485BPOS 1 b74130a1e485bpos.txt JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H As filed with the Securities and Exchange Commission on April 30, 2009 Registration No. 333-146591 811-4113 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 POST-EFFECTIVE AMENDMENT NO. 2 and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 AMENDMENT NO. 84 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H (formerly, The Manufacturers Life Insurance Company (U.S.A.) Separate Account H) (Exact name of Registrant) JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) (formerly, The Manufacturers Life Insurance Company (U.S.A.)) (Name of Depositor) 38500 Woodward Avenue Bloomfield Hills, Michigan 48304 (Address of Depositor's Principal Executive Offices) (617) 663-3000 (Depositor's Telephone Number Including Area Code) Thomas J. Loftus, Esquire John Hancock Life Insurance Company (U.S.A.) 601 Congress Street Boston, MA 02210-2805 (Name and Address of Agent for Service) Copy to: Title of Securities Being Registered: Variable Annuity Insurance Contracts It is proposed that this filing will become effective: [ ] immediately upon filing pursuant to paragraph (b) of Rule 485 [X] on May 1, 2009, pursuant to paragraph (b) of Rule 485 [ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485 [ ] on ___________ pursuant to paragraph (a)(1) of Rule 485 If appropriate, check the following box: [ ] this post-effective amendment designates a new effective date for a previously filed post-effective amendment PART A INFORMATION REQUIRED IN A PROSPECTUS (Venture Opportunity A Share Variable Annuity) (currently and previously issued contracts) JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H JOHN HANCOCK LIFE INSURANCE COMPANY OF NEW YORK SEPARATE ACCOUNT A SUPPLEMENT DATED MAY 1, 2009 TO PROSPECTUSES DATED MAY 1, 2009 This Supplement is intended to supplement prospectuses dated May 1, 2009 for VENTURE(R) OPPORTUNITY A SHARE VARIABLE ANNUITY AND VENTURE(R) OPPORTUNITY B SHARE VARIABLE ANNUITY Contracts issued by John Hancock Life Insurance Company (U.S.A.) and John Hancock Life Insurance Company of New York. We call each of these prospectuses an "annuity prospectus." You should read this Supplement together with the annuity prospectus for the Contract you purchase and retain all documents for future reference. If you would like another copy of the annuity prospectus, please contact our Annuities Service Office at 1-800-344-1029 to request a free copy. You may also visit our website at www.jhannuities.com or www.jhannuitiesnewyork.com. Temporary Changes in Variable Investment Options PURPOSE OF THIS SUPPLEMENT This Supplement provides information about temporary changes to the Variable Investment Options described in the annuity prospectus. In this Supplement, we provide information about: - the temporary unavailability until after May 1, 2009 of eight Variable Investment Options described in the annuity prospectus; - the temporary availability on May 1, 2009 of two Portfolios of the John Hancock Trust that may be elected as Variable Investment Options under the Contracts (see "Mergers of Certain Portfolios," beginning on page 2 of this Supplement); and - the restrictions on Variable Investment Options that are in effect on May 1, 2009 under Contracts issued with a guaranteed minimum withdrawal benefit Rider (see "Restrictions under Optional Benefit Riders," beginning on page 3 of this Supplement.) TEMPORARY UNAVAILABILITY OF VARIABLE INVESTMENT OPTIONS You will not be able to allocate Contract Values or Additional Purchase Payments to eight of the Variable Investment Options listed in the annuity prospectus until after May 1, 2009. The availability of these Variable Investment Options may be further restricted if you purchase a guaranteed minimum withdrawal benefit Rider (see "Restrictions under Optional Benefit Riders," beginning on page 4 of this Supplement). Each temporarily unavailable Variable Investment Options corresponds to one of the following Portfolios of the John Hancock Trust:
DECLARATION MANAGEMENT RESEARCH LLC MFC GLOBAL INVESTMENT MANAGEMENT (U.S.A.) LIMITED T. ROWE PRICE ASSOCIATES, INC. ----------------------------------- ------------------------------------------------- ---------------------------------- Total Bond Market Trust A 500 Index Trust Balanced Trust Core Allocation Trust Core Balanced Trust WELLINGTON MANAGEMENT COMPANY, LLP Core Fundamental Holdings Trust Core Allocation Plus Trust Core Global Diversification Trust
You should disregard any reference in the annuity prospectus to the availability of these Variable Investment Options or the corresponding Portfolios of the John Hancock Trust until after May 1, 2009. MERGERS OF CERTAIN PORTFOLIOS Additional Variable Investment Options You may allocate Contract Values or Additional Purchase Payments, to the extent permitted under your Contract, to two additional Variable Investment Options until the end of the Business Day on May 1, 2009. The availability of these Portfolios may be restricted if you purchase a guaranteed minimum withdrawal benefit Rider (see "Restrictions under Optional Benefit Page 1 of 6 Riders," beginning on page 4 of this Supplement.) If you select one of these additional Variable Investment Options, we will invest your money in the corresponding Portfolio of the John Hancock Trust: DAVIS SELECTED ADVISERS, L.P. Core Equity Trust T. ROWE PRICE ASSOCIATES, INC. Mid Cap Value Trust (We show the Portfolio's manager (i.e, subadviser) in bold above the name of the Portfolio.) These Portfolios (which we refer to as the "Acquired Portfolios") will be merged into two other Portfolios of the John Hancock Trust (which we refer to as the "Acquiring Portfolios") at the end of the Business Day on May 1, 2009:
ACQUIRED PORTFOLIOS: ACQUIRING PORTFOLIOS: -------------------- ----------------------- Core Equity Trust Fundamental Value Trust Mid Cap Value Trust Mid Value Trust
As a result of the mergers, you will not be able to allocate Contract Value or any Purchase Payments to Variable Investment Options corresponding to the Acquired Portfolios after the merger at the end of the Business Day on May 1, 2009, and any Contract Value you have allocated to an Acquired Portfolio will be transferred to the Variable Investment Option corresponding to the Acquiring Portfolio at that time. Expenses of the Acquired Portfolios The following table describes the operating expenses for each of the Acquired Portfolios, as a percentage of the Portfolio's average net assets for the fiscal year ending December 31, 2008. The table shows 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 daily net assets for 2008, 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 Contracts 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. More detail concerning each Acquired Portfolio's fees and expenses is contained in the Portfolio's prospectus and in the notes following the table. (Expenses shown do not include Separate Account fees and other Contract charges described in the annuity prospectus.)
ACQUIRED FUND FEES TOTAL CONTRACTUAL NET MANAGEMENT 12b-1 OTHER AND OPERATING EXPENSE OPERATING ACQUIRED PORTFOLIO FEES FEES EXPENSES EXPENSES EXPENSES(1) REIMBURSEMENT(2) EXPENSES -------------------- ---------- ----- -------- --------- ---------- ---------------- --------- CORE EQUITY (3,4,5) Series I 0.78% 0.05% 0.11% 0.00% 0.94% 0.00% 0.94% MID CAP VALUE(3) Series I 0.86% 0.05% 0.06% 0.00% 0.97% 0.00% 0.97%
NOTES TO ACQUIRED PORTFOLIO EXPENSE TABLE: (1) The "Total Operating Expenses" include fees and expenses incurred indirectly by a Portfolio as a result of its investment in other investment companies ("Acquired Portfolio Fees and Expenses"). The Total Operating Expenses shown may not correlate to the Portfolio's ratio of expenses to average net assets shown in the "Financial Highlights" section of the Portfolios' prospectus, which does not include Acquired Portfolio Fees and Expenses. Acquired Portfolio Fees and Expenses are based on the estimated indirect net expenses associated with the Portfolio's investment in the underlying portfolios. (2) Effective January 1, 2009, John Hancock Trust (the "Adviser") may recapture operating expenses reimbursed or fees waived under previous expense limitation or waiver arrangements and made subsequent to January 1, 2009, for a period of three years following the beginning of the month in which such reimbursement of waivers occurred. (3) Effective January 1, 2006, the Adviser has agreed to waive its management fee for certain portfolios or otherwise reimburse the expenses of those portfolios ("Participating Portfolios"). The reimbursement will equal, on an annualized basis, 0.02% of that portion of the aggregate net assets of all the Participating Portfolios that exceeds $50 billion. The amount of the Reimbursement will be calculated daily and allocated among all the Participating Portfolios in proportion to the daily net assets of each Portfolio. (4) "Other Expenses" includes an estimated expense based on new contractual custody agreement that became effective April 1, 2009. (5) The Adviser voluntarily agreed to reimburse expenses of the Portfolio that exceed 0.84% of the average annual net assets of the Portfolio. This reimbursement is not included in the expense table. Had this reimbursement been included the expense ratio would have been lower. Expenses includes all expenses of the portfolio except Rule 12b-1 fees, class specific expenses such as blue sky and transfer agency fees, portfolio brokerage, interest, and litigation and indemnification expenses and other extraordinary expense not incurred in the ordinary course of business. This reimbursement may be terminated at any time. Page 2 of 6 Information about the Acquired Portfolios' Managers and Investment Objectives We supplement the annuity prospectus to provide a general description about the Acquired Portfolios' managers and investment objectives. You can find a full description of each Portfolio, including the investment objectives, policies and restrictions of, and the risks relating to, investment in a Portfolio in the prospectus for that Portfolio. 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 Portfolio 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 PORTFOLIOS HELD IN OUR SEPARATE ACCOUNT. JOHN HANCOCK TRUST We show the Portfolio's manager (i.e. subadviser) in bold above the name of the Acquired Portfolio. DAVIS SELECTED ADVISERS, L.P. Core Equity Trust Seeks growth of capital. To do this, the Portfolio invests primarily in common stocks of U.S. companies with durable business models that can be purchased at attractive valuations relative to their intrinsic value. T. ROWE PRICE ASSOCIATES, INC. Mid Cap Value Trust Seek long-term capital appreciation. To do this, the Portfolio invests at least 80% of its net assets 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.
WE RESERVE THE RIGHT TO RESTRICT THE AVAILABILITY OF VARIABLE INVESTMENT OPTIONS AND MODEL ALLOCATIONS AT ANY TIME. You bear the investment risk of any Acquired Portfolio you choose as a Variable Investment Option. 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 CAN OBTAIN A COPY OF THE ACQUIRED PORTFOLIO'S PROSPECTUS, WITHOUT CHARGE, BY CONTACTING US AT THE ANNUITIES SERVICE OFFICE AT 1-800-344-1029 OR IN NEW YORK STATE AT 1-800-551-2078. YOU SHOULD READ THE ACQUIRED PORTFOLIO'S PROSPECTUS CAREFULLY BEFORE INVESTING IN THE CORRESPONDING VARIABLE INVESTMENT OPTION. RESTRICTIONS UNDER CONTRACTS ISSUED WITH A GUARANTEED MINIMUM WITHDRAWAL BENEFIT RIDER Temporary Availability of Individual Investment Options We revise Appendix D: "Information about Income Plus for Life Series Riders Available Prior to May 4, 2009" to describe the available Individual Investment Options in effect on May 1, 2009 for Contracts issued with a guaranteed minimum withdrawal benefit Rider. The following individual Investment Options and the corresponding Portfolios of the John Hancock Trust are available through May 1, 2009: INDIVIDUAL INVESTMENT OPTIONS AVAILABLE THROUGH MAY 1 2009: American Asset Allocation Trust* American Fundamental Holdings Trust* Core Allocation Plus Trust* Franklin Templeton Founding Allocation Trust* Lifestyle Balanced Trust Lifestyle Conservative Trust Lifestyle Growth Trust Lifestyle Moderate Trust Money Market Trust * These individual Investment Options will be restricted after May 1, 2009. Please read Appendix D in the annuity prospectus for further information. Page 3 of 6 The following individual Investment Options and corresponding Portfolios of the John Hancock Trust are not available after May 1, 2009: INDIVIDUAL INVESTMENT OPTIONS AVAILABLE AFTER MAY 1, 2009 Core Allocation Trust* Core Balanced Trust* Core Fundamental Holdings Trust* Core Global Diversification Trust* Lifestyle Balanced Trust Lifestyle Conservative Trust Lifestyle Growth Trust Lifestyle Moderate Trust Money Market Trust * These individual investment options will not be available until after May 1, 2009. Please read Appendix D in the annuity prospectus for further information. Temporary Availability of Model Allocations Options We revise Appendix D: "Information about Income Plus For Life Series Riders Available Prior to May 4, 2009" to describe the Model Allocations in effect on May 1, 2009 for Contracts issued with a guaranteed minimum withdrawal benefit Rider. These Model Allocations, and the corresponding Portfolios of the John Hancock Trust are :
MODEL ALLOCATION MODEL ALLOCATION NAME PERCENTAGE PORTFOLIO NAME --------------------------- ---------------- ------------------------------------ Balanced: Growth & Income 5% American Global Small Capitalization (Restricted May 1, 2009) (1) 5% American Growth 5% Global 5% Mid Cap Value(2) 15% Mutual Shares 15% American Blue Chip Income and Growth 10% American Growth-Income 25% American Bond 15% Investment Quality Bond Balanced Toward Growth 5% American Global Small Capitalization (Restricted May 1, 2009) (1) 10% American Growth 10% Global 5% Mid Cap Value(2) 20% Mutual Shares 15% American Blue Chip Income and Growth 10% American Growth-Income 15% American Bond 10% Investment Quality Bond Growth Focus 5% American Global Small Capitalization (Restricted May 1, 2009) (1) 5% Mid Cap Stock 15% American Growth 10% Global 5% Mid Cap Value(2) 20% Mutual Shares 15% American Blue Chip Income and Growth 15% American Growth-Income 10% American Bond
Page 4 of 6
MODEL ALLOCATION MODEL ALLOCATION NAME PERCENTAGE PORTFOLIO NAME --------------------------- ---------------- ------------------------------------ Balanced: Growth & Income 5% American Global Small Capitalization (Restricted May 1, 2009) (1) 5% American Growth 5% Global 5% Mid Cap Value(2) 15% Mutual Shares 15% American Blue Chip Income and Growth 10% American Growth-Income 25% American Bond 15% Investment Quality Bond Balanced: Growth & Income 5% American Global Small Capitalization (closed version - available 5% American Growth between February 11, 2008 5% Global to August 29, 2008)(1) 5% Mid Cap Value(2) 15% Mutual Shares 15% American Blue Chip Income and Growth 10% American Growth-Income 25% American Bond 15% Investment Quality Bond Balanced Toward Growth 5% American Global Small Capitalization (closed version - available 10% American Growth February 11, 2008 to August 10% Global 29, 2008)(1) 5% Mid Cap Value(2) 20% Mutual Shares 15% American Blue Chip Income and Growth 10% American Growth-Income 15% American Bond 10% Investment Quality Bond Growth Focus 5% American Global Small Capitalization (closed version, available 5% Mid Cap Stock February 11, 2008 to August 15% American Growth 29, 2008)(1) 10% Global 5% Mid Cap Value(2) 20% Mutual Shares 15% American Blue Chip Income and Growth 15% American Growth-Income 10% American Bond
(1) If your Contract Value was allocated to this Model Allocation on the last day it was available, you may continue to allocate your Contract Value to this Model Allocation if: (a) you continue to allocate your entire Contract Value (other than amounts in a Fixed Account under our DCA Program), including future Purchase Payments, to this Model Allocation; and (b) you rebalance your entire Contract Value to this Model Allocation on a quarterly basis. You will no longer be able to use this Model Allocation, however, if you transfer your Contract Value to any of the available individual Investment Options, to any other Model Allocation, or to any Variable Investment Option other than as permitted in this Model Allocation. (2) The Mid Cap Value Portfolio will be merged into the Mid Value Portfolio of the John Hancock Trust at the end of the Business Day on May 1, 2009. As a result of this merger, you will not be able to allocate Contract Value or any Purchase Payments to Mid Cap Value after the merger, and any Contract Value you have allocated to that Variable Investment Option will be transferred to the Mid Value Portfolio at the end of the Business Day on May 1, 2009. You will need to maintain the model allocation percentage shown for Mid Cap Value in the Mid Value Portfolio after May 1, 2009. Please read Appendix D in the annuity prospectus for more information about Model Allocations. None of the Model Allocations is a fund-of-funds. We do not actively manage any Model Allocation. Once you invest in a Model Allocation, we will not change the allocation percentages (except to rebalance) or component Portfolios based on changes in investment strategy, market conditions or expectations of future performance. Because a Model Allocation does not change, you should periodically consult with your financial advisor to ensure that your selected Model Allocation continues to be appropriate for your needs and circumstances. Page 5 of 6 WE RESERVE THE RIGHT TO RESTRICT THE AVAILABILITY OF MODEL ALLOCATIONS AT ANY TIME. If we restrict a Model Allocation and your Contract Value is allocated to that Model Allocation on the last day it was available, you may continue to allocate your Contract Value to that Model Allocation as long as you continue to allocate your entire Contract Value (other than amounts in a Fixed Account under our DCA Program), including future Purchase Payments, to that Model Allocation. We will continue to rebalance your Contract Value to that Model Allocation on a quarterly basis. You will no longer be able to use that Model Allocation, however, if you transfer your Contract Value to any of the available individual Investment Options, to any other Model Allocation, or to any Variable Investment Option other than as permitted in that Model Allocation. A MODEL ALLOCATION MAY EXPERIENCE VOLATILITY IN ITS INVESTMENT PERFORMANCE OR LOSE MONEY, DEPENDING ON THE PERFORMANCE OF THE COMPONENT PORTFOLIOS REFERENCED ABOVE. YOUR INVESTMENT IN THE PORTFOLIOS WILL FLUCTUATE AND WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN YOUR ORIGINAL INVESTMENT. FOR MORE INFORMATION REGARDING EACH PORTFOLIO THAT WE PERMIT YOU TO INVEST IN THROUGH A MODEL ALLOCATION, INCLUDING INFORMATION RELATING TO THAT PORTFOLIO'S INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS, AND THE RISKS OF INVESTING IN THAT PORTFOLIO, PLEASE SEE "IV. GENERAL INFORMATION ABOUT US, THE SEPARATE ACCOUNTS AND THE PORTFOLIOS" IN THE ANNUITY PROSPECTUS AS WELL AS THE PORTFOLIO'S PROSPECTUS. YOU CAN OBTAIN A PROSPECTUS CONTAINING MORE COMPLETE INFORMATION ON EACH OF THE PORTFOLIOS, BY CONTACTING THE RESPECTIVE ANNUITIES SERVICE CENTER SHOWN ON PAGE II OF THIS PROSPECTUS. YOU SHOULD READ THE PORTFOLIOS' PROSPECTUSES CAREFULLY BEFORE INVESTING IN THE CORRESPONDING INVESTMENT OPTION. Please see the "Restrictions on Investment Options Under Income Plus For Life Series Riders" section in the annuity prospectus for additional information. ______: 0509 333-146591 333-146698 Page 6 of 6 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H JOHN HANCOCK LIFE INSURANCE COMPANY OF NEW YORK SEPARATE ACCOUNT A SUPPLEMENT DATED MAY 4, 2009 TO PROSPECTUSES DATED MAY 1, 2009 This Supplement is intended to supplement prospectuses dated May 1, 2009 for VENTURE(R) OPPORTUNITY A SHARE VARIABLE ANNUITY AND VENTURE(R) OPPORTUNITY B SHARE VARIABLE ANNUITY Contracts issued before May 4, 2009 by John Hancock Life Insurance Company (U.S.A.) and John Hancock Life Insurance Company of New York. We call each of these prospectuses an "annuity prospectus." You should read this Supplement together with the annuity prospectus for the Contract you purchase and retain all documents for future reference. If you would like another copy of the annuity prospectus, please contact our Annuities Service Office at 1-800-344-1029 to request a free copy. You may also visit our website at www.jhannuities.com or www.jhannuitiesnewyork.com. This Supplement provides information about changes to the Model Allocations available only between February 11, 2008 and August 29, 2008 for Contracts with a guaranteed minimum withdrawal benefit Rider. Effective May 4, 2009, the Portfolios in the restricted Model Allocations "Balanced: Growth & Income," "Balanced Toward Growth," and "Growth Focus" are changed as result of the merger of the Mid Cap Value Portfolio of the John Hancock Trust into the Mid Value Portfolio of the John Hancock Trust. We revise the "Restrictions on Investment Options Under Income Plus For Life Series Riders" section of the annuity prospectus in Appendix D: "Information about Income Plus For Life Series Riders Available Prior to May 4, 2009," to list the following restricted Model Allocations:
MODEL ALLOCATION MODEL ALLOCATION NAME PERCENTAGE PORTFOLIO NAME ---------------- ---------------- ------------------ Balanced: Growth & Income 5% American Global Small Capitalization (closed version - available 5% American Growth February 11, 2008 to August 5% Global 29, 2008) (1) 5% Mid Value Trust 15% Mutual Shares 15% American Blue Chip Income and Growth 10% American Growth-Income 25% American Bond 15% Investment Quality Bond Balanced Toward Growth 5% American Global Small Capitalization (closed version - available 10% American Growth February 11, 2008 to August 10% Global 29, 2008) (1) 5% Mid Value Trust 20% Mutual Shares 15% American Blue Chip Income and Growth 10% American Growth-Income 15% American Bond 10% Investment Quality Bond Growth Focus 5% American Global Small Capitalization (closed version, available 5% Mid Cap Stock February 11, 2008 to August 15% American Growth 29, 2008) (1) 10% Global 5% Mid Value Trust 20% Mutual Shares 15% American Blue Chip Income and Growth 15% American Growth-Income 10% American Bond
(1) If your Contract Value was allocated to this Model Allocation on the last day it was available, you may continue to allocate your Contract Value to this Model Allocation if: (a) you continue to allocate your entire Contract Value (other than amounts in a Fixed Account under our DCA Program), including future Purchase Payments, to this Model Allocation; and (b) you rebalance your entire Contract Value to this Model Allocation on a quarterly basis. You will no longer be able to use this Model Allocation, however, if you transfer your Contract Value to any of the available individual Investment Options, to any other Model Allocation, or to any Variable Investment Option other than as permitted in this Model Allocation. For more information regarding the Portfolios, including information relating to their investment objectives, policies and restrictions, and the risks of investing in such Portfolios, please see the annuity prospectus and the Portfolios' prospectuses. You bear the investment risk of any Portfolio you choose as a Variable Investment Option. 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 CAN OBTAIN A COPY OF THE PORTFOLIO'S PROSPECTUS, WITHOUT CHARGE, BY CONTACTING US AT THE ANNUITIES SERVICE OFFICE AT 1-800-344-1029 OR IN NEW YORK STATE AT 1-800-551-2078. YOU SHOULD READ THE PORTFOLIO'S PROSPECTUS CAREFULLY BEFORE INVESTING IN THE CORRESPONDING VARIABLE INVESTMENT OPTION. 70304: 0509 333-146591 333-146698 Page 1 of 1 Prospectus dated May 1, 2009 (JOHN HANCOCK(R) LOGO) JOHN HANCOCK ANNUITIES Venture(R) Opportunity A Share Variable Annuity This Prospectus describes interests in VENTURE(R) OPPORTUNITY A SHARE flexible Purchase Payment deferred Variable Annuity contracts (singly, a "Contract" and collectively, the "Contracts") issued by JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) ("John Hancock USA") in all jurisdictions except New York, or by JOHN HANCOCK LIFE INSURANCE COMPANY OF NEW YORK ("John Hancock New York") in New York. Unless otherwise specified, "we," "us," "our," or a "Company" refers to the applicable issuing company of a Contract. You, the Contract Owner, should refer to the first page of your Venture(R) Opportunity A Share Variable Annuity Contract for the name of your issuing Company. VARIABLE INVESTMENT OPTIONS. You may allocate Contract Values or Additional Purchase Payments, to the extent permitted under your Contract, in Variable Investment Options. If you do, we will measure your Contract Value (other than value allocated to a DCA Fixed Investment Option) and Variable Annuity payments according to the investment performance of applicable Subaccounts of JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H or, in the case of John Hancock New York, applicable Subaccounts of JOHN HANCOCK LIFE INSURANCE COMPANY OF NEW YORK SEPARATE ACCOUNT A (singly, a "Separate Account" and collectively, the "Separate Accounts"). Each Subaccount invests in one of the following Portfolios of John Hancock Trust that corresponds to a Variable Investment Option that we make available on the date of this Prospectus. John Hancock Investments Management Services, LLC is the investment adviser to the John Hancock Trust. We show the Portfolio's manager (i.e., subadviser) in bold above the name of the Portfolio: CAPITAL RESEARCH AND MANAGEMENT COMPANY (Adviser to the American Fund Insurance Series) American Asset Allocation Trust American Blue Chip Income and Growth Trust American Bond Trust American Global Growth Trust American Global Small Capitalization Trust American Growth Trust American Growth-Income Trust American High-Income Bond Trust American International Trust American New World Trust DAVIS SELECTED ADVISERS, L.P. Fundamental Value Trust DECLARATION MANAGEMENT RESEARCH LLC Total Bond Market Trust A FRANKLIN MUTUAL ADVISORS LLC Mutual Shares Trust FRANKLIN TEMPLETON INVESTMENTS CORP. International Small Cap Trust GRANTHAM, MAYO, VAN OTTERLOO & CO. LLC International Core Trust LORD, ABBETT & CO. LLC All Cap Value Trust MFC GLOBAL INVESTMENT MANAGEMENT (U.S.), LLC Small Cap Intrinsic Value Trust MFC GLOBAL INVESTMENT MANAGEMENT (U.S.A.) LIMITED 500 Index Trust American Fundamental Holdings Trust Core Allocation Trust Core Balanced Trust Core Fundamental Holdings Trust Core Global Diversification Trust Franklin Templeton Founding Allocation Trust Lifestyle Balanced Trust Lifestyle Conservative Trust Lifestyle Growth Trust Lifestyle Moderate Trust Money Market Trust PACIFIC INVESTMENT MANAGEMENT COMPANY LLC Global Bond Trust Total Return Trust T. ROWE PRICE ASSOCIATES, INC. Balanced Trust Mid Value Trust TEMPLETON GLOBAL ADVISORS LIMITED Global Trust International Value Trust(1) VAN KAMPEN(2) Value Trust WELLINGTON MANAGEMENT COMPANY, LLP Core Allocation Plus Trust Investment Quality Bond Trust Mid Cap Intersection Trust Mid Cap Stock Trust Small Cap Growth Trust Small Cap Value Trust (1) Templeton Global Advisors Limited is sub-subadviser to the International Value Trust under an agreement with Templeton Investment Counsel, LLC. (2) Morgan Stanley Investment Management, Inc. doing business as Van Kampen. CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR INSURED, GUARANTEED OR ENDORSED BY, ANY BANK, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE. IT CONTAINS INFORMATION ABOUT THE SEPARATE ACCOUNTS AND THE VARIABLE INVESTMENT OPTIONS THAT YOU SHOULD KNOW BEFORE INVESTING. THE CONTRACTS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION ("SEC"). NEITHER THE SEC NOR ANY STATE HAS DETERMINED WHETHER THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Venture Opportunity A Share 2009 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) ANNUITIES SERVICE CENTER MAILING ADDRESS 164 Corporate Drive Post Office Box 9505 Portsmouth, NH 03801-6815 Portsmouth, NH 03802-9505 (617) 663-3000 or www.jhannuities.com (800) 344-1029 JOHN HANCOCK LIFE INSURANCE COMPANY OF NEW YORK ANNUITIES SERVICE CENTER MAILING ADDRESS 164 Corporate Drive Post Office Box 9506 Portsmouth, NH 03801-6815 Portsmouth, NH 03802-9506 (877) 391-3748 or www.jhannuitiesnewyork.com (800) 551-2078 ii Table of Contents I. GLOSSARY OF SPECIAL TERMS.............................................. 1 II. OVERVIEW.............................................................. 5 III. FEE TABLES........................................................... 10 EXAMPLES............................................................... 12 IV. GENERAL INFORMATION ABOUT US, THE SEPARATE ACCOUNTS AND THE PORTFOLIOS............................................................. 16 THE COMPANIES.......................................................... 16 THE SEPARATE ACCOUNTS.................................................. 16 THE PORTFOLIOS......................................................... 17 VOTING INTEREST........................................................ 25 V. DESCRIPTION OF THE CONTRACT............................................ 26 ELIGIBLE PLANS......................................................... 26 ACCUMULATION PERIOD PROVISIONS......................................... 26 Purchase Payments................................................... 26 Accumulation Units.................................................. 27 Value of Accumulation Units......................................... 27 Net Investment Factor............................................... 27 Transfers Among Investment Options.................................. 27 Maximum Number of Investment Options................................ 28 Telephone and Electronic Transactions............................... 29 Special Transfer Services - Dollar Cost Averaging................... 29 Special Transfer Services - Asset Rebalancing Program............... 30 Withdrawals......................................................... 30 Signature Guarantee Requirements for Surrenders and Partial Withdrawals...................................................... 31 Special Withdrawal Services - The Systematic Withdrawal Program..... 31 Special Withdrawal Services - The Income Made Easy Program.......... 31 Death Benefit During Accumulation Period............................ 31 PAY-OUT PERIOD PROVISIONS.............................................. 33 General............................................................. 33 Annuity Options..................................................... 34 Determination of Amount of the First Variable Annuity Payment....... 36 Annuity Units and the Determination of Subsequent Variable Annuity Payments......................................................... 36 Transfers During Pay-out Period..................................... 37 Death Benefit During Pay-out Period................................. 37 OTHER CONTRACT PROVISIONS.............................................. 37 Right to Review..................................................... 37 Ownership........................................................... 38 Annuitant........................................................... 38 Beneficiary......................................................... 39 Spouse.............................................................. 39 Modification........................................................ 39 Our Approval........................................................ 39 Misstatement and Proof of Age, Sex or Survival...................... 39 Loans............................................................... 39 VI. OPTIONAL BENEFITS..................................................... 40 OVERVIEW............................................................... 40 FEATURES OF THE INCOME PLUS FOR LIFE SERIES RIDERS..................... 40 Covered Person(s)................................................... 40 Availability of Income Plus For Life Series Riders.................. 40 Rider Fees.......................................................... 41 Benefit Base........................................................ 41 Benefit Rate........................................................ 42 Lifetime Income Amount.............................................. 42 Lifetime Income Date................................................ 42 Restrictions on Additional Purchase Payments........................ 43 Restrictions on Investment Options Under Income Plus For Life Series Riders........................................................... 43 Increases in Guaranteed Amounts..................................... 45 Withdrawals, Distributions and Settlements.......................... 48 Additional Annuity Options.......................................... 52 Comparison between Guaranteed Minimum Withdrawal Benefits and Annuity Payments................................................. 52 Impact of Death Benefits............................................ 52 Tax Considerations.................................................. 54 Termination of Rider................................................ 54 ANNUAL STEP-UP DEATH BENEFIT........................................... 55 Rider Benefit....................................................... 55 Termination of the Optional Annual Step-Up Death Benefit............ 55 Annual Step-Up Death Benefit Fee.................................... 55 Qualified Plans..................................................... 55 VII. CHARGES AND DEDUCTIONS............................................... 56 FRONT-END SALES CHARGES................................................ 56 WITHDRAWAL CHARGES..................................................... 56 ANNUAL CONTRACT FEE.................................................... 57 ASSET-BASED CHARGES.................................................... 57 Daily Administration Fee............................................ 57 Mortality and Expense Risks Fee..................................... 57 REDUCTION OR ELIMINATION OF CHARGES AND DEDUCTIONS..................... 58 PREMIUM TAXES.......................................................... 59 VIII. FEDERAL TAX MATTERS................................................. 60 INTRODUCTION........................................................... 60 OUR TAX STATUS......................................................... 60 SPECIAL CONSIDERATIONS FOR OPTIONAL BENEFITS........................... 60 NONQUALIFIED CONTRACTS................................................. 61 Exchanges of Annuity Contracts...................................... 61 Undistributed Gains................................................. 61 Taxation of Annuity Payments........................................ 61 Surrenders, Withdrawals and Death Benefits.......................... 62 Taxation of Death Benefit Proceeds.................................. 62 Penalty Tax on Premature Distributions.............................. 62 Diversification Requirements........................................ 63 QUALIFIED CONTRACTS.................................................... 63 Required Minimum Distributions...................................... 63 Penalty Tax on Premature Distributions.............................. 65 Rollovers and Transfers............................................. 65 Withholding on Rollover Distributions............................... 65 Conversions and Rollovers to Roth IRAs.............................. 66 SEE YOUR OWN TAX ADVISOR............................................... 66 IX. GENERAL MATTERS....................................................... 67 DISTRIBUTION OF CONTRACTS.............................................. 67 Standard Compensation............................................... 67 Revenue Sharing and Additional Compensation......................... 67 Differential Compensation........................................... 68 CONFIRMATION STATEMENTS................................................ 68 REINSURANCE ARRANGEMENTS............................................... 68 STATEMENTS OF ADDITIONAL INFORMATION................................... 68 Financial Statements................................................ 69 APPENDIX A: EXAMPLES OF CALCULATION OF WITHDRAWAL CHARGES................. A-1 APPENDIX B: QUALIFIED PLAN TYPES.......................................... B-1 APPENDIX C: ADDITIONAL AVAILABILITY OF GUARANTEED MINIMUM WITHDRAWAL BENEFIT RIDERS......................................................... C-1 APPENDIX D: INFORMATION ABOUT INCOME PLUS FOR LIFE SERIES RIDERS AVAILABLE PRIOR TO MAY 4, 2009................................................... D-1 APPENDIX U: TABLES OF ACCUMULATION UNIT VALUES............................ U-1
2 I. Glossary of Special Terms The following terms as used in this Prospectus have the indicated meanings. ACCUMULATION PERIOD: The period between the issue date of the Contract and the Annuity Commencement Date. ADDITIONAL PURCHASE PAYMENT: Any Purchase Payment made after the initial Purchase Payment. ADJUSTED BENEFIT BASE: A term used with our guaranteed minimum withdrawal benefit Riders to describe an adjustment we make to the Rider's Benefit Base to reflect any Additional Purchase Payments we applied to the Benefit Base during the Contract Year prior to a Contract Anniversary. See "VI. Optional Benefits - Rider Fees." AGE 65 CONTRACT ANNIVERSARY: The Contract Anniversary on, or next following, the date the Owner attains age 65. AGE 95 CONTRACT ANNIVERSARY: A term used with our optional guaranteed minimum withdrawal benefit Riders to describe The Contract Anniversary on, or next following, the date the oldest Owner attains age 95. ANNIVERSARY VALUE: A term used with our optional Annual Step-Up Death Benefit Rider that describes one of the values we use to determine the death benefit. The Anniversary Value equals your Contract Value on the Contract Anniversary, plus Additional Purchase Payments, less amounts deducted in connection with partial withdrawals since the last day of the Contract Year. The amount deducted in connection with partial withdrawals will be on a pro rata basis and will be equal to (a) multiplied by (b) where: a) is equal to the optional Annual Step-Up Death Benefit prior to the withdrawal; and b) is equal to the Withdrawal Amount divided by the Contract Value prior to the partial withdrawal. (See "VI. Optional Benefits - Annual Step-Up Death Benefit.") ANNUITANT: Any natural person or persons to whom annuity payments are made and whose life is used to determine the duration of annuity payments involving life contingencies. If the Contract Owner names more than one person as an "Annuitant," the second person named is referred to as "co-Annuitant." The "Annuitant" and "co-Annuitant" are referred to collectively as "Annuitant." The Annuitant is as designated on the Contract specification page or in the application, unless changed. The Annuitant becomes the Owner of the Contract during the Pay-out Period. ANNUITIES SERVICE CENTER: The mailing address of our service office is listed on page ii of this Prospectus. You can send overnight mail to us at the street address of the service office, 164 Corporate Drive, Portsmouth, NH 03801-6815. ANNUITY COMMENCEMENT DATE: The date we/you annuitize your Contract. That is, the Pay-out Period commences and we begin to make annuity payments to the Annuitant. You can change the Annuity Commencement Date to any date prior to the Maturity Date. ANNUITY OPTION: The method selected by the Contract Owner (or as specified in the Contract if no selection is made) for annuity payments made by us. ANNUITY UNIT: A unit of measure that is used after the election of an Annuity Option to calculate Variable Annuity payments. ASSOCIATED ACCOUNTS: The sources of your assets that are used (in states where permitted; not available in New York) to determine your Cumulative Value and applicable front-end sales charge. Associated Accounts include your Variable Annuity Contracts issued by us through your financial adviser's broker-dealer that are currently in the accumulation phase and certain additional contracts or accounts identified by your financial adviser's broker-dealer. BENEFICIARY: The person, persons or entity entitled to the death benefit under the Contract upon the death of a Contract Owner or, in certain circumstances, an Annuitant. The Beneficiary is as specified in the application, unless changed. BENEFIT BASE: A term used with our optional guaranteed minimum withdrawal benefit Riders to describe a value we use to determine a guaranteed amount under the Rider. Please refer to "VI. Optional Benefits" for more details. BENEFIT RATE means a rate we use to determine a guaranteed amount under an optional guaranteed minimum withdrawal benefit Rider. BUSINESS DAY: Any day on which the New York Stock Exchange is open for business. The end of a Business Day is the close of daytime trading of the New York Stock Exchange, which generally is 4:00 p.m. Eastern Time. CODE: The Internal Revenue Code of 1986, as amended. 1 COMMUTED VALUE: The present value of any remaining guaranteed annuity payments under your Contract, determined on the day we receive your written request for surrender. See "Full Surrenders During the Pay-out Period" in "V. Description of the Contract - Pay-Out Period Provisions." COMPANY: John Hancock USA or John Hancock New York. CONTINGENT BENEFICIARY: The person, persons or entity to become the Beneficiary if the Beneficiary is not alive. The Contingent Beneficiary is as specified in the application, unless changed. CONTRACT: The Variable Annuity contract offered by this Prospectus. CONTRACT ANNIVERSARY: The anniversary of the Contract Date. CONTRACT DATE: The date of issue of the Contract. CONTRACT VALUE: The total of the Investment Account values attributable to the Contract. CONTRACT YEAR: The period of twelve consecutive months beginning on the date as of which the Contract is issued, or any anniversary of that date. COVERED PERSON(S): A term used with our optional guaranteed minimum withdrawal benefit Riders to describe an individual (or individuals) whose lifetime(s) we use to determine the duration of any guaranteed lifetime income amounts under the Rider. Please refer to "VI. Optional Benefits" for more details. CREDIT: A term used with our optional guaranteed minimum withdrawal benefit Riders to describe an increase in the Benefit Base that we may apply during one or more Credit Periods. The Credit may also be referred to as the "Bonus" or "Target Amount" in the Rider you purchase. Please refer to "VI. Optional Benefits" for more details. CREDIT PERIOD: A term used with our optional guaranteed minimum withdrawal benefit Riders to describe a period of time we use to measure the availability of Credits. Credit Periods may be referred to as a "Bonus Period," or the period ending on a "Target Date" in the Rider you purchase. Please refer to "VI. Optional Benefits" for more details. CREDIT RATE is the rate we use to determine a Credit, if any, under our optional guaranteed minimum withdrawal benefit Riders. EXCESS WITHDRAWAL: A term used with our optional guaranteed minimum withdrawal benefit Riders to describe a withdrawal that exceeds certain limits under the Rider. Please refer to "VI. Optional Benefits" for more details. CUMULATIVE VALUE: This is the amount we use to determine your applicable front-end sales charge. Cumulative Value is equal to your current Purchase Payment plus your existing Contract Value plus the value of any Associated Accounts (in states where permitted; not available in New York). DCA FIXED INVESTMENT OPTION: An Investment Option, held in the Company's general account, established to make automatic transfers over a pre-determined period to elected Variable Investment Options. FIXED ANNUITY: An Annuity Option with payments for a set dollar amount that we guarantee. GENERAL ACCOUNT: All of a Company's assets, other than assets in its Separate Account and any other separate accounts it may maintain. INCOME PLUS FOR LIFE SERIES RIDERS: Both Income Plus For Life Riders - i.e., Income Plus For Life and Income Plus For Life - Joint Life. INVESTMENT ACCOUNT: An account we establish for you which represents your interests in an Investment Option during the Accumulation Period. INVESTMENT OPTIONS: The investment choices available to Contract Owners. JOHN HANCOCK NEW YORK: John Hancock Life Insurance Company of New York. 2 JOHN HANCOCK USA: John Hancock Life Insurance Company (U.S.A.). LIFETIME INCOME AMOUNT: A term used with our guaranteed minimum withdrawal benefit Riders that generally describes the amount we guarantee to be available each Contract Year for withdrawal during the Accumulation Period after the date you purchased the Rider (or the Lifetime Income Date, if later). Please refer to "VI. Optional Benefits" for more details. LIFETIME INCOME DATE: A term used with our guaranteed minimum withdrawal benefit Riders that generally describes the date on which we determine the Lifetime Income Amount. Please refer to "VI. Optional Benefits" for more details. MATURITY DATE: The latest allowable Annuity Commencement Date under your Contract. That is, the last date (unless we consent to a later date) on which the Pay-out Period commences and we begin to make annuity payments to the Annuitant. The Maturity Date is the date specified on the Contract specifications page, unless changed with our consent. NET PURCHASE PAYMENT: A Purchase Payment less any applicable front-end sales charge and premium tax. NONQUALIFIED CONTRACT: A Contract which is not issued under a Qualified Plan. OWNER OR CONTRACT OWNER ("YOU"): The person, persons (co-Owner) or entity entitled to all of the ownership rights under the Contract. References in this Prospectus to Contract Owners are typically by use of "you." The Owner has the legal right to make all changes in contractual designations where specifically permitted by the Contract. The Owner is as specified in the application, unless changed. The Annuitant becomes the Owner of the Contract during the Pay-out Period. PAY-OUT PERIOD: The period when we make annuity payments to you following the Annuity Commencement Date. PORTFOLIO: A series of a registered open-end management investment company which corresponds to a Variable Investment Option. PROSPECTUS: This Prospectus that describes interests in the Contract. PURCHASE PAYMENT: An amount you pay to us for the benefits provided by the Contract. Purchase Payment (as opposed to "Net Purchase Payment") is the gross payment amount, and does not reflect reductions for any applicable front-end sales charge or premium tax. QUALIFIED CONTRACT: A Contract issued under a Qualified Plan. QUALIFIED PLAN: A retirement plan that receives favorable tax treatment under Section 401, 403, 408 (IRAs), 408A (Roth IRAs) or 457 of the Code. RESET: A term used with our guaranteed minimum withdrawal benefit Riders that means a reduction of the Benefit Base if you take Excess Withdrawals. RIDER: An optional benefit that you may elect for an additional charge. SEPARATE ACCOUNT: John Hancock Life Insurance Company (U.S.A.) Separate Account H or John Hancock Life Insurance Company of New York Separate Account A, as applicable. A separate account is a segregated asset account of a company that is not commingled with the general assets and obligations of the company. SETTLEMENT PHASE: A term used with our optional guaranteed minimum withdrawal benefit Riders to describe the period when your Contract Value is equal to zero and we automatically begin making payments to you under the Rider, subject to the conditions described in the Rider. During the Settlement Phase, the Contract will continue but all other rights and benefits under the Contract, including death benefits and any additional Riders, terminate. Please refer to "VI. Optional Benefits" for more details. STEP-UP: A term used with our optional guaranteed minimum withdrawal benefit Riders to describe an increase in the Benefit Base and Lifetime Income Amount on certain Contract Anniversary dates when your Contract Value exceeds the previous Benefit Base. Please refer to "VI. Optional Benefits" for more details. STEP-UP DATE: A term used with our optional guaranteed minimum withdrawal benefit Riders to describe the date on which we determine whether a Step-Up could occur. SUBACCOUNT: A Subaccount of a Separate Account. Each Subaccount invests in shares of a specific Portfolio. 3 UNLIQUIDATED PURCHASE PAYMENTS: The amount of all Purchase Payments in the Contract net of any Withdrawal Amounts that have been taken to date. VARIABLE ANNUITY: An Annuity Option with payments which: (1) are not predetermined or guaranteed as to dollar amount; and (2) vary in relation to the investment experience of one or more specified Subaccounts. VARIABLE INVESTMENT OPTION: An Investment Option corresponding to a Subaccount of a Separate Account that invests in shares of a specific Portfolio. WITHDRAWAL AMOUNT: The total amount taken from your Contract Value, including any applicable withdrawal charge, tax and proportional share of administrative fee, to process a withdrawal. 4 II. Overview This overview tells you some key points you should know about the Contract. Because this is an overview, it does not contain all the information that may be important to you. You should read carefully this entire Prospectus, including its Appendices, your Contract and the Statement of Additional Information for more detailed information. Insurance laws and regulations apply to us in every state in which our Contracts are sold. As a result, various terms and conditions of your Contract may vary from the terms and conditions described in this Prospectus, depending upon where you purchase a Contract. These variations will be reflected in your Contract or in a Rider attached to your Contract. WHAT KIND OF CONTRACT IS DESCRIBED IN THIS PROSPECTUS? The Contract is a flexible Purchase Payment deferred Variable Annuity Contract between you and a Company. "Deferred" means payments by a Company begin on a future date under the Contract. "Variable" means your investment amounts in the Contract may increase or decrease in value daily based upon your investment choices. The Contract provides for the accumulation of your investment amounts and the payment of annuity benefits on a variable and/or fixed basis. WHO IS ISSUING MY CONTRACT? Your Contract provides the name of the Company that issues your Contract. In general, John Hancock USA may issue the Contract in any jurisdiction except New York. John Hancock New York issues the Contract only in New York. Each Company sponsors its own Separate Account. WHAT ARE SOME BENEFITS OF THE CONTRACT? The Contract offers access to diversified money managers, a death benefit and an optional death benefit, an optional guaranteed minimum withdrawal benefit, annuity payments and tax-deferred treatment of earnings. We will pay a death benefit to your Beneficiary if you die during the Accumulation Period, which is described in this Prospectus under "Death Benefit During Accumulation Period." For an additional fee, you may elect an optional death benefit called the "Annual Step-Up Death Benefit." The Contract also offers optional guaranteed minimum withdrawal benefits, each for an additional fee. We provide more information about these benefits under "VI. Optional Benefits." We offer a variety of Fixed Annuity and Variable Annuity payment options. Periodic annuity payments will begin on the Annuity Commencement Date. You select the Annuity Commencement Date, the frequency of payment and the type of annuity payment option. Annuity payments are made to the Annuitant. We provide more information about payout benefits in "V. Description of the Contract - Pay-Out Period Provisions." In most cases, no income tax will have to be paid on your earnings under the Contract until these earnings are paid out. WHEN YOU PURCHASE A CONTRACT FOR ANY TAX-QUALIFIED RETIREMENT PLAN, THE CONTRACT DOES NOT PROVIDE ANY ADDITIONAL TAX DEFERRED TREATMENT OF EARNINGS BEYOND THE TREATMENT PROVIDED BY THE PLAN. CONSEQUENTLY, YOU SHOULD PURCHASE A CONTRACT FOR A QUALIFIED PLAN ONLY ON THE BASIS OF OTHER BENEFITS OFFERED BY THE CONTRACT. THESE BENEFITS MAY INCLUDE LIFETIME INCOME PAYMENTS, PROTECTION THROUGH LIVING AND DEATH BENEFITS, AND GUARANTEED FEES. HOW DOES THE CONTRACT WORK? Under the Contract, you make one or more Purchase Payments to a Company for a period of time, known as the Accumulation Period. During the Accumulation Period, your Net Purchase Payments will be allocated to Investment Options. You may transfer among the investment options and take withdrawals. Later, beginning on the Annuity Commencement Date, that Company makes one or more annuity payments under the Contract, known as the Pay-out Period. Your Contract Value during the Accumulation Period will be variable and the amounts of annuity payments during the Pay-out Period may either be variable or fixed, depending upon your choice. 5 HOW CAN I INVEST MONEY IN THE CONTRACT? We use the term Purchase Payment to refer to the investments you make in the Contract. The table below shows the required minimum amount for the initial Purchase Payment. The table also shows the required minimum amount for Additional Purchase Payments.
TYPE OF MINIMUM INITIAL MINIMUM ADDITIONAL CONTRACT PURCHASE PAYMENT PURCHASE PAYMENT -------- ---------------- ------------------ Nonqualified $5,000 $30 Qualified $2,000 $30
Generally, you may make Additional Purchase Payments at any time. If a Purchase Payment would cause your Contract Value to exceed $1 million or your Contract Value already exceeds $1 million, you must obtain our approval in order to make the Purchase Payment. There may be additional restrictions on Purchase Payments if you purchase a guaranteed minimum withdrawal benefit Rider. See "Restrictions on Additional Purchase Payments" in "VI. Optional Benefits." WHAT CHARGES DO I PAY UNDER THE CONTRACT? Your Contract has a front-end sales charge, which we deduct from your Purchase Payment before it is invested in your allocated Investment Options. The amount of the sales charge varies, as described in the section "VII. Charges & Deductions - Front-End Sales Charges." To ensure that you are charged the lowest sales charge for which you qualify, be sure to send your Purchase Payments for this Contract through your broker-dealer. Contracts with Contract Value under $50,000 have an annual Contract fee of $30. Your Contract also has asset-based charges to compensate us primarily for our administrative and distribution expenses and for the mortality and expense risks that we assume under the Contract. These charges do not apply to assets you have in a DCA Fixed Investment Option. We take the deduction proportionally from each of your Variable Investment Options. We make deductions for any applicable taxes based on the amount of a Purchase Payment. If you elect a Rider, we also deduct the Rider charges shown in the Fee Tables proportionally from each of your Investment Options, based on your value in each. WHAT ARE MY INVESTMENT CHOICES? You may invest in any of the Variable Investment Options. Each Variable Investment Option is a Subaccount of a Separate Account that invests in a corresponding Portfolio. The Portfolio prospectus contains a full description of a Portfolio. The amount you've invested in any Variable Investment Option will increase or decrease based upon the investment performance of the corresponding Portfolio (reduced by certain charges we deduct - see "III. Fee Tables"). Your Contract Value during the Accumulation Period and the amounts of annuity payments will depend upon the investment performance of the underlying Portfolio of the Variable Investment Option you select. Allocating assets only to one or a small number of the Variable Investment Options, other than to Portfolios with balanced and diversified investment strategies (see "Portfolio Investment Objectives and Strategies" on page 18), should not be considered a diversified investment strategy. In particular, allocating assets to a small number of Variable Investment Options that concentrate their investments in a particular business or market sector will increase the risk that your Contract Value will be more volatile since these Variable Investment Options may react similarly to business or market specific events. Examples of business or market sectors where this risk historically has been and may continue to be particularly high include: (a) technology-related business sectors, (b) small cap securities and (c) foreign securities. We do not provide advice regarding appropriate investment allocations, and you should discuss this matter with your broker-dealer. Your investment option choices may be limited if you purchase a guarantee minimum withdrawal benefit Rider. See "Restrictions on Investment Options Under Income Plus For Life Series Riders" in "VI. Optional Benefits." 6 HOW CAN I CHANGE MY INVESTMENT CHOICES? ALLOCATION OF NET PURCHASE PAYMENTS. You designate how your Net Purchase Payments are to be allocated among the Investment Options. You may change this investment allocation for future Net Purchase Payments at any time. TRANSFERS AMONG INVESTMENT OPTIONS. During the Accumulation Period, you may transfer your investment amounts among Investment Options, subject to certain restrictions described below and in "V. Description of the Contract - Transfers Among Investment Options." During the Pay-out Period, you may transfer your allocations among the Variable Investment Options, subject to certain restrictions described in " V. Description of the Contract - Transfers During Pay-out Period." The Variable Investment Options can be a prime target for abusive transfer activity. Long-term investors in a Variable Investment Option can be harmed by frequent transfer activity since such activity may expose the Variable Investment Option's corresponding Portfolio to increased Portfolio transaction costs (affecting the value of the shares) and/or disruption to the corresponding Portfolio manager's ability to effectively manage such corresponding Portfolio, both of which may result in dilution with respect to interests held for long-term investment. To discourage disruptive frequent trading activity, we have adopted a policy for each Separate Account to restrict transfers to two per calendar month per Contract, with certain exceptions described in more detail in this Prospectus. We apply each Separate Account's policy and procedures uniformly to all Contract Owners. In addition to the transfer restrictions that we impose, the John Hancock Trust also has adopted policies under Rule 22c-2 of the Investment Company Act of 1940, as amended (the "1940 Act") to detect and deter abusive short-term trading. Accordingly, a Portfolio may require us to impose trading restrictions if it discovers violations of its frequent short-term trading policy. We will provide tax identification numbers and other Contract Owner transaction information to John Hancock Trust upon request, which it may use to identify any pattern or frequency of activity that violates its short-term trading policy. HOW DO I ACCESS MY MONEY? During the Accumulation Period, you may withdraw all or a portion of your Contract Value. The amount you withdraw from any Investment Option must be at least $300 or, if less, your entire balance in that Investment Option. If the Withdrawal Amount would reduce your Contract Value to less than $300, we may treat your withdrawal request as a request to withdraw all of your Contract Value. A withdrawal charge and an administration fee may apply to your withdrawal. A withdrawal may be subject to income tax and a 10% IRS penalty tax. WHAT TYPES OF OPTIONAL BENEFIT RIDERS MAY I BUY UNDER THE CONTRACT? For the additional charge shown in the Fee Tables, you may elect a Rider offering optional benefits. The availability of the Riders may vary by state. Guaranteed Minimum Withdrawal Benefit Riders Each of our optional guaranteed minimum withdrawal benefit Riders guarantees that you will be able to make withdrawals in an amount and over a period of time specified in your Rider, regardless of your Contract's investment performance. For more details, see "VI. Optional Benefits." The guaranteed minimum withdrawal benefit Riders offered under the Contract are: - Income Plus For Life, or - Income Plus For Life - Joint Life. We use the term "INCOME PLUS FOR LIFE SERIES RIDERS" in the Prospectus to refer to both Income Plus For Life Riders - i.e., Income Plus For Life and Income Plus For Life - Joint Life, as well as the versions of the Income Plus For Life and Income Plus For Life - Joint Life Riders that were available for purchase prior to May 4, 2009. Please see Appendix D: "Information about Income Plus For Life Series Riders Available Prior to May 4, 2009" for details about these Riders. You may elect to purchase one of these optional benefit Riders if it is available in your state. The guaranteed minimum withdrawal benefit Riders are not available to new Beneficiary IRAs (see "Availability of Income Plus For Life Series Riders" in "VI. Optional Benefits"). You may only elect one guaranteed minimum withdrawal benefit Rider. Either you, or the older of you and your spouse in the case of the Income Plus For Life - Joint Life Rider, must be under age 81 to purchase a Rider. We designed the Income Plus For Life Series Riders to make a Lifetime Income Amount available for annual withdrawals starting on a Lifetime Income Date. If you limit your annual withdrawals to the Lifetime Income Amount, we will make this benefit available for as long as you live, even after your Contract Value reduces to zero. You may extend this benefit to cover the lifetimes of you and your spouse by selecting our Income Plus For Life - Joint Life Rider. 7 Under either of our Income Plus For Life Series Riders, you choose how much Contract Value to withdraw at any time. We may reset the Lifetime Income Amount that we guarantee for future lifetime benefit payments, however, if your annual Withdrawal Amounts: - exceed the Lifetime Income Amount in any year after the Lifetime Income Date, or - exceed the Benefit Rate multiplied by the Benefit Base at the prior Contract Anniversary, increased by any Additional Purchase Payments, before the Lifetime Income Date. YOU COULD LOSE BENEFITS IF YOUR ANNUAL WITHDRAWAL AMOUNTS EXCEED THE LIMITS SPECIFIED IN THE INCOME PLUS FOR LIFE SERIES RIDERS. WE MAY RESET THE LIFETIME INCOME AMOUNT IF YOU TAKE ANY WITHDRAWALS BEFORE THE APPLICABLE LIFETIME INCOME DATE. YOU WILL LOSE THE LIFETIME INCOME AMOUNT IF YOUR WITHDRAWAL AMOUNTS BEFORE THE APPLICABLE LIFETIME INCOME DATE DEPLETE YOUR CONTRACT VALUE AND ANY REMAINING BENEFIT BASE TO ZERO (SEE "I. GLOSSARY OF SPECIAL TERMS" AND "VI. OPTIONAL BENEFITS"). For the Income Plus For Life Series Riders, the initial Benefit Base is equal to your initial Purchase Payment, up to the maximum Benefit Base ($5 million). We will increase the Benefit Base by a Credit (we may also refer to this as a "Deferral Credit" or "Bonus") that varies by Rider, if you choose not to make any withdrawals at all during certain Contract Years. We also may increase or "Step up" the guaranteed minimum withdrawal benefit amounts on certain dates to reflect market performance or other factors. You may also increase the amounts we guarantee, depending on the Rider, by making Additional Purchase Payments that we accept. WE IMPOSE SPECIAL LIMITS ON ADDITIONAL PURCHASE PAYMENTS AFTER THE FIRST YEAR FOR CONTRACTS ISSUED WITH A GUARANTEED MINIMUM WITHDRAWAL BENEFIT RIDER. We will pay withdrawal benefits automatically during an Income Plus For Life Series Rider's "Settlement Phase" that we describe in "VI. Optional Benefits." IF YOU ELECT TO PURCHASE AN INCOME PLUS FOR LIFE SERIES RIDER, YOU MAY INVEST YOUR CONTRACT VALUE ONLY IN THE INVESTMENT OPTIONS WE MAKE AVAILABLE FOR THAT RIDER. WE ALSO RESERVE THE RIGHT TO IMPOSE ADDITIONAL RESTRICTIONS ON INVESTMENT OPTIONS AT ANY TIME. If we do impose additional restrictions, any amounts you allocated to a permitted Investment Option will not be affected by the restriction as long as it remains in that Investment Option. (We describe the currently available Investment Options for Contracts issued with a guaranteed minimum withdrawal benefit Rider in "VI. Optional Benefits.") Annual Step-Up Death Benefit Rider You may elect to purchase the optional Annual Step-Up Death Benefit Rider, if available in your state, whether or not you purchase a guaranteed minimum withdrawal benefit Rider. Under the Annual Step-Up Death Benefit Rider, we guarantee a minimum death benefit up to the earlier of the Annuity Commencement Date or the Maturity Date based on the Contract's highest "Anniversary Value" that may be achieved before you (or any Co-Owner) reach 81 years old. The Annual Step-Up Death Benefit is available only at Contract issue and cannot be revoked once elected. You may not purchase the Annual Step-Up Death Benefit Rider, however, if you (or any co-Owner) have attained age 80, or if your Contract is an IRA that you inherited from someone else (unless you are the spouse of the decedent and own the IRA in your own name). WHAT ARE THE TAX CONSEQUENCES OF OWNING A CONTRACT? In most cases, no income tax will have to be paid on amounts you earn under a Contract until these earnings are paid out. All or part of the following distributions from a Contract may constitute a taxable payout of earnings: - full or partial withdrawals (including surrenders, systematic withdrawals and withdrawals under a guaranteed minimum withdrawal benefit Rider); - payment of any death benefit proceeds; - periodic payments under one of our annuity payment options; and - certain ownership changes. How much you will be taxed on a distribution is based upon complex tax rules and depends on matters such as: - the type of the distribution; - when the distribution is made; - the nature of any Qualified Plan for which the Contract is being used; and - the circumstances under which the payments are made. If your Contract is issued in connection with a Qualified Plan, all or part of your Purchase Payments may be tax-deductible. A 10% tax penalty applies in many cases to the taxable portion of any distributions taken from a Contract before you reach age 59 1/2. Also, most Qualified Plans require that minimUm distributions from a Contract commence and/or be completed within a certain period of time. This effectively limits the period of time during which you can continue to derive tax deferral benefits from any tax- 8 deductible Purchase Payments you paid or on any earnings under the Contract. Special rules have waived minimum distribution requirements for calendar year 2009 (see "VIII. Federal Tax Matters"). IF YOU ARE PURCHASING THE CONTRACT AS AN INVESTMENT VEHICLE FOR A QUALIFIED PLAN, YOU SHOULD CONSIDER THAT THE CONTRACT DOES NOT PROVIDE ANY ADDITIONAL TAX-DEFERRAL BENEFITS BEYOND THE TREATMENT PROVIDED BY THE QUALIFIED PLAN ITSELF. THE FAVORABLE TAX-DEFERRAL BENEFITS AVAILABLE FOR QUALIFIED PLANS THAT INVEST IN ANNUITY CONTRACTS ARE ALSO GENERALLY AVAILABLE IF THE QUALIFIED PLANS PURCHASE OTHER TYPES OF INVESTMENTS, SUCH AS MUTUAL FUNDS, EQUITIES AND DEBT INSTRUMENTS. HOWEVER, THE CONTRACT OFFERS FEATURES AND BENEFITS THAT OTHER INVESTMENTS MAY NOT OFFER. YOU AND YOUR FINANCIAL ADVISOR SHOULD CAREFULLY CONSIDER WHETHER THE FEATURES AND BENEFITS, INCLUDING THE INVESTMENT OPTIONS AND PROTECTION THROUGH LIVING GUARANTEES, DEATH BENEFITS AND OTHER BENEFITS PROVIDED UNDER AN ANNUITY CONTRACT ISSUED IN CONNECTION WITH A QUALIFIED PLAN ARE SUITABLE FOR YOUR NEEDS AND OBJECTIVES AND ARE APPROPRIATE IN LIGHT OF THE EXPENSE. We provide additional information on taxes in "VIII. Federal Tax Matters." We make no attempt to provide more than general information about use of the Contract with the various types of retirement plans. Purchasers of Contracts for use with any retirement plan should consult their legal counsel and tax advisor regarding the suitability of the Contract. CAN I RETURN MY CONTRACT? In most cases, you have the right to cancel your Contract within 10 days (or longer in some states) after you receive it. In most states, you will receive a refund equal to the Contract Value on the date of cancellation, which may be increased by any sales charges or charges for premium taxes deducted by us to that date. In some states, or if your Contract is issued as an IRA, you will receive a refund of any Purchase Payments (including sales charges) you made, if that amount is higher than Contract Value (increased by any sales charges or charges for premium taxes). The date of cancellation is the date we receive the Contract or acceptable written notification. WILL I RECEIVE A CONFIRMATION STATEMENT? We will send you a confirmation statement for certain transactions in your Investment Accounts. You should carefully review these statements to verify their accuracy. You should immediately report any mistakes to our Annuities Service Center (at the address or phone number shown on page ii of this Prospectus). If you fail to notify our Annuities Service Center of any mistake within 60 days of the mailing of the confirmation statement, you will be deemed to have ratified the transaction. 9 III. Fee Tables The following tables describe the fees and expenses applicable to buying, owning and surrendering a Venture(R) Opportunity A Share Contract. These fees and expenses are more completelY described in this Prospectus under "VII. Charges and Deductions." The items listed under "Total Annual Portfolio Operating Expenses" are described in detail in the Portfolio prospectus. Unless otherwise shown, the tables below show the maximum fees and expenses (including fees deducted from Contract Value for optional benefits). THE FOLLOWING TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU WILL PAY AT THE TIME THAT YOU BUY THE CONTRACT, SURRENDER THE CONTRACT, OR TRANSFER CASH VALUE BETWEEN INVESTMENT OPTIONS. STATE PREMIUM TAXES MAY ALSO BE DEDUCTED. CONTRACT OWNER TRANSACTION EXPENSES(1) JOHN HANCOCK USA JOHN HANCOCK NEW YORK SALES CHARGE
The Sales Charge (as a percentage If your Cumulative Value(2) is: of Purchase Payments) is: ------------------------------- --------------------------------- Up to $49,999.99 5.50% $50,000 to $99,999.99 4.50% $100,000 to $249,999.99 3.50% $250,000 to $499,999.99 2.50% $500,000 to $999,999.99 2.00% $1,000,000 and over 0.50%
WITHDRAWAL CHARGE If your Cumulative Value(2) is $1 million and over, we apply a withdrawal charge equal to 0.50% of Purchase Payments withdrawn in the first six months after payment. TRANSFER FEE(3) Maximum Fee $25 Current Fee $ 0
(1) State premium taxes may also apply to your Contract, which currently range from 0.04% to 4.00% of each Purchase Payment (see "VII. Charges and Deductions - Premium Taxes"). (2) Cumulative Value is your current Purchase Payment plus your existing Contract Value plus the value of any "Associated Accounts." Associated Accounts include (in states where permitted; not available in New York) your variable annuity contracts issued by us that are currently in the accumulation phase and certain additional contracts or accounts identified by your financial adviser's broker-dealer (see "VII. Charges & Deductions - Front-End Sales Charges" on page 56). (3) We reserve the right to impose a charge in the future for transfers in excess of 12 per year. The amount of this fee will not exceed the lesser of $25 or 2% of the amount transferred. 10 THE FOLLOWING TABLE DESCRIBES FEES AND EXPENSES THAT YOU PAY PERIODICALLY DURING THE TIME THAT YOU OWN THE CONTRACT. THIS TABLE DOES NOT INCLUDE ANNUAL PORTFOLIO OPERATING EXPENSES. PERIODIC FEES AND EXPENSES OTHER THAN PORTFOLIO EXPENSES
JOHN HANCOCK USA JOHN HANCOCK NEW YORK --------------------- ANNUAL CONTRACT FEE(1) $ 30 ANNUAL SEPARATE ACCOUNT EXPENSES(2) Mortality and Expense Risks Fee 0.65% Daily Administration Fee (asset based) 0.15% ---- TOTAL ANNUAL SEPARATE ACCOUNT EXPENSES(2) 0.80% (With No Optional Riders Reflected) OPTIONAL BENEFITS Optional Annual Step-Up Death Benefit Fee(2) 0.20% ---- TOTAL ANNUAL SEPARATE ACCOUNT EXPENSES(3) 1.00% Optional Guaranteed Minimum Withdrawal Benefit Rider Fee (maximum) (4) 1.20% ==== TOTAL FEES AND EXPENSES OTHER THAN PORTFOLIO EXPENSES(5) 2.20%
(1) The $30 annual Contract fee will not be assessed prior to the Maturity Date if at the time of its assessment the Contract Value is greater than or equal to $50,000. (2) A daily charge reflected as a percentage of the Variable Investment Options. (3) Amount shown includes the Mortality and Expense Risks Fee and the Daily Administration Fee as well as the optional Annual Step-Up Death Benefit Fee, as applicable. (4) The current charge for the Income Plus For Life and Income Plus For Life- Joint Life Riders is 0.90%. We reserve the right to increase the charge to a maximum charge of 1.20% if the Benefit Base is stepped up to equal the Contract Value. This fee is deducted from the Contract Value. This is an annual charge applied as a percentage of the Adjusted Benefit Base. All of the charges shown, including the Optional Guaranteed Minimum Withdrawal Benefit Rider Fee ("GMWB Fee"), are expressed in this table as a percentage of the Variable Investment Options (the "Separate Account Value"). The GMWB Fee is applied in the Contract as a percentage of the Adjusted Benefit Base. (5) For the purpose of adding and comparing the charges shown in this table, the Adjusted Benefit Base is assumed to be equal to the value of Separate Account Value. When the Separate Account Value and the Adjusted Benefit Base are not equal, the GMWB Fee may be a higher or lower percentage of the Separate Account Value than the percentage shown. For more information on increases and reductions in the Benefit Base, see "VI. Optional Benefits." THE NEXT TABLE DESCRIBES THE MINIMUM AND MAXIMUM TOTAL OPERATING EXPENSES CHARGED BY THE PORTFOLIOS THAT YOU MAY PAY PERIODICALLY DURING THE TIME THAT YOU OWN THE CONTRACT. MORE DETAIL CONCERNING EACH PORTFOLIO'S FEES AND EXPENSES IS CONTAINED IN THE PORTFOLIO'S PROSPECTUS.
