company ("JHMLICO" or "John
Hancock"), a mutual life insurance company organized under the laws of the
Commonwealth of Massachusetts in 1862.

  JHVLICO is principally engaged in the writing of variable and universal life
insurance policies. JHVLICO's policies are primarily marketed through
JHMLICO's sales organization, which includes a proprietary sales force
employed at JHMLICO's own agencies and a network of independent general
agencies. Policies also are sold through various unaffiliated securities
broker-dealers and certain financial institutions with which JHMLICO and
JHVLICO have sales agreements. Currently, JHVLICO writes business in all
states except New York. At December 31, 1997, JHVLICO had $51.1 billion of
life insurance in force.

  In 1993, JHVLICO acquired Colonial Penn Annuity and Life Insurance Company
and changed the latter company's name to John Hancock Life Insurance Company
of America. The subsidiary's principal business activity at December 31, 1997,
is the run-off of a block of single premium whole life insurance. For
additional discussion of this acquisition, see Note 3 of Notes to Financial
Statements.


SELECTED FINANCIAL DATA

  The following financial data for JHVLICO and its subsidiary should be read in
conjunction with the financial statements and notes thereto, included elsewhere
in this Prospectus.  The results for past accounting periods are not necessarily
indicative of the results to be expected in the future.  The selected financial
data and financial statements have been prepared on the basis of accounting
practices prescribed or permitted by the Commonwealth of Massachusetts Division
of Insurance and in conformity with the practices of the National Association of
Insurance Commissioners ("NAIC") ("statutory accounting practices").  See Note
1--Nature of Operations and Significant Accounting Practices page F-6, for
additional discussion.


                                      16

<PAGE>



The information presented below should be read in conjunction with, and is
qualified in its entirety by, "Management's Discussion and Analysis of Financial
Condition and Results of Operations," below, and the financial statements and
other information included elsewhere in this prospectus.



                                          Year ended and at December 31
                                    ----------------------------------------
                                      1997     1996    1995    1994    1993
                                      ----     ----    ----    ----    ----
                                                   (In millions)

Selected Financial Data
INCOME STATEMENT DATA
  Premiums                           $872.7   $820.6  $570.9  $430.5  $398.8
  Net investment income                89.7     76.1    62.1    57.6    61.3
  Other income, net                   420.1    406.0    85.7    95.5    (4.0)
        TOTAL REVENUES              1,382.5  1,302.7   718.7   583.6   456.1
  Total benefits and expenses       1,313.5  1,227.3   659.2   556.0   456.6
  Income tax expense                   38.5     38.6    28.4    15.0     6.5
  Net realized capital gains (losses)  (3.0)    (1.5)    0.5     0.4    (2.6)
  Net gain (loss)                      27.5     35.3    31.6    13.0    (9.6)
BALANCE SHEET DATA
  Total assets                       $6,522   $4,568  $3,446  $2,627  $2,379
  Total obligations                   6,200    4,285   3,197   2,409   2,176
  Total stockholder's equity            322      283     249     218     203


 . On October 1, 1993, JHVLICO entered into an assumption reinsurance agreement
  with JHMLICO to cede a block of variable life, universal life and flexible
  variable life insurance policies to JHMLICO representing substantially all of
  such policies written by JHVLICO in the State of New York. In connection with
  this agreement, general account assets consisting of bonds, mortgage loans,
  policy loans, cash, investment income due and accrued and deferred and
  uncollected premiums totaling $72.2 million were transferred by JHVLICO to
  JHMLICO, along with policy reserves, unearned premiums and dividend
  liabilities totaling $47.7 million and surplus totaling $24.5 million.
  Separate account assets consisting of common stock and policy loans totaling
  $200.8 million were transferred to John Hancock's separate accounts along with
  $200.8 million in separate account policyholder obligations.


MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS


   Financial Condition

   As of December 31, 1997, total assets grew by 42.8% to $6,521.5 million, from
$4,567.8 million at December 31, 1996.  This increase is principally due to the
growth in the separate accounts where assets increased by 42.6% during 1997 from
$3,290.5 million at December 31, 1996, to $4,691.1 million at December 31, 1997.
Total obligations grew by 44.7% to $6,199.8 million from $4,284.7 million at
December 31, 1996.  As with assets, most of this growth was in the separate
accounts, which grew by 42.6% during 1997, from $3,285.8 million at December 31,
1996, to $4,685.7 million at December 31, 1997.  Separate account assets and
liabilities consist primarily of the fund balances associated with variable life
and annuity business.  The asset holdings include fixed income, equity growth,
total return real estate, and global mutual funds, with liabilities representing
amounts due to policyholders.  Total stockholder's equity grew by 13.6% from
$283.1 million at December 31, 1996, to $321.7 million at December 31, 1997.

   As of December 31, 1996, total assets grew by 32.5% to $4,567.8 million, from
$3,446.3 million at December 31, 1995.  Much of this growth was also
attributable to an increase in separate account assets which grew by  35.9%
during 1996 from $2,421.0 million at December 31, 1995, to $3,290.5 million at
December 31, 1996.  Total obligations grew by 34.0% during 1996 to $4,284.7
million from $3,197.6 million at December 31, 1995.  As with assets, most of
this growth was in the separate accounts, which grew by 35.9% during 1996, from
$2,417.0 million at December 31, 1995, to $3,285.8 million at December 31, 1996.
Total stockholder's equity grew by 13.8% from $248.7 million at December 31,
1995, to $283.1 million at December 31, 1996.


   Investments

   The Company continues to address industry wide issues of asset quality and
liquidity that have emerged in recent years.  JHVLICO's bond portfolio is highly
diversified.  It maintains  diversity by geographic region, industry group, and
limiting the size of  individual investments relative to the total portfolio.
In 1997, 1996, and 1995, the Company invested new money predominantly in long-
term investment grade corporate bonds as a means of lowering the relative
proportion of assets invested in commercial mortgages.  As a result, the
Company's holdings in investment (NAIC SVO classes 1 and 2) and medium (NAIC SVO
class 3) grade bonds are 90.2% and 7.5%, respectively, of total general account
bonds at December 31, 1997.  The corresponding percentages at December 31, 1996
were 90.5% and 7.2%, respectively.  Most of the medium grade bonds are private
placements that provide long-term financing for medium size companies.  These
bonds typically are protected by individually negotiated financial covenants
and/or collateral.  At December 31, 1997, the balance (NAIC SVO classes 4, 5,
and 6) of 2.3% of total general account bonds consists of lower grade bonds and
bonds in default.  Bonds in default represent 0.5% of total general account
bonds.

   Management believes the Company's commercial mortgage lending philosophy and
practices are sound.  The Company generally makes mortgage loans against
properties with proven track records and high occupancy levels, and typically
does not make construction or condominium loans nor lend more than 75% of the
property's value at the time of the loan.  To assist in the management of its
mortgage loans, the Company uses a computer based mortgage risk analysis system.


                                      17
<PAGE>


   The Company has outstanding commitments to purchase long-term bonds and issue
real estate mortgages totaling $168.6 million and $28.3 million, respectively at
December 31, 1997. The corresponding amounts at December 31, 1996 were $42.1
million and $33.5 million, respectively. The Company monitors the
creditworthiness of borrowers under long-term bond commitments and requires
collateral as deemed necessary. The majority of these commitments expire in
1998.


