Prospectus dated ______, 2006
for interests in
Separate Account B
Interests are made available under
MAJESTIC PERFORMANCE VARIABLE UNIVERSAL LIFE
a flexible premium variable universal life insurance policy issued by
JOHN HANCOCK LIFE INSURANCE COMPANY of NEW YORK
("John Hancock NY")
The policy provides fixed account options with fixed rates of return declared
by John Hancock NY and the following investment accounts:
Science & Technology Quantitative All Cap Income & Value
Pacific Rim All Cap Core Managed
Health Sciences Total Stock Market Index PIMCO VIT All Asset
Emerging Growth Blue Chip Growth Global Allocation
Small Cap Growth U.S. Large Cap High Yield
Emerging Small Company Core Equity U.S. High Yield Bond
Small Cap Strategic Value Strategic Bond
Small Cap Index Large Cap Value Strategic Income
Dynamic Growth Classic Value Global Bond
Mid Cap Stock Utilities Investment Quality Bond
Natural Resources Real Estate Securities Total Return
All Cap Growth Small Cap Opportunities American Bond
Strategic Opportunities Small Cap Value Real Return Bond
Financial Services Small Company Value Bond Index B
International Special Value Core Bond
Opportunities
International Small Cap Mid Value Active Bond
International Equity Mid Cap Value U.S. Government
Index B Securities
Overseas Equity Value Short-Term Bond
American International All Cap Value Money Market B
International Value Growth & Income Lifestyle Aggressive
International Core 500 Index B Lifestyle Growth
Quantitative Mid Cap Fundamental Value Lifestyle Balanced
Mid Cap Index U.S. Core Lifestyle Moderate
Mid Cap Core Large Cap Lifestyle Conservative
Global Quantitative Value Brandes International
Equity
Capital Appreciation American Growth-Income Turner Core Growth Equity
American Growth Equity-Income Frontier Capital
Appreciation
US Global Leaders Growth American Blue Chip Income Business Opportunity
and Growth Value
* * * * * * * * * * * *
Please note that the Securities and Exchange Commission ("SEC") has not
approved or disapproved these securities, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
GUIDE TO THIS PROSPECTUS
This prospectus is arranged in the following way:
. Starting on the next page is a Table of Contents for this prospectus.
. The section after the Table of Contents is called "Summary of Benefits
and Risks". It contains a summary of the benefits available under the
policy and of the principal risks of purchasing the policy. You should
read this section before reading any other section of this prospectus.
. Behind the Summary of Benefits and Risks section is a section called "Fee
Tables" that describes the fees and expenses you will pay when buying,
owning and surrendering the policy.
. Behind the Fee Tables section is a section called "Detailed Information".
This section gives more details about the policy. It may repeat certain
information contained in the Summary of Benefits and Risks section in
order to put the more detailed information in proper context.
. Finally, on the back cover of this prospectus is information concerning
the Statement of Additional Information (the "SAI") and how the SAI,
personalized illustrations and other information can be obtained.
Prior to making any investment decisions, you should carefully review this
product prospectus and all applicable supplements. In addition, you will
receive the prospectuses for the underlying funds that we make available as
investment options under the policies. The funds' prospectuses describe the
investment objectives, policies and restrictions of, and the risks relating to,
investment in the funds. In the case of any of the portfolios that are operated
as "feeder funds", the prospectus for the corresponding "master fund" is also
provided. If you need to obtain additional copies of any of these documents,
please contact your John Hancock representative or contact our Service Office
at the address and telephone number on the back page of this product prospectus.
TABLE OF CONTENTS
Page No.
--------
SUMMARY OF BENEFITS AND RISKS............................... 4
The nature of the policy.................................... 4
Summary of policy benefits.................................. 4
Death benefit............................................... 4
Surrender of the policy..................................... 4
Withdrawals................................................. 4
Policy loans................................................ 4
Optional supplementary benefit riders....................... 5
Investment options.......................................... 5
Summary of policy risks..................................... 5
Lapse risk.................................................. 5
Investment risk............................................. 5
Transfer risk............................................... 5
Early surrender risk........................................ 5
Market timing risk.......................................... 5
Tax risks................................................... 6
FEE TABLES.................................................. 6
DETAILED INFORMATION........................................ 14
Table of Investment Options and Investment Subadvisers...... 14
Description of John Hancock NY.............................. 24
Description of Separate Account B........................... 24
The fixed account options................................... 24
The death benefit........................................... 25
Limitations on payment of death benefit..................... 25
Base Face Amount vs. Supplemental Face Amount............... 25
The minimum death benefit................................... 25
When the insured person reaches 121......................... 26
Requesting an increase in coverage.......................... 26
Requesting a decrease in coverage........................... 26
Change of death benefit option.............................. 27
Tax consequences of coverage changes........................ 27
Your beneficiary............................................ 27
Ways in which we pay out policy proceeds.................... 27
Changing a payment option................................... 27
Tax impact of payment option chosen......................... 27
Premiums.................................................... 28
Planned premiums............................................ 28
Minimum initial premium..................................... 28
Maximum premium payments.................................... 28
Processing premium payments................................. 28
Ways to pay premiums........................................ 28
Lapse and reinstatement..................................... 29
Lapse....................................................... 29
No lapse guarantee.......................................... 29
Cumulative premium test..................................... 30
Death during grace period................................... 30
Reinstatement............................................... 30
The policy value............................................ 30
Allocation of future premium payments....................... 31
Transfers of existing policy value.......................... 31
Surrender and withdrawals................................... 32
Surrender................................................... 32
Withdrawals................................................. 32
Policy loans................................................ 33
Repayment of policy loans................................... 33
Effects of policy loans..................................... 33
Description of charges at the policy level.................. 33
Deduction from premium payments............................. 33
Deductions from policy value................................ 34
Additional information about how certain policy charges work 35
Sales expenses and related charges.......................... 35
Effect of premium payment pattern........................... 35
Method of deduction......................................... 35
Reduced charges for eligible classes........................ 35
Other charges we could impose in the future................. 36
Description of charges at the portfolio level............... 36
Other policy benefits, rights and limitations............... 36
Optional supplementary benefit riders you can add........... 36
Variations in policy terms.................................. 38
Procedures for issuance of a policy......................... 38
Commencement of insurance coverage.......................... 38
Backdating.................................................. 39
Temporary coverage prior to policy delivery................. 39
Monthly deduction dates..................................... 39
Changes that we can make as to your policy.................. 39
The owner of the policy..................................... 39
Policy cancellation right................................... 40
Reports that you will receive............................... 40
Assigning your policy....................................... 40
When we pay policy proceeds................................. 40
General..................................................... 40
Delay to challenge coverage................................. 40
Delay for check clearance................................... 40
Delay of separate account proceeds.......................... 40
Delay of general account surrender proceeds................. 41
How you communicate with us................................. 41
General rules............................................... 41
Telephone, facsimile and internet transactions.............. 41
Distribution of policies.................................... 41
Tax considerations.......................................... 43
General..................................................... 43
Policy death benefit proceeds............................... 43
Other policy distributions.................................. 43
Policy loans................................................ 44
Diversification rules and ownership of the Account.......... 44
7-pay premium limit and modified endowment contract status.. 45
Corporate and H.R. 10 retirement plans...................... 45
Withholding................................................. 46
Life insurance purchases by residents of Puerto Rico........ 46
Life insurance purchases by non-resident aliens ............ 46
Financial statements reference.............................. 46
Registration statement filed with the SEC................... 46
Independent registered public accounting firm............... 46
SUMMARY OF BENEFITS AND RISKS
The nature of the policy
The policy's primary purpose is to provide lifetime protection against
economic loss due to the death of the insured person. The policy is unsuitable
as a short-term savings vehicle because of the substantial policy-level
charges. We are obligated to pay all amounts promised under the policy. The
value of the amount you have invested under the policy may increase or decrease
daily based upon the investment results of the investment accounts that you
choose. The amount we pay to the policy's beneficiary upon the death of the
insured person (we call this the "death benefit") may be similarly affected.
That's why the policy is referred to as a "variable" life insurance policy. We
call the investments you make in the policy "premiums" or "premium payments".
The amount we require as your first premium depends upon the specifics of your
policy and the insured person. Except as noted in the "Detailed Information"
section of this prospectus, you can make any other premium payments you wish at
any time. That's why the policy is called a "flexible premium" policy.
Summary of policy benefits
Death benefit
When the insured person dies, we will pay the death benefit minus any
outstanding loans and accrued interest. There are two ways of calculating the
death benefit (Option 1 and Option 2). You choose which one you want in the
application. The two death benefit options are:
. Option 1 - The death benefit will equal the greater of (1) the Total Face
Amount, or (2) the minimum death benefit (as described under "The minimum
death benefit" provision in the "Detailed Information" section of this
prospectus).
. Option 2 - The death benefit will equal the greater of (1) the Total Face
Amount plus the policy value on the date of death, or (2) the minimum
death benefit.
Surrender of the policy
You may surrender the policy in full at any time. If you do, we will pay you
the policy value less any outstanding policy debt and less any surrender charge
that then applies. This is called your "net cash surrender value". You must
return your policy when you request a surrender.
If you have not taken a loan on your policy, the "policy value" of your
policy will, on any given date, be equal to:
. the amount you invested,
. gain or loss of the investment experience of the investment options
you've chosen,
. minus all charges we deduct, and
. minus all withdrawals you have made.
If you take a loan on your policy, your policy value will be computed
somewhat differently. See "Effects of policy loans".
Withdrawals
You may make a withdrawal of part of your surrender value. Generally, each
withdrawal must be at least $500. We reserve the right to charge a fee of up to
the lesser of 2% of the withdrawal amount or $25 for each withdrawal. Your
policy value is automatically reduced by the amount of the withdrawal and the
fee. We reserve the right to refuse a withdrawal if it would reduce the net
cash surrender value or the Total Face Amount below certain minimum amounts.
Policy loans
You may borrow from your policy at any time by completing the appropriate
form. Generally, the minimum amount of each loan is $500. The maximum amount
you can borrow is determined by a formula (see the section entitled "Policy
loans" for the formula). Interest is charged on each loan. You can pay the
interest or allow it to become part of the outstanding loan balance. You can
repay all or part of a loan at any time. If there is an outstanding loan when
the insured person dies, it will be deducted from the death benefit. Policy
loans permanently affect the calculation of your policy value, and may also
result in adverse tax consequences.
4
Optional supplementary benefit riders
When you apply for the policy, you can request any of the optional
supplementary benefit riders that we make available. Availability of riders
varies from state to state. Charges for most riders will be deducted monthly
from the policy value.
Investment options
The policy offers a number of investment options, as listed on the cover of
this prospectus. We currently offer two "fixed account" options - the standard
fixed account option, and the enhanced yield fixed account option offered as a
supplementary benefit rider. The rest of the options have returns that vary
depending upon the investment results of underlying portfolios. These options
are referred to in this prospectus as "investment accounts". The fixed accounts
and the investment accounts are sometimes collectively referred to in this
prospectus as the "accounts". The investment accounts cover a broad spectrum of
investment styles and strategies. Although the portfolios of the Series Funds
that underlie those investment accounts operate like publicly traded mutual
funds, there are important differences between the investment accounts and
publicly-traded mutual funds. On the plus side, you can transfer money from one
investment account to another without tax liability. Moreover, any dividends
and capital gains distributed by each underlying portfolio are automatically
reinvested and reflected in the portfolio's value and create no taxable event
for you. On the negative side, if and when policy earnings are distributed
(generally as a result of a surrender or withdrawal), they will be treated as
ordinary income instead of as capital gains. Also, you must keep in mind that
you are purchasing an insurance policy and you will be assessed charges at the
policy level as well as at the fund level. Such policy level charges, in
aggregate, are significant and will reduce the performance of your policy.
Summary of policy risks
Lapse risk
If the net cash surrender value is insufficient to pay the charges when due
and the no-lapse guarantee is not in effect, your policy can terminate (i.e.
"lapse"). This can happen because you haven't paid enough premiums or because
the investment performance of the investment accounts you've chosen has been
poor or because of a combination of both factors. You'll be given a "grace
period" within which to make additional premium payments to keep the policy in
effect. If lapse occurs, you'll be given the opportunity to reinstate the
policy by making the required premium payments and satisfying certain other
conditions.
Since withdrawals reduce your policy value, withdrawals increase the risk of
lapse. Policy loans also increase the risk of lapse.
Investment risk
As mentioned above, the investment performance of any investment account may
be good or bad. Your policy value will rise or fall based on the investment
performance of the investment accounts you've chosen. Some investment accounts
are riskier than others. These risks (and potential rewards) are discussed in
detail in the prospectuses of the underlying portfolios.
Transfer risk
There is a risk that you will not be able to transfer your policy value from
one investment account to another because of limitations on the dollar amount
or frequency of transfers you can make. The limitations on transfers out of the
fixed account options are more restrictive than those that apply to transfers
out of investment accounts.
Early surrender risk
There are surrender charges assessed if you surrender your policy in the
first 10 policy years. Depending on the policy value at the time you are
considering surrender, there may be little or no surrender value payable to you.
Market timing risk
Variable investment accounts in variable life insurance products can be a
prime target for abusive transfer activity because these products value their
investment accounts on a daily basis and allow transfers among investment
accounts without immediate tax consequences. As a result, some investors may
seek to frequently transfer into and out of investment accounts in reaction to
market news or to exploit a perceived pricing inefficiency. Whatever the
reason, long-term investors in an investment account can be harmed by frequent
transfer activity since such activity may expose the investment account's
underlying portfolio to increased portfolio transaction costs and/or disrupt
the portfolio manager's ability to effectively manage the portfolio's
investments in accordance with
5
the portfolio's investment objectives and policies, both of which may result in
dilution with respect to interests held for long-term investment.
To discourage disruptive frequent trading activity, we impose restrictions
on transfers (see "Transfers of existing policy value") and reserve the right
to change, suspend or terminate telephone, facsimile and internet transaction
privileges (see "How you communicate with us"). In addition, we reserve the
right to take other actions at any time to restrict trading, including, but not
limited to: (i) restricting the number of transfers made during a defined
period, (ii) restricting the dollar amount of transfers, and (iii) restricting
transfers into and out of certain investment accounts. We also reserve the
right to defer a transfer at any time we are unable to purchase or redeem
shares of the underlying portfolio.
While we seek to identify and prevent disruptive frequent trading activity,
it may not always be possible to do so.
Therefore, no assurance can be given that the restrictions we impose will be
successful in preventing all disruptive frequent trading and avoiding harm to
long-term investors.
Tax risks
In order for you to receive the tax benefits extended to life insurance
under the Internal Revenue Code, your policy must comply with certain
requirements of the Code. We will monitor your policy for compliance with these
requirements, but a policy might fail to qualify as life insurance in spite of
our monitoring. If this were to occur, you would be subject to income tax on
the income credited to your policy for the period of disqualification and all
subsequent periods. The tax laws also contain a so-called "7 pay limit" that
limits the amount of premium that can be paid in relation to the policy's death
benefit. If the limit is violated, the policy will be treated as a "modified
endowment contract", which can have adverse tax consequences. There are also
certain Treasury Department rules referred to as the "investor control rules"
that determine whether you would be treated as the "owner" of the assets
underlying your policy. If that were determined to be the case, you would be
taxed on any income or gains those assets generate. In other words, you would
lose the value of the so-called "inside build-up" that is a major benefit of
life insurance.
In general, you will be taxed on the amount of distributions that exceed the
premiums paid under the policy. Any taxable distribution will be treated as
ordinary income (rather than as capital gains) for tax purposes. If you have
elected the Long-Term Care Acceleration Rider, you may be deemed to have
received a distribution for tax purposes each time a deduction is made from
your policy value to pay the rider charge. The tax laws are not clear on this
point.
There is a tax risk associated with policy loans. Although no part of a loan
is treated as income to you when the loan is made unless your policy is a
"modified endowment contract", surrender or lapse of the policy would result in
the loan being treated as a distribution at the time of lapse or surrender.
This could result in a considerable tax bill. Under certain circumstances
involving large amounts of outstanding loans and an insured person of advanced
age, you might find yourself having to choose between high premium requirements
to keep your policy from lapsing and a significant tax burden if you allow the
lapse to occur.
Tax consequences of ownership or receipt of policy proceeds under Federal,
state and local estate, inheritance, gift and other tax laws can vary greatly
depending upon the circumstances of each owner or beneficiary. There can also
be unfavorable tax consequences on such things as the change of policy
ownership or assignment of ownership interests. For these and all the other
reasons mentioned above, we recommend you consult with a qualified tax adviser
before buying the policy and before exercising certain rights under the policy.
FEE TABLES
This section contains five tables that describe all of the fees and expenses
that you will pay when buying and owning the policy. In the first three tables,
certain entries show the minimum charge, the maximum charge and the charge for
a representative insured person. Other entries show only the maximum charge we
can assess and are labeled as such. Except where necessary to show a rate
greater than zero, all rates shown in the tables have been rounded to two
decimal places as required by prospectus disclosure rules. Consequently, the
actual rates charged may be slightly higher or lower than those shown in the
tables.
6
The first table below describes the fees and expenses that you will pay at
the time that you pay a premium, withdraw policy value, surrender the policy,
lapse the policy or transfer policy value between investment accounts. We
reserve the right to increase the premium charge beyond the level indicated in
the Transaction Fees table in order to correspond with changes in state premium
tax levels or in the Federal income tax treatment of the deferred acquisition
costs for this type of policy. Currently, state premium tax levels range from
0% to 3.5%.
Transaction Fees
Charge When Charge is Deducted Amount Deducted
------ ----------------------- ---------------
Maximum premium charge Upon payment of premium 8% of premiums /(1)/
Maximum withdrawal fee Upon making a withdrawal The lesser of 2% of
withdrawal amount or $25
(currently $0)/(2)/
Surrender charge/(3)/ Upon surrender, policy
lapse or any reduction in
Base Face Amount
Maximum surrender charge $125.44 per thousand
dollars of Base Face
Amount
Minimum surrender charge $2.72 per thousand
dollars of Base Face
Amount
Surrender charge for $13.82 per thousand
representative insured dollars of Base Face
person Amount
Maximum transfer fee Upon each transfer into $25 (currently $0) /(2)/
or out of an investment
account beyond an annual
limit of not less than 12
/(1)/ The amount stated in the table is the maximum premium charge in all
policy years. Currently, a premium charge of 6.4% is deducted from each
premium paid up to the Target Premium in each of the first 5 policy
years. A premium charge of 2% is deducted from each premium in excess of
Target Premium for the first 5 policy years, and a charge of 2% is
deducted from all premiums paid in policy years 6 and later. The "Target
Premium" will appear in the "Policy Specifications" section of the policy.
/(2)/ This fee is not currently imposed, but we reserve the right to do so in
the policy.
/(3)/ A surrender charge is applicable for up to 10 policy years from the
Policy Date and is calculated as a percentage of the premium paid in
policy year 1 up to the Target Premium stated in the Policy
Specifications page of your policy. The percentage applied to the
calculation reduces over the surrender charge period. The first year
surrender charge percentage will vary based upon the particular policy
specifications, but can be as high as 100%. The Target Premium varies by
the sex, issue age and underwriting risk of the insured person. The
maximum charge shown in the table is for a 90 year old male substandard
smoker underwriting risk, the minimum charge shown is for a 0 year old
female standard non-smoker underwriting risk, and the charge for a
representative insured person is for a 45 year old male standard
non-smoker underwriting risk.
The next two tables describe the charges and expenses that you will pay
periodically during the time you own the policy. These tables do not include
fees and expenses paid at the portfolio level. Except for the policy loan
interest rate, all of the charges shown in the tables are deducted from your
policy value. The second table is devoted only to optional supplementary rider
benefits.