TOTAL ANNUAL PORTFOLIO OPERATING EXPENSES MINIMUM MAXIMUM ----------------------------------------- ------- ------- Range of expenses that are deducted from Portfolio assets, including management fees, Rule 12b-1 fees, and other expenses 0.49% 1.25%
11 EXAMPLES We provide the following examples that are intended to help you compare the costs of investing in a Contract with the costs of investing in other variable annuity contracts. These costs include Contract Owner expenses, Contract fees, Separate Account annual expenses and Portfolio fees and expenses. Example 1 pertains to a Contract with the optional benefit Riders shown below. Example 2 pertains to a Contract without optional benefit Riders. EXAMPLE 1: MAXIMUM PORTFOLIO OPERATING EXPENSES - CONTRACT WITH OPTIONAL BENEFIT RIDERS The following example assumes that you invest $10,000 in a Contract with the optional benefit Riders shown below. The first example also assumes that your investment has a 5% return each year and assumes the maximum annual Contract fee and Rider fees, the maximum fees and expenses of any of the Portfolios and no reduction in sales charges based on Associated Account values. Please note that the Rider fees are reflected as a percentage of the Adjusted Benefit Base, which may vary in value from the total Variable Investment Option value. Although your actual costs may be higher or lower, based on these assumptions, your costs would be: JOHN HANCOCK USA & JOHN HANCOCK NEW YORK CONTRACT WITH INCOME PLUS FOR LIFE AND ANNUAL STEP-UP DEATH BENEFIT
1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ ------- ------- -------- If you surrender the Contract at the end of the applicable time period: $893 $1,579 $2,299 $4,241 If you annuitize, or do not surrender the Contract at the end of the applicable time period: $893 $1,579 $2,299 $4,241
EXAMPLE 2: MINIMUM PORTFOLIO OPERATING EXPENSES - CONTRACT WITH NO OPTIONAL BENEFIT RIDERS The next example assumes that you invest $10,000 in a Contract, but with no optional benefit Riders. This example also assumes that your investment has a 5% return each year and assumes the average annual Contract fee we expect to receive for the Contracts and the minimum fees and expenses of any of the Portfolios, and no reduction in sales charges based on Associated Account values. Although your actual costs may be higher or lower, based on these assumptions, your costs would be: JOHN HANCOCK USA & JOHN HANCOCK NEW YORK CONTRACT WITH NO OPTIONAL BENEFIT RIDERS
1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ ------- ------- -------- If you surrender the Contract at the end of the applicable time period: $675 $925 $1,193 $1,954 If you annuitize, or do not surrender the Contract at the end of the applicable time period: $675 $925 $1,193 $1,954
THE FOLLOWING TABLES DESCRIBE THE OPERATING EXPENSES FOR EACH OF THE PORTFOLIOS, AS A PERCENTAGE OF THE PORTFOLIO'S AVERAGE NET ASSETS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2008, EXCEPT AS STATED BELOW IN THE NOTES THAT FOLLOW THE TABLES. THE TABLES SHOW ONLY THOSE CONTRACTUAL EXPENSE REIMBURSEMENTS EXTENDING A YEAR BEYOND THE DATE OF THIS PROSPECTUS. MORE DETAIL CONCERNING EACH PORTFOLIO'S FEES AND EXPENSES IS CONTAINED IN THE PORTFOLIO'S PROSPECTUS AND IN THE NOTES FOLLOWING THE TABLES. 12 The Portfolios available may be restricted if you purchase a guaranteed minimum withdrawal benefit Rider (see "VI. Optional Benefits").
TOTAL DISTRIBUTION ACQUIRED ANNUAL CONTRACTUAL NET MANAGEMENT AND SERVICE OTHER PORTFOLIO FEES OPERATING EXPENSE OPERATING PORTFOLIO/SERIES FEE (12B-1) FEES EXPENSES AND EXPENSES EXPENSES (1) REIMBURSEMENT(2) EXPENSES ---------------- ---------- ------------ -------- -------------- ----------- --------------- --------- 500 INDEX(3,4) Series NAV 0.46% 0.00% 0.03% 0.00% 0.49% 0.00% 0.49% ALL CAP VALUE(3) Series I 0.85% 0.05% 0.09% 0.00% 0.99% 0.00% 0.99% AMERICAN FUNDAMENTAL HOLDINGS(5,6) Series III 0.05% 0.25% 0.04% 0.40% 0.74% -0.05% 0.69% BALANCED(7) Series I 0.84% 0.05% 0.07% 0.00% 0.96% 0.00% 0.96% CORE ALLOCATION(5,8) Series I 0.05% 0.05% 0.07% 0.85% 1.02% -0.05% 0.97% CORE ALLOCATION PLUS(3,9) Series I 0.92% 0.05% 0.22% 0.00% 1.19% 0.00% 1.19% CORE BALANCED(5,8) Series I 0.05% 0.05% 0.07% 0.79% 0.96% -0.05% 0.91% CORE FUNDAMENTAL HOLDINGS(5,8) Series III 0.05% 0.15% 0.05% 0.41% 0.66% -0.05% 0.61% CORE GLOBAL DIVERSIFICATION(5,8) Series III 0.05% 0.15% 0.05% 0.42% 0.67% -0.05% 0.62% FRANKLIN TEMPLETON FOUNDING ALLOCATION(10) Series I 0.04% 0.05% 0.04% 0.83% 0.96% -0.05% 0.91% FUNDAMENTAL VALUE(3) Series I 0.76% 0.05% 0.05% 0.00% 0.86% 0.00% 0.86% GLOBAL(3,9,11,12) Series I 0.81% 0.05% 0.11% 0.00% 0.97% -0.01% 0.96% GLOBAL BOND(3,9) Series I 0.70% 0.05% 0.10% 0.00% 0.85% 0.00% 0.85% INTERNATIONAL CORE(3,9) Series I 0.89% 0.05% 0.14% 0.00% 1.08% 0.00% 1.08% INTERNATIONAL SMALL CAP(3,9) Series I 0.94% 0.05% 0.16% 0.00% 1.15% 0.00% 1.15% INTERNATIONAL VALUE(3,9,11) Series I 0.81% 0.05% 0.14% 0.00% 1.00% -0.02% 0.98% INVESTMENT QUALITY BOND(3) Series I 0.59% 0.05% 0.09% 0.00% 0.73% 0.00% 0.73% LIFESTYLE BALANCED(13) Series I 0.04% 0.05% 0.03% 0.76% 0.88% 0.00% 0.88% LIFESTYLE CONSERVATIVE(13) Series I 0.04% 0.05% 0.03% 0.71% 0.83% 0.00% 0.83% LIFESTYLE GROWTH(13) Series I 0.04% 0.05% 0.03% 0.76% 0.88% 0.00% 0.88% LIFESTYLE MODERATE(13) Series I 0.04% 0.05% 0.03% 0.74% 0.86% 0.00% 0.86% MID CAP INTERSECTION(3) Series I 0.87% 0.05% 0.06% 0.00% 0.98% 0.00% 0.98% MID CAP STOCK(3) Series I 0.84% 0.05% 0.05% 0.00% 0.94% 0.00% 0.94% MID VALUE(3,7) Series I 0.98% 0.05% 0.10% 0.00% 1.13% 0.00% 1.13% MONEY MARKET(3) Series I 0.47% 0.05% 0.06% 0.00% 0.58% 0.00% 0.58% MUTUAL SHARES(3,14) Series I 0.96% 0.05% 0.11% 0.00% 1.12% -0.01% 1.11% SMALL CAP GROWTH(3) Series I 1.06% 0.05% 0.08% 0.00% 1.19% 0.00% 1.19% SMALL CAP INTRINSIC VALUE(3) Series I 0.90% 0.05% 0.30% 0.00% 1.25% 0.00% 1.25%
13
TOTAL DISTRIBUTION ACQUIRED ANNUAL CONTRACTUAL NET MANAGEMENT AND SERVICE OTHER PORTFOLIO FEES OPERATING EXPENSE OPERATING PORTFOLIO/SERIES FEE (12B-1) FEES EXPENSES AND EXPENSES EXPENSES (1) REIMBURSEMENT(2) EXPENSES --------------- ---------- ------------ -------- -------------- ----------- --------------- --------- SMALL CAP VALUE(3) Series I 1.06% 0.05% 0.06% 0.00% 1.17% 0.00% 1.17% TOTAL BOND MARKET A(3,4) Series NAV 0.47% 0.00% 0.05% 0.00% 0.52% 0.00% 0.52% TOTAL RETURN(3,15) Series I 0.69% 0.05% 0.06% 0.00% 0.80% 0.00% 0.80% VALUE(3) Series I 0.74% 0.05% 0.06% 0.00% 0.85% 0.00% 0.85%
FEEDER FUND MASTER FUND --------------------------------------------------------------------- ------------------------------------- TOTAL TOTAL MASTER MASTER FUND AND NET FUND AND NET DISTRIBUTION TOTAL CONTRACTUAL PORTFOLIO FEEDER FEEDER MANAGEMENT AND SERVICE OTHER OPERATING EXPENSE OPERATING MANAGEMENT OTHER FUND FUND PORTFOLIO/SERIES FEES (12B-1) FEES EXPENSES EXPENSES(1)REIMBURSEMENT(2) EXPENSES FEES (16) EXPENSES EXPENSES EXPENSES ---------------- ---------- ------------ -------- ---------- --------------- --------- ---------- -------- -------- -------- AMERICAN ASSET ALLOCATION(17) Series III 0.00% 0.25% 0.04% 0.29% -0.01% 0.28% 0.31% 0.01% 0.61% 0.60% AMERICAN BLUE CHIP INCOME AND GROWTH Series III 0.00% 0.25% 0.06% 0.31% 0.00% 0.31% 0.42% 0.01% 0.74% 0.74% AMERICAN BOND Series III 0.00% 0.25% 0.04% 0.29% 0.00% 0.29% 0.39% 0.01% 0.69% 0.69% AMERICAN GLOBAL GROWTH(17) Series III 0.00% 0.25% 0.06% 0.31% -0.03% 0.28% 0.53% 0.02% 0.86% 0.83% AMERICAN GLOBAL SMALL CAPITALIZATION(17) Series III 0.00% 0.25% 0.11% 0.36% -0.08% 0.28% 0.71% 0.03% 1.10% 1.02% AMERICAN GROWTH Series III 0.00% 0.25% 0.04% 0.29% 0.00% 0.29% 0.32% 0.01% 0.62% 0.62% AMERICAN GROWTH- INCOME Series III 0.00% 0.25% 0.04% 0.29% 0.00% 0.29% 0.27% 0.01% 0.57% 0.57% AMERICAN HIGH-INCOME BOND(17) Series III 0.00% 0.25% 0.21% 0.46% -0.18% 0.28% 0.47% 0.01% 0.94% 0.76% AMERICAN INTERNATIONAL Series III 0.00% 0.25% 0.04% 0.29% 0.00% 0.29% 0.49% 0.03% 0.81% 0.81% AMERICAN NEW WORLD Series III 0.00% 0.25% 0.13% 0.38% -0.10% 0.28% 0.76% 0.05% 1.19% 1.09%
(1) The "Total Operating Expenses" include fees and expenses incurred indirectly by a Portfolio as a result of its investment in other investment companies ("Acquired Portfolio Fees and Expenses"). The Total Operating Expenses shown may not correlate to the Portfolio's ratio of expenses to average net assets shown in the "Financial Highlights" section of the Portfolio's prospectus, which does not include Acquired Portfolio Fees and Expenses. Acquired Portfolio Fees and Expenses are based on the estimated indirect net expenses associated with the Portfolio's investment in the underlying portfolios. (2) Effective January 1, 2009, John Hancock Trust ("JHT" or the "Adviser") may recapture operating expenses reimbursed or fees waived under previous expense limitation or waiver arrangements and made subsequent to January 1, 2009, for a period of three years following the beginning of the month in which such reimbursement or waivers occurred. (3) Effective January 1, 2006, the Adviser has agreed to waive its management fee for certain Portfolios or otherwise reimburse the expenses of those Portfolios ("Participating Portfolios"). The reimbursement will equal, on an annualized basis, 0.02% of that portion of the aggregate net assets of all the Participating Portfolios that exceeds $50 billion. The amount of the Reimbursement will be calculated daily and allocated among all the Participating Portfolios in proportion to the daily net assets of each Portfolio. (4) The Adviser has agreed to reduce its advisory fee for each class of shares of the Portfolio in an amount equal to the amount by which the Expenses of such class of the Portfolio exceed the Expense Limit (as a percentage of the average annual net assets of the Portfolio attributable to the class) of 0.050% and, if necessary, to remit to that class of the Portfolio an amount necessary to ensure that such Expenses do not exceed that Expense Limit. "Expenses" means all the expenses of a class of the Portfolio excluding: (a) advisory fees, (b) Rule 12b-1 fees, (c) transfer agency fees and service fees, (d) blue sky fees, (e) taxes, (f) portfolio brokerage commissions, (g) interest, and (h) litigation and indemnification expenses and (i) other extraordinary expenses not incurred in the ordinary course of JHT's business. This expense limitation will continue in effect unless otherwise terminated by the Adviser upon notice to JHT. This voluntary expense limitation may be terminated at any time. (5) For Portfolios and series of Portfolios that have not commenced operations or have an inception date of less than six months as of December 31, 2008, expenses are estimated. (6) The management fee of 0.05% of average annual net assets is being waived until May 1, 2010. 14 (7) T. Rowe Price has voluntarily agreed to waive a portion of its subadvisory fee for the following Portfolios of the Trust: Balanced Trust, Blue Chip Growth Trust, Capital Appreciation Value Trust, Equity-Income Trust, Health Sciences Trust, Mid Value Trust, Real Estate Equity Trust, Science & Technology Trust, Small Company Value Trust, and Spectrum Income Trust. This waiver is based on the combined average daily net assets of these Portfolios and the following Portfolios of John Hancock Trust II: Blue Chip Growth Fund, Equity-Income Fund, Mid Value Fund, Small Company Value Fund, Spectrum Income Fund and Real Estate Equity Fund (collectively, the "T. Rowe Portfolios"). Based on the combined average daily net assets of the T. Rowe Portfolios, the percentage fee reduction (as a percentage of the Subadvisory Fee) is as follows: 0.00% for the first $750 million, 5.0% for the next $750 million, 7.5% for the Next $1.5 billion, and 10.0% if over $3 billion. The Adviser has also voluntarily agreed to reduce the advisory fee for each Portfolio by the amount that the subadvisory fee is reduced. This voluntary fee waiver may be terminated by T. Rowe Price or the Adviser at any time. (8) The Adviser has contractually agreed to waive the advisory fee. This waiver will expire May 1, 2010 unless extended by the Adviser. (9) "Other Expenses" reflects the estimated amount based on a contractual change in the custody agreement. This agreement went into effect on April 1, 2009. (10) The Adviser has contractually agreed to limit Portfolio Expenses to 0.025% until May 1, 2010. "Portfolio Expenses" includes advisory fee and other operating expenses of the Portfolio but excludes 12b-1fees, underlying Portfolio expenses, taxes, brokerage commissions, interest expenses, litigation and indemnification expenses and other extraordinary expenses not incurred in the ordinary course of business. (11) The Adviser has contractually agreed to waive its advisory fees so that the amount retained by the Adviser after payment of the subadvisory fees for the Portfolio does not exceed 0.45% of the Portfolio's average net assets. This advisory fee waiver will remain in place until May 1, 2010. (12) The Adviser has contractually agreed to reduce its advisory fee for each class of shares of the Portfolio in an amount equal to the amount by which the Expenses of such class of the Portfolio exceed the Expense Limit (as a percentage of the average annual net assets of the Portfolio attributable to the class) of 0.15% and, if necessary, to remit to that class of the Portfolio an amount necessary to ensure that such Expenses do not exceed that Expense Limit. "Expenses" means all the expenses of a class of a Portfolio excluding: (a) advisory fees, (b) Rule 12b-1 fees, (c) transfer agency fees and service fees, (d) blue sky fees, (e) taxes, (f) portfolio brokerage commissions, (g) interest, and (h) litigation and indemnification expenses and (i) other extraordinary expenses not incurred in the ordinary course of JHT's business. This contractual reimbursement will be in effect until May 1, 2010 and thereafter until terminated by the Adviser on notice to the Portfolio. (13) "Acquired Portfolio Fees and Expenses" are estimated based on a rebalance of investments in underlying Portfolios. (14) The Adviser has contractually agreed to reduce its advisory fee for each class of shares of the Portfolio in an amount equal to the amount by which the Expenses of such class of the Portfolio exceed the Expense Limit (as a percentage of the average annual net assets of the Portfolio attributable to the class) of 0.10% and, if necessary, to remit to that class of the Portfolio an amount necessary to ensure that such Expenses do not exceed that Expense Limit. "Expenses" means all the expenses of a class of the Portfolio excluding: (a) advisory fees, (b) Rule 12b-1 fees, (c) transfer agency fees and service fees, (d) blue sky fees, (e) taxes, (f) portfolio brokerage commissions, (g) interest, and (h) litigation and indemnification expenses and (i) other extraordinary expenses not incurred in the ordinary course of JHT's business. This contractual reimbursement will be in effect until May 1, 2010 and thereafter until terminated by the Adviser on notice to the Portfolio. (15) "Other Expenses" reflect the estimate expenses to be paid as substitute dividend expenses on securities borrowed for the settlement of short sales. (16) Capital Research Management Company (the adviser to the master fund for each of the JHT American Funds) waived a portion of its management fee from September 1, 2004 through December 31, 2008. The fees shown do not reflect any waivers. See the financial highlights table in the American Funds Insurance Series' prospectus or annual report for further information. (17) The Adviser has contractually limited other Portfolio level expenses to 0.03% until May 1, 2010. "Other Portfolio level expenses" consist of operating expenses of the Portfolio, excluding adviser fee, 12b-1 fee, transfer agent fees, blue sky, taxes, brokerage commissions, interest expense, litigation and indemnification expenses and other extraordinary expenses not incurred in the ordinary course of business. A Table of Accumulation Unit Values relating to the Contract is included in Appendix U to this Prospectus. 15 IV. General Information about Us, the Separate Accounts and the Portfolios THE COMPANIES We are subsidiaries of Manulife Financial Corporation. Your Contract is issued by either John Hancock USA or John Hancock New York. Please refer to your Contract to determine which Company issued your Contract. John Hancock USA, formerly known as "The Manufacturers Life Insurance Company (U.S.A.)," is a stock life insurance company originally organized under the laws of Maine on August 20, 1955 by a special act of the Maine legislature. John Hancock USA redomesticated under the laws of Michigan on December 30, 1992. John Hancock USA is authorized to transact life insurance and annuity business in all states (except New York), the District of Columbia, Guam, Puerto Rico and the Virgin Islands. Its principal office is located at 601 Congress Street, Boston, Massachusetts 02210-2805. John Hancock USA also has an Annuities Service Center at 164 Corporate Drive, Portsmouth, NH 03801-6815. John Hancock New York, formerly known as "The Manufacturers Life Insurance Company of New York," is a wholly-owned subsidiary of John Hancock USA and is a stock life insurance company organized under the laws of New York on February 10, 1992. John Hancock New York is authorized to transact life insurance and annuity business only in the State of New York. Its principal office is located at 100 Summit Lake Drive, Valhalla, New York 10595. John Hancock New York also has an Annuities Service Center at 164 Corporate Drive, Portsmouth, NH 03801-6815. The ultimate parent of both companies is Manulife Financial Corporation, a publicly traded company, based in Toronto, Canada. Manulife Financial Corporation is the holding company of The Manufacturers Life Insurance Company and its subsidiaries, collectively known as Manulife Financial. The Companies changed their names to John Hancock Life Insurance Company (U.S.A.) and John Hancock Life Insurance Company of New York, respectively, on January 1, 2005 following Manulife Financial Corporation's acquisition of John Hancock Financial Services, Inc. RATING AGENCIES, ENDORSEMENTS AND COMPARISONS. We are ranked and rated by independent financial rating services, including Moody's Investors Service, Inc., Standard & Poor's Rating Services, Fitch Ratings Ltd. and A.M. Best Company. The purpose of these ratings is to reflect the financial strength or claims-paying ability of John Hancock USA and John Hancock NY. The ratings are not intended to reflect the investment experience or financial strength of the Separate Accounts or their Subaccounts, or the Trust or its Portfolios. The ratings are available on our website. We may from time to time publish the ratings in advertisements, sales literature, reports to Contract Owners, etc. In addition, we may include in certain promotional literature endorsements in the form of a list of organizations, individuals or other parties which recommend the Company or the Contracts. We may also occasionally include in advertisements comparisons of performance information for a Variable Account to: - other variable annuity separate accounts, mutual funds, or investment products tracked by research firms, rating services, companies, publications, or persons who rank separate accounts or investment products on overall performance or other criteria; - the Consumer Price Index, to assess the real rate of return from buying a Contract by taking inflation into consideration; - various indices that are unmanaged; and - currently taxable and tax deferred investment programs, based on selected tax brackets. Our advertisements may also include discussions of alternative investment vehicles and general economic conditions. When you direct money into a DCA Fixed Investment Option, the Company guarantees the principal value and the rate of interest credited to that Investment Option for the term of any DCA guarantee period. THE SEPARATE ACCOUNTS We use our Separate Accounts to support the Variable Investment Options you choose. You do not invest directly in the Portfolios made available under the Contracts. When you direct or transfer money to a Variable Investment Option, we will purchase shares of a corresponding Portfolio through one of our Separate Accounts. We hold the Portfolio's shares in a "Subaccount" (usually with a name similar to that of the corresponding Portfolio) of the applicable Separate Account. A Separate Account's assets (including the Portfolio's shares) belong to the Company that maintains that Separate Account. For Contracts issued by John Hancock USA, we purchase and hold Portfolio shares in John Hancock Life Insurance Company (U.S.A.) Separate Account H. John Hancock USA, then known as The Manufacturers Life Insurance Company (U.S.A.), became the owner of this Separate Account in a merger transaction with The 16 Manufacturers Life Insurance Company of North America ("Manulife North America") on January 1, 2002. Manulife North America initially established Separate Account H on August 24, 1984 as a separate account under the laws of Delaware. When Manulife North America merged with John Hancock USA, John Hancock USA became the owner of Separate Account H and reestablished it as a Separate Account under the laws of Michigan. As a result of this merger, John Hancock USA became the owner of all of Manulife North America's assets, including the assets of Separate Account H, and assumed all of Manulife North America's obligations including those under its contracts. The merger had no other effects on the terms and conditions of contracts issued prior to January 1, 2002. For Contracts issued by John Hancock New York, we purchase and hold Portfolio shares in John Hancock Life Insurance Company of New York Separate Account A. John Hancock New York established this Separate Account on March 4, 1992 as a separate account under the laws of New York. The income, gains and losses, whether or not realized, from assets of a Separate Account are credited to or charged against that Separate Account without regard to a Company's other income, gains, or losses. Nevertheless, all obligations arising under a Company's Contracts are general corporate obligations of that Company. Assets of a Separate Account may not be charged with liabilities arising out of any of the respective Company's other business. We reserve the right, subject to compliance with applicable law, to add other Subaccounts, eliminate existing Subaccounts, combine Subaccounts or transfer assets in one Subaccount to another Subaccount that we, or an affiliated company, may establish. We will not eliminate existing Subaccounts or combine Subaccounts without the prior approval of the appropriate state or federal regulatory authorities. We registered the Separate Accounts with the SEC under the Investment Company Act of 1940, as amended (the "1940 Act") as unit investment trusts. Registration under the 1940 Act does not involve supervision by the SEC of the management or investment policies or practices of the Separate Accounts. If a Company determines that it would be in the best interests of persons having voting rights under the Contracts it issues, that Company's Separate Account may be operated as a management investment company under the 1940 Act or it may be deregistered if 1940 Act registration were no longer required. THE PORTFOLIOS When you select a Variable Investment Option, we invest your money in a Subaccount of our Separate Account and it invests in shares of a corresponding Portfolio of John Hancock Trust. THE PORTFOLIOS IN THE SEPARATE ACCOUNT ARE NOT PUBLICLY TRADED MUTUAL FUNDS. The Portfolios are only available to you as Investment Options in the Contracts 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 Portfolios also may be available through participation in certain tax-qualified pension, retirement or college savings plans. Investment Management 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 Portfolio 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 PORTFOLIOS HELD IN OUR SEPARATE ACCOUNT. The John Hancock Trust is a so-called "series" type mutual fund and is registered under the 1940 Act as an open-end management investment company. John Hancock Investment Management Services, LLC ("JHIMS LLC") provides investment advisory services to the John Hancock Trust and receives investment management fees for doing so. JHIMS LLC pays a portion of its investment management fees to other firms that manage the John Hancock Trust's Portfolios. JHIMS LLC is our affiliate and we indirectly benefit from any investment management fees JHIMS LLC retains. The John Hancock Trust has obtained an order from the SEC permitting JHIMS LLC, subject to approval by the Board of Trustees, to change a subadviser for a Portfolio or the fees paid to Subadvisers and to enter into new subadvisory agreements from time to time without the expense and delay associated with obtaining shareholder approval of the change. This order does not, however, permit JHIMS LLC to appoint a subadviser that is an affiliate of JHIMS LLC or the John Hancock Trust (other than by reason of serving as subadviser to a Portfolio) (an "Affiliated Subadviser") or to change a subadvisory fee of an Affiliated Subadviser without the approval of shareholders. If 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, or of another open-end registered investment 17 company. A 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 SEC (to the extent required by the 1940 Act). Portfolio Expenses The table in the Fee Tables section of the Prospectus shows 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 daily net assets for 2008, 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 Contracts 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. 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 which are deducted from a Portfolio's assets and paid for the services we or our affiliates provide to that Portfolio. Compensation payments may be made by a Portfolio's investment adviser 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 Fund Portfolios" of the John Hancock Trust for the marketing support services it provides. None of these compensation payments, however, results in any charge to you in addition to what is shown in the Total Annual Portfolio Operating Expenses table. Funds-of-Funds and Master-Feeder Funds Each of the John Hancock Trust's American Fundamental Holdings, Core Allocation, Core Balanced, Core Fundamental Holdings, Core Global Diversification, Franklin Templeton Founding Allocation, Lifestyle Balanced, Lifestyle Conservative, Lifestyle Growth and Lifestyle Moderate Trusts ("JHT Funds of Funds") is a "fund-of-funds" that invests in other underlying mutual funds. Expenses for a fund-of-funds may be higher than that for other portfolios because a fund-of-funds bears its own expenses and indirectly bears its proportionate share of expenses of the underlying portfolios in which it invests. The prospectus for each of the JHT Funds of Funds contains a description of the underlying portfolios for that Portfolio, including expenses and associated investment risks. Each of the John Hancock Trust's American Asset Allocation, American Blue Chip Income & Growth, American Bond, American Global Growth, American Global Small Capitalization, American Growth, American Growth-Income, American High-Income Bond, American International and American New World Trusts ("JHT American Fund Portfolios") invests in Series III shares of the corresponding investment portfolio of a "master" fund. The JHT American Fund Portfolios operate as "feeder funds," which means that the each Portfolio does not buy investment securities directly. Instead, it invests in a corresponding master fund which in turn purchases investment securities. Each of the JHT American Fund Portfolios has the same investment objective and limitations as its corresponding master fund. The combined master and feeder 12b-1 fees for each JHT American Fund Portfolio totals 0.25% of net assets. The prospectus for the American Fund master funds is included with the prospectuses for the JHT American Fund Portfolios. Portfolio Investment Objectives and Strategies You bear the investment risk of any Portfolio you choose as a Variable Investment Option for your Contract. The following table contains a general description of the Portfolios that we make available under the Contracts. 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 CAN OBTAIN A COPY OF A PORTFOLIO'S PROSPECTUS (INCLUDING THE PROSPECTUS FOR A MASTER FUND FOR ANY OF THE PORTFOLIOS THAT ARE OPERATED AS "FEEDER FUNDS"), WITHOUT CHARGE, BY CONTACTING US AT THE ANNUITIES SERVICE CENTER SHOWN ON PAGE II OF THIS PROSPECTUS. YOU SHOULD READ THE PORTFOLIO'S PROSPECTUS CAREFULLY BEFORE INVESTING IN THE CORRESPONDING VARIABLE INVESTMENT OPTION. 18 JOHN HANCOCK TRUST We show the Portfolio's manager (i.e. subadviser) in bold above the name of the Portfolio and we list the Portfolios alphabetically by subadviser. The Portfolios available may be restricted if you purchase a guaranteed minimum withdrawal benefit Rider (see "VI. Optional Benefits"). CAPITAL RESEARCH AND MANAGEMENT COMPANY (ADVISER TO THE AMERICAN FUND INSURANCE SERIES) - ADVISER TO MASTER FUND American Asset Allocation Trust Seeks to provide high total return (including income and capital gains) consistent with preservation of capital over the long term. To do this, the Portfolio invests all of its assets in Class 1 shares of the master fund, the American Funds Insurance Series Asset Allocation Fund, which invests in a diversified portfolio of common stocks and other equity securities, bonds and other intermediate and long-term debt securities, and money market instruments (debt securities maturing in one year or less). American Blue Chip Income and Growth Seeks to produce income exceeding the average Trust yield on U.S. stocks generally and to provide an opportunity for growth of principal consistent with sound common stock investing. To do this, the Portfolio invests all of its assets in Class 1 shares of the master fund, the American Funds Insurance Series Blue Chip Income and Growth Fund, which invests primarily in common stocks of larger U.S.-based companies American Bond Trust Seeks to maximize current income and preserve capital. To do this, the Portfolio invests all of its assets in Class 1 shares of the master fund, the American Funds Insurance Series Bond Fund, which normally invests at least 65% in investment-grade debt securities and up to 35% in lower rated debt securities. American Global Growth Trust Seeks to make shareholders' investment grow over time. To do this, the Portfolio invests all of its assets in Class 1 shares of the master fund, the American Funds Insurance Series Global Growth Fund, which invests primarily in common stocks of companies located around the world. American Global Small Capitalization Seeks to make the shareholders' investment Trust grow over time. To do this, the Portfolio invests all of its assets in Class 1 shares of the master fund, the American Funds Insurance Series Global Small Capitalization Fund, which invests primarily in stocks of smaller companies located around the world. American Growth Trust Seeks to make the shareholders' investment grow. To do this, the Portfolio invests all of its assets in Class 1 shares of the master fund, the American Funds Insurance Series Growth Fund, which invests primarily in common stocks of companies that appear to offer superior opportunities for growth of capital. American Growth-Income Trust Seeks to make the shareholders' investments grow and to provide the shareholder with income over time. To do this, the Portfolio invests all of its assets in Class 1 shares of the master fund, the American Funds Insurance Series Growth-Income Fund, which invests primarily in common stocks or other securities that demonstrate the potential for appreciation and/or dividends.
19 JOHN HANCOCK TRUST We show the Portfolio's manager (i.e. subadviser) in bold above the name of the Portfolio and we list the Portfolios alphabetically by subadviser. The Portfolios available may be restricted if you purchase a guaranteed minimum withdrawal benefit Rider (see "VI. Optional Benefits"). CAPITAL RESEARCH AND MANAGEMENT COMPANY (ADVISER TO THE AMERICAN FUND INSURANCE SERIES) - ADVISER TO MASTER FUND - CONTINUED American High-Income Bond Trust Seeks to provide a high level of current income and, secondarily, capital appreciation. To do this, the Portfolio invests all of its assets in Class 1 shares of the master fund, the American Funds Insurance Series High-Income Bond Fund, which invests at least 65% of its assets in higher yielding and generally lower quality debt securities. American International Trust Seeks to make the shareholders' investment grow. To do this, the Portfolio invests all of its assets in Class 1 shares of the master fund, the American Funds Insurance Series International Fund, which invests primarily in common stocks of companies located outside the United States. American New World Trust Seeks to make the shareholders' investment grow over time. To do this, the Portfolio invests all of its assets in Class 1 shares of the master fund, the American Funds Insurance Series New World Fund, which invests primarily in stocks of companies with significant exposure to countries with developing economies and/or markets. DAVIS SELECTED ADVISERS, L.P. Seeks growth of capital. To do this, the Fundamental Value Trust Portfolio invests primarily in common stocks (successor to Core Equity Trust) of U.S. companies with durable business models that can be purchased at attractive valuations relative to their intrinsic value. DECLARATION MANAGEMENT & RESEARCH LLC Seeks to track the performance of the Barclays Total Bond Market Trust A Capital U.S. Aggregate Bond Index (which represents the U.S. investment grade bond market). To do this, the Portfolio invests at least 80% of its net assets in securities listed in the Barclays Capital U.S. Aggregate Bond Index. FRANKLIN MUTUAL ADVISERS, LLC Seeks capital appreciation, which may Mutual Shares Trust occasionally be short-term; income is a secondary objective. To do this, the Portfolio invests mainly in equity securities of companies of any nation where the market prices are believed to be less than their value. FRANKLIN TEMPLETON INVESTMENTS CORP. Seeks long-term capital appreciation. To do International Small Cap Trust this, the Portfolio invests at least 80% of its net assets in securities issued by foreign small-cap companies including in emerging markets. GRANTHAM, MAYO, VAN OTTERLOO & CO. LLC Seeks high total return. To do this, the International Core Trust Portfolio invests at least 80% of its total assets in a diversified portfolio of equity investments from developed markets outside the U.S.
20 JOHN HANCOCK TRUST We show the Portfolio's manager (i.e. subadviser) in bold above the name of the Portfolio and we list the Portfolios alphabetically by subadviser. The Portfolios available may be restricted if you purchase a guaranteed minimum withdrawal benefit Rider (see "VI. Optional Benefits"). LORD, ABBETT & CO. LLC Seeks capital appreciation. To do this, the All Cap Value Trust Portfolio invests at least 50% of its net assets in equity securities of large, seasoned U.S. and multinational companies that are believed to be undervalued. The Portfolio invests the remainder of its assets in undervalued mid-sized and small company securities. MFC GLOBAL INVESTMENT MANAGEMENT Seeks long-term capital appreciation. To do (U.S.), LLC this, the Portfolio invests at least 80% of Small Cap Intrinsic Value Trust its net assets in equity securities of small- capitalization companies. MFC GLOBAL INVESTMENT MANAGEMENT Seeks to approximate the aggregate total (U.S.A.) LIMITED return of a broad-based U.S. domestic equity 500 Index Trust market index. To do this, the Portfolio invests at least 80% of its net assets in the common stocks in the S&P 500(R) index and securities that as a group will behave in A manner similar to the index. (1) American Fundamental Holdings Trust Seeks long term growth of capital. To do this, the Portfolio invests primarily in four funds of the American Funds Insurance Series: Bond Fund, Growth Fund, Growth-Income Fund, and International Fund. The Portfolio is permitted to invest in six other funds of the American Funds Insurance Series as well as other funds, investment companies, and other types of investments. Core Allocation Trust Seeks long term growth of capital. To do this, the Portfolio invests a substantial portion of its assets in the underlying Portfolio Core Allocation Plus Trust. The Portfolio is a fund-of-funds and is authorized to invest in other underlying Portfolios and investment companies. Core Balanced Trust Seeks long term growth of capital. To do this, the Portfolio invests a substantial portion of its assets in the underlying Portfolio Balanced Trust. The Portfolio is a fund-of-funds and is authorized to invest in other underlying Portfolios and investment companies. Core Fundamental Holdings Trust Seeks long term growth of capital. To do this, the Portfolio invests a substantial portion of its assets in underlying Portfolios that are series of the American Funds Insurance Series. The Portfolio is a fund-of-funds and is authorized to invest in other underlying Portfolios and investment companies. Core Global Diversification Trust Seeks long term growth of capital. To do this, the Portfolio invests a significant portion of its assets, directly or indirectly through underlying Portfolios, in securities that are located outside the U.S. The Portfolio is a fund-of-funds and is authorized to invest in other underlying Portfolios and investment companies.
21 JOHN HANCOCK TRUST We show the Portfolio's manager (i.e. subadviser) in bold above the name of the Portfolio and we list the Portfolios alphabetically by subadviser. The Portfolios available may be restricted if you purchase a guaranteed minimum withdrawal benefit Rider (see "VI. Optional Benefits"). MFC GLOBAL INVESTMENT MANAGEMENT (U.S.A.) LIMITED - CONTINUED Franklin Templeton Founding Seeks long-term growth of capital. To do this, Allocation Trust the Portfolio invests primarily in three underlying Portfolios: Global Trust, Income Trust and Mutual Shares Trust. The Portfolio is a fund-of-funds and is also authorized to invest in other underlying Portfolios and investment companies. Lifestyle Balanced Trust (2) Seeks a balance between a high level of current income and growth of capital, with a greater emphasis on growth of capital. The Portfolio operates as a fund-of-funds and normally invests approximately 40% of its assets in underlying Portfolios which invest primarily in fixed income securities, and approximately 60% in underlying Portfolios which invest primarily in equity securities. The subadviser may change this allocation from time to time. Lifestyle Conservative Trust (2) Seeks a high level of current income with some consideration given to growth of capital. The Portfolio operates as a fund-of-funds and normally invests approximately 80% of its assets in underlying Portfolios which invest primarily in fixed income securities, and approximately 20% in underlying Portfolios which invest primarily in equity securities. The subadviser may change this allocation from time to time. Lifestyle Growth Trust (2) Seeks long-term growth of capital. Current income is also a consideration. The Portfolio operates as a fund-of-funds and normally invests approximately 20% of its assets in underlying Portfolios which invest primarily in fixed income securities, and approximately 80% in underlying Portfolios which invest primarily in equity securities. The subadviser may change this allocation from time to time. Lifestyle Moderate Trust (2) Seeks a balance between a high level of current income and growth of capital, with a greater emphasis on income. The Portfolio operates as a fund-of-funds and normally invests approximately 60% of its assets in underlying Portfolios which invest primarily in fixed income securities, and approximately 40% in underlying Portfolios which invest primarily in equity securities. The subadviser may change this allocation from time to time. Money Market Trust Seeks to obtain maximum current income consistent with preservation of principal and liquidity. To do this, the Portfolio invests in high quality, U.S. dollar denominated money market instruments. Note: The returns of a Money Market Subaccount in your Contract may become extremely low or possibly negative if the interest rates earned by the underlying Money Market Portfolio are not sufficient to offset Contract expense deductions.
22 JOHN HANCOCK TRUST We show the Portfolio's manager (i.e. subadviser) in bold above the name of the Portfolio and we list the Portfolios alphabetically by subadviser. The Portfolios available may be restricted if you purchase a guaranteed minimum withdrawal benefit Rider (see "VI. Optional Benefits"). PACIFIC INVESTMENT MANAGEMENT COMPANY LLC Global Bond Trust Seeks maximum total return, consistent with preservation of capital and prudent investment management. To do this, the Portfolio invests at least 80% of its net assets in fixed income instruments that are economically tied to at least three countries (one of which may be the U.S.), which may be represented by futures contracts and options on such securities. Total Return Trust Seeks maximum total return, consistent with preservation of capital and prudent investment management. To do this, the Portfolio invests at least 65% of its total assets in a diversified portfolio of fixed income instruments of varying maturities, which may be represented by forwards or derivatives. T. ROWE PRICE ASSOCIATES, INC. Balanced Trust Seeks long-term capital appreciation. To do this, the Portfolio invests in both equity and fixed-income securities. The Portfolio employs growth, value and core approaches to allocate is assets among stocks of small, medium and large-capitalization companies in both the U.S. and foreign countries. Mid Value Trust Seek long-term capital appreciation. To do (successor to Mid Cap Value Trust) this, the Portfolio invests at least 80% of its net assets 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. TEMPLETON GLOBAL ADVISORS LIMITED Global Trust Seeks long-term capital appreciation. To do this, the Portfolio invests primarily in the equity securities of companies located throughout the world, including emerging markets. TEMPLETON INVESTMENT COUNSEL, LLC International Value Trust(3) Seeks long-term growth of capital. To do this, the Portfolio invests primarily in equity securities of companies located outside the U.S., including in emerging markets. VAN KAMPEN (A REGISTERED TRADE NAME OF MORGAN STANLEY INVESTMENT MANAGEMENT INC.) Value Trust Seeks to realize an above-average total return over a market cycle of three to five years, consistent with reasonable risk. To do this, the Portfolio invests at least 65% of its total assets in equity securities which are believed to be undervalued relative to the stock market in general. WELLINGTON MANAGEMENT COMPANY, LLP Core Allocation Plus Trust Seeks to provide total return, consisting of long-term capital appreciation and current income. To do this, the Portfolio invests in equity and fixed income securities of issuers located within and outside the U.S. The Portfolio allocates its assets between fixed income securities and equity securities based upon the subadviser's targeted asset mix, which may change over time.
23 JOHN HANCOCK TRUST We show the Portfolio's manager (i.e. subadviser) in bold above the name of the Portfolio and we list the Portfolios alphabetically by subadviser. The Portfolios available may be restricted if you purchase a guaranteed minimum withdrawal benefit Rider (see "VI. Optional Benefits"). WELLINGTON MANAGEMENT COMPANY, LLP - CONTINUED Investment Quality Bond Trust Seeks to provide a high level of current income consistent with the maintenance of principal and liquidity. To do this, the Portfolio invests at least 80% of its net assets in bonds rated investment grade, focusing on corporate bonds and U.S. government bonds with intermediate to longer term maturities. Mid Cap Intersection Trust Seeks long-term growth of capital. To do this, the Portfolio invests at least 80% of its net assets in equity securities of medium-sized companies with significant capital appreciation potential. Mid Cap Stock Trust Seeks long-term growth of capital. To do this, the Portfolio invests at least 80% of its net assets in equity securities of medium-sized companies with significant capital appreciation potential. Small Cap Growth Trust Seeks long-term capital appreciation. To do this, the Portfolio invests at least 80% of its net assets in small-cap companies that are believed to offer above-average potential for growth in revenues and earnings. Small Cap Value Trust Seeks long-term capital appreciation. To do this, the Portfolio invests at least 80% of its net assets in small-cap companies that are believed to be undervalued.
(1) "Standard & Poor's(R)," "S&P 500(R)," and "S&P MidCap 400(R)" are trademarks of The McGraw-Hill Companies, Inc. None of the Index Trusts 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 Trust. As of February 28, 2009, the mid cap range for S&P 500(R) was from $224 million to $337.87 billion, and for the S&P MidCap 400(R), was $42 million to $4.6 billion. (2) Deutsche Asset Management Americas, Inc. provides subadvisory consulting services to MFC Global Investment Management (U.S.A.) Limited in its management of the Lifestyle Trusts. (3) The Portfolio is subadvised by Templeton Global Advisors Limited under an agreement with Templeton Investment Counsel, LLC. 24 VOTING INTEREST You instruct us how to vote Portfolio shares. We will vote Portfolio shares held in a Separate Account at any Portfolio shareholder meeting in accordance with voting instructions received from the persons having the voting interest under the Contract. We will determine the number of Portfolio shares for which voting instructions may be given not more than 90 days prior to the meeting. We will arrange for proxy materials to 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 a Separate Account for Contract Owners) in proportion to the instructions so received. The effect of this proportional voting is that a small number of Contract Owners can determine the outcome of a vote. During the Accumulation Period, the Contract Owner has the voting interest under a Contract. We determine the number of votes for each Portfolio for which voting instructions may be given by dividing the value of the Investment Account corresponding to the Subaccount in which such Portfolio shares are held by the net asset value per share of that Portfolio. During the Pay-out Period, the Annuitant has the voting interest under a Contract. We determine the number of votes as to each Portfolio for which voting instructions may be given by dividing the reserve for the Contract allocated to the Subaccount in which such Portfolio shares are held by the net asset value per share of that Portfolio. Generally, the number of votes tends to decrease as annuity payments progress since the amount of reserves attributable to a Contract will usually decrease after commencement of annuity payments. We will determine the number of Portfolio shares for which voting instructions may be given not more than 90 days prior to the meeting. We reserve the right to make any changes in the voting rights described above that may be permitted by the federal securities laws, regulations, or interpretations thereof. 25 V. Description of the Contract ELIGIBLE PLANS The Contract may be used to fund plans qualifying for special income tax treatment under the Code, such as individual retirement accounts and annuities, pension and profit-sharing plans for corporations and sole proprietorships/partnerships ("H.R. - 10" and "Keogh" plans), and state and local government deferred compensation plans (see Appendix B: "Qualified Plan Types" or you may request a copy of the Statement of Additional Information). We also designed the Contract so that it may be used with nonqualified retirement plans, such as payroll savings plans and such other groups (with or without a trustee) as may be eligible under applicable law. ACCUMULATION PERIOD PROVISIONS We may impose restrictions on your ability to make initial and Additional Purchase Payments. Purchase Payments You may make Purchase Payments to us at our Annuities Service Center at any time. The minimum initial Purchase Payment is $5,000 for Nonqualified Contracts and $2,000 for Qualified Contracts. Additional Purchase Payments must be at least $30. All Purchase Payments must be in U.S. dollars. We may provide for Purchase Payments to be automatically withdrawn from your bank account on a periodic basis. If a Purchase Payment would cause your Contract Value to exceed $1 million or your Contract Value already exceeds $1 million, you must obtain our approval in order to make the payment. There may be additional restrictions on Purchase Payments if you purchase a guaranteed minimum withdrawal benefit Rider. We make a sales charge against your Purchase Payments. Except for Contracts issued in New York, the sales charge is based on the amount of your payment and any "Associated Accounts" you may have with your broker-dealer's firm. You must submit each Purchase Payment through your broker-dealer's firm to receive a reduction in the front-end sales charge based on the value of your Associated Accounts (see "Front-End Sales Charges" in "VII. Charges and Deductions"). John Hancock USA may reduce the minimum initial Purchase Payment requirement, upon your request and as permitted by state law, in the following circumstances: - You purchase your Contract through an exchange under Section 1035 of the Code or a Qualified Plan transfer of an existing contract(s) issued by another carrier(s) AND at the time of application, the value of your existing contract(s) meets or exceeds the applicable minimum initial Purchase Payment requirement AND prior to our receipt of such Section 1035 monies, the value drops below the applicable minimum initial Purchase Payment requirement due to market conditions. - You purchase more than one new Contract and such Contracts cannot be combined AND the average initial Purchase Payments for these new Contracts is equal to or greater than $50,000. - You and your spouse each purchase at least one new Contract AND the average initial Purchase Payments for the new Contract(s) is equal to or greater than $50,000. - You purchase multiple Contracts issued in conjunction with a written retirement savings plan (either qualified or nonqualified), for the benefit of plan participants AND the Annuitant under each contract is a plan participant AND the average initial Purchase Payment for these new Contracts is equal to or greater than $50,000. If permitted by state law, we may cancel a Contract at the end of any TWO consecutive Contract Years (THREE in New York) in which no Purchase Payments have been made, if both: - the total Purchase Payments made over the life of the Contract, less any Withdrawal Amounts, are less than $2,000; and - the Contract Value at the end of such two year period is less than $2,000. As a matter of administrative practice, the respective Company will attempt to notify you prior to any such cancellation in order to allow you to make the necessary Purchase Payment to keep your Contract in force. The cancellation of Contract provisions may vary in certain states to comply with the requirements of insurance laws and regulations in such states. If we cancel your Contract, we will pay you the Contract Value computed as of the valuation period during which the cancellation occurs. The amount paid will be treated as a withdrawal for federal tax purposes and thus may be subject to income tax and to a 10% penalty tax (see "VIII. Federal Tax Matters"). You designate how your Net Purchase Payments are to be allocated among the Investment Options. You may change the allocation of subsequent Net Purchase Payments at any time by notifying us in writing (or by telephone or electronically if you comply with our telephone or electronic transaction procedures described in "Telephone and Electronic Transactions" in this section, below). 26 Accumulation Units During the Accumulation Period, we establish an Investment Account for you for each Variable Investment Option to which you allocate a portion of your Contract Value. We credit amounts to those Investment Accounts in the form of "accumulation units" to measure the value of the variable portion of your Contract during the Accumulation Period. We calculate and credit the number of accumulation units in each of your Investment Accounts by dividing (i) the amount allocated to that Investment Account by (ii) the value of an accumulation unit for that Investment Account we next compute after a purchase transaction is complete. We will usually credit initial Net Purchase Payments received by mail on the Business Day on which they are received at our Annuities Service Center, and no later than two Business Days after our receipt of all information necessary for issuing the Contract. We will inform you of any deficiencies preventing processing if your Contract cannot be issued. If the deficiencies are not remedied within five Business Days after receipt, we will return your Purchase Payment promptly, unless you specifically consent to our retaining your Purchase Payment until all necessary information is received. We will credit initial Net Purchase Payments received by wire transfer from broker-dealers on the Business Day received by us if the broker-dealers have made special arrangements with us. We will credit Additional Purchase Payments on the Business Day they are received at our Annuities Service Center. We will deduct accumulation units based on the value of an accumulation unit we next compute each time you make a withdrawal or transfer amounts from an Investment Option, and when we deduct certain Contract charges, pay death benefit proceeds, or apply amounts to an Annuity Option. We measure the value of an Investment Account in accumulation units, which vary in value with the performance of the underlying Portfolio. Value of Accumulation Units The value of your accumulation units will vary from one Business Day to the next depending upon the investment results of the Investment Options you select. We arbitrarily set the value of an accumulation unit for each Subaccount on the first Business Day the Subaccount was established. We determine the value of an accumulation unit for any subsequent Business Day by multiplying (i) the value of an accumulation unit for the immediately preceding Business Day by (ii) the "net investment factor" for that Subaccount (described below) for the Business Day for which the value is being determined. We value accumulation units as of the end of each Business Day. We deem a Business Day to end, for these purposes, at the time a Portfolio determines the net asset value of its shares. We will use a Portfolio share's net asset value at the end of a Business Day to determine accumulation unit value for a Purchase Payment, Withdrawal Amount or transfer transaction only if: - your Purchase Payment transaction is complete before the close of daytime trading on the New York Stock Exchange (usually 4:00 p.m. Eastern time) for that Business Day; or - we receive your request for a withdrawal or transfer of Contract Value at the Annuities Service Center before the close of daytime trading on the New York Stock Exchange for that Business Day. Net Investment Factor The net investment factor is an index used to measure the investment performance of a Subaccount from one Business Day to the next (the "valuation period"). The net investment factor may be greater, less than or equal to one; therefore, the value of an accumulation unit may increase, decrease or remain the same. We determine the net investment factor for each Subaccount for any valuation period by dividing (a) by (b) and subtracting (c) from the result: Where (a) is: - the net asset value per share of a Portfolio share held in the Subaccount determined at the end of the current valuation period; plus - the per share amount of any dividend or capital gain distributions made by the Portfolio on shares held in the Subaccount if the "ex-dividend" date occurs during the current valuation period. The "ex-dividend" date is normally set (for stocks) two business days before the record date, on or after which the seller, not the buyer, receives the next dividend payment. Where (b) is the net asset value per share of a Portfolio share held in the Subaccount determined as of the end of the immediately preceding valuation period. Where (c) is a factor representing the charges deducted from the Subaccount on a daily basis for Annual Separate Account Expenses. Transfers Among Investment Options During the Accumulation Period, you may transfer amounts among the Variable Investment Options, subject to the restrictions set forth below. 27 You may make a transfer by providing written notice to us, by telephone or by other electronic means that we may provide through the internet (see "Telephone and Electronic Transactions"). We will cancel accumulation units from the Investment Account from which you transfer amounts and we will credit to the Investment Account to which you transfer amounts. Your Contract Value on the date of the transfer will not be affected by a transfer. You must transfer at least $300 or, if less, the entire value of the Investment Account. If after the transfer the amount remaining in the Investment Account is less than $100, then we may transfer the entire amount instead of the requested amount. Currently, we do not impose a charge for transfer requests. The first twelve transfers in a Contract Year are free of any transfer charge. For each additional transfer in a Contract Year, we do not currently assess a charge but reserve the right (to the extent permitted by your Contract) to assess a reasonable charge (not to exceed the lesser of $25 or 2% of the amount transferred) to reimburse us for the expenses of processing transfers. Investment options in variable annuity and variable life insurance products can be a prime target for abusive transfer activity because these products value their investment options on a daily basis and allow transfers among investment options without immediate tax consequences. As a result, some investors may seek to frequently transfer into and out of variable investment options in reaction to market news or to exploit some perceived pricing inefficiency. Whatever the reason, frequent transfer activity can harm long-term investors in a variable investment option since such activity may expose a variable investment option's underlying portfolio to increased portfolio transaction costs and/or disrupt the portfolio manager's ability to effectively manage a portfolio in accordance with its investment objective and policies, both of which may result in dilution with respect to interests held for long-term investment. We have adopted a policy and procedures to restrict frequent transfers of Contract Value among Variable Investment Options. To discourage disruptive frequent trading activity, we have adopted a policy for each Separate Account to restrict transfers to two per calendar month per Contract, with certain exceptions, and established procedures to count the number of transfers made under a Contract. Under the current procedures of the Separate Accounts, we count all transfers made during each Business Day that the net asset value of the shares of a Portfolio are determined ending at the close of daytime trading of the New York Stock Exchange (usually 4 p.m.) as a SINGLE transfer. We do NOT count: (a) scheduled transfers made pursuant to our Dollar Cost Averaging program or our Asset Rebalancing program, (b) transfers made within a prescribed period before and after a substitution of underlying Portfolios and (c) transfers made during the Pay-out Period (these transfers are subject to a 30-day notice requirement, however, as described in "Transfers During Pay-out Period"). Under each Separate Account's policy and procedures, Contract Owners may transfer to a Money Market investment option even if a Contract Owner reaches the two transfers per month limit if 100% of the Contract Value in all Variable Investment Options is transferred to that Money Market Investment Option. If such a transfer to a Money Market Investment Option is made, for a 30-calendar day period after such transfer, a Contract Owner may not make any subsequent transfers from that Money Market investment option to another Variable Investment Option. We apply each Separate Account's policy and procedures uniformly to all Contract Owners. We reserve the right to take other actions to restrict trading, including, but not limited to: - restricting the number of transfers made during a defined period; - restricting the dollar amount of transfers; - restricting the method used to submit transfers (e.g., requiring transfer requests to be submitted in writing via U.S. mail); and - restricting transfers into and out of certain Subaccount(s). In addition, we reserve the right to defer a transfer at any time we are unable to purchase or redeem shares of the Portfolios (see "Withdrawals" in this section, below, for details on when suspensions of redemptions may be permissible). We also reserve the right to modify or terminate the transfer privilege at any time (to the extent permitted by applicable law). In addition to the transfer restrictions that we impose, the John Hancock Trust also has adopted policies under Rule 22c-2 of the 1940 Act to detect and deter abusive short term trading. Accordingly, a Portfolio may require us to impose trading restrictions if it discovers violations of its frequent short-term trading policy. We will provide tax identification numbers and other Contract Owner transaction information to John Hancock Trust upon request, which it may use to identify any pattern or frequency of activity that violates its short-term trading policy. While we seek to identify and prevent disruptive frequent trading activity, it is not always possible to do so. Therefore, we cannot provide assurance that the restrictions we impose will be successful in restricting disruptive frequent trading activity and avoiding harm to long-term investors. Maximum Number of Investment Options We currently do not limit the number of Investment Options to which you may allocate Purchase Payments. 28 We permit you to make certain types of transactions by telephone or electronically through the internet. Telephone and Electronic Transactions When you purchase a Contract, we will automatically permit you to request transfers and withdrawals by telephone. We will also permit you to access information about your Contract, request transfers and perform some transactions (other than withdrawals) electronically through the internet. You can contact us at the applicable telephone number or internet address shown on page ii of this Prospectus. To access information and perform electronic transactions through our website, we require you to create an account with a username and password, and to maintain a valid e-mail address. You may also authorize other people to make certain transaction requests by telephone or electronically through the internet by sending us instructions in a form acceptable to us. We will not be liable for following instructions communicated by telephone or electronically that we reasonably believe to be genuine. We will employ reasonable procedures to confirm that instructions we receive are genuine. Our procedures require you to provide information to verify your identity when you call us and we will record all conversations with you. When someone contacts us by telephone and follows our procedures, we will assume that you are authorizing us to act upon those instructions. For electronic transactions through the internet, you will need to provide your username and password. You are responsible for keeping your password confidential and must notify us of: - any loss or theft of your password; or - any unauthorized use of your password. We may only be liable for any losses due to unauthorized or fraudulent instructions where we fail to employ our procedures properly. All transaction instructions we receive by telephone or electronically will be followed by a confirmation statement of the transaction. Transaction instructions we receive by telephone or electronically before the close of any Business Day will usually be effective at the end of that day. Circumstances beyond our control, such as system outages, or during periods when our telephone lines or our website may be busy, may limit your ability to access or transact business electronically. We may, for example, experience unusual volume during periods of substantial market change. We may suspend, modify or terminate our telephone or electronic transaction procedures at any time. We may, for example, impose limits on the maximum Withdrawal Amount available to you through a telephone transaction. Also, as stated earlier in this Prospectus, we have imposed restrictions on transfers and reserve the right to take other actions to restrict trading, including the right to restrict the method used to submit transfers (e.g., by requiring transfer requests to be submitted in writing via U.S. mail). We also reserve the right to suspend or terminate the transfer privilege altogether with respect to anyone who we feel is abusing the privilege to the detriment of others. We make available Dollar Cost Averaging and Asset Rebalancing programs. Special Transfer Services - Dollar Cost Averaging We administer a Dollar Cost Averaging ("DCA") program. If you enter into a DCA agreement, you may elect, at no cost, to automatically transfer on a monthly basis, a predetermined dollar amount from any Variable Investment Option, or from a DCA Fixed Investment Option we permit for this purpose (the "DCA Source Fund(s)"), to other Variable Investment Options (the "Destination Funds") until the amount in the DCA Source Fund is exhausted. You may allocate only Purchase Payments (and not existing Contract Values) to the DCA Fixed Investment Option. If you elect the DCA Fixed Investment Option, we will credit the amounts allocated to this option with interest at the guaranteed interest rate in effect on the date of such allocation. You may make Additional Purchase Payments while you are enrolled in a DCA program. If you do not provide us with express written allocation instructions for these Additional Purchase Payments, no amount will be allocated into your DCA Source Fund. Instead, they will be allocated among the Destination Funds according to the allocation you selected upon enrollment in the DCA program. If the interest rate guaranteed for the DCA program is stated as an annual figure, you should be aware that the actual effective yield will be substantially lower than the stated rate, based on your DCA account balance diminishing through monthly transfers. For example, a deposit of $100,000 into a 12 month DCA account at a stated annual rate of 7% with transfers beginning immediately will yield $3,130.07 (or 3.13%) in interest rather than $7,000 (7%) at the end of the year. A deposit of $100,000 into a 6 month DCA account at a stated annual rate of 5% with transfers beginning immediately will yield $1,019.21 (or 1.02%) in interest rather than $5,000 (5%) at the end of the year. From time to time, we may offer special DCA programs where the rate of interest credited to a DCA Fixed Investment Option exceeds our actual earnings on the supporting assets, less appropriate risk and expense adjustments. In such case, we will recover any amounts we credit to your account in excess of amounts earned by us on the assets in the General Account from existing charges described in your Contract. Your Contract charges will not increase as a result of electing to participate in any special DCA program. 29 The DCA program allows investments to be made in equal installments over time in an effort to reduce the risk posed by market fluctuations. Therefore, you may achieve a lower purchase price over the long-term by purchasing more accumulation units of a particular Subaccount when the unit value is low; less when the unit value is high. However, the DCA program does not guarantee profits or prevent losses in a declining market and requires regular investment regardless of fluctuating price levels. If you are interested in the DCA program, you may elect to participate in the program on the appropriate application or you may obtain a separate authorization form and full information concerning the program and its restrictions from your financial advisor or our Annuities Service Center. There is no charge for participation in the DCA program. You should consult with your financial advisor to assist you in determining whether the DCA program is suited for your financial needs and investment risk tolerance. Special Transfer Services - Asset Rebalancing Program We administer an Asset Rebalancing program which enables you to specify the percentage levels you would like to maintain in particular Portfolios. We will automatically rebalance your Contract Value pursuant to the schedule described below to maintain the indicated percentages by transfers among the Portfolios. (DCA Fixed Investment Options are not eligible for participation in the Asset Rebalancing program.) You must include your entire value in the Variable Investment Options in the Asset Rebalancing program. Other investment programs, such as the DCA program, or other transfers or withdrawals may not work in concert with the Asset Rebalancing program. Therefore, you should monitor your use of these other programs and any other transfers or withdrawals while the Asset Rebalancing program is being used. If you are interested in the Asset Rebalancing program, you may obtain a separate authorization form and full information concerning the program and its restrictions from your financial advisor or our Annuities Service Center. There is no charge for participation in the Asset Rebalancing program. We will permit asset rebalancing only on the following time schedules: - quarterly on the 25th day of the last month of the calendar quarter (or the next Business Day if the 25th is not a Business Day); - semi-annually on June 25th and December 26th (or the next Business Day if these dates are not Business Days); or - annually on December 26th (or the next Business Day if December 26th is not a Business Day). You may withdraw all or a portion of your Contract Value, but may incur withdrawal charges or tax liability as a result. Withdrawals During the Accumulation Period, you may withdraw all or a portion of your Contract Value upon written request (complete with all necessary information) to our Annuities Service Center. You may make withdrawals by telephone as described above under "Telephone and Electronic Transactions." For certain Qualified Contracts, exercise of the withdrawal right may require the consent of the Qualified Plan participant's spouse under the Code. In the case of a total withdrawal, we will pay the Contract Value as of the date of receipt of the request at our Annuities Service Center, minus any applicable withdrawal charge, Rider charge, administrative fee, or tax. We will then cancel the Contract. In the case of a partial withdrawal, we will pay the amount requested, reduced by any applicable withdrawal charge, Rider charge, administrative fee, or tax, and cancel accumulation units credited to each Investment Account equal in value to the Withdrawal Amount from that Investment Account. When making a partial withdrawal, you should specify the Investment Options from which the withdrawal is to be made. The Withdrawal Amount requested from an Investment Option may not exceed the value of that Investment Option. If you do not specify the Investment Options from which a partial withdrawal is to be taken, we will take the withdrawal from the Variable Investment Options until exhausted. We will then take from any DCA Fixed Investment Option, beginning with the shortest remaining guarantee period first and ending with the longest remaining guarantee period last. If the Withdrawal Amount is less than the total value in the Variable Investment Options, we will take the withdrawal proportionately from all of your Variable Investment Options. There is no limit on the frequency of partial withdrawals; however, the Withdrawal Amount must be at least $300 or, if less, the entire balance in the Investment Option. If after the withdrawal the amount remaining in the Investment Option is less than $100, we generally treat the partial withdrawal as a withdrawal of the entire amount held in the Investment Option. If the Withdrawal Amount would reduce the Contract Value to less than $300, we generally treat the partial withdrawal as a total withdrawal of the Contract Value. We currently enforce these Contract minimum restrictions only for Venture(R) Opportunity variable annuity Contracts that do not have a guaranteed minimum withdrawal benefit Rider. We reserve the right to enforce thesE restrictions for other Contracts in the future. We will pay the amount of any withdrawal from the Variable Investment Options promptly, and in any event within seven days of receipt of the request, complete with all necessary information at our Annuities Service Center. We reserve the right to defer the right of withdrawal or postpone payments for any period when: - the New York Stock Exchange is closed (other than customary weekend and holiday closings); - trading on the New York Stock Exchange is restricted; 30 - an emergency exists as determined by the SEC, as a result of which disposal of securities held in the Separate Accounts is not reasonably practicable or it is not reasonably practicable to determine the value of the Separate Accounts' net assets; or - the SEC, by order, so permits for the protection of security holders; provided that applicable rules and regulations of the SEC shall govern as to whether trading is restricted or an emergency exists. IMPACT OF DIVORCE. In the event that you and your spouse become divorced after you purchase a Contract, we will treat any request to reduce or divide benefits under a Contract as a request for a withdrawal of Contract Value. The transaction may be subject to any applicable tax or withdrawal charge. Also, for Contracts issued with an optional guaranteed minimum withdrawal benefit Rider, your guarantee may be reduced. If you determine to divide a Contract with an optional benefit Rider, we will permit you to continue the existing Rider under one, but not both, resulting Contracts. We will also permit the owner of the new Contract to purchase any optional benefit Rider then available. TAX CONSIDERATIONS. Withdrawals from the Contract may be subject to income tax and a 10% IRS penalty tax (see "VIII. Federal Tax Matters" and the section entitled "Qualified Plan Types" in the Statement of Additional Information). Signature Guarantee Requirements for Surrenders and Partial Withdrawals (Not applicable to Contracts issued in New Jersey) We may require that you obtain a signature guarantee on a surrender or partial withdrawal in the following circumstances: - you are requesting that we mail the amount withdrawn to an alternate address; or - you have changed your address within 30 days of the withdrawal request; or - you are requesting a withdrawal in the amount of $250,000 or greater. We must receive the original signature guarantee on your withdrawal request. We will not accept copies or facsimiles of a signature guarantee. You may obtain a signature guarantee at most banks, financial institutions or credit unions. A notarized signature is not the same as a signature guarantee and will not satisfy this requirement. There may be circumstances, of which we are not presently aware, in which we would not impose a signature guarantee on a surrender or partial withdrawal as described above. You may make systematic withdrawals. Special Withdrawal Services - The Systematic Withdrawal Program We administer a Systematic Withdrawal Program ("SWP") which permits you to pre-authorize a periodic exercise of the contractual withdrawal rights described above. After entering into a SWP agreement, you may instruct us to withdraw a level dollar amount from specified Investment Options on a periodic basis. We limit the total of SWP withdrawals in a Contract Year to not more than 10% of the Purchase Payments made. The SWP is not available to Contracts participating in the DCA program or for which Purchase Payments are being automatically deducted from a bank account on a periodic basis. We reserve the right to suspend your ability to make Additional Purchase Payments while you are enrolled in a SWP. SWP withdrawals, like other withdrawals, may be subject to income tax and a 10% IRS penalty tax. If you are interested in a SWP, you may obtain a separate authorization form and full information concerning the program and its restrictions from your financial advisor or our Annuities Service Center. There is no charge for participation in the SWP program. Special Withdrawal Services - The Income Made Easy Program Our Income Made Easy Program provides you with an automatic way to access guaranteed withdrawal amounts if you purchase a guaranteed minimum withdrawal benefit Rider with a Contract. There is no charge for participation in this program. We will, however, suspend your participation in the SWP if you enroll in the Income Made Easy Program. Please read "Pre-authorized Withdrawals - The Income Made Easy Program" on page 49 for more information. If you die during the Accumulation Period, your Beneficiary will receive a death benefit that might exceed your Contract Value. Death Benefit During Accumulation Period The Contracts described in this Prospectus provide for the distribution of a death benefit before the Annuity Commencement Date. AMOUNT OF DEATH BENEFIT. The death benefit payable under the Contract will be the greater of: - the Contract Value; or - the sum of all Purchase Payments made, less any amounts deducted in connection with partial withdrawals. The amount deducted in connection with partial withdrawals will be on a pro rata basis and will be equal to (i) multiplied by (ii) where: (i) is equal to the death benefit prior to the withdrawal; and 31 (ii) is equal to the partial withdrawal amount divided by the Contract Value prior to the partial withdrawal. Please see "VI. Optional Benefits" for information regarding the effect of withdrawals on Contracts with an optional benefit Rider. PAYMENT OF DEATH BENEFIT. The determination of the death benefit will be made on the date we receive written notice and "proof of death" as well as all required claims forms from all Beneficiaries at our Annuities Service Center. No one is entitled to the death benefit until this time. Proof of death occurs when we receive one of the following at our Annuities Service Center: - a certified copy of a death certificate; or - a certified copy of a decree of a court of competent jurisdiction as to the finding of death; or - any other proof satisfactory to us. DISTRIBUTION OF DEATH BENEFIT. The following discussion applies principally to distribution of death benefits upon the death of an Owner under Contracts that are not issued in connection with Qualified Plans, i.e., Nonqualified Contracts. Tax law requirements applicable to Qualified Plans, including IRAs, and the tax treatment of amounts held and distributed under such plans, are quite complex. Accordingly, if your Contract is used in connection with a Qualified Plan, you should seek competent legal and tax advice regarding requirements governing the distribution of benefits, including death benefits, under the plan. In particular, if you intend to use the Contract in connection with a Qualified Plan, including an IRA, you and your advisor should consider that there is some uncertainty as to the income tax effects of the death benefit on Qualified Plans, including IRAs (see "VIII. Federal Tax Matters" and the section entitled "Qualified Plan Types" in the Statement of Additional Information). In designating Beneficiaries you may impose restrictions on the timing and manner of payment of death benefits. The description of death benefits in this Prospectus does not reflect any of the restrictions that could be imposed, and it should be understood as describing what will happen if the Contract Owner chooses not to restrict death benefits under the Contract. If the Contract Owner imposes restrictions, those restrictions will govern payment of the death benefit. We will pay the death benefit to the Beneficiary if any Contract Owner dies before the earlier of the Maturity Date or the Annuity Commencement Date. If there is a surviving Owner, that Contract Owner will be deemed to be the Beneficiary. No death benefit is payable on the death of any Annuitant, except that if any Owner is not a natural person, the death of any Annuitant will be treated as the death of an Owner. On the death of the last surviving Annuitant, the Owner, if a natural person, will become the Annuitant unless the Owner designates another person as the Annuitant. Upon request, the death benefit proceeds may be taken in the form of a lump sum. In that case, we will pay the death benefit within seven calendar days of the date that we determine the amount of the death benefit, subject to postponement under the same circumstances that payment of withdrawals may be postponed (see "Withdrawals" above). Beneficiaries who opt for a lump sum payout of their portion of the death benefit will receive the funds in a John Hancock Safe Access Account ("JHSAA"). Similar to a checking account, the JHSAA provides the Beneficiary access to the payout funds via a checkbook, and account funds earn interest at a variable interest rate. The Beneficiary can obtain the remaining death benefit proceeds in a single sum by cashing one check for the entire amount. Note, however, that a JHSAA is not a true checking account as the Beneficiary cannot make deposits. It is solely a means of distributing the death benefit, so the Beneficiary can only make withdrawals. The JHSAA is part of our general account; it is not a bank account and it is not insured by the FDIC or any other government agency. As part of our general account, it is subject to the claims of our creditors. We receive a benefit from all amounts left in the JHSAA. If the Beneficiary does not choose a form of payment, or the death benefit payable upon the death of an Owner is not taken, the Contract will continue, subject to the following: - The Beneficiary will become the Owner. - We will allocate any excess of the death benefit over the Contract Value to the Owner's Investment Accounts in proportion to their relative values on the date of receipt by us of due proof of the Owner's death. - No Additional Purchase Payments may be made. - We will waive withdrawal charges for all future distributions. - If the deceased Owner's Beneficiary is a surviving spouse who falls within the definition of spouse under the federal Defense of Marriage Act, he or she may continue the Contract as the new Owner without triggering adverse federal tax consequences. In such a case, the distribution rules applicable when a Contract Owner dies will apply when the spouse, as the Owner, dies. In addition, a death benefit will be paid upon the death of the spouse. For purposes of calculating the death benefit payable upon the death of the spouse (excluding any optional benefits), we will treat the death benefit paid upon the first Owner's death as a Purchase Payment to the Contract. In addition, all payments made and all amounts deducted in connection with partial withdrawals prior to the date of the first Owner's death will not be considered in the determination of the spouse's death benefit. - If the Beneficiary is not the deceased Owner's spouse (as defined by the federal Defense of Marriage Act), distribution of the Owner's entire interest in the Contract must be made within five years of the Owner's death, or alternatively, 32 distribution may be made as an annuity, under one of the Annuity Options described below, which begins within one year of the Owner's death and is payable over the life of the Beneficiary or over a period not extending beyond the life expectancy of the Beneficiary (see "Annuity Options" below). If distribution is not made within five years and the Beneficiary has not specified one of the above forms of payment, we will distribute a lump sum cash payment of the Beneficiary's portion of the death benefit. Also, if distribution is not made as an annuity, upon the death of the Beneficiary, any remaining death benefit proceeds will be distributed immediately in a single sum cash payment. - Alternatively, if the Contract is not a Qualified Contract and if the Beneficiary is not the deceased Owner's spouse, distribution of the Owner's entire interest in the Contract may be made as a series of withdrawals over the Beneficiary's life expectancy. If this form of distribution is selected, the Beneficiary may not reduce or stop the withdrawals, but may in any year withdraw more than the required amount for that year. If life expectancy withdrawals have been selected and the initial Beneficiary dies while value remains in the Contract, a successor Beneficiary may either take a lump sum distribution of the remaining balance or continue periodic withdrawals according to the original schedule based on the initial Beneficiary's life expectancy. We may change the way we calculate the death benefit if you substitute or add any Contract Owner. If we do, the new death benefit will equal the Contract Value as of the date of the ownership change. We will also treat the Contract Value on the date of the change as a "Purchase Payment" made on that date for any subsequent calculations of the death benefit prior to the Annuity Commencement Date, and we will not consider any Purchase Payments made and any amounts deducted in connection with partial withdrawals prior to the date of the ownership change in our determination of the death benefit. We will not change the way we calculate the death benefit if the person whose death will cause the death benefit to be paid is the same after the ownership change or if you transfer ownership to the Owner's spouse. The federal Defense of Marriage Act ("DOMA") does not recognize civil union or same-sex marriage partners as "spouses." Therefore, the federal tax treatment available to spouses who fall within the DOMA definition may not be available to civil union or same-sex marriage partners. However, state law may extend to civil union and same-sex marriage partners some or all of the benefits (other than federal tax benefits) accorded to spouses that fall under the DOMA definition. See the Statement of Additional Information for a table that identifies these states. See your qualified tax advisor and/or financial advisor for information on DOMA and your state's treatment of civil unions and same-sex marriage. A change of Contract Owner may be a taxable event if the Owner or co-Owner before the change is an individual and the new Owner or co-Owner is not a spouse of the previous Owner (or co-Owner). You should consult with a qualified tax advisor for further information relevant to your situation. Please see "VI. Optional Benefits" for a discussion of benefits available to Beneficiaries under the optional Annual Step-Up Death Benefit. PAY-OUT PERIOD PROVISIONS You have a choice of several different ways of receiving annuity payments from us. General Generally, the Contracts contain provisions for the commencement of annuity payments to the Annuitant up to the Contract's Maturity Date (the "Annuity Commencement Date" is the first day of the Pay-out Period). The Maturity Date is the date specified on your Contract's specifications page, unless you obtain our consent to change that date. For John Hancock USA Contracts, there is no limit on when the earliest Annuity Commencement Date may be set. For John Hancock New York Contracts, the earliest allowable Annuity Commencement Date is one year from the Contract Date. If no date is specified, the Annuity Commencement Date is the first day of the month following the later of the 90th birthday of the oldest Annuitant or the tenth Contract Anniversary. The Annuity Commencement Date may be changed at any time before annuity payments begin. The new Annuity Commencement Date may not be later than the Maturity Date specified in the Contract, or a later date if we consent to the change. NOTICE OF ANNUITY COMMENCEMENT DATE. Under our current administrative procedures, we will send you one or more notices at least 30 days before your scheduled Annuity Commencement Date and request that you verify information we currently have on file. We may delay the start of annuity payments if you fail to verify this information. Annuity Commencement and Maturity Dates which occur when the Annuitant is at an advanced age, e.g., past age 90, may have adverse income tax consequences. Distributions may be required from Qualified Contracts before the Maturity Date. (See "VIII. Federal Tax Matters.") 