   Reserves and Obligations

   The Company's obligations principally consist of aggregate reserves for life
policies and contracts of $1,124.3 million in the general account and
obligations of $4,685.7 million in the separate accounts at December 31, 1997.
The corresponding amounts at December 31, 1996 were $877.8 million and $3,285.8
million, respectively. These liabilities are computed in accordance with
commonly accepted actuarial standards and are based on actuarial assumptions
which are in accordance with, or more conservative than, those called for in
state regulations.  All reserves meet the requirements of the insurance laws of
the Commonwealth of Massachusetts.  Intensive asset adequacy testing was
performed in 1997 for the vast majority of reserves.  During 1997, the Company
refined certain assumptions inherent in the calculation of reserves related to
AIDS claims under individual life policies resulting in a $6.4 million increase
in stockholder's equity at December 31, 1997. Adequacy testing is done annually
and generally performed in the fourth quarter.

   The Company's investment reserves include the Asset Valuation Reserve ("AVR")
required by the NAIC and state insurance regulatory authorities.  The AVR is
included in the Company's obligations.  At December 31, 1997, the AVR was $18.6
million, compared to $16.6 million at December 31, 1996 and $15.4 million at
December 31, 1995.  The AVR contained voluntary contributions of $0.0 in 1997
and in 1996, $2.8 million in 1995, $1.1 million in 1994, and $1.7 million in
1993. Management believes the Company's level of reserve is adequate and is made
more conservative by the voluntary contributions.

   The AVR was established to stabilize statutory surplus from non-interest
related fluctuations in the market value of bonds, stocks, mortgage loans, real
estate and other invested assets.  The AVR generally captures realized and
unrealized capital gains or losses on such assets, other than those resulting
from changes in interest rates.  Each year, the amount of an insurer's AVR will
fluctuate as capital gains or losses are absorbed by the reserve.  To adjust for
such changes over time, an annual contribution must be made to the AVR equal to
20% of the difference between the maximum AVR (as determined annually according
to the type and quality of an insurer's assets) and the actual AVR.  The AVR
provisions permitted a phase-in period whereby the required contribution was 10%
in 1992, 15% in 1993, and the full 20% factor thereafter.

   Such contributions may result in a slower rate of growth of, or a reduction
to, surplus. Changes in the AVR are accounted for as direct increases or
decreases in surplus. The impact of the AVR on the surplus position of the
Company in the future will depend in part on the composition of the Company's
investment portfolio.

   The Interest Maintenance Reserve ("IMR") captures realized capital gains and
losses (net of taxes) on fixed income investments (primarily bonds and mortgage
loans) resulting from changes in interest rate levels.  These amounts are not
reflected in the Company's capital account and are amortized into net investment
income over the estimated remaining lives of the investments disposed.  At
December 31, 1997, December 31, 1996 and December 31, 1995, the balance of the
IMR was $7.8 million, $5.9 million, and $6.9 million, respectively.  The IMR
provisions permitted a phase-in period so that in 1992, 50% of realized capital
gains and losses on United States government securities were recognized in net
income and were not captured by



<PAGE>


the IMR. In 1993, the provisions allowed 25% of these capital gains and losses
to flow to net income with the remainder being captured in the IMR. In 1997,
1996, 1995 and 1994, all capital gains and losses on United States government
securities were captured by the IMR. The impact of the IMR on the surplus of the
Company depends upon the amount of future interest related capital gains and
losses on fixed income investments.

   Results of Operations

   1997 compared to 1996

   Net gain from operations was $30.5 million in 1997, $6.3 million lower than
for 1996. The decreased operating gain was largely the result of the
implementation of a reinsurance agreement that ceded variable annuity business
to the John Hancock Mutual Life Insurance Company during 1996.  The
implementation of the agreement created a one-time gain in 1996, which did not
recur in 1997.

Total revenues increased by 6.1%, or $79.8 million to $1,382.5 million during
1997 as compared to 1996.  Premiums, net of premium ceded to reinsurers,
increased by 6.3% or $52.1 million. Net investment income increased by 17.9% or
$13.6 million to $89.7 million during 1997. This increase is due largely to a
10.1%, or $5.9 million increase in gross income on long-term bonds, and a 49.7%,
or $5.4 million increase in gross income on commercial mortgages. The increases
can both be attributed to an increased asset base.  Other income increased by
$14.1 million that was primarily attributable to reserve adjustments on
reinsurance ceded.

Total benefits and expenses increased by 7.0% or $86.2 million to $1,313.5
million during 1997 as compared to 1996. Benefit payments and additions to
reserves increased by 5.1% or $52.0 million to $1,078.2 million. Insurance
expenses increased by 17.6% or $32.4 million, to $216.2 million. This consists
of an $18.3 million increase in commission expense resulting from the sale of
new and renewal business, and a $14.1 million increase in the expense of
providing service to policyholders.


   1996 compared to 1995

   Net gain from operations was $36.8 million in 1996, $5.7 million higher than
for 1995.  Operating gain was relatively stable even with the sale of the new
variable annuity product which was introduced in early 1995 and the new
corporate-owned life insurance product introduced in 1996.  Premium income was
offset by credits to contractholders' accounts in the form of reserve increases.
The gain was further dampened by the first year commission charged on new
products.

Total revenues increased by 81.3%, or $584.0 million to $1,302.7 million during
1996 as compared during 1995.  Premiums, net of premium ceded to reinsurers,
increased by 43.7% or $249.7 million.  Of this increase, $255.0 million was due
to the sale of corporate-owned life insurance.  Net investment income increased
by 22.5% or $14.0 million to $76.1 million during 1996 due largely to a 39.0%,
or $16.4 million increase in gross income on long-term bonds. The increase on
long-term bond income was the result of an increased asset base.  Other income
increased by $320.3 million which was primarily attributable to the increase in
commission and expense allowances and reserve adjustments on reinsurance ceded.

Total benefits and expenses increased by 86.2% or $568.1 million to $1,227.3
million during 1996 as compared to 1995.  Benefit payments and additions to
reserves increased by 107.0% or $530.4 million to $1,026.2 million.  Insurance
expenses increased by 22.0% or $33.1 million, to


                                      19
<PAGE>




$183.8 million. The increase was attributable largely to commission expense
resulted from the sale of new business.

   1995 Compared to 1994

   Net gain from operations was $31.1 million in 1995, $18.5 million higher than
1994.  Operating gain was positively impacted by the effects of a modified
coinsurance reinsurance agreement between John Hancock and the Company entered
into during 1994.  Under the agreement, John Hancock reinsured 50% of the 1995
and 1994 sales of the Company's flexible premium variable and scheduled premium
variable life insurance policies.  The 1995 increase in operating gain
attributable to this reinsurance agreement was $20.3 million.  The increase was
partially offset by acquisition expenses of new sales and an increase in the
federal income tax expense.

Total revenues increased by 23.1%, or $135.1 million to $718.7 million, during
1995.  Premiums increased by 32.6% or $140.4 million during 1995.  This increase
was primarily due to the sale of a new variable annuity product.