Periodic Charges Other Than Fund Operating Expenses
Amount
------------------------------------------
Charge When Charge is Applied Guaranteed Rate Current Rate
------ -------------------------------------------------- -------------------- --------------------
Cost of insurance Monthly
charge:/(1)/
Minimum charge $0.02 per $1,000 of $0.02 per $1,000 of
NAR NAR
Maximum charge $83.33 per $1,000 of $83.33 per $1,000 of
NAR NAR
Charge for representative $0.20 per $ 1,000 of $0.10 per $1,000 of
insured person NAR NAR
Face Amount charge:/(2)/ Monthly for a duration varying with the age of the
insured person (see footnote 2)
Minimum charge $0.02 per $1,000 of $0.02 per $1,000 of
Base Face Amount Base Face Amount
Maximum charge $.79 per $1,000 of $.79 per $1,000 of
Base Face Amount Base Face Amount
Charge for representative $0.14 per $1,000 of $0.14 per $1,000 of
insured person Base Face Amount Base Face Amount
Administrative charge Monthly $15 $15
Asset-based risk charge/(3)/ Monthly 0.06% of policy value 0.05% of policy value
Maximum policy loan Accrues daily Payable annually 4.25% 4.25%
interest rate/(4)/
/(1)/ The cost of insurance charge is determined by multiplying the amount of
insurance for which we are at risk (the net amount at risk or "NAR") by
the applicable cost of insurance rate. The rates vary widely depending
upon the length of time the policy has been in effect, the insurance risk
characteristics of the insured person and (generally) the gender of the
insured person. The "minimum" rate shown in the table is the rate in the
first policy year for a policy issued to cover a 5 year old female
preferred underwriting risk class. The "maximum" rate shown in the table
at both guaranteed and current rates is the rate in the first policy year
for a policy issued to cover a 90 year old male substandard smoker
underwriting risk. This includes the so-called "extra mortality charge".
The "representative insured person" referred to in the table is a 45 year
old male standard non-smoker underwriting risk with a policy in the first
policy year. The charges shown in the table may not be particularly
relevant to your current situation. For more information about cost of
insurance rates, talk to your John Hancock NY representative.
7
/(2)/ The duration of the Face Amount charge varies based upon the age of the
insured person as of the anniversary date nearest the policy date, as
follows: age 50 and under, 4 years; age 51, 5 years; age 52, 6 years; age
53, 7 years; age 54, 8 years; age 55, 9 years; and age 56 and over, 10
years. The charge is determined by multiplying the Base Face Amount at
issue by the applicable rate. The rates vary by the sex, age and risk
class of the insured person. The "minimum" charge shown in the table is
for a 0 year old female. The "maximum" rate shown is for a 90 year old
male substandard smoker underwriting risk. The "representative insured
person" referred to in the table is a 45 year old male standard risk.
/(3)/ This charge only applies to that portion of policy value held in the
investment accounts. The charge determined does not apply to any fixed
account. The percentage amount indicated in the table are the amounts
assessed in policy years 1-15. In policy years 16 and after, the
guaranteed rate is 0.02%.
/(4)/ 4.25% is the maximum effective annual interest rate we can charge and
applies only during policy years 1-10. The effective annual interest rate
is 3.0% thereafter (although we reserve the right to increase the rate
after the tenth policy year to as much as 3.25%). The amount of any loan
is transferred from the accounts to a special loan account which earns
interest at an effective annual rate of 3.0%.
Therefore, the cost of a loan is the difference between the loan interest we
charge and the interest we credit to the special loan account.
Rider Charges
When Charge is
Charge Applied Amount
------ -------------- ------
Extended No-Lapse Guarantee Monthly
Rider:/(1)/
Minimum charge $0.02 per $1,000 of Base Face
Amount
Maximum charge $0.08 per $1,000 of Base Face
Amount
Charge for representative $0.03 per $1,000 of Base Face
insured person Amount
Acceleration of Death Benefit Monthly
for Qualified
Long-Term Care Services
Rider:/(2)/
Minimum charge $0.01 per $1,000 of NAR
Maximum charge $1.80 per $1,000 of NAR
Charge for representative $0.08 per $1,000 of NAR
insured person
Optional Enhanced Surrender Upon payment 2% of premiums paid in the
Value Rider of premium first policy year up to the
Target Premium
Return of Premium Death Benefit Monthly
Rider:/(3)/
Minimum charge $0.02 per $1,000 of NAR
Maximum charge $83.33 per $1,000 of NAR
Charge for representative $0.10 per $1,000 of NAR
insured person
Change of Life Insured Rider At exercise of $250.00/(4)/
benefit
Accelerated Benefit Rider At exercise of $150.00/(5)/
benefit
/(1)/ The charge for this rider is determined by multiplying the Base Face
Amount by the applicable rate. The rates vary by sex, issue age, and
underwriting risk class of the insured person. The "minimum" rate shown
in the table is for a 0 year old female standard non-smoker underwriting
risk. The "maximum" rate shown in the table is for a 90 year old male
standard smoker underwriting risk. The "representative insured person"
referred to in the table is a 45 year old male standard non-smoker
underwriting risk.
8
/(2)/ The charge for this rider is determined by multiplying the net amount of
insurance for which we are at risk (the net amount at risk or "NAR") by
the applicable rate. The rates vary by the long-term care insurance risk
characteristics of the insured person and the rider benefit level
selected. The "minimum" rate shown in the table is for a 20 year old
female standard non-smoker underwriting risk with a 1% Monthly
Acceleration Percentage. The Monthly Acceleration Percentage is stated in
the Policy Specifications page of your policy.
The "maximum" rate shown in the table is for an 80 year old male substandard
smoker underwriting risk with a 4% Monthly Acceleration Percentage. The
"representative insured person" referred to in the table is a 45 year old
male standard non-smoker underwriting risk with a 4% Monthly Acceleration
Percentage.
/(3)/ The Return of Premium Death Benefit Rider charge is determined by
multiplying the amount of insurance for which we are at risk (the net
amount at risk or "NAR") by the applicable rate. The rates vary depending
upon the insurance risk characteristics of the insured person and
(generally) the gender of the insured person. The "minimum" rate shown in
the table is the rate in the first policy year for a policy issued to
cover a 0 year old female standard non-smoker underwriting risk. The
"maximum" rate shown in the table is the rate in the first policy year
for a policy issued to cover a 90 year old male substandard smoker
underwriting risk. This includes the so-called "extra mortality charge".
The "representative insured person" referred to in the table is a 45 year
old male standard non-smoker underwriting risk with a policy in the first
policy year. The charges shown in the table may not be particularly
relevant to your current situation.
(4) The charge for this benefit will be assessed separately and will not be
deducted from the policy value.
(5) This charge is not currently imposed, but we reserve the right to do so in
the policy.
The next table describes the minimum and maximum portfolio level fees and
expenses charged by any of the portfolios underlying a variable investment
option offered through this prospectus, expressed as a percentage of average
net assets (rounded to two decimal places). These expenses are deducted from
portfolio assets.
Total Annual Portfolio Operating Expenses Minimum Maximum
----------------------------------------- ------- -------
Range of expenses, including management fees, distribution
and/ or service (12b-1) fees, and other expenses.......... 0.50% 1.53%
The next table describes the fees and expenses for each class of shares of
each portfolio underlying a variable investment option offered through this
prospectus. None of the portfolios charge a sales load or surrender fee. The
fees and expenses do not reflect the fees and expenses of any variable
insurance contract or qualified plan which may use the portfolio as its
underlying investment medium. Except for the American International, American
Growth, American Growth-Income, American Blue Chip Income and Growth, American
Bond and PIMCO VIT All Asset portfolios, all of the portfolios shown in the
table are NAV class shares that are not subject to Rule 12b-1 fees. Except as
indicated in the footnotes appearing at the end of the table, the expense
ratios are based upon the portfolio's actual expenses for the year ended
December 31, 2005.
9
Portfolio Annual Expenses
(as a percentage of portfolio average net assets, rounded to two decimal places)
Management 12b-1 Other Total Annual
Portfolio Fees Fees Expenses Expenses
--------- ---------- ----- -------- ------------
Science & Technology......................... 1.05%/A/ N/A 0.07% 1.12%
Pacific Rim.................................. 0.80% N/A 0.24% 1.04%
Health Sciences.............................. 1.05%/A/ N/A 0.12% 1.17%
Emerging Growth.............................. 0.80% N/A 0.08% 0.88%
Small Cap Growth............................. 1.07% N/A 0.06% 1.13%
Emerging Small Company....................... 0.97% N/A 0.07% 1.04%
Small Cap/B/................................. 0.85% N/A 0.03% 0.88%
Small Cap Index.............................. 0.49% N/A 0.04% 0.53%
Dynamic Growth............................... 0.95% N/A 0.07% 1.02%
Mid Cap Stock................................ 0.84% N/A 0.08% 0.92%
Natural Resources............................ 1.00% N/A 0.07% 1.07%
All Cap Growth............................... 0.85% N/A 0.06% 0.91%
Strategic Opportunities...................... 0.80% N/A 0.08% 0.88%
Financial Services........................... 0.82%/C/ N/A 0.09% 0.91%
International Opportunities.................. 0.90% N/A 0.06% 0.96%
International Small Cap...................... 0.92% N/A 0.21% 1.13%
International Equity Index B/B/D/I/.......... 0.55% N/A 0.04% 0.59%
Overseas Equity/B/........................... 1.05% N/A 0.23% 1.28%
American International/E/H/.................. 0.52% 0.60% 0.08% 1.20%
International Value.......................... 0.82%/F/ N/A 0.19% 1.01%
International Core........................... 0.89% N/A 0.07% 0.96%
Quantitative Mid Cap......................... 0.74% N/A 0.10% 0.84%
Mid Cap Index................................ 0.49% N/A 0.04% 0.53%
Mid Cap Core................................. 0.87% N/A 0.08% 0.95%
Global....................................... 0.82%/F/ N/A 0.16% 0.98%
Capital Appreciation......................... 0.81% N/A 0.05% 0.86%
American Growth/E/........................... 0.33% 0.60% 0.04% 0.97%
U.S. Global Leaders Growth................... 0.70% N/A 0.06% 0.76%
Quantitative All Cap......................... 0.71% N/A 0.06% 0.77%
All Cap Core................................. 0.80% N/A 0.07% 0.87%
Total Stock Market Index..................... 0.49% N/A 0.04% 0.53%
Blue Chip Growth............................. 0.81%/A/ N/A 0.07% 0.88%
U.S. Large Cap............................... 0.83% N/A 0.06% 0.89%
Core Equity.................................. 0.79% N/A 0.06% 0.85%
Strategic Value.............................. 0.85% N/A 0.08% 0.93%
Large Cap Value.............................. 0.84% N/A 0.08% 0.92%
Classic Value................................ 0.80% N/A 0.24% 1.04%
Utilities.................................... 0.85% N/A 0.19% 1.04%
Real Estate Securities....................... 0.70% N/A 0.06% 0.76%
Small Cap Opportunities...................... 0.99% N/A 0.08% 1.07%
Small Cap Value/B/D/......................... 1.07% N/A 0.05% 1.12%
Small Company Value/D/....................... 1.03%/A/ N/A 0.05% 1.08%
Special Value................................ 1.00% N/A 0.21% 1.21%
Mid Value.................................... 0.98%/A/ N/A 0.08% 1.06%
Mid Cap Value................................ 0.85% N/A 0.05% 0.90%
Value........................................ 0.74% N/A 0.06% 0.80%
All Cap Value................................ 0.83% N/A 0.07% 0.90%
Growth & Income/B/........................... 0.68% N/A 0.08% 0.76%
500 Index B/B/D/I/........................... 0.47% N/A 0.03% 0.50%
Fundamental Value............................ 0.77%/C/ N/A 0.05% 0.82%
U.S. Core.................................... 0.76% N/A 0.05% 0.81%
Large Cap/B/................................. 0.84% N/A 0.05% 0.89%
Quantitative Value........................... 0.70% N/A 0.06% 0.76%
American Growth-Income/E/.................... 0.28% 0.60% 0.05% 0.93%
Equity-Income................................ 0.81%/A/ N/A 0.05% 0.86%
American Blue Chip Income and Growth/E/...... 0.44% 0.60% 0.04% 1.08%
Income & Value............................... 0.79% N/A 0.08% 0.87%
Managed/B/................................... 0.69% N/A 0.06% 0.75%
PIMCO VIT All Asset.......................... 0.20% 0.25% 1.08%/G/ 1.53%
Global Allocation............................ 0.85% N/A 0.19% 1.04%
High Yield................................... 0.66% N/A 0.07% 0.73%
U.S. High Yield Bond/B/D/.................... 0.74% N/A 0.21% 0.95%
10
Management 12b-1 Other Total Annual
Portfolio Fees Fees Expenses Expenses
--------- ---------- ----- -------- ------------
Strategic Bond............................... 0.67% N/A 0.08% 0.75%
Strategic Income............................. 0.73% N/A 0.30% 1.03%
Global Bond.................................. 0.70% N/A 0.12% 0.82%
Investment Quality Bond...................... 0.60% N/A 0.09% 0.69%
Total Return................................. 0.70% N/A 0.07% 0.77%
American Bond/E/............................. 0.43% 0.60% 0.04% 1.07%
Real Return Bond............................. 0.70% N/A 0.07% 0.77%
Bond Index B/B/D/I/.......................... 0.47% N/A 0.03% 0.50%
Core Bond/B/................................. 0.67% N/A 0.07% 0.74%
Active Bond/B/............................... 0.60% N/A 0.07% 0.67%
U.S. Government Securities................... 0.59% N/A 0.07% 0.66%
Short-Term Bond/B/........................... 0.59% N/A 0.09% 0.68%
Money Market B/B/D/I/........................ 0.49% N/A 0.04% 0.53%
Lifestyle Aggressive......................... 0.05% N/A 0.95%/H/ 1.00%
Lifestyle Growth............................. 0.05% N/A 0.89%/H/ 0.94%
Lifestyle Balanced........................... 0.05% N/A 0.86%/H/ 0.91%
Lifestyle Moderate........................... 0.05% N/A 0.81%/H/ 0.86%
Lifestyle Conservative....................... 0.05% N/A 0.78%/H/ 0.83%
Brandes International Equity/J/.............. 0.69% N/A 0.23% 0.92%
Turner Core Growth/J/........................ 0.45% N/A 0.23% 0.68%
Frontier Capital............................. 0.90% N/A 0.21% 1.11%
Appreciation/J/
Business Opportunity Value/J/................ 0.65% N/A 0.36% 1.01%
/A/ The adviser has voluntarily agreed to waive a portion of its advisory fee
for the Blue Chip Growth, Equity-Income, Health Sciences, Mid Value,
Science & Technology, and Small Company Value portfolios.
This waiver is based on the combined average daily net assets of these
portfolios and the following funds of John Hancock Funds II: Blue Chip Growth
Fund, Equity-Income Fund, Health Sciences Fund, Science & Technology Fund,
Small Company Value Fund, Spectrum Income Fund and Real Estate Equity Fund
(collectively, the "T. Rowe Portfolios").
The percentage fee reduction is as follows:
Combined Average Daily Net Assets Fee Reduction (as a percentage
of the T. Rowe Portfolios of the Management Fee)
--------------------------------- ------------------------------
First $750 million........ 0.00%
Over $750 million......... 5.0%
Effective November 1, 2006, the percentage reduction will be as follows:
Combined Average Daily Net Assets Fee Reduction (as a percentage
of the T. Rowe Portfolios of the Management Fee)
--------------------------------- ------------------------------
First $750 million........... 0.00%
Next $750 million............ 5.0%
Excess over $1.5 billion..... 7.5%
This voluntary fee waiver may be terminated at any time by the adviser.
11
/B/ Commenced operations April 29, 2005.
/C/ For the period prior to October 14, 2005, the adviser voluntarily agreed
to reduce its advisory fee for the Financial Services and Fundamental
Value portfolios to the amounts shown below as a percentage of average
annual net assets.
First $50 Between $50 million and $500 Excess Over $500
Portfolio million million million
--------- --------- ---------------------------- ----------------
Financial Services... 0.85% 0.80% 0.75%
Fundamental Value.... 0.85% 0.80% 0.75%
Effective October 14, 2005, the advisory fees for the Financial Services and
the Fundamental Value portfolios were lowered to the rates for the voluntary
advisory fee waiver set forth above and the voluntary advisory fee waiver was
eliminated.
If the advisory fee waiver for the period prior to October 14, 2005 were
reflected, it is estimated that the management fees for these portfolios would
have been as follows:
Financial Services... 0.82%
Fundamental Value.... 0.77%
/D/ Based on estimates for the current fiscal year.
/E/ Reflects the aggregate annual operating expenses of each portfolio and
its corresponding master fund. In the case of the American Blue Chip
Income and Growth, American Bond, American Growth, American Growth-Income
and American International portfolios, and during the year ended
December 31, 2005, Capital Research Management Company (the adviser to
the American Blue Chip Income and Growth, American Bond, American Growth,
American Growth-Income and American International portfolios) voluntarily
reduced investment management fees to rates provided by amended agreement
effective April 1, 2004. If such fee waiver had been reflected, the
management fee would be 0.40%, 0.39%, 0.30%, 0.25% and 0.47% and Total
Annual Expenses would be 1.04%, 1.03%, 0.94%, 0.90% and 1.15%.
/F/ Effective December 9, 2003, due to a decrease in the subadvisory fees for
the Global and International Value portfolios, the adviser voluntarily
agreed to waive its advisory fees so that the amount retained by the
adviser after payment of the subadvisory fees for each such portfolio
does not exceed 0.45% of the portfolio's average net assets. For the year
ended December 31, 2005, the effective annual advisory fee for the Global
and International Value portfolios was 0.77% and 0.78%, respectively.
These advisory fee waivers may be rescinded at any time.
12
/G/ Other Expenses for the PIMCO All Asset portfolio reflect an
administrative fee of 0.25%, a service fee of 0.20% and expenses of
underlying funds in which the PIMCO All Asset portfolio invests ("PIMCO
Underlying Funds"). The PIMCO Underlying Funds' expenses (0.63%) are
estimated based upon an allocation of the portfolio's assets among the
PIMCO Underlying Funds and upon the total annual operating expenses of
the Institutional Class shares of these PIMCO Underlying Funds. PIMCO
Underlying Fund expenses will vary with changes in the expenses of the
PIMCO Underlying Funds, as well as allocation of the portfolio's assets,
and may be higher or lower than those shown above. PIMCO has
contractually agreed, for the portfolio's current fiscal year, to waive
its advisory fee to the extent that the PIMCO Underlying Funds' expenses
attributable to advisory and administrative fees exceed 0.64% of the
total assets invested in PIMCO Underlying Funds.
/H/ Each of the Lifestyle Trusts may invest in all the other Trust portfolios
except the American Growth, the American International, the American Blue
Chip Income and Growth, American Bond, and the American Growth-Income
(the "Underlying Portfolios"). The Total Annual Expenses for the
Underlying Portfolios range from 0.50% to 1.53%.