33 You may select the frequency of annuity payments. However, if the Contract Value at the Annuity Commencement Date is such that a monthly payment would be less than $20, we may pay the Contract Value in one lump sum to the Annuitant on the Annuity Commencement Date. Annuity Options Annuity payments are available under the Contract on a fixed, variable, or combination fixed and variable basis. Upon purchase of the Contract, and at any time during the Accumulation Period, you may select one or more of the Annuity Options described below on a fixed and/or variable basis or choose an alternate form of payment acceptable to us. If an Annuity Option is not selected, we will provide as a default an Annuity Option in the form of a variable life annuity with payments guaranteed for ten years, as described below. We will determine annuity payments based on the Investment Account Value of each Investment Option at the Annuity Commencement Date. Internal Revenue Service ("IRS") regulations may preclude the availability of certain Annuity Options in connection with certain Qualified Contracts. Once annuity payments commence: - you will no longer be permitted to make any withdrawals under the Contract; - you will no longer be permitted to make or receive any withdrawals under a guaranteed minimum withdrawal benefit Rider; - we may not change the Annuity Option or the form of settlement; and - your Guaranteed Minimum Death Benefit will terminate. Please read the description of each Annuity Option carefully. In general, a non-refund life annuity provides the highest level of payments. However, because there is no guarantee that any minimum number of payments will be made, an Annuitant may receive only one payment if the Annuitant dies prior to the date the second payment is due. You may also elect annuities with payments guaranteed for a certain number of years but the amount of each payment will be lower than that available under the non-refund life Annuity Option. ANNUITY OPTIONS OFFERED IN THE CONTRACT. The Contracts guarantee the availability of the following Annuity Options: Option 1(a): Non-Refund Life Annuity - An annuity with payments during the lifetime of the Annuitant. No payments are due after the death of the Annuitant. Because there is no guarantee that we will make any minimum number of payments, an Annuitant may receive only one payment if the Annuitant dies prior to the date the second payment is due. Option 1(b): Life Annuity with Payments Guaranteed for 10 Years - An annuity with payments guaranteed for 10 years and continuing thereafter during the lifetime of the Annuitant. Because we guarantee payments for 10 years, we will make annuity payments to the end of such period if the Annuitant dies prior to the end of the tenth year. Option 2(a): Joint & Survivor Non-Refund Life Annuity - An annuity with payments during the lifetimes of the Annuitant and a designated co-Annuitant. No payments are due after the death of the last survivor of the Annuitant and co-Annuitant. Because there is no guarantee that we will make any minimum number of payments, an Annuitant or co-Annuitant may receive only one payment if the Annuitant and co-Annuitant die prior to the date the second payment is due. Option 2(b): Joint & Survivor Life Annuity with Payments Guaranteed for 10 Years - An annuity with payments guaranteed for 10 years and continuing thereafter during the lifetimes of the Annuitant and a designated co-Annuitant. Because we guarantee payments for 10 years, we will make annuity payments to the end of such period if both the Annuitant and the co-Annuitant die prior to the end of the tenth year. ADDITIONAL ANNUITY OPTIONS. We currently offer the following Annuity Options which are in addition to the ones we are contractually obligated to make available. We may cease offering any of the following Annuity Options at any time and may offer other Annuity Options in the future. Option 3: Life Annuity with Payments Guaranteed for 5, 15 or 20 Years - An annuity with payments guaranteed for 5, 15 or 20 years and continuing thereafter during the lifetime of the Annuitant. Because we guarantee payments for the specific number of years, we make annuity payments to the end of the last year of the 5, 15 or 20 year period. Option 4: Lifetime Annuity with Cash Refund - An annuity with payments during the lifetime of the Annuitant. After the death of the Annuitant, we will pay the Beneficiary a lump sum amount equal to the excess, if any, of the Contract Value at the election of this option over the sum of the annuity payments made under this option. Option 5: Joint Life Annuity with Payments Guaranteed for 20 Years - An annuity with payments guaranteed for 20 years and continuing thereafter during the lifetime of the Annuitant and a designated co-Annuitant. Because we guarantee payments for the specific number of years, we make annuity payments to the end of the last year of the 20 year period if both the Annuitant and the co-Annuitant die during the 20 year period. 34 Option 6: Joint & Two-Thirds Survivor Non-Refund Life Annuity - An annuity with full payments during the joint lifetime of the Annuitant and a designated co-Annuitant and two-thirds payments during the lifetime of the survivor. Because we do not guarantee that we will make any minimum number of payments, an Annuitant or co-Annuitant may receive only one payment if the Annuitant and co-Annuitant die prior to the date the second payment is due. Option 7: Period Certain Only Annuity for 10, 15 or 20 Years - An annuity with payments for a 10, 15 or 20 year period and no payments thereafter. You may surrender all or part of your Contract for its 'Commuted Value' after the Pay-out Period has begun only if you select a variable pay-out under this Option. (See "Full Surrenders During the Pay-out Period" and "Partial Surrenders During the Pay-out Period" below.) ADDITIONAL ANNUITY OPTIONS FOR CONTRACTS WITH A GUARANTEED MINIMUM WITHDRAWAL BENEFIT RIDER. We make one or more additional Annuity Options available if you purchase a Contract with one of our Income Plus For Life Series Riders. If you purchase a Contract with an Income Plus For Life Series Rider, you may select the additional Annuity Options shown below. These additional Annuity Options are only available for Annuity Commencement Dates no earlier than the first day of the month following the later of the 90th birthday of the oldest Annuitant or the tenth Contract Anniversary. GMWB Alternate Annuity Option 1: Lifetime Income Amount with Cash Refund - This Annuity Option is available if you purchase a Contract with one of the Income Plus For Life Series Riders. For the Income Plus For Life - Joint Life Series Riders, this Annuity Option is available only if one Covered Person (see "VI. Optional Benefits"), not two, remains on the Rider at the Annuity Commencement Date. Under this option, we will make annuity payments during the lifetime of the Annuitant. After the death of the Annuitant, we will pay the Beneficiary a lump sum amount equal to the excess, if any, of the Contract Value at the election of this option over the sum of the annuity payments made under this option. The annual amount of the annuity payments will equal the greater of: - the Lifetime Income Amount on the Annuity Commencement Date, if any, as provided by the Income Plus For Life Series Rider that you purchased with your Contract; or - the annual amount that your Contract Value provides on a guaranteed basis under a lifetime with cash refund annuity. (Unlike Option 1(b), however, we will not continue making payments for the remainder of the 10 year term upon the death of the Annuitant. Instead, we will pay a lump sum amount of the excess Contract Value, if any, described above.) GMWB Alternate Annuity Option 2: Joint & Survivor Lifetime Income Amount with Cash Refund - This Annuity Option is available if you purchase a Contract with one of the Income Plus For Life - Joint Life Series Riders and both Covered Persons remain on the Rider at the Annuity Commencement Date. Under this option, we will make annuity payments during the joint lifetime of the co-Annuitants. After the death of the last surviving Annuitant, we will pay the Beneficiary a lump sum amount equal to the excess, if any, of the Contract Value at the election of this option over the sum of the annuity payments made under this option. The annual amount of the annuity payments will equal the greater of: - the Lifetime Income Amount on the Annuity Commencement Date, if any, as provided by the Income Plus For Life - Joint Life Series Rider that you purchased with your Contract; or - the annual amount that your Contract Value provides on a guaranteed basis under a joint life with cash refund annuity. (Unlike Option 2(b), however, we will not continue making payments for the remainder of the 10 year term upon the death of the last surviving Annuitant. Instead, we will pay a lump sum amount of the excess Contract Value, if any, described above.) FULL SURRENDERS DURING THE PAY-OUT PERIOD. You may surrender your Contract, after the Pay-out Period has begun, only if you have selected a variable pay-out under Option 7: Period Certain Only Annuity for 10, 15, or 20 years. Under this option, we will pay you the present value of any remaining guaranteed annuity payments ("Commuted Value") of your Contract. The Commuted Value is determined on the day we receive your written request for surrender. We determine the Commuted Value by: - multiplying the number of Annuity Units we currently use to determine each payment by the respective Annuity Unit value on the last payment date (see "Annuity Units and the Determination of Subsequent Variable Annuity Payments" below for a description of an Annuity Unit); - assuming that the net investment factor for the remainder of the guarantee period will equal the assumed interest rate of 3%, resulting in level annuity payments; and - calculating the present value of these payments at the assumed interest rate of 3%. If you elect to take the entire Commuted Value of the remaining annuity payments due in the Period Certain, no future annuity payments will be made. PARTIAL SURRENDERS DURING THE PAY-OUT PERIOD. We permit partial surrenders after the Pay-out Period has begun, only if you have selected a variable pay-out under Option 7: Period Certain Only Annuity for 10, 15, or 20 Years. You may take partial surrenders of 35 amounts equal to the Commuted Value of the payments that we would have made during the Period Certain. The Commuted Value is determined on the day we receive your written request for surrender in the manner described above. If you elect to take only the Commuted Value of some of the remaining annuity payments due in the Period Certain, we will reduce the remaining annuity payments during the remaining Period Certain by reducing the number of Annuity Units used to determine payments (see "Annuity Units and the Determination of Subsequent Variable Annuity Payments" in this section, below, for how we determine the initial number of Annuity Units used to determine payments). Since there will be fewer Annuity Units, your remaining payments will be reduced. The new number of Annuity Units used to determine future payments after an amount is commuted will equal A x [1 - ((B / C) / D)], where: A equals the number of Annuity Units used to determine future payments before the commutation; B equals the dollar amount requested to be paid out as part of the commutation; C equals the present value of all Annuity Units to be paid out if there were no commutation, where the interest rate used to present value the Annuity Units is the assumed interest rate of 3%; and D equals the Annuity Unit value on the day the commutation is executed. For example, assume that before you request a partial Commuted Value, you will receive 400 units a year for 10 years. You request $20,000 in Commuted Value. Since you are receiving those 400 units for 10 years, C equals the present value of 400 units for 10 years starting the end of this year at a rate of an assumed interest rate of 3%. This value is 3,412.08 units. Assuming the annuity unit value on the day the commutation is executed is $12.50, after the commutation you will receive 400 x {1 - (($20,000 / 3412.08) / $12.50)} = 212.43 units a year for 10 years. You will not be able to make any additional withdrawals under a Contract with a guaranteed minimum withdrawal benefit Rider once annuity payments begin under an Annuity Option. FIXED ANNUITY OPTIONS. Subject to the distribution of death benefits provisions (see "Death Benefit During Accumulation Period" above), on death, withdrawal or the Maturity Date of the Contract, the death benefit proceeds may be applied to a Fixed Annuity Option. We determine the amount of each Fixed Annuity payment by applying the portion of the death benefit proceeds (minus any applicable sales charge and premium taxes) applied to purchase the Fixed Annuity to the appropriate table in the Contract. If the table we are then using is more favorable to you, we will substitute that table. If you choose an Annuity Option that is not guaranteed in the Contract, we will use the Single Premium Immediate Annuity rate that we are currently offering. We guarantee the dollar amount of Fixed Annuity payments. We deduct a pro rata portion of the administration fee from each annuity payment. This fee will be waived if the Contract Value to effect the annuity is at least $50,000. Determination of Amount of the First Variable Annuity Payment We determine the first Variable Annuity payment by applying the portion of the death benefit proceeds (minus any applicable sales charge and premium taxes) applied to purchase a Variable Annuity to the annuity tables contained in the Contract. We will determine the amount of the Contract Value as of the date not more than ten Business Days prior to the Annuity Commencement Date. We will reduce Contract Value used to determine annuity payments by any applicable sales charge and premium taxes. The rates contained in the annuity tables vary with the Annuitant's sex and age and the Annuity Option selected. However, we may not use sex-distinct tables for Contracts issued in connection with certain employer-sponsored retirement plans, with Contracts issued to residents of Massachusetts, or with Contracts issued in Montana. Under such tables, the longer the life expectancy of the Annuitant under any life Annuity Option or the longer the period for which payments are guaranteed under the option, the smaller the amount of the first monthly Variable Annuity payment will be. We deduct a pro rata portion of the administration fee from each annuity payment. This fee will be waived if the Contract Value to effect the annuity is at least $50,000. Annuity Units and the Determination of Subsequent Variable Annuity Payments We will base Variable Annuity payments after the first one on the investment performance of the Subaccounts selected during the Pay-out Period. The amount of a subsequent payment is determined by dividing the amount of the first annuity payment from each Subaccount by the Annuity Unit value of that Subaccount (as of the same date the Contract Value to effect the annuity was determined) to establish the number of Annuity Units which will thereafter be used to determine payments. This number of Annuity Units for each Subaccount is then multiplied by the appropriate Annuity Unit value as of a uniformly applied date not more than ten Business Days before the annuity payment is due, and the resulting amounts for each Subaccount are then totaled to arrive at the amount of the annuity payment to be made. The number of Annuity Units generally remains constant throughout the Pay-out Period 36 (assuming no transfer is made). We will deduct a pro rata portion of the administration fee from each annuity payment. This fee will be waived if the Contract Value to effect the annuity is at least $50,000. We charge the same Annual Separate Account Expenses during the annuitization period as we do during the Accumulation Period. We determine the "net investment factor" for an Annuity Unit in the same manner as we determine the net investment factor for an accumulation unit (see "Value of Accumulation Units" and "Net Investment Factor" on page 27). The value of an Annuity Unit for each Subaccount for any Business Day is determined by multiplying the Annuity Unit value for the immediately preceding Business Day by the net investment factor for that Subaccount for the valuation period for which the Annuity Unit value is being calculated and by a factor to neutralize the assumed interest rate. Generally, if the net investment factor is greater than the assumed interest rate, the payment amount will increase. If the net investment factor is less than the assumed interest rate, the payment amount will decrease. We build a 3% assumed interest rate into the annuity tables in the Contract used to determine the first Variable Annuity payment. The smallest annual rate of investment return which is required to be earned on the assets of the Separate Account so that the dollar amount of Variable Annuity payments will not decrease is 3.83%. Some transfers are permitted during the Pay-out Period, but subject to different limitations than during the Accumulation Period. Transfers During Pay-out Period Once Variable Annuity payments have begun, you may transfer all or part of the investment upon which those payments are based from one Subaccount to another. You must submit your transfer request to our Annuities Service Center at least 30 DAYS BEFORE the due date of the first annuity payment to which your transfer will apply. We will make transfers after the Annuity Commencement Date by converting the number of Annuity Units being transferred to the number of Annuity Units of the Subaccount to which the transfer is made, so that the next annuity payment if it were made at that time would be the same amount that it would have been without the transfer. Thereafter, annuity payments will reflect changes in the value of the Annuity Units for the new Subaccount selected. We reserve the right to limit, upon notice, the maximum number of transfers a Contract Owner may make per Contract Year to four. Once annuity payments have commenced, a Contract Owner may not make transfers from a Fixed Annuity Option to a Variable Annuity Option or from a Variable Annuity Option to a Fixed Annuity Option. In addition, we reserve the right to defer the transfer privilege at any time that we are unable to purchase or redeem shares of a Portfolio. We also reserve the right to modify or terminate the transfer privilege at any time in accordance with applicable law. Death Benefit During Pay-out Period If an Annuity Option providing for payments for a guaranteed period has been selected and the Annuitant dies during the Pay-out Period, we will make the remaining guaranteed payments to the Beneficiary. We will make any remaining payments as rapidly as under the method of distribution being used as of the date of the Annuitant's death. If no Beneficiary is living, we will commute any unpaid guaranteed payments to a single sum (on the basis of the interest rate used in determining the payments) and pay that single sum to the estate of the last to die of the Annuitant and the Beneficiary. We do not make any payments to a Beneficiary, however, if we are making payments during the Settlement Phase under an optional guaranteed minimum withdrawal benefit Rider and the last surviving Covered Person dies. Please read "VI. Optional Benefits" for additional information. OTHER CONTRACT PROVISIONS You have a right to cancel your Contract. Right to Review You may cancel the Contract by returning it to our Annuities Service Center or to your financial advisor at any time within 10 days after receiving it or such other period as required by law. Within 7 days of receiving a returned Contract, we will pay you the Contract Value (plus any sales charge deducted) computed at the end of the Business Day on which we receive your returned Contract or written notification acceptable to us. No withdrawal charge is imposed upon return of a Contract within the 10-day right to review period. The 10-day right to review may vary in certain states in order to comply with the requirements of state insurance laws and regulations. Also, when required by state law or when the Contract is issued as an individual retirement annuity under Sections 408 or 408A of the Code, during the first 7 days of the 10-day period, we will return all Purchase Payments if this is greater than the amount otherwise payable (as described in the preceding paragraph). If you purchase your Contract in connection with a replacement of an existing contract, your Contract may provide for a longer time period to return it to us. For example, in New York, you may return the Contract at any time within 60 days after receiving it. Replacement of an existing annuity contract generally is defined as the purchase of a new contract in connection with (a) the lapse, 37 partial or full surrender or change of, or borrowing from, an existing annuity or life insurance contract or (b) the assignment to a new issuer of an existing annuity contract. This description, however, does not necessarily cover all situations which could be considered a replacement of an existing contract. Therefore, you should consult with your financial advisor or attorney regarding whether the purchase of a new Contract is a replacement of an existing contract. (Applicable to Contracts issued in California Only) Contracts issued in California to persons 60 years of age or older may be cancelled by returning the Contract to our Annuities Service Center or agent at any time within 30 days after receiving it. We will allocate your Net Purchase Payments to the Money Market Investment Option during this period. We will, however, permit you to elect to allocate your Net Purchase Payments during this 30 day period to a DCA Fixed Investment Option (if available), or to one or more of the Variable Investment Options. If you cancel the Contract during this 30 day period and your Net Purchase Payments were allocated to a DCA Fixed Investment Option, we will pay you the original amount of your Purchase Payments (including any sales charges deducted). If your Net Purchase Payments were allocated to the Money Market Investment Option, we will pay you the greater of the original amount of your Purchase Payments (including any sales charges deducted) or the Contract Value (plus any sales charges deducted), computed at the end of the Business Day on which we receive your returned Contract. If your Net Purchase Payments were allocated to a Variable Investment Option (other than the Money Market Investment Option), we will pay you the Contract Value, (plus any sales charges deducted), computed at the end of the Business Day on which we receive your returned Contract. You own the Contract. Ownership Prior to the Maturity Date, the Contract Owner is the person designated in the Contract specifications page or as subsequently named. On and after the Annuity Commencement Date, the Annuitant is the Contract Owner. If amounts become payable to any Beneficiary under the Contract, the Beneficiary is the Contract Owner. In the case of Nonqualified Contracts, you may change ownership of the Contract or you may collaterally assign the Contract at any time prior to the earlier of the Annuity Commencement Date or the Maturity Date, subject to the rights of any irrevocable Beneficiary. Changing the ownership of a Contract may be treated as a (potentially taxable) distribution from the Contract for federal tax purposes. Changing the ownership of a Contract will also impact any guaranteed minimum withdrawal benefit Riders purchased under the Contract (see "VI. Optional Benefits"). A collateral assignment is treated as a distribution from the Contract and will be tax reported as such. An addition or substitution of any Contract Owner may result in resetting the death benefit to an amount equal to the Contract Value as of the date of the change and treating that value as a Purchase Payment made on that date for purposes of computing the amount of the death benefit. You must make any change of ownership or assignment in writing and we must receive such written change at the Annuities Service Center. We must approve any change. We assume no liability for any payments made or actions taken before a change is approved or an assignment is accepted or responsibility for the validity or sufficiency of any assignment. An absolute assignment or ownership change will revoke the interest of any revocable Beneficiary. In the case of Qualified Contracts, ownership of the Contract generally may not be transferred except by the trustee of an exempt employees' trust which is part of a retirement plan qualified under Section 401 of the Code or as otherwise permitted by applicable IRS regulations. Subject to the foregoing, you may not sell, assign, transfer, discount or pledge (as collateral for a loan or as security for the performance of an obligation, or for any other purpose) a Qualified Contract to any person other than us. The Annuitant is either you or someone you designate. Annuitant The Annuitant is any natural person or persons whose life is used to determine the duration of annuity payments involving life contingencies. The Annuitant is entitled to receive all annuity payments under the Contract. If the Contract Owner names more than one person as an "Annuitant," the second person named shall be referred to as "co-Annuitant." The Annuitant is as designated on the Contract specifications page or in the application, unless changed. You must make any change of Annuitant in writing in a form acceptable to us and the change must be received at our Annuities Service Center. We must approve any change. On the death of the Annuitant prior to the Annuity Commencement Date, the co-Annuitant, if living, becomes the Annuitant. If there is no living co-Annuitant, the Owner becomes the Annuitant. In the case of certain Qualified Contracts, there are limitations on the ability to designate and change the Annuitant and the co-Annuitant. The Annuitant becomes the Owner of the Contract at the Annuity Commencement Date. If any Annuitant is changed and any Contract Owner is not a natural person, we must distribute the entire interest in the Contract to the Contract Owner within five years. We will reduce the amount distributed by charges that would otherwise apply upon withdrawal. 38 The Beneficiary is the person you designate to receive the death benefit if you die. Beneficiary The Beneficiary is the person, persons or entity designated in the Contract specifications page (or as subsequently changed). However, if there is a surviving Contract Owner, we will treat that person as the Beneficiary. You may change the Beneficiary subject to the rights of any irrevocable Beneficiary. You must make any change in writing and the change must be received at our Annuities Service Center. We must approve any change. If approved, we will effect such change as of the date on which it was written. We assume no liability for any payments made or actions taken before the change is approved. If no Beneficiary is living, the Contingent Beneficiary will be the Beneficiary. The interest of any Beneficiary is subject to that of any assignee. If no Beneficiary or Contingent Beneficiary is living, the Beneficiary is the estate of the deceased Contract Owner. In the case of certain Qualified Contracts, IRS regulations may limit designations of Beneficiaries. Spouse FEDERAL DEFINITION OF SPOUSE. Any federal tax provisions related to status as a "spouse" are governed by the Federal Defense of Marriage Act ("DOMA"), which does not recognize civil unions or same-sex marriages that may be allowed under state law. Please consult your tax advisor for information on how federal tax rules may affect Contracts where civil union or same-sex marriage partners, either singularly or jointly own the Contract, or are designated Annuitant(s), Beneficiary(ies) and/or Covered Person(s). STATE VARIATIONS. Some states require that civil union and same-sex marriage partners receive the same contractual benefits as spouses who fall within the DOMA definition. To see a table of states with such a requirement, you may request a Statement of Additional Information from the Annuities Service Center. You should consult with a qualified financial advisor for additional information on your state's regulations regarding civil unions and same-sex marriages. Modification We may not modify your Contract or certificate without your consent, except to the extent required to make it conform to any law or regulation or ruling issued by a governmental agency. Our Approval We reserve the right to accept or reject any Contract application at our sole discretion. Misstatement and Proof of Age, Sex or Survival We may require proof of age, sex (where permitted by state law) or survival of any person upon whose age, sex or survival any payment depends. If the age or sex of the Annuitant has been misstated, the benefits will be those that would have been provided for the Annuitant's correct age and sex. If we have made incorrect annuity payments, we will pay the amount of any underpayment immediately and we will deduct the amount of any overpayment from future annuity payments. Loans Loans are not available under the Contract. 39 VI. Optional Benefits OVERVIEW You may elect to purchase optional benefit Riders when you purchase a Contract. We currently offer two types of optional benefit Riders, Guaranteed Minimum Withdrawal Benefit Riders and a Death Benefit Rider. GUARANTEED MINIMUM WITHDRAWAL BENEFIT RIDERS. If available in your state, you may select one of the following "guaranteed minimum withdrawal benefit" ("GMWB") Riders: - Income Plus For Life*; or - Income Plus For Life - Joint Life*. * The version of our Income Plus For Life or Income Plus For Life - Joint Life Riders offered on or after May 4, 2009 are described in this section. Please see Appendix D: "Information about Income Plus For Life Series Riders Available Prior to May 4, 2009" for details about those Riders. We use the term "INCOME PLUS FOR LIFE SERIES RIDERS" in the Prospectus to refer to both the Income Plus For Life and Income Plus For Life - Joint Life Riders. DEATH BENEFIT RIDER. You also may select an Annual Step-Up Death Benefit Rider. We provide additional information about these optional benefit Riders in the following sections. FEATURES OF THE INCOME PLUS FOR LIFE SERIES RIDERS Covered Person(s) The Income Plus For Life Series we currently offer provides a lifetime income guarantee based on a single life (Income Plus For Life) or on the lifetime duration of two Covered Persons (Income Plus For Life- Joint Life). SINGLE LIFE GUARANTEE. For Riders that provide a lifetime income guarantee based on the life of a single Covered Person, the Covered Person is the oldest Owner at issue of the Rider. We may waive the Contract ownership requirement and permit you to designate a Covered Person who is an Annuitant in situations where the Owner is not the Annuitant. For example, we will permit the Annuitant to be a Covered Person if a custodial account owns a Qualified Contract for the benefit of an Annuitant. The Covered Person must remain an Owner (or an Annuitant, subject to our underwriting rules) to receive benefits under the Rider. JOINT LIFE GUARANTEE. For Riders that provide a lifetime income guarantee based on the lifetime duration of two Covered Persons, we determine the Covered Persons at the time you elect the Rider. A spouse may need to qualify as a "spouse" under federal law to be a Covered Person. See "Civil Union and Same-Sex Marriage Partners" below. For Riders issued with Nonqualified Contracts: - both the spouses must be named as co-Owners of the Contract; or - if only one spouse is named as an Owner of the Contract (or Annuitant if the Owner is a non-natural person), the other spouse must be designated as the Beneficiary of the Contract. For Riders issued with Qualified Contracts: - one spouse must be named as the Owner (or Annuitant if the Owner is a non-natural person); and - the Owner's spouse must be the designated Beneficiary. A Covered Person will no longer qualify as such (i.e., that Covered Person will be removed from the Rider) if that person is no longer designated as an Owner, co-Owner, Annuitant, co-Annuitant or Beneficiary as required above. In the event that you and your spouse become divorced after you purchase the Rider, you may not add a new spouse as a Covered Person. If you remove your spouse as an Owner, Beneficiary or Annuitant, that person will no longer be a Covered Person under the Rider. (See page 31 for additional information on the impact of divorce.) You may lose benefits under the Rider if a Covered Person is removed from the Rider. Availability of Income Plus For Life Series Riders You may elect an Income Plus For Life Series Rider at the time you purchase a Contract, provided: - the Rider is available for sale in the state where the Contract was sold; 40 - you limit your investment allocations of Purchase Payments and Contract Value to the Investment Options we make available with the Rider; - you (and any other Covered Person) comply with the age restrictions we may impose for the Rider; and - you do not intend the Contract to be used with an IRA you inherited from someone else (sometimes referred to as an "Inherited IRA" or "Beneficiary IRA"), unless you are the spouse of the decedent and own the IRA in your own name. Please contact the John Hancock Annuities Service Center at 1-800-344-1029 (in NY: 1-800-551-2078) for additional information on availability. We offer these optional benefit Riders only where approved by local state insurance regulatory agencies. We reserve the right to accept or refuse to issue any guaranteed minimum withdrawal benefit Rider at our sole discretion. Once you elect a guaranteed minimum withdrawal benefit Rider, its effective date usually will be the Contract Date (unless we permit otherwise) and it is irrevocable. We charge an additional fee for each Income Plus For Life Series Rider. AGE RESTRICTIONS. You, or both you and your spouse (who must also qualify as a Covered Person in the case of an Income Plus For Life - Joint Life Rider) must be under age 81 to purchase a Rider. ADDITIONAL AVAILABILITY OF GUARANTEED MINIMUM WITHDRAWAL BENEFIT RIDERS. You may elect to add a guaranteed minimum withdrawal benefit Rider to your Contract after you purchase a Contract under certain conditions. Please see Appendix C: "Additional Availability of Guaranteed Minimum Withdrawal Benefit Riders" for details. CIVIL UNION AND SAME-SEX MARRIAGE PARTNERS. The Riders generally are designed to comply with current federal tax provisions related to status as a "spouse" under the federal Defense of Marriage Act ("DOMA"). The DOMA definition does not recognize civil unions or same-sex marriages that may be allowed under state law. In certain states, however, we will allow civil union and same-sex marriage partners to purchase the Contract with a guaranteed minimum withdrawal benefit Rider and receive the same Rider benefits as a "spouse" who falls within the DOMA definition. See the Statement of Additional Information for a table identifying these states. Please note that in these states, there may be adverse federal tax consequences with distributions and other transactions upon the death of the first civil union or same-sex marriage partner. Please consult with your own qualified tax advisor. Rider Fees We charge an additional fee on each Contract Anniversary for an Income Plus For Life Series Rider, and reserve the right to increase the fee on the effective date of each Step-Up under that Rider. We withdraw the fee from each Investment Option in the same proportion that the value of Investment Accounts of each Investment Option bears to the Contract Value. We will deduct a pro rata share of the annual fee from the Contract Value: - on the date we determine the death benefit; - after the Annuity Commencement Date at the time an Annuity Option under the Contract begins; or - at full surrender of the Contract. We do not deduct additional Rider fees during the Settlement Phase or after the Annuity Commencement Date once an Annuity Option begins. FEE FOR INCOME PLUS FOR LIFE SERIES RIDERS. The current fee is equal to 0.90% of the Adjusted Benefit Base. The Adjusted Benefit Base is the Benefit Base that was available on the prior Contract Anniversary (including any Step-Up applied on that prior Contract Anniversary) increased by any Additional Purchase Payments that we applied to the Benefit Base during the Contract Year prior to the current Contract Anniversary. We reserve the right to increase either the Income Plus For Life or Income Plus For Life- Joint Life fee on the effective date of each Step-Up. In such a situation, neither fee will ever exceed 1.20%. FEE FOR INCOME PLUS FOR LIFE SERIES RIDERS PURCHASED PRIOR TO MAY 4, 2009. We describe the fees for Income Plus For Life Series Riders purchased prior to May 4, 2009 in Appendix D. If we decide to increase the rate of a Rider fee at the time of a Step-Up, you will receive advance notice and be given the opportunity of no less than 30 days to decline the Step-Up. If you decline a scheduled Step-Up, we will not increase the Rider fee at that time. You will have the option to elect to a Step-Up within 30 days of subsequent Step-Up Dates. If you decide to step-up a guaranteed amount at that time, we will thereafter resume automatic Step-Ups on each succeeding Step-Up Date. Benefit Base The maximum Benefit Base at any time is $5 million. The initial Benefit Base is equal to your initial Purchase Payment (up to $5 million). If we allow you to purchase the Rider after the first Contract Year, we may determine the initial Benefit Base based on your Contract Value after the first Contract Year. 41 We will reset the Benefit Base if you take withdrawals prior to the Lifetime Income Date or if you take Excess Withdrawals. We may reset the Benefit Base to reflect these withdrawals either on a dollar-for-dollar basis, or to equal the Contract Value, depending on the nature of the withdrawal. Please see "Withdrawals, Distributions and Settlements" in this section, below, for more information. We will increase the Benefit Base to reflect Step-Ups, Credits and Additional Purchase Payments. Please see "Increases in Guaranteed Amounts" in this section, below, for more information. Benefit Rate The Benefit Rate is: - Income Plus For Life - 5% - Income Plus For Life - Joint Life - 4.75% (4.25% in New York). Because we provide our guarantee over the lifetimes of two Covered Persons under the Income Plus For Life - Joint Life Rider, we use a lower Benefit Rate than we do under the Income Plus For Life Rider. We may change the Benefit Rate we offer for this Rider. We do not expect the Benefit Rate(s) we offer to be less than 3% or more than 7%, but provide no assurance that we will continue to offer the Rider within this range. Once you purchase this Rider, however, the Benefit Rate(s) in effect when we issue the Rider will remain in effect for as long as the Rider remains in effect. Lifetime Income Amount The Rider provides our guarantee that a Lifetime Income Amount will be available for withdrawal each Contract Year, beginning on a Lifetime Income Date as long as: - (for Income Plus For Life) - the Covered Person remains alive and an Owner (or an Annuitant, subject to our underwriting rules) under the Contract; or - (for Income Plus For Life - Joint Life) - either Covered Person remains alive and an Owner, Beneficiary or Annuitant under the Contract. The Lifetime Income Amount reduces to zero upon the death of the last Covered Person or upon a change in Owner, Beneficiary or Annuitant that removes the last Covered Person from the Contract as an Owner, Beneficiary or Annuitant. We determine the initial Lifetime Income Amount by multiplying: - the Benefit Rate for the Rider on the Lifetime Income Date; by - the Benefit Base for the Rider on the Lifetime Income Date. EXAMPLE (Income Plus For Life): Assume that the Benefit Base on the Lifetime Income Date is $100,000. If the Benefit Rate is 5%, the Lifetime Income Amount is $5,000 (5% x $100,000). EXAMPLE (Income Plus For Life - Joint Life): Assume that the Benefit Base on the Lifetime Income Date is $100,000. If the Benefit Rate is 4.75% (4.25% in New York), the Lifetime Income Amount is $4,750 = 4.75% x $100,000 ($4,250 = 4.25% x $100,000 in New York). We will reset the Lifetime Income Amount if you take Excess Withdrawals. Please see "Withdrawals, Distributions and Settlements" in this section, below, for more information. We will increase the Lifetime Income Amount to reflect Step-Ups, Credits, Additional Purchase Payments and increases in your Benefit Rate, if any. Please see "Increases in Guaranteed Amounts" in this section, below, for more information. Lifetime Income Date The Lifetime Income Amount guarantee starts on a Lifetime Income Date. The earliest Lifetime Income Date will be the date you purchase the Rider (the Rider's "effective date") if the Covered Person (or the youngest Covered Person for Income Plus For Life - Joint Life) is age 58 1/2 or older at the time. Otherwise, the Lifetime Income Date in most cases is the Contract Anniversary immediately following the date the Covered Person (or youngest Covered Person for Income Plus For Life - Joint Life) attains age 58 1/2. The earliest available Lifetime Income Date we offer for this Rider is subject to change. Once you purchase this Rider, the earliest available Lifetime Income Date In effect when we issue the Rider will remain in effect for as long as the Rider remains in effect. Benefits under the Rider may be affected if you purchase the Rider before the earliest available Lifetime Income Date and take a withdrawal before then. Please see "Withdrawals before the Lifetime Income Date" for more information. 42 We determine the initial Lifetime Income Amount on the Lifetime Income Date. You cannot change or defer the Lifetime Income Date under the Rider, but you may continue to be eligible for Credits and increases in the Benefit Rate, if any, if you defer taking withdrawals (see "Increases in Guaranteed Amounts" in this section, below). Restrictions on Additional Purchase Payments If you purchase a guaranteed minimum withdrawal benefit Rider, we restrict your ability to make Additional Purchase Payments to the Contract. You must obtain our prior approval if the Contract Value immediately following an Additional Purchase Payment would exceed $1 million. We do not permit Additional Purchase Payments during a Rider's Settlement Phase (see "Settlement Phase" in this section, below). Other limitations on Additional Purchase Payments may vary by state. Special Purchase Payment limits on Nonqualified Contracts. If we issue your Contract not in connection with an IRA or other tax-qualified retirement plan, we also impose the following limit on your ability to make Purchase Payments: - on or after the first Contract Anniversary, without our prior approval, we will not accept an Additional Purchase Payment if your total payments after the first Contract Anniversary exceed $100,000. Special Purchase Payment limits on Qualified Contracts. If we issue your Contract in connection with a tax qualified retirement plan, including an IRA, we also impose additional limits on your ability to make Purchase Payments: - to the extent provided in your Rider, we will not accept an Additional Purchase Payment if your total payments after the first Contract Anniversary, or the Age 65 Contract Anniversary, if later, exceed $100,000; - for the year that you become age 70 1/2 and for any subsequent years, if we issue your Contract in connection with an IRA, we will only accept a Purchase Payment that qualifies as a "rollover contribution"; but - we will not accept any Purchase Payment after the oldest Owner becomes age 81. You should consult with a qualified tax advisor prior to electing an Income Plus For Life Series Rider for further information on tax rules affecting Qualified Contracts, including IRAs. General right of refusal. We reserve the right to refuse to accept Additional Purchase Payments at any time after the first Contract Anniversary to the extent permitted in the state we issue your Contract. We do not reserve this right of refusal for Additional Purchase Payments before the Age 65 Contract Anniversary that are permitted to Contracts issued in connection with tax qualified retirement plans, including IRAs. Restrictions on Investment Options Under Income Plus For Life Series Riders If you elect to purchase one of our Income Plus For Life Series Riders, you may invest your Contract Value only in the Investment Options we make available with that Rider. If you purchase one of our Income Plus For Life Series Riders, you must invest 100% of your Contract Value at all times in one or more of the Investment Options we make available for these Riders. Under our current rules, you must invest either: (a) among the currently available individual Investment Options (see "Available Individual Investment Options" below); or (b) in a manner consistent with any one of the currently available Model Allocations (see "Available Model Allocations" below). You may transfer between (a) and (b), or vice versa, on any date subject to our restrictions on frequent trading, provided you transfer 100% of your Contract Value. You may take withdrawals only in accordance with our default procedures; you may not specify the Investment Option from which you wish to make a withdrawal. We will allocate Additional Purchase Payments in accordance with your instructions, subject to the restrictions described herein. All Investment Options may not be available through all distribution partners. YOU SHOULD CONSULT WITH YOUR FINANCIAL ADVISOR TO ASSIST YOU IN DETERMINING WHICH AVAILABLE INDIVIDUAL INVESTMENT OPTION OR MODEL ALLOCATION IS BEST SUITED FOR YOUR FINANCIAL NEEDS AND RISK TOLERANCE. AVAILABLE INDIVIDUAL INVESTMENT OPTIONS If you purchase a Contract with one of our Income Plus For Life Series Riders, we restrict the individual Investment Options to which you may allocate your Contract Value. These Investment Options invest in the following Portfolios: 43 - Lifestyle Balanced Trust - Lifestyle Conservative Trust - Lifestyle Moderate Trust - Lifestyle Growth Trust - Money Market Trust - Core Allocation Trust - Core Balanced Trust - Core Fundamental Holdings Trust - Core Global Diversification Trust You may allocate your Contract Value to any combination of these Investment Options and you may also use our DCA program from the Money Market or any available DCA Fixed Investment Option in connection with your selected Investment Options. WE RESERVE THE RIGHT TO RESTRICT INVESTMENT OPTIONS IN YOUR VARIABLE INVESTMENT ACCOUNT AT ANY TIME. If we restrict an Investment Option, you may not be able to transfer or allocate Contract Value or Purchase Payments to the restricted Investment Option after the date of the restriction. Any amounts you allocated to an Investment Option before we imposed restrictions will not be affected by such restrictions as long as it remains in that Investment Option. FOR MORE INFORMATION REGARDING THESE PORTFOLIOS, INCLUDING INFORMATION RELATING TO THEIR INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS, AND THE RISKS OF INVESTING IN SUCH PORTFOLIOS, PLEASE SEE "IV. GENERAL INFORMATION ABOUT US, THE SEPARATE ACCOUNTS AND THE PORTFOLIOS" AS WELL AS THE PROSPECTUS FOR THE APPLICABLE PORTFOLIOS. YOU CAN OBTAIN A COPY OF THE PORTFOLIOS' PROSPECTUSES BY CONTACTING THE ANNUITIES SERVICE CENTER SHOWN ON PAGE II OF THIS PROSPECTUS. YOU SHOULD READ THE PORTFOLIOS' PROSPECTUSES CAREFULLY BEFORE INVESTING IN A CORRESPONDING VARIABLE INVESTMENT OPTION. AVAILABLE MODEL ALLOCATIONS. You may allocate your entire Contract Value to any one of the available Model Allocations in the table shown below. You may also use our DCA program from any available DCA Fixed Investment Option in connection with your selected Model Allocation. If you select a Model Allocation, you authorize us to rebalance your entire Contract Value allocated to your selected Model Allocation on a quarterly basis to the fixed percentages shown in the table for each Investment Option in that Model Allocation. In addition, you may not transfer monies between Investment Options other than to transfer 100% of your Contract Value to another Model Allocation if available or 100% to any one, or any combination of, the available individual Investment Options. None of the Model Allocations is a fund-of-funds. We do not actively manage any Model Allocation. Once you invest in a Model Allocation, we will not change the allocation percentages (except to rebalance) or component Portfolios based on changes in investment strategy, market conditions or expectations of future performance. Because a Model Allocation does not change, you should periodically consult with your financial advisor to ensure that your selected Model Allocation continues to be appropriate for your needs and circumstances. WE RESERVE THE RIGHT TO RESTRICT THE AVAILABILITY OF MODEL ALLOCATIONS AT ANY TIME. If we restrict a Model Allocation and your Contract Value is allocated to that Model Allocation on the last day it was available, you may continue to allocate your Contract Value to that Model Allocation as long as you continue to allocate your entire Contract Value (other than amounts in a Fixed Account under our DCA Program), including future Purchase Payments, to that Model Allocation. We will continue to rebalance your Contract Value to that Model Allocation on a quarterly basis. You will no longer be able to use that Model Allocation, however, if you transfer your Contract Value to any of the available individual Investment Options, to any other Model Allocation, or to any Variable Investment Option other than as permitted in that Model Allocation. 44 The currently available Model Allocations are:
MODEL ALLOCATION NAME MODEL ALLOCATION PERCENTAGE PORTFOLIO NAME --------------------- --------------------------- ------------------------------------- CORE PLUS BALANCED GROWTH & INCOME 24% 500 Index 9% American Blue Chip Income and Growth 15% American Bond 3% American Global Small Capitalization 3% American Growth 6% American Growth-Income 3% Global 9% Investment Quality Bond 9% Mutual Shares 16% Total Bond Market Trust A 3% Value CORE PLUS BALANCED TO GROWTH 30% 500 Index 9% American Blue Chip Income and Growth 9% American Bond 3% American Global Small Capitalization 6% American Growth 6% American Growth-Income 6% Global 6% Investment Quality Bond 12% Mutual Shares 10% Total Bond Market Trust A 3% Value
A MODEL ALLOCATION MAY EXPERIENCE VOLATILITY IN ITS INVESTMENT PERFORMANCE OR LOSE MONEY, DEPENDING ON THE PERFORMANCE OF THE COMPONENT PORTFOLIOS REFERENCED ABOVE. YOUR INVESTMENT IN THE PORTFOLIOS WILL FLUCTUATE AND WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN YOUR ORIGINAL INVESTMENT. FOR MORE INFORMATION REGARDING EACH PORTFOLIO THAT WE PERMIT YOU TO INVEST IN THROUGH A MODEL ALLOCATION, INCLUDING INFORMATION RELATING TO THAT PORTFOLIO'S INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS, AND THE RISKS OF INVESTING IN THAT PORTFOLIO, PLEASE SEE "IV. GENERAL INFORMATION ABOUT US, THE SEPARATE ACCOUNTS AND THE PORTFOLIOS" AS WELL AS THE PORTFOLIO'S PROSPECTUS. YOU CAN OBTAIN A PROSPECTUS CONTAINING MORE COMPLETE INFORMATION ON EACH OF THE PORTFOLIOS, BY CONTACTING THE RESPECTIVE ANNUITIES SERVICE CENTER SHOWN ON PAGE II OF THIS PROSPECTUS. YOU SHOULD READ THE PORTFOLIOS' PROSPECTUSES CAREFULLY BEFORE INVESTING IN THE CORRESPONDING INVESTMENT OPTION. Increases in Guaranteed Amounts ADDITIONAL PURCHASE PAYMENTS. Prior to the Lifetime Income Date, we will increase the Benefit Base each time you make an Additional Purchase Payment, up to a maximum Benefit Base of $5 million. On and after the earliest available Lifetime Income Date, we may increase the Benefit Base each time you make an Additional Purchase Payment, up to a maximum Benefit Base of $5 million. The new Benefit Base will be the Benefit Base immediately before the Additional Purchase Payment, plus the excess, if any, of the Additional Purchase Payment (subject to our Purchase Payment limits) over any Withdrawal Amount (reduced by any subsequent Purchase Payment) since the later of: - the Lifetime Income Date or - the latest of: - the date of a Purchase Payment that we applied to the Benefit Base, - the date of a reduction in the Benefit Base, or - the effective date of a Step-Up. EXAMPLE: Assume you took a withdrawal equal to the Lifetime Income Amount of $5,000 after the Lifetime Income Date, your current Benefit Base is $100,000, and you make an Additional Purchase Payment of $15,000. Your Benefit Base will increase by $10,000, the excess of the Additional Purchase Payment over the prior withdrawal ($15,000 - $5,000). Your new Benefit Base will equal $110,000. Assume that the following year you take an Excess Withdrawal of $10,000 that reduces your Benefit Base to 45 $100,000. If you then make an Additional Purchase Payment of $10,000, the entire $10,000 will be added to your current Benefit Base, since the Benefit Base was reduced by the previous withdrawal. The new Benefit Base will be $110,000 ($100,000 + $10,000). CREDITS. On the date of the Prospectus, we offer the Rider with the following Credit features: Credits may increase one or more of our guarantees when you defer withdrawals. - Annual Credit Rate - 5.00% - Credit Period (for Annual Credits) - The initial Credit Period coincides with the first 10 Contract Years while the Rider is in effect. We will extend the Credit Period each time a Step-Up occurs to the lesser of 10 years from the Step-Up Date or the Age 95 Contract Anniversary. - Ten Year Credit Rate - See "Ten Year Credit" for a description of the rate we use to calculate a Ten Year Credit. - Ten Year Credit Period - The Credit Period for the Ten Year Credit ends on a "Target Date" that coincides with the 10th Contract Anniversary after the effective date of the Income Plus For Life Rider. The Credit Rate and Credit Periods we offer for this Rider are subject to change. We may offer a Credit Rate that varies, based on a Contract Anniversary Date, the age of the Covered Person of the Lifetime Income Date, the length of a Credit Period, or a combination of these factors. We do not expect the Credit Rate(s) we offer to be less than 3% or more than 7% and the Credit Period to be between 5 and 15 Contract Years, but provide no assurance that we will continue to offer the Rider within these ranges. Once you purchase this Rider, however, the Credit Rates and the Credit Period(s) in effect when we issue the Rider will remain in effect for as long as the Rider remains in effect. Annual Credits. (We may refer to the Annual Credit in your Rider as a "Bonus" and we may refer to Annual Credits as "Deferral Credits" in our communications.) We increase the Benefit Base on each Contract Anniversary during the Credit Period if you did not take any withdrawals during the previous Contract Year. If you take a withdrawal during a Contract Year, you will not be eligible for a Credit at the end of that Contract Year and Annual Credits for future Contract Years may be reduced, or eliminated, if the withdrawal results in a reduction of the Benefit Base. EXAMPLE (Income Plus For Life): Assume that you purchase a Contract with an Income Plus For Life Rider when you, the Covered Person, are 65, you take no withdrawals during the first and second Contract Year and the applicable Annual Credit rate is 5%. Also assume that you purchase the Contract and Rider for $100,000, make no Additional Purchase Payments, and there is no increase in Contract Value during the first and second Contract Years. - At the end of the first Contract Year, we will apply an Annual Credit to the Benefit Base and increase it to $105,000 ($100,000 + 5% x $100,000). The Lifetime Income Amount will increase to $5,250 (5% x $105,000). - At the end of the second Contract Year, we will apply an Annual Credit to the Benefit Base and increase it again to $110,000 ($105,000 + 5% x $100,000). The Lifetime Income Amount will increase to $5,500 (5% x $110,000). Now assume you take an Excess Withdrawal of $10,000 during the third Contract Year that reduces the Benefit Base to $90,000, and you take no withdrawal and make an Additional Purchase Payment of $5,000 in the fourth Contract Year. - At the end of the third Contract Year, there is no Credit since you took a withdrawal during the year. - At the end of the fourth Contract Year, we will apply an Annual Credit to the Benefit Base. The Credit will be based on the reduced Benefit Base plus the Additional Purchase Payment (5% x ($90,000 + $5,000) = $4,750). The Benefit Base will increase to $99,750 ($90,000 + $5,000 + $4,750) and the Lifetime Income Amount will increase to $4,988 (5% x $99,750). EXAMPLE (Income Plus For Life - Joint Life): Assume that you purchase a Contract with an Income Plus For Life - Joint Life Rider when the younger Covered Person is age 65, you take no withdrawals during the first and second Contract Year and the applicable Annual Credit rate is 5%. Also assume that you purchase the Contract and Rider for $100,000, make no Additional Purchase Payments, and there is no increase in Contract Value during the first and second Contract Years. - At the end of the first Contract Year, we will apply an Annual Credit to the Benefit Base and increase it to $105,000 ($100,000 + 5% x $100,000). The Lifetime Income Amount will increase to $4,988 = 4.75% x $105,000 ($4,463 = 4.25% x $105,000 in New York). - At the end of the second Contract Year, we will apply an Annual Credit to the Benefit Base and increase it again to $110,000 ($105,000 + 5% x $100,000). The Lifetime Income Amount will increase to $5,225 = 4.75% x $110,000 ($4,675 = 4.25% x $110,000 in New York). Now assume you take an Excess Withdrawal of $10,000 during the third Contract Year that reduces the Benefit Base to $90,000, and you take no withdrawal and make an Additional Purchase Payment of $5,000 in the fourth Contract Year. - At the end of the third Contract Year, there is no Credit since you took a withdrawal during the year. - At the end of the fourth Contract Year, we will apply an Annual Credit to the Benefit Base. The Credit will be based on the reduced Benefit Base plus the Additional Purchase Payment (5% x ($90,000 + $5,000) = $4,750). The Benefit Base 46 will increase to $99,750 ($90,000 + $5,000 + $4,750) and the Lifetime Income Amount will increase to $4,738 = 4.75% x $99,750 ($4,239 = 4.25% x $99,750 in New York). Ten Year Credit. (We may refer to the Ten Year Credit as a "Target Amount Adjustment" in your Rider and in our communications.) If you take no withdrawals under your Contract from the effective date of the Income Plus For Life Rider until the end of the Ten Year Credit Period, we will make a calculation at that time and, to the extent necessary, apply a Credit so that the Benefit Base will equal the greater of: - the current Benefit Base, as increased by any Annual Credit or Step-Up for the Contract Year ending on the Target Date; or - the Target Amount. On the date of this prospectus, the Target Amount is 150% of all Purchase Payments made in the first Contract Year plus 100% of all Additional Purchase Payments you make prior to the Target Date (subject to our Purchase Payment limits). In no event, however, will we set a Target Amount in excess of $5 million. The Ten Year Credit Rate we offer for this Rider is subject to change. We may offer a Ten Year Credit Rate that varies, based on a Contract Anniversary Date, the age of the Covered Person, or a combination of these factors. We do not expect the Ten Year Credit Rate(s) we offer to be less than 100% or more than 200%, but provide no assurance that we will continue to offer the Rider within these ranges. The Ten Year Credit Period may also require that the Covered Person attain a certain age before the Credit is applied. Once you purchase this Rider, however, the Ten Year Credit Rates and the Ten Year Credit Period(s) in effect when we issue the Rider will remain in effect for as long as the Rider remains in effect. The Ten Year Credit in effect as of the date of this Prospectus does not provide any value to you in addition to the cumulative amount of the Annual Credits. You should only purchase the Rider based on the value of the other features it provides. Step-Ups may increase one or more of our guarantees if your Contract has favorable investment performance. STEP-UPS. We offer the Income Plus For Life Series Riders with the following Step-Up Dates: - (for Income Plus For Life) - the first Contract Anniversary after you purchase the Rider, and every Contract Anniversary thereafter up to, and including, the Age 95 Contract Anniversary. - (for Income Plus For Life - Joint Life) - the first Contract Anniversary after you purchase the Rider, and every Contract Anniversary thereafter up to, and including, the Age 95 Contract Anniversary. The Step-Up Dates we offer are subject to change. We may offer the Rider with Step-Up Dates that differ between Income Plus For Life and Income Plus For Life - Joint Life, that occur after the Rider has been in effect for more than one Contract Year, or that occur at intervals longer than one Contract Year. We also may shorten the period during which we provide Step-Up Dates. We do not expect the Step-Up Dates we may offer in the future to begin more than 5 Contract Years from the date you purchase a Rider, to occur at intervals greater than 5 Contract Years, or to end sooner than on the Age 75 Contract Anniversary, but provide no assurance that we will continue to offer the Rider within these ranges. Once you purchase this Rider, however, the Step-Up Dates in effect when we issue the Rider will remain in effect for as long as the Rider remains in effect. If the Contract Value on any Step-Up Date is greater than the Benefit Base (including any Credit) on that date, we will automatically step up the Benefit Base to equal the Contract Value (subject to the maximum Benefit Base limit of $5 million). We will also increase the Lifetime Income Amount (after the Lifetime Income Date) and the dollar amount of the Rider fee (see "Rider Fees" on page 41). The new Lifetime Income Amount will equal the Benefit Base value after the Step-Up multiplied by the Benefit Rate then in effect for your Rider, and the Rider fee will be based on the increased Benefit Base. We also reserve the right to increase the rate of the fee for the Income Plus For Life Series Riders, up to a maximum rate of 1.20% on any Step-Up Date. If we decide to increase the rate at the time of a Step-Up, you will receive advance notice and be given the opportunity of no less than 30 days to decline the automatic Step-Up. If you decline the Step-Up, the fee rate will not be increased. Step-Ups may occur only while an Income Plus For Life Series Rider is in effect. If you decline an automatic Step-Up, you will have the option to elect to step up the Benefit Base (as well as Lifetime Income Amount) within 30 days of subsequent Step-Up Dates. If you decide to step up the Benefit Base, we will thereafter resume automatic Step-Ups. EXAMPLE: Assume that you purchase a Contract with an Income Plus For Life Rider, you take no withdrawals during the first three Contract Years and the applicable Annual Credit rate is 5%. Also assume that you purchase the Contract and Rider for $100,000, make no Additional Purchase Payments, and that the Contract Value on the third Contract Anniversary is $125,000. The Benefit Base 47 on the third Contract Anniversary including the Annual Credits for the first three Contract Years is $115,000. Since the Contract Value of $125,000 is greater than the current Benefit Base including the Credit, the Benefit Base will increase to $125,000 and the Lifetime Income Amount will increase to $6,250 (5% x $125,000). If no withdrawals are taken in the fourth Contract Year, the Annual Credit on the fourth Contract Anniversary will equal $6,250 (5% x $125,000). Withdrawals, Distributions and Settlements OVERVIEW. Each of our Income Plus For Life Series Riders provides a guaranteed minimum withdrawal benefit during the Accumulation Period. In particular, these Riders will permit you to withdraw a minimum annual amount, for as long as a Covered Person lives, subject to the terms and conditions of the specific Rider you elect. We may determine the amount of the initial guarantee after we issue your Contract, depending on the age of the Covered Person when we issue the Contract and the type of guaranteed minimum withdrawal benefit you purchase. We may increase the guarantee: - by one or more Credits if you make no withdrawals during certain Contract Years, up to limits that vary by Rider; - as a result of a Step-Up of the guarantee to reflect your then current Contract Value on certain Contract Anniversary dates; or - if you make an Additional Purchase Payment up to specified limits. Although these Riders guarantee a minimum annual withdrawal amount, you may take withdrawals of any amount of Contract Value during your Contract's Accumulation Period. EXCESS WITHDRAWALS. For the Income Plus For Life Series Riders, an Excess Withdrawal is: - a Withdrawal Amount you take before the Lifetime Income Date that, together with all other Withdrawal Amounts previously taken during the Contract Year, exceeds the Benefit Rate (see "Benefit Rate" above) multiplied by the Benefit Base at the prior Contract Anniversary, increased for any Additional Purchase Payments; or - a Withdrawal Amount you take on or after the Lifetime Income Date that, together with all other Withdrawal Amounts during a Contract Year, exceeds the Lifetime Income Amount for that Contract Year. We do not consider withdrawals under our Life Expectancy Distribution program to result in an Excess Withdrawal unless you take additional withdrawals outside of that program. WITHDRAWALS BEFORE THE LIFETIME INCOME DATE. Each time you take a withdrawal before the Lifetime Income Date, we reduce the Benefit Base by the Withdrawal Amount. If, however, a withdrawal is an Excess Withdrawal, we will reset the Benefit Base to equal the lesser of: - the Contract Value immediately after the withdrawal; or - the Benefit Base minus the Withdrawal Amount. EXAMPLE (Income Plus For Life): Assume that you purchase a Contract with an Income Plus For Life Rider when you are age 55. Also assume that when you are age 57, the Contract Value is $90,000 and the Benefit Base is $110,000. The Benefit Rate multiplied by the Benefit Base is 5% x $110,000 = $5,500. If you withdraw $10,000, the withdrawal would be an Excess Withdrawal and you would reset your Benefit Base to $80,000, the lesser of the Contract Value after the withdrawal ($90,000 - $10,000) or the Benefit Base after the withdrawal ($110,000 - $10,000). EXAMPLE (Income Plus For Life - Joint Life): Assume that you purchase a Contract with an Income Plus For Life - Joint Life Rider when the younger Covered Person is age 55. Also assume that when the younger Covered Person is age 57, the Contract Value is $90,000 and the Benefit Base is $110,000. The Benefit Rate multiplied by the Benefit Base is 4.75% x $110,000 = $5,225 (4.25% x $110,000 = $4,675 in New York). If you withdraw $10,000, the withdrawal would be an Excess Withdrawal and you would reset your Benefit Base to $80,000, the lesser of the Contract Value after the withdrawal ($90,000 - $10,000) or the Benefit Base after the withdrawal ($110,000 - $10,000). If you take withdrawals prior to the Lifetime Income Date, we reset the Benefit Base we use to determine the guaranteed Lifetime Income Amount on the Lifetime Income Date. You could eventually lose any benefit based on the Lifetime Income Amount if you take withdrawals in excess of the Benefit Rate multiplied by the Benefit Base. If Contract Value declines to zero during a Contract Year in which you have an Excess Withdrawal, you will lose the guaranteed minimum withdrawal benefit under the Income Plus For Life Rider. (See "Settlement Phase" in this section, below.) Note: withdrawals may be taxable and if made prior to age 59 1/2 may be subject to a 10% penalty (see "VIII. Federal Tax Matters"). WITHDRAWALS AFTER THE LIFETIME INCOME DATE. After the Lifetime Income Date, you may withdraw the guaranteed Lifetime Income Amount each Contract Year without affecting the Benefit Base. If your total withdrawals during a Contract Year exceed the Lifetime Income Amount, however, we will reset the Benefit Base and the Lifetime Income Amount. 