Total benefits and expenses increased by 18.6%, or $103.2 million to $659.2
million during 1995. Benefit payments and additions to reserves increased by
33.0%, or $123.0 million to $495.8 million.  This increase was partially offset
by a decrease of $18.2 million in insurance expenses.



   Liquidity and Capital Resources

   The Company's liquidity resources at December 31, 1997, include cash of $83.1
million, public bonds of $621.3 million, and investment grade private placement
bonds of $461.7 million.  The corresponding amounts at December 31, 1996 were
$26.7 million, $264.2 million, and $436.2 million, respectively.  In addition,
the Company's separate accounts are highly liquid and are available to meet most
outflow needs for variable life insurance.

   Management believes the liquidity resources above of $1,166.1 million as of
December 31, 1997, strongly position the Company to meet all its obligations to
policyholders and others.  Generally, the Company's financing needs are met by
means of funds provided by normal operations.  As of December 31, 1997 and 1996,
the Company had no outstanding borrowings from sources outside its affiliated
group.

   Total surplus, or stockholder's equity, including the AVR, is $340.3 million
as of December 31, 1997, compared to $299.7 million as of December 31, 1996, and
$264.1 million as of December 31, 1995.  The current statutory accounting
treatment of deferred acquisition cost ("DAC") taxes results in an
understatement of the Company's surplus, which will persist during periods of
growth in new business written.  These taxes result from federal income tax law
that approximates acquisition expenses and then spreads the corresponding tax
deduction over a period of years.  The result is a DAC tax which is collected
immediately and subsequently returned through tax deduction in later years.

   Since it began its operations, the Company has received a total of $381.8
million in capital contributions from John Hancock, of which $377.5 million is
credited to paid-in capital and $2.5 million is credited to capital stock as of
December 31, 1997.  In 1993, $1.8 million of capital was returned to John
Hancock.  To support the Company's operations, for the indefinite future, John
Hancock is committed to make additional capital contributions if necessary to
ensure that the Company maintains a positive net worth.  The Company's
stockholder's equity, net of unassigned deficit, was $321.7 million at December
31, 1997 and $283.1 million at December 31,


                                      20
<PAGE>



1996. For additional discussion of the Company's capitalization, see Note 2 of
the Notes to Financial Statements.

   In December 1992, the NAIC approved risk-based capital ("RBC") standards for
life insurance companies as well as a Model Act (the "RBC Model Act") to apply
such standards at the state level.  The RBC Model Act provides that life
insurance companies must submit an annual RBC report which compares a company's
total adjusted capital (statutory surplus plus AVR, voluntary investment
reserves, and one-half the apportioned dividend liability) with its risk-based
capital as calculated by an RBC formula, where the formula takes into account
the risk characteristics of the company's investments and products.  The formula
is to be used by insurance regulators as an early warning tool to identify
possible weakly capitalized companies for purposes of initiating further
regulatory action.  The formula is not intended as a means to rank insurers.
The RBC Model Act gives state insurance commissioners explicit regulatory
authority to require various actions by, or take various actions against,
insurance companies whose total adjusted capital does not meet the RBC
standards.  The RBC Model Act imposes broad confidentiality requirements on
those engaged in the insurance business (including insurers, agents, brokers and
others) as to the use and publication of RBC data.  As of December 31, 1997, the
Company's total adjusted capital as defined by the NAIC was well in excess of
RBC standards.



Impact of Year 2000

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

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

John Hancock expects the project to be substantially complete by early 1999.
This completion target was derived utilizing numerous assumptions of future
events, including availability of certain resources and other factors. However,
there can be no guarantee that this completion target will be achieved, that
the steps taken will be sufficient, or that actual results may differ materially
from those anticipated.
                                      21
<PAGE>




 Reinsurance

  To reduce its exposure to large losses under its insurance policies, the
Company enters into reinsurance arrangements with its parent, John Hancock,
and other non-affiliated insurance companies. For further discussion of the
Company's reinsurance arrangements, including business ceded to John Hancock,
see Notes 5 and 7 of the Notes to Financial Statements.

 Separate Accounts

  Under applicable state insurance laws, insurers are permitted to establish
separate investment accounts in which assets backing certain policies or
contracts, including variable life policies and certain individual and group
annuity contracts, are held. The investments in each separate investment
account (which may be pooled or customer specific) are maintained separately
from other separate investment accounts and the general investment account.
The investment results of the separate investment account assets are passed
through directly to separate investment account policyholders and
contractholders, so that an insurer derives certain fees from, but bears no
investment risk on, these assets, except the risk on a small number of
products that the investment results of the separate account assets will not
meet the minimum rate guaranteed on these products. Other than amounts derived
from or otherwise attributable to the Company's general investment account,
assets of separate investment accounts are not available to fund the
liabilities of the general investment account.

COMPETITION

  JHVLICO is engaged in a highly competitive business due to the large number
of stock and mutual life insurance companies and other entities marketing
insurance products. There are approximately 1,700 stock, mutual, and other
types of insurers in the life insurance business in the United States.
According to the July 1997, issue of Best's Review Life/Health, JHVLICO ranks
101th in terms of individual direct ordinary life insurance premiums written
during 1996. JHVLICO's parent, JHMLICO, ranks 8th.

  Best's Company Report, dated March 17, 1997, affirms JHVLICO's financial
stability rating from A.M. Best Company, Inc. of A++, its highest, based on
the strength of its parent company and the capital guarantee discussed above.
Standard & Poor's Corporation and Duff & Phelps Credit Rating Company have
assigned insurance claims-paying ability ratings to JHVLICO of AA+ and AAA,
respectively, which place JHVLICO in the second highest and highest
categories, respectively, by these rating agencies. Moody's Investors Service,
Inc. has assigned JHVLICO a financial strength rating of Aa2, which is its
third highest rating.

EMPLOYEES AND FACILITIES

  JHMLICO provides JHVLICO with personnel, property, and facilities for the
performance of certain of JHVLICO's corporate functions. JHMLICO annually
determines a fee for these services and facilities based on a number of criteria
which were revised in 1997, 1996 and 1995 to reflect continuing changes in
JHVLICO's operations. The amount of service fee charged to JHVLICO was $123.6
million, $111.7 million, and $97.9 million in 1997, 1996, and 1995
respectively.

  Approximately 1,100 of JHMLICO's field office employees and agents are
members of a labor union. The agreement with union employees and agents was
ratified in June, 1996.

                                      22
<PAGE>

TRANSACTIONS WITH JHMLICO

  As indicated, property, personnel and facilities are provided, at a service
fee, by JHMLICO for purposes of JHVLICO's operations, and the two companies
have entered into certain reinsurance arrangements. In addition, JHMLICO has
contributed all of JHVLICO's capital, of which $1.8 million of paid-in capital
was returned to JHMLICO during 1993. It is expected that arrangements and
transactions such as the foregoing will continue in the future to an
indeterminate extent. See Notes 2 and 6 of the Notes to Financial Statements.

  JHMLICO receives no additional compensation for its services as underwriter
and distributor of the Contracts issued by JHVLICO.