/I/ The adviser for this fund has agreed, pursuant to its agreement with the
John Hancock Trust, to waive its management fee (or, if necessary,
reimburse expenses of the fund) to the extent necessary to limit the
fund's "Annual Operating Expenses" A fund's "Annual Operating Expenses"
includes all of its operating expenses including advisory fees and Rule
12b-1 fees, but excludes taxes, brokerage commissions, interest,
litigation and indemnification expenses and extraordinary expenses of the
fund not incurred in the ordinary course of the fund's business. Under
the agreement, the adviser's obligation will remain in effect until
May 1, 2007 and will terminate after that date only if the John Hancock
Trust, without the prior written consent of the adviser, sells shares of
the fund to (or has shares of the fund held by) any person other than the
variable life insurance or variable annuity insurance separate accounts
of John Hancock Life Insurance Company of New York or any of its
affiliates that are specified in the agreement. If this fee waiver had
been reflected, the management fee shown for the 500 Index Trust B, Bond
Index Trust B, International Equity Index Trust B and Money Market Trust
B would be 0.22%, 0.22%, 0.30% and 0.24%, respectively, and the Total
Fund Annual Expenses shown would be 0.25%, 0.25%, 0.34% and 0.28%,
respectively.
13
/J/ For the period ending May 1, 2006 to April 30, 2007, the adviser has
contractually agreed to reimburse the portfolio for any expenses (other
than advisory fees, brokerage or other portfolio expenses) to the extent
that such expenses exceed 0.25% of the portfolio's annualized average
daily net assets. Fees and expenses shown are for the year end
December 31, 2005. Future fees and expenses may be different.
DETAILED INFORMATION
This section of the prospectus provides additional detailed information that
is not contained in the Summary of Benefits and Risks section.
Table of Investment Options and Investment Subadvisers
When you select a Separate Account investment option, we invest your money
in shares of a corresponding portfolio of the John Hancock Trust (the "Trust")
(or the PIMCO Variable Insurance Trust (the "PIMCO Trust") with respect to the
All Asset portfolio) and hold the shares in a sub-account of the Separate
Account. The Fee Tables show the investment management fees, Rule 12b-1 fees
and other operating expenses for these portfolio shares as a percentage
(rounded to two decimal places) of each portfolio's average net assets for
2005, except as indicated in the footnotes appearing at the end of the table.
Fees and expenses of the portfolios are not fixed or specified under the terms
of the policies and may vary from year to year. These fees and expenses differ
for each portfolio and reduce the investment return of each portfolio.
Therefore, they also indirectly reduce the return you will earn on any Separate
Account investment options you select.
John Hancock Trust and the PIMCO Trust are so-called "series" type mutual
funds and each is registered under the Investment Company Act of 1940 ("1940
Act") as an open-end management investment company. John Hancock Investment
Management Services, LLC ("JHIMS LLC") provides investment advisory services to
the Trust and receives investment management fees for doing so. JHIMS pays a
portion of its investment management fees to other firms that manage the
Trust's portfolios. We and our affiliate own JHIMS LLC and indirectly benefit
from any investment management fees JHIMS LLC retains.
14
The All Asset portfolio of the PIMCO Trust receives investment advisory
services from Pacific Investment Management Company LLC ("PIMCO") and pays
investment management fees to PIMCO.
Each of the American Blue Chip Income and Growth, American Bond, American
Growth-Income, American Growth, and American International portfolios invests
in Series 1 shares of the corresponding investment portfolio of the Trust and
are subject to a 0.60% 12b-1 fee. The American Growth, American International,
American Growth-Income, American Blue Chip Income and Growth and American Bond
portfolios operate as "feeder funds", which means that the portfolio does not
buy investment securities directly. Instead, it invests in a "master fund"
which in turn purchases investment securities. Each of the American feeder fund
portfolios has the same investment objective and limitations as its master
fund. The prospectus for the American Fund master fund is included with the
prospectuses for the underlying funds.
The Brandes International Equity, Turner Core Growth, Frontier Capital
Appreciation and Business Opportunity Value portfolios are series of M Fund,
Inc. (the "M Fund"), an open-end management investment company registered under
the 1940 Act. The assets of the Brandes International Equity, Turner Core
Growth, Frontier Capital Appreciation and Business Opportunity Value
subaccounts are invested in the corresponding portfolios of the M Fund. M
Financial Investment Advisers, Inc. ("M Financial") is the investment adviser
for all portfolios of the M Fund. The entities shown in the table below as
"Portfolio Managers" of the the Fund portfolios are sub-investment advisers
selected by M Financial and are the entities that manage the portolio's assets.
The portfolios pay us or certain of our affiliates compensation for some of
the distribution, administrative, shareholder support, marketing and other
services we or our affiliates provide to the portfolios. The amount of this
compensation is based on a percentage of the assets of the portfolios
attributable to the variable insurance products that we and our affiliates
issue. These percentages may differ from portfolio to portfolio and among
classes of shares within a portfolio. In some cases, the compensation is
derived from the Rule 12b-1 fees that are deducted from a portfolio's assets
for the services we or our affiliates provide to that portfolio. In addition,
compensation payments of up to 0.45% of assets may be made by a portfolio's
investment advisers or its affiliates. We pay American Funds Distributors,
Inc., the principal underwriter for the American Fund Insurance Series, a
percentage of some or all of the amounts allocated to the "American" portfolios
of the Trust for the marketing support services it provides. Any of these
compensation payments do not, however, result in any charge to you in addition
to what is shown in the Fee Tables.
The following table provides a general description of the portfolios that
underlie the variable investment options we make available under the policy.
You bear the investment risk of any portfolio you choose as an investment
option for your policy. You can find a full description of each portfolio,
including the investment objectives, policies and restrictions of, and the
risks relating to investment in the portfolio, in the prospectus for that
portfolio. You should read the portfolio's prospectus carefully before
investing in the corresponding variable investment option.
The investment options in the Separate Account are not publicly traded
mutual funds. The investment options are only available to you as investment
options in the policies, or in some cases through other variable annuity
contracts or variable life insurance policies issued by us or by other life
insurance companies. In some cases, the investment options also may be
available through participation in certain qualified pension or retirement
plans. The portfolios' investment advisers and managers (i.e. subadvisers) may
manage publicly traded mutual funds with similar names and investment
objectives.
However, the portfolios are not directly related to any publicly traded mutual
fund. You should not compare the performance of any investment option described
in this prospectus with the performance of a publicly traded mutual fund. The
performance of any publicly traded mutual fund could differ substantially from
that of any of the investment options of our Separate Account.
The portfolios available under the policies are as follows:
Portfolio
Portfolio Manager Investment Description
--------- ---------------- -------------------------------------
Science & Technology T. Rowe Price Seeks long-term growth of capital by
Associates, Inc. investing, under normal market
conditions, at least 80% of its net
assets (plus any borrowings for
investment purposes) in common stocks
15
Portfolio Portfolio Manager Investment Description
--------- ------------------- -------------------------------------
of companies expected to benefit
from the development, advancement,
and use of science and technology.
Current income is incidental to the
portfolio's objective.
Pacific Rim MFC Global Seeks long-term growth of capital by
Investment investing in a Diversified portfolio
Management (U.S.A.) that is comprised primarily of
Limited common stocks and equity-related
securities of corporations domiciled
in countries in the Pacific Rim
region.
Health Sciences T. Rowe Price Seeks long-term capital appreciation
Associates, Inc. by investing, under normal market
conditions, at least 80% of its net
assets (plus any borrowings for
investment purposes) in common
stocks of companies engaged in the
research, development, production,
or distribution of products or
services related to health care,
medicine, or the life sciences.
Emerging Growth MFC Global Seeks superior long-term rates of
Investment return through capital appreciation
Management (U.S.A.) by investing, under normal
Limited circumstances, primarily in high
quality securities and convertible
instruments of small-cap U.S.
companies.
Small Cap Growth Wellington Seeks long-term capital appreciation
Management Company, by investing, under normal market
LLP conditions, primarily in small-cap
companies that are believed to offer
above average potential for growth
in revenues and earnings.
Emerging Small Franklin Advisers, Seeks long-term growth of capital by
Company Inc. investing, under normal market
conditions, at least 80% of its net
assets (plus any borrowings for
investment purposes) in common stock
equity securities of companies with
market capitalizations that
approximately match the range of
capitalization of the Russell 2000
Growth Index* at the time of
purchase.
Small Cap Independence Seeks maximum capital appreciation
Investment LLC consistent with reasonable risk to
principal by investing, under normal
market conditions, at least 80% of
its net assets in equity securities
of companies whose market
capitalization is under $2 billion.
Small Cap Index MFC Global Seeks to approximate the aggregate
Investment total return of a small cap U.S.
Management (U.S.A.) domestic equity market index by
Limited attempting to track the performance
of the Russell 2000 Index.*
Dynamic Growth Deutsche Asset Seeks long-term growth of capital by
Management Inc. investing in stocks and other equity
securities of medium-sized U.S.
companies with strong growth
potential.
Mid Cap Stock Wellington Seeks long-term growth of capital by
Management Company, investing primarily in equity
LLP securities of mid-size companies
with significant capital
appreciation potential.
Natural Resources Wellington Seeks long-term total return by
Management Company, investing, under normal market
LLP conditions, primarily in equity and
equity-related securities of natural
resource-related companies worldwide.
All Cap Growth AIM Capital Seeks long-term capital appreciation
Management, Inc. by investing the portfolio's assets,
under normal market conditions,
principally in common stocks of
companies that are likely to benefit
from new or innovative products,
services or processes, as well as
those that have experienced above
average, long-term growth in
earnings and have excellent
prospects for future growth.
Strategic Fidelity Management Seeks growth of capital by investing
Opportunities & Research Company primarily in common stocks.
Investments may include securities
of domestic and foreign issuers, and
growth or value stocks or a
combination of both.
Financial Services Davis Advisors Seeks growth of capital by investing
primarily in common stocks of
financial companies. During normal
market conditions, at least 80% of
the portfolio's net assets (plus any
borrowings for investment purposes)
are invested in
16
Portfolio Portfolio Manager Investment Description
--------- ----------------- ----------------------
companies that are principally
engaged in financial services. A
company is "principally engaged" in
financial services if it owns
financial services-related assets
constituting at least 50% of the
value of its total assets, or if at
least 50% of its revenues are
derived from its provision of
financial services.
International Marisco Capital Seeks long-term growth of capital by
Opportunities Management, LLC investing, under normal market
conditions, at least 65% of its
assets in common stocks of foreign
companies that are selected for
their long-term growth potential.
The portfolio may invest in
companies of any size throughout the
world. The portfolio normally
invests in issuers from at least
three different countries not
including the U.S. The portfolio may
invest in common stocks of companies
operating in emerging markets.
International Small Templeton Seeks capital appreciation by
Cap Investment Counsel, investing primarily in the common
Inc. stock of companies located outside
the U.S. which have total stock
market capitalization or annual
revenues of $1.5 billion or less.
International SSgA Funds Seeks to track the performance of
Equity Index B Management, Inc. broad-based equity indices of
foreign companies in developed and
emerging markets by attempting to
track the performance of the MSCI
All Country World ex-US Index*.
(Series I shares are available for
sale to contracts purchased prior to
May 13, 2002; Series II shares are
available for sale to contracts
purchased on or after May 13, 2002).
Overseas Equity Capital Guardian Seeks long-term capital appreciation
Trust Company by investing, under normal
conditions, at least 80% of its
assets in equity securities of a
diversified mix of large established
and medium-sized foreign companies
located primarily in developed
countries and, to a lesser extent,
in emerging markets.
American Capital Research Invests all of its assets in Class 2
International Management Company shares of the International Fund, a
series of American Fund Insurance
Series. The International Fund
invests primarily in common stocks
of companies located outside the
United States.
International Value Templeton Seeks long-term growth of capital by
Investment Counsel, investing, under normal market
Inc. conditions, primarily in equity
securities of companies located
outside the U.S., including emerging
markets.
International Core Grantham, Mayo, Van Seeks to outperform the MSCI EAFE
Otterloo & Co. LLC Index* by investing typically in a
diversified portfolio of equity
investments from developed markets
other than the U.S.
Quantitative Mid Cap MFC Global Seeks long-term growth of capital by
Investment investing, under normal market
Management (U.S.A.) conditions, at least 80% of its
Limited total assets (plus any borrowings
for investment purposes) in U.S.
mid- cap stocks, convertible
preferred stocks, convertible bonds
and warrants.
Mid Cap Index MFC Global Seeks to approximate the aggregate
Investment total return of a mid- cap U.S.
Management (U.S.A.) domestic equity market index by
Limited attempting to track the performance
of the S&P Mid Cap 400 Index*.
Mid Cap Core AIM Capital Seeks long-term growth of capital by
Management, Inc. investing, under normal market
conditions, at least 80% of its
assets in equity securities,
including convertible securities, of
mid- capitalization companies.
Global Templeton Global Seeks long-term capital appreciation
Advisors Limited by investing, under normal market
conditions, at least 80% of its net
assets (plus any borrowings for
investment purposes) in equity
securities of companies located
anywhere in the world, including
emerging markets.
Capital Appreciation Jennison Associates Seeks long-term capital growth by
LLC investing at least 65% of its total
assets in equity-related securities
of companies that exceed $1 billion
in market capitalization and that the
17
Portfolio Portfolio Manager Investment Description
--------- ------------------- -------------------------------------
subadviser believes have
above-average growth prospects.
These companies are generally
medium-to-large capitalization
companies.
American Growth Capital Research Invests all of its assets in Class 2
Management Company shares of the Growth Fund, a series
of American Fund Insurance Series.
The Growth Fund invests primarily in
common stocks of companies that
appear to offer superior
opportunities for growth of capital.
U.S. Global Leaders Sustainable Growth Seeks long-term growth of capital by
Growth Advisers, L.P. investing, under normal market
conditions, primarily in common
stocks of "U.S. Global Leaders."
Quantitative All Cap MFC Global Seeks long-term growth of capital by
Investment investing, under normal
Management (U.S.A.) circumstances, primarily in equity
Limited securities of U.S. companies. The
portfolio will generally focus on
equity securities of U.S. companies
across the three market
capitalization ranges of large, mid
and small.
All Cap Core Deutsche Asset Seeks long-term growth of capital by
Management Inc. investing primarily in common stocks
and other equity securities within
all asset classes (small, mid and
large cap) primarily those within
the Russell 3000 Index*.
Total Stock Market MFC Global Seeks to approximate the aggregate
Index Investment total return of a broad U.S.
Management (U.S.A.) domestic equity market index by
Limited attempting to track the performance
of the Wilshire 5000 Equity Index*.
Blue Chip Growth T. Rowe Price Seeks to achieve long-term growth of
Associates, Inc. capital (current income is a
secondary objective) by investing,
under normal market conditions, at
least 80% of the portfolio's total
assets in the common stocks of large
and medium- sized blue chip growth
companies. Many of the stocks in the
portfolio are expected to pay
dividends.
U.S. Large Cap Capital Guardian Seeks long-term growth of capital
Trust Company and income by investing the
portfolio's assets, under normal
market conditions, primarily in
equity and equity-related securities
of companies with market
capitalization greater than $500
million.
Core Equity Legg Mason Funds Seeks long-term capital growth by
Management, Inc. investing, under normal market
conditions, primarily in equity
securities that, in the subadviser's
opinion, offer the potential for
capital growth. The subadviser seeks
to purchase securities at large
discounts to the subadviser's
assessment of their intrinsic value.
Strategic Value Massachusetts Seeks capital appreciation by
Financial Services investing, under normal market
Company conditions, at least 65% of its net
assets in common stocks and related
securities of companies which the
subadviser believes are undervalued
in the market relative to their long
term potential.
Large Cap Value Mercury Advisors Seeks long-term growth of capital by
investing, under normal market
conditions, primarily in a
diversified portfolio of equity
securities of large cap companies
located in the U.S.
Classic Value Pzena Investment Seeks long-term growth of capital by
Management, LLC investing, under normal market
conditions, at least 80% of its net
assets in domestic equity securities.
Utilities Massachusetts Seeks capital growth and current
Financial Services income (income above that available
Company from a portfolio invested entirely
in equity securities) by investing,
under normal market conditions, at
least 80% of the portfolio's net
assets (plus any borrowings for
investment purposes) in equity and
debt securities of domestic and
foreign companies in the utilities
industry.
Real Estate Deutsche Asset Seeks to achieve a combination of
Securities Management Inc. long-term capital appreciation and
current income by investing, under
normal market conditions, at least
80% of its net assets (plus any
borrowings for investment purposes)
in equity securities of
18
Portfolio Portfolio Manager Investment Description
--------- ----------------- ----------------------
real estate investment trusts
("REITS") and real estate companies.
Small Cap Munder Capital Seeks long-term capital appreciation
Opportunities Management by investing, under normal
circumstances, at least 80% of its
assets in equity securities of
companies with market
capitalizations within the range of
the companies in the Russell 2000
Index*.
Small Cap Value Wellington Seeks long-term capital appreciation
Management Company, by investing, under normal market
LLP conditions, at least 80% of its
assets in small-cap companies that
are believed to be undervalued by
various measures and offer good
prospects for capital appreciation.
Small Company Value T. Rowe Price Seeks long-term growth of capital by
Associates, Inc. investing, under normal market
conditions, primarily in small
companies whose common stocks are
believed to be undervalued. Under
normal market conditions, the
portfolio will invest at least 80%
of its net assets (plus any
borrowings for investment purposes)
in companies with a market
capitalization that do not exceed
the maximum market capitalization of
any security in the Russell 2000
Index* at the time of purchase.
Special Value Salomon Brothers Seeks long-term capital growth by
(only Series II Asset Management investing, under normal
available) Inc. circumstances, at least 80% of its
net assets in common stocks and
other equity securities of companies
whose market capitalization at the
time of investment is no greater
than the market capitalization of
companies in the Russell 2000 Value
Index*.
Mid Value T. Rowe Price Seeks long-term capital appreciation
Associates, Inc. by investing, under normal market
conditions, primarily in a
diversified mix of common stocks of
mid size U.S. companies that are
believed to be undervalued by
various measures and offer good
prospects for capital appreciation.
Mid Cap Value Lord, Abbett & Co Seeks capital appreciation by
investing, under normal market
conditions, at least 80% of the
portfolio's net assets (plus any
borrowings for investment purposes)
in mid-sized companies, with market
capitalization of roughly $500
million to $10 billion.
Value Van Kampen Seeks to realize an above-average
total return over a market cycle of
three to five years, consistent with
reasonable risk, by investing
primarily in equity securities of
companies with capitalizations
similar to the market capitalization
of companies in the Russell Midcap
Value Index*.
All Cap Value Lord, Abbett & Co Seeks capital appreciation by
investing in equity securities of
U.S. and multinational companies in
all capitalization ranges that the
subadviser believes are undervalued.
Growth & Income Independence Seeks income and long-term capital
Investment LLC appreciation by investing, under
normal market conditions, primarily
in a diversified mix of common
stocks of large U.S. companies.
500 Index B MFC Global Seeks to approximate the aggregate
Investment total return of a broad U.S.
Management (U.S.A.) domestic equity market index
Limited investing, under normal market
conditions, at least 80% of its net
assets (plus any borrowings for
investment purposes) in (a) the
common stocks that are included in
the S&P 500 Index* and (b)
securities (which may or may not be
included in the S&P 500 Index) that
MFC Global (U.S.A.) believes as a
group will behave in a manner
similar to the index.
Fundamental Value Davis Advisors Seeks growth of capital by
investing, under normal market
conditions, primarily in common
stocks of U.S. companies with market
capitalizations of at least $5
billion that the subadviser believes
are undervalued. The portfolio may
also invest in U.S. companies with
smaller capitalizations.
U.S. Core Grantham, Mayo, Van Seeks long-term growth of capital
Otterloo & Co. LLC and income, consistent with prudent
investment risk, by investing
primarily in a
19
Portfolio Portfolio Manager Investment Description
--------- ----------------- ----------------------
diversified portfolio of common
stocks of U.S. issuers which the
subadviser believes are of high
quality.