48 Each time you take a withdrawal after the Lifetime Income Date, we first determine if the Withdrawal Amount is an Excess Withdrawal. If so, we will reset the Benefit Base to equal the lesser of: - the Benefit Base before the withdrawal minus the entire amount of the Excess Withdrawal; or - the Contract Value immediately after the Excess Withdrawal. Each time we reset the Benefit Base, we also reset the Lifetime Income Amount. We do this by multiplying the reduced Benefit Base by the Benefit Rate in effect for your Rider. We also will reset the Benefit Base and the Lifetime Income Amount for each subsequent Excess Withdrawal that you take during that Contract Year. EXAMPLE (Income Plus For Life): Assume that you purchase a Contract with an Income Plus For Life Rider. Also assume that when you are age 67, the Contract Value is $90,000, the Benefit Base is $110,000, the Lifetime Income Amount is $5,500 and the Benefit Rate is 5%. If you withdraw $10,000, the withdrawal would be an Excess Withdrawal and you would reset your Benefit Base to $80,000, the lesser of the Contract Value after the withdrawal ($90,000 - $10,000) or the Benefit Base minus the amount of the withdrawal ($110,000 - $10,000). The new Lifetime Income Amount is $4,000 = 5% x $80,000. If your Contract Value in this example was $120,000, the Benefit Base after the $10,000 withdrawal would be $100,000, the lesser of the Contract Value after the withdrawal ($120,000 - $10,000) or the Benefit Base minus the amount of the withdrawal ($110,000 - $10,000). However, if you take a withdrawal of $5,500, followed by a withdrawal of $4,500 the next day, the $5,500 withdrawal will not reduce the Benefit Base since it is equal to the Lifetime Income Amount. The $4,500 will reduce the Benefit Base to $105,500 ($110,000 - $4,500). EXAMPLE (Income Plus For Life - Joint Life): Assume that you purchase a Contract with an Income Plus For Life - Joint Life Rider. Also assume that when you are age 67, the Contract Value is $90,000, the Benefit Base is $110,000, the Lifetime Income Amount is $5,225 and the Benefit Rate is 4.75%. If you withdraw $10,000, the withdrawal would be an Excess Withdrawal and you would reset your Benefit Base to $80,000, the lesser of the Contract Value after the withdrawal ($90,000 - $10,000) or the Benefit Base minus the amount of the withdrawal ($110,000 - $10,000). The new Lifetime Income Amount is $3,800 = 4.75% x $80,000 ($3,400 = 4.25% x $80,000 in New York). If the Contract Value in this example was $120,000, the Benefit Base after the $10,000 withdrawal would be $100,000, the lesser of the Contract Value after the withdrawal ($120,000 - $10,000) or the Benefit Base minus the amount of the withdrawal ($110,000 - $10,000). However, if you take a withdrawal of $5,225, followed by a withdrawal of $4,775 the next day, the $5,225 withdrawal will not reduce the Benefit Base since it is equal to the Lifetime Income Amount. The $4,775 will reduce the Benefit Base to $105,225 ($110,000 - $4,775). EXCESS WITHDRAWALS, WITH LIMITED EXCEPTIONS, LOWER THE LIFETIME INCOME AMOUNT GUARANTEED FOR FUTURE WITHDRAWALS. IF YOU HAVE EXPERIENCED UNFAVORABLE INVESTMENT PERFORMANCE (AND THEREFORE YOUR CONTRACT VALUE IS LESS THAN YOUR BENEFIT BASE) THE REDUCTION COULD BE SIGNIFICANTLY MORE THAN THE AMOUNT OF THE EXCESS WITHDRAWAL. We do not reset the Benefit Base and/or the Lifetime Income Amount on or after the Lifetime Income Date: - if the withdrawals are taken under our Life Expectancy Distribution Program, or - if your total Withdrawal Amounts during a Contract Year are less than or equal to the Lifetime Income Amount. (Any applicable withdrawal charges cannot cause a withdrawal to exceed the Lifetime Income Amount.) The Income Plus For Life Series Riders enter the Settlement Phase in any Contract Year that your Contract Value declines to zero if your Benefit Base is greater than zero at that time and you have taken no Excess Withdrawals during that Contract Year. In the event of an Excess Withdrawal, you will lose the guaranteed minimum withdrawal benefit under the Rider, and the Rider will not enter the Settlement Phase, if Contract Value declines to zero during the Contract Year of the Excess Withdrawal. See "Settlement Phase" in this section, below. The Income Plus For Life benefit terminates if the Contract Value and Benefit Base immediately after a withdrawal are all equal to zero. We may reset the Benefit Base and Lifetime Income Amount values if you take Excess Withdrawals. We reduce your Contract Value and your death benefit each time you take a withdrawal (see "Effect of Withdrawals on Guaranteed Minimum Death Benefit Amount" in this section below. PRE-AUTHORIZED WITHDRAWALS - THE INCOME MADE EASY PROGRAM. If you purchase a Income Plus For Life Series Rider with a Contract, you can pre-authorize periodic withdrawals to receive amounts guaranteed under the Rider. Depending on the Rider you purchase, the Income Made Easy Program provides an income for the lifetime of the Covered Person(s) beginning no earlier than the Lifetime Income Date. 49 The Income Made Easy Program allows you to select: (A) the annual guaranteed amount ("full allowable amount") under your Rider, which will automatically increase to reflect an increase in the annual guaranteed amount under the Rider resulting from a Step-Up or an Additional Purchase Payment; (B) the full allowable amount and any increases in Contract Value above that amount at the end of a Contract Year resulting from investment gains in your Contract at the end of that Contract Year (this option will replace your ability to obtain Step-Ups after you enroll in the program); (C) the full allowable amount plus any amount under our Life Expectancy Distribution Program that would exceed the full allowable amount; (D) the annual amount under our Life Expectancy Distribution Program (in lieu of the full allowable amount); or (E) a specified dollar amount that is less than the full allowable amount. We may make additional options available in the future or upon request. Your participation in the Income Made Easy Program will be suspended (i.e., we will not process any further withdrawals under the Program until you re-enroll) if: - you select option A, B or C; and - you take an additional withdrawal outside the Income Made Easy Program in any Contract Year in which the program is in effect. Income Made Easy withdrawals, like other withdrawals: - may be subject to income tax (including withholding for taxes) and, if your Rider calculates an annual guaranteed amount before age 59 1/2, a 10% IRS penalty tax; - reduce the death benefit and other optional benefits; and - cancel your eligibility to earn a Credit under the provisions of your guaranteed minimum withdrawal benefit Rider during any Contract Year in which you receive a payment under the program. If you are interested in the Income Made Easy Program, you may obtain a separate authorization form and full information concerning the program and its restrictions from your financial advisor or our Annuities Service Center. There is no charge for participation in this program. We will, however, suspend your participation in the Income Plan (see "Special Withdrawal Services - The Income Plan" in "V. Description of the Contract") if you enroll in the Income Made Easy Program. PRE-AUTHORIZED WITHDRAWALS - LIFE EXPECTANCY DISTRIBUTION PROGRAM. You may request us in writing, in a form acceptable to us and received at our Annuities Service Center, to pay you withdrawals that we determine to be part of a series of substantially equal periodic payments over your "life expectancy" (or, if applicable, the joint life expectancy of you and your spouse). The Life Expectancy Distribution Program may provide one or more of the following: - Pre-59 1/2 Distributions - these are payments made at the request of the Owner that are intended to comply with Code Section 72(q)(2)(D) or Section 72(t)(2)(A)(iv); or - Nonqualified Death Benefit Stretch Distributions - these are payments made to the Beneficiary that are intended to comply with Code Section 72(s)(2); or - Qualified Death Benefit Stretch Distributions these are payments we calculate to comply with Code Section 401(a)(9), Section 403(b)(10), Section 408(b)(3), or Section 408A(c)(5); or - Required Minimum Distributions and "Qualified Death Benefit Stretch Distributions - these are payments we calculate to comply with Code Section 401(a)(9), Section 403(b)(10), Section 408(b)(3), or Section 408A(c)(5). For further information on such distributions, including special tax treatment relating to calendar year 2009, please see "Required Minimum Distributions" in "VIII. Federal Tax Matters." Each withdrawal under our Life Expectancy Distribution program will reset your Contract Value. If you take the withdrawal before the Lifetime Income Date, we may reset future amounts guaranteed under the Rider. If you take a withdrawal under our Life Expectancy Program on or after the Lifetime Income Date, however, we will not reset annual withdrawal amounts under your Rider. Please refer to the "Features" section of the Rider you are considering for more details regarding the effect withdrawals that are made after the Lifetime Income Date have on the Rider's guarantees. The Life Expectancy Distribution program ends when certain amounts described in the Rider are depleted to zero. We may make further distributions as part of the Settlement Phase for the Rider you purchase. If you are interested in the Life Expectancy Distribution Program, you may obtain further information concerning the program and its restrictions from your financial advisor or our Annuities Service Center. There is no charge for participation in this program. Withdrawals you take under the Life Expectancy Distribution Program must be made while participating in the Income Plan (see "Special Withdrawal Services - The Income Plan" in "V. Description of the Contract") or the Income Made Easy Program (see the preceding section). 50 Under our Life Expectancy Distribution program, each withdrawal will be in an amount that we determine to be your Contract's share of all life expectancy distributions, based on information that you provide and our understanding of the Code. We reserve the right to make any changes we deem necessary to comply with the Code and Treasury Regulations. We base our life expectancy calculations on our understanding and interpretation of the requirements under tax law applicable to Pre-59 1/2 Distributions, Required Minimum DistributionS, Nonqualified Death Benefit Stretch Distributions and Qualified Death Benefit Stretch Distributions. If you participate in our Life Expectancy Distribution Program, we will make a withdrawal for Required Minimum Distributions and Qualified Death Benefit Stretch Distributions for tax year 2009 unless you notify us otherwise in writing. (Please see "Temporary Waiver of RMDs for 2009" in "VIII. Federal Tax Matters" for more information.) You should discuss these matters with a qualified tax advisor. EFFECT OF WITHDRAWALS ON GUARANTEED MINIMUM DEATH BENEFIT AMOUNT. If you purchase an Income Plus For Life Series Rider, we will adjust the way we calculate the death benefit payable under your Contract upon the death of the Owner (or deemed Owner if the Owner is not a natural person) during the Accumulation Period. We reduce that death benefit each time you take a withdrawal. We will reduce the death benefit on a dollar for dollar basis if: - you limit your Withdrawal Amounts during a Contract Year to the Lifetime Income Amount; or, - you purchased the Income Plus For Life Rider before the Covered Person (younger Covered Person for Income Plus For Life - Joint Life) attained age 58 1/2, and you limit yoUr Withdrawal Amounts each Contract Year before the Lifetime Income Date to the Benefit Rate multiplied by the Benefit Base, and each Contract Year after that to the Lifetime Income Amount. If you take an Excess Withdrawal, we will reduce the death benefit on a pro rata basis by the entire amount of the withdrawal. Pro rata means we reduce the Guaranteed Minimum Death Benefit by the same percentage that the Withdrawal Amount reduces the Contract Value. That is, by an amount equal to: - the Guaranteed Minimum Death before the withdrawal; multiplied by - the Withdrawal Amount; divided by - the Contract Value before the withdrawal. EXAMPLE: If your Lifetime Income Amount is $5,000 and you take a withdrawal of $8,000 when your Contract Value is $80,000 and your Guaranteed Minimum Death Benefit is $100,000, we will reduce your Guaranteed Minimum Death Benefit by 10% ($8,000/$80,000) to $90,000 ($100,000 - 10% x $100,000). If instead you first take a withdrawal of $5,000, we will reduce your Death Benefit by the Withdrawal Amount to $95,000. If your Contract Value the next day is $75,000 and you take another withdrawal of $5,000, we will reduce your Guaranteed Minimum Death Benefit by 6.67% ($5,000/$75,000) to $88,667. Automated withdrawals under our Life Expectancy Distribution program will reduce your Death Benefit on a dollar for dollar basis. Otherwise, any subsequent Excess Withdrawals that you take during that Contract Year will reduce the Guaranteed Minimum Death Benefit in the same manner described above. SETTLEMENT PHASE. The Settlement Phase under the Rider begins if: - the Contract Value reduces to zero at any time during a Contract Year; and - there were no Excess Withdrawals during that Contract Year; and - the Benefit Base is still greater than zero at the time. There is no Settlement Phase under an Income Plus For Life Series Rider if you take a withdrawal that is an Excess Withdrawal and the Contract Value declines to zero during the Contract Year of the withdrawal. YOU WILL LOSE THE ABILITY TO RECEIVE LIFETIME INCOME AMOUNTS IF YOU WITHDRAW MORE THAN THE LIFETIME INCOME AMOUNT DURING A CONTRACT YEAR AND THE CONTRACT VALUE DECLINES TO ZERO. The settlement amount we pay to you under the Rider varies: - If the Lifetime Income Amount is greater than zero at the start of the Settlement Phase, we will pay an initial settlement amount equal to the remaining Lifetime Income Amount for that Contract Year and make additional annual payments of the Lifetime Income Amount as long as a Covered Person is living. - (for Income Plus For Life) If the Settlement Phase begins before the earliest available Lifetime Income Date, we will begin making annual settlement payments following the earliest available Lifetime Income Date as long as the Covered Person is living. In this case, the annual amount will equal the Lifetime Income Amount (i.e., the Benefit Base at the Lifetime Income Date multiplied by the Benefit Rate then in effect). - (for Income Plus For Life - Joint Life) If you purchased the Rider before the younger Covered Person attained age 58 1/2, and the Settlement Phase begins before the Lifetime IncoMe Date, we will begin making annual settlement payments following the Lifetime Income Date as long as either Covered Person is living. In this case, the annual amount will equal 51 the Lifetime Income Amount (i.e., the Benefit Base at the Lifetime Income Date multiplied by the Benefit Rate then in effect). - In lieu of annual payments of the settlement amount, we will permit you to elect monthly, quarterly or semi-annual installment payments of the Lifetime Income Amount. Additional Annuity Options In addition to the traditional Annuity Options we provide under the Contract, we provide additional Annuity Options for Contracts issued with an Income Plus For Life Series Rider. These additional Annuity Options are only available for Annuity Commencement Dates no earlier than the first day of the month following the later of the 90th birthday of the oldest Annuitant or the tenth Contract Anniversary. These additional Annuity Options are designed so that you will receive annuity payments that are no less than the Lifetime Income Amount at the time of annuitization, but you could receive larger payments, depending on your investment experience prior to annuitization. The Annuity Options available to you are described in detail in "Pay-out Period Provisions" in "V. Description of the Contract." Comparison between Guaranteed Minimum Withdrawal Benefits and Annuity Payments If you choose to take withdrawals under one of our Income Plus For Life Series Riders, it is not the same as receiving annuity payments upon annuitization (as described in "Pay-out Period Provisions" in "V. Description of the Contract"). When you take withdrawals: - you will have the flexibility to start and stop withdrawals; - you will have the flexibility to choose an amount of your withdrawal that is less than or equal to your Lifetime Income Amount (without reducing your future available Lifetime Income Amount); - you will have the ability to surrender your Contract for the cash surrender value (Contract Value minus any applicable charges and premium taxes), if any; - you reduce the Contract Value available for annuitization; and - you may receive less favorable tax treatment of your withdrawals than annuity payments would provide. See "VIII. Federal Tax Matters" for tax considerations related to optional benefit Riders. When you annuitize: - you will receive annuity payments that will be fixed in amount (or in the number of units paid for Variable Annuity payments); - your annuity payments will not vary in timing once they commence (for as long as we are due to pay them to you); - you will no longer have access to the Contract Value; and - your Annuity Payments may receive more favorable tax treatment than guaranteed minimum withdrawal benefits. See "VIII. Federal Tax Matters" for information on tax considerations related to optional benefit Riders. Impact of Death Benefits Our Income Plus For Life Series Riders end if a death benefit becomes payable during the Accumulation Period (but before the Settlement Phase under the Rider), and the Beneficiary takes the death benefit provided under the terms of the Contract as a lump sum under our current administrative procedures. In cases where the Rider continues, we will determine the Adjusted Benefit Base and the Rider fee based on the date we determine the death benefit, and anniversaries of that date, instead of the initial Contract Anniversary date. We reduce the death benefit each time you take a withdrawal. If you limit withdrawals to the amount available under the terms of the Rider, the death benefit will be reduced by the Withdrawal Amount. Excess withdrawals will reduce the death benefit proportionally (see "Effect of Withdrawals on Guaranteed Minimum Death Benefit Amount" below). 52 INCOME PLUS FOR LIFE. If the Beneficiary elects not to take the death benefit as a lump sum, the following will apply:
THEN IF THE DECEASED OWNER IS: INCOME PLUS FOR LIFE: ------------------------- ---------------------------------- 1. Not the Covered Person and - may continue if the Beneficiary the Beneficiary is the elects to continue the Contract deceased Owner's spouse within the time we permit under our administrative rules. We will automatically increase the Benefit Base to equal the initial death benefit we determine, if the death benefit is greater than the Benefit Base prior to our determination. We will also recalculate the Lifetime Income Amount to equal 5% of the recalculated Benefit Base and will assess the Rider Fee based on the recalculated Benefit Base. - enters its Settlement Phase if a subsequent withdrawal would deplete the Contract Value to zero, and the remaining Lifetime Income Amount for the year of withdrawal is still greater than zero. - continues to be eligible for any remaining Credits and Step-Ups, and a Target Amount adjustment, but we will change the date we determine and apply these benefits to future anniversaries of the date we determine the initial death benefit. We will permit the spouse to opt out of an increase in the Benefit Base, if any, to reflect the initial death benefit and any future Step-Ups if we increase the rate of the Income Plus For Life fee at that time. 2. Not the Covered Person and - may continue in the same manner the Beneficiary is not the as 1. deceased Owner's spouse - enters its Settlement Phase if a subsequent withdrawal would deplete the Contract Value to zero, and the remaining Lifetime Income Amount for the year of withdrawal is still greater than zero. - does not continue to be eligible for any Credits and Step-Ups, or a Target Amount adjustment. We will permit the Beneficiary to opt out of an increase in the Benefit Base, if any, to reflect the initial death benefit if we increase the rate of the Income Plus For Life fee at that time. 3. The Covered Person and the - ends without any further benefit. Beneficiary is the deceased Owner's spouse 4. The Covered Person and the - ends without any further benefit. Beneficiary is not the deceased Owner's spouse
If you die during the Settlement Phase, the only death benefits we provide are the remaining settlement payments that may become due under the Income Plus For Life Rider. If the Covered Person dies during the Settlement Phase, we reduce the Lifetime Income Amount to zero and make no further payments. If the Beneficiary is not the deceased Owner's spouse, the Beneficiary may choose to receive any remaining settlement payments over a period not extending beyond the life expectancy of the Beneficiary beginning within one year of the Owner's death. Otherwise, the entire interest must be distributed within five years of the Owner's death. INCOME PLUS FOR LIFE - JOINT LIFE. If the Beneficiary continues a Contract in force following the death of an Owner, coverage under an Income Plus For Life - Joint Life Rider ends if the deceased Owner is the last Covered Person under the Rider. If the Beneficiary continues a Contract in force following the death of an Owner, coverage under the Rider may continue only if: (a) the deceased Owner is the first Covered Person under the Rider to die; and either (b) the surviving Covered Person is a spousal Beneficiary or (c) the surviving Covered Person is a spouse of the deceased Owner and a tax-qualified retirement plan is the non-spousal Beneficiary. If the death benefit is greater than the Contract Value, we will increase the Contract Value to equal the amount of the death benefit (but will not increase the Benefit Base, Lifetime Income Amount, Credits or Step-Ups). If the Rider continues, we will determine the Adjusted Benefit Base and the Rider fee based on the date we determine the death benefit, and anniversaries of that date, instead of the initial Contract Anniversary date. Death of First Covered Person. If the first Covered Person to die is an Owner of the Contract (or deemed to be an Owner if the Owner is a non-natural person), the surviving Covered Person may elect to continue the Contract in effect in lieu of receiving the Contract's death benefit as a lump sum under our current administrative procedures. (See "Death after Removal of a Covered Person" below if there is no surviving Covered Person.) If the Contract continues, the Income Plus For Life - Joint Life Rider will continue. We will continue to provide the Lifetime Income Amount guarantee only for the lifetime of the surviving Covered Person and continue to charge the Income Plus For Life - Joint Life Rider fee (see "Fee for Income Plus For Life Series Riders" on page 41). If the death benefit is greater than the Contract Value, we will increase the Contract Value to equal the amount of the death benefit (but will not make any adjustments to the Benefit Base, Lifetime Income Amount, Credits or Step-Ups). We will treat any distribution of death 53 benefits under a Contract as a "withdrawal" for purposes of subsequent calculations of the Benefit Base and the Lifetime Income Amount. If the first Covered Person to die is not the Owner (and is not deemed to be an Owner if the Owner is a non-natural person), no death benefit is payable under the Contract. The Rider will continue in effect and we will base the duration of the Lifetime Income Amount only on the lifetime of the surviving Covered Person. We will continue to charge the Income Plus For Life - Joint Life Rider fee; however, we will make no adjustments to the Contract Value or make any adjustments to the Benefit Base, Lifetime Income Amount, Credits or Step-Ups. Death of Last Covered Person. If the surviving Covered Person dies while the Income Plus For Life - Joint Life Rider is in effect we will reduce the Lifetime Income Amount to zero and we make no additional payments under the Rider to the Beneficiary. Death after Removal of a Covered Person. In certain instances, a person initially designated as a Covered Person may be removed as a Covered Person from the Rider. If that happens and: - if the removed Covered Person subsequently dies, there will be no impact on the guarantees provided by the Rider in most cases; and - if the remaining Covered Person subsequently dies, we will consider that Covered Person to be the "last" Covered Person and the Rider will terminate. Death Benefits during the Settlement Phase. If death occurs during an Income Plus For Life - Joint Life Rider's Settlement Phase, the only death benefit we provide is the remaining settlement payments that may become due under that Rider. If the death of the first Covered Person occurs while the Rider is in its Settlement Phase, no additional death benefit is payable under the Contract and, in most instances, we will continue to make settlement payments in the same manner as before the death. If the death occurs before the Lifetime Income Date, we will compute a Lifetime Income Amount during the Settlement Phase on the Lifetime Income Date. Settlement payments will equal the Lifetime Income Amount. WE MAY LIMIT THE ABILITY OF THE SURVIVING COVERED PERSON TO CHOOSE A SETTLEMENT PAYMENT AMOUNT AND DURATION THAT DIFFERS FROM THE AMOUNT AND DURATION IN EFFECT BEFORE THE DEATH OF THE FIRST COVERED PERSON. Tax Considerations Withdrawals may be taxable and may be subject to a 10% penalty if made prior to age 59 1/2. See "VIII. Federal Tax Matters" for additional information on tax considerations related to optionAl benefit Riders. Termination of Rider You may not terminate an Income Plus For Life Series Rider once it is in effect. However, the Income Plus For Life Series Rider will terminate automatically upon the earliest of: - the date a death benefit is payable and the Beneficiary takes the death benefit as a lump sum under the terms of the Contract; - the date an Annuity Option begins; - the date the Contract Value and the Benefit Base both equal zero; - (for Income Plus For Life) the death of the Covered Person; - (for Income Plus For Life - Joint Life) the death of the last Covered Person remaining under the Rider; - the date a new guaranteed minimum withdrawal benefit Rider becomes effective under any exchange program that we may make available; or - termination of the Contract. You should consult with your financial advisor to assist you in determining whether an Income Plus For Life Series Rider is suited for your financial needs and investment risk tolerance. The addition of the Rider to a Contract may not always be in your interest since an additional fee is imposed annually for this benefit and a Covered Person must reach the Lifetime Income Date and remain living for you to receive certain benefits. Furthermore, Income Plus For Life Series Riders limit the Investment Options otherwise available under the Contract, require you to defer taking withdrawals to receive certain benefits, contain age caps and limitations on a Contract Owner's rights and benefits at certain ages and values, and provide no guaranteed minimum withdrawal benefits once payments begin under certain Annuity Options described in the Prospectus. You should carefully consider each of these factors before deciding if an Income Plus For Life Series Rider is suitable for your needs, especially at older ages. 54 ANNUAL STEP-UP DEATH BENEFIT You may elect the optional Annual Step-Up Death Benefit: - for an additional charge of 0.20% of the value of the Variable Investment Options; - as long as the oldest Owner of a Contract is not age 80 or older at the time of purchase (We impose this restriction because the Annual Step-Up Death Benefit would be zero if the oldest Owner were age 80 or older on the effective date of the Rider); and - if you do not intend the Contract to be used with an IRA you inherited from someone else (sometimes referred to as a "Beneficiary IRA"), unless you are the spouse of the decedent and own the IRA in your own name. Election of this optional benefit may only be made at the time the Contract is issued and, once made, is irrevocable. Rider Benefit The amount of the death benefit for the optional Annual Step-Up Death Benefit is the greater of: - the death benefit described under "Death Benefit During Accumulation Period"; or - the Annual Step-Up Death Benefit. The Annual Step-Up Death Benefit is the greatest Anniversary Value after the effective date of the Optional Annual Step-Up Death Benefit but prior to the oldest Owner's 81st birthday. ANNIVERSARY VALUE. For purposes of the Rider, the Anniversary Value is equal to the Contract Value on the Contract Anniversary, plus Additional Purchase Payments, less amounts deducted in connection with partial withdrawals since the last day of the Contract Year. The amount deducted in connection with partial withdrawals will be on a pro rata basis and will be equal to (a) multiplied by (b) where: (a) is equal to the optional Annual Step-Up Death Benefit prior to the withdrawal; and (b) is equal to the Withdrawal Amount divided by the Contract Value prior to the partial withdrawal. CONTINUATION OF RIDER UPON DEATH OF OWNER. If the Beneficiary under the Contract is the Contract Owner's surviving spouse and elects to continue the Contract, the Contract and the Optional Annual Step-Up Death Benefit will continue with the surviving spouse as the new Contract Owner. For purposes of calculating the Optional Annual Step-Up Death Benefit payable upon the death of the surviving spouse, the death benefit paid upon the first Owner's death will be treated as a payment to the Contract. In addition, all payments made and all amounts deducted in connection with partial withdrawals prior to the date the first death benefit is paid will not be considered in determination of the optional Annual Step-Up Death Benefit. In determination of the optional Annual Step-Up Death Benefit, the Anniversary Values for all prior Contract Anniversaries will be set to zero as of the date the first death benefit is paid. Termination of the Optional Annual Step-Up Death Benefit The Optional Annual Step-Up Death Benefit will terminate upon the earliest to occur of (a) the date the Contract terminates, (b) the earlier of the Annuity Commencement Date or the Maturity Date; or (c) the date on which the Optional Annual Step-Up Death Benefit is paid. However, as noted in the paragraph above, if the deceased Owner's spouse is the Beneficiary, the spouse may elect to continue the Contract (including the Optional Annual Step-Up Death Benefit) as the new Owner. Annual Step-Up Death Benefit Fee A daily charge in an amount equal to 0.20% of the value of each variable Investment Account on an annual basis is deducted from each Subaccount for the Annual Step-Up Death Benefit. Qualified Plans If you intend to use your Contract in connection with a Qualified Plan, including an IRA, you should consider the effects that the death benefit provided under the Contract (with or without Annual Step-Up Death Benefit) may have on your plan. Please consult your qualified tax advisor. The addition of the Annual Step-Up Death Benefit to a Contract may not always be in your interest since an additional fee is imposed for this benefit and we provide no assurance that investment performance will result in an increased death benefit. 55 VII. Charges and Deductions We assess charges and deductions under the Contracts against Purchase Payments, Contract Values or annuity payments. In addition, there are deductions from and expenses paid out of the assets of the Portfolios that are described in the Portfolio prospectus. For information on the optional benefits fees, see "VI. Optional Benefits." FRONT-END SALES CHARGES To compensate us for assuming certain distribution expenses, we calculate a "front-end" sales charge each time you make a Purchase Payment, and deduct it from that payment. Each front-end sales charge is a percent (the "sales charge percentage") of the corresponding Purchase Payment. The sales charge percentage applicable to one Purchase Payment may differ from the sales charge percentage applicable to a different Purchase Payment. That is because we base the sales charge percentage on a "Cumulative Value" calculated at the time we receive your Purchase Payment. Cumulative Value means the sum of: (a) the current Purchase Payment; and (b) the existing Contract Value of your Contract; and (c) if permitted in the state where we issue the Contract, the value of any "Associated Accounts" (we are not permitted to include Associated Accounts in New York). As of the date of this Prospectus, Associated Accounts include: - the contract value of any other individual variable annuity contract issued by us, for which your broker-dealer's firm (through whom you purchased the Contract) is listed as the broker of record, that is: (a) subject to a front-end sales charge; (b) in its accumulation period; and (c) either held by you as an owner or joint owner or held by a tax-deferred retirement plan and you or your spouse is named as the annuitant; - the amount (in dollars) of any shares subject to a front-end sales charge (i.e., Class A shares) of a publicly offered retail mutual fund you own (excluding those assets in fee based or advisory accounts) that are: (a) from underlying fund families of managers that are also subadvisers to the Portfolios offered under the Contract; (b) held by you as owner or joint owner, or a retirement plan held in your behalf; and (c) in the retail mutual fund and have your broker-dealer's firm is listed as the broker of record; and - any additional investment accounts that may qualify as Associated Accounts in accordance with our current administrative policies (that we determine with your broker-dealer's firm). We require your broker-dealer's firm to verify each Associated Account's value at the time you make a Purchase Payment before we include that amount in your Cumulative Value. John Hancock USA will credit the combined value of all Associated Accounts identified and verified by your broker-dealer's firm to determine whether your Cumulative Value qualifies you for a reduced sales charge on your Purchase Payment, as shown in the following table:
THE FRONT-END SALES CHARGE IF YOUR CUMULATIVE VALUE IS: ON YOUR PURCHASE PAYMENT IS: ---------------------------- ---------------------------- Up to $49,999.99 5.50% $50,000 to $99,999 4.50% $100,000 to $249,999 3.50% $250,000 to $499,999 2.50% $500,000 to $999,999 2.00% $1,000,000 and over 0.50%
You must submit each Purchase Payment through your broker-dealer's firm to receive a reduction in the front-end sales charges based on the value of your Associated Accounts. If you do not submit an Additional Purchase Payment through your broker-dealer's firm, the front-end sales charge for that Purchase Payment will be based on a sales charge percentage that we will determine without regard to the value of any Associated Accounts. WITHDRAWAL CHARGES If you make a withdrawal from your Contract during the Accumulation Period, we may assess a withdrawal charge. We base the withdrawal charge on Purchase Payments that have been in the Contract less than six months. We do not assess a withdrawal charge with respect to i) earnings accumulated in the Contract, ii) any withdrawal guaranteed under a Rider attached to the Contract, iii) 56 Purchase Payments that have been in the Contract more than six months, iv) payment of the Death Benefit or v) Required Minimum Distributions. In no event may the total withdrawal charges exceed 0.50% of the amount invested. Each time you make a withdrawal, "unliquidated Purchase Payments" (i.e., the amount of all Purchase Payments in the Contract net of any withdrawals in excess of earnings that have been taken to date) will be liquidated on a first-in first-out basis. On any withdrawal request, we will liquidate Purchase Payments equal to the Withdrawal Amount in the order the Purchase Payments were made: the oldest unliquidated Purchase Payment first, the next Purchase Payment second, etc., until the total Withdrawal Amount has been liquidated. Upon a full surrender of a Contract, we will liquidate all unliquidated Purchase Payments for purposes of calculating the withdrawal charge. Each Purchase Payment or portion thereof liquidated in connection with a withdrawal request is subject to a withdrawal charge based on the length of time the Purchase Payment has been in the Contract and the Cumulative Value at the time the Purchase Payment was received. We calculate the amount of the withdrawal charge by multiplying the amount of the Purchase Payment being liquidated by the applicable withdrawal charge percentage. We deduct from the amount paid to the Contract Owner as a result of the withdrawal, any withdrawal charge, any applicable Contract fees, any applicable Rider fees and any taxes from the Contract Value. In the case of a partial withdrawal, the amount requested from an Investment Account may not exceed the value of that Investment Account less any applicable fees and charges. There is generally no withdrawal charge on distributions made as a result of the death of the Contract Owner or, if applicable, the Annuitant, and we impose no withdrawal charges on the Annuity Commencement Date if the Contract Owner annuitizes as provided in the Contract. Withdrawal charges help to compensate us for the cost of selling the Contracts. The amount of the charges in any Contract Year does not specifically correspond to sales expenses for that year. To the extent that the withdrawal charges do not cover total sales expenses, the sales expenses may be recovered from other sources, including gains from the asset-based risk charge, the Sales Charge and other gains with respect to the Contracts or from our general assets. Similarly, administrative expenses not fully recovered by the administration fee may also be recovered from such other sources. For examples of calculation of the withdrawal charges, see Appendix A to this Prospectus. ANNUAL CONTRACT FEE We will deduct each year an annual Contract fee of $30 as partial compensation for the cost of providing all administrative services attributable to the Contracts and the operations of the Separate Accounts and us in connection with the Contracts. However, if prior to the Maturity Date (or Annuity Commencement Date if earlier) the Contract Value is equal to or greater than $50,000 at the time of the fee's assessment, we will waive the annual Contract fee. During the Accumulation Period, this administration fee is deducted on the last day of each Contract Year. It is withdrawn from each investment option in the same proportion that the value of such investment option bears to the Contract Value. If the entire Contract Value is withdrawn on a day other than the last day of any Contract Year, the $30 Contract fee will be deducted from the amount paid. During the Pay-out Period, the fee is deducted on a pro rata basis from each annuity payment. We will waive this fee if the Contract Value to effect the annuity is greater than or equal to $50,000. ASSET-BASED CHARGES We deduct asset-based charges on an annual basis for administration and mortality and expense risks. Daily Administration Fee We allocate a portion of the asset-based charges shown in the Fee Tables to help cover our administrative expenses. We deduct a daily charge in an amount equal to 0.15% of the value of each Variable Investment Option on an annual basis deducted from each Subaccount to reimburse us for administrative expenses. The charge will be reflected in the Contract Value as a proportionate reduction in the value of each Variable Investment Option. Even though administrative expenses may increase, we guarantee that the amount of the administration fees will not increase as a result. Mortality and Expense Risks Fee The mortality risk we assume is the risk that Annuitants may live for a longer period of time than we estimate. We assume this mortality risk by virtue of annuity payment rates incorporated into the Contract which cannot be changed. This assures each Annuitant that his or her longevity will not have an adverse effect on the amount of annuity payments. We also assume mortality risks in connection with our guarantee that, if the Contract Owner dies during the Accumulation Period, we will pay a death benefit (see 57 "Death Benefit During Accumulation Period" on page 31). The expense risk we assume is the risk that the administration charges, distribution charge, or sales or withdrawal charges may be insufficient to cover actual expenses. To compensate us for assuming these risks, we deduct from each of the Subaccounts a daily charge in an amount equal to 0.65% of the value of the Variable Investment Options on an annual basis. The rate of the mortality and expense risks charge cannot be increased. If the charge is insufficient to cover the actual cost of the mortality and expense risks assumed, we will bear the loss. Conversely, if the charge proves more than sufficient, the excess will be profit to us and will be available for any proper corporate purpose including, among other things, payment of distribution expenses. On the Period Certain Only Annuity Option, if you elect benefits payable on a variable basis, the mortality and expense risks charge is assessed although we bear only the expense risk and not any mortality risk. REDUCTION OR ELIMINATION OF CHARGES AND DEDUCTIONS In addition to the reductions available on front-end sales charges (see "Front-End Sales Charges" on page 56), we may reduce or eliminate the amount of the charges and deductions for certain Contracts where permitted by state law. These Contracts would involve sales that are made to individuals or to a group of individuals in a manner that results in savings of sales or maintenance expenses or that we expect may result in reduction of other risks that are normally associated with the Contracts. We will determine entitlement to such a reduction in the charges or deductions in the following manner: - We will consider the size and type of group to which sales are to be made. Generally, sales expenses for a larger group are smaller than for a smaller group because of the ability to implement large numbers of Contracts with fewer sales contacts. - We will consider the nature of the group or class for which the Contracts are being purchased including the expected persistency, mortality or morbidity risks associated with the group or class of Contracts. - We will consider any prior or existing relationship with us. Per-Contract sales expenses are likely to be less when there is a prior or existing relationship because of the likelihood of implementing the Contract with fewer sales contacts. - We will consider the level of commissions paid to selling broker-dealers. Certain broker-dealers may offer the Contract in connection with financial planning programs offered on a fee-for-service basis. In view of the financial planning fees, such broker-dealers may elect to receive lower commissions for sales of the Contracts, thereby reducing our sales expenses. - There may be other circumstances of which we are not presently aware, which could result in reduced expenses. If after consideration of the foregoing factors, we determine that there will be a reduction in expenses, we will provide a reduction in the charges or deductions. In no event will we permit reduction or elimination of the charges or deductions where that reduction or elimination will be unfairly discriminatory to any person. For further information, contact your broker-dealer. 58 PREMIUM TAXES We will charge you for state premium taxes to the extent we incur them and reserve the right to charge you for new taxes we may incur. We make deductions for any applicable premium or similar taxes. Currently, certain local jurisdictions assess a tax of up to 4% of each Purchase Payment. In most cases, we deduct a charge in the amount of the tax from the total value of the Contract only at the time of annuitization, death, surrender, or withdrawal. We reserve the right, however, to deduct the charge from each Purchase Payment at the time it is made. We compute the amount of the charge by multiplying the applicable premium tax percentage by the amount you are withdrawing, surrendering, annuitizing or applying to a death benefit.
PREMIUM TAX RATES(1) ------------------------ STATE OR QUALIFIED NONQUALIFIED TERRITORY CONTRACTS CONTRACTS --------- --------- ------------ CA 0.50% 2.35% GUAM 4.00% 4.00% ME(2) 0.00% 2.00% NV 0.00% 3.50% PR 1.00% 1.00% SD(2) 0.00% 1.25%(3) TX(4) 0.04% 0.04% WV 1.00% 1.00% WY 0.00% 1.00%
(1) Based on the state of residence at the time the tax is assessed. (2) We pay premium tax upon receipt of Purchase Payment. (3) 0.80% on Purchase Payments in excess of $500,000. (4) Referred to as a "maintenance" tax. 59 VIII. Federal Tax Matters INTRODUCTION The following discussion of the federal income tax treatment of the Contract is not exhaustive, does not purport to cover all situations, and is not intended as tax advice. The federal income tax treatment of an annuity contract is unclear in certain circumstances, and you should consult a qualified tax advisor with regard to the application of the law to your circumstances. This discussion is based on the Code, IRS regulations and interpretations existing on the date of this Prospectus. These authorities, however, are subject to change by Congress, the Treasury Department and judicial decisions. This discussion does not address state or local tax consequences associated with the purchase of a Contract. IN ADDITION, WE MAKE NO GUARANTEE REGARDING ANY TAX TREATMENT -- FEDERAL, STATE, OR LOCAL-- OF ANY CONTRACT OR OF ANY TRANSACTION INVOLVING A CONTRACT. OUR TAX STATUS We are taxed as a life insurance company. Under current tax law rules, we include the investment income (exclusive of capital gains) of a Separate Account in our taxable income and take deductions for investment income credited to our "policyholder reserves." We are also required to capitalize and amortize certain costs instead of deducting those costs when they are incurred. We do not currently charge a Separate Account for any resulting income tax costs. We also claim certain tax credits or deductions relating to foreign taxes paid and dividends received by the Portfolios. These benefits can be material. We do not pass these benefits through to a Separate Account, principally because: (i) the deductions and credits are allowed to the Company and not the Contract owners under applicable tax law; and (ii) the deductions and credits do not represent investment return on Separate Account assets that is passed through to Contract owners. The Contracts permit us to deduct a charge for any taxes we incur that are attributable to the operation or existence of the Contracts or a Separate Account. Currently, we do not anticipate making a charge for such taxes. If the level of the current taxes increases, however, or is expected to increase in the future, we reserve the right to make a charge in the future. (Please note that this discussion applies to federal income tax but not to any state or local taxes.) SPECIAL CONSIDERATIONS FOR OPTIONAL BENEFITS At present, the IRS has not provided guidance as to the tax treatment of charges for optional benefits to an annuity contract. The IRS might take the position that each charge associated with these optional benefits is deemed a withdrawal from the contract subject to current income tax to the extent of any gains and, if applicable, the 10% penalty tax for premature withdrawals. We do not currently report charges for optional benefits as partial withdrawals, but we may do so in the future if we believe that the IRS would require us to report them as such. When you take a withdrawal under a Nonqualified Contract, it ordinarily is taxable only to the extent it does not exceed gain in the Contract, if any, at the time of the withdrawal. Under current IRS guidance, we expect to determine gain on a withdrawal, including withdrawals during the "Settlement Phase" of an optional guaranteed minimum withdrawal benefit Rider, using the Contract Value. See "VI. Optional Benefits" for a description of the guaranteed minimum withdrawal benefit Riders available under the Contracts. It is possible, however, that the IRS may take the position that the value of amounts guaranteed to be available in the future should also be taken into account in computing the taxable portion of a withdrawal. In that event, you may be subject to a higher amount of tax on a withdrawal. Please see "Conversions and Rollovers to Roth IRAs" below for additional information on the impact on withdrawals of tax withholding pursuant to a conversion to a Roth IRA. If you purchased a Qualified Contract with an optional death benefit or other optional benefit Rider, the presence of these benefits may increase the amount of any required minimum distributions under the requirements of your Qualified Plan. See "Qualified Contracts (Contracts Purchased for a Qualified Plan)" below. Any annuity payments that you receive under an Annuity Option, including Annuity Options that only are available when you elect a guaranteed minimum withdrawal benefit Rider, will be taxed in the manner described in "Taxation of Annuity Payments" below. You should consult a tax advisor for information on any optional benefit Riders. 60 CHARITABLE REMAINDER TRUSTS This federal tax discussion does not address tax consequences of a Contract used in a charitable remainder trust. The tax consequences of charitable remainder trusts may vary depending on the particular facts and circumstances of each individual case. Additionally, the tax rules governing charitable remainder trusts, or the taxation of a Contract used with a charitable remainder trust, may be subject to change by legislation, regulatory changes, judicial decrees or other means. You should consult competent legal or tax counsel regarding the tax treatment of a charitable remainder trust before purchasing a Contract for use within it. NONQUALIFIED CONTRACTS (Contracts Not Purchased to Fund an Individual Retirement Account or Other Qualified Plan) Exchanges of Annuity Contracts We may issue the Contract in exchange for all or part of another annuity contract that you own. Such an exchange will be tax free if certain requirements are satisfied. If the exchange is tax free, your investment in the Contract immediately after the exchange will generally be the same as that of the annuity contract exchanged, increased by any Additional Purchase Payment made as part of the exchange. Your Contract Value immediately after the exchange may exceed your investment in the Contract. That excess may be includable in income should amounts subsequently be withdrawn or distributed from the Contract (e.g., as a partial surrender, full surrender, annuity payment, or death benefit). If you exchange part of an existing contract for the Contract, and within 12 months of the exchange you receive a payment (e.g., you make a withdrawal) from either contract, the exchange may not be treated as a tax free exchange. Rather, the exchange may be treated as if you had made a partial surrender from the existing contract and then purchased the Contract. In these circumstances, some or all of the amount exchanged into the Contract could be includible in your income and subject to a 10% penalty tax. There are various circumstances in which a partial exchange followed by receipt of a payment within 12 months of the exchange is unlikely to affect the tax free treatment of the exchange. You should consult your tax advisor in connection with an exchange of all or part of an annuity contract for the Contract, especially if you may make a withdrawal from either contract within 12 months after the exchange. Undistributed Gains Except where the Owner is not an individual, we expect our Contracts to be considered annuity contracts under Section 72 of the Code. This means that, ordinarily, you pay no federal income tax on any gains in your Contract until we actually distribute assets to you. However, a Contract held by an Owner other than a natural person (for example, a corporation, partnership, limited liability company or other such entity) does not generally qualify as an annuity contract for tax purposes. Any increase in value therefore would constitute ordinary taxable income to such an Owner in the year earned. Notwithstanding this general rule, a Contract will ordinarily be treated as held by a natural person if the nominal Owner is a trust or other entity which holds the Contract as an agent for a natural person. Taxation of Annuity Payments When we make payments under a Contract in the form of an annuity, normally a portion of each annuity payment is taxable as ordinary income. The taxable portion of an annuity payment is equal to the excess of the payment over the exclusion amount. In the case of variable annuity payments, the exclusion amount is the investment in the Contract when payments begin to be made divided by the number of payments expected to be made (taking into account the Annuitant's life expectancy and the form of annuity benefit selected). In the case of Fixed Annuity payments, the exclusion amount is based on the investment in the Contract and the total expected value of Fixed Annuity payments for the term of the Contract (determined under IRS regulations). In general, your investment in the Contract equals the aggregate amount of premium payments you have made over the life of the Contract, reduced by any amounts previously distributed from the Contract that were not subject to tax. (A simplified method of determining the taxable portion of annuity payments applies to Contracts issued in connection with certain Qualified Plans other than IRAs.) Once you have recovered your total investment in the Contract tax-free, further annuity payments will be fully taxable. If annuity payments cease because the Annuitant dies before all of the investment in the Contract is recovered, the unrecovered amount generally will be allowed as a deduction on the Annuitant's last tax return or, if there is a beneficiary entitled to receive further payments, will be distributed to the beneficiary as described more fully below under "Taxation of Death Benefit Proceeds." 61 Surrenders, Withdrawals and Death Benefits When we make a single sum payment consisting of the entire value of your Contract, you have ordinary taxable income to the extent the payment exceeds your investment in the Contract (discussed above). Such a single sum payment can occur, for example, if you surrender your Contract before the Maturity Date or if no extended payment option is selected for a death benefit payment. When you take a partial withdrawal from a Contract before the Maturity Date (or Annuity Commencement Date if earlier), including a payment under a systematic withdrawal plan or guaranteed minimum withdrawal benefit, all or part of the payment may constitute taxable ordinary income to you. If, on the date of withdrawal, the total value of your Contract exceeds the investment in the Contract, the excess will be considered gain and the withdrawal will be taxable as ordinary income up to the amount of such gain. Taxable withdrawals may also be subject to a penalty tax for premature withdrawals as explained below. When only the investment in the Contract remains, any subsequent withdrawal made before the Maturity Date will be a tax-free return of investment, until you have recovered your entire investment in the Contract (additional withdrawals based upon a Rider guarantee will be subject to income tax). If you assign or pledge any part of your Contract's value, the value so pledged or assigned is taxed the same way as if it were a partial withdrawal. For purposes of determining the amount of taxable income resulting from a single sum payment or a partial withdrawal, all Non-qualified annuity contracts issued by us or our affiliates to the Owner within the same calendar year are treated as if they were a single contract. There may be special income tax issues present in situations where the Owner and the Annuitant are not the same person and are not married to each other. A tax advisor should be consulted in those situations. Taxation of Death Benefit Proceeds All or part of any death benefit proceeds may constitute a taxable payout of earnings. A death benefit payment generally results in taxable ordinary income to the extent such payment exceeds your investment in the Contract. Amounts may be distributed from a Contract because of the death of an Owner or the Annuitant. During the Accumulation Period, death benefit proceeds are includible in income as follows: - if distributed in a single sum payment under our current administrative procedures, they are taxed in the same manner as a full withdrawal, as described above; or - if distributed under an Annuity Option, they are taxed in the same manner as annuity payments, as described above; or - if distributed as a series of withdrawals over the Beneficiary's life expectancy, they are taxable to the extent the Contract Value exceeds the investment in the Contract. After a Contract matures and annuity payments begin, if the Contract guarantees payments for a stated period and the Owner dies before the end of that period, payments made to the Beneficiary for the remainder of that period are includible in the Beneficiary's income as follows: - if received in a single sum under our current administrative procedures, they are includible in income to the extent that they exceed the unrecovered investment in the Contract at that time; or - if distributed in accordance with the existing Annuity Option selected, they are fully excludable from income until the remaining investment in the Contract has been recovered, and all annuity payments thereafter are fully includible in income. Penalty Tax on Premature Distributions There is a 10% IRS penalty tax on the taxable portion of any payment from a Nonqualified Contract. Exceptions to this penalty tax include distributions: - received on or after the date on which the Contract Owner reaches age 59 1/2; - attributable to the Contract Owner becoming disabled (as defined in the tax law); - made to a Beneficiary on or after the death of the Contract Owner or, if the Contract Owner is not an individual, on or after the death of an Annuitant; - made as a series of substantially equal periodic payments for the life (or life expectancy) of the Owner or for the joint lives (or joint life expectancies) of the Owner and designated individual Beneficiary; - made under a single-premium immediate annuity contract; or - made with respect to certain annuities issued in connection with structured settlement agreements. Note that when a series of substantially equal periodic payments (Life Expectancy Distribution) is used to avoid the penalty, if the Contract Owner then modifies the payment pattern (other than by reason of death or disability) before the LATER of the Contract Owner's attaining age 59 1/2 and the passage of five years after the date of the first payment, such modification mAy cause retroactive imposition of the penalty plus interest on it. 62 Diversification Requirements Your Contract will not qualify for the tax benefits of an annuity contract unless the Separate Account follows certain rules requiring diversification of investments underlying the Contract. In addition, the rules require that the Contract Owner not have "investment control" over the underlying assets. In certain circumstances, the owner of a variable annuity contract may be considered the owner, for federal income tax purposes, of the assets of the separate account used to support the contract. In those circumstances, income and gains from the separate account assets would be includible in the Contract Owner's gross income. The Internal Revenue Service ("IRS") has stated in published rulings that a variable contract owner will be considered the owner of separate account assets if the contract 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 subaccounts 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 annuity contract despite the owner's ability to allocate funds among as many as twenty subaccounts. The ownership rights under your Contract are similar to, but different in certain respects from, those described in IRS rulings in which it was determined that contract owners were not owners of separate account assets. Since you have greater flexibility in allocating premiums and Contract Values than was the case in those rulings, it is possible that you would be treated as the owner of your Contract's proportionate share of the assets of the Separate Account. We do not know what future Treasury Department regulations or other guidance may require. We cannot guarantee that an underlying Portfolio will be able to operate as currently described in its prospectus, or that a Portfolio will not have to change any of its investment objectives or policies. We have reserved the right to modify your Contract if we believe doing so will prevent you from being considered the owner of your Contract's proportionate share of the assets of the Separate Account, but we are under no obligation to do so. QUALIFIED CONTRACTS (Contracts Purchased for a Qualified Plan) The Contracts are also available for use in connection with certain types of retirement plans that receive favorable treatment under the Code ("Qualified Plans"). Numerous special tax rules apply to the participants in Qualified Plans and to the Contracts used in connection with these plans. We provide a brief description of types of Qualified Plans in Appendix __ of this Prospectus and in the Statement of Additional Information, but make no attempt to provide more than general information about use of the Contracts with the various types of Qualified Plans in this Prospectus. We may limit the availability of the Contracts to certain types of Qualified Plans and may discontinue making Contracts available to any Qualified Plan in the future. If you intend to use a Contract in connection with a Qualified Plan you should consult a tax advisor. We have no responsibility for determining whether a particular retirement plan or a particular contribution to the plan satisfies the applicable requirements of the Code, or whether a particular employee is eligible for inclusion under a plan. In general, the Code imposes limitations on the amount of annual compensation that can be contributed into a Qualified Plan and contains rules to limit the amount you can contribute to all of your Qualified Plans. Trustees and administrators of Qualified Plans may, however, generally invest and reinvest existing plan assets without regard to such Code imposed limitations on contributions. Certain distributions from Qualified Plans may be transferred directly to another plan, unless funds are added from other sources, without regard to such limitations. The tax rules applicable to Qualified Plans vary according to the type of plan and the terms and conditions of the plan itself. For example, for both withdrawals and annuity payments under certain Qualified Contracts, there may be no "investment in the Contract" and the total amount received may be taxable. Both the amount of the contribution that may be made and the tax deduction or exclusion that you may claim for that contribution are limited under Qualified Plans. Under the tax rules, the Owner and the Annuitant may not be different individuals if a Contract is used in connection with a Qualified Plan. If a co-Annuitant is named, all distributions made while the Annuitant is alive must be made to the Annuitant. Also, if a co-Annuitant is named who is not the Annuitant's spouse, the Annuity Options which are available may be limited, depending on the difference in ages between the Annuitant and co-Annuitant. Additionally, for Contracts issued in connection with Qualified Plans subject to the Employee Retirement Income Security Act of 1974 (ERISA), the spouse or ex-spouse of the Owner will have rights in the Contract. In such a case, the Owner may need the consent of the spouse or ex-spouse to change Annuity Options or make a withdrawal from the Contract. Required Minimum Distributions Treasury Regulations prescribe required minimum distribution ("RMD") rules governing the time at which distributions to the Owner and beneficiaries must commence and the form in which the distributions must be paid. These special rules may also require the length 63 of any guarantee period to be limited. They also affect the restrictions that the Owner may impose on the timing and manner of payment of death benefits to beneficiaries or the period of time over which a Beneficiary may extend payment of the death benefits under the Contract. In addition, the presence of the death benefit or a benefit provided under an optional rider may affect the amount of the required minimum distributions that must be made under the Contract. Failure to comply with minimum distribution requirements will result in the imposition of an excise tax, generally 50% of the amount by which the amount required to be distributed exceeds the actual distribution. In the case of IRAs (other than Roth IRAs), distributions of minimum amounts (as specified in the tax law) to the Owner must generally commence by April 1 of the calendar year following the calendar year in which the Owner attains age 70 1/2. In the case of certain other Qualified Plans, such distributions of such minimum amounts must generally commence by the later of this date Or April 1 of the calendar year following the calendar year in which the employee retires. Distributions made under certain Qualified Plans, including IRAs and Roth IRAs, after the Owner's death must also comply with the minimum distribution requirements, and different rules governing the timing and the manner of payments apply, depending on whether the designated Beneficiary is an individual and, if so, the Owner's spouse, or an individual other than the Owner's spouse. If you wish to impose restrictions on the timing and manner of payment of death benefits to your designated beneficiaries or if your Beneficiary wishes to extend over a period of time the payment of the death benefits under your Contract, please consult your tax advisor. TEMPORARY WAIVER OF RMDS FOR 2009. On December 23, 2008, the Worker, Retiree, and Employer Recovery Act of 2008 (the "Act") was signed into law. The Act provides a temporary waiver from required minimum distribution (RMD) rules in 2009 for certain tax-qualified retirement plans (including IRAs). You will need to notify us if you wish to suspend systematic withdrawals of RMD amounts under a Contract intended for use with a tax-qualified retirement plan (including an IRA). Under the Act, no minimum distribution is required for calendar year 2009 from individual retirement plans and employer-provided "defined contribution" retirement plans. The next RMD under these types of plans would be for calendar year 2010. This relief applies to lifetime distributions to employees and IRA owners and after-death distributions to beneficiaries. In the case of an individual who attains age 70 1/2 in 2009 (i.e., the individual's required beginning date under current law is April 1, 2010), no distribution is required for 2009 and No distribution will be required to be made by April 1, 2010. If the five year rule applies to the payment of death benefit amounts, the Act provides that the five year period is determined without regard to calendar year 2009. For example, if an individual dies in 2007, the Act provides that the five year period ends in 2013 instead of 2012. The Act does not change: - the requirement for an individual who attains age 70 1/2 in 2008 to begin RMDs, if not made during 2008, by April 1, 2009; and - any RMD for calendar years after 2009. In the case of an employer-provided plan, the Act also provides that if a plan makes a distribution in 2009 that is an "eligible rollover distribution" (but would have been an RMD if not for the Act's waiver of 2009 requirements), the plan may, but is not required to, offer an employee the ability to make a direct rollover of that amount and provide the employee with a written explanation of the requirement. If the employee elects to receive the distribution, the distribution is not subject to mandatory 20% federal income tax withholding. Unless you notify us otherwise, we will continue to process systematic withdrawals that you have pre-authorized for an RMD amount. Please read the annuity prospectus carefully for additional information about the systematic withdrawal program(s) offered under your Contract. You may not be required to take an RMD from a Contract in 2009. If you take a pre-authorized systematic withdrawal for a "required minimum distribution" amount in 2009, the withdrawal: (i) may be subject to income tax and, if your Rider calculates an annual guaranteed amount before age 59 1/2, a 10% IRS penalty tax; (ii) may reduce the death benefit and other optional benefitS; and (iii) may cancel your eligibility to earn a Credit under the provisions of your guaranteed minimum withdrawal benefit Rider during any Contract Year in which you receive a payment under the systematic withdrawal program. Call or write us at the Annuities Service Center listed on page ii of this Prospectus if you wish to defer your RMD for 2009. If you would like to defer your RMD for 2009 but have already received a scheduled distribution, call our Annuities Service Center within 60 days of receipt of your distribution to discuss your options. Please consult your tax advisor to determine how the Act affects your RMDs. 64 Penalty Tax on Premature Distributions There is also a 10% IRS penalty tax on the taxable amount of any payment from certain Qualified Contracts (but not Section 457 plans). (The amount of the penalty tax is 25% of the taxable amount of any payment received from a SIMPLE retirement account during the 2-year period beginning on the date the individual first participated in any qualified salary reduction arrangement maintained by the individual's employer.) There are exceptions to this penalty tax which vary depending on the type of Qualified Plan. In the case of an Individual Retirement Annuity or an IRA, including a SIMPLE IRA, the penalty tax does not apply to a payment: - received on or after the date on which the Contract Owner reaches age 59 1/2; - received on or after the Owner's death or because of the Owner's disability (as defined in the tax law); or - made as a series of substantially equal periodic payments (not less frequently than annually) for the life (or life expectancy) of the Owner or for the joint lives (or joint life expectancies) of the Owner and "designated beneficiary" (as defined in the tax law). Note that when a series of substantially equal periodic payments is used to avoid the penalty, if the Contract Owner then modifies the payment pattern (other than by reason of death or disability) before the LATER of the Contract Owner's attaining age 59 1/2 and the passage of five years after the date of the first payment, such modification may cause retroactive imposition Of the penalty plus interest on it. These exceptions generally apply to taxable distributions from other Qualified Plans (although, in the case of plans qualified under Sections 401 and 403, the exception for substantially equal periodic payments applies only if the Owner has separated from service). In addition, the penalty tax does not apply to certain distributions from IRAs that are used for first time home purchases or for higher education expenses, or for distributions made to certain eligible individuals called to active duty after September 11, 2001. Special conditions must be met to qualify for these three exceptions to the penalty tax. If you wish to take a distribution from an IRA for these purposes, you should consult your tax advisor. When we issue a Contract in connection with a Qualified Plan, we will amend the Contract as necessary to conform to the requirements of the plan. However, your rights to any benefits under the plan may be subject to the terms and conditions of the plan itself, regardless of the terms and conditions of the Contracts. Rollovers and Transfers If permitted under your plan, you may make a distribution: - from a traditional IRA and make a "tax-free" rollover to another traditional IRA; - from a traditional IRA and make a "tax-free" rollover to a retirement plan qualified under Sections 401(a) or 403(a) of the Code or a governmental deferred compensation plan described in Section 457(b) of the Code; - from any Qualified Plan (other than a Section 457 deferred compensation plan maintained by a tax-exempt organization) and make a "tax-free" rollover to a traditional IRA; and - from a retirement plan qualified under Sections 401(a) or 403(a) of the Code or a governmental deferred compensation plan described in Section 457(b) of the Code and make a "tax-free" rollover to any such plans. In addition, if your spouse survives you, he or she is permitted to take a distribution from your tax-qualified retirement account and make a "tax-free" rollover to another tax-qualified retirement account in which your surviving spouse participates, to the extent permitted by your surviving spouse's plan. A beneficiary who is not your surviving spouse may, if permitted by the plan, transfer to a traditional IRA the amount distributable to him or her upon your death under a Contract that is held as part of a retirement plan described in Sections 401(a) or 403(a) of the Code or a governmental deferred compensation plan described in Section 457(b) of the Code. The transfer must be a direct trustee-to-trustee transfer. The IRA is treated as an inherited IRA of the non-spouse beneficiary. You may also make a taxable rollover from a traditional IRA to a Roth IRA. In addition, distributions that you receive from a retirement plan described in Sections 401(a) or 403(a) of the Code or a governmental deferred compensation plan described in Section 457(b) of the Code may be rolled over directly to a Roth IRA if (i) your adjusted gross income is not in excess of $100,000 and (ii) you are not a married taxpayer filing a separate return. This type of rollover is taxable. You may make a tax-free rollover to a Roth IRA from a Roth IRA or from a Roth account in a retirement plan described in Section 401(a) of the Code. Although we allow a beneficiary of an IRA who is eligible to roll the IRA over to a Contract as a traditional or Roth IRA to do so, we do not allow such an IRA beneficiary to purchase any of our optional benefit Riders on that Contract. In lieu of taking a distribution from your plan (including a Section 457 deferred compensation plan maintained by a tax-exempt organization), your plan may permit you to make a direct trustee-to-trustee transfer of plan assets. Withholding on Rollover Distributions Eligible rollover distributions from a retirement plan that is qualified under Sections 401(a) or 403(a) of the Code, or a governmental deferred compensation plan described in Section 457(b) of the Code are subject to mandatory withholding. An eligible rollover 65 distribution generally is any taxable distribution from such plans except (i) minimum distributions required under Section 401(a)(9) of the Code, (ii) certain distributions for life, life expectancy, or for 10 years or more which are part of a "series of substantially equal periodic payments," and (iii) if applicable, certain hardship withdrawals. Federal income tax of 20% will be withheld from an eligible rollover distribution. The withholding is mandatory and you cannot elect to have it not apply. This 20% withholding will not apply, however, if instead of receiving the eligible rollover distribution, you choose to have it directly transferred to an applicable plan, a traditional IRA, or a Roth IRA. If you take a distribution from a Qualified Contract, we may have to take a withdrawal from your Contract Value, withhold it from you, and remit it to the IRS. The amount we may be required to withhold is up to 20% of the taxable gain in the Contract. We treat any amount we withhold as a withdrawal from your Contract, which could result in an Excess Withdrawal or other type of reduction in guarantees and benefits that you may have purchased under an optional benefits Rider to your Contract. Please read "VI. Optional Benefits" for information about the impact of withdrawals on optional benefit Riders. We do not need to withhold any amounts if you provide us with information, on the forms we require for this purpose, that you wish to assign a Qualified Contract and/or transfer amounts from that Contract directly to another tax-qualified retirement plan. Similarly, if you wish to purchase a Qualified Contract, you may find it advantageous to instruct your existing retirement plan to transfer amounts directly to us in lieu of making a distribution to you. YOU SHOULD SEEK INDEPENDENT TAX ADVICE IF YOU INTEND TO PURCHASE A CONTRACT FOR USE WITH A TAX-QUALIFIED RETIREMENT PLAN. Conversions and Rollovers to Roth IRAs You can convert a traditional IRA to a Roth IRA or directly roll over distributions that you receive from a retirement plan described in Sections 401(a) or 403(a) of the Code or a governmental deferred compensation plan described in Section 457(b) of the Code to a Roth IRA unless: - you have adjusted gross income over $100,000; or - you are a married tax payer filing a separate return. These restrictions do not apply in tax years beginning after December 31, 2009. The Roth IRA annual contribution limit does not apply to converted or rollover amounts. You must, however, pay tax on any portion of the converted or rollover amount that would have been taxed if you had not converted or rolled over to a Roth IRA. No similar limitations apply to rollovers to one Roth IRA from another Roth IRA or from a Roth account in a retirement plan described in Section 401(a) of the Code. Please note that the amount deemed to be the "converted amount" for tax purposes may be higher than the Contract Value because of the deemed value of guarantees. If you convert a Contract issued as a traditional IRA (or other type of Qualified Contract, if permitted under your plan) to a Roth IRA, or instruct us to transfer a rollover amount from a Qualified Contract to a Roth IRA, you may instruct us to not withhold any of the conversion for taxes and remittance to the IRS. A direct rollover or conversion is not subject to mandatory tax withholding, even if the distribution is includible in gross income. If you do instruct us to withhold for taxes when converting an existing Contract to a Roth IRA, we will treat any amount we withhold as a withdrawal from your Contract, which could result in an Excess Withdrawal or other reduction of the guarantees and benefits you may have purchased under an optional benefits Rider to your Contract. Please read "VI. Optional Benefits" for information about the impact of withdrawals on optional benefit Riders. You may find it advantageous to pay the tax due from resources other than your retirement plan assets if you wish to purchase a Contract for use as a Roth IRA through a rollover from that retirement plan. You should seek independent tax advice if you intend to use the Contract in connection with a Roth IRA. SEE YOUR OWN TAX ADVISOR The foregoing description of federal income tax topics and issues is only a brief summary and is not intended as tax advice. It does not include a discussion of federal estate and gift tax or state tax consequences. The rules under the Code governing Qualified Plans are extremely complex and often difficult to understand. Changes to the tax laws may be enforced retroactively. Anything less than full compliance with the applicable rules, all of which are subject to change from time to time, can have adverse tax consequences. The taxation of an Annuitant or other payee has become so complex and confusing that great care must be taken to avoid pitfalls. For further information you should always consult a qualified tax advisor. 66 IX. General Matters DISTRIBUTION OF CONTRACTS We pay compensation for sales of the Contracts. John Hancock Distributors, LLC ("JH Distributors"), a Delaware limited liability company that we control, is the principal underwriter and distributor of the Contracts offered by 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 Variable Investment Options under the Contracts and under other annuity and life insurance products we offer. JH Distributors' principal address is 200 Bloor Street East, Toronto, Canada M4W 1E5. It also maintains offices with us at 601 Congress Street, Boston, Massachusetts 02210. JH Distributors is a broker-dealer registered under the Securities Exchange Act of 1934, as amended (the "1934 Act") and is a member of the Financial Industry Regulatory Authority ("FINRA," formerly the National Association of Securities Dealers, Inc., or "NASD"). We offer the Contracts for sale through broker-dealers (firms) that have entered into selling agreements with JH Distributors and us. Broker-dealers sell the Contracts through their registered representatives who have been appointed by us to act as our insurance agents. JH Distributors, or any of its affiliates that is registered under the 1934 Act and a member of FINRA, may also offer the Contracts directly to potential purchasers. Signator Investors, Inc. is an affiliated broker-dealer. JH Distributors pays compensation to broker-dealers for the promotion and sale of the Contracts. These payments are made from JH Distributors' and our own revenues, profits or retained earnings, which may be derived from a number of sources, such as fees received from an underlying Portfolio's or fund-of-funds' (but not both) distribution plan ("12b-1 fees"), the fees and charges imposed under the Contract, and other sources. The individual financial advisor who sells you a Contract typically will receive a portion of the compensation, under the financial advisor's own arrangement as a registered representative with his or her broker-dealer. A limited number of broker-dealers may also be paid commissions or overrides to "wholesale" the Contract; 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 broker-dealers for providing ongoing service in relation to Contract(s) that have already been purchased. Standard Compensation The amount and timing of compensation JH Distributors may pay to broker-dealers may vary depending on the selling agreement, but compensation with respect to Contracts sold through broker-dealers (inclusive of wholesaler overrides and expense allowances) and paid to broker-dealers is not expected to exceed 6.00% of Purchase Payments, and in states where permitted is subject to reductions in accordance with the reduced sales charges available to Associated Accounts (see "Front-End Sales Charges" on page 56). In addition, JH Distributors may pay ongoing compensation at an annual rate of up to 0.50% of the values of the Contracts attributable to such Purchase Payments. The greater the amount of compensation paid by JH Distributors at the time you make a Purchase Payment, the less it will pay as ongoing compensation. Revenue Sharing and Additional Compensation In addition to standard compensation arrangements and to the extent permitted by SEC and FINRA rules and other applicable laws and regulations, we, either directly or through JH Distributors, may enter into special compensation or reimbursement arrangements ("revenue sharing") with selected firms. We determine which firms to support and the extent of the payments that are made. Under these arrangements, the form of payment may be any one or a combination of a flat fee, a percentage of the assets we hold that are attributable to Contract allocations, a percentage of sales revenues, reimbursement of administrative expenses (including ticket charges), conference fees, or some other type of compensation. We hope to benefit from these revenue sharing arrangements through increased sales of our annuity products. In consideration of these arrangements, a firm may feature the Contract in its sales system or give us preferential access to members of its sales force. In addition, the firm may agree to participate in our marketing efforts by allowing JH Distributors or its affiliates to participate in conferences, seminars or other programs attended by the firm's sales force. These arrangements may 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, including a list of firms to whom we paid annual amounts greater than $5,000 under these arrangements in 2008, in the Statement of Additional Information (SAI), 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. 67 Selling broker-dealers may receive additional payments from us, either directly or through JH Distributors, in the form of cash, other special compensation or reimbursement of expenses. These additional compensation or reimbursement payments may include, for example, payments for providing conferences or seminars, sales or training programs for invited registered representatives and other employees, payments for travel expenses, including lodging, incurred by registered representatives and other employees for such seminars or training programs, seminars for the public, advertising and sales campaigns regarding the Contract, and payments to assist a firm in connection with its marketing expenses and/or other events or activities sponsored by the firms. We may contribute to, as well as sponsor, various educational programs, sales promotions and/or contests in which participating firms and their sales persons may receive gifts and prizes such as merchandise, cash, or other awards, as may be permitted by applicable FINRA rules and other applicable laws and regulations. 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 contracts. In addition, under their own arrangements, broker-dealer firms may pay a portion of any amounts received from us to their registered representatives. As a result, financial advisors who are registered representatives of such firms may be motivated to sell the variable annuity contracts of one issuer over another issuer, or one product over another product. You should contact your financial advisor for more information on compensation arrangements in connection with the sale and purchase of your Contract. CONFIRMATION STATEMENTS We will send you confirmation statements for certain transactions in your Investment Accounts. You should carefully review these statements to verify their accuracy. You should report any mistakes immediately to our Annuities Service Center. If you fail to notify our Annuities Service Center of any mistake within 60 days of the mailing of the confirmation statement, we will deem you to have ratified the transaction. REINSURANCE ARRANGEMENTS From time to time we may utilize reinsurance as part of our risk management program. Under any reinsurance agreement, we remain liable for the contractual obligations of the Contracts' guaranteed benefits and the reinsurer(s) agree to reimburse us for certain amounts and obligations in connection with the risks covered in the reinsurance agreements. The reinsurer's contractual liability runs solely to us, and no Contract Owner shall have any right of action against any reinsurer. In evaluating reinsurers, we consider the financial and claims paying ability ratings of the reinsurer. Our philosophy is to minimize incidental credit risk. We do so by engaging in secure types of reinsurance transactions with high quality reinsurers and diversifying reinsurance counterparties to limit concentrations. Some of the benefits that may be reinsured include living benefits, guaranteed death benefits, DCA Fixed Investment Option guarantees, or other obligations. STATEMENTS OF ADDITIONAL INFORMATION Our Statements of Additional Information provide additional information about the Contract and the Separate Accounts, including information on our history, services provided to the Separate Accounts and legal and regulatory matters. We filed the Statements of Additional Information with the SEC on the same date as this Prospectus and incorporate them herein by reference. You may obtain a copy of the current Statements of Additional Information without charge by contacting us at the Annuities Service Center shown on page ii of this Prospectus. The SEC also maintains a Web site (http://www.sec.gov) that contains the Statements of Additional Information and other information about us, the Contracts and the Separate Accounts. We list the Table of Contents of the Statements of Additional Information below. JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H Statement of Additional Information Table of Contents General Information and History...................................... 1 Services............................................................. 1 Independent Registered Public Accounting Firm..................... 1 Servicing Agent................................................... 1 Principal Underwriter............................................. 1 Special Compensation and Reimbursement Arrangements............... 2 State Variations Regarding Recognition of Same-Sex Couples........... 3 Qualified Plan Types................................................. 4 Legal and Regulatory Matters......................................... 8 Appendix A: Audited Financial Statements............................. A-1