REGULATION

  JHVLICO is subject to extensive state regulatory oversight in jurisdictions
in which it does business. This regulatory oversight, increasing scrutiny upon
the insurance regulatory framework and proposals to adopt a federal regulatory
framework may in the future adversely affect JHVLICO's ability to sustain
adequate returns. JHVLICO's business also could be adversely affected by
changes in state law relating to asset and reserve valuation requirements,
limitations on investments and risk-based capital requirements, and, at the
federal level, by laws and regulations that may affect certain aspects of the
insurance industry. Assessments also are levied against John Hancock companies
as a result of participation in various types of state guaranty associations,
state insurance pools for the uninsured or other arrangements.

  Regulators have the discretionary authority, in connection with the
continual licensing of JHVLICO, to limit or prohibit new issuances of business
to policyholders when, in their judgment, such regulators determine that such
insurer is not maintaining minimum statutory surplus or capital or if further
transaction of business will be hazardous to its policyholders. JHVLICO does
not believe the current or anticipated levels of statutory surplus of JHVLICO
or any member of its affiliated group, and the volume of their sales of new
life and annuity policies, present a material risk that the amount of new
insurance that JHVLICO or any of such insurance affiliates may issue will be
limited.

  Although the federal government does not directly regulate the business of
insurance, federal initiatives often have an impact on the business in a
variety of ways. Current and proposed federal
measures which may significantly affect the insurance business include removal
of barriers preventing banks from engaging in the insurance business, limits
to medical testing for insurability, tax law changes affecting the taxation of
insurance companies, the tax treatment of insurance products and its impact on
the relative desirability of various personal investment vehicles and proposed
legislation to prohibit the use of gender in determining insurance and pension
rates and benefits.

                                      23
<PAGE>

DIRECTORS AND EXECUTIVE OFFICERS

  The directors and executive officers of JHVLICO are as follows:

<TABLE>
<CAPTION>
                                  POSITION                 OTHER BUSINESS
          NAME           AGE    WITH JHVLICO            WITHIN PAST 5 YEARS
          ----           ---    ------------            -------------------
<S>                      <C> <C>                 <C>
David F. D'Alessandro,
 Director...............  47 Chairman            President, John Hancock
                                                  Mutual Life Insurance Company
Henry D. Shaw,
 Director...............  64 Vice Chairman &     Senior Vice President, Retail
                              President           Product Management, John Hancock
Robert S. Paster,
 Director...............  46 Vice President      Second Vice President, Direct
                                                  Distribution, John Hancock
Michele G. Van Leer,
 Director...............  40 Senior
                              Vice President     Vice President, Life Product
                                                  Management, John Hancock
Joseph A. Tomlinson,
 Director...............  51 Vice President      Vice President, Annuity and
                                                  Special Products, John Hancock
Robert R. Reitano,
 Director...............  47 Vice President      Vice President, Investment Policy
                                                  & Research, John Hancock
Barbara L. Luddy,
 Director...............  46 Vice President &    Vice President, Financial
                              Actuary             Reporting & Analysis, John
                                                  Hancock
Ronald J. Bocage,
 Director...............  52 Vice President &    Vice President, Equity and
                              Counsel             Pension Law, John Hancock
Thomas J. Lee,
 Director...............  43 Vice President      Vice President, Life Product and
                                                  Systems Management, John Hancock
Daniel L. Ouellette.....  48 Vice President,     Vice President, Retail Marketing,
                              Marketing           John Hancock
Edward P. Dowd..........  55 Vice President,     Senior Vice President, Real
                              Investments         Estate Investment Group, John
                                                  Hancock
Roger G. Nastou.........  55 Vice President,     Vice President, Bond & Corporate
                              Investments         Finance, John Hancock
Laura L. Mangan.........  34 Vice President &    Corporate Secretary, John Hancock
                              Secretary
Patrick F. Smith........  55 Controller          Senior Associate Controller,
                                                  Controller's Department, John
                                                  Hancock
Julie H. Indge..........  44 Treasurer           Financial Officer, Financial
                                                  Sector Management, John Hancock
</TABLE>


                                       24
<PAGE>

EXECUTIVE COMPENSATION

  Executive officers of JHVLICO also serve one or more of the affiliated
companies of JHMLICO. Allocations have been made as to each individual's time
devoted to his or her duties as an executive officer of JHVLICO. The following
table provides information on the allocated compensation paid to the chief
executive officer for 1997. There were no executive officers of JHVLICO whose
allocated compensation exceeded $100,000 during 1997. Directors of JHVLICO
receive no compensation in addition to their compensation as employees of
JHMLICO.

<TABLE>
                                            CAPTION>
                                                                   LONG TERM
                                         ANNUAL COMPENSATION     COMPENSATION
                                        ---------------------- -----------------
   NAME                         TITLE   SALARY   BONUS  OTHER   LTIP   ALL OTHER
   ----                        -------- ------- ------- ------ ------- ---------
<S>                            <C>      <C>     <C>     <C>    <C>     <C>
David F. D'Alessandro......... Chairman $32,130 $32,168 $3,682 $16,646    $ 0
</TABLE>

                            REGISTRATION STATEMENT

  JHVLICO has filed a registration statement (the "Registration Statement")
with the Commission under the Securities Act of 1933 relating to the Contracts
offered by this Prospectus. This Prospectus has been filed as a part of the
Registration Statement and does not contain all of the information set forth
in the Registration Statement and exhibits thereto, and reference is hereby
made to such Registration Statement and exhibits for further information
relating to JHVLICO and the Contracts. The Registration Statement and the
exhibits thereto may be inspected and copied, at the Commission's Washington,
D.C., headquarters.

                                    EXPERTS

  The statutory-basis financial statements of JHVLICO at December 31, 1997 and
1996, and for each of the three years in the period ended December 31, 1997,
appearing in this Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein, and are included in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.

                                      25
<PAGE>

                      APPENDIX A: MARKET VALUE ADJUSTMENT

The Market Value Adjustment (MVA) is equal to A times (B - 1) where

  A is (i) any surrender or withdrawal in excess of the Free Withdrawal
  Value,

    less (ii) any early withdrawal charge, if applicable; and

  B is the Market Value Adjustment Factor below:


               /n/12/
  (   1 + g    )
  (------------)
  (1 + c + .005)

  where

    g= The guarantee rate in effect for the current Guarantee Period
       (expressed as a decimal).

    c= The current rate (expressed as a decimal) in effect for durations
       equal to the number of years remaining in the current Guarantee
       Period (years rounded up to the nearest whole number). If not
       available, JHVLICO will declare a rate solely for this purpose that
       is consistent with rates for durations that are currently available.

    n= The number of complete months from the date of withdrawal to the end
       of the current Guarantee Period. (Where less than one complete month
       remains, n will equal 1 unless the withdrawal is made on the last
       day of the guarantee period, at which time no adjustment will
       apply.)