Large Cap UBS Global Asset Seeks to maximize total return,
Management consisting of capital appreciation
and current income by investing,
under normal circumstances, at least
80% of its net assets (plus
borrowings for investment purposes,
if any) in equity securities of U.S.
large capitalization companies.
Quantitative Value MFC Global Seeks long-term capital appreciation
Investment by investing primarily in large-cap
Management (U.S.A.) U.S. securities with the potential
Limited for long-term growth of capital.
American Growth - Capital Research Invests all of its assets in Class 2
Income Management Company shares of the Growth-Income Fund, a
series of American Fund Insurance
Series. The Growth-Income Fund
invests primarily in common stocks
or other securities which
demonstrate the potential for
appreciation and/or dividends.
Equity-Income T. Rowe Price Seeks to provide substantial
Associates, Inc. dividend income and also long-term
capital appreciation by investing
primarily in dividend-paying common
stocks, particularly of established
companies with favorable prospects
for both increasing dividends and
capital appreciation.
American Blue Chip Capital Research Invests all of its assets in Class 2
Income and Growth Management Company shares of the Blue Chip Income and
Growth Fund, a series of American
Fund Insurance Series. The Blue Chip
Income and Growth Fund invests
primarily in common stocks of
larger, more established companies
based in the U.S. with market
capitalizations of $4 billion and
above.
Income & Value Capital Guardian Seeks the balanced accomplishment of
Trust Company (a) conservation of principal and
(b) long-term growth of capital and
income by investing the portfolio's
assets in both equity and
fixed-income securities. The
subadviser has full discretion to
determine the allocation between
equity and fixed income securities.
Managed Independence Seeks the balanced accomplishment of
Investment LLC (a) conservation of principal and
Capital Guardian (b) long-term growth of capital and
Trust Company income by investing the portfolio's
Declaration assets in both equity and
Management & fixed-income securities. The
Research LLC subadviser has full discretion to
determine the allocation between
equity and fixed income securities.
PIMCO VIT All Asset Pacific Investment The portfolio invests primarily in a
Portfolio (a series Management Company diversified mix of: (a) common
of the PIMCO stocks of large and mid sized U.S.
Variable Insurance companies, and (b) bonds with an
Trust) (only Class overall intermediate term average
M is available for maturity.
sale)
Global Allocation UBS Global Asset Seeks total return, consisting of
Management long-term capital appreciation and
current income, by investing in
equity and fixed income securities
of issuers located within and
outside the U.S.
High Yield Salomon Brothers Seeks to realize an above-average
Asset Management total return over a market cycle of
Inc. three to five years, consistent with
reasonable risk, by investing
primarily in high yield debt
securities, including corporate
bonds and other fixed-income
securities.
U.S. High Yield Bond Wells Fargo Fund Seeks total return with a high level
Management, LLC of current income by investing,
under normal market conditions,
primarily in below investment-grade
debt securities (sometimes referred
to as "junk bonds" or high yield
securities). The portfolio also
invests in corporate debt securities
and may buy preferred and other
convertible securities and bank
loans.
Strategic Bond Salomon Brothers Seeks a high level of total return
Asset Management consistent with preservation of
Inc. capital by giving its subadviser
broad discretion to deploy the
portfolio's assets among certain
segments of the fixed income market
as the subadviser believes will best
contribute to achievement of the
portfolio's investment objective.
20
Portfolio Portfolio Manager Investment Description
--------- ----------------- ----------------------
Strategic Income Sovereign Asset Seeks a high level of current income
Management, LLC, LLC by investing, under normal market
conditions, primarily in foreign
government and corporate debt
securities from developed and
emerging markets; U.S. Government
and agency securities; and U.S. high
yield bonds.
Global Bond Pacific Investment Seeks to realize maximum total
Management Company return, consistent with preservation
of capital and prudent investment
management, by investing the
portfolio's assets primarily in
fixed income securities denominated
in major foreign currencies, baskets
of foreign currencies (such as the
ECU), and the U.S. dollar.
Investment Quality Wellington Seeks a high level of current income
Bond Management Company, consistent with the maintenance of
LLP principal and liquidity, by
investing in a diversified portfolio
of investment grade bonds.
Investments will tend to focus on
corporate bonds and U.S. Government
bonds with intermediate to longer
term maturities. The portfolio may
also invest up to 20% of its assets
in non-investment grade fixed income
securities.
Total Return Pacific Investment Seeks to realize maximum total
Management Company return, consistent with preservation
of capital and prudent investment
management, by investing, under
normal market conditions, at least
65% of the portfolio's assets in a
diversified portfolio of fixed
income securities of varying
maturities. The average portfolio
duration will normally vary within a
three- to six- year time frame based
on the subadviser's forecast for
interest rates.
American Bond Capital Research Seeks to maximize current income and
Management Co LLC preserve capital.
Real Return Bond Pacific Investment Seeks maximum return, consistent
Management Company with preservation of capital and
prudent investment management, by
investing, under normal market
conditions, at least 80% of its net
assets in inflation-indexed bonds of
varying maturities issued by the
U.S. and non-U.S. governments and by
corporations.
Bond Index B Declaration Seeks to track the performance of
Management & the Lehman Brothers Aggregate
Research LLC Index** (which represents the U.S.
investment grade bond market) by
investing at least 80% of its assets
in securities listed in the Lehman
Index.
Core Bond Wells Fargo Fund Seeks total return consisting of
Management, LLC income and capital appreciation by
investing, under normal market
conditions, in a broad range of
investment-grade debt securities.
The subadviser invests in debt
securities that the subadviser
believes offer attractive yields and
are undervalued relative to issues
of similar credit quality and
interest rate sensitivity. From time
to time, the portfolio may also
invest in unrated bonds that the
subadviser believes are comparable
to investment-grade debt securities.
Under normal circumstances, the
subadviser expects to maintain an
overall effective duration range
between 4 and 5 1/2 years.
Active Bond Declaration Seeks income and capital
Management & appreciation by investing at least
Research LLC 80% of its assets in a diversified
Sovereign Asset mix of debt securities and
Management, LLC instruments.
U.S. Government Salomon Brothers Seeks a high level of current income
Securities Asset Management consistent with preservation of
Inc. capital and maintenance of
liquidity, by investing in debt
obligations and mortgage-backed
securities issued or guaranteed by
the U.S. Government, its agencies or
instrumentalities and derivative
securities such as collateralized
mortgage obligations backed by such
securities.
Short- Term Bond Declaration Seeks income and capital
Management & appreciation by investing at least
Research LLC 80% of its assets in a diversified
mix of debt securities and
instruments.
21
Portfolio Portfolio Manager Investment Description
--------- ------------------------- -------------------------------------------------------------------------
Money Market B MFC Global Investment Seeks maximum current income consistent with preservation of
Management (U.S.A.) principal and liquidity by investing in high quality, money market
Limited instruments with maturities of 397 days or less issued primarily by U. S.
entities.
Lifestyle Aggressive MFC Global Investment Seeks to provide long-term growth of capital (current income is not a
Management (U.S.A.) consideration) by investing 100% of the Lifestyle Trust's assets in other
Limited Deutsche Asset portfolios of the Trust which invest primarily in equity securities.
Management Inc.
Lifestyle Growth MFC Global Investment Seeks to provide long-term growth of capital with consideration also
Management (U.S.A.) given to current income by investing approximately 20% of the
Limited Deutsche Asset Lifestyle Trust's assets in other portfolios of the Trust which invest
Management Inc. primarily in fixed income securities and approximately 80% of its
assets in other portfolios of the Trust which invest primarily in equity
securities.
Lifestyle Balanced MFC Global Investment Seeks to provide a balance between a high level of current income and
Management (U.S.A.) growth of capital with a greater emphasis given to capital growth by
Limited Deutsche Asset investing approximately 40% of the Lifestyle Trust's assets in other
Management Inc. portfolios of the Trust which invest primarily in fixed income securities
and approximately 60% of its assets in other portfolios of the Trust
which invest primarily in equity securities.
Lifestyle Moderate MFC Global Investment Seeks to provide a balance between a high level of current income and
Management (U.S.A.) growth of capital with a greater emphasis given to current income by
Limited Deutsche Asset investing approximately 60% of the Lifestyle Trust's assets in other
Management Inc. portfolios of the Trust which invest primarily in fixed income securities
and approximately 40% of its assets in other portfolios of the Trust
which invest primarily in equity securities.
Lifestyle Conservative MFC Global Investment Seeks to provide a high level of current income with some
Management (U.S.A.) consideration also given to growth of capital by investing
Limited Deutsche Asset approximately 80% of the Lifestyle Trust's assets in other portfolios of
Management Inc. the Trust which invest primarily in fixed income securities and
approximately 20% of its assets in other portfolios of the Trust which
invest primarily in equity securities.
Brandes International Brandes Investment Seeks long-term capital appreciation through investment in equity
Equity Partners, LLC securities of foreign issuers, including common stocks, and securities
that are convertible into common stocks.
Turner Core Growth Turner Investment Seeks long-term capital appreciation through investment mainly in
Partners, LLC common stocks of U.S. companies that the portfolio manager believes
have strong earnings-growth potential.
Frontier Capital Frontier Capital Seeks maximum capital appreciation through investment in common
Appreciation Management Company, stock of U.S. companies of all states, with emphasis on stocks with
LLC capitalizations consistent with the capitalizations of those companies
found in the Russell 2500 Index*.
Business Opportunity Iridian Asset Management, Seeks long-term capital appreciation through investment primariliy in
Value LLC equity securities of U.S. issuers in the large-to- medium capitalization
segment of the U.S. stock market.
* "Standard & Poor's(R)," "S&P 500(R)," "Standard and Poor's 500(R)" and "S&P
Mid Cap 400(R)" are trademarks of The McGraw-Hill Companies, Inc. "Russell
2000(R)," "Russell 2000(R) Growth," and "Russell 3000(R)" are trademarks of
Frank Russell Company. "Wilshire 5000(R)" is a trademark of Wilshire
Associates. "MSCI All Country World ex US Index" and "EAFE(R)" are
trademarks of Morgan Stanley & Co. Incorporated. None of the portfolios are
sponsored, endorsed, managed, advised, sold or promoted by any of these
companies, and none of these companies make any representation regarding the
advisability of investing in the portfolios.
22
** The Lehman Brothers Aggregate Index is a Bond Index. A Bond Index relies on
indicators such as quality, liquidity, term and duration as relevant
measures of performance.
The indexes referred to in the portfolio descriptions track companies having
the ranges of market capitalization, as of December 31, 2005, set out below:
Russell 2000 Growth Index -- $26 million to $4.4 billion Russell 2000 Index
-- $105 million to $4.4 billion Russell 2500 Index -- $25 million to $11.2
billion Russell 3000 Index -- $26 million to $370 billion Russell 2000 Value
Index -- $41 million to $3.5 billion Russell Midcap Value Index -- $582
million to $18.2 billion Wilshire 5000 Equity Index -- $1 million to $370
billion
23
MSCI All Country World ex US Index -- $419 million to $219.5 billion MSCI
EAFE Index -- $419 million to $219.5 billion S&P Mid Cap 400 Index -- $423
million to $14.6 billion S&P 500 Composite Stock Price Index -- $768 million
to $370 billion
You bear the investment risk of any portfolio you choose as an investment
option for your contract. A full description of each portfolio, including the
investment objectives, policies and restrictions of, and the risks relating to
investments in, each portfolio is contained in the portfolio prospectuses. The
portfolio prospectuses should be read carefully before allocating purchase
payments to a sub-account.
If the shares of a portfolio are no longer available for investment or in our
judgment investment in a portfolio becomes inappropriate, we may eliminate the
shares of a portfolio and substitute shares of another portfolio of the Trust
or another open-end registered investment company. Substitution may be made
with respect to both existing investments and the investment of future purchase
payments. However, we will make no such substitution without first notifying
you and obtaining approval of the appropriate insurance regulatory authorities
and the SEC (to the extent required by the 1940 Act).
We will purchase and redeem Series Fund shares for the Account at their net
asset value without any sales or redemption charges. Shares of a Series Fund
represent an interest in one of the funds of the Series Fund which corresponds
to a subaccount of the Account. Any dividend or capital gains distributions
received by the Account will be reinvested in shares of that same fund at their
net asset value as of the dates paid.
On each business day, shares of each fund are purchased or redeemed by us for
each subaccount based on, among other things, the amount of net premiums
allocated to the subaccount, distributions reinvested, and transfers to, from
and among subaccounts, all to be effected as of that date. Such purchases and
redemptions are effected at each fund's net asset value per share determined
for that same date. A "business day" is any date on which the New York Stock
Exchange is open for trading. We compute policy values for each business day as
of the close of that day (usually 4:00 p.m.Eastern time).
We will vote shares of the portfolios held in the Account at the shareholder
meetings according to voting instructions received from persons having the
voting interest under the contracts. We will determine the number of portfolio
shares for which voting instructions may be given not more than 90 days prior
to the meeting. Proxy material will be distributed to each person having the
voting interest under the contract together with appropriate forms for giving
voting instructions. We will vote all portfolio shares that we hold (including
our own shares and those we hold in the Account for contract owners) in
proportion to the instructions so received.
We determine the number of a fund's shares held in a subaccount attributable to
each owner by dividing the amount of a policy's account value held in the
subaccount by the net asset value of one share in the fund. Fractional votes
will be counted. We determine the number of shares as to which the owner may
give instructions as of the record date for a Series Fund's meeting. Owners of
policies may give instructions regarding the election of the Board of Trustees
or Board of Directors of a Series Fund, ratification of the selection of
independent auditors, approval of Series Fund investment advisory agreements
and other matters requiring a shareholder vote. We will furnish owners with
information and forms to enable owners to give voting instructions.
However, we may, in certain limited circumstances permitted by the SEC's rules,
disregard voting instructions. If we do disregard voting instructions, you will
receive a summary of that action and the reasons for it in the next semi-annual
report to owners.
The voting privileges described above reflect our understanding of applicable
federal securities law requirements. To the extent that applicable law,
regulations or interpretations change to eliminate or restrict the need for
such voting privileges, we reserve the right to proceed in accordance with any
such revised requirements. We also reserve the right, subject to compliance
with applicable law, including approval of owners if so required, (1) to
transfer assets determined by John Hancock NY to be associated with the class
of policies to which your policy belongs from the Account to another separate
account or subaccount, (2) to deregister the Account under the 1940 Act, (3) to
substitute for the fund shares held by a subaccount any other investment
permitted by law, and (4) to take any action necessary to comply with or obtain
any exemptions from the 1940 Act. Any such change will be made only if, in our
judgment, the change would best serve the interests of owners of policies in
your policy class or would be appropriate in carrying out the purposes of such
policies. We would notify owners of any of the forgoing changes and to the
extent legally required, obtain approval of affected owners and any regulatory
body prior thereto. Such notice and approval, however, may not be legally
required in all cases.
Description of John Hancock NY
John Hancock NY is a stock life insurance company organized under the laws
of New York on February 10, 1992. Our principal office is located at 100 Summit
Lake Drive, Second Floor, Valhalla, New York 10595. We are a wholly-owned
subsidiary of John Hancock Life Insurance Company (U.S.A.). Our ultimate parent
is Manulife Financial Corporation ("MFC"), a publicly traded company based in
Toronto, Canada. MFC is the holding company of The Manufacturers Life Insurance
Company and its subsidiaries, collectively known as Manulife Financial.
However, neither John Hancock NY nor any of its affiliated companies guarantees
the investment performance of the Account.
We have received the following ratings from independent rating agencies:
A++ A.M. Best
Superior companies have a very strong ability to meet their obligations; 1st
category of 16 AA+ Fitch Ratings Very strong capacity to meet policyholder
and contract obligations; 2nd category of 24 AA+ Standard & Poor's Very
strong financial security characteristics; 2nd category of 21
These ratings, which are current as of the date of this prospectus and are
subject to change, are assigned as a measure of John Hancock NY's ability to
honor any guarantees provided by the policy and any applicable optional riders,
but do not specifically relate to its products, the performance (return) of
these products, the value of any investment in these products upon withdrawal
or to individual securities held in any portfolio. These ratings do not apply
to the safety and performance of the Separate Account.
Description of Separate Account B
The investment accounts shown on page 1 are in fact subaccounts of Separate
Account B (the "Account"), a separate account established under New York law.
The Account meets the definition of "separate account" under the Federal
securities laws and is registered as a unit investment trust under the 1940
Act. Such registration does not involve supervision by the SEC of the
management of the Account or of us.
The Account's assets are our property. Each policy provides that amounts we
hold in the Account pursuant to the policies cannot be reached by any other
persons who may have claims against us and can't be used to pay any
indebtedness of John Hancock NY other than those arising out of policies that
use the Account. Income, gains and losses credited to, or charged against, the
Account reflect the Account's own investment experience and not the investment
experience of the John Hancock NY's other assets.
New subaccounts may be added and made available to policy owners from time
to time. Existing subaccounts may be modified or deleted at any time.
The fixed account options
Our obligations under any fixed account options are backed by our general
account assets. Our general account consists of assets owned by us other than
those in the Account and in other separate accounts that we may establish.
Subject to applicable law, we have sole discretion over the investment of
assets of the general account and policy owners do not share in the investment
experience of, or have any preferential claim on, those assets. Instead, we
guarantee that the policy value allocated to any fixed account will accrue
interest daily at an effective annual rate that we determine without regard to
the actual investment experience of the general account. We currently offer two
fixed account options -- the standard fixed account, and the enhanced yield
fixed account offered as a supplementary benefit rider. The effective annual
rate we declare for the fixed account options will never be less than 3%. We
reserve the right to offer one or more additional fixed accounts with
characteristics that differ from those of the current fixed account options,
but we are under no obligation to do so.
Because of exemptive and exclusionary provisions, interests in our fixed
account options have not been and will not be registered under the Securities
Act of 1933 ("1933 Act") and our general account has not been registered as an
investment company under the 1940 Act. Accordingly, neither the general account
nor any interests therein are subject to the provisions of these acts, and we
have been advised that the staff of the SEC has not reviewed the disclosure in
this prospectus relating to any fixed account. Disclosure
24
regarding fixed accounts may, however, be subject to certain
generally-applicable provisions of the Federal securities laws relating to
accuracy and completeness of statements made in prospectuses.
The death benefit
In your application for the policy, you will tell us how much life insurance
coverage you want on the life of the insured person. This is called the "Total
Face Amount". Total Face Amount is composed of the Base Face Amount and any
Supplemental Face Amount you elect. The Supplemental Face Amount you can have
generally cannot exceed 400% of the Base Face Amount at the Issue Date.
Thereafter, increases to the Supplemental Face Amount cannot exceed 400% of the
Total Face Amount at the Issue Date. There are a number of factors you should
consider in determining whether to elect coverage in the form of Base Face
Amount or in the form of Supplemental Face Amount. These factors are discussed
under "Base Face Amount vs. Supplemental Face Amount" below.
When the insured person dies, we will pay the death benefit minus any
outstanding loans, accrued interest and unpaid fees and charges. There are two
ways of calculating the death benefit. You must choose which one you want in
the application. The two death benefit options are:
. Option 1 - The death benefit will equal the greater of (1) the Total Face
Amount, or (2) the minimum death benefit (as described below).
. Option 2 - The death benefit will equal the greater of (1) the Total Face
Amount plus the policy value on the date of death, or (2) the minimum
death benefit.
For the same premium payments, the death benefit under Option 2 will tend to
be higher than the death benefit under Option 1. On the other hand, the monthly
insurance charge will be higher under Option 2 to compensate us for the
additional insurance risk. Because of that, the policy value will tend to be
higher under Option 1 than under Option 2 for the same premium payments.