68 JOHN HANCOCK LIFE INSURANCE COMPANY OF NEW YORK SEPARATE ACCOUNT A Statement of Additional Information Table of Contents General Information and History...................................... 1 Services............................................................. 1 Independent Registered Public Accounting Firm..................... 1 Servicing Agent................................................... 1 Principal Underwriter............................................. 1 Special Compensation and Reimbursement Arrangements............... 2 State Variations Regarding Recognition of Same-Sex Couples........... 3 Qualified Plan Types................................................. 4 Legal and Regulatory Matters......................................... 8 Appendix A: Audited Financial Statements............................. A-1
Financial Statements The Statements of Additional information also contain the Company's financial statements as of the years ended 2007 and 2008, and its Separate Accounts' financial statements as of the year ended 2008 (the "Financial Statements"). Our Financial Statements provide information on our financial strength as of the year ended 2008, including information on our general account assets that were available at that time to support our guarantees under the Contracts and any optional benefit Riders. The Company's general account is comprised of securities and other investments, the value of which may decline during periods of adverse market conditions. 69 Appendix A: Examples of Calculation of Withdrawal Charges EXAMPLE 1. This example assumes an initial Purchase Payment of $100,000 on January 1, 2008 and an Additional Purchase Payment of $1,000,000 on May 1, 2008. The value of Associated Accounts is $0. If you withdraw $200,000 on October 1, 2008, we will calculate the withdrawal charge as follows: a) First we determine the amount of Purchase Payments to be liquidated as the greater of the Withdrawal Amount or the unliquidated Purchase Payments. This amount is $200,000. b) Next we calculate the withdrawal charge by applying the appropriate withdrawal charge percentage for each Purchase Payment liquidated based on the length of time the Purchase Payment has been in the Contract. - The initial Purchase Payment of $100,000 has an applicable withdrawal charge of $0. - The remaining $100,000 will come from the subsequent payment of $1,000,000 that has been in the Contract for 5 months. The applicable withdrawal charge is .0050 x $100,000 = $500. - The total withdrawal charge is $0 + $500 = $500. c) We will deduct $200,000 from your Contract Value and you will receive a payment of $199,500 ($200,000 - $500) less any applicable taxes. EXAMPLE 2. This example assumes an initial Purchase Payment of $1,000,000 on January 1, 2008 and an Additional Purchase Payment of $100,000 on May 1, 2008. The value of Associated Accounts is $0. If you withdraw $200,000 on October 1, 2008, we will calculate the withdrawal charge as follows: a) First we determine the amount of Purchase Payments to be liquidated as the greater of the Withdrawal Amount or the unliquidated Purchase Payments. This amount is $200,000. b) Next we calculate the withdrawal charge by applying the appropriate withdrawal charge percentage for each Purchase Payment liquidated based on the length of time the Purchase Payment has been in the Contract. The withdrawal will liquidate $200,000 of the initial Purchase Payment of $1,000,000. Since this Purchase Payment has been in the Contract more than 6 months, the withdrawal charge is $0. A-1 Appendix B: Qualified Plan Types
PLAN TYPE --------- TRADITIONAL IRAS Section 408 of the Code permits eligible individuals to contribute to an individual retirement program known as an Individual Retirement Annuity or IRA (sometimes referred to as a traditional IRA to distinguish it from the Roth IRA discussed below). IRAs are subject to limits on the amounts that may be contributed and deducted, the persons who may be eligible and the time when distributions may commence. Also, distributions from certain other types of qualified retirement plans may be rolled over on a tax-deferred basis into an IRA. The Contract may not, however, be used in connection with an Education IRA under Section 530 of the Code. In general, unless you have made non-deductible contributions to your IRA, all amounts paid out from a traditional IRA contract (in the form of an annuity, a single sum, death benefits or partial withdrawal), are taxable to the payee as ordinary income. ROTH IRAS Section 408A of the Code permits eligible individuals to contribute to a type of IRA known as a Roth IRA. Roth IRAs are generally subject to the same rules as non-Roth IRAs, but they differ in certain significant respects. Among the differences are that contributions to a Roth IRA are not deductible and qualified distributions from a Roth IRA are excluded from income SIMPLE IRA PLANS In general, under Section 408(p) of the Code a small business employer may establish a SIMPLE IRA retirement plan if the employer employed no more than 100 employees earning at least $5,000 during the preceding year. Under a SIMPLE IRA plan both employees and the employer make deductible contributions. SIMPLE IRAs are subject to various requirements, including limits on the amounts that may be contributed, the persons who may be eligible, and the time when distributions may commence. The requirements for minimum distributions from a SIMPLE IRA retirement plan are generally the same as those discussed above for distributions from a traditional IRA. The rules on taxation of distributions are also similar to those that apply to a traditional IRA with a few exceptions (please see the section titled "Qualified Plan Types" in the Statement of Additional Information for that information). SIMPLIFIED EMPLOYEE Section 408(k) of the Code allows employers to establish PENSIONS (SEP - IRAS) simplified employee pension plans for their employees, using the employees' IRAs for such purposes, if certain criteria are met. Under these plans the employer may, within specified limits, make deductible contributions on behalf of the employees to IRAs. The requirements for minimum distributions from a SEP - IRA, and rules on taxation of distributions from a SEP - IRA, are generally the same as those discussed above for distributions from a traditional IRA. SECTION 403(B) Section 403(b) of the Code permits public school QUALIFIED PLANS OR employees and employees of certain types of tax-exempt TAX-SHELTERED organizations to have their employers purchase annuity ANNUITIES contracts for them and, subject to certain limitations, to exclude the Purchase Payments from gross income for tax purposes. There also are limits on the amount of incidental benefits that may be provided under a tax-sheltered annuity. These Contracts are commonly referred to as "tax-sheltered annuities." We currently are not offering this Contract for use in a Section 403(b) Qualified Plan except under limited circumstances. Please see the Statement of Additional Information for this information. CORPORATE AND Sections 401(a) and 403(a) of the code permit corporate SELF-EMPLOYED PENSION employers to establish various types of tax-deferred AND PROFIT-SHARING retirement plans for employees. The Self-Employed PLANS (H.R. 10 AND Individuals' Tax Retirement Act of 1962, as amended, KEOGH) commonly referred to as "H.R. - 10" or "Keogh," permits self-employed individuals to establish tax-favored retirement plans for themselves and their employees. Such retirement plans may permit the purchase of annuity contracts in order to provide benefits under the plans, however, there are limits on the amount of incidental benefits that may be provided under pension and profit sharing plans. DEFERRED COMPENSATION Section 457 of the Code permits employees of state and PLANS OF STATE AND local governments and tax-exempt organizations to defer LOCAL GOVERNMENTS AND a portion of their compensation without paying current TAX-EXEMPT taxes. The employees must be participants in an eligible ORGANIZATIONS deferred compensation plan. A Section 457 plan must satisfy several conditions, including the requirement that it must not permit distributions prior to your separation from service (except in the case of an unforeseen emergency). When we make payments under a Section 457 Contract, the payment is taxed as ordinary income.
For more detailed information about these plan types, you may request a Statement of Additional Information. B-1 Appendix C: Additional Availability of Guaranteed Minimum Withdrawal Benefit Riders Additional Availability of Guaranteed Minimum Withdrawal Benefit Riders This section describes the conditions under which you may elect to purchase, or to exchange an existing guaranteed minimum withdrawal benefit ("GMWB") Rider to your Contract, for one of the following optional GMWB Riders after you have purchased a Contract: - Income Plus For Life (if available in your state on your Contract Anniversary); or - Income Plus For Life - Joint Life (if available in your state on your Contract Anniversary). Any exchange of Riders is subject to the availability of the new Rider and/or this exchange program in your state. DO I NEED TO SATISFY ANY CONDITIONS TO PURCHASE A NEW GUARANTEED MINIMUM WITHDRAWAL BENEFIT RIDER? Yes, we impose several conditions: - Exchange of existing GMWB Rider - Only one GMWB Rider may be in effect at any time. If you elect to exchange, for example, an existing Income Plus For Life Rider for a new Income Plus For Life - Joint Life Rider in connection with a previously issued Contract, we will terminate the existing Income Plus For Life Rider upon the effective date of the new Income Plus For Life - Joint Life Rider. You may lose guaranteed lifetime income benefits, "accumulation benefits," Credits, Target Amount adjustments, and Step-Ups under your existing guaranteed minimum withdrawal benefit Rider if you purchase a new Income Plus For Life Series Rider. - No withdrawal charges in excess of $1000 or 1% of total Purchase Payments - You may not purchase a new Income Plus For Life Series Rider if the withdrawal charges under your Contract are greater than $1000 or 1% of the total Purchase Payments you have made under the Contract. You may need to wait until the withdrawal charges applicable to your Contract, if any, decline to $1000 or 1% of total Purchase Payments, or less, during the withdrawal charge period specified in your Contract. (We restart any withdrawal charge period specified in your Contract each time you make an Additional Purchase Payment.) Your purchase of a new Income Plus For Life Series Rider will not impact the withdrawal charges, if any, that we may impose under your Contract. You should review the Prospectus and the Contract you purchased to determine the amount and duration of any remaining withdrawal charges under your Contract. - Investment Option Restrictions - You must invest 100% of your Contract Value at all times after you purchase a new Income Plus For Life Series Rider in one or more of the Investment Options we make available for that Rider. Your existing Rider may permit you to invest in Investment Options that are not available under a new Income Plus For Life Series Rider. If you choose to purchase a new Income Plus For Life Series Rider, none of your Contract Value may remain in any previously "restricted" Investment Option. You must transfer your Contract Value out of any Investment Option that is not available under a new Income Plus For Life Series Rider before you can purchase the new Rider. For more information regarding the currently available Investment Options for Income Plus For Life Series Riders, please see "VI. Optional Benefits." You should consult with your financial advisor to assist you in determining which available individual Investment Option(s) or Model Allocation under a new Income Plus For Life Series Rider is best suited for your financial needs and risk tolerance. - Age Restrictions - Once you turn 81, you will not be eligible to purchase a new Income Plus For Life Series Rider. You and your spouse must both be less than age 81 to purchase a new Income Plus For Life - Joint Life Rider. - Settlement Phase Restriction - Your Contract must not be in the Settlement Phase under your existing Rider for you to elect to purchase a new Income Plus For Life Series Rider. The Settlement Phase occurs only when your Contract Value declines to zero and your existing Rider still has guaranteed benefits. - Different Rider - You cannot exchange your existing Rider for the same version or type of Rider (e.g., Income Plus For Life for Income Plus For Life or Income Plus For Life - Joint Life for Income Plus For Life - Joint Life) unless we agree C-1 otherwise. For these purposes, we treat Income Plus For Life Series Riders issued prior to May 4, 2009 as different Riders from Income Plus For Life Riders issued on or after May 4, 2009. - State of Issue Restriction - You may purchase an Income Plus For Life Series Rider only if it is then available in the state where we issued your Contract. You can find out if an Income Plus For Life Series Rider is available in the state where we issued your Contract by contacting our Annuities Service Office at 1-800-344-1029, or in New York State, 1-800-551-2078. - IRA Beneficiary Restriction - You may not purchase a new Income Plus For Life Series Rider in connection with a new or existing Beneficiary IRA (see "Availability of Income Plus For Life Series Riders" in "VI. Optional Benefits"). - Availability of Offer - We reserve the right to suspend, modify, or terminate our offer of any GMWB Rider at any time. We also reserve the right to refuse to issue any new GMWB Rider at our sole discretion. Before you purchase a new Income Plus For Life Series Rider: - compare the fees, benefits and restrictions of any existing GMWB Rider to your Contract with the fees, benefits and restrictions of the new Rider; and - consult with your financial advisor to determine if the new Rider is appropriate for your needs and financial circumstances. WHEN CAN I ELECT TO PURCHASE A NEW INCOME PLUS FOR LIFE SERIES RIDER? We provide a thirty-day "Election Period" following each Contract Anniversary (assuming any withdrawal charges are $1000 or 1% of total Purchase Payments, or less, at that time) for you to elect a new Income Plus For Life Series Rider. You must submit all required paperwork in good order to our Annuities Service Center during the Election Period to elect to purchase a new Income Plus For Life Series Rider. We also provide a thirty-day Election Period in certain circumstances for a Beneficiary to elect to purchase a new Income Plus For Life Series Rider following the death of an Owner. In addition to the conditions discussed above, a Beneficiary must be age 75 or younger and may not exchange to a new joint life Rider. Under our current administrative procedures, neither you nor a Beneficiary can exchange an existing GMWB Rider for a new Rider during the first Contract Year. We may change our administrative procedures from time to time to increase or decrease an Election Period, or to permit other election periods during a Contract Year. HOW DOES MY PURCHASE OF A NEW INCOME PLUS FOR LIFE SERIES RIDER AFFECT RIDER FEES? We charge you the annual Rider fee under your existing Rider for coverage during the immediately preceding Contract Year. The date we assess this fee (i.e., a Contract Anniversary) may coincide with the date on which you qualify to purchase a new Income Plus For Life Series Rider (i.e., the start of an Election Period). If you purchase a new Income Plus For Life Series Rider, we will charge you the annual fee for the new Rider on the next succeeding Contract Anniversary and on each Contract Anniversary after that while the new Rider is in force (we may impose the new Rider fee earlier if you surrender your Contract). The amount of the Rider fee we impose may change, depending on the Rider you elect to purchase:
INCOME PLUS FOR INCOME PLUS FOR INCOME PLUS FOR INCOME PLUS FOR LIFE (PURCHASED LIFE - JOINT LIFE LIFE (PURCHASED LIFE - JOINT LIFE FEES DEDUCTED FROM ON OR AFTER (PURCHASED ON OR PRIOR TO MAY (PURCHASED PRIOR CONTRACT VALUE(1) MAY 4, 2009) AFTER MAY 4, 2009) 4, 2009) TO MAY 4, 2009) ------------------ --------------- ------------------ --------------- ----------------- Maximum Fee(2) 1.20% 1.20% 1.20% 1.20% Current Fee 0.90% 0.90% 0.60% 0.60%
(1) Fees are shown as a percentage of the Adjusted Benefit Base. (2) We reserve the right to increase the current fee shown to the maximum fee in the event of a "Step-Up" of the Benefit Base to equal the Contract Value. Please see "VI. Optional Benefits" or "Appendix D: Information about Income Plus For Life Series Riders Available Prior to May 4, 2009" for additional information on the fee for each Income Plus For Life Series Rider. C-2 WILL I BE ABLE TO WITHDRAW THE SAME AMOUNT UNDER A NEW INCOME PLUS FOR LIFE SERIES RIDER AS I CAN UNDER MY EXISTING GUARANTEED MINIMUM WITHDRAWAL BENEFIT RIDER? Your ability to withdraw your Contract Value at any time does not change. We will decrease amounts guaranteed under each of our GMWB Riders, however, if your withdrawals exceed the annual amount permitted under that Rider. Since the amount "permitted" to be withdrawn each year differs, depending on the Rider you elect to purchase, the amount you can withdraw without reduction may be more or less than the amount you can withdraw without a reduction under your existing Rider. The amount "permitted" to be withdrawn each year is, in most cases, the annual guaranteed amount under the new Rider. We calculate the initial annual guaranteed amount based on your Contract Value at the beginning of the Election Period ($5 million maximum). The initial annual guarantee amount may be more or less than the guarantee under your existing GMWB Rider. The amount will vary, depending on the new Rider you elect to purchase, as shown in the following table:
INITIAL ANNUAL GUARANTEE ON NEW RIDER INCOME PLUS FOR LIFE INCOME PLUS FOR LIFE - JOINT LIFE ------------------------------------- ---------------------- ------------------------------------- 4.75% of Contract Value Lifetime Income Amount(1) 5.0% of Contract Value (4.25% of Contract Value in New York)
(1) Amounts shown are for Contract Value at the beginning of the Election Period (i.e., the Contract Anniversary) in which you purchase a new Rider. We calculate the initial Lifetime Income Amount when you purchase the Rider only if the Covered Person (younger spouse for Income Plus For Life - Joint Life) is at least 58 1/2 at that time. Otherwise, we will calculate a Lifetime Income Amount on the Lifetime Income Date described in the Prospectus. Please see "VI. Optional Benefits" for additional information about reductions and the annual "permitted" amounts under a new Income Plus For Life Series Rider. We will decrease amounts guaranteed under a new Income Plus For Life Series Rider if you take annual withdrawals that exceed the annual amount permitted under that Rider. The annual permitted amount under a new Rider may be more or less than that permitted under your existing Rider. WHAT OTHER BENEFITS DO YOU CALCULATE WHEN I PURCHASE A NEW INCOME PLUS FOR LIFE SERIES RIDER? If you purchase a new Income Plus For Life Series Rider for an existing Contract, we will calculate other benefits under the new Rider measured from the start of the Election Period. These benefits differ by Rider and may be more or less than other benefits under your existing Rider. For Credit information, see the "Credit" section specific to each Rider. Impact of Purchase Payments Since the initial guarantees and other benefits under a new Income Plus For Life Series Rider reflect your Contract Value at the time of purchase, the amount we guarantee under a new Rider may be more or less than the amount of any Purchase Payments made before you purchased the new Rider. Please see "VI. Optional Benefits" for additional information about Step-Ups and the impact of Additional Purchase Payments you make after you elect to purchase a new Rider. WHAT IS THE IMPACT OF A NEW INCOME PLUS FOR LIFE SERIES RIDER ON THE DEATH BENEFIT UNDER MY CONTRACT? Effect of withdrawals We reduce the death benefit payable under your Contract each time you make a withdrawal. We will reduce the death benefit on a dollar for dollar basis if : - you limit your Withdrawal Amounts during a Contract Year to the Lifetime Income Amount; or, - you limit your Withdrawal Amounts each Contract Year before the Lifetime Income Date to the Benefit Rate multiplied by the Benefit Base, and to the Lifetime Income Amount for each Contract Year after that. However, if you take any Excess Withdrawals, we will deduct the entire Withdrawal Amount on a pro rata basis (i.e., we reduce the death benefit by a percentage equal to the ratio of the entire Withdrawal Amount divided by your Contract Value prior to the withdrawal). Please see "VI. Optional Benefits" for additional information on the effect of withdrawals under an Income Plus For Life Series Rider. C-3 Continuation of Contract after death benefits become payable Coverage under our GMWB Riders ends if the Beneficiary takes the death benefit as a lump sum. In certain circumstances, a Beneficiary may elect to continue a Contract in force after a death benefit becomes payable in lieu of taking the death benefit as a lump sum. The amount of coverage under a Rider will vary in these circumstances, depending on the Rider you elect to purchase and whether the Beneficiary under the Contract is a spouse (a "spousal Beneficiary"), or someone other than the spouse (a "non-spousal Beneficiary") of the deceased Owner (or deemed Owner if the Owner is a non-natural person). CIRCUMSTANCES WHEN COVERAGE ENDS. If the Beneficiary continues a Contract in force following the death of an Owner, coverage under each Income Plus For Life Series Rider ends as described in its respective section in "VI. Optional Benefits". CIRCUMSTANCES WHEN COVERAGE MAY CONTINUE. If the Beneficiary continues a Contract in force following the death of an Owner, coverage under each Income Plus For Life Series Rider may continue as described in its respective section in "VI. Optional Benefits". If death occurs during a Rider's Settlement Phase, however, the only benefits we provide are the remaining settlement payments that may become due under the Rider. You should carefully review and compare the impact on death benefits under your current Rider to the impact on death benefits under a new Rider. C-4 Appendix D: Information about Income Plus For Life Series Riders Available Prior to May 4, 2009 This Appendix provides information about the versions of our Income Plus For Life and Income Plus For Life - Joint Life Riders, collectively referred to as the "INCOME PLUS FOR LIFE SERIES" Riders, that were offered for purchase prior to May 4, 2009. This version of the Income Plus For Life - Joint Life Rider was not available in New York. The general information about Income Plus For Life Series Riders contained in "VI. Optional Benefits" also applies to the versions of the Riders described in this Appendix. In particular, you should read the sections on: - Availability, including age restrictions, - Withdrawals, Distributions and Settlements under Guaranteed Minimum Withdrawal Benefit Riders, - Impact of Additional Purchase Payments on Benefit Base and Lifetime Income Amount, - Comparison between Guaranteed Minimum Withdrawal Benefits and Annuity Payments, - Additional Annuity Options, - Tax Considerations, and - Restrictions on Investment Options Under Guaranteed Minimum Withdrawal Benefit Riders. FEATURES OF INCOME PLUS FOR LIFE SERIES RIDERS (PURCHASED PRIOR TO MAY 4, 2009) This section describes only those features of the Income Plus For Life Series Riders that differ between Riders purchased on or after May 4, 2009 and Riders purchased prior to May 4, 2009. FEE FOR INCOME PLUS FOR LIFE SERIES RIDERS. The fee is equal to 0.60% of the Adjusted Benefit Base. The Adjusted Benefit Base is the Benefit Base that was available on the prior Contract Anniversary (including any Step-Up applied on that prior Contract Anniversary) increased by any Additional Purchase Payments that we applied to the Benefit Base during the Contract Year prior to the current Contract Anniversary. Lifetime Income Date The Lifetime Income Amount guarantee starts on a Lifetime Income Date. This will be the date you purchase the Rider if: - (for Income Plus For Life) you are age 59 1/2 or older at the time; otherwise, the Lifetime Income Date in most cases is the Contract Anniversary on, or immediately following, tHe date you attain age 59 1/2 . - (for Income Plus For Life - Joint Life) both you and your spouse are age 59 1/2 or older at the time; otherwise, the Lifetime Income Date in most cases is the Contract AnniversaRy on, or immediately following, the date the younger spouse would attain age 59 1/2. (The Lifetime Income Date does not change if the younger spouse does not survive to this daTe and the older spouse is still a Covered Person under the Rider.) Benefits under the Rider may be affected if you purchase the Rider before the earliest available Lifetime Income Date and take a withdrawal before then. Please see "Withdrawals before the Lifetime Income Date" for more information. We determine the initial Lifetime Income Amount on the Lifetime Income Date. You cannot change or defer the Lifetime Income Date under the Rider, but you may continue to be eligible for Credits and Step-Ups if you defer taking withdrawals (see "Increases in Guaranteed Amounts" in this section, below). Increases in Guaranteed Amounts CREDITS. We offer the Income Plus For Life Rider with the following Credit features: - Annual Credit Rate - 7% - Credit Period (for Annual Credits) - The initial Credit Period coincides with the first 10 Contract Years while the Rider is in effect. We will extend the Credit Period for Annual Credits each time a Step-Up occurs to the lesser of 10 years from the Step-Up Date or the Age 95 Contract Anniversary. - Ten Year Credit Rate - See "Ten Year Credit" for a description of the rate we use to calculate a Ten Year Credit. - Ten Year Credit Period - The Credit Period for the Ten Year Credit ends on a "Target Date" that coincides with the later of: - the 10th Contract Anniversary after the effective date of the Income Plus For Life Rider; or - the Contract Anniversary on or next following the date the Covered Person attains age 69. Annual Credits. (We refer to an Annual Credit in your Rider as a "Bonus" and we may refer to Annual Credits as "Deferral Credits" in our communications.) We increase the Benefit Base on each Contract Anniversary during the Credit Period for Annual Credits if you take no withdrawals during the previous Contract Year. D-1 EXAMPLE (Income Plus For Life): Assume that you purchase a Contract with an Income Plus For Life Rider when you, the Covered Person, are 61, you take no withdrawals during the first and second Contract Year and the applicable Annual Credit rate is 7%. Also assume that you purchase the Contract and Rider for $100,000, make no Additional Purchase Payments, and there is no increase in Contract Value during the first and second Contract Years. - At the end of the first Contract Year, we will apply an Annual Credit to the Benefit Base and increase it to $107,000 ($100,000 + 7% x $100,000). The Lifetime Income Amount will increase to $5,350 (5% x $107,000). - At the end of the second Contract Year, we will apply an Annual Credit to the Benefit Base and increase it again to $114,000 ($107,000 + 7% x $100,000). The Lifetime Income Amount will increase to $5,700 (5% x $114,000). Now assume you take an Excess Withdrawal of $10,000 during the third Contract Year that reduces the Benefit Base to $100,000, and you take no withdrawal and make an Additional Purchase Payment of $5,000 in the fourth Contract Year. - At the end of the third Contract Year, there is no Credit since you took a withdrawal during the year. - At the end of the fourth Contract Year, we will apply an Annual Credit to the Benefit Base. The Credit will be based on the reduced Benefit Base plus the Additional Purchase Payment (7% x ($100,000 + $5,000) = $7,350). The Benefit Base will increase to $112,350 ($100,000 + $5,000 + $7,350) and the Lifetime Income Amount will increase to $5,618 (5% x $112,350). EXAMPLE (Income Plus For Life - Joint Life): Assume that you purchase a Contract with an Income Plus For Life - Joint life Rider when the younger Covered Person is age 61, you take no withdrawals during the first and second Contract Year and the applicable Annual Credit rate is 7%. Also assume that you purchase the Contract and Rider for $100,000, make no Additional Purchase Payments, and there is no increase in Contract Value during the first and second Contract Years. - At the end of the first Contract Year, we will apply an Annual Credit to the Benefit Base and increase it to $107,000 ($100,000 + 7% x $100,000). The Lifetime Income Amount will increase to $5,083 (4.75% x $107,000). - At the end of the second Contract Year, we will apply an Annual Credit to the Benefit Base and increase it again to $114,000 ($107,000 + 7% x $100,000). The Lifetime Income Amount will increase to $5,415 (4.75% x $114,000). Now assume you take an Excess Withdrawal of $10,000 during the third Contract Year that reduces the Benefit Base to $100,000, and you take no withdrawal and make an Additional Purchase Payment of $5,000 in the fourth Contract Year. - At the end of the third Contract Year, there is no Credit since you took a withdrawal during the year. - At the end of the fourth Contract Year, we will apply an Annual Credit to the Benefit Base. The Credit will be based on the reduced Benefit Base plus the Additional Purchase Payment (7% x ($100,000 + $5,000) = $7,350). The Benefit Base will increase to $112,350 ($100,000 + $5,000 + $7,350) and the Lifetime Income Amount will increase to $5,337 (4.75% x $112,350). Ten Year Credit. (We may refer to the Ten Year Credit as a "Target Amount adjustment" in your Rider and in our communications.) If you take no withdrawals under your Contract from the effective date of the Income Plus For Life Rider until the end of the Ten Year Credit Period, we will make a calculation at that time and, to the extent necessary, apply a Credit so that the Benefit Base will equal the greater of: - the current Benefit Base, as increased by any Annual Credit or Step-Up for the Contract Year ending on the Target Date; or - the Target Amount. The "Ten Year Credit Period" will exceed ten Contract Years if you purchase this Rider before a Covered Person attains age 59. The Target Amount is 200% of all Purchase Payments made in the first Contract Year plus 100% of all Additional Purchase Payments you make prior to the Target Date (subject to our Purchase Payment limits). In no event, however, will we set a Target Amount in excess of $5 million. The Ten Year Credit can provide higher lifetime income than you would otherwise receive under this Rider, as long as you wait until the end of the Target Date to take your first withdrawal. If you plan to purchase this Rider and take a withdrawal prior to the Target Date, then the Ten Year Credit will not be of value to you. In that case, you should only purchase the Rider based on the value of the other features it provides. Restrictions on Investment Options Under Guaranteed Minimum Withdrawal Benefit Riders If you purchase any of our Income Plus For Life Series Riders, you must invest 100% of your Contract Value at all times in one or more of the investment options we make available for these Riders. Under our current rules, you must invest either: (a) among the currently available individual Investment Options (see "Available Individual Investment Options" below); or D-2 (b) in a manner consistent with any one of the currently available Model Allocations (see "Available Model Allocations" below). You may transfer between (a) and (b), or vice versa, on any date subject to our restrictions on frequent trading, provided you transfer 100% of your Contract Value. You may take withdrawals only in accordance with our default procedures; you may not specify the Investment Option from which you wish to make a withdrawal. We will allocate Additional Purchase Payments in accordance with your instructions, subject to the restrictions described herein. All Investment Options may not be available through all distribution partners. YOU SHOULD CONSULT WITH YOUR FINANCIAL ADVISOR TO ASSIST YOU IN DETERMINING WHICH AVAILABLE INDIVIDUAL INVESTMENT OPTION OR MODEL ALLOCATION IS BEST SUITED FOR YOUR FINANCIAL NEEDS AND RISK TOLERANCE. AVAILABLE INDIVIDUAL INVESTMENT OPTIONS. If you purchase a Contract with any of our currently offered Income Plus For Life Series Riders, we restrict the individual Investment Options to which you may allocate your Contract Value. These Investment Options invest in the following Portfolios: - American Asset Allocation Trust (restricted May 4, 2009) - American Fundamental Holdings Trust (restricted May 4, 2009) - Core Allocation Plus Trust (restricted May 4, 2009) - Franklin Templeton Founding Allocation Trust (restricted May 4, 2009) - Lifestyle Balanced Trust - Lifestyle Conservative Trust - Lifestyle Growth Trust - Lifestyle Moderate Trust - Money Market Trust - Core Allocation Trust - Core Fundamental Holdings Trust - Core Global Diversification Trust - Core Balanced Trust You may allocate your Contract Value to any combination of these Investment Options and you may also use our DCA program from the Money Market or any available DCA Fixed Investment Option in connection with your selected Investment Options. WE RESERVE THE RIGHT TO RESTRICT INVESTMENT OPTIONS IN YOUR VARIABLE INVESTMENT ACCOUNT AT ANY TIME. If we restrict an Investment Option, you may not be able to transfer or allocate Contract Value or Purchase Payments to the restricted Investment Option after the date of the restriction. Any amounts you allocated to an Investment Option before we imposed restrictions will not be affected by such restrictions as long as it remains in that Investment Option. If all or a portion of your Contract Value was allocated to one of more of the restricted individual Investment Options above on the last day it was available, you may continue to allocate Additional Purchase Payments to that restricted individual Investment Option. You will not be able to transfer amounts from another Investment Option to the restricted individual Investment Option. You will no longer be able to use that individual Investment Option, however, if you transfer all of your Contract Value out of that individual Investment Option to any of the available individual Investment Options or to any Model Allocation. FOR MORE INFORMATION REGARDING THESE PORTFOLIOS, INCLUDING INFORMATION RELATING TO THEIR INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS, AND THE RISKS OF INVESTING IN SUCH PORTFOLIOS, PLEASE SEE "IV. GENERAL INFORMATION ABOUT US, THE SEPARATE ACCOUNTS AND THE PORTFOLIOS" AS WELL AS THE PROSPECTUS FOR THE APPLICABLE PORTFOLIOS. YOU CAN OBTAIN A COPY OF THE PORTFOLIOS' PROSPECTUSES BY CONTACTING THE ANNUITIES SERVICE CENTER SHOWN ON PAGE II OF THIS PROSPECTUS. YOU SHOULD READ THE PORTFOLIOS' PROSPECTUSES CAREFULLY BEFORE INVESTING IN A CORRESPONDING VARIABLE INVESTMENT OPTION. AVAILABLE MODEL ALLOCATIONS. You may allocate your entire Contract Value to any one of the available Model Allocations in the table shown below. You may also use our DCA program from any available DCA Fixed Investment Option in connection with your selected Model Allocation. If you select a Model Allocation, you authorize us to rebalance your entire Contract Value allocated to your selected Model Allocation on a quarterly basis to the fixed percentages shown in the table for each Investment Option in that Model Allocation. In addition, you may not transfer monies between Investment Options other than to transfer 100% of your Contract Value to another Model Allocation if available or 100% to any one, or any combination of, the available individual Investment Options. D-3 None of the Model Allocations is a fund-of-funds. We do not actively manage any Model Allocation. Once you invest in a Model Allocation, we will not change the allocation percentages (except to rebalance) or component Portfolios based on changes in investment strategy, market conditions or expectations of future performance. Because a Model Allocation does not change, you should periodically consult with your financial advisor to ensure that your selected Model Allocation continues to be appropriate for your needs and circumstances. WE RESERVE THE RIGHT TO RESTRICT THE AVAILABILITY OF MODEL ALLOCATIONS AT ANY TIME. If we restrict a Model Allocation and your Contract Value is allocated to that Model Allocation on the last day it was available, you may continue to allocate your Contract Value to that Model Allocation as long as you continue to allocate your entire Contract Value (other than amounts in a Fixed Account under our DCA Program), including future Purchase Payments, to that Model Allocation. We will continue to rebalance your Contract Value to that Model Allocation on a quarterly basis. You will no longer be able to use that Model Allocation, however, if you transfer your Contract Value to any of the available individual Investment Options, to any other Model Allocation, or to any Variable Investment Option other than as permitted in that Model Allocation. The available Model Allocations are:
MODEL MODEL ALLOCATION ALLOCATION NAME PERCENTAGE PORTFOLIO NAME ---------------- ---------- ------------------------------------ Core Plus Balanced Growth and Income 3% American Global Small Capitalization (available beginning May 4, 2009 to new 3% American Growth and existing Contracts) 3% Global 3% Value Trust 9% Mutual Shares 9% American Blue Chip Income and Growth 6% American Growth-Income 15% American Bond 9% Investment Quality Bond 24% 500 Index Trust 16% Total Bond Market Core Plus Balanced to Growth (available 3% American Global Small Capitalization beginning May 4, 2009 to new and 6% American Growth existing Contracts) 6% Global 3% Value Trust 12% Mutual Shares 9% American Blue Chip Income and Growth 6% American Growth-Income 9% American Bond 6% Investment Quality Bond 30% 500 Index Trust 10% Total Bond Market Balanced: Growth & Income (closed 5% American Global Small Capitalization version - available beginning 5% American Growth September 2, 2008 to new and existing 5% Global Contracts, and restricted May 1, 2009) 5% Value Trust 15% Mutual Shares 15% American Blue Chip Income and Growth 10% American Growth-Income 25% American Bond 15% Investment Quality Bond Balanced Toward Growth (closed version 5% American Global Small Capitalization - available beginning September 2, 2008 10% American Growth to new and existing Contracts, and 10% Global restricted May 1, 2009) 5% Value Trust 20% Mutual Shares 15% American Blue Chip Income and Growth 10% American Growth-Income 15% American Bond 10% Investment Quality Bond
D-4
MODEL MODEL ALLOCATION ALLOCATION NAME PERCENTAGE PORTFOLIO NAME ---------------- ---------- ------------------------------------ Growth Focus (closed version - available 5% American Global Small Capitalization beginning September 2, 2008 to new and 5% Mid Cap Stock existing Contracts, and restricted 15% American Growth May 1, 2009) 10% Global 5% Value Trust 20% Mutual Shares 15% American Blue Chip Income and Growth 15% American Growth-Income 10% American Bond Balanced: Growth & Income (closed 5% American Global Small Capitalization version - available only for Contracts 5% American Growth issued between February 11, 2008 and 5% Global August 29, 2008)(1) 5% Mid Cap Value Trust 15% Mutual Shares 15% American Blue Chip Income and Growth 10% American Growth-Income 25% American Bond 15% Investment Quality Bond Balanced Toward Growth (closed version 5% American Global Small Capitalization - available only for Contracts issued 10% American Growth between February 11, 2008 and August 10% Global 29, 2008)(1) 5% Mid Cap Value Trust 20% Mutual Shares 15% American Blue Chip Income and Growth 10% American Growth-Income 15% American Bond 10% Investment Quality Bond Growth Focus (closed version, available 5% American Global Small Capitalization only for Contracts issued between 5% Mid Cap Stock February 11, 2008 and August 29, 15% American Growth 2008)(1) 10% Global 5% Mid Cap Value Trust 20% Mutual Shares 15% American Blue Chip Income and Growth 15% American Growth-Income 10% American Bond
(1) If you allocated Contract Value to the Model Allocation shown on the last day it was available, you may continue to allocate your Contract Value to that Model Allocation if: (a) you continue to allocate your entire Contract Value (other than amounts in a Fixed Account under our DCA Program), including future Purchase Payments, to that Model Allocation; and (b) you rebalance your entire Contract Value to that Model Allocation on a quarterly basis. You will no longer be able to use that Model Allocation, however, if you transfer your Contract Value to any of the available individual investment options, to any other Model Allocation, or to any Variable Investment Option other than as permitted in that Model Allocation. A MODEL ALLOCATION MAY EXPERIENCE VOLATILITY IN ITS INVESTMENT PERFORMANCE OR LOSE MONEY, DEPENDING ON THE PERFORMANCE OF THE COMPONENT PORTFOLIOS REFERENCED ABOVE. YOUR INVESTMENT IN THE PORTFOLIOS WILL FLUCTUATE AND WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN YOUR ORIGINAL INVESTMENT. FOR MORE INFORMATION REGARDING EACH PORTFOLIO THAT WE PERMIT YOU TO INVEST IN THROUGH A MODEL ALLOCATION, INCLUDING INFORMATION RELATING TO THAT PORTFOLIO'S INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS, AND THE RISKS OF INVESTING IN THAT PORTFOLIO, PLEASE SEE "IV. GENERAL INFORMATION ABOUT US, THE SEPARATE ACCOUNTS AND THE PORTFOLIOS" AS WELL AS THE PORTFOLIO'S PROSPECTUS. YOU CAN OBTAIN A PROSPECTUS CONTAINING MORE COMPLETE INFORMATION ON EACH OF THE PORTFOLIOS, BY CONTACTING THE RESPECTIVE ANNUITIES SERVICE CENTER SHOWN ON PAGE II OF THIS PROSPECTUS. YOU SHOULD READ THE PORTFOLIOS' PROSPECTUSES CAREFULLY BEFORE INVESTING IN THE CORRESPONDING INVESTMENT OPTION. D-5 APPENDIX U: Tables of Accumulation Unit Values The following table provides information about Variable Investment Options available under the Contracts described in this Prospectus. We present this information in columns that compare the value of various classes of accumulation units for each Variable Investment Option during the periods shown. We use accumulation units to measure the value of your investment in a particular Variable Investment Option. Each accumulation unit reflects the value of underlying shares of a particular Portfolio (including dividends and distributions made by that Portfolio), as well as the charges we deduct on a daily basis for Separate Account Annual Expenses (see the Fee Tables section of the Prospectus for additional information on these charges). The table contains information on different classes of accumulation units because we deduct different levels of daily charges. In particular, the table shows accumulation units reflecting the daily charges for: - Venture(R) Opportunity Contracts with no optional benefit Riders; and - Venture(R) Opportunity Contracts issued with an Annual Step-Up Death Benefit Rider. Please note that the fees for guaranteed minimum withdrawal benefit Riders are deducted from Contract Value and, therefore, are not reflected in the accumulation unit values. U-1 Venture Opportunity A Shares JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H ACCUMULATION UNIT VALUES VENTURE OPPORTUNITY A-SHARE VARIABLE ANNUITY
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED 12/31/08 12/31/07 12/31/06 12/31/05 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00 12/31/99 --------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ALL CAP VALUE TRUST - SERIES I SHARES (units first credited 2-11-2008) Venture Opportunity A-Share Contracts with No Optional Benefits Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 9.343 -- -- -- -- -- -- -- -- -- No. of Units 6,029 -- -- -- -- -- -- -- -- -- Venture Opportunity A-Share Contracts with the Annual Step Death Benefit Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 9.326 -- -- -- -- -- -- -- -- -- No. of Units 4,360 -- -- -- -- -- -- -- -- -- AMERICAN ASSET ALLOCATION TRUST - SERIES III SHARES (units first credited 2-11-2008) Venture Opportunity A-Share Contracts with No Optional Benefits Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 9.240 -- -- -- -- -- -- -- -- -- No. of Units 2,360,593 -- -- -- -- -- -- -- -- -- Venture Opportunity A-Share Contracts with the Annual Step Death Benefit Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 9.223 -- -- -- -- -- -- -- -- -- No. of Units 1,252,214 -- -- -- -- -- -- -- -- -- AMERICAN BLUE CHIP INCOME AND GROWTH TRUST - SERIES III SHARES (units first credited 2-11-2008) Venture Opportunity A-Share Contracts with No Optional Benefits Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 8.503 -- -- -- -- -- -- -- -- -- No. of Units 1,198,423 -- -- -- -- -- -- -- -- -- Venture Opportunity A-Share Contracts with the Annual Step Death Benefit Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 8.488 -- -- -- -- -- -- -- -- -- No. of Units 563,322 -- -- -- -- -- -- -- -- -- AMERICAN BOND TRUST - SERIES III SHARES (units first credited 2-11-2008) Venture Opportunity A-Share Contracts with No Optional Benefits Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 11.189 -- -- -- -- -- -- -- -- -- No. of Units 1,097,180 -- -- -- -- -- -- -- -- -- Venture Opportunity A-Share Contracts with the Annual Step Death Benefit Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 11.169 -- -- -- -- -- -- -- -- -- No. of Units 558,159 -- -- -- -- -- -- -- -- -- AMERICAN FUNDAMENTAL HOLDINGS TRUST - SERIES III SHARES (units first credited 2-11-2008) Venture Opportunity A-Share Contracts with No Optional Benefits Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 9.093 -- -- -- -- -- -- -- -- -- No. of Units 975,406 -- -- -- -- -- -- -- -- -- Venture Opportunity A-Share Contracts with the Annual Step Death Benefit Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 9.077 -- -- -- -- -- -- -- -- -- No. of Units 527,965 -- -- -- -- -- -- -- -- -- AMERICAN GLOBAL GROWTH TRUST - SERIES III SHARES (units first credited 2-11-2008) Venture Opportunity A-Share Contracts with No Optional Benefits Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 8.360 -- -- -- -- -- -- -- -- -- No. of Units 7,185 -- -- -- -- -- -- -- -- -- Venture Opportunity A-Share Contracts with the Annual Step Death Benefit Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 8.345 -- -- -- -- -- -- -- -- -- No. of Units 21,506 -- -- -- -- -- -- -- -- --
U-2 Venture Opportunity A Shares
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED 12/31/08 12/31/07 12/31/06 12/31/05 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00 12/31/99 --------- -------- -------- -------- -------- -------- -------- -------- -------- -------- AMERICAN GLOBAL SMALL CAPITALIZATION TRUST - SERIES III SHARES (units first credited 2-11-2008) Venture Opportunity A-Share Contracts with No Optional Benefits Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 6.460 -- -- -- -- -- -- -- -- -- No. of Units 515,110 -- -- -- -- -- -- -- -- -- Venture Opportunity A-Share Contracts with the Annual Step Death Benefit Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 6.448 -- -- -- -- -- -- -- -- -- No. of Units 238,281 -- -- -- -- -- -- -- -- -- AMERICAN GROWTH TRUST - SERIES III SHARES (units first credited 2-11-2008) Venture Opportunity A-Share Contracts with No Optional Benefits Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 7.478 -- -- -- -- -- -- -- -- -- No. of Units 861,674 -- -- -- -- -- -- -- -- -- Venture Opportunity A-Share Contracts with the Annual Step Death Benefit Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 7.465 -- -- -- -- -- -- -- -- -- No. of Units 385,548 -- -- -- -- -- -- -- -- -- AMERICAN GROWTH-INCOME TRUST - SERIES III SHARES (units first credited 2-11-2008) Venture Opportunity A-Share Contracts with No Optional Benefits Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 8.328 -- -- -- -- -- -- -- -- -- No. of Units 953,330 -- -- -- -- -- -- -- -- -- Venture Opportunity A-Share Contracts with the Annual Step Death Benefit Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 8.313 -- -- -- -- -- -- -- -- -- No. of Units 446,688 -- -- -- -- -- -- -- -- -- AMERICAN HIGH-INCOME BOND TRUST - SERIES III SHARES (units first credited 2-11-2008) Venture Opportunity A-Share Contracts with No Optional Benefits Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 9.743 -- -- -- -- -- -- -- -- -- No. of Units 7,009 -- -- -- -- -- -- -- -- -- Venture Opportunity A-Share Contracts with the Annual Step Death Benefit Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 9.726 -- -- -- -- -- -- -- -- -- No. of Units 2,348 -- -- -- -- -- -- -- -- -- AMERICAN INTERNATIONAL TRUST - SERIES III SHARES (units first credited 2-11-2008) Venture Opportunity A-Share Contracts with No Optional Benefits Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 8.103 -- -- -- -- -- -- -- -- -- No. of Units 27,466 -- -- -- -- -- -- -- -- -- Venture Opportunity A-Share Contracts with the Annual Step Death Benefit Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 8.089 -- -- -- -- -- -- -- -- -- No. of Units 5,019 -- -- -- -- -- -- -- -- -- AMERICAN NEW WORLD TRUST - SERIES III SHARES (units first credited 2-11-2008) Venture Opportunity A-Share Contracts with No Optional Benefits Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 7.839 -- -- -- -- -- -- -- -- -- No. of Units 4,561 -- -- -- -- -- -- -- -- -- Venture Opportunity A-Share Contracts with the Annual Step Death Benefit Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 7.825 -- -- -- -- -- -- -- -- -- No. of Units 8,691 -- -- -- -- -- -- -- -- --
U-3 Venture Opportunity A Shares
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED 12/31/08 12/31/07 12/31/06 12/31/05 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00 12/31/99 --------- -------- -------- -------- -------- -------- -------- -------- -------- -------- CORE ALLOCATION PLUS TRUST - SERIES I SHARES (units first credited 2-11-2008) Venture Opportunity A-Share Contracts with No Optional Benefits Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 9.030 -- -- -- -- -- -- -- -- -- No. of Units 295,029 -- -- -- -- -- -- -- -- -- Venture Opportunity A-Share Contracts with the Annual Step Death Benefit Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 9.014 -- -- -- -- -- -- -- -- -- No. of Units 149,766 -- -- -- -- -- -- -- -- -- CORE EQUITY TRUST - SERIES I SHARES (units first credited 2-11-2008) Venture Opportunity A-Share Contracts with No Optional Benefits Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 6.300 -- -- -- -- -- -- -- -- -- No. of Units 10,324 -- -- -- -- -- -- -- -- -- Venture Opportunity A-Share Contracts with the Annual Step Death Benefit Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 6.289 -- -- -- -- -- -- -- -- -- No. of Units 1,944 -- -- -- -- -- -- -- -- -- FRANKLIN TEMPLETON FOUNDING ALLOCATION TRUST - SERIES I SHARES (units first credited 2-11-2008) Venture Opportunity A-Share Contracts with No Optional Benefits Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 8.686 -- -- -- -- -- -- -- -- -- No. of Units 810,066 -- -- -- -- -- -- -- -- -- Venture Opportunity A-Share Contracts with the Annual Step Death Benefit Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 8.671 -- -- -- -- -- -- -- -- -- No. of Units 496,535 -- -- -- -- -- -- -- -- -- FUNDAMENTAL VALUE TRUST - SERIES I SHARES (units first credited 2-11-2008) Venture Opportunity A-Share Contracts with No Optional Benefits Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 8.186 -- -- -- -- -- -- -- -- -- No. of Units 11,079 -- -- -- -- -- -- -- -- -- Venture Opportunity A-Share Contracts with the Annual Step Death Benefit Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 8.172 -- -- -- -- -- -- -- -- -- No. of Units 7,764 -- -- -- -- -- -- -- -- -- GLOBAL BOND TRUST - SERIES I SHARES (units first credited 2-11-2008) Venture Opportunity A-Share Contracts with No Optional Benefits Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 11.412 -- -- -- -- -- -- -- -- -- No. of Units 6,853 -- -- -- -- -- -- -- -- -- Venture Opportunity A-Share Contracts with the Annual Step Death Benefit Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 11.392 -- -- -- -- -- -- -- -- -- No. of Units 7,023 -- -- -- -- -- -- -- -- -- GLOBAL TRUST - SERIES I SHARES (units first credited 2-11-2008) Venture Opportunity A-Share Contracts with No Optional Benefits Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 8.510 -- -- -- -- -- -- -- -- -- No. of Units 627,553 -- -- -- -- -- -- -- -- -- Venture Opportunity A-Share Contracts with the Annual Step Death Benefit Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 8.495 -- -- -- -- -- -- -- -- -- No. of Units 278,523 -- -- -- -- -- -- -- -- --
U-4 Venture Opportunity A Shares
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED 12/31/08 12/31/07 12/31/06 12/31/05 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00 12/31/99 --------- -------- -------- -------- -------- -------- -------- -------- -------- -------- INTERNATIONAL CORE TRUST - SERIES I SHARES (units first credited 2-11-2008) Venture Opportunity A-Share Contracts with No Optional Benefits Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 8.784 -- -- -- -- -- -- -- -- -- No. of Units -- -- -- -- -- -- -- -- -- -- Venture Opportunity A-Share Contracts with the Annual Step Death Benefit Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 8.768 -- -- -- -- -- -- -- -- -- No. of Units -- -- -- -- -- -- -- -- -- -- INTERNATIONAL SMALL CAP TRUST - SERIES I SHARES (units first credited 2-11-2008) Venture Opportunity A-Share Contracts with No Optional Benefits Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 6.634 -- -- -- -- -- -- -- -- -- No. of Units 1,434 -- -- -- -- -- -- -- -- -- Venture Opportunity A-Share Contracts with the Annual Step Death Benefit Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 6.622 -- -- -- -- -- -- -- -- -- No. of Units 3,599 -- -- -- -- -- -- -- -- -- INTERNATIONAL VALUE TRUST - SERIES I SHARES (units first credited 2-11-2008) Venture Opportunity A-Share Contracts with No Optional Benefits Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 8.164 -- -- -- -- -- -- -- -- -- No. of Units 3,978 -- -- -- -- -- -- -- -- -- Venture Opportunity A-Share Contracts with the Annual Step Death Benefit Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 8.149 -- -- -- -- -- -- -- -- -- No. of Units 2,725 -- -- -- -- -- -- -- -- -- INVESTMENT QUALITY BOND TRUST - SERIES I SHARES (units first credited 2-11-2008) Venture Opportunity A-Share Contracts with No Optional Benefits Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 12.054 -- -- -- -- -- -- -- -- -- No. of Units 552,692 -- -- -- -- -- -- -- -- -- Venture Opportunity A-Share Contracts with the Annual Step Death Benefit Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 12.033 -- -- -- -- -- -- -- -- -- No. of Units 277,368 -- -- -- -- -- -- -- -- -- LIFESTYLE BALANCED TRUST - SERIES I SHARES (units first credited 2-11-2008) Venture Opportunity A-Share Contracts with No Optional Benefits Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 9.053 -- -- -- -- -- -- -- -- -- No. of Units 970,882 -- -- -- -- -- -- -- -- -- Venture Opportunity A-Share Contracts with the Annual Step Death Benefit Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 9.036 -- -- -- -- -- -- -- -- -- No. of Units 406,955 -- -- -- -- -- -- -- -- -- LIFESTYLE CONSERVATIVE TRUST - SERIES I SHARES (units first credited 2-11-2008) Venture Opportunity A-Share Contracts with No Optional Benefits Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 10.577 -- -- -- -- -- -- -- -- -- No. of Units 191,066 -- -- -- -- -- -- -- -- -- Venture Opportunity A-Share Contracts with the Annual Step Death Benefit Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 10.558 -- -- -- -- -- -- -- -- -- No. of Units 70,395 -- -- -- -- -- -- -- -- --
U-5 Venture Opportunity A Shares
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED 12/31/08 12/31/07 12/31/06 12/31/05 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00 12/31/99 --------- -------- -------- -------- -------- -------- -------- -------- -------- -------- LIFESTYLE GROWTH TRUST - SERIES I SHARES (units first credited 2-11-2008) Venture Opportunity A-Share Contracts with No Optional Benefits Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 8.531 -- -- -- -- -- -- -- -- -- No. of Units 1,011,188 -- -- -- -- -- -- -- -- -- Venture Opportunity A-Share Contracts with the Annual Step Death Benefit Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 8.516 -- -- -- -- -- -- -- -- -- No. of Units 575,415 -- -- -- -- -- -- -- -- -- LIFESTYLE MODERATE TRUST - SERIES I SHARES (units first credited 2-11-2008) Venture Opportunity A-Share Contracts with No Optional Benefits Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 9.757 -- -- -- -- -- -- -- -- -- No. of Units 236,887 -- -- -- -- -- -- -- -- -- Venture Opportunity A-Share Contracts with the Annual Step Death Benefit Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 9.739 -- -- -- -- -- -- -- -- -- No. of Units 129,554 -- -- -- -- -- -- -- -- -- MID CAP INTERSECTION TRUST - SERIES I SHARES (units first credited 2-11-2008) Venture Opportunity A-Share Contracts with No Optional Benefits Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 7.773 -- -- -- -- -- -- -- -- -- No. of Units -- -- -- -- -- -- -- -- -- -- Venture Opportunity A-Share Contracts with the Annual Step Death Benefit Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 7.759 -- -- -- -- -- -- -- -- -- No. of Units 625 -- -- -- -- -- -- -- -- -- MID CAP STOCK TRUST - SERIES I SHARES (units first credited 2-11-2008) Venture Opportunity A-Share Contracts with No Optional Benefits Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 7.783 -- -- -- -- -- -- -- -- -- No. of Units 105,189 -- -- -- -- -- -- -- -- -- Venture Opportunity A-Share Contracts with the Annual Step Death Benefit Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 7.769 -- -- -- -- -- -- -- -- -- No. of Units 38,477 -- -- -- -- -- -- -- -- -- MID CAP VALUE TRUST - SERIES I SHARES (units first credited 2-11-2008) Venture Opportunity A-Share Contracts with No Optional Benefits Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 8.178 -- -- -- -- -- -- -- -- -- No. of Units 271,438 -- -- -- -- -- -- -- -- -- Venture Opportunity A-Share Contracts with the Annual Step Death Benefit Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 8.164 -- -- -- -- -- -- -- -- -- No. of Units 127,510 -- -- -- -- -- -- -- -- -- MONEY MARKET TRUST - SERIES I SHARES (units first credited 2-11-2008) Venture Opportunity A-Share Contracts with No Optional Benefits Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 12.583 -- -- -- -- -- -- -- -- -- No. of Units 84,078 -- -- -- -- -- -- -- -- -- Venture Opportunity A-Share Contracts with the Annual Step Death Benefit Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 12.561 -- -- -- -- -- -- -- -- -- No. of Units 93,859 -- -- -- -- -- -- -- -- --
U-6 Venture Opportunity A Shares
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED 12/31/08 12/31/07 12/31/06 12/31/05 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00 12/31/99 --------- -------- -------- -------- -------- -------- -------- -------- -------- -------- MUTUAL SHARES TRUST - SERIES I SHARES (units first credited 2-11-2008) Venture Opportunity A-Share Contracts with No Optional Benefits Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 8.384 -- -- -- -- -- -- -- -- -- No. of Units 1,457,914 -- -- -- -- -- -- -- -- -- Venture Opportunity A-Share Contracts with the Annual Step Death Benefit Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 8.369 -- -- -- -- -- -- -- -- -- No. of Units 666,111 -- -- -- -- -- -- -- -- -- SMALL CAP GROWTH TRUST - SERIES I SHARES (units first credited 2-11-2008) Venture Opportunity A-Share Contracts with No Optional Benefits Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 8.289 -- -- -- -- -- -- -- -- -- No. of Units 878 -- -- -- -- -- -- -- -- -- Venture Opportunity A-Share Contracts with the Annual Step Death Benefit Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 8.274 -- -- -- -- -- -- -- -- -- No. of Units 1,202 -- -- -- -- -- -- -- -- -- SMALL CAP INTRINSIC VALUE TRUST - SERIES I SHARES (units first credited 2-11-2008) Venture Opportunity A-Share Contracts with No Optional Benefits Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 5.775 -- -- -- -- -- -- -- -- -- No. of Units -- -- -- -- -- -- -- -- -- -- Venture Opportunity A-Share Contracts with the Annual Step Death Benefit Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 5.765 -- -- -- -- -- -- -- -- -- No. of Units -- -- -- -- -- -- -- -- -- -- SMALL CAP VALUE TRUST - SERIES I SHARES (units first credited 2-11-2008) Venture Opportunity A-Share Contracts with No Optional Benefits Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 9.778 -- -- -- -- -- -- -- -- -- No. of Units 69 -- -- -- -- -- -- -- -- -- Venture Opportunity A-Share Contracts with the Annual Step Death Benefit Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 9.761 -- -- -- -- -- -- -- -- -- No. of Units 754 -- -- -- -- -- -- -- -- -- TOTAL RETURN TRUST - SERIES I SHARES (units first credited 2-11-2008) Venture Opportunity A-Share Contracts with No Optional Benefits Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 12.304 -- -- -- -- -- -- -- -- -- No. of Units 31,805 -- -- -- -- -- -- -- -- -- Venture Opportunity A-Share Contracts with the Annual Step Death Benefit Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 12.282 -- -- -- -- -- -- -- -- -- No. of Units 10,310 -- -- -- -- -- -- -- -- -- VALUE TRUST - SERIES I SHARES (units first credited 2-11-2008) Venture Opportunity A-Share Contracts with No Optional Benefits Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 7.840 -- -- -- -- -- -- -- -- -- No. of Units 152,328 -- -- -- -- -- -- -- -- -- Venture Opportunity A-Share Contracts with the Annual Step Death Benefit Value at Start of Year 12.500 -- -- -- -- -- -- -- -- -- Value at End of Year 7.826 -- -- -- -- -- -- -- -- -- No. of Units 71,098 -- -- -- -- -- -- -- -- --
U-7 PART B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION Statement of Additional Information dated May 1, 2009 (JOHN HANCOCK(R) LOGO) JOHN HANCOCK ANNUITIES Statement of Additional Information John Hancock Life Insurance Company (U.S.A.) Separate Account H THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS. This Statement of Additional Information should be read in conjunction with the Prospectuses dated the same date as this Statement of Additional Information. This Statement of Additional Information describes additional information regarding the variable portion of the flexible purchase payment individual deferred variable annuity contracts (singly, a "Contract and collectively, the "Contracts" issued by JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) ("John Hancock USA") in all jurisdictions except New York as follows: PROSPECTUSES ISSUED BY JOHN HANCOCK USA (to be read with this Statement of Additional Information) Venture (R) Opportunity A Share Variable Annuities Venture (R) Opportunity B Share Variable Annuities You may obtain a copy of the Prospectus listed above by contacting us at the following addresses: JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) ANNUITIES SERVICE CENTER MAILING ADDRESS 164 Corporate Drive Post Office Box 9505 Portsmouth, NH 03801-6815 Portsmouth, NH 03802-9505 (617) 663-3000 or (800) 344-1029 www.jhannuities.com JHUSA SEP ACCT H SAI 05/09 Table of Contents GENERAL INFORMATION AND HISTORY........................................... 1 SERVICES.................................................................. 1 Independent Registered Public Accounting Firm.......................... 1 Servicing Agent........................................................ 1 Principal Underwriter.................................................. 1 Special Compensation and Reimbursement Arrangements.................... 2 STATE VARIATIONS REGARDING RECOGNITION OF SAME-SEX COUPLES................ 3 QUALIFIED PLAN TYPES...................................................... 4 LEGAL AND REGULATORY MATTERS.............................................. 8 APPENDIX A: FINANCIAL STATEMENTS.......................................... A-1