EXAMPLES OF THE MARKET VALUE ADJUSTMENT

These examples assume the following:

<TABLE>
   <C>                      <S>
   Premium:                 $20,000
   Guarantee Period:        7 years
   Guarantee Rate:          6.00%
   Surrender:               2 years and 106 days (3.5 months) after deposit
   Prior Withdrawals:       none
</TABLE>

At time of surrender:

<TABLE>
   <C>                           <S>
   The Accumulated Value         = $20,000 X 1.06 (2 + 106/365 )
                                 = $22,855.51
   The Free Withdrawal Value     = (.1) X ($20,000) X 1.06/2/
                                 = $2,247.20
   The early withdrawal charge   = ($22,855.51 - $2,247.20) X (.05)
                                 = $1,030.42
   n, the number of complete
   months from date of
   withdrawal to end of current
   Guarantee Period              = 7 years - (2 years + 3.5) months
                                 = 56 months
</TABLE>

                                       26
<PAGE>

EXAMPLE OF A POSITIVE MARKET VALUE ADJUSTMENT:

  Assume that on the date of surrender, the current interest rate for a new
Guarantee Period of 5 years (4 years and 8.5 months remaining in the Guarantee
Period rounded up to the next full year) is 5%.
<TABLE>
   <S>                      <C>
                                           /n/12/
                              (   1 + g    )
  The MVA factor            = (------------)
                              (1 + c + .005)

                                       /56/12/
                              (  1.06  )
                              (--------)
                              (  1.055 )


                            = 1.02231
   The MVA                  = ($22,855.51 - $2,247.20 - $1,030.42) X (1.02231 - 1)
                            = $436.78
   The Surrender Value      = $22,855.51 - $1,030.42 + $436.78
                            = $22,261.87
</TABLE>

EXAMPLE OF A NEGATIVE MARKET VALUE ADJUSTMENT:

  Assume that on the date of surrender, the current interest rate for a new
Guarantee Period of 5 years is 7%.

<TABLE>
  <S>                       <C>
                                           /n/12/
                              (   1 + g    )
  The MVA factor            = (------------)
                              (1 + c + .005)

                                       /56/12/
                              ( 1.06  )
                              (-------)
                              ( 1.075 )

                            = .936529
   The MVA                  = ($22,855.51 - $2,247.20 - $1,030.42) X (.936529 - 1)
                            = -$1,242.63
   The Surrender Value      = $22,855.51 - $1,030.42 - $1,242.63
                            = $20,582.46
</TABLE>

                                      27
<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, 1997
and 1996, and the related statutory-basis statements of operations and
unassigned deficit and cash flow for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

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


In our opinion, because of the effects of the matter described in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of John Hancock Variable Life Insurance Company at December 31, 1997 and 1996,
or the results of its operations or its cash flows for the three years in the
period then ended.

Also, in our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of John Hancock Variable Life
Insurance Company at December 31, 1997 and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997 in conformity with accounting practices prescribed or
permitted by the Commonwealth of Massachusetts Division of Insurance.



February 18, 1998


                                      F-1

<PAGE>

                 JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

               STATUTORY-BASIS STATEMENTS OF FINANCIAL POSITION

<TABLE>
<CAPTION>
                                                              December 31
                                                     --------------------------
                                                           1997          1996
                                                           ----          ----
                                                             (In Millions)
<S>                                                    <C>         <C>
ASSETS
  Bonds--Note 6                                        $  1,092.7  $    753.5
  Preferred stocks                                           17.2         9.6
  Common stocks                                               2.3         1.4
  Investment in affiliates                                   79.1        72.0
  Mortgage loans on real estate--Note 6                     273.9       212.1
  Real estate                                                39.9        38.8
  Policy loans                                              106.8        80.8
  Cash items:
   Cash in banks                                             83.1        26.7
   Temporary cash investments                                60.1         5.2
                                                     --------------------------
                                                            143.2        31.9

  Premiums due and deferred                                  33.8        36.8
  Investment income due and accrued                          24.7        22.6
  Other general account assets                               16.8        17.8
  Assets held in separate accounts                        4,691.1     3,290.5
                                                     --------------------------
                              TOTAL ASSETS             $  6,521.5  $  4,567.8
                                                     ==========================

OBLIGATIONS AND STOCKHOLDER'S EQUITY
<CAPTION>
OBLIGATIONS
<S>                                                    <C>         <C>
  Policy reserves                                      $  1,124.3  $    877.8
  Federal income and other taxes
   payable--Note 1                                           36.1        29.4
  Other accrued expenses                                    335.1        75.1
  Asset valuation reserve--Note 1                            18.6        16.6
  Obligations related to separate accounts                4,685.7     3,285.8
                                                     --------------------------
                          TOTAL OBLIGATIONS               6,199.8     4,284.7

STOCKHOLDER'S EQUITY
  Common Stock, $50 par value; authorized 50,000
   shares; issued and outstanding 50,000 shares               2.5         2.5
  Paid-in capital                                           377.5       377.5
  Unassigned deficit                                        (58.3)      (96.9)
                                                     --------------------------
                TOTAL STOCKHOLDER'S EQUITY                  321.7       283.1
                                                     --------------------------

   TOTAL OBLIGATIONS AND STOCKHOLDER'S EQUITY          $  6,521.5  $  4,567.8
                                                     ==========================
</TABLE>

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



                                      F-2
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

        STATUTORY-BASIS STATEMENTS OF OPERATIONS AND UNASSIGNED DEFICIT

<TABLE>
<CAPTION>

                                                                    Year ended December 31
                                                       -----------------------------------------------
                                                           1997             1996              1995
                                                           ----             ----              ----
<S>                                                      <C>              <C>                <C>
INCOME
  Premiums                                               $  872.7         $  820.6           $ 570.9
  Net investment income--Note 3                              89.7             76.1              62.1
  Other, net                                                420.1            406.0              85.7
                                                       -----------------------------------------------
                                                          1,382.5          1,302.7             718.7

BENEFITS AND EXPENSES
  Payments to policyholders
   and beneficiaries                                        264.0            236.1             213.4
  Additions to reserves to provide for future
   payments to policyholders and beneficiaries              814.2            790.1             282.4
  Expenses of providing service to policyholders
   and obtaining new insurance--Note 5                      216.2            183.8             150.7
  State and miscellaneous taxes                              19.1             17.3              12.7
                                                       -----------------------------------------------
                                                          1,313.5          1,227.3             659.2
                                                       -----------------------------------------------

                       GAIN FROM OPERATIONS
                BEFORE FEDERAL INCOME TAXES
             AND NET REALIZED CAPITAL GAINS
                                   (LOSSES)                  69.0             75.4              59.5

Federal income taxes--Note 1                                 38.5             38.6              28.4
                                                       -----------------------------------------------
                       GAIN FROM OPERATIONS
                BEFORE NET REALIZED CAPITAL
                              GAINS (LOSSES)                 30.5             36.8              31.1

Net realized capital gains (losses)--Note 4                (  3.0)         (   1.5)              0.5
                                                       -----------------------------------------------
                                   NET GAIN                  27.5             35.3              31.6

Unassigned deficit at beginning of year                    ( 96.9)          (131.3)           (162.1)
Net unrealized capital gains (losses) and
 other adjustments--Note 4                                    5.0              2.5            (  3.0)
Other reserves and adjustments                                6.1           (  3.4)              2.2
                                                       -----------------------------------------------

          UNASSIGNED DEFICIT AT END OF YEAR              $ ( 58.3)        $ ( 96.9)          $(131.3)
                                                       ===============================================
</TABLE>