Limitations on payment of death benefit
If the insured person commits suicide within certain time periods, the
amount of death benefit we pay will be limited as described in the policy.
Also, if an application misstated the age or gender of the insured person, we
will adjust the amount of any death benefit as described in the policy.
Base Face Amount vs. Supplemental Face Amount
As noted above, you should consider a number of factors in determining
whether to elect coverage in the form of Base Face Amount or in the form of
Supplemental Face Amount.
For the same amount of premiums paid, the amount of the premium charge on
premium payments and the face amount charge deducted from policy value and the
amount of compensation paid to the selling insurance agent will generally be
less if coverage is included as Supplemental Face Amount, rather than as Base
Face Amount. On the other hand, the amount of any Supplemental Face Amount may
be subject to a shorter No-Lapse Guarantee Period (see "No-lapse guarantee").
Also, the amount of any Supplemental Face Amount coverage expires on the policy
anniversary nearest the insured person's 121/st/ birthday.
If your priority is to reduce your Face Amount charges and the premium
charge on your premiums, you may wish to maximize the proportion of the
Supplemental Face Amount. However, if your priority is to take advantage of the
No-Lapse Guarantee feature after the 2nd policy year or to maximize the death
benefit when the insured person reaches 121, then you may wish to maximize the
proportion of the Base Face Amount.
If you want to purchase Supplemental Face Amount coverage, you may select
either a level amount of coverage or an amount of coverage that increases each
year up to a prescribed limit. If you elect to forego any scheduled increase in
coverage, we reserve the right to discontinue scheduled increases for all
following years.
The minimum death benefit
In order for a policy to qualify as life insurance under Federal tax law,
there has to be a minimum amount of insurance in relation to policy value.
There are two tests that can be applied under Federal tax law -- the "guideline
premium test" and the "cash value accumulation test". When you elect the death
benefit option, you must also elect which test you wish to have applied. Once
elected, the test cannot be changed without our approval. Under the guideline
premium test, we compute the minimum death benefit each
25
business day by multiplying the policy value on that date by the death benefit
factor applicable on that date. In this case, the factors are derived by
applying the guideline premium test. Factors for some ages are shown in the
table below:
Applicable
Attained Age Factor
------------ ----------
40 and under............................ 250%
45...................................... 215%
50...................................... 185%
55...................................... 150%
60...................................... 130%
65...................................... 120%
70...................................... 115%
75...................................... 105%
90...................................... 105%
95 and above............................ 100%
A table showing the factor for each age will appear in the policy.
Under the cash value accumulation test, we compute the minimum death benefit
each business day by multiplying the policy value on that date by the death
benefit factor applicable on that date. In this case, the factors are derived
by applying the cash value accumulation test. The factor decreases as attained
age increases. A table showing the factor for each age will appear in the
policy.
As noted above, you have to elect which test will be applied when you elect
the death benefit option. The cash value accumulation test may be preferable if
you want an increasing death benefit in later policy years and/or want to fund
the policy at the "7 pay" limit for the full 7 years (see "Tax
considerations"). The guideline premium test may be preferable if you want the
policy value under the policy to increase without increasing the death benefit
as quickly as might otherwise be required.
To the extent that the calculation of the minimum death benefit under the
selected life insurance qualification test causes the death benefit to exceed
our limits, we reserve the right to return premiums or distribute a portion of
the policy value so that the resulting amount of insurance is maintained within
our limits. Alternatively, if we should decide to accept the additional amount
of insurance, we may require additional evidence of insurability.
When the insured person reaches 121
At and after the policy anniversary nearest the insured person's 121/st/
birthday, the following will occur:
. Any Supplemental Face Amount will be limited (see "Base Face Amount vs.
Supplemental Face Amount").
. We will stop deducting any monthly deductions.
. We will stop accepting any premium payments.
Requesting an increase in coverage
After the first policy year, we may approve an unscheduled increase in the
Supplemental Face Amount at any time, subject to the maximum limit stated in
the policy. Generally, each such increase must be at least $50,000. However,
you will have to provide us with evidence that the insured person still meets
our requirements for issuing insurance coverage. An approved increase will take
effect on the policy anniversary on or next following the date we approve the
request.
Requesting a decrease in coverage
After the first policy year, we may approve a reduction in the Base Face
Amount or the Supplemental Face Amount, but only if:
. the remaining Total Face Amount and Base Face Amount will each be at
least $100,000, and
. the remaining Total Face Amount will at least equal the minimum required
by the tax laws to maintain the policy's life insurance status.
26
A pro-rata portion of the surrender charge will be payable upon any
requested reduction in the Base Face Amount (see "Surrender charge"). An
approved decrease will take effect on the monthly deduction date on or next
following the date we approve the request. We reserve the right to require that
the Supplemental Face Amount be fully depleted before the Base Face Amount can
be reduced.
Change of death benefit option
Under our current administrative rules, we permit the death benefit option
to be changed from Option 2 to Option 1, after the first policy year. We
reserve the right to limit a request for a change if the change would cause the
policy to fail to qualify as life insurance for tax purposes.
A change in the death benefit option will result in a change in the policy's
Total Face Amount, in order to avoid any change in the amount of the death
benefit. The new Total Face Amount will be equal to the Total Face Amount prior
to the change plus the policy value as of the date of the change. The change
will take effect on the monthly deduction date on or next following the date
the written request for the change is received at our Service Office.
If you change the death benefit option, the Federal tax law test ("guideline
premium test" or "cash value accumulation test") that you elected at issue will
continue to apply. Please read "The minimum death benefit" for more information
about these Federal tax law tests.
Tax consequences of coverage changes
A change in the death benefit option or Total Face Amount will often change
the policy's limits under the life insurance qualification test that you
elected. To avoid having the policy cease to qualify as life insurance for tax
purposes, we reserve the right to (i) refuse or limit a change in the death
benefit option or Total Face Amount and (ii) change the Guideline Single
Premium or Guideline Level Premium, as applicable. Please read "Tax
considerations" to learn about possible tax consequences of changing your
insurance coverage under the policy.
Your beneficiary
You name your beneficiary when you apply for the policy. The beneficiary is
entitled to the proceeds we pay following the insured person's death. You may
change the beneficiary during the insured person's lifetime. Such a change
requires the consent of any named irrevocable beneficiary. A new beneficiary
designation is effective as of the date you sign it, but will not affect any
payments we make before we receive it. If no beneficiary is living when the
insured person dies, we will pay the insurance proceeds to the owner or the
owner's estate.
Ways in which we pay out policy proceeds
You may choose to receive proceeds from the policy as a single sum. This
includes proceeds that become payable because of death or surrender.
Alternatively, you can elect to have proceeds of $1,000 or more applied to any
of the other payment options we may offer at the time. You cannot choose an
option if the monthly payments under the option would be less than $50. We will
issue a supplementary agreement when the proceeds are applied to any
alternative payment option. That agreement will spell out the terms of the
option in full. If no alternative payment option has been chosen, proceeds will
be paid as a single sum.
Changing a payment option
You can change the payment option at any time before the proceeds are
payable. If you haven't made a choice, the payee of the proceeds has a
prescribed period in which he or she can make that choice.
Tax impact of payment option chosen
There may be tax consequences to you or your beneficiary depending upon
which payment option is chosen. You should consult with a qualified tax adviser
before making that choice.
27
Premiums
Planned premiums
The Policy Specifications page of your policy will show the "Planned
Premium" for the policy. You will also choose how often to pay premiums --
annually, semi-annually or quarterly. You may also choose to pay premiums by
monthly electronic funds transfers. The premium reminder notice we send you is
based on the amount and period you choose. However, payment of Planned Premiums
is not necessarily required. You need only invest enough to keep the policy in
force (see "Lapse and reinstatement").
Minimum initial premium
The minimum initial premium is set forth in the Policy Specifications page
of your policy. After the payment of the initial premium, premiums may be paid
at any time and in any amount until the insured person reaches age 121, subject
to the limitations on premium amount described below.
Maximum premium payments
Federal tax law limits the amount of premium payments you can make relative
to the amount of your policy's insurance coverage. We will not knowingly accept
any amount by which a premium payment exceeds this limit. If you exceed certain
other limits, the law may impose a penalty on amounts you take out of your
policy. More discussion of these tax law requirements is provided under "Tax
considerations".
Large premium payments may expose us to unanticipated investment risk. In
order to limit our investment risk exposure under certain market conditions, we
may refuse to accept additional premium payments. This may be the case, for
example, in an environment of decreasing interest rates, where we may not be
able to acquire investments for our general account that will sufficiently
match the liabilities we are incurring under our fixed account guarantees.
Excessive allocations may also interfere with the effective management of our
variable investment account portfolios, if we are unable to make an orderly
investment of the additional premium into the portfolios. Also, we may refuse
to accept an amount of additional premium if the amount of the additional
premium would increase our insurance risk exposure, and the insured person
doesn't provide us with adequate evidence that he or she continues to meet our
requirements for issuing insurance.
We will notify you in writing of our refusal to accept additional premium
under these provisions within three days following the date that it is received
by us, and will promptly thereafter take the necessary steps to return the
premium to you. Notwithstanding the foregoing limits on the additional premium
that we will accept, we will not refuse to accept any premium necessary to
prevent the policy from terminating.
Processing premium payments
No premiums will be accepted prior to our receipt of a completed application
at our Service Office. All premiums received prior to the Issue Date of the
policy will be held in the general account and credited with interest from the
date of receipt at the rate of return then being earned on amounts allocated to
the Money Market B investment account. After the Issue Date but prior to the
Allocation Date, premiums received are allocated to the Money Market B
investment account.The "Allocation Date" of the policy is the 10th day after
the Issue Date. The Issue Date is shown on the Policy Specifications page of
the policy. On the Allocation Date, the Net Premiums paid plus interest
credited, if any, will be allocated among the investment accounts or the fixed
account in accordance with the policy owner's instructions. The "Net Premium"
is the premium paid less the premium charge we deduct from it.
Any Net Premium received on or after the Allocation Date will be allocated
among investment accounts or any fixed account option as of the business day on
or next following the date the premium is received at the Service Office.
Monthly deductions are normally due on the Policy Date and at the beginning of
each policy month thereafter. However, if the monthly deductions are due prior
to the Contract Completion Date, they will be deducted from policy value on the
Contract Completion Date instead of the dates they were due (see "Procedures
for issuance of a policy" for the definition of "Contract Completion Date").
Payment of premiums will not guarantee that the policy will stay in force.
Conversely, failure to pay premiums will not necessarily cause the policy to
lapse. However, in states where permitted, the policy will have a No-Lapse
Guarantee which would prevent the policy from lapsing during the guarantee
period, provided certain criteria are satisfied.
Ways to pay premiums
If you pay premiums by check or money order, they must be drawn on a U.S.
bank in U.S. dollars and made payable to "John Hancock". We will not accept
credit card checks. We will not accept starter or third party checks if they
fail to satisfy our administrative requirements. Premiums after the first must
be sent to the John Hancock NY Service Office at the appropriate address shown
on the back cover of this prospectus.
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We will also accept premiums:
. by wire or by exchange from another insurance company, or
. via an electronic funds transfer program (any owner interested in making
monthly premium payments must use this method).
Lapse and reinstatement
Lapse
Unless the No-Lapse Guarantee is in effect, a policy will go into default if
at the beginning of any policy month the policy's net cash surrender value
would be zero or below after deducting the monthly deductions then due.
Therefore, a policy could lapse eventually if increases in policy value (prior
to deduction of policy charges) are not sufficient to cover policy charges. A
lapse could have adverse tax consequences as described under "Tax
considerations". We will notify you of the default and will allow a 61 day
grace period in which you may make a premium payment sufficient to bring the
policy out of default. The required payment will be equal to the amount
necessary to bring the net cash surrender value to zero, if it was less than
zero on the date of default, plus the monthly deductions due at the date of
default and payable at the beginning of each of the two policy months
thereafter, plus any applicable premium charge. If the required payment is not
received by the end of the grace period, the policy will terminate (i.e.,
"lapse") with no value.
No-lapse guarantee
In those states where it is permitted, as long as the cumulative premium
test is satisfied during the No-Lapse Guarantee Period, as described below, we
will guarantee that the policy will not go into default, even if adverse
investment experience or other factors should cause the policy's surrender
value to fall to zero or below during such period.
The Monthly No-Lapse Guarantee Premium is one-twelfth of the No-Lapse
Guarantee Premium.
The No-Lapse Guarantee Premium is set at issue on the basis of the Face
Amount and reflects the age, sex and risk class of the proposed insured, as
well as any additional rating and supplementary benefits, if applicable. It is
subject to change if (i) the Face Amount of the policy is changed, (ii) there
is a death benefit option change, (iii) there is a decrease in the Face Amount
of insurance due to a withdrawal, (iv) there is any change in the supplementary
benefits added to the policy or in the risk classification of the insured
person or (v) a temporary additional rating is added (due to a Face Amount
increase).
The No-Lapse Guarantee Period is set at issue and is stated in the policy.
The No-Lapse Guarantee Period for any Supplemental Face Amount is the first 2
policy years. Certain state limitations may apply, but generally the No-Lapse
Guarantee Period for the Base Face Amount is (i) the lesser of twenty years or
to age 75 or (ii) 5 years if the insured person's issue age is 70 or older. The
No-Lapse Guarantee Period for the Base Face Amount under any policy that has
elected an increasing Supplemental Face Amount or a Return of Premium rider,
however, is limited to the first 2 policy years.
While the No-Lapse Guarantee is in effect, we will determine at the
beginning of the policy month that your policy would otherwise be in default,
whether the cumulative premium test, described below, has been met. If the test
has not been satisfied, we will notify you of that fact and allow a 61-day
grace period in which you may make a premium payment sufficient to keep the
policy from going into default. This required payment, as described in the
notification, will be equal to the lesser of:
(a) the outstanding premium requirement to satisfy the cumulative premium
test at the date of default, plus the monthly No-Lapse Guarantee Premium due
for the next 3 policy months, or
(b) the amount necessary to bring the net cash surrender value to zero plus
the monthly deductions due, plus the next 3 monthly deductions plus the
applicable premium charge.
If the required payment is not received by the end of the grace period, the
No-Lapse Guarantee and the policy will terminate.
29
Cumulative premium test
The cumulative premium test is satisfied if, as of the beginning of the
policy month that your policy would otherwise be in default, the sum of all
premiums paid to date less any withdrawals taken on or before the date of the
test and less any policy debt is equal to or exceeds the sum of the Monthly
No-Lapse Guarantee Premiums due from the policy date to the date of the test.
Death during grace period
If the insured person should die during the grace period, the policy value
used in the calculation of the death benefit will be the policy value as of the
date of default and the insurance benefit will be reduced by any outstanding
monthly deductions due at the time of death.
Reinstatement
You can reinstate a policy that has gone into default and terminated at any
time within 21 days following the date of termination without furnishing
evidence of insurability, subject to the following conditions:
(a) The insured person's risk classification is standard or preferred, and
(b) The insured person's attained age is less than 46.
By making a written request, you can reinstate a policy that has gone into
default and terminated at any time within the three-year period following the
date of termination subject to the following conditions:
(a) You must provide to us evidence of the insured person's insurability
that is satisfactory to us; and
(b) You must pay a premium equal to the amount that was required to bring
the policy out of default immediately prior to termination, plus the amount
needed to keep the policy in force to the next scheduled date for payment of
the Planned Premium.
If the reinstatement is approved, the date of reinstatement will be the
later of the date we approve your request or the date the required payment is
received at our Service Office. In addition, any surrender charges will be
reinstated to the amount they were at the date of default. The policy value on
the date of reinstatement, prior to the crediting of any Net Premium paid in
connection with the reinstatement, will be equal to the policy value on the
date the policy terminated. Any policy debt not paid upon termination of a
policy will be reinstated if the policy is reinstated.
Generally, the suicide exclusion and incontestability provision will apply
from the effective date of the reinstatement. Your policy will indicate if this
is not the case. A surrendered policy cannot be reinstated.
The policy value
From each premium payment you make, we deduct the premium charge described
under "Deduction from premium payments". We invest the rest (known as the "Net
Premium") in the accounts (fixed or investment) you've elected. Special
investment rules apply to premiums processed prior to the Allocation Date. (See
"Processing premium payments".)
Over time, the amount you've invested in any investment account will
increase or decrease the same as if you had invested the same amount directly
in the corresponding underlying portfolio and had reinvested all portfolios'
dividends and distributions in additional portfolio shares; except that we will
deduct certain additional charges which will reduce your policy value. We
describe these charges under "Description of charges at the policy level".
We calculate the unit values for each investment account once every business
day as of the close of trading on the New York Stock Exchange, usually 4.00
p.m. Eastern time. Sales and redemptions within any investment account will be
transacted using the unit value next calculated after we receive your request
either in writing or other form that we specify. If we receive your request
before the close of our business day, we'll use the unit value calculated as of
the end of that business day. If we receive your request at or after the close
of our business day, we'll use the unit value calculated as of the end of the
next business day. If a scheduled transaction falls on a day that is not a
business day, we'll process it as of the end of the next business day.
The amount you've invested in a fixed account option will earn interest at
the rates we declare from time to time. We guarantee that this rate will be at
least 3%. If you want to know what the current declared rate is for a fixed
account, just call or write to us. Amounts you invest in a fixed account will
not be subject to the asset-based risk charge described under "Deductions from
policy
30
value". Otherwise, the policy level charges applicable to any fixed account are
the same as those applicable to the investment accounts.
Allocation of future premium payments
At any time, you may change the accounts (fixed or investment) in which
future premium payments will be invested. You make the original allocation in
the application for the policy. The percentages you select must be in whole
numbers and must total 100%.
Transfers of existing policy value
You may also transfer your existing policy value from one account (fixed or
investment) to another. To do so, you must tell us how much to transfer, either
as a whole number percentage or as a specific dollar amount. A confirmation of
each transfer will be sent to you. Without our approval, the maximum amount you
may transfer to or from any account in any policy is $1,000,000.
The policies are not designed for professional market timing organizations
or other persons or entities that use programmed or frequent transfers among
investment accounts. As a consequence, we have reserved the right to impose
limits on the number and frequency of transfers into and out of investment
accounts and to impose a fee of up to $25 for any transfer beyond an annual
limit (which will not be less than 12). No transfer fee will be imposed on any
transfer from an investment account into a fixed account if the transfer occurs
during the following periods:
. within 18 months after the policy's Issue Date, or
. within 60 days after the later of the effective date of a material change
in the investment objectives of any investment account or the date you
are notified of the change.
Subject to the restrictions that we've specified, you may transfer existing
policy value into or out of investment accounts. Transfers out of a fixed
account are subject to additional limitations noted below.
Our current practice is to restrict transfers into or out of investment
accounts to two per calendar month (except with respect to those policies
described in the following paragraph). For purposes of this restriction, and in
applying the limitation on the number of free transfers, transfers made during
the period from the opening of a business day (usually 9:00 a.m. Eastern Time)
to the close of that business day (usually 4:00 p.m. Eastern Time) are
considered one transfer. You may, however, transfer to the Money Market B
investment account even if the two transfer per month limit has been reached,
but only if 100% of the account value in all investment accounts is transferred
to the Money Market B investment account. If such a transfer to the Money
Market B investment account is made, then, for the 30 calendar day period after
such transfer, no transfers from the Money Market B investment account to any
other investment accounts (variable or fixed) may be made. If your policy
offers a dollar cost averaging or automatic asset allocation rebalancing
program, any transfers pursuant to such program are not considered transfers
subject to these restrictions on frequent trading. The restrictions described
in this paragraph will be applied uniformly to all policy owners subject to the
restrictions.