General Information and History John Hancock Life Insurance Company (U.S.A.) Separate Account H, (the "Separate Account") (formerly, The Manufacturers Life Insurance Company (U.S.A.) Separate Account H) is a separate investment account of John Hancock Life Insurance Company (U.S.A.), ("we," "us," "the Company," or "John Hancock USA") (formerly, The Manufacturers Life Insurance Company (U.S.A.)). We are a stock life insurance company organized under the laws of Delaware in 1979. Our principal office is located at 38500 Woodward Avenue Bloomfield Hills, Michigan 48304. We also have an Annuities Service Center located at 164 Corporate Drive, Portsmouth, New Hampshire 03801-6815. Our ultimate parent is Manulife Financial Corporation ("MFC") based in Toronto, Canada. MFC is the holding company of The Manufacturers Life Insurance Company and its subsidiaries, collectively known as Manulife Financial. The Separate Account was established on August 24, 1984 as a separate account of The Manufacturers Life Insurance Company of North America ("Manulife North America"), another wholly-owned subsidiary of MFC which on January 1, 2002 merged into the Company. As a result of this merger, the Company became the owner of all of Manulife North America's assets, including the assets of the Separate Account and assumed all of Manulife North America's obligations including those under the contracts. The merger had no other effect on the terms and conditions of the contracts or on your allocations among investment options. Our financial statements which are included in this Statement of Additional Information should be considered only as bearing on our ability to meet our obligations under the contracts. They should not be considered as bearing on the investment performance of the assets held in the Separate Account. Services Independent Registered Public Accounting Firm The consolidated financial statements of John Hancock Life Insurance Company (U.S.A.) at December 31, 2008 and 2007 and for each of the three years in the period ended December 31, 2008, and the financial statements of John Hancock Life Insurance Company (U.S.A.) Separate Account H at December 31, 2008 and for each of the two years in the period ended December 31, 2008, appearing in this 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. Servicing Agent Computer Sciences Corporation Financial Services Group ("CSC FSG") provides to us a computerized data processing recordkeeping system for variable annuity administration. CSC FSG provides various daily, semimonthly, monthly, semiannual and annual reports including: - daily updates on accumulation unit values, variable annuity participants and transactions, and agent production and commissions; - semimonthly commission statements; - monthly summaries of agent production and daily transaction reports; - semiannual statements for contract owners; and - annual contract owner tax reports. We pay CSC FSG approximately $7.80 per Contract per year, plus certain other fees for the services provided. Principal Underwriter John Hancock Distributors, LLC, ("JH Distributors"), an indirect wholly owned subsidiary of MFC, serves as principal underwriter of the contracts. Contracts are offered on a continuous basis. The aggregate dollar amounts of underwriting commissions paid to JH Distributors in 2008, 2007, and 2006 were $597,650,909, $657,183,413, and $516,555,523, respectively. 1 Special Compensation and Reimbursement Arrangements The Contracts are primarily sold through selected firms. The Contracts' principal distributor, JH Distributors, and its affiliates (collectively, "JHD") pay compensation to broker-dealers (firms) for the promotion and sale of the Contracts. The compensation JHD pays may vary depending on each firm's selling agreement, but compensation (inclusive of wholesaler overrides and expense allowances) paid to the firms for sale of the Contracts (not including riders) is not expected to exceed the standard compensation amounts referenced in the product prospectuses. The amount and timing of this compensation may differ among firms. The registered representative through whom your Contract is sold will be compensated pursuant to that registered representative's own arrangement with his or her broker-dealer. The registered representative and the firm may have multiple options on how they wish to allocate their commissions and/or compensation. We are not involved in determining your registered representative's compensation. You are encouraged to ask your registered representative about the basis upon which he or she will be personally compensated for the advice or recommendations provided in connection with the sale of your Contract. Compensation to firms for the promotion and sale of the Contracts is not paid directly by Contract owners, but we expect to recoup it through the fees and charges imposed under the Contract. We may, directly or through JHD, make, either from 12b-1 distribution fees received from the Contracts' underlying investment Portfolios or out of our own resources, additional payments to firms. These payments are sometimes referred to as "revenue sharing." Revenue sharing expenses are any payments made to broker-dealers or other intermediaries to either (i) compensate the intermediary for expenses incurred in connection with the promotion and/or sale of John Hancock investment products or (ii) obtain promotional and/or distribution services for John Hancock investment products. Many firms that sell the Contracts receive one or more types of these cash payments. We are among several insurance companies that pay additional payments to certain firms to receive "preferred" or recommended status. These privileges include: additional or special access to sales staff; opportunities to provide and/or attend training and other conferences; advantageous placement of our products on customer lists ("shelf-space arrangements"); and other improvements in sales by featuring our products over others. Revenue sharing payments assist in our efforts to promote the sale of the Contracts and could be significant to a firm. Not all firms, however, receive additional compensation. We determine which firms to support and the extent of the payments we are willing to make, and generally choose to compensate firms that are willing to cooperate with our promotional efforts and have a strong capability to distribute the Contracts. We do not make an independent assessment of the cost of providing such services. Instead, we agree with the firm on the methods for calculating any additional compensation. The methods, which vary by firm and are further described below, may include different categories to measure the amount of revenue sharing payments, such as the level of sales, assets attributable to the firm and the variable annuity contracts covered under the arrangement (including contracts issued by any of our affiliates). The categories of revenue sharing payments that we may provide to firms, directly or through JHD, are not mutually exclusive and may vary from Contract to Contract. We or our affiliates may make additional types of revenue sharing payments for other products, and may enter into new revenue sharing arrangements in the future. Currently, Edward Jones & Company, a member firm of the Financial Industry Regulatory Authority ("FINRA," formerly the National Association of Securities Dealers, Inc., or "NASD") is the exclusive distributor soliciting sales of the Venture Opportunity variable annuity contract. We anticipate making revenue sharing payments of more than $5,000 to Edward Jones & Company with respect to Venture Opportunity annuity business during calendar year 2008. Your registered representative can provide you with more information about the compensation arrangements that apply upon the sale of a variable annuity contract. The sums paid to Edward Jones & Company do not necessarily constitute "special cash compensation" as defined by NASD Conduct Rule 2830(l)(4). We will endeavor to update this disclosure annually; interim arrangements may not be reflected. We assume no duty to notify any investor whether his or her registered representative is or should be included in any such disclosure. You are encouraged to review the prospectus for each Portfolio for any other compensation arrangements pertaining to the distribution of Portfolio shares. We may, directly or through JHD, also have arrangements with intermediaries that are not members of FINRA. Sales and Asset Based Payments. We may, directly or through JHD, make revenue sharing payments as incentives to certain firms to promote and sell the Contracts. We hope to benefit from revenue sharing by increasing Contract sales. In consideration for revenue sharing, a firm may feature the Contracts in its sales system or give us additional access to members of its sales force or management. In addition, a firm may agree to participate in our marketing efforts by allowing us to participate in conferences, seminars or other programs attended by the firm's sales force. Although a firm may seek revenue sharing payments to offset costs 2 incurred by the firm in servicing its clients that have purchased the Contracts, the firm may earn a profit on these payments. Revenue sharing payments may provide a firm with an incentive to favor the Contracts in its sales efforts. The revenue sharing payments we make may be calculated on sales of our products by the firm ("Sales-Based Payments"). These payments are based upon a percentage of the total amount of money received, or anticipated to be received, for sales through a firm of some or all of the insurance products that we and/or our affiliates offer. We make these payments on a periodic basis. Such payments also may be calculated based upon the "assets under management" attributable to a particular firm ("Asset-Based Payments"). These payments are based upon a percentage of the contract value of some or all of our (and/or our affiliates') insurance products that were sold through the firm. We make these payments on a periodic basis. Sales-Based Payments primarily create incentives to make new sales of our insurance products and Asset-Based Payments primarily create incentives to service and maintain previously sold Contracts. We may pay a firm either or both Sales-Based Payments and Asset-Based Payments. Administrative and Processing Support Payments. We may, directly or through JHD, also make payments to certain firms that sell our products for certain administrative services, including record keeping and sub-accounting Contract owner accounts, and in connection with account maintenance support, statement preparation and transaction processing. The types of payments that we may make under this category include, among others, payment of ticket charges per purchase or exchange order placed by a firm, payment of networking fees in connection with certain mutual fund trading systems, or one-time payments for ancillary services such as setting up funds on a firm's mutual fund trading system. Other Payments. We may, directly or through JHD, also provide, either from the 12b-1 distribution fees received from the Portfolios underlying the Contracts or out of our own resources, additional compensation to firms that sell or arrange for the sale of Contracts. Such compensation may include seminars for the public, advertising and sales campaigns regarding the Contracts to assist a firm in connection with its systems, operations and marketing expenses, or for other activities of a selling firm or wholesaler. We may contribute to, as well as sponsor, various educational programs, sales contests and/or promotions in which participating firms and their sales persons may receive prizes such as merchandise, cash, or other awards. Other compensation may be offered to the extent not prohibited by federal or state laws or any self-regulatory agency, such as FINRA. We make payments for entertainment events we deem appropriate, subject to our guidelines and applicable law. These payments may vary widely, depending upon the nature of the event or the relationship. We may make these payments upon the initiation of a relationship with a firm, and at any time thereafter. We may have other relationships with firms relating to the provisions of services to the Contracts, such as providing omnibus account services, transaction processing services, or effecting portfolio transactions for Portfolios. If a firm provides these services, we may compensate the firm for these services. In addition, a firm may have other compensated or uncompensated relationships with us that are not related to the Contracts. State Variations Regarding Recognition of Same-Sex Couples The Federal Defense of Marriage Act ("DOMA") does not recognize civil unions or same-sex marriage. Therefore, the federal tax treatment available to spouses who fall within the definition of DOMA may not be available to civil union or same-sex marriage partners. However, the following table identifies the states that may, pursuant to state law, extend to civil union and same-sex marriage partners the same benefits (other than federal tax benefits) that are granted to spouses who fall within the definition of DOMA:
STATE TYPE OF JURISDICTION RELATED RULE -------------------- ----------------------------------- -------------------------------------------------- California Domestic Partnership Connecticut Civil Union, Same-Sex Marriage District of Columbia Domestic Partnership Hawaii Reciprocal Beneficiary Relationship Iowa Same-Sex Marriage Maine Domestic Partnerships Maryland Domestic Partnership Massachusetts Same-Sex Marriage New Hampshire Civil Union New Jersey Civil Union, Also recognizes spouses of same-sex marriages who
3
STATE TYPE OF JURISDICTION RELATED RULE -------------------- ----------------------------------- -------------------------------------------------- Domestic Partnership were married in another jurisdiction New York -- Recognizes spouses of civil unions and same-sex marriages who were married in another jurisdiction Oregon Domestic Partnership Rhode Island -- Recognizes spouses of civil unions and same-sex marriages who were married in another jurisdiction Vermont Same-Sex Marriage Washington Domestic Partnership
Qualified Plan Types TRADITIONAL IRAS Individual Retirement Annuities Section 408 of the Code permits eligible individuals to contribute to an individual retirement program known as an Individual Retirement Annuity or IRA (sometimes referred to as a traditional IRA to distinguish it from the Roth IRA discussed below). IRAs are subject to limits on the amounts that may be contributed and deducted, the persons who may be eligible and the time when distributions may commence. Also, distributions from certain other types of qualified retirement plans may be rolled over on a tax-deferred basis into an IRA. The Contract may not, however, be used in connection with an Education IRA under Section 530 of the Code. The Contract may be issued with a death benefit or certain benefits provided by an optional rider. The presence of such benefits may increase the amount of any required minimum distributions for IRAs and other Contracts subject to the required minimum distribution rules. Distributions In general, unless you have made non-deductible contributions to your IRA, all amounts paid out from a traditional IRA contract (in the form of an annuity, a single sum, death benefits or partial withdrawal), are taxable to the payee as ordinary income. As in the case of a Contract not purchased under a Qualified Plan, you may incur an additional 10% penalty tax if you make a surrender or withdrawal before you reach age 59 1/2 (unless certain exceptions apply as specified in Code Section 72(t)). If you have made any non-deductible contributions to an IRA contract, all or part of any withdrawal or surrender distribution, single sum death benefit or annuity payment, may be excluded from your taxable income when you receive the distribution. The tax law requires that annuity payments or other distributions under a traditional IRA contract begin no later than April 1 of the year following the year in which the Owner attains age 70 1/2. The amount that must be distributed each year is computed on the basis of the Owner's age and the value of the Contract, taking into account both the account balance and, in 2006 and subsequent years, the actuarial present value of other benefits provided under the Contract. ROTH IRAS Section 408A of the Code permits eligible individuals to contribute to a type of IRA known as a Roth IRA. Roth IRAs are generally subject to the same rules as non-Roth IRAs, but they differ in certain significant respects. Among the differences are that contributions to a Roth IRA are not deductible and qualified distributions from a Roth IRA are excluded from income. A qualified distribution is a distribution that satisfies two requirements. First, the distribution must be made in a taxable year that is at least five years after the first taxable year for which a contribution to any Roth IRA established for the Owner was made. Second, the distribution must be: - made after the Owner attains age 59 1/2; - made after the Owner's death; - attributable to the Owner being disabled; or - a qualified first-time homebuyer distribution within the meaning of Section 72(t) (2) (F) of the Code. In addition, distributions from Roth IRAs need not commence when the Owner attains age 70 1/2. Distributions must, however, begin after the Owner's death. A Roth IRA may (subject to constraints explained below under "Conversion or Direct Rollover to a Roth IRA") accept a "qualified rollover contribution" from another Roth IRA, a traditional IRA, a qualified retirement plan described in Section 401(a) or 403(a) of the Code, a tax-sheltered annuity contract described in Section 403(b) of the Code, or an eligible deferred compensation plan maintained by a governmental employer under Section 457(b) of the Code. 4 If the Contract is issued with certain death benefits or benefits provided by an optional rider, the presence of these benefits may increase the amount of any required minimum distributions for IRAs (which include Roth IRAs) and other Contracts subject to the minimum distribution rules. Also, the state tax treatment of a Roth IRA may differ from the federal income tax treatment of a Roth IRA. YOU SHOULD SEEK INDEPENDENT TAX ADVICE IF YOU INTEND TO USE THE CONTRACT IN CONNECTION WITH A ROTH IRA. Conversion or Direct Rollover to a Roth IRA You can convert a traditional IRA to a Roth IRA or directly roll over distributions that you receive from a retirement plan described in Sections 401(a), 403(a), or 403(b) of the Code or a governmental deferred compensation plan described in Section 457(b) of the Code to a Roth IRA unless: - you have adjusted gross income over $100,000; or - you are a married tax payer filing a separate return. These restrictions do not apply in tax years beginning after December 31, 2009. The Roth IRA annual contribution limit does not apply to converted or rollover amounts. You must, however, pay tax on any portion of the converted or rollover amount that would have been taxed if you had not converted or rolled over to a Roth IRA. No similar limitations apply to rollovers to a Roth IRA from another Roth IRA or from a designated Roth account within a qualified retirement plan. Please note that the amount deemed to be the "converted amount" for tax purposes may be higher than the Contract Value because of the deemed value of guarantees. If the converted or rollover amount is held in an annuity contract issued by us, we may have to withhold (make a contract withdrawal and remit to the IRS) up to 20% of the taxable gain in the contract. This amount withheld could reduce the benefit value of any elected optional guarantee rider, in a proportion determined by the rider. You may find it advantageous to pay the tax due on the conversion from resources outside of the annuity contract in order to avoid any benefit reduction. YOU SHOULD SEEK INDEPENDENT TAX ADVICE IF YOU INTEND TO USE THE CONTRACT IN CONNECTION WITH A ROTH IRA. SIMPLE IRA PLANS In general, under Section 408(p) of the Code a small business employer may establish a SIMPLE IRA retirement plan if the employer employed no more than 100 employees earning at least $5,000 during the preceding year. Under a SIMPLE IRA plan both employees and the employer make deductible contributions. SIMPLE IRAs are subject to various requirements, including limits on the amounts that may be contributed, the persons who may be eligible, and the time when distributions may commence. If the Contract is issued with certain death benefits or benefits provided by an optional rider, the presence of these benefits may increase the amount of any required minimum distributions for IRAs (which would include SIMPLE IRAs) and other Contracts subject to the minimum distribution rules. The requirements for minimum distributions from a SIMPLE IRA retirement plan are generally the same as those discussed above for distributions from a traditional IRA. The rules on taxation of distributions are also similar to those that apply to a traditional IRA, except that (i) tax free rollovers may be made from a SIMPLE IRA plan only to another SIMPLE IRA plan during the first two years of participation in the plan; and (ii) the penalty tax on early distribution from a SIMPLE IRA plan that occurs during the first two years of participation is 25%, instead of 10%. EMPLOYERS INTENDING TO USE THE CONTRACT IN CONNECTION WITH SUCH PLANS SHOULD SEEK INDEPENDENT TAX ADVICE. SIMPLIFIED EMPLOYEE PENSIONS (SEP-IRAS) Section 408(k) of the Code allows employers to establish simplified employee pension plans for their employees, using the employees' IRAs for such purposes, if certain criteria are met. Under these plans the employer may, within specified limits, make deductible contributions on behalf of the employees to IRAs. If the Contract is issued with certain death benefits or benefits provided by an optional rider, the presence of these benefits may increase the amount of any required minimum distributions for IRAs (which would include SEP - IRAs) and other Contracts subject to the minimum distribution rules. The requirements for minimum distributions from a SEP - IRA, and rules on taxation of distributions from a SEP - IRA, are generally the same as those discussed above for distributions from a traditional IRA. SECTION 403(B) QUALIFIED PLANS OR TAX-SHELTERED ANNUITIES Section 403(b) of the Code permits public school employees and employees of certain types of tax-exempt organizations to have their employers purchase annuity contracts for them and, subject to certain limitations, to exclude the Purchase Payments from gross income for tax purposes. These Contracts are commonly referred to as "tax-sheltered annuities." PURCHASERS OF THE CONTRACTS FOR SUCH PURPOSES SHOULD SEEK INDEPENDENT ADVICE AS TO ELIGIBILITY, LIMITATIONS ON PURCHASE PAYMENTS, AND OTHER TAX CONSEQUENCES. In particular, purchasers should note that the Contract provides death benefit options that may exceed the greater of the Purchase Payments and Contract Value. It is possible that the presence of the death benefit could be characterized by the IRS as an "incidental 5 death benefit" and result in currently taxable income to the Owner. There also are limits on the amount of incidental benefits that may be provided under a tax-sheltered annuity. If a Contract is issued with a death benefit or benefits provided by an optional rider, the presence of these benefits may increase the amount of any required minimum distributions that must be made. Final regulations concerning tax sheltered annuity contracts became effective on July 26, 2007, but are generally applicable for tax years beginning after December 31, 2008. These regulations require the employer to adopt a written defined contribution plan which, in both form and operation, satisfies the requirements of the regulations. The regulations specify that any exchange of a 403(b) annuity contract for another 403(b) annuity contract occurring after September 24, 2007 will not be treated as a taxable distribution provided the employer and the company issuing the new contract have agreed to share information concerning the employee's employment status, hardship distributions and loans, if any. Restrictions on Section 403(b) Qualified Plans AVAILABILITY. We currently are not offering this Contract for use in a retirement plan intended to qualify as a Section 403(b) Qualified Plan (a "Section 403(b) Qualified Plan" or the "Plan") unless (a) we (or an affiliate of ours) previously issued annuity contracts to that retirement plan, (b) the initial purchase payment for the new Contract is sent to us directly from the Section 403(b) Qualified Plan through your employer, the Plan's administrator, the Plan's sponsor or in the form of a transfer acceptable to us, (c) we have entered into an agreement with your Section 403(b) Qualified Plan concerning the sharing of information related to your Contract (an "Information Sharing Agreement"), and (d) unless contained in the Information Sharing Agreement, we have received a written determination by your employer, the Plan administrator or the Plan sponsor of your Section 403(b) Qualified Plan that the plan qualifies under Section 403(b) of the Code and complies with applicable Treasury regulations (a "Certificate of Compliance") (Information Sharing Agreement and Certificate of Compliance, together the "Required Documentation"). We may accept, reject or modify any of the terms of a proposed Information Sharing Agreement presented to us, and make no representation that we will enter into an Information Sharing Agreement with your Section 403(b) Qualified Plan. In the event that we do not receive the Required Documentation and you nonetheless direct us to proceed with a rollover transfer of initial Purchase Payment funds, the transfer may be treated as a taxable transaction. OWNERSHIP. You may not sell, assign, transfer, discount or pledge (as collateral for a loan or as security for the performance of an obligation, or for any other purpose) a 403(b) Qualified Contract or some or all of such a Contract's value to any person other than us without the consent of an employer, a Plan administrator or a Plan sponsor. A request to transfer ownership must be accompanied by the Required Documentation. In the event we do not receive the Required Documentation and you nonetheless direct us to proceed with a transfer of ownership, the transfer may be treated as a taxable transaction and your Contract may no longer be qualified under Section 403(b), which may result in additional adverse tax consequences to you. ADDITIONAL PURCHASE PAYMENTS. We will not accept Additional Purchase Payments in the form of salary reduction, matching or other similar contributions in the absence of the Required Documentation. Matching or other employer contributions to Contracts issued on or after January 1, 2009, will be subject to restrictions on withdrawals specified in the Section 403(b) Qualified Plan. We will not knowingly accept transfers, in the absence of the Required Documentation, from another existing annuity contract or other investment under a Section 403(b) Qualified Plan to a previously issued Contract used in a Section 403(b) Qualified Plan. Such transfers shall be made directly from a Plan through an employer, a Plan administrator or a Plan sponsor, or by a transfer acceptable to us. In the event that we do not receive the Required Documentation and you nonetheless direct us to proceed with the Additional Purchase Payments, the Additional Purchase Payment may be treated as a taxable transaction and your Contract may no longer be qualified under Section 403(b), which may result in additional adverse tax consequences to you. WITHDRAWALS. Tax-sheltered annuity contracts must contain restrictions on withdrawals of: - contributions made pursuant to a salary reduction agreement in years beginning after December 31, 1988; - earnings on those contributions; and - earnings after 1988 on amounts attributable to salary reduction contributions (and earnings on those contributions) held as of the last day of 1988. These amounts can be paid only if the employee has reached age 59 1/2, separated from service, died, or become disabled (within the meaning of the tax law), or in the case of hardship (within the meaning of the tax law). Amounts permitted to be distributed in the event of hardship are limited to actual contributions for elective contributions made after 1988; earnings thereon cannot be distributed on account of hardship. Amounts subject to the withdrawal restrictions applicable to Section 403(b)(7) custodial accounts may be subject to more stringent restrictions. 6 Exercise of the withdrawal right for each withdrawal under the Contract may be subject to the terms of the Section 403(b) Qualified Plan and may require the consent of the employer, the Plan administrator or the Plan sponsor, as well as the participant's spouse, under Section 403(b) of the Code and applicable Treasury Regulations. In the event that we do not receive the Required Documentation and you nonetheless direct us to proceed with the withdrawal, your Contract may no longer be qualified under Section 403(b), which may result in additional adverse tax consequences to you. Employer consent is not required when we have received documentation in a form acceptable to us confirming that you have reached age 59 1/2, separated from service, died or become disabled. (These limitations on withdrawals do not apply to the extent we are directed to transfer some or all of the Contract Value to the issuer of another tax-sheltered annuity or into a Section 403(b)(7) custodial account.) LOANS. Loans from Qualified Contracts intended for use under Section 403(b) Qualified Plans, where allowed, are subject to a variety of limitations, including restrictions as to the amount that may be borrowed, the duration of the loan and the manner in which the loan must be repaid. We currently offer a loan privilege to Owners of Contracts issued in connection with Section 403(b) Qualified Plans: 1) that were issued prior to January 1, 2009; 2) that are not subject to Title 1 of ERISA, and 3) that have not elected a guaranteed minimum withdrawal benefit Rider. We will not permit nor support loans from Contracts issued on or after January 1, 2009 in connection with Section 403(b) Qualified Plans. COLLECTING AND USING INFORMATION. Through your participation in a retirement plan intended to qualify under Section 403(b), the Company, your employer, your Plan administrator, and your Plan sponsor collect various types of confidential information you provide in your agreements, such as your name and the name of any Beneficiary, Social Security Numbers, addresses, and occupation information. The Company, your employer, the Plan administrator, and your Plan sponsor also collect confidential information relating to your Plan transactions, such as contract values, purchase payments, withdrawals, transfers, loans and investments. In order to comply with IRS regulations and other applicable law in servicing your Contract, the Company, your employer, the Plan administrator and the Plan sponsor may be required to share such confidential information among themselves, other current, former or future providers under the Section 403(b) Qualified Plan, and among their employees. By applying for or purchasing a Contract for use in a Section 403(b) Qualified Plan or by intending to make an additional purchase payment, transfer of ownership, transfer, withdrawal or loan on an existing Contract for use in a Section 403(b) Qualified Plan, you consent to such sharing of confidential information. The Company will not disclose any such confidential information to anyone, except as permitted by law or in accordance with your consent. If you are considering making a rollover transfer from a retirement plan described in Section 403(b) of the Code to a traditional IRA or a Roth IRA, you should consult with a tax advisor regarding possible tax consequences. If you have a loan outstanding under the section 403(b) plan, the transfer may subject you to income taxation on the amount of the loan balance. Restrictions Under the Texas Optional Retirement Program Section 830.105 of the Texas Government Code permits participants in the Texas Optional Retirement Program ("ORP") to withdraw their interest in a variable annuity contract issued under the ORP only upon: - termination of employment in all Texas public institutions of higher education; - retirement; - death; or - the participant's attainment of age 70 1/2. Accordingly, before you withdraw any amounts from the Contract, you must furnish proof to us that one of these four events has occurred. For these purposes a change of company providing ORP benefits or a participant's transfer between institutions of higher education is not a termination of employment. Consequently there is no termination of employment when a participant in the ORP transfers the Contract Value to another Contract or another qualified custodian during the period of participation in the ORP. CORPORATE AND SELF-EMPLOYED ("H.R. 10" AND "KEOGH") PENSION AND PROFIT-SHARING PLANS Sections 401(a) and 403(a) of the code permit corporate employers to establish various types of tax-deferred retirement plans for employees. The Self-Employed Individuals' Tax Retirement Act of 1962, as amended, commonly referred to as "H.R. - 10" or "Keogh," permits self-employed individuals to establish tax-favored retirement plans for themselves and their employees. Such retirement plans may permit the purchase of annuity contracts in order to provide benefits under the plans. The Contract provides death benefit options that in certain circumstances may exceed the greater of the Purchase Payments and Contract Value. It is possible that the presence of the death benefit could be characterized by the IRS as an "incidental death benefit" and result in currently taxable income to the participant. There also are limits on the amount of incidental benefits that may be provided under pension and profit sharing plans. If the Contract is issued with certain death benefits or benefits provided under an optional rider, the presence of these 7 benefits may increase the amount of any required minimum distributions that must be made. EMPLOYERS INTENDING TO USE THE CONTRACT IN CONNECTION WITH SUCH PLANS SHOULD SEEK INDEPENDENT ADVICE. Minimum distributions to the employee under an employer's pension and profit sharing plan qualified under Section 401(a) of the Code must begin no later than April 1 of the year following the calendar year in which the employee reaches age 70 1/2 or, if later, retires. In the case of an employee who is a 5 percent Owner as defined in Code Section 416, the required beginning date is April 1 of the year following the calendar year in which employee reaches age 70 1/2. DEFERRED COMPENSATION PLANS OF STATE AND LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANIZATIONS Section 457 of the Code permits employees of state and local governments and tax-exempt organizations to defer a portion of their compensation without paying current taxes. The employees must be participants in an eligible deferred compensation plan. Generally, a Contract purchased by a state or local government or a tax-exempt organization will not be treated as an annuity contract for federal income tax purposes. A Section 457 plan must satisfy several conditions, including the requirement that it must not permit distributions prior to your separation from service (except in the case of an unforeseen emergency). When we make payments under your Contract, the payment is taxed as ordinary income. Minimum distributions under a Section 457 plan must begin no later than April 1 of the year following the year in which the employee reaches age 70 1/2 or, if later, retires. Legal and Regulatory Matters There are no legal proceedings to which we, the Separate Account or the principal underwriter is a party, or to which the assets of the Separate Account are subject, that are likely to have a material adverse effect on: - the Separate Account; or - the ability of the principal underwriter to perform its contract with the Separate Account; or - on our ability to meet our obligations under the variable annuity contracts funded through the Separate Account. On June 25, 2007, John Hancock Investment Management Services, LLC (the "Adviser") and John Hancock Distributors LLC (the "Distributor") and two of their affiliates (collectively, the "John Hancock Affiliates") reached a settlement with the Securities and Exchange Commission ("SEC") that resolved an investigation of certain practices relating to the John Hancock Affiliates' variable annuity and mutual fund operations involving directed brokerage and revenue sharing. Under the terms of the settlement, each John Hancock Affiliate was censured and agreed to pay a $500,000 civil penalty to the United States Treasury. In addition, the Adviser and the Distributor agreed to pay disgorgement of $14,838,943 and prejudgment interest of $2,001,999 to the John Hancock Trust Portfolios that participated in the Adviser's commission recapture program during the period from 2000 to April 2004. Collectively, all John Hancock Affiliates agreed to pay a total disgorgement of $16,926,420 and prejudgment interest of $2,361,460 to the entities advised or distributed by John Hancock Affiliates. The Adviser discontinued the use of directed brokerage in recognition of the sale of Portfolio shares in April 2004. 8 APPENDIX A: Financial Statements A-1 AUDITED CONSOLIDATED FINANCIAL STATEMENTS John Hancock Life Insurance Company (U.S.A.) Years Ended December 31, 2008, 2007, and 2006 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) INDEX TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm....................................... F-2 Audited Consolidated Financial Statements Consolidated Balance Sheets- As of December 31, 2008 and 2007............................................................. F-3 Consolidated Statements of Operations- For the Years Ended December 31, 2008, 2007, and 2006........................................ F-5 Consolidated Statements of Changes in Shareholder's Equity and Comprehensive Income (Loss)- For the Years Ended December 31, 2008, 2007, and 2006........................................ F-6 Consolidated Statements of Cash Flows- For the Years Ended December 31, 2008, 2007, and 2006........................................ F-7 Notes to Consolidated Financial Statements................................................... F-9
F-1 Report of Independent Registered Public Accounting Firm The Board of Directors John Hancock Life Insurance Company (U.S.A.) We have audited the accompanying consolidated balance sheets of John Hancock Life Insurance Company (U.S.A.) ("the Company") as of December 31, 2008 and 2007, and the related consolidated statements of operations, changes in shareholders' equity and comprehensive income (loss), and cash flows for each of the three years in the period ended December 31, 2008. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of John Hancock Life Insurance Company (U.S.A.) at December 31, 2008 and 2007, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2008, in conformity with U.S. generally accepted accounting principles. As discussed in Note 1 to the consolidated financial statements, in 2007 the Company changed their method of accounting for collateral related to certain derivative activities and in 2006 the Company changed their method of accounting for defined benefit pension and other postretirement benefit plans. /s/ ERNST & YOUNG LLP Boston, Massachusetts April 16, 2009 F-2 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) CONSOLIDATED BALANCE SHEETS
December 31, ----------------------- 2008 2007 ----------------------- (in millions) Assets Investments Fixed maturities: Available-for-sale--at fair value (amortized cost: 2008--$14,875; 2007--$13,050)......................... $ 14,736 $ 13,689 Equity securities: Available-for-sale--at fair value (cost: 2008--$517; 2007--$781)......................................... 415 956 Mortgage loans on real estate............................................ 2,629 2,414 Investment real estate................................................... 1,719 1,543 Policy loans............................................................. 2,785 2,519 Short-term investments................................................... 3,665 2,723 Other invested assets.................................................... 398 325 ----------- ----------- Total Investments...................................................... 26,347 24,169 Cash and cash equivalents................................................ 3,477 3,345 Accrued investment income................................................ 319 310 Goodwill................................................................. 54 54 Deferred policy acquisition costs and deferred sales inducements......... 8,293 5,928 Amounts due from and held for affiliates................................. 2,622 2,723 Reinsurance recoverable.................................................. 1,518 1,390 Embedded derivatives recoverable for certain separate account guarantees. 4,382 586 Other assets............................................................. 1,504 619 Separate account assets.................................................. 77,681 105,380 ----------- ----------- Total Assets........................................................... $ 126,197 $ 144,504 =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. F-3 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) CONSOLIDATED BALANCE SHEETS - (CONTINUED)
December 31, ----------------------- 2008 2007 ----------------------- (in millions) Liabilities and Shareholder's Equity Liabilities Future policy benefits............................................................. $ 27,796 $ 24,594 Policyholders' funds............................................................... 381 300 Unearned revenue................................................................... 2,178 543 Unpaid claims and claim expense reserves........................................... 591 720 Policyholder dividends payable..................................................... 216 210 Amounts due to affiliates.......................................................... 4,511 4,371 Current income tax payable......................................................... 142 174 Deferred income tax liability...................................................... 855 1,000 Embedded derivatives payable for certain separate account guarantees............... 2,859 567 Other liabilities.................................................................. 3,836 1,261 Separate account liabilities....................................................... 77,681 105,380 ----------- ----------- Total Liabilities............................................................ 121,046 139,120 Commitments, Guarantees, and Legal Proceedings (Note 10) Shareholder's Equity Preferred stock ($1.00 par value; 50,000,000 shares authorized; 100,000 shares issued and outstanding at December 31, 2008 and 2007)............................ - - Common stock ($1.00 par value; 50,000,000 shares authorized; 4,728,937 shares issued and outstanding at December 31, 2008; 4,728,935 issued and outstanding at December 31, 2007)............................................................... 5 5 Additional paid-in capital......................................................... 2,704 2,222 Retained earnings.................................................................. 2,534 2,572 Accumulated other comprehensive (loss) income...................................... (92) 585 ----------- ----------- Total Shareholder's Equity................................................... 5,151 5,384 ----------- ----------- Total Liabilities and Shareholder's Equity................................... $ 126,197 $ 144,504 =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. F-4 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, ----------------------------- 2008 2007 2006 ----------------------------- (in millions) Revenues Premiums....................................................... $ 963 $ 875 $ 1,014 Fee income..................................................... 2,688 3,262 2,483 Net investment income.......................................... 1,435 1,337 1,163 Net realized investment and other gains........................ 426 162 32 --------- --------- --------- Total revenues............................................. 5,512 5,636 4,692 Benefits and expenses Benefits to policyholders...................................... 4,500 2,375 1,889 Policyholder dividends......................................... 421 416 395 Amortization of deferred policy acquisition costs and deferred sales inducements............................................ (388) 584 536 Other operating costs and expenses............................. 1,320 1,269 1,117 --------- --------- --------- Total benefits and expenses................................ 5,853 4,644 3,937 --------- --------- --------- (Loss) income before income taxes............................... (341) 992 755 Income tax (benefit) expense.................................... (303) 273 230 --------- --------- --------- Net (loss) income............................................... $ (38) $ 719 $ 525 ========= ========= =========
The accompanying notes are an integral part of these consolidated financial statements. F-5 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY AND COMPREHENSIVE INCOME (LOSS)
Additional Accumulated Other Total Capital Paid-in Retained Comprehensive Shareholder's Outstanding Stock Capital Earnings Income Equity Shares -------------------------------------------------------------------------- (in millions, except for shares outstanding) (in thousands) Balance at January 1, 2006...................... $ 5 $ 2,045 $ 1,463 $ 525 $ 4,038 4,829 Comprehensive income: Net income..................................... 525 525 Other comprehensive income, net of tax: Net unrealized investment losses........... (46) (46) Foreign currency translation adjustment............................... (5) (5) Minimum pension liability.................. 5 5 ------------- Comprehensive income............................ 479 SFAS No. 158 transition adjustment.............. (2) (2) Employee stock option plan (ESOP)............... 13 13 Capital contribution from Parent................ 71 71 Transfer of real estate to affiliate............ 87 87 -------------------------------------------------------------------------- Balance at December 31, 2006.................... $ 5 $ 2,216 $ 1,988 $ 477 $ 4,686 4,829 Comprehensive income: Net income..................................... 719 719 Other comprehensive income, net of tax: Net unrealized investment gains............ 124 124 Foreign currency translation adjustment............................... (4) (4) Amortization of periodic pension costs..... 1 1 Cash flow hedges........................... (13) (13) ------------- Comprehensive income............................ 827 Employee stock option plan (ESOP)............... 6 6 Dividends paid to Parent........................ (135) (135) -------------------------------------------------------------------------- Balance at December 31, 2007.................... $ 5 $ 2,222 $ 2,572 $ 585 $ 5,384 4,829 Comprehensive income: Net loss....................................... (38) (38) Other comprehensive income, net of tax: Net unrealized investment losses........... (645) (645) Foreign currency translation adjustment............................... (23) (23) Change in funded status of pension plan and amortization of periodic pension costs.................................... (15) (15) Cash flow hedges........................... 6 6 ------------- Comprehensive loss.............................. (715) Capital contribution from Parent................ 477 477 Employee stock option plan (ESOP)............... 5 5 -------------------------------------------------------------------------- Balance at December 31, 2008.................... $ 5 $ 2,704 $ 2,534 $ (92) $ 5,151 4,829 ==========================================================================
The accompanying notes are an integral part of these consolidated financial statements. F-6 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31 ---------------------------------------- 2008 2007 2006 ---------------------------------------- (in millions) Cash flows from operating activities: Net (loss) income....................................................... $ (38) $ 719 $ 525 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Amortization of premium and accretion of discounts, net--fixed maturities........................................................... (28) 9 13 Net realized investment and other gains................................ (426) (162) (32) Amortization of deferred policy acquisition costs and deferred sales inducements.......................................................... (388) 584 536 Capitalization of deferred policy acquisition costs and deferred sales inducements.......................................................... (1,687) (1,700) (1,154) Depreciation and amortization.......................................... 59 26 26 Increase in accrued investment income.................................. (9) (63) (1) Decrease in other assets and other liabilities, net.................... 1,584 448 398 Increase in policyholder liabilities and accruals, net................. 1,958 781 479 Increase in deferred income taxes...................................... 212 50 237 ---------------------------------------- Net cash provided by operating activities............................... 1,237 692 1,027 ---------------------------------------- Cash flows from investing activities: Sales of: Fixed maturities..................................................... 4,008 8,814 9,657 Equity securities.................................................... 411 304 355 Real estate.......................................................... - - 27 Other invested assets................................................ 149 - - Maturities, prepayments, and scheduled redemptions of: Fixed maturities..................................................... 413 485 658 Mortgage loans on real estate........................................ 1,221 1,453 1,105 Purchases of: Fixed maturities..................................................... (6,483) (11,150) (10,327) Equity securities.................................................... (195) (229) (690) Real estate.......................................................... (205) (168) (16) Other invested assets................................................ (283) (121) (74) Mortgage loans on real estate issued................................... (1,434) (1,409) (1,128) Issuance of notes receivable from affiliates........................... (295) - - Cash received on sale of mortgage backed security to affiliate......... - 15 - Net purchases of short-term investments................................ (939) (2,013) (162) Other, net............................................................. (161) (249) (281) ---------------------------------------- Net cash used in investing activities................................... (3,793) (4,268) (876) ----------------------------------------
The accompanying notes are an integral part of these consolidated financial statements. F-7 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) CONSOLIDATED STATEMENTS OF CASH FLOWS - (CONTINUED)
Years ended December 31, --------------------------------- 2008 2007 2006 --------------------------------- (in millions) Cash flows from financing activities: Capital contribution from Parent............................. $ 477 $ - $ 71 Dividends paid to Parent..................................... - (135) - (Decrease) increase in amounts due to affiliates............. (666) 1,768 14 Universal life and investment-type contract deposits......... 4,760 2,748 2,832 Universal life and investment-type contract maturities and withdrawals................................................ (1,422) (509) (1,266) Net transfers to separate accounts from policyholders' funds. (1,929) (881) (433) Excess tax benefits related to share-based payments.......... 1 2 2 Cash received on sale of real estate to affiliate............ - - 150 Unearned revenue on financial reinsurance.................... 1,592 (149) (49) Net reinsurance recoverable.................................. (125) (35) 49 --------------------------------- Net cash provided by financing activities....................... 2,688 2,809 1,370 --------------------------------- Net increase (decrease) in cash and cash equivalents............ 132 (767) 1,521 Cash and cash equivalents at beginning of year.................. 3,345 4,112 2,591 --------------------------------- Cash and cash equivalents at end of year........................ $ 3,477 $ 3,345 $ 4,112 =================================
The accompanying notes are an integral part of these consolidated financial statements. F-8 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 -- Summary of Significant Accounting Policies Business. John Hancock Life Insurance Company (U.S.A.) ("JHUSA" or the "Company") is a wholly-owned subsidiary of The Manufacturers Investment Corporation ("MIC"). MIC is a wholly-owned subsidiary of Manulife Holdings (Delaware) LLC ("MHDLLC"), which is an indirect, wholly-owned subsidiary of The Manufacturers Life Insurance Company ("MLI"). MLI, in turn, is a wholly-owned subsidiary of Manulife Financial Corporation ("MFC"), a Canadian-based, publicly traded stock life insurance company. The Company provides a wide range of insurance and investment products to both individual and institutional customers located primarily in the United States. These products, including individual life insurance, individual and group fixed and variable annuities, and group pension contracts, are sold through an extensive network of agents, securities dealers, and other financial institutions. The Company also offers investment management services with respect to the Company's separate account assets and to mutual funds and institutional customers. The Company is licensed in forty-nine states. Basis of Presentation. These financial statements have been prepared in conformity with U.S. generally accepted accounting principles ("U.S. GAAP"), which requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The accompanying consolidated financial statements include the accounts of the Company and its majority-owned and or controlled subsidiaries and variable interest entities ("VIEs") in which the Company is the primary beneficiary. Partnerships, joint venture interests, and other equity investments in which the Company does not have a controlling financial interest, but has significant influence, are recorded using the equity method of accounting and are included in other invested assets. All significant intercompany transactions and balances have been eliminated. For further discussion regarding VIEs, see Note 3 -- Relationships with Variable Interest Entities. Reclassifications. Certain prior year amounts have been reclassified to conform to the current year presentation. Investments. The Company classifies its fixed maturity securities, other than leveraged leases, as available-for-sale and records these securities at fair value. Unrealized investment gains and losses related to available-for-sale securities are reflected in shareholder's equity, net of policyholder related amounts and deferred income taxes. Interest income is generally recognized on the accrual basis. The amortized cost of fixed maturity securities is adjusted for other-than-temporary impairments, amortization of premiums, and accretion of discounts to maturity. Amortization of premiums and accretion of discounts are included in net investment income. Impairments in value deemed to be other-than-temporary are reported as a component of net realized investment and other gains (losses). For mortgage-backed securities, the Company recognizes income using a constant effective yield based on anticipated prepayments and the estimated economic life of the securities. When actual prepayments differ significantly from anticipated prepayments, the effective yield is recalculated to reflect actual payments to date plus anticipated future payments, and any resulting adjustment is included in net investment income. Equity securities include common stock and preferred stock. Equity securities that have readily determinable fair values are carried at fair value. For equity securities that the Company classifies as available-for-sale, unrealized investment gains and losses are reflected in shareholder's equity, as described above for available-for-sale fixed maturity securities. Equity securities that do not have readily determinable fair values are carried at cost and are included in other invested assets. Impairments in value deemed to be other-than-temporary are reported as a component of net realized investment and other gains (losses). Dividends are recorded as income on the ex-dividend date. Mortgage loans on real estate are carried at unpaid principal balances and are adjusted for amortization of premium or accretion of discount, less allowance for probable losses. Premiums or discounts are amortized over the life of the mortgage loan contract in a manner that results in a constant effective yield. Interest income and amortization amounts and other costs that are recognized as an adjustment of yield are included as components of net investment income. Mortgage loans on real estate are evaluated periodically as part of the Company's loan review procedures and are considered impaired when it is probable that the Company will be unable to collect all amounts of principal and interest due according to the contractual terms of the mortgage loan agreement. The valuation allowance established as a result of impairment is based on the present value of the expected future cash flows, discounted at the loan's original effective interest rate, or is based on the collateral value of the loan if higher and the loan is collateral dependent. The Company estimates this level to be adequate to absorb F-9 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 1 -- Summary of Significant Accounting Policies - (continued) estimated probable credit losses that exist at the balance sheet date. Any change to the valuation allowance for mortgage loans on real estate is reported as a component of net realized investment and other gains (losses). Interest received on impaired mortgage loans on real estate is included in net investment income in the period received. If foreclosure becomes probable, the measurement method used is based on the collateral value. Foreclosed real estate is recorded at the collateral's fair value at the date of foreclosure, which establishes a new cost basis. Investment real estate, which the Company has the intent to hold for the production of income, is carried at depreciated cost, using the straight-line method of depreciation, less adjustments for impairments in value. In those cases where it is determined that the carrying amount of investment real estate is not recoverable, an impairment loss is recognized based on the difference between the depreciated cost and fair value of the asset. The Company reports impairment losses as part of net realized investment and other gains (losses). Real estate held-for-sale is carried at the lower of depreciated cost or fair value less expected disposition costs. Any change to the valuation allowance for real estate held-for-sale is reported as a component of net realized investment and other gains (losses). The Company does not depreciate real estate classified as held-for-sale. Policy loans are carried at unpaid principal balances. Short-term investments, which include investments with remaining maturities of one year or less, but greater than three months, at the time of purchase, are reported at fair value. Net realized investment and other gains (losses), other than those related to separate accounts for which the Company does not bear the investment risk, are determined on a specific identification method and are reported net of amounts credited to participating contract holder accounts. Derivative Financial Instruments. The Company uses various derivative instruments to hedge and manage its exposure to changes in interest rate levels, foreign exchange rates, and equity market prices and also to manage the duration of assets and liabilities. All derivative instruments are carried on the Company's Consolidated Balance Sheets in other assets or other liabilities at fair value. In certain cases, the Company uses hedge accounting by designating derivative instruments as either fair value hedges or cash flow hedges. For derivative instruments that are designated and qualify as fair value hedges, any changes in fair value of the derivative instruments, as well as the offsetting changes in fair value of the hedged items, are recorded in net realized investment and other gains (losses). Basis adjustments are amortized into income through net realized investment and other gains (losses). For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the change in fair value of the derivative instrument is recorded in accumulated other comprehensive income and then reclassified into income when the hedged item affects income. When a cash flow hedge is terminated, the effective portion of the accumulated derivative gain or loss continues to be reported in accumulated other comprehensive income and then is reclassified into income when the hedged item affects income. If it is determined that the forecasted transaction is not probable of occurring, the balance remaining in accumulated other comprehensive income is immediately recognized in earnings. Hedge effectiveness is assessed quarterly using a variety of techniques, including regression analysis and cumulative dollar offset. When it is determined that a derivative is not effective as a hedge, the Company discontinues hedge accounting. In certain cases, there is no hedge ineffectiveness because the derivative instrument was constructed such that all the terms of the derivative exactly match the hedged risk in the hedged item. In cases where the Company receives or pays a premium as consideration for entering into a derivative instrument (i.e., interest rate caps and floors and swaptions), the premium is amortized into net investment income over the term of the derivative instrument. The change in fair value of such premiums (i.e. the inherent ineffectiveness of the derivative) is excluded from the assessment of hedge effectiveness and is included in net realized investment and other gains (losses). Changes in fair value of derivatives that are not hedges are included in net realized investment and other gains (losses). F-10 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 1 -- Summary of Significant Accounting Policies - (continued) The Company is a party to financial instruments that may contain embedded derivatives. The Company assesses each identified embedded derivative to determine whether bifurcation is required. If it is determined that the terms of the embedded derivative are not clearly and closely related to the economic characteristics of the host contract and that a separate instrument with the same terms would qualify as a derivative instrument, the embedded derivative is bifurcated from the host contract. Embedded derivatives are carried at fair value with changes in fair value reported in net realized investment and other gains (losses) for derivatives embedded in investment securities, or benefits to policyholders for the reinsurance recoverable related to guaranteed minimum income benefits and certain separate account guarantees related to guaranteed minimum withdrawal benefits. Cash and Cash Equivalents. Cash and cash equivalents include cash and all highly liquid debt investments with a remaining maturity of three months or less when purchased. Goodwill. As a result of the acquisition of Wood Logan Associates, the Company recognized an asset for goodwill representing the excess of the cost over the fair value of the assets acquired and liabilities assumed. The Company tests goodwill for impairment at least annually, or more frequently if circumstances indicate impairment may have occurred. Deferred Policy Acquisition Costs and Deferred Sales Inducements. Deferred policy acquisition costs ("DAC") are costs that vary with, and are related primarily to, the production of new business and have been deferred to the extent that they are deemed recoverable. Such costs include sales commissions, certain policy issuance and underwriting costs, and certain agency expenses. Similarly, any amounts assessed as initiation fees or front-end loads are recorded as unearned revenue. The Company tests the recoverability of DAC at least annually. DAC related to participating traditional life insurance is amortized over the life of the policies at a constant rate based on the present value of the estimated gross margin amounts expected to be realized over the lives of the policies. Estimated gross margin amounts include anticipated premiums and investment results less claims and administrative expenses, changes in the net level premium reserve, and expected annual policyholder dividends. For annuity, group pension contracts, universal life insurance, DAC and unearned revenue are amortized generally in proportion to the change in present value of expected gross profits arising principally from surrender charges, investment results, including realized gains (losses), and mortality and expense margins. DAC amortization is adjusted retrospectively when estimates are revised. For annuity, universal life insurance, and investment-type products, the DAC asset is adjusted for the impact of unrealized gains (losses) on investments as if these gains (losses) had been realized, with corresponding credits or charges included in accumulated other comprehensive income. DAC related to non-participating traditional life insurance is amortized over the premium-paying period of the related policies using assumptions consistent with those used in computing policy benefit reserves. The Company offers sales inducements, including enhanced crediting rates or bonus payments, to contract holders on certain of its individual and group annuity products. The Company defers sales inducements and amortizes them over the life of the underlying contracts using the same methodology and assumptions used to amortize DAC. Reinsurance. Assets and liabilities related to reinsurance ceded contracts are reported on a gross basis. The accompanying Consolidated Statements of Operations reflect premiums, benefits, and settlement expenses net of reinsurance ceded. Reinsurance premiums, commissions, expense reimbursements, benefits, and reserves related to reinsured business are accounted for on a basis consistent with those used in accounting for the original policies issued and the terms of the reinsurance contracts. The Company remains liable to its contract holders to the extent that counterparties to reinsurance ceded contracts do not meet their contractual obligations. Separate Account Assets and Liabilities. Separate account assets and liabilities reported on the Company's Consolidated Balance Sheets represent funds that are administered and invested by the Company to meet specific investment objectives of contract holders. Net investment income and net realized investment and other gains (losses) generally accrue directly to F-11 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 1 -- Summary of Significant Accounting Policies - (continued) such contract holders who bear the investment risk, subject, in some cases, to principal guarantees and minimum guaranteed rates of income. The assets of each separate account are legally segregated and are not subject to claims that arise out of any other business of the Company. Separate account assets are reported at fair value. Deposits, surrenders, net investment income, net realized investment and other gains (losses), and the related liability changes of separate accounts are offset within the same line item in the Consolidated Statements of Operations. Fees charged to contract holders, principally mortality, policy administration, investment management, and surrender charges, are included in the revenues of the Company. Future Policy Benefits and Policyholders' Funds. Future policy benefits for participating traditional life insurance policies are based on the net level premium method. The net level premium reserve is calculated using the guaranteed mortality and dividend fund interest rates. The liability for annual dividends represents the accrual of annual dividends earned. Settlement dividends are accrued in proportion to gross margins over the life of the policies. Participating business represented 27% and 34% of the Company's traditional life net insurance in-force at December 31, 2008 and 2007, respectively, and 77%, 88%, and 93% of the Company's traditional life net insurance premiums for the years ended December 31, 2008, 2007, and 2006, respectively. Benefit liabilities for annuities during the accumulation period are equal to accumulated contract holders' fund balances and after annuitization are equal to the present value of expected future payments. For payout annuities in loss recognition, future policy benefits are computed using estimates of expected mortality, expenses, and investment yields as determined at the time these contracts first moved into loss recognition. Payout annuity reserves are adjusted for the impact of net realized investment and other gains (losses) associated with the underlying assets. For non-participating traditional life insurance policies and reinsurance policies, future policy benefits are estimated using a net level premium method based upon actuarial assumptions as to mortality, persistency, interest, and expenses established at the policy issue date. Assumptions established at policy issue as to mortality and persistency are based on the Company's experience, which, together with interest and expense assumptions, include a margin for adverse deviation. Policyholders' funds for universal life products and group pension contracts are equal to the total of the policyholder account values before surrender charges. Policyholder account values include deposits plus credited interest or change in investment value less expense and mortality fees, as applicable, and withdrawals. Policy benefits are charged to expense and include benefit claims incurred in the period in excess of related policy account balances and interest credited to policyholders' account balances. Components of policyholders' funds were as follows:
December 31, --------------- 2008 2007 --------------- (in millions) Individual and group annuities. $ 65 $ 41 Group pension contracts........ 78 82 Universal life and other....... 238 177 --------------- Total policyholders' funds..... $ 381 $ 300 ===============
Liabilities for unpaid claims and claim expenses include estimates of payments to be made on reported life claims and estimates of incurred but not reported claims based on historical claims development patterns. Estimates of future policy benefit reserves, claim reserves, and expenses are reviewed on a regular basis and adjusted as necessary. Any changes in estimates are reflected in current earnings. Policyholder Dividends. Policyholder dividends for the closed block are approved annually by the Company's Board of Directors. The aggregate amount of policyholder dividends is calculated based upon actual interest, mortality, morbidity, persistency, and expense experience for the year, as well as management's judgment as to the proper level of statutory surplus to be retained by the Company. For additional information on the closed block, see Note 6 -- Closed Block. F-12 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 1 -- Summary of Significant Accounting Policies - (continued) Revenue Recognition. Premiums from participating and non-participating traditional life insurance, and reinsurance contracts are recognized as revenue when due. When premiums are due over a significantly shorter period than the period over which benefits are provided, any excess profit is deferred and recognized into income in a constant relationship to insurance in-force or, for annuities, the amount of expected future benefit payments. Deposits related to universal life contracts are credited to policyholders' account balances. Revenues from these contracts, as well as annuities and group pension contracts, consist of amounts assessed against policyholders' account balances for mortality, policy administration, and surrender charges and are recorded in fee income in the period in which the services are provided. Fee income also includes advisory fees and administration service fees. Such fees and commissions are recognized in the period in which services are performed. Share-Based Payments. The Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), "Share-Based Payment," ("SFAS No. 123(R)") on January 1, 2006. The standard requires that the costs resulting from share-based payment transactions with employees be recognized in the financial statements utilizing a fair value based measurement method. Certain Company employees are provided compensation in the form of stock options, deferred share units, and restricted share units in MFC. The fair value of the stock options granted by MFC to the Company's employees is recorded by the Company over the vesting periods. The fair value of the deferred share units and the intrinsic fair value of the restricted share units granted by MFC to Company employees are recognized in the accounts of the Company over the vesting periods of the units. The share-based payments are a legal obligation of MFC, but in accordance with U.S. GAAP, are recorded in the accounts of the Company in other operating costs and expenses. Upon adoption of SFAS No. 123(R), the Company was required to determine the portion of additional paid-in capital that was generated from the realization of excess tax benefits prior to the adoption of SFAS No. 123(R) available to offset deferred tax assets that may need to be written off in future periods had the Company adopted the SFAS No. 123 fair value recognition provisions in 2001. The Company elected to calculate this "pool" of additional paid-in capital using the shortcut method as permitted by FASB Staff Position No. 123(R)-3, "Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards." SFAS No. 123(R) also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow. This requirement reduces net operating cash flows and increases net financing cash flows in periods after adoption. For the years ended December 31, 2008 and 2007, the Company recognized $1 million and $2 million, respectively, of excess tax benefits related to share-based payments in the Consolidated Statement of Cash Flows. Upon adoption in 2006, the Company recognized $2 million of excess tax benefits related to share-based payments, which was reclassified from net operating cash flows to net financing cash flows. Income Taxes. The provision for federal income taxes includes amounts currently payable or recoverable and deferred income taxes, computed under the liability method, resulting from temporary differences between the tax and financial statement bases of assets and liabilities. A valuation allowance is established for deferred tax assets when it is more likely than not that an amount will not be realized. Foreign Currency. Assets and liabilities relating to foreign operations are translated into U.S. dollars using current exchange rates as of the balance sheet date. Revenues and expenses are translated using the average exchange rates during the year. The resulting net translation adjustments for each year are included in accumulated other comprehensive income. Gains or losses on foreign currency transactions are reflected in earnings. F-13 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 1 -- Summary of Significant Accounting Policies - (continued) Recent Accounting Pronouncements FASB Staff Position No. EITF 99-20-1, "Amendments to the Impairment Guidance of EITF Issue No. 99-20" ("FSP EITF No. 99-20-1") In January 2009, the Financial Accounting Standards Board ("FASB") issued FSP EITF No. 99-20-1 which helps conform the impairment guidance in EITF No. 99-20 to the impairment guidance of SFAS No. 115. EITF No. 99-20 applies to debt securities backed by securitized financial assets ("ABS"), which are of less than high credit quality and can be contractually prepaid in a way that the investor could lose part of its investment. These securities are categorized as available-for-sale and have fair values below their carrying values. FSP EITF No. 99-20-1 allows the Company to consider its own expectations about probabilities that the ABS can and will be held until the fair values recover, while assessing whether the ABS is other-than-temporarily impaired. EITF No. 99-20 formerly required the Company to consider only market participant expectations about the ABS future cash flows in this situation. FSP EITF No. 99-20-1 was effective for the Company on December 31, 2008. Adoption of FSP EITF No. 99-20-1 on January 1, 2009 did not result in any impact to the Company's Consolidated Balance Sheets or Consolidated Statements of Operations. FASB Staff Position SFAS No. 132(R)-1, "Employers' Disclosures about Postretirement Benefit Plan Assets" ("FSP SFAS No. 132R-1") In December 2008, the FASB issued FSP SFAS No. 132R-1 which requires enhanced disclosures of the assets of the Company's pension and other postretirement benefit plans in the Company's consolidated financial statements. FSP SFAS No. 132R-1 requires a narrative description of investment policies and strategies for plan assets, and discussion of long term rate of return assumptions for plan assets. FSP SFAS No. 132R-1 requires application of SFAS No. 157 style disclosures to fair values of plan assets, including disclosure of fair values of plan assets sorted by asset category and valuation levels 1, 2 and 3, with roll forward of level 3 plan assets, and discussion of valuation processes used. FSP SFAS No. 132R-1 will be effective for the Company's consolidated financial statements at December 31, 2009. FASB Staff Position SFAS No. 140-4 and FIN No. 46(R)-8, "Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities" ("FSP SFAS No. 140-4 and FIN No. 46R-8") In December 2008, the FASB issued FSP SFAS No. 140-4 and FIN No. 46(R)-8 which requires enhanced disclosures about transfers of financial assets and interests in variable interest entities. While the Company is not involved in securitizing financial assets, it does have significant relationships with VIEs. This FSP was effective for the Company at December 31, 2008 and resulted in enhanced disclosures about the Company's relationships with VIEs. See Note 3 -- Relationships with Variable Interest Entities. Statement of Financial Accounting Standards No. 161, "Disclosures about Derivative Instruments and Hedging Activities-an amendment of FASB Statement No. 133" ("SFAS No. 161") In March 2008, the FASB issued SFAS No. 161 which provides extensively expanded disclosure requirements for derivative instruments and hedging activities and applies to all derivative instruments, including bifurcated derivative instruments and related hedged items which are accounted for under SFAS No. 133. SFAS No. 161 will be effective for the Company's Consolidated Balance Sheets and Consolidated Statements of Operations in 2009. The adoption of this guidance is not expected to have a material impact on the Company's Consolidated Balance Sheets or Consolidated Statements of Operations. Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" ("SFAS No. 157") Effective January 1, 2008, the Company adopted SFAS No. 157, which provides a single definition of fair value for accounting purposes, establishes a consistent framework for measuring fair value, and expands disclosure requirements about fair value measurements. SFAS No. 157 requires, among other things, an exit value approach for valuing assets and liabilities, using the best available information about what a market would bear. The exit value approach focuses on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Exit values for liabilities should include margins for risk even if they are not observable. SFAS No. 157 provides guidance on how to measure fair value, when required, under existing accounting standards. SFAS No. 157 F-14 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 1 -- Summary of Significant Accounting Policies - (continued) establishes a fair value hierarchy based on the observability of the inputs to valuation techniques used to measure fair value, sorted into three levels ("Level 1, 2, and 3"), with the most observable input level being Level 1. The impact of changing valuation methods to comply with SFAS No. 157 resulted in adjustments to actuarial liabilities, which were recorded as an increase in net income of $60 million, net of tax, as of January 1, 2008. Effective January 1, 2008, the Company adopted FASB Staff Position No. FAS 157-1, "Application of FASB Statement No. 157 to FASB Statement No. 13 ("SFAS 13") and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13 ("FSP No. FAS 157-1")." FSP No. FAS 157-1 amends SFAS No. 157 to provide a scope exception from SFAS No. 157 for the evaluation criteria on lease classification and capital lease measurement under SFAS No. 13, "Accounting for Leases," and other related accounting pronouncements. As a result of adopting FSP No. FAS 157-1, the Company does not apply the provisions of SFAS No. 157 to its leases. Statement of Financial Accounting Standards No. 160, "Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB No. 51" ("SFAS No. 160") In December 2007, the FASB issued SFAS No. 160 which establishes accounting guidance for non-controlling interests in a subsidiary and for deconsolidation of a subsidiary. SFAS No. 160 will require that non-controlling interests be included in shareholders' equity and separately reported there, that a consolidated entity's net income include and present separately amounts attributable to both the controlling and non-controlling interests, that continuity of equity accounts for both controlling interests and non-controlling interests be presented on a company's statement of changes in equity, and that changes in a parent's ownership of a subsidiary which do not result in deconsolidation be accounted for as transactions in the company's own stock. Deconsolidation will result in gain/loss recognition, with any retained non-controlling interest measured initially at fair value. SFAS No. 160 will be effective for the Company's Consolidated Balance Sheets and Consolidated Statements of Operations in 2009, and will be applied prospectively, except for the presentation and disclosure requirements which will be applied retrospectively. The adoption of this guidance is not expected to have a material impact on the Company's Consolidated Balance Sheets or Consolidated Statements of Operations. Statement of Financial Accounting Standards No. 141 (R), "Business Combinations" ("SFAS No. 141(R)") In December 2007, the FASB issued SFAS No. 141(R) which replaces SFAS No. 141, "Business Combinations". SFAS No. 141(R) retains the underlying concepts of SFAS No. 141 in that all business combinations are still required to be accounted for at fair value under the acquisition method of accounting, but SFAS No. 141(R) changes the method of applying the acquisition method in a number of significant aspects. Some of the more significant requirements under SFAS No. 141(R) include; the acquisition date is defined as the date that the acquirer achieves control over the acquiree; any consideration transferred will be measured at fair value as of acquisition date; and all identifiable assets acquired, and liabilities assumed and any non-controlling interest in the acquiree will be recorded at their acquisition date fair value, with certain exceptions. SFAS No. 141(R) will be effective on a prospective basis for all business combinations for which the acquisition date is on or after January 1, 2009, except for accounting for valuation allowances on deferred income taxes and acquired tax contingencies. SFAS No. 141(R) amends SFAS No. 109 such that adjustments made to valuation allowances on deferred taxes and acquired tax contingencies associated with acquisitions that closed prior to the effective date of SFAS No. 141(R) would be subject to SFAS No. 141(R). FASB Staff Position Fin No. 39-1, "Amendment of Offsetting of Amounts Related to Certain Contracts" ("FSP FIN No. 39-1") In April 2007, the FASB Staff issued FSP FIN No. 39-1 to amend the reporting standards for offsetting amounts related to derivative instruments with the same counterparty. FSP FIN No. 39-1 specifies that an entity that has in the past elected to offset fair value of derivative assets and liabilities may change its policy election. The Company early adopted FSP FIN No. 39-1 in the quarter ended December 31, 2007, changing its accounting policy from net to gross balance sheet presentation of offsetting derivative balances with the same counterparty. This accounting policy change was applied retrospectively to all periods presented, resulting in an increase in derivative assets equally offset by an increase in derivative liabilities at December 31, 2007 of $57 million. F-15 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 1 -- Summary of Significant Accounting Policies - (continued) Statement of Financial Accounting Standards No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132R" ("SFAS No. 158") In September 2006, the FASB issued SFAS No. 158. SFAS No. 158 requires the Company to recognize in its statement of financial position either assets or liabilities for the overfunded or underfunded status of its defined benefit postretirement plans. Changes in the funded status of a defined benefit postretirement plan are recognized in accumulated other comprehensive income in the year the changes occur. SFAS No. 158 was effective for the Company on December 31, 2006. As a result of the Company's adoption of SFAS No. 158, the Company recorded a decrease to accumulated other comprehensive income of $2 million, net of tax, as of December 31, 2006 to recognize the funded status of its defined benefit pension and other postretirement benefit plans. FASB Financial Interpretation No. 48, "Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109" ("FIN No. 48") In June 2006, the FASB issued FIN No. 48. FIN No. 48 prescribes a comprehensive model for how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that it has taken or expects to take on a tax return. FIN No. 48 requires evaluation of whether a tax position taken on a tax return is more likely than not to be sustained if challenged, and if so, evaluation of the largest benefit that is more than 50% likely of being realized on ultimate settlement. Differences between these benefits and actual tax positions result in either (a) an increase in a liability for income taxes payable or a reduction of an income tax refund receivable, (b) a reduction in a deferred tax asset or an increase in a deferred tax liability, or both (a) and (b). FIN No. 48 requires recording a cumulative effect of adoption in retained earnings as of beginning of year of adoption. FIN No. 48 was effective for the Company's consolidated financial statements beginning January 1, 2007. The Company had no cumulative effect of adoption to its January 1, 2007 consolidated retained earnings. Adoption of FIN No. 48 had no material impact on the Company's Consolidated Balance Sheets at December 31, 2007 or Consolidated Statements of Operations for the year ended December 31, 2007. AICPA Statement of Position No. 05-1, "Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection With Modifications or Exchanges of Insurance Contracts" ("SOP No. 05-1") In September 2005, the Accounting Standards Executive Committee ("AcSEC") of the American Institute of Certified Public Accountants ("AICPA") issued SOP No. 05-1. SOP No. 05-1 provides guidance on accounting for deferred acquisition costs of internal replacements of insurance and investment contracts. An internal replacement that is determined to result in a replacement contract that is substantially changed from the replaced contract should be accounted for as an extinguishment of the replaced contract. Unamortized deferred acquisition costs, unearned revenue liabilities, and deferred sales inducement assets from extinguished contracts should no longer be deferred and should be charged to expense. SOP No. 05-1 was effective for the Company's internal replacements occurring on or after January 1, 2007. Retrospective adoption is not permitted. In connection with the Company's adoption of SOP No. 05-01 as of January 1, 2007, there was no material impact to the Company's Consolidated Balance Sheets or Consolidated Statements of Operations. Emerging Issues Task Force Issue No. 04-5, "Determining Whether a General Partner or the General Partners as a Group Controls a Limited Partnership or a Similar Entity When the Limited Partners Have Certain Rights" ("EITF No. 04-5") In July 2005, the Emerging Issues Task Force of the FASB issued EITF No. 04-5. EITF No. 04-5 mandates a rebuttable presumption that the general partner of a partnership (or managing member of a limited liability company) controls the partnership and should consolidate it, unless limited partners have either substantive kickout rights (defined as the ability to remove the general partner without cause by action of simple majority) or have substantive participating rights (defined as the ability to be actively involved in managing the partnership) or the partnership is a VIE, in which case VIE consolidation accounting rules should instead be followed. EITF No. 04-5 was effective for the Company on January 1, 2006. In connection with the Company's adoption of EITF No. 04-5, there was no impact to the Company's Consolidated Balance Sheets or Consolidated Statements of Operations. F-16 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 2 -- Investments Fixed Maturities and Equity Securities The Company's investments in fixed maturities and equity securities classified as available-for-sale are summarized below:
December 31, 2008 ----------------------------------------------- Gross Gross Unrealized Unrealized Amortized Cost Gains Losses Fair Value ----------------------------------------------- (in millions) Fixed maturities and equity securities: Corporate securities......................................... $ 11,765 $ 508 $ 821 $ 11,452 Asset-backed and mortgage-backed securities.................. 1,072 - 143 929 Obligations of states and political subdivisions............. 201 6 7 200 Debt securities issued by foreign governments................ 995 209 1 1,203 U.S. Treasury securities and obligations of U.S. government corporations and agencies.................................. 793 110 - 903 ----------------------------------------------- Fixed maturities............................................. 14,826 833 972 14,687 Other fixed maturities (1)................................... 49 - - 49 ----------------------------------------------- Total fixed maturities available-for-sale, at fair value..... 14,875 833 972 14,736 Equity securities available-for-sale......................... 517 44 146 415 ----------------------------------------------- Total fixed maturities and equity securities................. $ 15,392 $ 877 $ 1,118 $ 15,151 =============================================== December 31, 2007 ----------------------------------------------- Gross Gross Unrealized Unrealized Amortized Cost Gains Losses Fair Value ----------------------------------------------- (in millions) Fixed maturities and equity securities: Corporate securities......................................... $ 10,292 $ 574 $ 121 $ 10,745 Asset-backed and mortgage-backed securities.................. 992 15 2 1,005 Obligations of states and political subdivisions............. 83 4 - 87 Debt securities issued by foreign governments................ 893 145 - 1,038 U.S. Treasury securities and obligations of U.S. government corporations and agencies.................................. 718 24 - 742 ----------------------------------------------- Fixed maturities............................................. 12,978 762 123 13,617 Other fixed maturities (1)................................... 72 - - 72 ----------------------------------------------- Total fixed maturities available-for-sale, at fair value..... 13,050 762 123 13,689 Equity securities available-for-sale......................... 781 193 18 956 ----------------------------------------------- Total fixed maturities and equity securities................. $ 13,831 $ 955 $ 141 $ 14,645 ===============================================
(1)The Company classifies its leveraged leases as fixed maturities and records as its carrying value the net investment of its leveraged leases calculated by accruing income at each lease's expected internal rate of return. F-17 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 2 -- Investments - (continued) The amortized cost and fair value of available-for-sale fixed maturities at December 31, 2008, by contractual maturity, are shown below:
Amortized Cost Fair Value ------------------------- (in millions) Fixed maturities: Due in one year or less..................... $ 432 $ 432 Due after one year through five years....... 2,364 2,296 Due after five years through ten years...... 3,626 3,511 Due after ten years......................... 7,332 7,519 -------------- ---------- 13,754 13,758 Asset-backed and mortgage-backed securities. 1,072 929 -------------- ---------- Total.................................... $ 14,826 $ 14,687 ============== ==========
Expected maturities may differ from contractual maturities because eligible borrowers may exercise their right to call or prepay obligations with or without call or prepayment penalties. Asset-backed and mortgage-backed securities are shown separately in the table above, as they are not due at a single maturity date. Fixed Maturities and Equity Securities Impairment Review The Company has a process in place to identify securities that could potentially have an impairment that is other-than-temporary. This process involves monitoring market events that could impact issuers' credit ratings, business climate, management changes, litigation and government actions, and other similar factors. This process also involves monitoring late payments, downgrades by rating agencies, key financial ratios, financial statements, revenue forecasts, and cash flow projections as indicators of credit issues. At the end of each quarter, the MFC Loan Review Committee reviews all securities where market value is less than 80 percent of amortized cost for six months or more to determine whether impairments need to be taken. The analysis focuses on each company's or project's ability to service its debts in a timely fashion and the length of time the security has been trading below amortized cost. The results of this analysis are reviewed by the Credit Committee at MFC. This committee includes MFC's Chief Financial Officer, Chief Investment Officer, Chief Risk Officer, Chief Credit Officer, and other senior management. This quarterly process includes a fresh assessment of the credit quality of each investment in the entire fixed maturities portfolio. The Company considers relevant facts and circumstances in evaluating whether the impairment of a security is other-than-temporary. Relevant facts and circumstances considered include (1) the length of time the fair value has been below cost; (2) the financial position of the issuer, including the current and future impact of any specific events; and (3) the Company's ability and intent to hold the security to maturity or until it recovers in value. To the extent the Company determines that a security is deemed to be other than temporarily impaired, the difference between amortized cost and fair value would be charged to earnings. There are a number of significant risks and uncertainties inherent in the process of monitoring impairments and determining if impairment is other-than-temporary. These risks and uncertainties include (1) the risk that its assessment of an issuer's ability to meet all of its contractual obligations will change based on changes in the credit characteristics of that issuer, (2) the risk that the economic outlook will be worse than expected or have more of an impact on the issuer than anticipated, (3) the risk that fraudulent information could be provided to its investment professionals who determine the fair value estimates and other-than-temporary impairments, and (4) the risk that new information obtained by the Company or changes in other facts and circumstances lead it to change its intent to hold the security to maturity or until it recovers in value. Any of these situations could result in a charge to earnings in a future period. The cost amounts for both fixed maturity securities and equity securities are net of other-than-temporary impairment charges. F-18 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 2 -- Investments - (continued) The following table shows the carrying value and gross unrealized losses aggregated by investment category and length of time that individual available-for-sale fixed maturity securities and equity securities have been in a continuous unrealized loss position: Unrealized Losses on Available-For-Sale Fixed Maturity Securities and Equity Securities -- By Investment Age
Year ended December 31, 2008 ----------------------------------------------------------- Less than 12 months 12 months or more Total ----------------------------------------------------------- Carrying Unrealized Carrying Unrealized Carrying Unrealized Value Losses Value Losses Value Losses ----------------------------------------------------------- (in millions) Corporate securities............................. $ 4,400 $ 431 $ 1,681 $ 390 $ 6,081 $ 821 Asset-backed and mortgage-backed securities...... 810 116 92 27 902 143 Obligations of states and political subdivisions. 92 7 - - 92 7 Debt securities issued by foreign governments.... 28 1 - - 28 1 ----------------------------------------------------------- Total fixed maturities available-for-sale........ 5,330 555 1,773 417 7,103 972 Equity securities available-for-sale............. 241 118 34 28 275 146 ----------------------------------------------------------- Total............................................ $ 5,571 $ 673 $ 1,807 $ 445 $ 7,378 $ 1,118 ===========================================================
Year ended December 31, 2007 ----------------------------------------------------------- Less than 12 months 12 months or more Total ----------------------------------------------------------- Carrying Unrealized Carrying Unrealized Carrying Unrealized Value Losses Value Losses Value Losses ----------------------------------------------------------- (in millions) Corporate securities........................ $ 1,521 $ 50 $ 1,462 $ 71 $ 2,983 $ 121 Asset-backed and mortgage-backed securities. 99 2 32 - 131 2 ----------------------------------------------------------- Total fixed maturities available-for-sale... 1,620 52 1,494 71 3,114 123 Equity securities available-for-sale........ 145 18 - - 145 18 ----------------------------------------------------------- Total....................................... $ 1,765 $ 70 $ 1,494 $ 71 $ 3,259 $ 141 ===========================================================
Unrealized losses can be created by rising interest rates or by rising credit concerns and hence widening credit spreads. Credit concerns are apt to play a larger role in the unrealized loss on below investment grade securities. Unrealized losses on investment grade securities principally relate to changes in interest rates or changes in credit spreads since the securities were acquired. Credit rating agencies' statistics indicate that investment grade securities have been found to be less likely to develop credit concerns. The gross unrealized loss on below investment grade available-for-sale fixed maturity securities increased to $79 million at December 31, 2008 from $19 million at December 31, 2007. At December 31, 2008 and 2007, there were 753 and 339 available-for-sale fixed maturity securities with an aggregate gross unrealized loss of $972 million and $123 million, respectively, of which the single largest unrealized loss was $22 million and $16 million, respectively. The Company anticipates that these fixed maturity securities will perform in accordance with their contractual terms and currently has the ability and intent to hold these securities until they recover or mature. At December 31, 2008 and 2007, there were 550 and 174 equity securities with an aggregate gross unrealized loss of $146 million and $18 million, respectively, of which the single largest unrealized loss was $14 million and $1 million, respectively. The Company anticipates that these equity securities will recover in value in the near term. F-19 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 2 -- Investments - (continued) There were no non-income producing available-for-sale securities for the year ended December 31, 2008. Non-income producing assets represent investments that have not produced income for the twelve months preceding December 31, 2008. Securities Lending The Company participated in a securities lending program for the purpose of enhancing income on securities held in 2007, but there were no securities on loan and no collateral held as of December 31, 2008. At December 31, 2007, $1,476 million of the Company's securities, at market value, were on loan to various brokers/dealers and were fully collateralized by cash and highly liquid securities. The market value of the loaned securities was monitored on a daily basis, and the collateral was maintained at a level of at least 102% of the loaned securities' market value. Assets on Deposit As of December 31, 2008 and 2007, fixed maturity securities with a fair value of $9 million and $7 million were on deposit with government authorities as required by law. Mortgage Loans on Real Estate At December 31, 2008, the mortgage portfolio was diversified by specific collateral property type and geographic region as displayed below:
Collateral Carrying Geographic Carrying Property Type Amount Concentration Amount ----------------------------------- ----------------------------------- (in millions) (in millions) Apartments........... $ 356 East North Central... $ 323 Industrial........... 531 East South Central... 38 Office buildings..... 955 Middle Atlantic...... 463 Retail............... 468 Mountain............. 243 Mixed use............ 120 New England.......... 160 Agricultural......... 48 Pacific.............. 689 Agri business........ 42 South Atlantic....... 551 Other................ 114 West North Central... 14 West South Central... 153 Provision for losses. (5) Provision for losses. (5) ------------- ------------- Total................ $ 2,629 Total................ $ 2,629 ============= =============
Changes in the allowance for probable losses on mortgage loans on real estate are summarized below:
Balance at Beginning Balance at End of of Period Additions Deductions Period ----------------------------------------------------------- (in millions) Year ended December 31, 2008. $ 3 $ 2 $ - $ 5 Year ended December 31, 2007. 3 5 5 3 Year ended December 31, 2006. 5 1 3 3
Mortgage loans with a carrying value of $11 million were non-income producing for the years ended December 31, 2008 and 2007. At December 31, 2008, mortgage loans with carrying value of $4 million were delinquent by less than 90 days. There were no mortgage loans delinquent by 90 days or more. F-20 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 2 -- Investments - (continued) The total recorded investment in mortgage loans that are considered to be impaired along with the related provision for losses were as follows:
December 31, --------------- 2008 2007 --------------- (in millions) Impaired mortgage loans on real estate with provision for losses. $ 16 $ 12 Provision for losses............................................. (5) (3) ------ ------ Net impaired mortgage loans on real estate....................... $ 11 $ 9 ====== ======
The average recorded investment in impaired loans and the interest income recognized on impaired loans were as follows:
Years ended December 31, ------------------------ 2008 2007 2006 ------------------------ (in millions) Average recorded investment in impaired loans. $ 14 $ 12 $ 16 Interest income recognized on impaired loans.. - - -
The payment terms of mortgage loans on real estate may be restructured or modified from time to time. Generally, the terms of the restructured mortgage loans call for the Company to receive some form or combination of an equity participation in the underlying collateral, excess cash flows or an effective yield at the maturity of the loans sufficient to meet the original terms of the loans. There were no restructured mortgage loans as of December 31, 2008 and 2007. Investment Real Estate There was no non-income producing real estate for the years ended December 31, 2008 and 2007, respectively. Depreciation expense on investment real estate was $29 million, $26 million, and $26 million, in 2008, 2007, and 2006, respectively. Accumulated depreciation was $248 million and $218 million at December 31, 2008 and 2007, respectively. Equity Method Investments Investments in other assets, which include unconsolidated joint ventures, partnerships, and limited liability corporations, accounted for using the equity method of accounting totaled $392 million and $309 million at December 31, 2008 and 2007, respectively. Total combined assets of such investments were $8,051 million and $5,322 million (consisting primarily of investments) and total combined liabilities were $3,753 million and $2,916 million (including $3,219 million and $2,444 million of debt) at December 31, 2008 and 2007, respectively. Total combined revenues and expenses of these investments in 2008 were $1,423 million and $1,513 million, respectively, resulting in $90 million of total combined loss from operations. Total combined revenues and expenses of these investments in 2007 were $560 million and $582 million, respectively, resulting in $22 million of total combined loss from operations. Total combined revenues and expenses in 2006 were $68 million and $110 million, respectively, resulting in $42 million of total combined loss from operations. Net investment (loss) income on investments accounted for on the equity method totaled $(9) million, $2 million, and $0 in 2008, 2007, and 2006, respectively. Depending on the timing of receipt of the audited financial statements of these other assets, the above investee level financial data may be up to one year in arrears. F-21 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 2 -- Investments - (continued) Net Investment Income and Net Realized Investment and Other Gains (Losses) The following information summarizes the components of net investment income and net realized investment and other gains (losses):
Years ended December 31, ------------------------- 2008 2007 2006 ------------------------- (in millions) Net investment income Fixed maturities............................................ $ 913 $ 798 $ 730 Equity securities........................................... 50 38 24 Mortgage loans on real estate............................... 161 145 152 Investment real estate...................................... 96 100 98 Policy loans................................................ 202 185 166 Short-term investments...................................... 93 145 61 Other....................................................... 12 7 (8) ------------------------- Gross investment income..................................... 1,527 1,418 1,223 Less investment expenses................................ 92 81 60 ------------------------- Net investment income (1)...................................... $ 1,435 $ 1,337 $ 1,163 ========================= Net realized investment and other gains (losses) Fixed maturities............................................ $ (55) $ 69 $ (27) Equity securities........................................... (151) 38 44 Mortgage loans on real estate and real estate held-for-sale. 1 13 20 Derivatives and other invested assets....................... 631 42 (5) ------------------------- Net realized investment and other gains (1).................... $ 426 $ 162 $ 32 =========================
(1)Includes net investment income and net realized investment and other gains on assets held in trust on behalf of MRBL, which are included in amounts due from and held for affiliates on the Consolidated Balance Sheets. See Note 7 --Related Party Transactions, for information on the associated MRBL reinsurance agreement. For 2008, 2007, and 2006, net investment income passed through to participating contract holders as interest credited to policyholders' account balances amounted to $1 million, $2 million, and $1 million, respectively. Gross gains were realized on the sale of available-for-sale securities of $212 million, $203 million, and $189 million for the years ended December 31, 2008, 2007, and 2006, respectively, and gross losses were realized on the sale of available-for-sale securities of $50 million, $51 million, and $132 million for the years ended December 31, 2008, 2007, and 2006, respectively. In addition, other-than-temporary impairments on available-for-sale securities of $341 million, $74 million, and $64 million for the years ended December 31, 2008, 2007, and 2006, respectively, were recognized in the Consolidated Statements of Operations. Note 3 -- Relationships with Variable Interest Entities In its capacities as an investor and as an investment manager, the Company has relationships with various types of entities, some of which are considered variable interest entities ("VIEs") in accordance with FASB Interpretation No. 46, "Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51 (revised December 2003)" ("FIN No. 46(R)"). Under FIN No. 46(R), the variable interest holder, if any, that will absorb a majority of the VIE's expected losses, receive a majority of the VIE's expected residual returns, or both, is deemed to be the primary beneficiary and must consolidate the VIE. An entity that holds a significant variable interest in a VIE, but is not the primary beneficiary, must disclose certain information regarding its involvement with the VIE. F-22 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 3 -- Relationships with Variable Interest Entities - (continued) The Company determines whether it is the primary beneficiary of a VIE by evaluating the contractual rights and obligations associated with each party involved in the entity, calculating estimates of the entity's expected losses and expected residual returns, and allocating the estimated amounts to each party. In addition, the Company considers qualitative factors, such as the extent of the Company's involvement in creating or managing the VIE. If it is not considered to be the primary beneficiary, the Company assesses the materiality of its relationship with the VIE to determine if it holds a significant variable interest, which requires disclosure. This assessment considers the materiality of the VIE relationship to the Company as, among other factors, a percentage of total investments, percentage of total net investment income, and percentage of total funds under management. For purposes of assessing materiality and disclosing significant variable interests, the Company aggregates similar entities. Significant Variable Interests in Unconsolidated Variable Interest Entities The following table presents the total assets of, investment in, and maximum exposure to loss relating to VIEs for which the Company has concluded that it holds significant variable interests, but it is not the primary beneficiary, and which have not been consolidated. The Company does not record any liabilities related to the unconsolidated VIEs.
December 31, --------------------------------------- 2008 --------------------------------------- Maximum Exposure to Total Assets Investment (1) Loss (2) --------------------------------------- (in millions) Real estate limited partnerships (3). $ 142 $ 100 $ 148 Timber funds (4)..................... 205 13 13 --------------------------------------- Total................................ $ 347 $ 113 $ 161 =======================================
December 31, --------------------------------------- 2007 --------------------------------------- Maximum Exposure to Total Assets Investment (1) Loss (2) --------------------------------------- (in millions) Real estate limited partnerships (3). $ 103 $ 38 $ 85 Timber funds (4)..................... 266 17 17 --------------------------------------- Total................................ $ 369 $ 55 $ 102 =======================================
(1)The Company's investments in unconsolidated VIEs are included in other invested assets on the Consolidated Balance Sheets. (2)The maximum exposure to loss related to real estate limited partnerships and timber funds is limited to the Company's investment plus unfunded capital commitments. The maximum loss is expected to occur only upon bankruptcy of the issuer or investee or as a result of a natural disaster in the case of the timber funds. (3)Real estate limited partnerships include partnerships established for the purpose of investing in real estate that qualifies for low income housing and/or historic tax credits. Limited partnerships are owned by a general partner, who manages the business, and by limited partners, who invest capital, but have limited liability and are not involved in the partnerships' management. The Company is typically the sole limited partner or investor member of each and is not a general partner or managing member of any. (4)The Company acts as investment manager for the VIEs owning the timberland properties (the timber funds), which the general account and institutional separate accounts invest in. Timber funds are investment vehicles used primarily by large institutional investors, such as public and corporate pension plans, whose primary source of return is derived from the growth and harvest of timber and long-term appreciation of the property. The primary risks of timberland investing include market uncertainty (fluctuation of timber and timberland investments), relative F-23 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 3 -- Relationships with Variable Interest Entities - (continued) illiquidity (compared to stocks and other investment assets), and environmental risk (natural hazards or legislation related to threatened or endangered species). These risks are mitigated through effective investment management and geographic diversification of timberland investments. The Company collects an advisory fee from each timber fund and is also eligible for performance and forestry management fees. Note 4 -- Derivatives and Hedging Instruments The Company uses various derivative instruments to hedge and manage its exposure to changes in interest rate levels, foreign exchange rates, and equity market prices and to manage the duration of assets and liabilities. Fair Value Hedges. The Company uses interest rate futures contracts and interest rate swap agreements as part of its overall strategies of managing the duration of assets and liabilities or the average life of certain asset portfolios to specified targets. Interest rate swap agreements are contracts with counterparties to exchange interest rate payments of a differing character (e.g., fixed-rate payments exchanged for variable-rate payments) based on an underlying principal balance (notional principal). The net differential to be paid or received on interest rate swap agreements is accrued and recognized as a component of net investment income. Cross currency rate swap agreements are used to manage the Company's exposure to foreign exchange rate fluctuations. Cross currency rate swap agreements are contracts to exchange the currencies of two different countries at the same rate of exchange at specified future dates. The net differential to be paid or received on cross currency rate swap agreements is accrued and recognized as a component of net investment income. For the years ended December 31, 2008, and 2006, the Company recognized net losses of $22 million and net gains of $3 million, respectively, related to the ineffective portion of its fair value hedges. These amounts were recorded in net realized investment and other gains (losses). For the year ended December 31, 2007, no gains or losses related to the ineffective portion of its fair value hedges were recognized. For the years ended December 31, 2008, 2007, and 2006, the Company did not recognize any gains or losses related to the portion of the hedging instruments that were excluded from the assessment of hedge effectiveness. In 2008, the Company had no hedges of firm commitments. Cash Flow Hedges. The Company uses interest rate swap agreements to hedge the variable cash flows associated with payments that it will receive on certain floating rate fixed income securities. Amounts are reclassified from accumulated other comprehensive income as a yield adjustment when the payments are made. For the years ended December 31, 2008, 2007, and 2006, no gains or losses related to the ineffective portion of cash flow hedges were recognized. For the years ended December 31, 2008, 2007, and 2006, all of the Company's hedged forecast transactions qualified as cash flow hedges. No gains or losses were reclassified from accumulated other comprehensive income to net income in 2008 or 2006. For the year ended December 31, 2007, net gains of $13 million, net of tax, were reclassified from accumulated other comprehensive income to net income. It is anticipated that losses of approximately $4 million will be reclassified from accumulated other comprehensive income to earnings within the next 12 months. The maximum length for which variable cash flows are hedged is 26.4 years. For the years ended December 31, 2008, 2007, and 2006, no cash flow hedges were discontinued because it was probable that the original forecasted transactions would not occur by the end of the originally specified time period documented at inception of the hedging relationship. For the years ended December 31, 2008 and 2006, net gains of $6 million, net of tax, and net losses of $10 million, net of tax, respectively, representing the effective portion of the change in fair value of derivative instruments designated as cash flow hedges were added to accumulated other comprehensive income. No gains or losses representing the effective portion of the change in fair value were added to accumulated other comprehensive income in 2007. Derivatives Not Designated as Hedging Instruments. The Company enters into interest rate swap agreements, cancelable interest rate swap agreements, total return swaps, interest rate futures contracts, and credit default swaps to manage exposure to interest rates without designating the derivatives as hedging instruments. In addition, the Company uses interest rate floor F-24 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 4 -- Derivatives and Hedging Instruments - (continued) agreements to hedge the interest rate risk associated with minimum interest rate guarantees in certain of its life insurance and annuity businesses, without designating the derivatives as hedging instruments. The Company offers certain variable annuity products with a guaranteed minimum withdrawal benefit ("GMWB") rider. This rider is effectively an embedded option on the basket of the mutual funds, which is sold to contract holders. Beginning in November 2007, for certain contracts, the Company implemented a hedging program to reduce its exposure to the GMWB rider. This dynamic hedging program uses interest rate swaps, equity index futures (including but not limited to the Dow Jones Industrial, Standard & Poor's 500, Russell 2000, and Dow Jones Euro Stoxx 50 indices), and foreign currency futures to match the sensitivities of the GMWB rider liability to the market risk factors. For the years ended December 31, 2008 and 2007, net gains of $625 million and $22 million, respectively, related to derivatives in a non-hedge relationship were recognized by the Company. These amounts were recorded in net realized investment and other gains (losses). Embedded Derivatives. The Company has certain embedded derivatives that are required to be separated from their host contracts and accounted for as derivatives. These host contracts include reinsurance contracts. Outstanding derivative instruments were as follows:
December 31, ------------------------------------------------- 2008 2007 ------------------------------------------------- Notional Carrying Fair Notional Carrying Fair Amount Value Value Amount Value Value ------------------------------------------------- (in millions) Assets: Derivatives: Interest rate swap agreements............... $ 4,190 $ 759 $ 759 $ 1,653 $ 28 $ 28 Cross currency rate swap agreements......... 1,617 321 321 1,214 179 179 Foreign exchange forward agreements......... 84 3 3 89 9 9 Embedded derivatives--reinsurance contracts. - 36 36 - - - ------------------------------------------------- Total Assets................................. $ 5,891 $ 1,119 $ 1,119 $ 2,956 $ 216 $ 216 ================================================= Liabilities: Derivatives: Interest rate swap agreements............... $ 1,991 $ 325 $ 325 $ 1,818 $ 22 $ 22 Cross currency rate swap agreements......... 1,713 377 377 1,567 277 277 Foreign exchange forward agreements......... 38 3 3 212 9 9 Credit default swaps........................ 24 1 1 - - - Equity swaps................................ 34 15 15 1 1 1 Embedded derivatives--fixed maturities...... 2 - - 2 - - Embedded derivatives--reinsurance contracts. - - - - 4 4 ------------------------------------------------- Total Liabilities............................ $ 3,802 $ 721 $ 721 $ 3,600 $ 313 $ 313 =================================================
F-25 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 4 -- Derivatives and Hedging Instruments - (continued) Credit Risk. The Company may be exposed to credit-related losses in the event of nonperformance by counterparties to the derivative financial instruments. The current credit exposure of the Company's derivative contracts is limited to the fair value at the reporting date. The Company manages its credit risk by entering into transactions with creditworthy counterparties, obtaining collateral where appropriate, and entering into master netting agreements that provide for a netting of payments and receipts with a single counterparty. The Company enters into credit support annexes with its over-the-counter derivative dealers in order to manage its credit exposure to those counterparties. As part of the terms and conditions of those agreements, the pledging and accepting of collateral in connection with the Company's derivative usage is required. As of December 31, 2008 and 2007, the Company had accepted collateral consisting of various securities with a fair value of $225 million and $52 million, respectively, which is held in separate custodial accounts. In addition, as of December 31, 2008, the Company pledged collateral of $439 million, which is included in fixed maturities on the Consolidated Balance Sheets. The Company had no pledged collateral in 2007. F-26 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 5 -- Income Taxes JHUSA and its subsidiaries join with MIC and other affiliates in filing a consolidated federal income tax return. In accordance with the income tax sharing agreements in effect for the applicable tax years, the income tax provision (or benefit) is computed as if each entity filed separate federal income tax returns. The tax charge to each of the respective companies will not be more than that which each company would have paid on a separate return basis. Intercompany settlements of income taxes are made through an increase or reduction to amounts due to or from affiliates. Such settlements occur on a periodic basis in accordance with the tax sharing agreements. Tax benefits from operating losses are provided at the U.S. statutory rate plus any tax credits attributable, provided the consolidated group utilizes such benefits currently. The components of income taxes were as follows:
Years ended December 31, ------------------------ 2008 2007 2006 ------------------------ (in millions) Current taxes: Federal........................... $ (515) $ 223 $ (7) Deferred taxes: Federal........................... 212 50 237 ------------------------ Total income tax (benefit) expense. $ (303) $ 273 $ 230 ========================
A reconciliation of income taxes at the federal income tax rate to income tax expense charged to operations follows:
Years ended December 31, -------------------------- 2008 2007 2006 -------------------------- (in millions) Tax at 35%......................... $ (119) $ 348 $ 264 Add (deduct): Prior year taxes.................. (78)/(1)/ (43) (4) Tax credits....................... (19) (35) - Tax-exempt investment income...... (88) (160) (42) Unrecognized tax benefits......... 2 161 9 Other............................. (1) 2 3 -------------------------- Total income tax (benefit) expense. $ (303) $ 273 $ 230 ==========================
(1)During 2008, the Company performed a detailed analysis of its tax-basis balance sheet and related deferred tax balances. This analysis resulted in an $81 million decrease in the 2008 net deferred tax liability balance due to book/tax differences attributable to prior years. This adjustment has been reflected as a reduction of the 2008 tax expense. F-27 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 5 -- Income Taxes - (continued) Deferred income tax assets and liabilities result from tax effecting the differences between the financial statement values and income tax values of assets and liabilities at each Consolidated Balance Sheet date. Deferred tax assets and liabilities consisted of the following:
December 31, --------------- 2008 2007 --------------- (in millions) Deferred tax assets: Policy reserve adjustments......... $ 2,348 $ 2,408 Net operating loss carryforwards... 309 49 Tax credits........................ 145 126 Unearned revenue................... 756 190 Dividends payable to policyholders. 14 12 Unrealized losses on securities.... 61 - Other.............................. 84 62 --------------- Total deferred tax assets........ 3,717 2,847 --------------- Deferred tax liabilities: Deferred policy acquisition costs.. 2,394 1,637 Unrealized gains on securities..... - 447 Premiums receivable................ 41 24 Deferred sales inducements......... 121 92 Deferred gains..................... 609 94 Investments........................ 604 65 Reinsurance........................ 695 1,433 Other.............................. 108 55 --------------- Total deferred tax liabilities... 4,572 3,847 --------------- Net deferred tax liabilities... $ 855 $ 1,000 ===============
At December 31, 2008, the Company had $883 million of operating loss carryforwards, which will expire in various years through 2023. The Company believes that it will realize the full benefit of its deferred tax assets. The Company made income tax payments of $14 million, $28 million, and $9 million in 2008, 2007, and 2006, respectively. The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state, or local income tax examinations by taxing authorities for years before 1998. The Internal Revenue Service ("IRS") completed its examinations for years 1998 through 2003 on December 31, 2005. The Company has filed protests with the IRS Appeals Division of various adjustments raised by the IRS in its examinations of these years. The IRS commenced an examination of the Company's income tax returns for years 2004 through 2005 in the third quarter of 2007. It is anticipated that the examination will be completed by the end of 2009. The Company adopted the provisions of FIN No. 48 on January 1, 2007. In connection with the adoption of FIN No. 48, the Company did not recognize an increase or decrease in its liability for unrecognized tax benefits. F-28 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 5 -- Income Taxes - (continued) A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
December 31 ------------- 2008 2007 ------------- (in millions) Beginning balance............................................. $ 379 $ 230 Additions based on tax positions related to the current year.. 51 77 Reductions based on tax positions related to the current year. - (7) Additions for tax positions of prior years.................... 39 89 Reductions for tax positions of prior years................... (58) (10) ------------- Ending balance................................................ $ 411 $ 379 =============
Included in the balances as of December 31, 2008 and 2007, respectively, are $291 million and $291 million of unrecognized benefits that, if recognized, would affect the Company's effective tax rate. Included in the balances as of December 31, 2008 and 2007, respectively, are $120 million and $88 million of tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, other than interest or penalties, the disallowance of the shorter deductibility period would not affect the annual effective tax rate but would accelerate the payment of taxes to an earlier period. The Company recognizes interest accrued related to unrecognized tax benefits in interest expense (part of other operating costs and expenses) and penalties in income tax expense. During the years ended December 31, 2008, 2007, and 2006, the Company recognized approximately $4 million, ($24) million, and $17 million in interest expense (benefit), respectively. The Company had approximately $44 million and $39 million accrued for interest as of December 31, 2008 and December 31, 2007, respectively. The Company did not recognize any material amounts of penalties during the years ended December 31, 2008, 2007, and 2006. Note 6 -- Closed Block The Company operates a separate closed block for the benefit of certain classes of individual or joint traditional participating whole life insurance policies. The closed block was established upon the demutualization of MLI for those designated participating policies that were in-force on September 23, 1999. Assets were allocated to the closed block in an amount that, together with anticipated revenues from policies included in the closed block, was reasonably expected to be sufficient to support such business, including provision for payment of benefits, direct asset acquisition and disposition costs, and taxes, and for continuation of dividend scales, assuming experience underlying such dividend scales continues. Assets allocated to the closed block inure solely to the benefit of the holders of the policies included in the closed block and will not revert to the benefit of the shareholders of the Company. No reallocation, transfer, borrowing, or lending of assets can be made between the closed block and other portions of the Company's general account, any of its separate accounts, or any affiliate of the Company without prior approval of the Michigan Commissioner of Financial and Insurance Regulation (the "Commissioner"). If, over time, the aggregate performance of the closed block's assets and policies is better than was assumed in funding the closed block, dividends to policyholders will be increased. If, over time, the aggregate performance of the closed block's assets and policies is less favorable than was assumed in the funding, dividends to policyholders will be reduced. The assets and liabilities allocated to the closed block are recorded in the Company's Consolidated Balance Sheets and Statements of Operations on the same basis as other similar assets and liabilities. The carrying amount of the closed block's liabilities in excess of the carrying amount of the closed block's assets at the date the closed block was established (adjusted to eliminate the impact of related amounts in accumulated other comprehensive income) represents the maximum future earnings from the assets and liabilities designated to the closed block that can be recognized in income over the period the policies in the closed block remain in force. The Company has developed an actuarial calculation of the timing of such maximum future shareholder earnings, and this is the basis of the policyholder dividend obligation. F-29 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 6 -- Closed Block - (continued) If actual cumulative earnings are greater than expected cumulative earnings, only expected earnings will be recognized in income. Actual cumulative earnings in excess of expected cumulative earnings represents undistributed accumulated earnings attributable to policyholders, which are recorded as a policyholder dividend obligation because the excess will be paid to the closed block's policyholders as an additional policyholder dividend unless otherwise offset by future performance of the closed block that is less favorable than originally expected. If actual cumulative performance is less favorable than expected, only actual earnings will be recognized in net income. For all closed block policies, the principal cash flow items that affect the amount of closed block assets and liabilities are premiums, net investment income, purchases and sales of investments, policyholders' benefits, policyholder dividends, premium taxes, guaranty fund assessments, and income taxes. The amounts shown in the following tables for assets, liabilities, revenues, and expenses of the closed block are those that enter into the determination of amounts that are to be paid to policyholders. The following tables set forth certain summarized financial information relating to the closed block as of the dates indicated:
December 31, ----------------- 2008 2007 ----------------- (in millions) Liabilities Future policy benefits............................................................. $ 8,680 $ 8,619 Policyholders' funds............................................................... 79 79 Policyholder dividends payable..................................................... 211 206 Other closed block liabilities..................................................... 99 99 ----------------- Total closed block liabilities................................................ $ 9,069 $ 9,003 ================= Assets Investments Fixed maturities: Available-for-sale--at fair value (amortized cost: 2008--$3,235; 2007--$3,086).................................... $ 3,128 $ 3,165 Mortgage loans on real estate..................................................... 583 562 Policy loans...................................................................... 1,700 1,545 Other invested assets............................................................. 644 740 ----------------- Total investments............................................................. 6,055 6,012 Cash borrowings and cash equivalents............................................... (437) (374) Accrued investment income.......................................................... 115 106 Amounts due from and held for affiliates........................................... 1,752 2,016 Other closed block assets.......................................................... 488 202 ----------------- Total assets designated to the closed block................................... $ 7,973 $ 7,962 ================= Excess of closed block liabilities over assets designated to the closed block.............................................................. $ 1,096 $ 1,041 Portion of above representing accumulated other comprehensive income: Unrealized appreciation, net of deferred income tax expense of $42 million and $174 million, respectively.................................................... 78 322 Adjustment for deferred policy acquisition costs, net of deferred income tax benefit of $14 million and $48 million, respectively.......................... (26) (88) Foreign currency translation adjustment......................................... (21) (76) ----------------- Total amounts included in accumulated other comprehensive income......... 31 158 ----------------- Maximum future earnings to be recognized from closed block assets and liabilities.. $ 1,127 $ 1,199 =================
F-30 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 6 -- Closed Block - (continued)
Years ended December 31, -------------------------- 2008 2007 2006 -------------------------- (in millions) Revenues Premiums................................................... $ 647 $ 661 $ 678 Net investment income...................................... 473 438 423 Net realized investment and other (losses) gains........... (9) 17 81 -------------------------- Total revenues.......................................... 1,111 1,116 1,182 Benefits and Expenses Benefits to policyholders.................................. 782 799 862 Policyholder dividends..................................... 411 409 389 Amortization of deferred policy acquisition costs.......... (218) (50) 15 Other closed block operating costs and expenses............ 25 25 27 -------------------------- Total benefits and expenses............................. 1,000 1,183 1,293 Revenues, net of benefits and expenses before income taxes. 111 (67) (111) Income tax expense (benefit)............................... 39 (24) (39) -------------------------- Revenues, net of benefits and expenses and income taxes.... $ 72 $ (43) $ (72) ==========================
Maximum future earnings from closed block assets and liabilities:
Years Ended December 31, ------------------------ 2008 2007 ------------------------ (in millions) Beginning of period.. $ 1,199 $ 1,156 End of period........ 1,127 1,199 ------------------------ Change during period. $ (72) $ 43 ========================
Note 7 -- Related Party Transactions Reinsurance Transactions Effective October 1, 2008, the Company entered into a reinsurance agreement with an affiliate, Manulife Reinsurance (Bermuda) Limited ("MRBL"), to reinsure 75% of the group pension business in-force. The reinsurance agreement covers all contracts, excluding the guaranteed benefit rider, issued and in-force as of September 30, 2008. As the underlying contracts being reinsured are considered investment contracts, the agreement does not meet the criteria for reinsurance accounting and was classified as a financial instrument. Under the terms of the agreement, the Company received initial consideration of $1,495 million, which was classified as unearned revenue. The amount is being amortized into income through other operating costs and expenses on a basis consistent with the manner in which the deferred policy acquisition costs on the underlying reinsured contracts are recognized. The balance of unearned revenue related to the initial consideration was $1,484 million as of December 31, 2008. Effective December 31, 2003, the Company entered into a reinsurance agreement with MRBL to reinsure 90% of the non-reinsured risk of the closed block. As approximately 90% of the mortality risk is covered under previously existing contracts with third party reinsurers and the resulting limited mortality risk is inherent in the new contract with MRBL, it was classified as financial reinsurance and given deposit-type accounting treatment. The Company retained title to the invested assets supporting this block of business. These invested assets are held in trust on behalf of MRBL and are included in amounts due from and held for affiliates on the Consolidated Balance Sheets. The amounts held at December 31, 2008 and 2007 were $2,190 million and $2,493 million, respectively, and are accounted for as invested assets available-for-sale. Effective January 1, 2002, the Company entered into a 90% quota share reinsurance agreement with MRBL to reinsure a block of variable annuity business (the "Original Agreement"). The Original Agreement covered base contracts, but F-31 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 7 -- Related Party Transactions - (continued) excluded the guaranteed benefit riders. The primary risk reinsured was investment and lapse risk with only limited coverage, of mortality risk. Accordingly, the contract was classified as financial reinsurance and given deposit-type accounting treatment. Under the terms of the Original Agreement, the Company received (paid) a net ceding commission of $113 million, $(23) million, and $(35) million for the years ended December 31, 2008, 2007, and 2006, respectively. These amounts were classified as unearned revenue and were being amortized into income as payments were made to MRBL. The original agreement was amended effective October 1, 2008 as discussed further below. As a result of the amendment, the unearned revenue balance of $580 million as of September 30, 2008 was included in the calculation of cost of reinsurance, which was included with other liabilities on the Consolidated Balance Sheets. The balance of the unearned revenue liability was $437 million as of December 31, 2007. Effective October 1, 2008, the Company entered into an amended and restated variable annuity reinsurance agreement with MRBL. The base contracts continue to be reinsured on a modified coinsurance basis; however, MRBL now reinsures all substantial risks, including all guaranteed benefits, related to certain specified policies not already reinsured to third parties. Guaranteed benefit reinsurance coverage was apportioned in accordance with the reinsurance agreement provisions between modified coinsurance and coinsurance funds withheld as of December 31, 2008. The assets supporting the reinsured policies remained invested with the Company. As of December 31, 2008, the Company reported a reinsurance payable to MRBL of $781 million, which was included with amounts due to affiliates, a liability for coinsurance funds withheld of $285 million, which was included with other liabilities, and $2,123 million related to the cost of reinsurance, which was included with other liabilities on the Consolidated Balance Sheets. The cost of reinsurance is being amortized into income over the life of the underlying reinsured contracts in proportion to the policyholder fee income received. Service Agreements The Company has formal service agreements with MFC and MLI, which can be terminated by either party upon two months notice. Under the various agreements, the Company will pay direct operating expenses incurred by MFC and MLI on behalf of the Company. Services provided under the agreements include legal, actuarial, investment, data processing, accounting, and certain other administrative services. Costs incurred under the agreements were $374 million, $336 million, and $323 million for the years ended December 31, 2008, 2007, and 2006, respectively. As of December 31, 2008 and December 31, 2007, the Company had amounts receivable from MFC and MLI of $8 million and $18 million, respectively. There are two service agreements, both effective April 28, 2004, between the Company and an affiliate, John Hancock Life Insurance Company ("JHLICO"). Under one agreement, the Company provides services to JHLICO, and under the other, JHLICO provides services to the Company. In both cases, the Provider of the services can also employ a Provider Affiliate to provide services. In the case of the service agreement where JHLICO provides services to the Company, a Provider Affiliate means JHLICO's parent, John Hancock Financial Services, Inc. ("JHFS"), and its direct and indirect subsidiaries. Net services provided by the Company to JHLICO were $122 million, $126 million, and $111 million for the years ended December 31, 2008, 2007, and 2006, respectively. As of December 31, 2008 and 2007, there were accrued receivables from JHLICO to the Company of $12 million and $87 million, respectively. Management believes the allocation methods used are reasonable and appropriate in the circumstances; however, the Company's Consolidated Balance Sheets may not necessarily be indicative of the financial condition that would have existed if the Company operated as an unaffiliated entity. Debt Transactions Pursuant to a subordinated surplus note dated September 30, 2008, the Company borrowed $110 million from John Hancock Financial Holdings (Delaware) Inc. ("JHFH"). The interest rate is fixed at 7%, and interest is payable semi-annually. The note matures on March 31, 2033. Interest expense was $2 million for the year ended December 31, 2008. Pursuant to a subordinated surplus note dated September 30, 2008, the Company borrowed $295 million from JHFH. The interest rate is fixed at 7%, and interest is payable semi-annually. The note matures on March 31, 2033. Interest expense was $5 million for the year ended December 31, 2008. F-32 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 7 -- Related Party Transactions - (continued) On December 22, 2006, the Company issued a subordinated note to MHDLLC in the amount of $136 million due December 15, 2016 (the "Original Note"). Interest on the Original Note accrued at a variable rate equal to LIBOR plus 0.3% per annum calculated and reset quarterly on March 15, June 15, September 15, and December 15, and payable semi-annually on June 15 and December 15 of each year until December 15, 2011 and thereafter at a variable rate equal to LIBOR plus 1.3% per annum reset quarterly as aforesaid until payment in full. On September 30, 2008 the Original Note was converted to a subordinated surplus note on the same economic terms. Interest on the subordinated surplus note from October 1, 2008 until December 15, 2011 accrues at a variable rate equal to LIBOR plus 0.3% per annum calculated and reset quarterly on March 31, June 30, September 30, and December 31 and payable semi-annually on March 31 and September 30 of each year. Thereafter, interest accrues at a variable rate equal to LIBOR plus 1.3% per annum reset quarterly as aforementioned and payable semi-annually on June 15 and September 15 of each year until payment in full. Interest expense was $5 million, $10 million, and $0 for the years ended December 31, 2008, 2007, and 2006, respectively. The issuance of surplus notes by the Company was approved by the Commissioner, and any payments of interest or principal on the surplus notes require the prior approval of the Commissioner. Pursuant to a demand note dated September 30, 2008, the Company loaned $295 million to JHFS. The interest rate is calculated at a fluctuating rate equal to 3 month LIBOR plus 50 basis points. The note matures on December 31, 2009. Interest income was $3 million for the year ended December 31, 2008. Pursuant to a senior promissory note dated March 1, 2007, the Company borrowed $477 million from MHDLLC. The note was repaid on September 30, 2008. Interest was calculated at a fluctuating rate equal to 3-month LIBOR plus 33.5 basis points. Interest expense was $13 million and $23 million for the years ended December 31, 2008 and 2007, respectively. Pursuant to a Note Purchase Agreement dated November 10, 2006, the Company borrowed $90 million from JHLICO. The note provides for interest-only payments of $0.4 million per month commencing January 1, 2007 through November 1, 2011. The interest rate for the term of this note is fixed at 5.73%. The note matures on December 1, 2011 and is secured by a mortgage on the Company's property at 601 Congress Street, Boston, Massachusetts. Interest expense was $5 million, $5 million, and $0 for the years ended December 31, 2008, 2007, and 2006, respectively. Capital Stock Transactions On September 30, 2008, the Company issued two shares of common stock to MIC for $477 million in cash. Other On December 28, 2006, the Company sold real estate held for investment with a net book value of $17 million to JHILCO for $150 million in cash. Since this sale was accounted for as a transaction between entities under common control, the difference between the net book value and sales price resulted in an increase of $87 million, net of tax, to the Company's additional paid-in-capital as of December 31, 2006. On September 2, 2008, John Hancock Variable Life Insurance Company ("JHVLICO"), purchased a $60 million funding agreement from the Company. F-33 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 7 -- Related Party Transactions - (continued) The Company operates a liquidity pool in which affiliates can invest excess cash. Terms of operation and participation in the liquidity pool are set out in the Liquidity Pool and Loan Facility Agreement effective November 13, 2007. The maximum aggregate amounts that the Company can accept into the Liquidity Pool are $5 billion in U.S. dollar deposits and $200 million in Canadian dollar deposits. Under the terms of the agreement, certain participants may receive advances from the Liquidity Pool up to certain predetermined limits. Interest payable on the funds will be reset daily to the one-month London Interbank Bid Rate. The following table details the affiliates and their participation in the Company's Liquidity Pool:
December 31, --------------- 2008 2007 --------------- (in millions) The Manufacturers Investment Corporation..... $ 18 $ 25 Manulife Holdings (Delaware) LLC............. 14 36 Manulife Reinsurance Ltd..................... 144 158 Manulife Reinsurance (Bermuda) Ltd........... 54 155 Manulife Hungary Holdings KFT................ 44 48 John Hancock Life & Health Insurance Company. 40 31 John Hancock Life Insurance Company.......... 1,733 1,736 John Hancock Variable Life Insurance Company. 347 90 John Hancock Insurance Company of Vermont.... 31 95 John Hancock Reassurance Co, Ltd............. 37 271 John Hancock Financial Services, Inc......... 104 550 The Berkeley Financial Group LLC............. 30 12 John Hancock Subsidiaries LLC................ 85 68 --------------- Total..................................... $ 2,681 $ 3,275 ===============
The balances above are reported on the Consolidated Balance Sheets as amounts due to affiliates. MFC provides a claims paying guarantee to certain U.S. policyholders. F-34 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 8 -- Reinsurance The effect of reinsurance on life, health, and annuity premiums written and earned was as follows:
Years ended December 31, ----------------------------------------------------- 2008 2007 2006 ----------------------------------------------------- Premiums Premiums Premiums Written Earned Written Earned Written Earned ----------------------------------------------------- (in millions) Direct.................................... $ 1,310 $ 1,313 $ 1,148 $ 1,149 $ 1,294 $ 1,294 Assumed................................... 529 521 426 420 369 405 Ceded..................................... (871) (871) (694) (694) (685) (685) ----------------------------------------------------- Net life, health, and annuity premiums. $ 968 $ 963 $ 880 $ 875 $ 978 $ 1,014 =====================================================
For the years ended December 31, 2008, 2007, and 2006, benefits to policyholders under life, health, and annuity ceded reinsurance contracts were $880 million, $725 million, and $423 million, respectively. The Company utilizes reinsurance agreements to provide for greater diversification of business, allowing management to control exposure to potential losses arising from large risks and provide additional capacity for growth. Reinsurance ceded contracts do not relieve the Company from its obligations to policyholders. The Company remains liable to its policyholders for the portion reinsured to the extent that any reinsurer does not meet its obligations for reinsurance ceded to it under the reinsurance agreements. Failure of the reinsurers to honor their obligations could result in losses to the Company; consequently, estimates are established for amounts deemed or estimated to be uncollectible. To minimize its exposure to significant losses from reinsurance insolvencies, the Company evaluates the financial condition of its reinsurers and monitors concentration of credit risk arising from similar characteristics among the reinsurers. Note 9 -- Pension and Other Postretirement Benefit Plans Effective December 31, 2006, The Company's Cash Balance Plan was merged into the John Hancock Financial Services, Inc. Pension Plan (the "Plan"), which is a funded qualified defined benefit plan sponsored by JHFS. Pursuant to the merger, all of the assets of the former plans were commingled. The aggregate pool of assets from the former plans is available to meet the obligations of the merged plan. The merger did not have a material impact on the Consolidated Balance Sheets or Statements of Operations of the Company. Historically, pension benefits were calculated utilizing a traditional formula. Under the traditional formula, benefits are provided based upon length of service and final average compensation. As of July 1, 1998, all defined benefit pension plans were amended to a cash balance basis. Under the cash balance formula, participants are credited with benefits equal to a percentage of eligible pay, as well as interest. In addition, early retirement benefits are subsidized for certain grandfathered employees. The Company's funding policy for its qualified defined benefit plans is to contribute annually an amount at least equal to the minimum annual contribution required under the Employee Retirement Income Security Act of 1974, as amended, and other applicable laws and generally, not greater than the maximum amount that can be deducted for federal income tax purposes. In 2008, 2007, and 2006, no contributions were made to the qualified plans. The Company expects that no contributions will be made in 2009. Pension plan assets of $19 million and $26 million at December 31, 2008 and 2007, respectively, were investments managed by related parties. The Company also participates in an unfunded non-qualified defined benefit plan, which is also sponsored by JHFS. This plan provides supplemental benefits in excess of the compensation limit outlined in the Internal Revenue Code, for certain employees. F-35 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 9 -- Pension and Other Postretirement Benefit Plans - (continued) The Company participates in a new non-qualified defined contribution pension plan, maintained by MFC, which was established as of January 1, 2008 with participant directed investment options. The expense for the new plan was $5 million in 2008. The prior plan was frozen as of January 1, 2008, and the benefits accrued under the prior plan continue to be subject to the prior plan provisions. The Company's funding policy for its non-qualified defined benefit plans is to contribute the amount of the benefit payments made during the year. The contribution to the non-qualified plans was $1 million, $3 million, and $2 million in 2008, 2007, and 2006, respectively. The Company expects to contribute approximately $2 million to its non-qualified pension plans in 2009. The Company provides postretirement medical and life insurance benefits for its retired employees and their spouses through its participation in the John Hancock Financial Services, Inc. Employee Welfare Plan, sponsored by JHFS. Certain employees hired prior to 2005 who meet age and service criteria may be eligible for these postretirement benefits in accordance with the plan's provisions. The majority of retirees contribute a portion of the total cost of postretirement medical benefits. Life insurance benefits are based on final compensation subject to the plan maximum. The John Hancock Financial Services Inc. Employee Welfare Plan was amended effective January 1, 2007 whereby participants who had not reached a certain age and years of service with the Company were no longer eligible for such Company contributory benefits. Also the number of years of service required to be eligible for the benefit was increased to 15 years for all participants. The future retiree life insurance coverage amount was frozen as of December 31, 2006. The Company's policy is to fund its other postretirement benefits in amounts at or below the annual tax qualified limits. The contribution for the other postretirement benefits was $2 million, $1 million, and $2 million in 2008, 2007, and 2006, respectively. The Company participates in qualified defined contribution plans for its employees who meet certain eligibility requirements, sponsored by JHFS. These plans include the Investment-Incentive Plan for John Hancock Employees and the John Hancock Savings and Investment Plan. The expense for the defined contribution plans was $7 million, $7 million, and $3 million in 2008, 2007, and 2006, respectively. The Company uses a December 31 measurement date to account for its pension and other postretirement benefit plans. F-36 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 9 -- Pension and Other Postretirement Benefit Plans - (continued) Obligations and Funded Status of Defined Benefit Plans The amounts disclosed below represent the Company's share of the pension and other postretirement benefit plans described above:
Years Ended December 31, ------------------------------------- Other Postretirement Pension Benefits Benefits ------------------------------------- 2008 2007 2008 2007 ------------------------------------- (in millions) Change in benefit obligation: Benefit obligation at beginning of year....................... $ 124 $ 121 $ 30 $ 28 Service cost.................................................. 9 7 - - Interest cost................................................. 7 7 2 2 Actuarial loss (gain)......................................... - 9 (3) 1 Plan amendments............................................... - (7) - - Curtailments.................................................. - (4) - - Benefits paid................................................. (4) (9) (2) (1) ------------------------------------- Benefit obligation at end of year............................. $ 136 $ 124 $ 27 $ 30 ===================================== Change in plan assets: Fair value of plan assets at beginning of year................ $ 75 $ 75 $ - $ - Actual return on plan assets.................................. (22) 6 - - Employer contributions........................................ 1 3 2 1 Benefits paid................................................. (4) (9) (2) (1) ------------------------------------- Fair value of plan assets at end of year...................... $ 50 $ 75 $ - $ - ===================================== Funded status at end of year.................................. $ (86) $ (49) $(27) $(30) ===================================== Amounts recognized on Consolidated Balance Sheets: Assets........................................................ $ - $ - $ - $ - Liabilities................................................... (86) (49) (27) (30) ------------------------------------- Net amount recognized......................................... $ (86) $ (49) $(27) $(30) ===================================== Amounts recognized in accumulated other comprehensive income: Prior service cost............................................ $ (4) $ (5) $ - $ - Net actuarial loss (gain)..................................... 73 48 (14) (11) ------------------------------------- Total......................................................... $ 69 $ 43 $(14) $(11) =====================================
The accumulated benefit obligation for all defined benefit plans was $130 million and $117 million at December 31, 2008 and 2007, respectively. F-37 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 9 -- Pension and Other Postretirement Benefit Plans - (continued) The following table provides information for pension plans with accumulated benefit obligations in excess of plan assets:
December 31, ------------- 2008 2007 ------------- (in millions) Accumulated benefit obligation. $ 130 $ 117 Projected benefit obligation... 136 124 Fair value of plan assets...... 50 75
Components of Net Periodic Benefit Cost
Years Ended December 31, ---------------------------------------------- Pension Benefits Other Postretirement Benefits ---------------------------------------------- 2008 2007 2006 2008 2007 2006 ---------------------------------------------- (in millions) Service cost................... $ 9 $ 7 $ 6 $ - $ - $ - Interest cost.................. 7 7 6 2 2 2 Expected return on plan assets. (5) (6) (5) - - - Recognized actuarial loss...... - 1 3 - - - ---------------------------------------------- Net periodic benefit cost...... $ 11 $ 9 $ 10 $ 2 $ 2 $ 2 ==============================================
There are no amounts included in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost in 2009. F-38 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 9 -- Pension and Other Postretirement Benefit Plans - (continued) Assumptions Weighted-average assumptions used to determine benefit obligations were as follows:
Years Ended December 31, ------------------------------------- Other Postretirement Pension Benefits Benefits ------------------------------------- 2008 2007 2008 2007 ------------------------------------- Discount rate.................................. 6.00% 6.00% 6.00% 6.00% Rate of compensation increase.................. 4.10% 5.10% N/A N/A Health care cost trend rate for following year. 8.50% 9.00% Ultimate trend rate............................ 5.00% 5.00% Year ultimate rate reached..................... 2016 2016
Weighted-average assumptions used to determine net periodic benefit cost were as follows:
Years Ended December 31, ------------------------------------- Other Postretirement Pension Benefits Benefits ------------------------------------- 2008 2007 2008 2007 ------------------------------------- Discount rate.................................. 6.00% 5.75% 6.00% 5.75% Expected long-term return on plan assets....... 8.00% 8.25% N/A N/A Rate of compensation increase.................. 5.10% 4.00% N/A N/A Health care cost trend rate for following year. 9.00% 9.50% Ultimate trend rate............................ 5.00% 5.00% Year ultimate rate reached..................... 2016 2016
The expected long-term return on plan assets is based on the rate expected to be earned for plan assets. The asset mix based on the long-term investment policy and range of target allocation percentages of the plans and the Capital Asset Pricing Model are used as part of that determination. Current conditions and published commentary and guidance from U.S. Securities and Exchange Commission ("SEC") staff are also considered. Assumed health care cost trend rates have a significant effect on the amounts reported for the healthcare plans. A one-percentage point change in assumed health care cost trend rates would have the following effects:
One-Percentage One-Percentage Point Increase Point Decrease -------------- -------------- (in millions) Effect on total service and interest costs in 2008.................. $ - $ - Effect on postretirement benefit obligation as of December 31, 2008. (2) (2)
F-39 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 9 -- Pension and Other Postretirement Benefit Plans - (continued) Plan Assets The Company's weighted-average asset allocations for its defined benefit plans by asset category were as follows:
Pension Plan Assets at December 31, --------------- 2008 2007 --------------- Asset Category Equity securities......... 51% 64% Fixed maturity securities. 35 26 Real estate............... 5 3 Other..................... 9 7 --------------- Total.................. 100% 100% ===============
The target allocations for assets of the Company's defined benefit plans are summarized below for major asset categories: Asset Category Equity securities......... 50% - 80% Fixed maturity securities. 23% - 35% Real estate............... 0% - 5% Other..................... 5% - 15%
The plans do not own any of the Company's or MFC's common stock at December 31, 2008 and 2007. Cash Flows Expected Future Benefit Payments for Defined Benefit Plans Projections for benefit payments for the next ten years are as follows:
Other Postretirement Benefits- Other Postretirement Medicare Part D Pension Benefits Benefits Gross Payments Subsidy ---------------------------------------------------------------------- (in millions) 2009...... $ 12 $ 2 $ - 2010...... 12 2 - 2011...... 13 2 - 2012...... 14 2 - 2013...... 11 2 - 2014-2018. 62 10 1
F-40 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 10 -- Commitments, Guarantees, and Legal Proceedings Commitments. The Company has extended commitments to purchase U.S. private debt and to issue mortgage loans on real estate totaling $231 million and $27 million, respectively, at December 31, 2008. If funded, loans related to real estate mortgages would be fully collateralized by the mortgaged properties. The Company monitors the creditworthiness of borrowers under long-term bond commitments and requires collateral as deemed necessary. The majority of these commitments expire in 2009. The Company leases office space under non-cancelable operating lease agreements of various expiration dates. Rental expenses, net of sub-lease income, were $14 million, $12 million, and $11 million for the years ended December 31, 2008, 2007, and 2006, respectively. The future minimum lease payments, by year and in the aggregate, under the remaining non-cancelable operating leases along with the associated sub-lease income are presented below.