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



                                      F-3

<PAGE>

                 JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

                    STATUTORY-BASIS STATEMENTS OF CASH FLOW

<TABLE>
<CAPTION>
                                                                                    Year ended December 31
                                                                          -----------------------------------------
                                                                               1997          1996          1995
                                                                               ----          ----          ----
                                                                                        (In millions)
<S>                                                                        <C>            <C>           <C>
Cash flows from operating activities:
 Insurance premiums                                                         $ 877.0       $ 824.2       $ 574.0
 Net investment income                                                         89.9          73.4          59.2
 Benefits to policyholders and beneficiaries                                 (245.2)       (212.7)       (198.3)
 Dividends paid to policyholders                                              (18.7)        (15.7)        (13.2)
 Insurance expenses and taxes                                                (250.2)       (196.6)       (161.5)
 Net transfers to separate accounts                                          (703.2)       (524.2)       (257.4)
 Other, net                                                                   379.9         386.7          55.1
                                                                          -----------------------------------------
            NET CASH PROVIDED FROM OPERATIONS                                 129.5         335.1          57.9
                                                                          -----------------------------------------

Cash flows used in investing activities:
 Bond purchases                                                              (621.6)       (489.9)       (172.5)
 Bond sales                                                                   197.3         228.3          18.9
 Bond maturities and scheduled redemptions                                     34.1          27.8          36.0
 Bond prepayments                                                              51.6          31.9          20.6
 Stock purchases                                                              (15.7)         (6.5)         (1.7)
 Proceeds from stock sales                                                      6.7           0.4           1.4
 Real estate purchases                                                         (1.3)        (10.5)        (16.2)
 Real estate sales                                                              0.4           8.5           9.3
 Other invested assets purchases                                               (1.0)          0.0          (0.4)
 Proceeds from the sale of other invested assets                                0.3           1.5           0.3
 Mortgage loans issued                                                        (94.5)        (84.4)       ( 19.8)
 Mortgage loan repayments                                                      32.4          17.7          21.1
 Other, net                                                                   393.1        (104.6)         45.7
                                                                          -----------------------------------------
        NET CASH USED IN INVESTING ACTIVITIES                               (  18.2)       (379.8)        (57.3)
                                                                          -----------------------------------------

              INCREASE (DECREASE) IN CASH AND
           TEMPORARY CASH INVESTMENTS                                         111.3       (  44.7)          0.6
Cash and temporary cash investments at beginning of year                       31.9          76.6          76.0
                                                                          -----------------------------------------

           CASH AND TEMPORARY CASH INVESTMENTS
                            AT THE END OF YEAR                              $ 143.2       $  31.9       $  76.6
                                                                          =========================================
</TABLE>

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



                                      F-4

<PAGE>

                 JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

              STATUTORY-BASIS STATEMENTS OF STOCKHOLDER'S EQUITY

<TABLE>
<CAPTION>
                                                                      Additional
                                                        Common         Paid-in        Unassigned
                                                         Stock         Capital         Deficit          Total
                                                   --------------------------------------------------------------
                                                                           (In millions)
<S>                                                <C>                 <C>            <C>              <C>
Balance at January 1, 1995                              $ 25.0         $355.0         $(162.1)         $217.9
1995 Transactions:
   Net gain                                                                              31.6            31.6
   Net unrealized capital losses and other
      adjustments                                                                        (3.0)           (3.0)
   Other reserves and adjustments                                                         2.2             2.2
   Reclassification of paid-in capital                   (22.5)          22.5                             0.0
                                                   --------------------------------------------------------------
Balance at December 31, 1995                               2.5          377.5          (131.3)          248.7
1996 Transactions:
   Net gain                                                                              35.3            35.3
   Net unrealized capital gains and other
     adjustments                                                                          2.5             2.5
   Other reserves and adjustments                                                        (3.4)           (3.4)
                                                   --------------------------------------------------------------
Balance at December 31, 1996                               2.5          377.5           (96.9)          283.1
1997 Transactions:
   Net gain                                                                              27.5            27.5
   Net unrealized capital gains and other
     adjustments                                                                          5.0             5.0
   Other reserves and adjustments                                                         6.1             6.1
                                                   --------------------------------------------------------------
Balance at December 31, 1997                           $   2.5         $377.5        $(  58.3)         $321.7
                                                   ==============================================================
</TABLE>

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


                                      F-5
<PAGE>

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY


NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES

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

The preparation of the financial statements of insurance companies 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 was 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 valuation allowances would be
provided when there has been a decline in value deemed other than temporary; (7)
investments in affiliates are carried at their net equity value with changes in
value being recorded directly to unassigned deficit rather than consolidated in
the financial statements; (8) no provision is made for the deferred income tax
effects of temporary differences between book and tax basis reporting; and (9)
certain items, including modifications to required policy reserves resulting
from changes in actuarial assumptions or increased benefits, are recorded
directly to unassigned deficit rather than being reflected in income. The
effects of the foregoing variances from GAAP have not been determined but are
presumed to be material.



                                      F-6

<PAGE>

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY


NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES

The significant accounting practices of the Company are as follows:

Pending Statutory Standards: The NAIC currently is in the process of recodifying
---------------------------
statutory accounting practices, the result of which is expected to constitute
the only source of prescribed statutory accounting practices. Accordingly, that
project, which is expected to be approved by the NAIC in 1998 will likely
change, to some extent, prescribed statutory accounting practices, and may
result in changes to the accounting practices that the Company uses to prepare
its statutory-basis financial statements. The impact of any such changes on the
Company's unassigned deficit is not expected to be material.

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:

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

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

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



                                      F-7

<PAGE>

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY


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

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

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

Goodwill: The excess of cost over the statutory book value of the net assets of
--------
life insurance business acquired was $13.1 million and $15.1 million at December
31, 1997 and 1996, respectively, and generally is amortized over a ten-year
period using a straight-line method. Accumulated amortization was $8.8 million
and $6.7 million at December 31, 1997 and 1996, respectively.

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

Fair 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. See Note 11.

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

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

     Fair values for public bonds are obtained from an independent pricing
     service. Fair values for private placement securities and publicly traded
     bonds not provided by the independent pricing service are estimated by the
     Company by discounting expected future cash flows using current market
     rates applicable to the yield, credit quality and maturity of the
     investments.

     The fair values for common and preferred stocks, other than its subsidiary
     investments, which are carried at equity values, are based on quoted market
     prices.



                                      F-8

<PAGE>

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENT--CONTINUED

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY


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

  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. dollar 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 loans. Mortgage loans with similar characteristics and credit risks are
  aggregated into qualitative categories for purposes of the fair value
  calculations.

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

  The fair value for outstanding commitments to purchase long-term bonds and
  issue real estate mortgages is estimated using a discounted cash flow method
  incorporating adjustments for the difference in the level of interest rates
  between the dates the commitments were made and December 31, 1997. The fair
  value for commitments to purchase real estate approximates the amount of the
  initial commitment.