Policies such as yours may be purchased by a corporation or other entity as
a means to informally finance the liabilities created by an employee benefit
plan, and to this end the entity may aggregately manage the policies purchased
to match its liabilities under the plan. Policies sold under these
circumstances are subject to special transfer restrictions. In lieu of the two
transfers per month restriction, we will allow the policy owner under these
circumstances to rebalance the investment options in its policies within the
following limits: (i) during the 10 calendar day period after any policy values
are transferred from one investment account into a second investment account,
the values can only be transferred out of the second investment account if they
are transferred into the Money Market B investment account; and (ii) any policy
values that would otherwise not be transferable by application of the 10 day
limit described above and that are transferred into the Money Market B
investment account may not be transferred out of the Money Market B investment
account into any other accounts (fixed or investment) for 30 calendar days. The
restrictions described in this paragraph will be applied uniformly to all
policy owners subject to the restrictions.
The most you can transfer at any one time out of the enhanced yield fixed
account is the greater of (i) the fixed account maximum transfer amount of
$2,000, or (ii) the enhanced yield fixed account maximum transfer percentage of
10% multiplied by the amount in the enhanced yield fixed account on the
immediately preceding policy anniversary. Transfers out of the standard fixed
account option are limited to the greater of (i) $2,000, or (ii) the standard
fixed account maximum transfer percentage of 15% multiplied by the amount in
the standard fixed account on the immediately preceding policy anniversary. Any
transfer which involves a transfer out of a fixed account option may not
involve a transfer to the Money Market B investment account.
We reserve the right to impose a minimum amount limit on transfers out of a
fixed account. We also reserve the right to impose different restrictions on
any additional fixed account that we may offer in the future.
31
Dollar cost averaging. We may offer policy owners a dollar cost averaging
("DCA") program. Under the DCA program, the policy owner will designate an
amount which will be transferred monthly from the Money Market B investment
account into any other investment account(s) or any fixed account. If
insufficient funds exist to effect a DCA transfer, the transfer will not be
effected and you will be so notified. No fee is charged for this program.
We reserve the right to cease to offer this program as of 90 days after
written notice is sent to you.
Asset allocation balancer transfers. Under the asset allocation balancer
program the policy owner will designate an allocation of policy value among
investment accounts. At six-month intervals beginning six months after the
Policy Date, we will move amounts among the investment accounts as necessary to
maintain your chosen allocation. A change to your premium allocation
instructions will automatically result in a change in asset allocation balancer
instructions so that the two are identical unless you either instruct us
otherwise or have elected the dollar cost averaging program. No fee is charged
for this program.
We reserve the right to cease to offer this program as of 90 days after
written notice is sent to you.
Surrender and withdrawals
Surrender
You may surrender your policy in full at any time. If you do, we will pay
you the policy value less any policy debt and surrender charge that then
applies. This is called your "net cash surrender value". You must return your
policy when you request a surrender. We will process surrenders on the day we
receive the surrender request (unless such day is not a business day, in which
case we will process surrenders as of the business day next following the date
of the receipt).
Withdrawals
You you may make a withdrawal of part of your net cash surrender value once
in each policy month. Generally, each withdrawal must be at least $500. If the
withdrawal results in a reduction in Base Face Amount, a charge equal to a
pro-rata portion of any surrender charge will be applied. In addition, we
reserve the right to charge a withdrawal fee of up to the lesser of 2% of the
withdrawal amount or $25. We will automatically reduce the policy value of your
policy by the amount of the withdrawal and the related charges. Unless
otherwise specified by you, each account (fixed and investment) will be reduced
in the same proportion as the policy value is then allocated among them. We
will not permit a withdrawal if it would cause your surrender value to fall
below 3 months' worth of monthly deductions (see "Deductions from policy
value"). We also reserve the right to refuse any withdrawal that would cause
the policy's Total Face Amount or the Base Face Amount to fall below $100,000.
Because it reduces the policy value, any withdrawal will reduce your death
benefit under either Option 1 or Option 2 (see "The death benefit"). Under
Option 1, such a withdrawal may also reduce the Total Face Amount. Any such
reduction in the Total Face Amount will be implemented by first reducing any
Supplemental Face Amount then in effect. The Base Face Amount will be reduced
only after the Supplemental Face Amount has been reduced to zero. If such a
reduction in Total Face Amount would cause the policy to fail the Internal
Revenue Code's definition of life insurance, we will not permit the withdrawal.
As noted, above, if the withdrawal results in a reduction in Base Face Amount,
a pro-rata portion of the applicable surrender charge will be deducted from the
policy value (see "Surrender charge"). We reserve the right to waive the
pro-rata surrender charge on any reduction in Base Face Amount if the
withdrawal is designed to serve certain administrative purposes (such as the
payment of fees associated with the provision of asset management services).
For example, assume a policy owner that has elected death benefit Option 1
requests a withdrawal of $25,000 on a policy with a Base Face Amount of
$200,000 and a current surrender charge of $10,000. The $25,000 withdrawal
would reduce the Base Face Amount from $200,000 to $175,000. The reduction in
Base Face Amount would trigger a partial surrender charge equal to the
surrender charge times the proportionate reduction in Base Face Amount, in this
case equal to $10,000 X (25,000/200,000) or $1,250. The surrender charge after
the withdrawal would be equal to $10,000 - $1,250 or $8,750. If the policy
owner had instead purchased a policy with $200,000 of Base Face Amount and
$100,000 of Supplemental Face Amount, the withdrawal of $25,000 would reduce
the Supplemental Face Amount from $100,000 to $75,000. Since the Base Face
Amount would remain at $200,000, no partial surrender charge would be deducted.
32
Policy loans
You may borrow from your policy at any time by completing a form
satisfactory to us. The maximum amount you can borrow is the greater of (i) 90%
of net cash surrender value and (ii) the amount determined as follows:
. We first determine the net cash surrender value of your policy.
. We then subtract an amount equal to the monthly deductions then being
deducted from policy value times the number of full policy months until
the next policy anniversary.
. We then multiply the resulting amount by 1.25% in policy years 1 through
10 and 0% thereafter (although we reserve the right to increase the
percentage after the tenth policy year to as much as .25%).
. We then subtract the third item above from the second item above.
The minimum amount of each loan is $500. The interest charged on any loan is
an effective annual rate of 4.25% in the first 10 policy years and 3.0%
thereafter. However, we reserve the right to increase the percentage after the
tenth policy year to as much as 3.25%. Accrued interest will be added to the
loan daily and will bear interest at the same rate as the original loan amount.
Unless otherwise specified by you, the amount of the loan is deducted from the
accounts (fixed and investment) in the same proportion as the policy value is
then allocated among them. The amount of the loan is then placed in a special
loan account. This special loan account will earn interest at an effective
annual rate of 3.0%. However, if we determine that a loan will be treated as a
taxable distribution because of the differential between the loan interest rate
and the rate being credited on the special loan account, we reserve the right
to increase the rate charged on the loan to a rate that would, in our
reasonable judgement, result in the transaction being treated as a loan under
Federal tax law. We process policy loans as of the business day on or next
following the day we receive the loan request.
Repayment of policy loans
You can repay all or part of a loan at any time. Each repayment will be
allocated among the accounts as follows:
. The same proportionate part of the loan as was borrowed from any fixed
account option will be repaid to that fixed account.
. The remainder of the repayment will be allocated among the accounts in
the same way a new premium payment would be allocated (unless otherwise
specified by you).
If you want a payment to be used as a loan repayment, you must include
instructions to that effect. Otherwise, all payments will be assumed to be
premium payments. We process loan repayments as of the day we receive the
repayment.
Effects of policy loans
The policy value, the net cash surrender value, and any death benefit are
permanently affected by any loan, whether or not it is repaid in whole or in
part. This is because the amount of the loan is deducted from the accounts and
placed in a special loan account. The accounts and the special loan account
will generally have different rates of investment return.
The amount of the outstanding loan (which includes accrued and unpaid
interest) is subtracted from the amount otherwise payable when the policy
proceeds become payable.
Taking out a loan on the policy increases the risk that the policy may lapse
because of the difference between the interest rate charged on the loan and the
interest rate credited to the special loan account. Also, whenever the
outstanding loan equals or exceeds your policy value at and after the insured
person reaches age 121, the policy will terminate 31 days after we have mailed
notice of termination to you (and to any assignee of record at such assignee's
last known address) specifying the amount that must be paid to avoid
termination, unless a repayment of at least the amount specified is made within
that period.
Policy loans may also result in adverse tax consequences under certain
circumstances (see "Tax considerations").
Description of charges at the policy level
Deduction from premium payments
. Premium charge - A charge to help defray our sales costs and related
taxes. The maximum premium charge is 8% in all poilcy years. Currently,
however, we plan to assess a premium charge of 6.4% upon each premium
paid up to the Target Premium in each of the first 5 policy years. A
premium charge of 2% of premium will be deducted from each premium in
excess of Target Premium for the first 5 policy years, and a charge of 2%
will be deducted from all premiums paid in policy years 6 and later. The
33
"Target Premium" is determined at the time the policy is issued and will
appear in the "Policy Specification" section of the policy.
. Optional enhanced surrender value rider charge--A charge imposed if you
elect this rider. The charge is 2% of premiums paid up to the Target
Premium in the first policy year.
Deductions from policy value
. Administrative charge - A monthly charge to help cover our administrative
costs. This is a flat dollar charge of $15.
. Face Amount charge - A monthly charge to primarily help cover sales
costs. The duration of the face amount charge varies upon the age of the
insured person as of the anniversary date nearest the policy date, as
follows: age 50 and under, 4 years; age 51, 5 years; age 52, 6 years; age
53, 7 years; age 54, 8 years; age 55, 9 years; age 56 and over, 10 years.
The charge is determined by multiplying the Base Face Amount at issue by
the applicable rate. The rate will vary based upon the sex, age and risk
class of the insured person.
. Cost of insurance charge - A monthly charge for the cost of insurance. To
determine the charge, we multiply the net amount of insurance for which
we are then at risk by a cost of insurance rate. The rate is derived from
an actuarial table. The table in your policy will show the maximum cost
of insurance rates. The cost of insurance rates that we currently apply
are generally less than the maximum rates. The current rates will never
be more than the maximum rates shown in the policy. The cost of insurance
rates we use will depend on the age at issue, the underwriting risk class
and (usually) gender of the insured person, and the length of time the
policy has been in effect. Regardless of the table used, cost of
insurance rates generally increase each year that you own your policy, as
the insured person's attained age increases. (The insured person's
"attained age" on any date is his or her age on the birthday nearest that
date.) For death benefit Option 1, the net amount at risk is equal to the
greater of zero, or the result of (a) minus (b) where:
(a) is the death benefit as of the first day of the policy month,
divided by 1.0024663; and
(b) is the policy value as of the first day of the policy month after
the deduction of all other monthly deductions.
Since the net amount at risk for death benefit Option 1 is based on a
formula that includes as factors the death benefit and the policy value, the
net amount at risk is affected by the investment performance of the
investment accounts chosen, payment of premiums and charges assessed.
If the minimum death benefit is greater than the Total Face Amount, the cost
of insurance charge will reflect the amount of that additional benefit.
For death benefit Option 2, the net amount at risk is equal to the Total
Face Amount of insurance divided by 1.0024663.
.. Asset-based risk charge - A monthly charge to help cover sales,
administrative and other costs. The charge is a percentage of that portion
of your policy value allocated to investment accounts. This charge does not
apply to the current fixed account options.
.. Supplementary benefits charges - Monthly charges for any supplementary
insurance benefits added to the policy by means of a rider.
.. Withdrawal fee - A fee for each withdrawal of policy value to compensate us
for the administrative expenses of processing the withdrawal. The charge is
the lesser of 2% of the withdrawal amount or $25. This charge is not
currently imposed, but we reserve the right to do so.
.. Surrender charge - A charge we deduct if the policy lapses or is
surrendered within the surrender charge period, which can be up to 10
policy years. We deduct this charge to compensate us for sales expenses
that we would otherwise not recover in the event of early lapse or
surrender. The charge is a percentage of the premiums received in the first
policy year that do not exceed the Targt Premium stated in the Policy
Specifications page of your policy. The percentage applied is dependent
upon the policy year during which lapse or surrender occurs. The surrender
charge duration and percentages will vary based upon the particular policy
specifications, but can can be as high as 100% and as long as 10 policy
years, as shown in the following table:
Percentage
Policy Year Applied
----------- ----------
1-4..................................... 100%
5-6..................................... 95%
7....................................... 90%
8....................................... 70%
9....................................... 50%
10...................................... 30%
11 or later............................. 0%
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If lapse or surrender occurs during the surrender charge period, the
percentage is graded down proportionately at the beginning of each policy
month until the next level is reached. The above table applies only if the
insured person is less than age 45 at issue. For older issue ages, the
percentages in the above table may be reduced. A pro rata portion of the
surrender charge may also be charged in the case of any reduction in Base
Face Amount (see "Withdrawals" and "Requesting a decrease in coverage"). The
pro rata charge is calculated by dividing the reduction in Base Face Amount
by the Base Face Amount immediately prior to the reductions and then
multiplying the applicable surrender charge by that ratio.
Additional information about how certain policy charges work
Sales expenses and related charges
The premium charges help to compensate us for the cost of selling our
policies. (See "Description of charges at the policy level"). The amount of the
charges in any policy year does not specifically correspond to sales expenses
for that year. We expect to recover our total sales expenses over the life of
the policies. To the extent that the premium charges do not cover total sales
expenses, the sales expenses may be recovered from other sources, including
gains from the asset-based risk charge and other gains with respect to the
policies, or from our general assets. Similarly, administrative expenses not
fully recovered by the administrative charge may also be recovered from such
other sources.
Effect of premium payment pattern
You may structure the timing and amount of premium payments to minimize the
premium charges, although doing so involves certain risks. Paying less than one
Target Premium in the first policy year or paying more than one Target Premium
in any policy year could reduce your total premium charges over time. For
example, if the Target Premium was $10,000 and you paid a premium of $10,000 in
each of the first ten policy years, you would pay total premium charges of
$4,200. If you paid $20,000 (i.e., two times the Target Premium amount) in
every other policy year up to and including the ninth policy year, you would
pay total premium charges of only $3,320. However, delaying the payment of
Target Premiums to later policy years could increase the risk that the policy
value will be insufficient to pay monthly policy charges as they come due. As a
result, the policy or any Supplemental Face Amount may lapse and eventually
terminate. Conversely, accelerating the payment of Target Premiums to earlier
policy years could cause aggregate premiums paid to exceed the policy's 7-pay
premium limit and, as a result, cause the policy to become a modified endowment
contract, with adverse tax consequences to you upon receipt of policy
distributions. (see "Tax considerations".)
Method of deduction
We deduct the monthly deductions described in the Fee Tables section from
your policy's accounts (fixed and investment) in proportion to the amount of
policy value you have in each, unless otherwise specified by you.
Reduced charges for eligible classes
The charges otherwise applicable may be reduced with respect to policies
issued to a class of associated individuals or to a trustee, employer or
similar entity where we anticipate that the sales to the members of the class
will result in lower than normal sales or administrative expenses, lower taxes
or lower risks to us. We will make these reductions in accordance with our
rules in effect at the time of the application for a policy. The factors we
consider in determining the eligibility of a particular group for reduced
charges, and the level of the reduction, are as follows: the nature of the
association and its organizational framework; the method by which sales will be
made to the members of the class; the facility with which premiums will be
collected from the associated individuals and the association's capabilities
with respect to administrative tasks; the anticipated lapse and surrender rates
of the policies; the size of the class of associated individuals and the number
of years it has been in existence; the aggregate amount of premiums paid; and
any other such circumstances which result in a reduction in sales or
administrative expenses, lower taxes or lower risks. Any reduction in charges
will be reasonable and will apply uniformly to all prospective policy
purchasers in the class and will not unfairly discriminate against any owner.
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Other charges we could impose in the future
Except for a portion of the premium charge, we currently make no charge for
our Federal income taxes. However, if we incur, or expect to incur, income
taxes attributable to any subaccount of the Account or this class of policies
in future years, we reserve the right to make a charge for such taxes. Any such
charge would reduce what you earn on any affected investment accounts. However,
we expect that no such charge will be necessary.
We also reserve the right to increase the premium charge in order to
correspond with changes in the state premium tax levels or in the Federal
income tax treatment of the deferred acquisition costs for this type of policy.
Currently, state premium tax levels range from 0% to 3.5%.
Under current laws, we may incur state and local taxes (in addition to
premium taxes) in several states. At present, these taxes are not significant.
If there is a material change in applicable state or local tax laws, we may
make charges for such taxes.
Description of charges at the portfolio level
The portfolios must pay investment management fees and other operating
expenses. These fees and expenses (shown in the tables of portfolio annual
expenses under "Fee Tables") are different for each portfolio and reduce the
investment return of each portfolio. Therefore, they also indirectly reduce the
return you will earn on any investment accounts you select. We may also receive
payments from a Series Fund or its affiliates at an annual rate of up to
approximately 45% of the average net assets that holders of our variable life
insurance policies and other products have invested in that portfolio. Any such
payments do not, however, result in any charge to you in addition to what is
shown in the tables. Expenses of the portfolios are not fixed or specified
under the terms of the policy, and those expenses may vary from year to year.
Other policy benefits, rights and limitations
Optional supplementary benefit riders you can add
When you apply for a policy, you can request any of the optional
supplementary benefit riders that we then make available. Availability of any
rider, the benefits it provides and the charges for it may vary by state. Our
rules and procedures will govern eligibility for any rider and, in some cases,
the configuration of the actual rider benefits. Each rider contains specific
details that you should review before you decide to choose the rider. Charges
for most riders will be deducted from the policy value. We may change these
charges (or the rates that determine them), but not above any applicable
maximum amount stated in the Policy Specifications page of your policy. We may
add to, delete from or modify the list of optional supplementary benefit riders.
. Optional Extended No-Lapse Guarantee Rider - This rider extends the
No-Lapse Guarantee Period to the earlier of : (a) termination of the
policy or rider, (b) subject to any applicable state limitations, the
number of years selected by the policy owner and (c) age 121 of the
insured person. The rider may be terminated at any time but cannot be
reinstated once terminated. In order for the Extended No-Lapse Guarantee
to be applicable, the extended cumulative premium test must be satisfied.
This test is described in the rider. The cost of the rider varies by
issue age and Face Amount and a change in the Face Amount of the policy
may affect the cost of the rider.
. Acceleration of Death Benefit for Qualified Long-Term Care Services Rider
- This rider provides for periodic advance payments to you of a portion
of the death benefit if the insured person becomes "chronically ill" so
that such person: (1) is unable to perform at least 2 activities of daily
living without substantial human assistance or has a severe cognitive
impairment; and (2) is receiving certain qualified services described in
the rider.
Benefits under the Long-Term Care Acceleration Rider will not begin
until we receive proof that the insured person qualifies and has
received 100 days of "qualified long-term care service" as defined in
the rider, while the policy was in force. You must continue to submit
evidence during the insured person's lifetime of the insured person's
eligiblity for rider benefits.