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 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 amounts
required by the Commonwealth of Massachusetts Division of Insurance. Reserves
for variable life insurance policies are maintained principally on the modified
preliminary term method using the 1958 and 1980 Commissioner's Standard Ordinary
(CSO) mortality tables, with an assumed interest rate of 4% for policies issued
prior to May 1, 1983 and 4 1/2% for policies issued on or thereafter. Reserves
for single premium policies are determined by the net single premium method
using the 1958 CSO mortality table, with an assumed interest rate of 4%.
Reserves for universal life policies issued prior to 1985 are equal to the gross
account value which at all times exceeds minimum statutory requirements.
Reserves for universal life policies issued from 1985 through 1988 are
maintained at the greater of the Commissioner's Reserve Valuation Method (CRVM)
using the 1958 CSO mortality table, with 4 1/2% interest or the cash surrender
value. Reserves for universal life policies issued after 1988 and for flexible
variable policies are maintained using the greater of the cash surrender value
or the CRVM method with the 1980 CSO mortality table and 5 1/2% interest for
policies issued from 1988 through 1992; 5% interest for policies issued in 1993
and 1994; and 4 1/2% interest for policies issued in 1995 through 1997.

Federal Income Taxes: Federal income taxes are reported in the financial
--------------------
statements based on amounts determined to be payable as a result of operations
within the current accounting period. The operations of the Company are
consolidated with John Hancock in filing a consolidated federal income tax
return for the affiliated group. The federal income taxes of the Company are
allocated on a separate return basis with certain adjustments. The Company made
payments of $29.6 million in 1997, $33.5 million in 1996 and $32.2 million in
1995.




                                      F-9
<PAGE>




NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY


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

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

Adjustments to Policy Reserves: From time to time, the Company finds it
------------------------------
appropriate to modify certain required policy reserves because of changes in
actuarial assumptions or increased benefits. Reserve modifications resulting
from such determinations are recorded directly to the unassigned deficit. During
1997, the Company refined certain actuarial assumptions inherent in the
calculation of reserves related to AIDS claims under individual life policies,
resulting in a $6.4 million increase in the unassigned deficit at December 31,
1997. During 1996 and 1995, there were no refinements in actuarial assumptions
inherent in the calculation of policy reserves.

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 and 1997 amounts.


NOTE 2--ACQUISITION

On June 23, 1993, the Company acquired all of the outstanding shares of stock of
Colonial Penn Annuity and Life Insurance Company (CPAL) from Colonial Penn Life
Insurance Company, for an aggregate purchase price of approximately $42.5
million. At the date of acquisition, assets of CPAL were approximately $648.5
million, consisting principally of cash and temporary cash investments and
liabilities were approximately $635.2 million, consisting principally of
reserves related to a block of interest sensitive single-premium whole life
insurance business assumed by CPAL from Charter National Life Insurance Company
(Charter). The purchase price includes contingent payments of up to
approximately $7.3 million payable between 1994 and 1998 based on the actual
lapse experience of the business in force on June 23, 1993. The Company made
contingent payments to CPAL of $1.5 million during each of 1997, 1996, and 1995.
Unamortized goodwill of $13.1 at December 31, 1997 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.



                                     F-10

<PAGE>

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY


NOTE 3--NET INVESTMENT INCOME

Investment income has been reduced by the following amounts:
<TABLE>
<CAPTION>
                                                           1997              1996              1995
                                                           ----              ----              ----
                                                                         (In millions)
<S>                                                        <C>               <C>               <C>
Investment expenses                                        $5.0              $7.0              $5.1
Interest expense                                            0.7               0.0               0.0
Depreciation expense                                        1.1               0.9               1.0
Investment taxes                                            0.4               0.5               0.5
                                                      ----------------------------------------------------
                                                           $7.2              $8.4              $6.6
                                                      ====================================================
</TABLE>

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

Net realized capital gains (losses) consist of the following items:
<TABLE>
<CAPTION>
                                                            1997             1996              1995
                                                            ----             ----              ----
                                                                         (In millions)
<S>                                                        <C>              <C>               <C>
Net gains (losses) from asset sales                        $ 0.8            $(0.2)            $ 4.0
Capital gains (tax) credit                                  (0.7)            (1.0)             (2.5)
Net amounts transferred to IMR                              (3.1)            (0.3)             (1.0)
                                                      ----------------------------------------------------
                                                           $(3.0)           $(1.5)            $ 0.5
                                                      ====================================================
</TABLE>

Net unrealized capital gains (losses) and other adjustments consist of the
following items:
<TABLE>
<CAPTION>
                                                            1997              1996              1995
                                                            ----              ----              ----
                                                                         (In millions)
<S>                                                        <C>              <C>               <C>
Net gains (losses) from changes in security
  values and book value adjustments                        $ 7.0            $ 3.7             $(0.2)
Increase in asset valuation reserve                         (2.0)            (1.2)             (2.8)
                                                      ----------------------------------------------------
              Net Unrealized Capital Gains
         (Losses) and Other Adjustments                    $ 5.0            $ 2.5             $(3.0)
                                                      ====================================================
</TABLE>



                                     F-11

<PAGE>


NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY


NOTE 5--TRANSACTIONS WITH PARENT

The Company's Parent provides the Company with personnel, property and
facilities in carrying out certain of its corporate functions. The Parent
annually determines a fee for these services and facilities based on a number of
criteria which were revised in 1997, 1996, and 1995 to reflect continuing
changes in the Company's operations. The amount of the service fee charged to
the Company was $123.6 million, $111.7 million, and $97.9 million in 1997, 1996,
and 1995, respectively, which has been included in insurance and investment
expenses. The Parent has guaranteed that, if necessary, it will make additional
capital contributions to prevent the Company's stockholder's equity from
declining below $1.0 million.

The service fee charged to the Company by the Parent includes $0.9 million, $1.6
million, and $1.8 million for the years ended December 31, 1997, 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.

The Company has a modified coinsurance agreement with John Hancock to reinsure
50% of 1994 through 1997 issues of flexible premium variable life insurance and
scheduled premium variable life insurance policies. In connection with this
agreement, John Hancock transferred $22.0 million, $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 $10.1 million, $15.7
million, and $20.3 million in 1997, 1996, and 1995, respectively.

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

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



                                     F-12

<PAGE>

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY


NOTE 6--INVESTMENTS

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

<TABLE>
<CAPTION>
                                                                 Gross             Gross
                                              Statement        Unrealized        Unrealized          Fair
                                                Value            Gains             Losses            Value
                                         ----------------------------------------------------------------------
                                                                      (In millions)

<S>                                        <C>                 <C>                 <C>          <C>
Year ended December 31, 1997

U.S. Treasury securities and obligations
   of U.S. government corporations and
   agencies                                $   254.5           $  0.2              $0.1         $   254.6

Obligations of states and political
   subdivisions                                 12.1              1.0               0.0              13.1

Debt securities issued by foreign
   governments                                   0.2              0.0               0.0               0.2

Corporate securities                           712.7             43.9               2.7             753.9

Mortgage-backed securities                     113.2              3.5               0.0             116.7
                                         ----------------------------------------------------------------------

Total bonds                                 $1,092.7            $48.6              $2.8          $1,138.5
                                         ======================================================================
</TABLE>

<TABLE>
<CAPTION>
                                                                 Gross             Gross
                                              Statement        Unrealized        Unrealized          Fair
                                                Value            Gains             Losses            Value
                                         ----------------------------------------------------------------------
                                                                      (In millions)
<S>                                      <C>                   <C>               <C>                 <C>
Year ended December 31, 1996

U.S. Treasury securities and obligations
   of U.S. government corporations and
   agencies                                  $  44.4            $ 0.2              $0.2           $  44.4