We determine a maximum amount of death benefit that we will advance for
each month of qualification. This amount, called the "Maximum Monthly
Benefit", is based on the percentage of the policy's death benefit that
you select when you apply for the policy, and the death benefit amount
in effect when the insured person qualifies for benefits. The actual
amount of any advance is based on the expense incurred by the insured
person, up to the Maximum Monthly Benefit, for each day of qualified
long-term care service in a calendar month. The first 100 days of
qualified long-term care service, however, are excluded in any
determination of an advance. We will recalculate the Maximum Monthly
Benefit if you make a withdrawal of policy value, and for other events
described in the rider. Each advance reduces the remaining death benefit
under your policy, and causes a
36
proportionate reduction in your policy value. If you have a policy loan, we
will use a pro-rata portion of each death benefit advance to repay
indebtedness. For example, if current indebtedness is $10,000, the death
benefit is $100,000, and the gross advance is $2,000, then the net advance
would be $1,800 = $2,000 X (1 - ($10,000/ $100,000)). As a result of the
advance, the indebtedness will be reduced by $200.
We restrict your policy value's exposure to market risk when benefits are
paid under the Long-Term Care Acceleration rider. We do this in several
ways. First, before we begin paying any Monthly Benefit, we will transfer
all policy value from the investment accounts to the fixed account. (The
amount to be transferred will be determined on the business day immediately
following the date we approve a request for benefits under the rider.) In
addition, you will not be permitted to transfer policy value or allocate any
additional premium payment to an investment account while rider benefits are
paid. Your participation in any of the automatic investment plans will also
be suspended during this period.
If the insured person no longer qualifies for rider benefits and your policy
remains in force, you will be permitted to invest new premium payments or
transfer existing policy value in the investment accounts. (The restriction
on transfers from the fixed account described on page will continue to
apply.) Benefits under this rider do not reduce the No-Lapse Guarantee
Premium requirements or the Extended No-Lapse Guarantee Premium requirements
that may be necessary for the No-Lapse Guarantee or Extended No-Lapse
Guarantee to remain in effect after a termination of rider benefits.
If you purchase this rider:
. you and your immediate family will also have access to a national
program designed to help the elderly maintain their independent living
by providing advice about an array of elder care services available to
seniors, and
. you will have access to a list of long-term care providers in your
area who provide special discounts to persons who belong to the
national program.
This rider is sometimes referred to as the "LifeCare Rider".
. Return of Premium Death Benefit Rider - You may elect to have your policy
issued with an optional Return of Premium Death Benefit rider. This rider
provides an additional death benefit payable upon the death of the life
insured. The Return of Premium Rider death benefit has an initial value
equal to your initial premium times the Percentage of Premium as elected
and shown in the Policy Specifications page for the rider. The Percentage
of Premium will be applied to each subsequent premium and will increase
the coverage at the time of premium payment by that amount. The rider
also provides options to increase or decrease the benefit amount. The
Percentage of Premium is specified in the Policy Specifications page of
your policy and may range between 0% and 5%. This rider is only available
to you if death benefit Option 1 is elected.
The Return of Premium Rider death benefit will not exceed the Maximum
Benefit Amount shown in the Policy Specifications page for the rider. If
the policy owner makes a written request for a partial withdrawal of net
cash surrender value while this rider is in force, the amount of the
Return of Premium Rider death benefit will be reduced by the amount of
the withdrawal.
The No Lapse Guarantee provisions of the policy apply to the Return of
Premium Rider death benefit for the first two policy years only.
. Change of Life Insured Rider - This rider is only available to certain
owners purchasing the policy in connection with the financing of employee
benefit plan obligations. If you elect this rider, you may change the
life insured on or after the second policy anniversary. You must have an
insurable interest in the new life insured, and the new life insured must
consent in writing to the change. We will require evidence which
satisfies us of the new life insured's insurability, and the premiums and
charges after the change date will reflect the new life insured's age,
sex, risk classification and any additional rating which applies.
Supplementary benefits riders on the old life insured will be canceled as
of the change date. Supplementary benefits riders may be added on the new
life insured as of the change date, subject to our normal requirements
and restrictions for such benefits. The validity and suicide provisions
of the policy will apply to the entire Face Amount at the change date.
37
. Optional Enhanced Surrender Value Rider - In the application for the
policy, you may elect to purchase the enhanced value rider. This rider
provides an enhanced value benefit (in addition to the surrender value)
if you surrender the policy within the first nine policy years. The
amount of the benefit will be shown in the "Policy Specifications"
section of the policy. The amount available for partial withdrawals and
loans are based on the surrender value and will in no way be increased
due to this rider.
. Enhanced Yield Fixed Account Rider - You may elect to allocate your
premiums or policy value to the enhanced yield fixed account that we
offer by rider. Obligations under the enhanced yield fixed account are
backed by our general account. We will credit interest at the rate we
declare. Additional transfer restrictions apply to amounts in an enhanced
yield fixed account (see "Transfers of existing policy value").
. Accelerated Benefit Rider - This rider provides for acceleration of
payment of a portion of the death benefit should the insured person
become terminally ill and have a life expectancy of one year or less.
Payment of the accelerated benefits is subject to limits and conditions
specified in the rider.
Variations in policy terms
Insurance laws and regulations apply to us in every state in which our
policies are sold. As a result, various terms and conditions of your insurance
coverage may vary from the terms and conditions described in this prospectus,
depending upon where you reside. These variations will be reflected in your
policy or in endorsements attached to your policy.
We may vary the charges and other terms of our policies where special
circumstances result in sales or administrative expenses, mortality risks or
other risks that are different from those normally associated with the
policies. These include the type of variations discussed under "Reduced charges
for eligible classes". No variation in any charge will exceed any maximum
stated in this prospectus with respect to that charge.
Any variation discussed above will be made only in accordance with uniform
rules that we adopt and that we apply fairly to our customers.
Procedures for issuance of a policy
Generally, the policy is available with a minimum Total Face Amount at issue
of $100,000 and a minimum Base Face Amount at issue of $100,000. At the time of
issue, the insured person must have an attained age of no more than 90. All
insured persons must meet certain health and other insurance risk criteria
called "underwriting standards".
Policies issued in Montana or in connection with certain employee plans will
not directly reflect the sex of the insured person in either the premium rates
or the charges or values under the policy.
Commencement of insurance coverage
After you apply for a policy, it can sometimes take up to several weeks for
us to gather and evaluate all the information we need to decide whether to
issue a policy to you and, if so, what the insured person's risk classification
should be. After we approve an application for a policy and assign an
appropriate insurance risk classification, we will prepare the policy for
delivery. We will not pay a death benefit under a policy unless the policy is
in effect when the insured person dies (except for the circumstances described
under "Temporary coverage prior to policy delivery" below).
The policy will take effect only if all of the following conditions are
satisfied:
. The policy is delivered to and received by the applicant.
. The minimum initial premium is received by us.
. The insured person is living and there has been no deterioration in the
insurability of the insured person since the date of the application.
The date all of the above conditions are satisfied is referred to in this
prospectus as the "Contract Completion Date". If all of the above conditions
are satisfied, the policy will take effect on the date shown in the policy as
the "Policy Date". That is the date on which we begin to deduct monthly
charges. Policy months, policy years and policy anniversaries are all measured
from the Policy Date.
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Backdating
Under limited circumstances, we may backdate a policy, upon request, by
assigning a Policy Date earlier than the date the application is signed.
However, in no event will a policy be backdated earlier than the earliest date
allowed by state law, which is generally three months to one year prior to the
date of application for the policy. The most common reasons for backdating are
to preserve a younger age at issue for the insured person or to retain a common
monthly deduction date in certain corporate-owned life insurance cases
involving multiple policies issued over time. If used to preserve age,
backdating will result in lower insurance charges. However, monthly deductions
will begin earlier than would otherwise be the case. Monthly deductions for the
period the Policy Date is backdated will actually be deducted from policy value
on the Contract Completion Date.
Temporary coverage prior to policy delivery
If a specified amount of premium is paid with the application for a policy
and other conditions are met, we will provide temporary term life insurance
coverage on the insured person for a period prior to the time coverage under
the policy takes effect. Such temporary term coverage will be subject to the
terms and conditions described in the Temporary Life Insurance Agreement and
Receipt attached to the application for the policy, including conditions to
coverage and limits on amount and duration of coverage.
Monthly deduction dates
Each charge that we deduct monthly is assessed against your policy value at
the close of business on the Policy Date and at the close of the first day in
each subsequent policy month.
Changes that we can make as to your policy
We reserve the right to make any changes in the policy necessary to ensure
the policy is within the definition of life insurance under the Federal tax
laws and is in compliance with any changes in Federal or state tax laws.
In our policies, we reserve the right to make certain changes if they would
serve the best interests of policy owners or would be appropriate in carrying
out the purposes of the policies. Such changes include the following:
. Changes necessary to comply with or obtain or continue exemptions under
the Federal securities laws
. Combining or removing fixed accounts or investment accounts
. Changes in the form of organization of any separate account
Any such changes will be made only to the extent permitted by applicable
laws and only in the manner permitted by such laws. When required by law, we
will obtain your approval of the changes and the approval of any appropriate
regulatory authority.
The owner of the policy
Who owns the policy? That's up to the person who applies for the policy. The
owner of the policy is the person who can exercise most of the rights under the
policy, such as the right to choose the accounts in which to invest or the
right to surrender the policy. In many cases, the person buying the policy is
also the person who will be the owner. However, the application for a policy
can name another person or entity (such as a trust) as owner. Whenever we've
used the term "you" in this prospectus, we've assumed that the reader is the
person who has whatever right or privilege is being discussed. There may be tax
consequences if the owner and the insured person are different, so you should
discuss this issue with your tax adviser.
While the insured person is alive, you will have a number of options under
the policy. Here are some major ones:
. Determine when and how much you invest in the various accounts
. Borrow or withdraw amounts you have in the accounts
. Change the beneficiary who will receive the death benefit
. Change the amount of insurance
. Turn in (i.e., "surrender") the policy for the full amount of its net
cash surrender value
. Choose the form in which we will pay out the death benefit or other
proceeds
It is possible to name so-called "joint owners" of the policy. If more than
one person owns a policy, all owners must join in most requests to exercise
rights under the policy.
39
Policy cancellation right
You have the right to cancel your policy within 10 days after you receive it
(the period may be longer in some states). This is often referred to as the
"free look" period. To cancel your policy, simply deliver or mail the policy to:
. John Hancock NY at one of the addresses shown on the back cover of this
prospectus, or
. the John Hancock NY representative who delivered the policy to you.
The date of cancellation will be the date of such mailing or delivery. In
most states, you will receive a refund of any premiums you've paid. In some
states, the refund will be your policy value on the date of cancellation.
Reports that you will receive
At least annually, we will send you a statement setting forth at least the
following information as of the end of the most recent reporting period: the
amount of the death benefit, the portion of the policy value in a fixed account
and in each investment account, premiums received and charges deducted from
premiums since the last report, any outstanding policy loan (and interest
charged for the preceding policy year), and any further information required by
law. Moreover, you also will receive confirmations of premium payments,
transfers among accounts, policy loans, partial withdrawals and certain other
policy transactions.
Semiannually we will send you a report containing the financial statements
of the portfolios, including a list of securities held in each portfolio.
Assigning your policy
You may assign your rights in the policy to someone else as collateral for a
loan or for some other reason. Assignments do not require the consent of any
revocable beneficiary. A copy of the assignment must be forwarded to us. We are
not responsible for any payment we make or any action we take before we receive
a copy of the assignment at our Service Office. Nor are we responsible for the
validity of the assignment or its efficacy in meeting your objectives. An
absolute assignment is a change of ownership. All collateral assignees of
record must usually consent to any surrender, withdrawal or loan from the
policy.
When we pay policy proceeds
General
We will ordinarily pay any death benefit, withdrawal, surrender value or
loan within 7 days after we receive the last required form or request (and,
with respect to the death benefit, any other documentation that may be
required). If we don't have information about the desired manner of payment
within 7 days after the date we receive documentation of the insured person's
death, we will pay the proceeds as a single sum.
Delay to challenge coverage
We may challenge the validity of your insurance policy based on any material
misstatements made to us in the application for the policy. We cannot make such
a challenge, however, beyond certain time limits that are specified in the
policy.
Delay for check clearance
We reserve the right to defer payment of that portion of your policy value
that is attributable to a premium payment made by check for a reasonable period
of time (not to exceed 15 days) to allow the check to clear the banking system.
Delay of separate account proceeds
We reserve the right to defer payment of any death benefit, loan or other
distribution that is derived from an investment account if (1) the New York
Stock Exchange is closed (other than customary weekend and holiday closings) or
trading on the New York Stock Exchange is restricted; (2) an emergency exists,
as a result of which disposal of securities is not reasonably practicable or it
is not reasonably practicable to fairly determine the policy value; or (3) the
SEC by order permits the delay for the protection of owners. Transfers and
allocations of policy value among the investment accounts may also be postponed
under these circumstances. If we need to defer calculation of separate account
values for any of the foregoing reasons, all delayed transactions will be
processed at the next values that we do compute.
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Delay of general account surrender proceeds
State laws allow us to defer payment of any portion of the net cash
surrender value derived from any fixed account for up to 6 months. These laws
were enacted many years ago to help insurance companies in the event of a
liquidity crisis.
How you communicate with us
General rules
You should mail or express all checks and money orders for premium payments
and loan repayments to the John Hancock NY Service Office at the appropriate
address shown on the back cover.
Under our current rules, certain requests must be made in writing and be
signed and dated by you. They include the following:
. loans
. surrenders or withdrawals
. change of death benefit option
. increase or decrease in Face Amount
. change of beneficiary
. election of payment option for policy proceeds
. tax withholding elections
. election of telephone/internet transaction privilege.
The following requests may be made either in writing (signed and dated by
you) or by telephone or fax or through the Company's secured website, if a
special form is completed (see "Telephone, facsimile and internet transactions"
below):
. transfers of policy value among accounts
. change of allocation among accounts for new premium payments
You should mail or express all written requests to our Service Office at the
appropriate address shown on the back cover. You should also send notice of the
insured person's death and related documentation to our Service Office. We do
not consider that we've "received" any communication until such time as it has
arrived at the proper place and in the proper and complete form.
We have special forms that should be used for a number of the requests
mentioned above. You can obtain these forms from our Service Office or your
John Hancock NY representative. Each communication to us must include your
name, your policy number and the name of the insured person. We cannot process
any request that doesn't include this required information. Any communication
that arrives after the close of our business day, or on a day that is not a
business day, will be considered "received" by us on the next following
business day. Our business day currently closes at 4:00 p.m. Eastern Time, but
special circumstances (such as suspension of trading on a major exchange) may
dictate an earlier closing time.
Telephone, facsimile and internet transactions
If you complete a special authorization form, you can request transfers
among accounts and changes of allocation among accounts simply by telephoning
us at 1-800-521-1234 or by faxing us at 617-572-7008 or through the Company's
secured website. Any fax or internet request should include your name, daytime
telephone number, policy number and, in the case of transfers and changes of
allocation, the names of the accounts involved. We will honor telephone and
internet instructions from anyone who provides the correct identifying
information, so there is a risk of loss to you if this service is used by an
unauthorized person. However, you will receive written confirmation of all
telephone/internet transactions. There is also a risk that you will be unable
to place your request due to equipment malfunction or heavy phone line or
internet usage. If this occurs, you should submit your request in writing.
If you authorize telephone or internet transactions, you will be liable for
any loss, expense or cost arising out of any unauthorized or fraudulent
telephone or internet instructions which we reasonably believe to be genuine,
unless such loss, expense or cost is the result of our mistake or negligence.
We employ procedures which provide safeguards against the execution of
unauthorized transactions which are reasonably designed to confirm that
instructions received by telephone or internet are genuine. These procedures
include requiring personal identification, the use of a unique password for
internet authorization, recording of telephone
41
calls, and providing written confirmation to the owner. If we do not employ
reasonable procedures to confirm that instructions communicated by telephone or
internet are genuine, we may be liable for any loss due to unauthorized or
fraudulent instructions.
As stated earlier in this prospectus, the policies are not designed for
professional market timing organizations or other persons or entities that use
programmed or frequent transfers among investment options. To discourage
disruptive frequent trading, we have imposed certain transfer restrictions (see
"Transfers of existing policy value"). In addition, we also reserve the right
to change our telephone, facsimile and internet transaction privileges outlined
in this section at any time, and to suspend or terminate any or all of those
privileges with respect to any owners who we feel are abusing the privileges to
the detriment of other owners.
Distribution of policies
John Hancock Distributors LLC ("JH Distributors"), a Delaware limited
liability company affiliated with us, is the principal distributor and
underwriter of the securities offered through this prospectus and of other
annuity and life insurance products we and our affiliates offer. JH
Distributors also acts as the principal underwriter of the John Hancock Trust,
whose securities are used to fund certain investment accounts under the
policies and under other annuity and life insurance products we offer.
JH Distributors' principal address is 200 Bloor Street East, Toronto, Canada
M4W 1E5 and it also maintains offices with us at 197 Clarendon Street, Boston,
Massachusetts 02116. JH Distributors is a broker-dealer registered under the
Securities Exchange Act of 1934 (the "1934 Act") and is a member of the
National Association of Securities Dealers, Inc. (the "NASD").
We offer the policies for sale through individuals who are licensed as
insurance agents and who are registered representatives of broker-dealers that
have entered into selling agreements with JH Distributors. These broker-dealers
may include our affiliate Signator Investors, Inc.
Through JH Distributors, John Hancock NY pays compensation to broker-dealers
for the promotion and sale of the policies. The registered representative
through whom your policy is sold will be compensated pursuant to the registered
representative's own arrangement with his or her broker-dealer. Compensation to
broker-dealers for the promotion and sale of the policies is not paid directly
by policyowners but will be recouped through the fees and charges imposed under
the policy. (See "Description of charges at the policy level".)
A limited number of broker-dealers may also be paid commissions or overrides
to "wholesale" the policies; that is, to provide marketing support and training
services to the broker-dealer firms that do the actual selling. We may also
provide compensation to a limited number of broker-dealers for providing
ongoing service in relation to policies that have already been purchased.
Standard compensation. The compensation JH Distributors may pay to
broker-dealers may vary depending on the selling agreement, but compensation
(inclusive of wholesaler overrides and expense allowances) paid to
broker-dealers for sale of the policies (not including riders) is not expected
to exceed the following schedule: policy year 1, 99% of the premium paid up to
the first tier and 6.5% of any excess premiums; policy year 2, 26.5% of the
premium paid up to the first tier and 3.25% of any excess premiums; policy
years 3-5, 5.5% of the premium paid up to the first tier and 3.25% of any
excess premiums; policy years 6-10, 3.0% of the premium paid up to the first
tier and 3.0% of any excess premiums; and policy years 11+, no commissions
paid. The amount and timing of this compensation may differ among
broker-dealers, but would not be expected to materially exceed the foregoing
schedules on a present value basis.
Additional compensation and revenue sharing. To the extent permitted by SEC
and NASD rules and other applicable laws and regulations, selling
broker-dealers may receive, directly or indirectly, additional payments in the
form of cash, other compensation or reimbursement. These additional
compensation or reimbursement arrangements may include, for example, payments
in connection with the firm's "due diligence" examination of the policies,
payments for providing conferences or seminars, sales or training programs for
invited registered representatives and other employees, payment for travel
expenses, including lodging, incurred by registered representatives and other
employees for such seminars or training programs, seminars for public,
advertising and sales campaigns regarding the policies, payments to assist a
firm in connection with its systems, operations and marketing expenses and/or
other events or activities sponsored by the firms. Subject to applicable NASD
rules and other applicable laws and regulations, JH Distributors and its
affiliates may contribute to, as well as sponsor, various educational programs,
sales contests, and/or other promotions in which participating firms and their
sales persons may receive prizes such as merchandise, cash or other rewards.
These arrangements will not be offered to all firms, and the terms of such
arrangements may differ between firms. We provide additional information on
special compensation or reimbursement arrangements involving selling firms and
other financial institutions in the Statement of Additional Information, which
is available upon request. Any such compensation, which may be significant at
times, will not result in any additional direct charge to you by us.