Obligations of states and political
   subdivisions                                 12.6              0.4               0.0              13.0

Debt securities issued by foreign
   governments                                   0.8              0.1               0.0               0.9

Corporate securities                           623.2             29.8               3.4             649.6

Mortgage-backed securities                      72.5             10.2               0.1              82.6
                                         ----------------------------------------------------------------------

Total bonds                                   $753.5            $40.7              $3.7            $790.5
                                         ======================================================================
</TABLE>



                                 F-13

<PAGE>

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY


NOTE 6--INVESTMENTS--CONTINUED

The statement value and fair value of bonds at December 31. 1997 by contractual
maturity, are shown below. Maturities will differ from contractual maturities
because eligible borrowers may exercise their right to call or prepay
obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>
                                                                              December 31, 1997
                                                                          Statement            Fair
                                                                            Value             Value
                                                                       -------------------------------
                                                                                 (In millions)
<S>                                                                    <C>                <C>
Due In one year or less                                                 $    89.1         $    90.7
Due after one year through five years                                       466.8             477.0
Due after five years through ten years                                      284.2             299.2
Due after ten years                                                         139.4             154.9
                                                                       -------------------------------
                                                                            979.5           1,021.8
Mortgage-backed securities                                                  113.2             116.7
                                                                       -------------------------------
                                                                        $ 1,092.7         $ 1,138.5
                                                                       ===============================
</TABLE>

Gross gains of $1.1 million in 1997, $1.3 million in 1996, and $0.2 million in
1995 and gross losses of $4.5 million in 1997, $2.1 million in 1996, and $0.1
million in 1995 were realized on these transactions.

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

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

Bonds with amortized cost of $2.0 million were nonincome producing for the year
ended December 31, 1997. The corresponding amount for the twelve months ended
December 31, 1996 was $11.3 million.



                                     F-14

<PAGE>

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY


NOTE 6--INVESTMENTS--CONTINUED

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

<TABLE>
<CAPTION>

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

                                         $273.9                                               $273.9
                                    =================                                   ==================
</TABLE>

At December 31, 1997, the fair values of the commercial and agricultural
mortgage loans portfolios were $243.8 million and $42.0 million, respectively.
The corresponding amounts as of December 31, 1996 were approximately $189.0
million and $30.4 million, respectively. The corresponding amounts as of
December 31, 1995 were approximately $132.1 million and $22.2 million,
respectively

The maximum and minimum lending rates for mortgage loans during 1997 were 10.49%
and 8.14% for agricultural loans and 8.53% and 7.42% for other properties.
Generally, the maximum percentage of any loan to the value of security at the
time of the loan, exclusive of insured 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 provision of the National Housing Act. For
agricultural mortgage loans, fire insurance is not normally required on land
based loans except in those instances where a building is critical to the
farming operation. Fire insurance is required on all agri-business facilities in
an aggregate amount equal to the loan balance.


NOTE 7--REINSURANCE

The Company cedes business to reinsurers to share risks under variable life,
universal life and flexible variable life insurance policies for the purpose of
reducing exposure to large losses. Premiums, benefits and reserves ceded to
reinsurers during the year ended December 31, 1997 were $427.4 million, $18.3
million, and $10.1 million, respectively. The corresponding amounts in 1996 were
$384.3 million, $9.9 million, and $12.1 million, respectively. The corresponding
amounts in 1995 were $72.4 million, $8.7 million, and $12.1 million,
respectively.



                                     F-15

<PAGE>

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY


NOTE 7--REINSURANCE--CONTINUED

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

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

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


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

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

The Company enters into interest rate swap contracts for the purpose of
converting the interest rate characteristics (fixed or variable) of certain
investments to match those of related insurance liabilities. Maturities of
current agreements range through 2011. These swaps involve, to varying degrees,
interest rate risk in excess of amounts recognized in the statement of financial
position.

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

The Company also uses financial futures contracts to hedge public bonds intended
for future sale in order to lock in the market value at the date of contract.
The Company is subject to the risks associated with changes in the value of the
underlying securities; however, such changes in value generally are offset by
changes in the value of the hedged items. The contract or notional amounts of
the contracts represent the extent of the Company's involvement but not in the
future cash requirements, as the Company intends to close the open positions
prior to settlement. Net deferred losses on financial contracts were $2.8
million and $0.0 million at December 31, 1997 and 1996, respectively.

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



                                     F-16

<PAGE>

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY


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

The contract or notional amount of the foregoing financial instruments, which
indicates the Company's involvement and in certain instances, maximum credit
risk related to those instruments, is as follows:

<TABLE>
<CAPTION>
                                                                                  December 31
                                                                             1997              1996
                                                                       -----------------------------------
                                                                                 (In millions)
<S>                                                                    <C>                   <C>
Futures contracts to sell securities                                       $  40.8           $  73.0
                                                                       ===================================

Notional amount of interest rate swaps, currency rate swaps,
 and interest rate caps to:

        Receive variable rates                                              $323.7           $ 215.9
                                                                       ===================================

        Receive fixed rates                                                $  25.0           $  26.6
                                                                       ===================================

</TABLE>

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

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


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

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

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

Total annuity reserves and deposit liabilities                          $1,093.7              100.0%
                                                                ==========================================
</TABLE>



                                     F-17

<PAGE>

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY


NOTE 10--COMMITMENTS AND CONTINGENCIES

The Company has extended commitments to purchase long-term bonds and issue real
estate mortgages totalling $168.6 million and $28.3 million respectively, at
December 31, 1997. The Company monitors the creditworthiness of borrowers under
long-term bond commitments and requires collateral as deemed necessary. If
funded, loans related to real estate mortgages would be fully collateralized by
the related properties. The estimated fair values of the commitments described
above were $194.5 million at December 31, 1997. The majority of these
commitments expire in 1998.

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


NOTE 11--FAIR VALUE OF FINANCIAL INSTRUMENTS

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

<TABLE>
<CAPTION>
                                                                           Year Ended December 31
                                                                    1997                            1996
                                                          Carrying          Fair           Carrying         Fair
                                                           Amount          Value            Amount         Value
                                                                              (In millions)
<S>                                                        <C>            <C>              <C>            <C>
Assets
   Bonds--Note 6                                           $1,092.7       $1,138.5          $753.5         $790.5
   Preferred stocks--Note 6                                    17.2           17.2             9.6            9.6
   Common stocks--Note 6                                        2.3            2.3             1.4            1.4
   Mortgage loans on real estate--Note 6                      273.9          285.8           212.1          219.4
   Policy loans--Note 1                                       106.8          106.8            80.8           80.8
   Cash and cash equivalents--Note 1                          143.2          143.2            31.9           31.9

Derivatives liabilities relating to:--Note 8
   Interest rate swaps                                          -              7.8             -              2.3
   Currency rate swaps                                          -              2.1             -             (8.2)
   Interest rate caps                                           -             (1.4)            -             (2.0)

Liabilities
   Commitments--Note 10                                         -            194.5             -             76.2

</TABLE>

The carrying amounts in the table are included in the statutory-basis statements
of financial position. The method and assumptions utilized by the Company in
estimating its fair value disclosures are described in Note 1.





                                     F-18