42
Differential compensation. Compensation negotiated and paid by JH
Distributors pursuant to a selling agreement with a broker-dealer may differ
from compensation levels that the broker-dealer receives for selling other
variable policies or contracts. These compensation arrangements may give us
benefits such as greater access to registered representatives. In addition,
under their own arrangements, broker-dealer firms may pay a portion of any
amounts received under standard or additional compensation or revenue sharing
arrangements to their registered representatives. As a result, registered
representatives may be motivated to sell the policies of one issuer over
another issuer, or one product over another product. You should contact your
registered representative for more information on compensation arrangements in
connection with your purchase of a policy.
Tax considerations
This description of Federal income tax consequences is only a brief summary
and is not intended as tax advice. Tax consequences will vary based on your own
particular circumstances, and for further information you should consult a
qualified tax adviser. Federal, state and local tax laws, regulations and
interpretations can change from time to time. As a result, the tax consequences
to you and the beneficiary may be altered, in some cases retroactively.
The policy may be used in various arrangements, including non-qualified
deferred compensation or salary continuation plans, split dollar insurance
plans, executive bonus plans, retiree medical benefit plans and others. The tax
consequences of such plans may vary depending on the particular facts and
circumstances of each individual arrangement. Therefore, if the value of using
the policy in any such arrangement depends in part on the tax consequences, a
qualified tax advisor should be consulted for advice.
General
Generally, death benefits paid under policies such as yours are not subject
to income tax. Earnings on your policy value are ordinarily not subject to
income tax as long as we don't pay them out to you. If we do pay out any amount
of your policy value upon surrender or partial withdrawal, all or part of that
distribution would generally be treated as a return of the premiums you've paid
and not subjected to income tax. However certain distributions associated with
a reduction in death benefit or other policy benefits within the first 15 years
after issuance of the policy are ordinarily taxable in whole or in part. (See
"Other policy distributions" below.) Amounts you borrow are generally not
taxable to you.
However, some of the tax rules change if your policy is found to be a
modified endowment contract. This can happen if you've paid premiums in excess
of limits prescribed by the tax laws. Additional taxes and penalties may be
payable for policy distributions of any kind. (See "7-pay premium limit and
modified endowment contract status" below.)
Policy death benefit proceeds
We expect the policy to receive the same Federal income and estate tax
treatment as fixed benefit life insurance policies. Section 7702 of the
Internal Revenue Code (the "Code") defines a life insurance contract for
Federal tax purposes. For a policy to be treated as a life insurance contract,
it must satisfy either the cash value accumulation test or the guideline
premium test. These tests limit the amount of premium that you may pay into the
policy. We will monitor compliance with these standards. If we determine that a
policy does not satisfy Section 7702, we may take whatever steps are
appropriate and reasonable to bring it into compliance with Section 7702.
If the policy complies with Section 7702, the death benefit proceeds under
the policy should be excludable from the beneficiary's gross income under
Section 101 of the Code. In addition, if you have elected the Acceleration of
Death Benefit for Qualified Long-Term Care Services rider, the rider's benefits
generally will be excludable from gross income under the Code. The tax-free
nature of these accelerated benefits is contingent on the rider meeting
specific requirements under Section 101 and/or Section 7702B of the Code. We
have designed the rider to meet these standards.
Other policy distributions
Increases in policy value as a result of interest or investment experience
will not be subject to Federal income tax unless and until values are received
through actual or deemed distributions. In general, the owner will be taxed on
the amount of distributions that exceed the premiums paid under the policy. An
exception to this general rule occurs in the case of a decrease in the policy's
death benefit or any other change that reduces benefits under the policy in the
first 15 years after the policy is issued and that results in a cash
distribution to the policy owner in order for the policy to continue to comply
with the Section 7702 definitional limits. Changes that reduce benefits include
partial withdrawals and death benefit option changes. For purposes of this rule
any distribution within the two years immediately before a reduction in
benefits will also be treated as if it caused the reduction. A cash
distribution that reduces policy benefits will be taxed in whole or in part (to
the extent of any gain in the policy) under rules prescribed in Section 7702.
The
43
taxable amount is subject to limits prescribed in section 7702(f)(7). Any
taxable distribution will be ordinary income to the owner (rather than capital
gain).
Distributions for tax purposes include amounts received upon surrender or
partial withdrawals. You may also be deemed to have received a distribution for
tax purposes if you assign all or part of your policy rights or change your
policy's ownership. If you have elected the Acceleration of Death Benefit for
Qualified Long-Term Care Services Rider, as described in "Optional
supplementary benefit riders you can add" you may be deemed to have received a
distribution for tax purposes each time a deduction is made from your policy
value to pay the rider charge.
It is possible that, despite our monitoring, a policy might fail to qualify
as a life insurance contract under Section 7702 of the Code. This could happen,
for example, if we inadvertently failed to return to you any premium payments
that were in excess of permitted amounts, or if any of the funds failed to meet
certain investment diversification or other requirements of the Code. If this
were to occur, you would be subject to income tax on the income credited to the
policy from the date of issue to the date of the disqualification and for
subsequent periods.
Tax consequences of ownership or receipt of policy proceeds under Federal,
state and local estate, inheritance, gift and other tax laws will depend on the
circumstances of each owner or beneficiary. If the person insured by the policy
is also its owner, either directly or indirectly through an entity such as a
revocabale trust, the death benefit will be includible in his or her estate for
purposes of the Federal estate tax. If the owner is not the person insured, the
value of the policy will be includible in the owner's estate upon his or her
death. Even if ownership has been transferred, the death proceeds or the policy
value may be includible in the former owner's estate if the transfer occurred
less than three years before the former owner's death or if the former owner
retained certain kinds of control over the policy. You should consult your tax
adviser regarding these possible tax consequences.
Because there may be unfavorable tax consequences (including recognition of
taxable income and the loss of income tax-free treatment for any death benefit
payable to the beneficiary), you should consult a qualified tax adviser prior
to changing the policy's ownership or making any assignment of ownership
interests.
Policy loans
We expect that, except as noted below (see "7-pay premium limit and modified
endowment contract status"), loans received under the policy will be treated as
indebtedness of an owner and that no part of any loan will constitute income to
the owner. However, if the policy terminates for any reason, the amount of any
outstanding loan that was not previously considered income will be treated as
if it had been distributed to the owner upon such termination. This could
result in a considerable tax bill. Under certain circumstances involving large
amounts of outstanding loans, you might find yourself having to choose between
high premiums requirements to keep your policy from lapsing and a significant
tax burden if you allow the lapse to occur.
Diversification rules and ownership of the Account
Your policy will not qualify for the tax benefits of a life insurance
contract unless the Account follows certain rules requiring diversification of
investments underlying the policy. In addition, the rules require that the
policy owner not have "investment control" over the underlying assets.
In certain circumstances, the owner of a variable life insurance policy may
be considered the owner, for Federal income tax purposes, of the assets of the
separate account used to support the policy. In those circumstances, income and
gains from the separate account assets would be includible in the policy
owner's gross income. The Internal Revenue Service ("IRS") has stated in
published rulings that a variable policy owner will be considered the owner of
separate account assets if the policy owner possesses incidents of ownership in
those assets, such as the ability to exercise investment control over the
assets. A Treasury Decision issued in 1986 stated that guidance would be issued
in the form of regulations or rulings on the "extent to which Policyholders may
direct their investments to particular sub-accounts of a separate account
without being treated as owners of the underlying assets." As of the date of
this prospectus, no comprehensive guidance on this point has been issued. In
Rev. Rul. 2003-91, however, the IRS ruled that a contract holder would not be
treated as the owner of assets underlying a variable life insurance or annuity
contract despite the owner's ability to allocate funds among as many as twenty
subaccounts.
The ownership rights under your policy are similar to, but different in
certain respects from, those described in IRS rulings in which it was
determined that policyholders were not owners of separate account assets. Since
you have greater flexibility in allocating premiums and policy values than was
the case in those rulings, it is possible that you would be treated as the
owner of your policy's proportionate share of the assets of the Account.
44
We do not know what future Treasury Department regulations or other guidance
may require. We cannot guarantee that the funds will be able to operate as
currently described in the Series Funds' prospectuses, or that a Series Fund
will not have to change any fund's investment objectives or policies. We have
reserved the right to modify your policy if we believe doing so will prevent
you from being considered the owner of your policy's proportionate share of the
assets of the Account, but we are under no obligation to do so.
7-pay premium limit and modified endowment contract status
At the time of policy issuance, we will determine whether the Planned
Premium schedule will exceed the 7-pay limit discussed below. If so, our
standard procedures prohibit issuance of the policy unless you sign a form
acknowledging that fact.
The 7-pay limit is the total of net level premiums that would have been
payable at any time for a comparable fixed policy to be fully "paid-up" after
the payment of 7 equal annual premiums. "Paid-up" means that no further
premiums would be required to continue the coverage in force until maturity,
based on certain prescribed assumptions. If the total premiums paid at any time
during the first 7 policy years exceed the 7-pay limit, the policy will be
treated as a modified endowment contract, which can have adverse tax
consequences.
Policies classified as modified endowment contracts are subject to the
following tax rules:
. First, all partial withdrawals from such a policy are treated as ordinary
income subject to tax up to the amount equal to the excess (if any) of
the policy value immediately before the distribution over the investment
in the policy at such time.
. Second, loans taken from or secured by such a policy and assignments or
pledges of any part of its value are treated as partial withdrawals from
the policy and taxed accordingly. Past-due loan interest that is added to
the loan amount is treated as an additional loan.
. Third, a 10% additional income tax is imposed on the portion of any
distribution (including distributions on surrender) from, or loan taken
from or secured by, such a policy that is included in income except where
the distribution or loan:
. is made on or after the date on which the policy owner attains age
59 1/2;
. is attributable to the policy owner becoming disabled; or
. is part of a series of substantially equal periodic payments for the
life (or life expectancy) of the policy owner or the joint lives (or
joint life expectancies) of the policy owner and the policy owner's
beneficiary.
These exceptions to the 10% additional tax do not apply in situations where
the policy is not owned by an individual.
Furthermore, any time there is a "material change" in a policy, the policy
will begin a new 7-pay testing period as if it were a newly-issued policy. The
material change rules for determining whether a policy is a modified endowment
contract are complex. In general, however, the determination of whether a
policy will be a modified endowment contract after a material change generally
depends upon the relationship among the death benefit of the policy at the time
of such change, the policy value at the time of the change, and the additional
premiums paid into the policy during the seven years starting with the date on
which the material change occurs.
Moreover, if benefits under a policy are reduced (such as a reduction in the
death benefit or the reduction or cancellation of certain rider benefits)
during the 7 years in which a 7-pay test is being applied, the 7-pay limit will
generally be recalculated based on the reduced benefits. If the premiums paid
to date are greater than the recalculated 7-pay limit, the policy will become a
modified endowment contract.
All modified endowment contracts issued by the same insurer (or its
affiliates) to the same owner during any calendar year generally are required
to be treated as one contract for the purpose of applying the modified
endowment contract rules. A policy received in exchange for a modified
endowment contract will itself also be a modified endowment contract. You
should consult your tax advisor if you have questions regarding the possible
impact of the 7-pay limit on your policy.
Corporate and H.R. 10 retirement plans
The policy may be acquired in connection with the funding of retirement
plans satisfying the qualification requirements of Section 401 of the Code. If
so, the Code provisions relating to such plans and life insurance benefits
thereunder should be carefully
45
scrutinized. We are not responsible for compliance with the terms of any such
plan or with the requirements of applicable provisions of the Code.
Withholding
To the extent that policy distributions to you are taxable, they are
generally subject to withholding for your Federal income tax liability. However
if you reside in the United States, you can generally choose not to have tax
withheld from distributions.
Life insurance purchases by residents of Puerto Rico
In Rev. Rul. 2004-75, 2004-31 I.R.B. 109, the Internal Revenue Service ruled
that income received by residents of Puerto Rico under life insurance policy
issued by a United States company is U.S.-source income that is subject to
United States Federal income tax.
Life insurance purchases by non-resident aliens
If you are not a U.S. citizen or resident, you will generally be subject to
U.S. Federal withholding tax on taxable distributions from life insurance
policies at a 30% rate, unless a lower treaty rate applies. In addition, you
may be subject to state and/or municipal taxes and taxes imposed by your
country of citizenship or residence. You should consult with a qualified tax
adviser before purchasing a policy.
Financial statements reference
The financial statements of John Hancock NY and the Account can be found in
the Statement of Additional Information. The financial statements of John
Hancock NY should be distinguished from the financial statements of the Account
and should be considered only as bearing upon the ability of John Hancock NY to
meet its obligations under the policies.
Registration statement filed with the SEC
This prospectus omits certain information contained in the Registration
Statement which has been filed with the SEC. More details may be obtained from
the SEC upon payment of the prescribed fee.
Independent registered public accounting firm
The consolidated financial statements of John Hancock Life Insurance Company
of New York (formerly, The
Manufacturers Life Insurance Company of New York) at December 31, 2005 and
2004, and for each of the three years in the period ended December 31, 2005,
and the financial statements of Separate Account B of John Hancock Life
Insurance Company of New York (formerly, The Manufacturers Life Insurance
Company of New York) at December 31, 2005, and for each of the two years in the
period ended December 31, 2005, appearing in the Statement of Additional
Information of the Registration Statement have been audited by Ernst & Young
LLP, independent registered public accounting firm, as set forth in their
reports thereon appearing elsewhere herein, and are included in reliance upon
such reports given on the authority of such firm as experts in accounting and
auditing.
In addition to this prospectus, John Hancock NY has filed with the
Securities and Exchange Commission (the "SEC") a Statement of Additional
Information (the "SAI") which contains additional information about John
Hancock NY and the Account. The SAI and personalized illustrations of death
benefits, policy values and surrender values are available, without charge,
upon request. You may obtain the personalized illustrations from your John
Hancock NY representative. The SAI may be obtained by contacting the John
Hancock NY Service Office. You should also contact the John Hancock NY Service
Office to request any other information about your policy or to make any
inquiries about its operation.
46
SERVICE OFFICE
Express Delivery Mail Delivery
Specialty Products Specialty Products & Distribution
197 Clarendon Street, C-6 P.O. Box 192
Boston, MA 02117 Boston, MA 02117
Phone: Fax:
1-800-521-1234 617-572-7008
Information about the Account (including the SAI) can be reviewed and copied
at the SEC's Public Reference Branch, 100 F Street, NE, Room 1580, Washington,
DC, 20549. Information on the operation of the Public Reference Room may be
obtained by calling the SEC at 202-551-5850. Reports and other information
about the Account are available on the SEC's Internet website at
http://www.sec.gov. Copies of such information may be obtained, upon payment of
a duplicating fee, by writing the Public Reference Section of the SEC at 100 F
Street, NE, Washington, DC 20549-0102.
1940 Act File No. 811-8329 1933 Act File No. 333-132905
47
John Hancock Life Insurance Company
Law Sector
John Hancock Place
P.O. Box 111 [LOGO OF JOHN HANCOCK]
Boston, Massachusetts 02117-0111
(617) 572-9197
James C. Hoodlet
Vice President & Counsel
June 5, 2006
By EDGAR
Alison White, Esq.
Senior Counsel
Division of Investment Management
Office of Insurance Products
U.S. Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
RE: John Hancock Life Insurance Company of New York Separate Account B
File No. 333-132905 ("MPVUL NY")
Dear Alison:
Enclosed is a copy of the current version of the MPVUL NY prospectus that
contains revisions marked with R tags to show changes from the version of the
prospectus that was filed with the Commission on March 31, 2006 (SEC Accession
No. 0001193125-06-070773). The revisions that we have made reflect the staff's
comments in the letter sent to us on May 23, 2006. The revisions also reflect
changes that we have made to respond to staff comments upon the John Hancock
Life Insurance Company (U.S.A.) Account A File No. 333-131299 ("MPVUL") and to
our so-called Template Registration filed with the Commission on February 17,
2006 (SEC Accession No. 0001193125-06-034327).
The changes are summarized below.
1. Guide to this Prospectus
As requested, we have stated that the prospectus for the underlying funds
are being provided with the product prospectus.
2. Fee Tables
(a) We have added language to the end of the second paragraph under "Fee
Tables" that would reserve rights to increase the premium charge in order to
correspond with changes in the premium tax levels or in the tax treatment of
the deferred acquisition costs for this type of policy. This sentence
restates the similar reservation of rights
language appearing under "Other policy benefits, rights and limitations."
Also, we have added language to the Fee Tables section indicating the
current range of state premium tax levels (0% to 3.5%).
(b) In response to the staff's comment on the MPVUL prospectus, we have
added language confirming that the withdrawal fee will not exceed 2% of the
withdrawal amount. Conforming changes are being made to references to the
withdrawal charge appearing elsewhere in the prospectus.
3. Portfolio Annual Expenses
We have cleaned up the Portfolio Annual Expense table to (i) update the
table to reflect updated values and footnotes, and (ii) conform the order
and presentation reflected on the cover page and in the Table of Investment
Options and Investment Subadvisers.
4. Detailed Information
(a) As requested on the MPVUL prospectus, we have added disclosure to the
second paragraph of this section to provide additional detail concerning the
nature of the American portolios as "master-feeder" funds.
(b) Also, we have opted to move into a footnote the disclosure concerning
the range of market capitalizations covered by the indexes referred to in
the Table of Investment Options and Investment Subadvisers.
5. Description of Separate Account B
As requested by the staff's comments, we have added into the prospectus
the disclosure required by Item 4(b)(1) of Form N-6.
6. The Policy Value
In response to the staff's comment, we have revised the disclosure
regarding next day pricing in this section. We have made a similar
clarification in the paragraph dealing with this issue following the Table
of Investment Options and Subadvisers.
7. Description of charges at the policy level - Additional mortality charge
We have eliminated the reference to the additional mortality charge from
this section. As mentioned in our prior correspondence relating to MPVUL,
this is not an additional charge per se, but rather is a component of the
cost of insurance charge that applies in cases of substandard risks. The
effect of the additional mortality charge is reflected in the cost of
insurance charge in the Fee Tables.
8. Other policy benefits, rights and limitations - Return of Premium Death
Benefit Rider
As requested by the staff's comments on the MPVUL prospectus, we are
including disclosure in this section concerning the range of the percentage
of premium that may be applied in the calculation of this benefit.
This resulting MPVUL-NY prospectus is substantially identical to the MPVUL
prospectus (Accession No. 0001193125-06-092865) previously reviewed by the
staff except for the provisions reflecting the difference in Depositor and
Registrant and the removal of the Residual Life Insurance Benefit and
Continuation of Acceleration Rider.
Request for Acceleration
We hereby request an order to accelerate the effectiveness of the
above-referenced amendment to June 9, 2006. The Registrant and its Principal
Underwriter have authorized us to hereby state to the Commission on their
behalf that they are aware of their obligations under the Securities Act of
1933.
The Commission staff has requested that the Registrant acknowledge and
agree, and the Registrant does, hereby acknowledge and agree, that:
. should the Commission or the Staff, acting pursuant to delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
. the action of the Commission or the Staff, acting pursuant to delegated
authority, in declaring the filing effective, does not relieve the
Registrant from its full responsibility for the adequacy and accuracy of
the disclosure in the filing; and
. the Registrant may not assert this action as a defense in any proceeding
initiated by the Commission or any person under the federal securities
laws of the United States.
If you have any questions about the enclosed documents, please call me at
(617) 572-9197. Thank you.
Sincerely,
/s/ James C. Hoodlet
Enclosure