Non- cancelable Operating Sub-lease Leases Income -------------------- (in millions) 2009....... $ 9 $ 1 2010....... 6 - 2011....... 5 - 2012....... 5 - 2013....... 4 - Thereafter. 196 - -------------------- Total...... $ 225 $ 1 ====================
Guarantees. In the course of business, the Company enters into guarantees which vary in nature and purpose and which are accounted for and disclosed under U.S. GAAP specific to the insurance industry. The Company had no material guarantees outstanding outside the scope of insurance accounting at December 31, 2008. Legal Proceedings. The Company is regularly involved in litigation, both as a defendant and as a plaintiff. The litigation naming the Company as a defendant ordinarily involves its activities as a provider of insurance protection and wealth management products, as well as an investment adviser, employer, and taxpayer. In addition, state regulatory bodies, state attorneys general, the SEC, the Financial Industry Regulatory Authority, and other government and regulatory bodies regularly make inquiries and, from time to time, require the production of information or conduct examinations concerning the Company's compliance with, among other things, insurance laws, securities laws, and laws governing the activities of broker-dealers. The Company does not believe that the conclusion of any current legal or regulatory matters, either individually or in the aggregate, will have a material adverse effect on its consolidated financial condition or results of operations. Note 11 -- Shareholder's Equity Capital Stock The Company has two classes of capital stock, preferred stock and common stock. All of the outstanding preferred and common stock of the Company is owned by MIC, its parent. F-41 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 11 -- Shareholder's Equity - (continued) Accumulated Other Comprehensive Income The components of accumulated other comprehensive income were as follows:
Additional Net Pension and Accumulated Foreign Minimum Postretirement Net Unrealized Gain (Loss) Currency Pension Unrecognized Investment on Cash Translation Liability Net Periodic Gains (Losses) Flow Hedges Adjustment Adjustment Benefit Cost ---------------------------------------------------------------- (in millions) Balance at January 1, 2006......................... $ 506 $ 8 $ 36 $ (25) $ - Gross unrealized investment losses (net of deferred income tax benefit of $32 million)...... (60) Reclassification adjustment for losses realized in net income (net of deferred income tax benefit of $2 million)................................... 5 Adjustment for policyholder liabilities, (net of deferred income tax expense of $16 million)...... 30 Adjustment for deferred policy acquisition costs, deferred sales inducements, and unearned revenue liability (net of deferred income tax benefit of $11 million).......................... (21) -------------- Net unrealized investment losses................... (46) Foreign currency translation adjustment............ (5) Minimum pension liability (net of deferred income tax expense of $3 million)................ 5 SFAS No. 158 transition adjustment (net of deferred income tax benefit of $1 million)....... 20 (22) ---------------------------------------------------------------- Balance at December 31, 2006....................... $ 460 $ 8 $ 31 $ - $ (22) ================================================================
Accumulated Other Comprehensive Income -------------- Balance at January 1, 2006......................... $ 525 Gross unrealized investment losses (net of deferred income tax benefit of $32 million)...... (60) Reclassification adjustment for losses realized in net income (net of deferred income tax benefit of $2 million)................................... 5 Adjustment for policyholder liabilities, (net of deferred income tax expense of $16 million)...... 30 Adjustment for deferred policy acquisition costs, deferred sales inducements, and unearned revenue liability (net of deferred income tax benefit of $11 million).......................... (21) ------------- Net unrealized investment losses................... (46) Foreign currency translation adjustment............ (5) Minimum pension liability (net of deferred income tax expense of $3 million)................ 5 SFAS No. 158 transition adjustment (net of deferred income tax benefit of $1 million)....... (2) -------------- Balance at December 31, 2006....................... $ 477 ==============
Additional Net Pension and Accumulated Foreign Postretirement Accumulated Net Unrealized Gain (Loss) Currency Unrecognized Other Investment on Cash Translation Net Periodic Comprehensive Gains (Losses) Flow Hedges Adjustment Benefit Cost Income ------------------------------------------------------------------- (in millions) Balance at January 1, 2007............................. $ 460 $ 8 $ 31 $ (22) $ 477 Gross unrealized investment gains (net of deferred income tax expense of $135 million).................. 250 250 Reclassification adjustment for gains realized in net income (net of deferred income tax expense of $51 million)......................................... (94) (94) Adjustment for policyholder liabilities (net of deferred income tax expense of $4 million)........... 6 6 Adjustment for deferred policy acquisition costs, deferred sales inducements, and unearned revenue liability (net of deferred income tax benefit of $20 million)............................................. (38) (38) -------------- ------------- Net unrealized investment gains........................ 124 124 Foreign currency translation adjustment................ (4) (4) Amortization of periodic pension costs................. 1 1 Reclassification of net cash flow hedge gains to net income (net of deferred income tax benefit of $7 million).......................................... (13) (13) ------------------------------------------------------------------- Balance at December 31, 2007........................... $ 584 $ (5) $ 27 $ (21) $ 585 ===================================================================
F-42 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 11 -- Shareholder's Equity - (continued)
Additional Net Pension and Accumulated Foreign Postretirement Accumulated Net Unrealized Gain (Loss) Currency Unrecognized Other Investment on Cash Translation Net Periodic Comprehensive Gains (Losses) Flow Hedges Adjustment Benefit Cost Income (Loss) ------------------------------------------------------------------- (in millions) Balance at January 1, 2008............................ $ 584 $ (5) $ 27 $ (21) $ 585 Gross unrealized investment losses (net of deferred income tax benefit of $360 million)................. (668) (668) Reclassification adjustment for gains realized in net income (net of deferred income tax benefit of $146 million)....................................... (272) (272) Adjustment for policyholder liabilities (net of deferred income tax benefit of $72 million)......... 134 134 Adjustment for deferred policy acquisition costs, deferred sales inducements, and unearned revenue liability (net of deferred income tax expense of $86 million)............................. 161 161 -------------- ------------- Net unrealized investment losses...................... (645) (645) Foreign currency translation adjustment............... (23) (23) Change in funded status of pension plan and amortization of periodic pension costs (net of deferred income tax benefit of $8 million).......... (15) (15) Net gains on the effective portion of the change in fair value of cash flow hedges (net of deferred income tax expense of $4 million)................... 6 6 ------------------------------------------------------------------- Balance at December 31, 2008.......................... $ (61) $ 1 $ 4 $ (36) $ (92) ===================================================================
Net unrealized investment gains (losses) included on the Company's Consolidated Balance Sheets as a component of shareholder's equity are summarized below:
December 31, ------------------------- 2008 2007 2006 ------------------------- (in millions) Balance, end of year comprises: Unrealized investment (losses) gains on: Fixed maturities............................................................. $ (78) $ 855 $ 634 Equity investments........................................................... (88) 435 417 Other investments............................................................ 3 (6) (7) ------------------------- Total (1)...................................................................... (163) 1,284 1,044 Amounts of unrealized investment (losses) gains attributable to: Deferred policy acquisition costs, deferred sales inducements, and unearned revenue liability.......................................................... (58) 187 129 Policyholder liabilities..................................................... (9) 197 209 Deferred income taxes........................................................ (35) 316 246 ------------------------- Total.......................................................................... (102) 700 584 ------------------------- Net unrealized investment (losses) gains........................................ $ (61) $ 584 $ 460 =========================
(1)Includes unrealized investments gains (losses) on invested assets held in trust on behalf of MRBL, which are included in amounts due from and held for affiliates on the Consolidated Balance Sheets. See Note 7 -- Related Party Transactions, for information on the associated MRBL reinsurance agreement. F-43 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 11 -- Shareholder's Equity - (continued) Statutory Results The Company and its domestic insurance subsidiary are required to prepare statutory financial statements in accordance with statutory accounting practices prescribed or permitted by the insurance departments of their states of domicile, which are Michigan and New York. At December 31, 2008, JH USA, with the explicit permission of the Commissioner, used the implied forward rates from the rolling average of the swap rates that have been observed over the past three years instead of the implied forward rates from the swap curve observed at December 31, 2008 for purposes of its C-3 Phase II calculation. The impact of using this approach was a $53 million decrease in JH USA's authorized control level risk-based capital as of December 31, 2008. This permitted practice is effective for reporting periods beginning on or after December 31, 2008 and ending September 30, 2009. At December 31, 2008, JH USA, with the explicit permission of the Commissioner, recorded an increase in the net admitted deferred tax asset ("DTA") instead of the deferred tax calculation required by prescribed statutory accounting practices. If the net admitted DTA were reflected on the statutory balance sheet based on prescribed practices the DTA and statutory surplus at December 31, 2008 would both be decreased by $84 million. The permitted practice had no effect on statutory net income. This permitted practice is effective for reporting periods beginning on or after December 31, 2008 and ending September 30, 2009. The Company's statutory net (loss) income for the years ended December 31, 2008, 2007, and 2006 was $(2,011) million (unaudited), ($41) million, and $202 million, respectively. The Company's statutory capital and surplus as of December 31, 2008 and 2007 was $2,008 million (unaudited) and $1,504 million, respectively. Under Michigan insurance law, no insurer may pay any shareholder dividends from any source other than statutory unassigned surplus without the prior approval of the Commissioner. Michigan law also limits the dividends an insurer may pay, without the prior permission of the Commissioner, to the greater of (i) 10% of its statutory surplus earnings as of December 31 of the preceding year or (ii) the company's statutory net gain from operations for the 12 month period ending December 31 of the immediately preceding year, if such insurer is a life company. Note 12 -- Segment Information The Company operates in the following three business segments: (1) Protection and (2) Wealth Management, which primarily serve retail customers and institutional customers and (3) Corporate and Other, which includes reinsurance operations and the corporate account. The Company's reportable segments are strategic business units offering different products and services. The reportable segments are managed separately, as they focus on different products, markets, and distribution channels. Protection Segment. Offers a variety of individual life insurance products, including participating whole life, term life, universal life, and variable life insurance. Products are distributed through multiple distribution channels, including insurance agents, brokers, banks, financial planners, and direct marketing. Wealth Management Segment. Offers individual and group annuities and group pension contracts. Individual annuities consist of fixed deferred annuities, fixed immediate annuities, and variable annuities. This segment distributes its products through multiple distribution channels, including insurance agents and brokers affiliated with the Company, securities brokerage firms, financial planners, pension plan sponsors, pension plan consultants, and banks. Corporate and Other Segment. Primarily consists of certain corporate and reinsurance operations. Corporate operations primarily include certain financing activities and income on capital not specifically allocated to the reporting segments. Reinsurance refers to the transfer of all or part of certain risks related to policies issued by the Company to a reinsurer, or to the assumption of risk from other insurers. F-44 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 12 -- Segment Information - (continued) The accounting policies of the segments are the same as those described in Note 1 -- Summary of Significant Accounting Policies. Allocations of net investment income are based on the amount of assets allocated to each segment. Other costs and operating expenses are allocated to each segment based on a review of the nature of such costs, cost allocations utilizing time studies, and other relevant allocation methodologies. The following table summarizes selected financial information by segment for the periods indicated. Included in the Protection Segment for all periods presented are the assets, liabilities, revenues, and expenses of the closed block. For additional information on the closed block, see Note 6 -- Closed Block.
Wealth Corporate Protection Management and Other Total ------------------------------------------ (in millions) ------------------------------------------ 2008 Revenues from external customers..................................... $ 1,436 $ 1,964 $ 251 $ 3,651 Net investment income................................................ 857 225 353 1,435 Net realized investment and other (losses) gains..................... (57) 719 (236) 426 ------------------------------------------ Revenues............................................................. $ 2,236 $ 2,908 $ 368 $ 5,512 ========================================== Net income (loss).................................................... $ 72 $ (113) $ 3 $ (38) ========================================== Supplemental Information: Equity in net income (loss) of investees accounted for by the equity method............................................................. $ 1 $ 4 $ (14) $ (9) Carrying value of investments accounted for under the equity method............................................................. 17 157 218 392 Amortization of deferred policy acquisition costs and deferred sales inducements........................................................ (397) 4 5 (388) Interest expense..................................................... - 23 11 34 Income tax expense (benefit)......................................... 32 (204) (131) (303) Segment assets....................................................... $ 21,832 $ 90,968 $ 13,397 $ 126,197 Wealth Corporate Protection Management and Other Total ------------------------------------------ (in millions) ------------------------------------------ 2007 Revenues from external customers..................................... $ 1,844 $ 2,057 $ 236 $ 4,137 Net investment income................................................ 782 242 313 1,337 Net realized investment and other gains (losses)..................... 68 (6) 100 162 ------------------------------------------ Revenues............................................................. $ 2,694 $ 2,293 $ 649 $ 5,636 ========================================== Net income........................................................... $ 210 $ 318 $ 191 $ 719 ========================================== Supplemental Information: Equity in net (loss) income of investees accounted for by the equity method............................................................. $ (1) $ (2) $ 5 $ 2 Carrying value of investments accounted for under the equity method............................................................. 17 90 202 309 Amortization of deferred policy acquisition costs and deferred sales inducements........................................................ 301 277 6 584 Interest expense..................................................... - 27 41 68 Income tax expense................................................... 108 55 110 273 Segment assets....................................................... $ 21,192 $ 111,302 $ 12,010 $ 144,504
F-45 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 12 -- Segment Information - (continued)
Wealth Corporate Protection Management and Other Total --------------------------------------- (in millions) --------------------------------------- 2006 Revenues from external customers..................................... $ 1,483 $ 1,632 $ 382 $ 3,497 Net investment income................................................ 712 225 226 1,163 Net realized investment and other gains (losses)..................... 104 20 (92) 32 --------------------------------------- Revenues............................................................. $ 2,299 $ 1,877 $ 516 $ 4,692 ======================================= Net income (loss).................................................... $ 208 $ 324 $ (7) $ 525 ======================================= Supplemental Information: Equity in net (loss) income of investees accounted for by the equity method............................................................. $ (1) $ 1 $ - $ - Carrying value of investments accounted for under the equity method.. 17 34 46 97 Amortization of deferred policy acquisition costs and deferred sales inducements........................................................ 242 303 (9) 536 Interest expense..................................................... - 21 5 26 Income tax expense................................................... 111 115 4 230
The Company operates primarily in the United States and has no reportable major customers. F-46 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 13 -- Fair Value of Financial Instruments The following table presents the carrying amounts and estimated fair values of the Company's financial instruments. Fair values have been determined by using available market information and the valuation methodologies described below.
December 31, ------------------------------------- 2008 2007 ------------------------------------- Carrying Fair Carrying Fair Value Value Value Value ------------------------------------- (in millions) Assets: Fixed maturities (1): Available-for-sale........................ $ 14,687 $ 14,687 $ 13,617 $ 13,617 Equity securities: Available-for-sale........................ 415 415 956 956 Mortgage loans on real estate............... 2,629 2,649 2,414 2,424 Policy loans................................ 2,785 2,785 2,519 2,519 Short-term investments...................... 3,665 3,665 2,723 2,723 Cash and cash equivalents................... 3,477 3,477 3,345 3,345 Derivatives: Interest rate swap agreements............. 759 759 28 28 Cross currency rate swap agreements....... 321 321 179 179 Foreign exchange forward agreements....... 3 3 9 9 Embedded derivatives...................... 4,418 4,418 586 586 Assets held in trust........................ 2,190 2,190 2,493 2,493 Separate account assets..................... 77,681 77,681 105,380 105,380 Liabilities: Fixed rate deferred and immediate annuities. 1,852 1,843 1,665 1,665 Derivatives: Interest rate swap agreements............. 325 325 22 22 Cross currency rate swap agreements....... 377 377 277 277 Credit default swaps...................... 1 1 - - Equity swaps.............................. 15 15 1 1 Embedded derivatives...................... 2,859 2,859 572 572 Foreign exchange forward agreements....... 3 3 9 9
(1)Fixed maturities exclude leveraged leases of $49 million and $72 million for 2008 and 2007, respectively, which are carried at the net investment calculated by accruing income at the lease's expected internal rate of return in accordance with SFAS No. 13, "Accounting for Leases". Effective January 1, 2008, the Company adopted SFAS No. 157, which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; that is, an exit value. The exit value assumes the asset or liability is exchanged in an orderly transaction; it is not a forced liquidation or distressed sale. SFAS No. 157 resulted in effectively creating the following two primary categories of financial instruments for the purpose of fair value disclosure: . Financial Instruments Measured at Fair Value and Reported in the Consolidated Balance Sheets - This category includes assets and liabilities measured at fair value on a recurring and non recurring basis. Financial instruments measured on a recurring basis include fixed maturities, equity securities, short-term investments, derivatives and separate accounts. Assets and liabilities measured at fair value on a non recurring basis include mortgage loans, joint ventures and limited partnership interests, which are reported at fair value only in a period in which impairment is recognized. . Other Financial Instruments not Reported at Fair Value - This category includes assets and liabilities which do not require the additional SFAS No. 157 disclosures, as follows: F-47 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 13 -- Fair Value of Financial Instruments - (continued) Mortgage loans on real estate - The fair value of unimpaired mortgage loans is estimated using discounted cash flows and take into account the contractual maturities and discount rates, which were based on current market rates for similar maturity ranges and adjusted for risk due to the property type. Policy loans - These loans are carried at unpaid principal balances, which approximate their fair values. Cash and cash equivalents - The carrying values for cash and cash equivalents approximate fair value due to the short-term maturities of these instruments. Fixed-rate deferred and immediate annuities - The fair value of these financial instruments are estimated by projecting multiple stochastically generated interest rate scenarios under a risk neutral environment reflecting inputs (interest rates, volatility, etc.) observable at the valuation date. Financial Instruments Measured at Fair Value on the Consolidated Balance Sheets Valuation Hierarchy Following SFAS No. 157 guidance, the Company categorizes its fair value measurements according to a three-level hierarchy. The hierarchy prioritizes the inputs used by the Company's valuation techniques. A level is assigned to each fair value measurement based on the lowest level input significant to the fair value measurement in its entirety. The three levels of the fair value hierarchy are defined as follows: . Level 1 - Fair value measurements that reflect unadjusted, quoted prices in active markets for identical assets and liabilities that the Company has the ability to access at the measurement date. Valuations are based on quoted prices reflecting market transactions involving assets or liabilities identical to those being measured. Level 1 securities primarily include exchange traded equity securities and separate account assets. . Level 2 - Fair value measurements using inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in inactive markets, inputs that are observable that are not prices (such as interest rates, credit risks, etc.), and inputs that are derived from or corroborated by observable market data. Most debt securities are classified within Level 2. Also included in the Level 2 category are derivative instruments that are priced using models with observable market inputs, including interest rate swaps, equity swaps, and foreign currency forward contracts. . Level 3 - Fair value measurements using significant non market observable inputs. These include valuations for assets and liabilities that are derived using data, some or all of which is not market observable data, including assumptions about risk. Level 3 securities include structured asset-backed securities ("ABS"), commercial mortgage-backed securities ("CMBS"), other securities that have little or no price transparency, and certain derivatives. Determination of Fair Value The valuation methodologies used to determine the fair values of assets and liabilities under SFAS No. 157 reflect market participant assumptions and are based on the application of the fair value hierarchy that prioritizes observable market inputs over unobservable inputs. When available, the Company uses quoted market prices to determine fair value, and classifies such items within Level 1. If quoted market prices are not available, fair value is based upon valuation techniques, which discount expected cash flows utilizing independent market observable interest rates based on the credit quality and duration of the instrument. Items valued using models are classified according to the lowest level input that is significant to the valuation. Thus, an item may be classified in Level 3 even though significant market observable inputs are used. The following is a description of the valuation techniques used to measure fair value and the general classification of these instruments pursuant to the fair value hierarchy. F-48 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 13 -- Fair Value of Financial Instruments - (continued) Fair Value Measurements on a Recurring Basis Fixed Maturities For fixed maturities, including corporate, U.S. Treasury, and municipal securities, fair values are based on quoted market prices when available. When market prices are not available, fair value is generally estimated using discounted cash flow analyses, incorporating current market inputs for similar financial instruments with comparable terms and credit quality (matrix pricing). The significant inputs into these models include, but are not limited to, yield curves, credit risks and spreads, measures of volatility and prepayment speeds. These fixed maturities are classified within Level 2. Fixed maturities with significant pricing inputs which are unobservable are classified within Level 3. Equity Securities Equity securities with active markets are classified within Level 1 as fair values are based on quoted market prices. Short-term Investments Short-term investments are comprised of securities due to mature within one year of the date of purchase that are traded in active markets, and are classified within Level 1 as fair values are based on quoted market prices. Securities such as commercial paper and discount notes are classified within Level 2 because these securities are typically not actively traded due to their short maturities and, as such, their cost generally approximates fair value. Derivatives The fair value of derivatives is determined through the use of quoted market prices for exchange-traded derivatives or through the use of pricing models for over-the-counter ("OTC") derivatives. The pricing models used are based on market standard valuation methodologies and the inputs to these models are consistent with what a market participant would use when pricing the instruments. Derivative valuations can be affected by changes in interest rates, currency exchange rates, financial indices, credit spreads, default risk (including the counterparties to the contract), and volatility. The Company's derivatives are generally classified within Level 2 given the significant inputs to the pricing models for most OTC derivatives are inputs that are observable or can be corroborated by observable market data. Inputs that are observable generally include: interest rates, foreign currency exchange rates and interest rate curves. However, certain OTC derivatives may rely on inputs that are significant to the fair value that are not observable in the market or cannot be derived principally from or corroborated by observable market data and would be classified within Level 3. Inputs that are unobservable generally include: broker quotes, volatilities and inputs that are outside of the observable portion of the interest rate curve or other relevant market measures. These unobservable inputs may involve significant management judgment or estimation. Even though unobservable, these inputs are based on assumptions deemed appropriate given the circumstances and consistent with what market participants would use when pricing such instruments. The credit risk of both the counterparty and the Company are considered in determining the fair value for all over-the-counter derivatives after taking into account the effects of netting agreements and collateral arrangements. Embedded Derivatives As defined in SFAS Statement No. 133 "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133"), the Company holds assets and liabilities classified as embedded derivatives in the Consolidated Balance Sheets. Those assets include guaranteed minimum income benefits that are ceded under modified coinsurance reinsurance arrangements ("Reinsurance GMIB Assets"). Liabilities include policyholder benefits offered under variable annuity contracts such as guaranteed minimum withdrawal benefits with a term certain ("GMWB") and embedded reinsurance derivatives. Embedded derivatives are recorded in the Consolidated Balance Sheets at fair value, separately from their host contract, and the change in their fair value is reflected in net income. Many factors including, but not limited to, market conditions, credit ratings, variations in actuarial assumptions regarding policyholder liabilities and risk margins related to non-capital market inputs may result in significant fluctuations in the fair value of these embedded derivatives that could materially affect net income. F-49 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 13 -- Fair Value of Financial Instruments - (continued) The fair value of embedded derivatives is estimated as the present value of future benefits less the present value of future fees. The fair value calculation includes assumptions for risk margins including nonperformance risk. Risk margins are established to capture the risks of the instrument which represent the additional compensation a market participant would require to assume the risks related to the uncertainties of such actuarial assumptions as annuitization, persistency, partial withdrawal, and surrenders. The establishment of these actuarial assumptions, risk margins, nonperformance risk, and other inputs requires the use of significant judgment. Nonperformance risk refers to the risk that the obligation will not be fulfilled and affects the value of the liability. The fair value measurement assumes that the nonperformance risk is the same before and after the transfer. Therefore, fair value reflects the reporting entity's own credit risk. Nonperformance risk for liabilities held by the Company is based on MFC's own credit risk, which is determined by taking into consideration publicly available information relating to MFC's debt as well as its claims paying ability. Nonperformance risk is also reflected in the Reinsurance GMIB assets held by the Company. The credit risk of the reinsurance companies is most representative of the nonperformance risk for the Reinsurance GMIB assets, and is derived from publicly available information relating to the reinsurance companies' publicly issued debt. The fair value of embedded derivatives related to reinsurance agreements is determined based on a total return swap methodology. These total return swaps are reflected as liabilities on the Consolidated Balance Sheets representing the difference between the statutory book value and fair value of the related modified coinsurance assets with ongoing changes in fair value recorded in income. The fair value of the underlying assets is based on the valuation approach for similar assets described herein. Separate Account Assets Separate account assets are reported at fair value and reported as a summarized total on the Consolidated Balance Sheets in accordance with Statement of Position ("SOP 03-1"), "Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts". The fair value of separate account assets are based on the fair value of the underlying assets owned by the separate account. Assets owned by the Company's separate accounts primarily include: investments in mutual funds, fixed maturity securities, equity securities, and short-term investments and cash and cash equivalents. The fair value of mutual fund investments is based upon quoted prices or reported net assets values ("NAV"). Open-ended mutual fund investments are included in Level 1. The fair values of fixed maturity securities, equity securities, short-term investments and cash equivalents held by separate accounts are determined on a basis consistent with the methodologies described herein for similar financial instruments held within the Company's general account. F-50 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 13 -- Fair Value of Financial Instruments - (continued) The following table presents the Company's assets and liabilities that are measured at fair value on a recurring basis by SFAS No. 157 fair value hierarchy levels, as of December 31, 2008.
December 31, 2008 ------------------------------------ ------------------------------------ Total Fair Value Level 1 Level 2 Level 3 ------------------------------------ (in millions) Assets: Fixed maturities (1): Available-for-sale........... $ 14,687 $ - $ 14,325 $ 362 Equity securities: Available-for-sale........... 415 415 - - Short-term investments......... 3,665 - 3,665 - Derivative assets (2) 1,083 - 1,083 - Embedded derivatives........... 4,418 - 36 4,382 Assets held in trust (3)....... 2,190 497 1,693 - Separate account assets (4).... 77,681 77,626 55 - ------------------------------------ Total assets at fair value...... $ 104,139 $ 78,538 $ 20,857 $ 4,744 ==================================== Liabilities: Derivative liabilities (2)..... $ 721 $ - $ 721 $ - Embedded derivatives........... 2,859 - - 2,859 ------------------------------------ Total liabilities at fair value. $ 3,580 $ - $ 721 $ 2,859 ====================================
(1)Fixed maturities excludes leveraged leases of $49 million which are carried at the net investment calculated by accruing income at the lease's expected internal rate of return in accordance with SFAS No. 13, "Accounting for Leases". (2)Derivative assets are presented within other assets and derivative liabilities are presented within other liabilities in the Consolidated Balance Sheets. The amounts are presented gross in the table above to reflect the presentation in the Consolidated Balance Sheets, but are presented net for purposes of the Level 3 roll forward in the following table. (3)Represents the fair value of assets held in trust on behalf of MRBL, which are included in amounts due from and held for affiliates on the Consolidated Balance Sheets. See Note 7 -- Related Party Transactions, for information on the associated MRBL reinsurance agreement. The fair value of the trust assets are determined on a basis consistent with the methodologies described herein for similar financial instruments. (4)Separate account assets are recorded at fair value. Investment performance related to separate account assets is fully offset by corresponding amounts credited to contract holders whose interest in the separate account assets is recorded by the Company as separate account liabilities. Separate account liabilities are set equal to the fair value of separate account assets as prescribed by SOP 03-1. F-51 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 13 -- Fair Value of Financial Instruments - (continued) Level 3 Financial Instruments The changes in Level 3 assets and liabilities measured at fair value on a recurring basis are summarized as follows:
Net Fixed Embedded Maturities Derivatives ----------------------------- Balance at January 1, 2008........................................................................ $ 447 $ 18 Net realized/unrealized gains (losses) included in: Net income..................................................................................... (161)/(2)/ 1,505/(4)/ Other comprehensive income..................................................................... 79/(3)/ - Purchases, issuances, (sales) and (settlements), net............................................. (12) - Transfers in and/or (out) of Level 3, net (1).................................................... 9 - ----------------------------- Balance at December 31, 2008...................................................................... $ 362 $ 1,523 ============================= Gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities still held at December 31, 2008..................... $ - $ 1,505
(1)For financial assets that are transferred into and/or out of Level 3, the Company uses the fair value of the assets at the beginning of the reporting period. (2)This amount is included in net realized investments and other gains (losses) on the Consolidated Statement of Operations. (3)This amount is included in accumulated other comprehensive income (loss) on the Consolidated Balance Sheet. (4)This amount is included in benefits to policyholders on the Consolidated Statement of Operations. All gains and losses on Level 3 liabilities are classified as net realized investment and other gains (losses) for the purpose of this disclosure because it is not practicable to track realized and unrealized gains (losses) separately on a contract by contract basis. The Company may hedge positions with offsetting positions that are classified in a different level. For example, the gains and losses for assets and liabilities in the Level 3 category presented in the tables above may not reflect the effect of offsetting gains and losses on hedging instruments that have been classified by the Company in the Level 1 and Level 2 categories. Financial Instruments Measured at Fair Value on a Non Recurring Basis Certain financial assets are reported at fair value on a non recurring basis, including investments such as mortgage loans, joint ventures and limited partnership interests, which are reported at fair value only in a period in which an impairment is recognized. The fair value of these securities is calculated using either models that are widely accepted in the financial services industry or the valuation of collateral underlying impaired mortgages. During the reporting period, there were no material assets or liabilities measured at fair value on a nonrecurring basis. Note 14 -- Goodwill The changes in the carrying value of goodwill by segment were as follows:
Wealth Corporate Protection Management and Other Total ------------------------------------- (in millions) Balance at January 1, 2008... $ - $ 54 $ - $ 54 Dispositions and other, net.. - - - - ------------------------------------- Balance at December 31, 2008. $ - $ 54 $ - $ 54 ===================================== Wealth Corporate Protection Management and Other Total ------------------------------------- (in millions) Balance at January 1, 2007... $ - $ 54 $ - $ 54 Dispositions and other, net.. - - - - ------------------------------------- Balance at December 31, 2007. $ - $ 54 $ - $ 54 =====================================
F-52 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 14 -- Goodwill - (continued) The Company tests goodwill for impairment annually as of December 31 and more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit, which is defined as an operating segment or one level below an operating segment, below its carrying amount. There were no impairments recorded in 2008 or 2007. Note 15 -- Certain Separate Accounts The Company issues variable annuity and variable life contracts through its separate accounts for which investment income and investment gains and losses accrue to, and investment risk is borne by, the contract holder. All contracts contain certain guarantees, which are discussed more fully below. The assets supporting the variable portion of variable annuities are carried at fair value and reported on the Consolidated Balance Sheets as total separate account assets with an equivalent total reported for separate account liabilities. Amounts assessed against the contract holders for mortality, administrative, and other services are included in revenue, and changes in liabilities for minimum guarantees are included in benefits to policyholders in the Company's Consolidated Statements of Operations. For the years ended December 31, 2008, and 2007 there were no gains or losses on transfers of assets from the general account to the separate account. The deposits related to the variable life insurance contracts are invested in separate accounts, and the Company guarantees a specified death benefit if certain specified premiums are paid by the policyholder, regardless of separate account performance. For guarantees of amounts in the event of death, the net amount at risk is defined as the excess of the initial sum insured over the current sum insured for fixed premium variable life insurance contracts, and, for other variable life insurance contracts, is equal to the sum insured when the account value is zero and the policy is still in force. The following table reflects variable life insurance contracts with guarantees held by the Company:
December 31, ----------------------------- 2008 2007 ----------------------------- (in millions, except for age) Life insurance contracts with guaranteed benefits In the event of death Account value.................................... $ 559 $ 422 Net amount at risk related to deposits........... 86 56 Average attained age of contract holders......... 44 43
Many of the variable annuity contracts issued by the Company offer various guaranteed minimum death, income, and/or withdrawal benefits. Guaranteed Minimum Death Benefit ("GMDB") features guarantee the contract holder either (a) a return of no less than total deposits made to the contract less any partial withdrawals, (b) total deposits made to the contract less any partial withdrawals plus a minimum return, or (c) the highest contract value on a specified anniversary date minus any withdrawals following the contract anniversary. The Company sold contracts with GMIB riders from 1998 to 2004. The GMIB rider provides a guaranteed lifetime annuity, which may be elected by the contract holder after a stipulated waiting period (7 to 10 years), and which may be larger than what the contract account balance would purchase at then-current annuity purchase rates. In 2004, the Company introduced a GMWB rider and has since offered multiple variations of this optional benefit. The GMWB rider provides contract holders a guaranteed annual withdrawal amount over a specified time period or in some cases for as long as they live. In general, guaranteed annual withdrawal amounts are based on deposits and may be reduced if withdrawals exceed allowed amounts. Guaranteed amounts may also be increased as a result of "step-up" provisions which increase the benefit base to higher account values at specified intervals. Guaranteed amounts may also be increased if withdrawals are deferred over a specified period. In addition, certain versions of the GMWB rider extend lifetime guarantees to spouses. F-53 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 15 -- Certain Separate Accounts - (continued) Unaffiliated and affiliated reinsurance has been utilized to mitigate risk related to some of the guarantee benefit riders. Hedging has also been utilized to mitigate risk related to some of the GMWB riders. For GMDB, the net amount at risk is defined as the current guaranteed minimum death benefit in excess of the current account balance. For GMIB, the net amount at risk is defined as the excess of the current annuitization income base over the current account value. For GMWB, the net amount at risk is defined as the current guaranteed withdrawal amount minus the current account value. For all the guarantees, the net amount at risk is floored at zero at the single contract level. The Company had the following variable annuity contracts with guarantees. Amounts at risk are shown net of reinsurance. Note that the Company's variable annuity contracts with guarantees may offer more than one type of guarantee in each contract; therefore, the amounts listed are not mutually exclusive.
December 31, ------------------------------------------- 2008 2007 ------------------------------------------- (in millions, except for ages and percents) Guaranteed Minimum Death Benefit Return of net deposits In the event of death Account value................................................................ $ 15,224 $ 17,510 Net amount at risk- net of reinsurance....................................... 766 47 Average attained age of contract holders..................................... 54 55 Return of net deposits plus a minimum return In the event of death Account value................................................................ $ 428 $ 714 Net amount at risk- net of reinsurance....................................... 5 - Average attained age of contract holders..................................... 65 65 Guaranteed minimum return rate............................................... 5% 5% Highest specified anniversary account value minus withdrawals post anniversary In the event of death Account value................................................................ $ 22,508 $ 32,750 Net amount at risk- net of reinsurance....................................... 1,248 190 Average attained age of contract holders..................................... 54 54 Guaranteed Minimum Income Benefit Account value................................................................ $ 5,387 $ 9,552 Net amount at risk- net of reinsurance....................................... 45 29 Average attained age of contract holders..................................... 52 52 Guaranteed Minimum Withdrawal Benefit Account value................................................................ $ 24,769 $ 28,582 Net amount at risk........................................................... 1,812 116 Average attained age of contract holders..................................... 52 54
F-54 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 15 -- Certain Separate Accounts - (continued) Account balances of variable contracts with guarantees invest in various separate accounts with the following characteristics:
December 31, ------------ 2008 2007 ------------ (in billions) Type of Fund Domestic Equity...... $ 7 $ 13 International Equity. 2 3 Balanced............. 23 30 Bonds................ 3 4 Money Market......... 2 1 ------------ Total............. $ 37 $ 51 ============
The following table summarizes the liabilities for guarantees on variable contracts reflected in the general account:
Guaranteed Guaranteed Guaranteed Minimum Minimum Minimum Death Income Withdrawal Benefit Benefit Benefit (GMDB) (GMIB) (GMWB) Total ------------------------------------------ (in millions) Balance at January 1, 2008....... $ 89 $ 156 $ 568 $ 813 Incurred guarantee benefits...... (110) (74) - (184) Other reserve changes............ 372 356 2,322 3,050 ------------------------------------------ Balance at December 31, 2008..... $ 351 $ 438 $ 2,890 $ 3,679 Reinsurance recoverable.......... (259) (2,056) (2,352) (4,667) ------------------------------------------ Net balance at December 31, 2008. $ 92 $ (1,618) $ 538 $ (988) ========================================== Balance at January 1, 2007....... $ 80 $ 208 $ 95 $ 383 Incurred guarantee benefits...... (48) (122) - (170) Other reserve changes............ 57 70 473 600 ------------------------------------------ Balance at December 31, 2007..... $ 89 $ 156 $ 568 $ 813 Reinsurance recoverable.......... (36) (586) - (622) ------------------------------------------ Net balance at December 31, 2007. $ 53 $ (430) $ 568 $ 191 ==========================================
The GMDB gross and ceded reserves, the GMIB gross reserves, and the life portion of the GMWB reserves were determined in accordance with SOP 03-1, and the GMIB reinsurance recoverable and GMWB gross reserve were determined in accordance with SFAS No. 133. The Company regularly evaluates estimates used and adjusts the additional liability balance, with a related charge or credit to benefits to policyholders, if actual experience or other evidence suggests that earlier assumptions should be revised. The following assumptions and methodology were used to determine the amounts above at December 31, 2008 and 2007: . Data used included 1,000 stochastically generated investment performance scenarios. For SFAS No. 133 calculations, risk neutral scenarios were used. . For life products, reserves were established using stochastic modeling of future separate account returns and best estimate mortality, lapse, and premium persistency assumptions, which vary by product. . Mean return and volatility assumptions were determined by asset class. Market consistent observed volatilities were used where available for SFAS No. 133 calculations. F-55 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 15 -- Certain Separate Accounts - (continued) . Annuity mortality was based on the 1994 MGDB table multiplied by factors varied by rider types (living benefit/GMDB only) and qualified and non-qualified business. . Annuity base lapse rates vary by contract type and duration and ranged from 2% to 41.5%. . The discount rate is 7% (in-force issued before 2004) or 6.4% (in-force issued after 2003) in the SOP 03-01 calculations. The discount rates used for SFAS No. 133 calculations are based on the term structure of swap curves with a credit spread based on the credit standing of MFC (for GMWB) and the reinsurers (for GMIB). Note 16 -- Deferred Policy Acquisition Costs and Deferred Sales Inducements The balance of and changes in deferred policy acquisition costs as of and for the years ended December 31, were as follows:
December 31, ---------------- 2008 2007 ---------------- (in millions) Balance, beginning of year....................... $ 5,664 $ 4,655 Capitalization................................... 1,590 1,637 Amortization (1)................................. 405 (550) Change in unrealized investment gains and losses. 289 (78) ---------------- Balance, end of year............................. $ 7,948 $ 5,664 ================
(1)In 2008, DAC amortization includes significant unlocking due to the impact of lower estimated gross profits arising from higher benefits to policyholders related to certain separate account guarantees. This unlocking contributed to the overall negative amortization during the year. The balance of and changes in deferred sales inducements as of and for the years ended December 31, were as follows:
December 31, ------------- 2008 2007 ------------- (in millions) Balance, beginning of year....................... $ 264 $ 235 Capitalization................................... 97 63 Amortization..................................... (17) (34) Change in unrealized investment gains and losses. 1 - ------------- Balance, end of year............................. $ 345 $ 264 =============
Note 17 -- Share-Based Payments The Company participates in the stock compensation plans of MFC. The Company uses the Black-Scholes-Merton option pricing model to estimate the value of stock options granted to employees. The stock-based compensation is a legal obligation of MFC, but in accordance with U.S. GAAP, is recorded in the accounts of the Company in other operating costs and expenses. Stock Options (ESOP) Under MFC's Executive Stock Option Plan ("ESOP"), stock options are granted to selected individuals. Options provide the holder with the right to purchase common shares at an exercise price equal to the closing market price of MFC's common shares on the Toronto Stock Exchange on the business day immediately preceding the date the options were granted. The options vest over a period not exceeding four years and expire not more than 10 years from the grant date. A total of 73.6 million common shares have been reserved for issuance under the ESOP. MFC grants Deferred Share Units ("DSUs") under the ESOP and the Stock Plan for Non-Employee Directors. Under the ESOP, the holder is entitled to receive cash payment equal to the value of the same number of common shares plus credited dividends on retirement or termination of employment. These DSUs vest over a three-year period and each DSU entitles the holder to receive one common share on retirement or termination of employment. When dividends are paid on MFC's common shares, holders of DSUs are deemed to receive dividends at the same rate, payable in the form of additional DSUs. F-56 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Note 17 -- Share Based Payments - (continued) Under the Stock Plan for Non-Employee Directors, each eligible director may elect to receive his or her annual director's retainer and fees in DSUs or common shares in lieu of cash. Upon termination of board service, an eligible director who has elected to receive DSUs will be entitled to receive cash equal to the value of the DSUs accumulated in his or her account or, at his or her direction, an equivalent number of common shares. A total of 1 million common shares of MFC have been reserved for issuance under the Stock Plan for Non-Employee Directors. In 2008, 2007 and 2006, 217,000, 191,000, and 181,000 DSUs, respectively, were issued to certain employees who elected to defer receipt of all or part of their annual bonus. Also, in 2008 and 2007, 269,000 and 260,000 DSUs were issued to certain employees who elected to defer payment of all or part of their restricted share units. Restricted share units are discussed below. The DSUs issued in 2008, 2007 and 2006 vested immediately upon grant. The Company recorded compensation expense for stock options granted of $6 million, $5 million, and $5 million for the years ended December 31, 2008, 2007, and 2006, respectively. Global Share Ownership Plan (GSOP) Effective January 1, 2001, MFC established the Global Share Ownership Plan ("GSOP") for its eligible employees and the Stock Plan for Non-Employee Directors. Under the GSOP, qualifying employees can choose to have up to 5% of their annual base earnings applied toward the purchase of common shares of MFC. Subject to certain conditions, MFC will match a percentage of the employee's eligible contributions to certain maximums. MFC's contributions vest immediately. All contributions are used by the GSOP's trustee to purchase common shares in the open market. The Company's compensation expense related to the GSOP was $1 million for each of the three years ended December 31, 2008, 2007, and 2006. Restricted Share Unit Plan (RSU) In 2003, MFC established the Restricted Share Unit ("RSU") Plan. For the years ended December 31, 2008, 2007, and 2006, 1.8 million, 1.5 million and 1.6 million RSUs, respectively, were granted to certain eligible employees under this plan. For the years ended December 31, 2008, 2007, and 2006, the Company granted 0.4 million, 0.4 million, and 0.4 million RSUs, respectively, to certain eligible employees. RSUs entitle a participant to receive payment equal to the market value of the same number of common shares, plus credited dividends, at the time the RSUs vest. RSUs vest three years from the grant date, subject to performance conditions, and the related compensation expense is recognized over this period, except where the employee is eligible to retire prior to the vesting date, in which case the cost is recognized over the period between the grant date and the date on which the employee is eligible to retire. The Company's compensation expense related to RSUs was $14 million, $16 million, and $14 million for the years ended December 31, 2008, 2007, and 2006, respectively. F-57 AUDITED FINANCIAL STATEMENTS John Hancock Life Insurance Company (U.S.A.) Separate Account H December 31, 2008 John Hancock Life Insurance Company (U.S.A.) Separate Account H Audited Financial Statements December 31, 2008 CONTENTS Report of Ernst & Young LLP, Independent Registered Public Accounting Firm...... 1 Statement of Assets and Liabilities............................................. 4 Statement of Operations and Changes in Contract Owners' Equity.................. 30 Notes to Financial Statements................................................... 83
(ERNST & YOUNG LOGO) Ernst & Young LLP 200 Clarendon Street Boston, MA 02116 Tel: +1 617 266 2000 Fax: +1 617 266 5843 www.ey.com REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Contract Owners of John Hancock Life Insurance Company (U.S.A.) Separate Account H We have audited the accompanying statement of assets and liabilities of John Hancock Life Insurance Company (U.S.A.) Separate Account H ("the Account,") comprised of the following sub-accounts, 500 Index Fund B Series NAV 500 Index Series I 500 Index Series II Active Bond Series I Active Bond Series II All Cap Core Series I All Cap Core Series II All Cap Growth Series I All Cap Growth Series II All Cap Value Series I All Cap Value Series II American Asset Allocation Series II American Asset Allocation Series III American Asset High-Income Bond Series II American Asset High-Income Bond Series III American Blue-Chip Income & Growth Series II American Blue-Chip Income & Growth Series III American Bond Series II American Bond Series III American Century - Small Company Series II American Fundamental Holdings Series II American Fundamental Holdings Series III American Global Diversification Series II American Global Growth Series II American Global Growth Series III American Global Small Capitalization Series II American Global Small Capitalization Series III American Growth Series II American Growth Series III American Growth-Income Series II American Growth-Income Series III American International Series II American International Series III American New World Series II American New World Series III Basic Value Focus Blue Chip Growth Series I Blue Chip Growth Series II Bond Index Trust A Series II Capital Appreciation Series I Capital Appreciation Series II Capital Appreciation Value Series II CGTC Overseas Equity Series II Core Allocation Plus Series I Core Allocation Plus Series II Disciplined Diversification Series II Emerging Small Company Series I Emerging Small Company Series II Equity-Income Series I Equity-Income Series II Financial Services Series I Financial Services Series II Founding Allocation Series I Founding Allocation Series II Fundamental Value Series I Fundamental Value Series II Global Allocation Series I Global Allocation Series II Global Bond Series I Global Bond Series II Global Trust Series I Global Trust Series II Health Sciences Series I Health Sciences Series II High Income Series II High Yield Series I High Yield Series II Income & Value Series I A member firm of Ernst & Young Global Limited 1 (ERNST & YOUNG LOGO) Income & Value Series II Index Allocation Series II International Core Series I International Core Series II International Equity Index B Series NAV International Small Cap Series I International Small Cap Series II International Value Series I International Value Series II Investment Quality Bond Series I Investment Quality Bond Series II John Hancock International Equity Index Series I John Hancock International Equity Index Series II John Hancock Strategic Income Series II Large Cap Value Series I Large Cap Value Series II Lifestyle Aggressive Series I Lifestyle Aggressive Series II Lifestyle Balanced Series I Lifestyle Balanced Series II Lifestyle Conservative Series I Lifestyle Conservative Series II Lifestyle Growth Series I Lifestyle Growth Series II Lifestyle Moderate Series I Lifestyle Moderate Series II LMFC Core Equity Series I LMFC Core Equity Series II Marisco International Opportunities Series II Mid Cap Index Series I Mid Cap Index Series II Mid Cap Intersection Series I Mid Cap Intersection Series II Mid Cap Stock Series I Mid Cap Stock Series II Mid Cap Value Series I Mid Cap Value Series II ML Global Allocation Money Market B Series NAV Money Market Series I Money Market Series II Mutual Shares Series I Natural Resources Series II Optimized All Cap Series II Optimized Value Series II Pacific Rim Series I Pacific Rim Series II PIM Classic Value Series II PIMCO VIT All Asset Series II Real Estate Securities Series I Real Estate Securities Series II Real Return Bond Series II Science & Technology Series I Science & Technology Series II Scudder Equity Index 500 - B Scudder Fixed Income - B Small Cap Index Series I Small Cap Index Series II Small Cap Opportunities Series I Small Cap Opportunities Series II Small Cap Value Focus Small Company Value Series I Small Company Value Series II Strategic Bond Series I Strategic Bond Series II T Rowe Price Mid Value Series II Total Return Series I Total Return Series II Total Stock Market Index Series I Total Stock Market Index Series II U.S. Government Securities Series I U.S. Government Securities Series II U.S. High Yield Series II U.S. Large Cap Value Series I U.S. Large Cap Value Series II UBS Large Cap Series I UBS Large Cap Series II Utilities Series I Utilities Series II Value Series I Value Series II Wellington Small Cap Growth Series I Wellington Small Cap Growth Series II Wellington Small Cap Value Series I Wellington Small Cap Value Series II Wells Capital Core Bond Series II as of December 31, 2008, and the related statement of operations and changes in contract owners' equity for the above mentioned sub-accounts and for the Dynamic Growth Series I, Dynamic Growth Series II, Emerging Growth Series II, Independence Investment LLC Small Cap Series II, Quantitative Mid-Cap Series I, Quantitative Mid-Cap Series II, U.S. Core Series I, U.S. Core Series II, U.S. Global Leaders Growth Series I, U.S. Global Leaders Growth A member firm of Ernst & Young Global Limited 2 (ERNST & YOUNG LOGO) Series II sub-accounts (the "closed sub-accounts") for each of the two years in the period then ended. These financial statements are the responsibility of the Account's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Account's internal controls over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Account's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2008, by correspondence with the underlying Portfolios. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of each of the above mentioned sub-accounts constituting John Hancock Life Insurance Company (U.S.A.) Separate Account H at December 31, 2008, and the results of their and the closed sub-accounts' operations and changes in contract owners' equity for each of the two years in the period then ended, in conformity with U.S. generally accepted accounting principles. (ERNST & YOUNG LLP) March 31, 2009 A member firm of Ernst & Young Global Limited 3 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2008
500 Index All Cap Fund B 500 Index 500 Index Active Bond Active Bond Core Series NAV Series I Series II Series I Series II Series I ----------- ----------- ----------- ----------- ------------ ----------- TOTAL ASSETS Investments at fair value $44,221,566 $53,450,857 $39,678,677 $64,896,482 $275,345,876 $48,378,680 =========== =========== =========== =========== ============ =========== NET ASSETS Contracts in accumulation $44,217,420 $53,410,802 $39,678,677 $64,771,849 $275,334,062 $48,333,819 Contracts in payout (annuitization) 4,146 40,055 124,633 11,814 44,861 ----------- ----------- ----------- ----------- ------------ ----------- Total net assets $44,221,566 $53,450,857 $39,678,677 $64,896,482 $275,345,876 $48,378,680 =========== =========== =========== =========== ============ =========== Units outstanding 5,843,640 6,938,793 3,916,772 5,542,442 23,846,814 4,404,983 Unit value $ 7.57 $ 7.70 $ 10.13 $ 11.71 $ 11.55 $ 10.98 Shares 3,934,303 6,791,722 5,061,056 8,204,359 34,765,893 4,138,467 Cost $73,016,198 $72,183,622 $53,289,818 $77,950,186 $331,148,675 $57,003,501
4 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2008
All Cap All Cap All Cap All Cap All Cap American Asset Core Series Growth Growth Value Value Allocation II Series I Series II Series I Series II Series II ----------- ----------- ----------- ----------- ----------- -------------- TOTAL ASSETS Investments at fair value $ 7,549,207 $76,573,971 $10,760,343 $26,764,429 $25,562,124 $ 771,851,859 =========== =========== =========== =========== =========== ============== NET ASSETS Contracts in accumulation $ 7,549,207 $76,393,767 $10,760,343 $26,764,429 $25,562,124 $ 771,851,859 Contracts in payout (annuitization) 180,204 ----------- ----------- ----------- ----------- ----------- -------------- Total net assets $ 7,549,207 $76,573,971 $10,760,343 $26,764,429 $25,562,124 $ 771,851,859 =========== =========== =========== =========== =========== ============== Units outstanding 681,898 6,912,443 1,159,235 2,222,846 2,008,606 89,206,351 Unit value $ 11.07 $ 11.08 $ 9.28 $ 12.04 $ 12.73 $ 8.65 Shares 646,890 6,635,526 941,412 4,762,354 4,556,529 91,343,415 Cost $12,202,941 $89,914,975 $15,084,548 $44,053,013 $43,927,242 $1,043,303,099
5 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2008
American American American American American Asset Asset Blue-Chip Blue-Chip Asset High-Income High-Income Income & Income & American Allocation Bond Bond Growth Growth Bond Series III Series II Series III Series II Series III Series II ----------- ----------- ----------- ------------ ----------- ------------ TOTAL ASSETS Investments at fair value $34,188,459 $31,998,224 $102,930 $ 66,642,931 $15,440,949 $585,289,903 =========== =========== ======== ============ =========== ============ NET ASSETS Contracts in accumulation $34,188,459 $31,998,224 $102,930 $ 66,634,571 $15,440,949 $585,289,903 Contracts in payout (annuitization) 8,360 ----------- ----------- -------- ------------ ----------- ------------ Total net assets $34,188,459 $31,998,224 $102,930 $ 66,642,931 $15,440,949 $585,289,903 =========== =========== ======== ============ =========== ============ Units outstanding 3,702,897 3,593,978 10,576 5,409,736 1,817,222 50,087,972 Unit value $ 9.23 $ 8.90 $ 9.73 $ 12.32 $ 8.50 $ 11.69 Shares 4,050,765 4,097,084 13,196 7,521,775 1,746,714 54,699,991 Cost $40,014,184 $45,817,082 $115,279 $115,711,820 $18,485,614 $709,341,832
6 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2008
American Century - American American American American Small Fundamental Fundamental American Global Global Bond Company Holdings Holdings Diversification Growth Series III Series II Series II Series III Series II Series II ----------- ---------- ------------ ----------- --------------- ------------ TOTAL ASSETS Investments at fair value $19,101,227 $1,933,984 $553,472,370 $14,318,767 $504,068,239 $139,771,045 =========== ========== ============ =========== ============ ============ NET ASSETS Contracts in accumulation $19,101,227 $1,933,984 $553,472,370 $14,318,767 $504,068,239 $139,771,045 Contracts in payout (annuitization) ----------- ---------- ------------ ----------- ------------ ------------ Total net assets $19,101,227 $1,933,984 $553,472,370 $14,318,767 $504,068,239 $139,771,045 =========== ========== ============ =========== ============ ============ Units outstanding 1,708,415 230,989 64,803,896 1,576,102 62,575,683 17,516,452 Unit value $ 11.18 $ 8.37 $ 8.54 $ 9.08 $ 8.06 $ 7.98 Shares 1,786,831 306,011 72,634,170 1,881,573 71,600,602 18,011,732 Cost $20,770,480 $3,896,518 $739,459,286 $17,954,048 $734,865,005 $225,741,213
7 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2008
American American American Global Global American Global Small Small American American Growth- Growth Capitalization Capitalization Growth Growth Income Series III Series II Series III Series II Series III Series II ---------- -------------- -------------- -------------- ----------- -------------- TOTAL ASSETS Investments at fair value $269,670 $43,636,644 $5,017,292 $ 860,203,386 $ 9,588,537 $ 734,826,560 ======== =========== ========== ============== =========== ============== NET ASSETS Contracts in accumulation $269,670 $43,636,644 $5,017,292 $ 860,176,177 $ 9,588,537 $ 734,810,448 Contracts in payout (annuitization) 27,209 16,112 -------- ----------- ---------- -------------- ----------- -------------- Total net assets $269,670 $43,636,644 $5,017,292 $ 860,203,386 $ 9,588,537 $ 734,826,560 ======== =========== ========== ============== =========== ============== Units outstanding 32,316 7,111,095 777,248 74,067,311 1,283,084 63,942,059 Unit value $ 8.34 $ 6.14 $ 6.46 $ 11.61 $ 7.47 $ 11.49 Shares 34,841 7,236,591 834,824 74,283,539 828,741 63,787,028 Cost $329,979 $84,907,955 $6,573,369 $1,374,320,202 $12,137,616 $1,123,654,339
8 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2008
American Growth- American American American New American New Basic Income International International World Series World Series Value Series III Series II Series III II III Focus ----------- ------------- ------------- ------------ ------------ ----------- TOTAL ASSETS Investments at fair value $12,028,258 $569,687,370 $278,657 $38,682,388 $114,630 $ 9,193,487 =========== ============ ======== =========== ======== =========== NET ASSETS Contracts in accumulation $12,028,258 $569,680,337 $278,657 $38,682,388 $114,630 $ 9,193,487 Contracts in payout (annuitization) 7,033 ----------- ------------ -------- ----------- -------- ----------- Total net assets $12,028,258 $569,687,370 $278,657 $38,682,388 $114,630 $ 9,193,487 =========== ============ ======== =========== ======== =========== Units outstanding 1,445,391 36,071,377 34,407 4,594,159 14,645 560,419 Unit value $ 8.32 $ 15.79 $ 8.10 $ 8.42 $ 7.83 $ 16.40 Shares 1,045,935 39,838,278 19,527 4,746,305 14,100 1,103,660 Cost $14,757,262 $870,957,394 $383,903 $62,832,289 $143,641 $15,241,204
9 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2008
Capital Blue Chip Blue Chip Bond Index Capital Capital Appreciation Growth Growth Trust A Appreciation Appreciation Value Series I Series II Series II Series I Series II Series II ------------ ------------ ---------- ------------ ------------ ------------ TOTAL ASSETS Investments at fair value $224,482,328 $ 89,182,436 $905,694 $ 89,609,852 $45,779,941 $129,560,234 ============ ============ ======== ============ =========== ============ NET ASSETS Contracts in accumulation $224,153,606 $ 89,182,436 $905,694 $ 89,509,853 $45,779,941 $129,560,234 Contracts in payout (annuitization) 328,722 99,999 ------------ ------------ -------- ------------ ----------- ------------ Total net assets $224,482,328 $ 89,182,436 $905,694 $ 89,609,852 $45,779,941 $129,560,234 ============ ============ ======== ============ =========== ============ Units outstanding 17,615,463 9,393,422 67,335 13,837,049 4,711,470 14,299,260 Unit value $ 12.74 $ 9.49 $ 13.45 $ 6.48 $ 9.72 $ 9.06 Shares 18,355,055 7,304,049 67,640 14,291,842 7,360,119 14,363,662 Cost $282,850,792 $128,536,710 $882,210 $127,500,022 $64,854,746 $148,535,415
10 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2008
CGTC Core Core Emerging Emerging Overseas Allocation Allocation Disciplined Small Small Equity Plus Plus Diversification Company Company Series II Series I Series II Series II Series I Series II ---------- ---------- ----------- --------------- ----------- ----------- TOTAL ASSETS Investments at fair value $3,185,956 $4,146,720 $46,294,963 $79,086,010 $33,588,674 $18,300,019 ========== ========== =========== =========== =========== =========== NET ASSETS Contracts in accumulation $3,185,956 $4,146,720 $46,294,963 $79,086,010 $33,563,622 $18,300,019 Contracts in payout (annuitization) 25,052 ---------- ---------- ----------- ----------- ----------- ----------- Total net assets $3,185,956 $4,146,720 $46,294,963 $79,086,010 $33,588,674 $18,300,019 ========== ========== =========== =========== =========== =========== Units outstanding 284,112 459,578 5,294,414 8,663,009 3,348,224 2,087,921 Unit value $ 11.21 $ 9.02 $ 8.74 $ 9.13 $ 10.03 $ 8.76 Shares 427,072 487,849 5,446,466 8,876,095 2,418,191 1,337,721 Cost $5,752,922 $4,652,643 $50,667,693 $88,381,632 $62,298,797 $34,189,286
11 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2008
Equity- Equity- Financial Financial Founding Founding Income Income Services Services Allocation Allocation Series I Series II Series I Series II Series I Series II ------------ ------------ ----------- ----------- ----------- -------------- TOTAL ASSETS Investments at fair value $261,746,610 $126,408,553 $14,200,399 $23,207,419 $11,671,302 $1,035,742,268 ============ ============ =========== =========== =========== ============== NET ASSETS Contracts in accumulation $261,231,343 $126,408,553 $14,200,399 $23,188,830 $11,671,302 $1,035,742,268 Contracts in payout (annuitization) 515,267 18,589 ------------ ------------ ----------- ----------- ----------- -------------- Total net assets $261,746,610 $126,408,553 $14,200,399 $23,207,419 $11,671,302 $1,035,742,268 ============ ============ =========== =========== =========== ============== Units outstanding 13,650,160 11,489,143 1,623,612 2,476,693 1,344,727 136,082,295 Unit value $ 19.18 $ 11.00 $ 8.75 $ 9.37 $ 8.68 $ 7.61 Shares 26,279,780 12,729,965 1,885,843 3,090,202 1,585,775 140,344,481 Cost $407,561,034 $204,785,591 $25,775,978 $42,363,691 $14,891,130 $1,598,310,938
12 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2008
Fundamental Fundamental Global Global Global Global Value Value Allocation Allocation Bond Bond Series I Series II Series I Series II Series I Series II ------------ ------------ ----------- ------------ ----------- ------------ TOTAL ASSETS Investments at fair value $336,160,486 $251,340,629 $26,694,131 $121,345,796 $81,495,660 $154,495,811 ============ ============ =========== ============ =========== ============ NET ASSETS Contracts in accumulation $335,540,479 $251,340,356 $26,693,501 $121,345,796 $81,464,697 $154,453,670 Contracts in payout (annuitization) 620,007 273 630 30,963 42,141 ------------ ------------ ----------- ------------ ----------- ------------ Total net assets $336,160,486 $251,340,629 $26,694,131 $121,345,796 $81,495,660 $154,495,811 ============ ============ =========== ============ =========== ============ Units outstanding 33,466,331 23,786,071 3,166,226 11,729,356 3,602,575 9,374,175 Unit value $ 10.04 $ 10.57 $ 8.43 $ 10.35 $ 22.62 $ 16.48 Shares 34,337,128 25,725,755 3,914,095 17,871,251 5,643,744 10,751,274 Cost $381,187,053 $373,861,222 $43,282,775 $201,133,098 $86,171,435 $162,323,054
13 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2008
Health Health Global Trust Global Trust Sciences Sciences High Income High Yield Series I Series II Series I Series II Series II Series I ------------ ------------ ----------- ------------ ----------- ------------ TOTAL ASSETS Investments at fair value $109,603,317 $26,665,157 $37,028,670 $41,778,494 $1,474,198 $46,086,858 ============ =========== =========== =========== ========== =========== NET ASSETS Contracts in accumulation $109,457,934 $26,593,145 $37,026,530 $41,778,129 $1,474,198 $46,027,363 Contracts in payout (annuitization) 145,383 72,012 2,140 365 59,495 ------------ ----------- ----------- ----------- ---------- ----------- Total net assets $109,603,317 $26,665,157 $37,028,670 $41,778,494 $1,474,198 $46,086,858 ============ =========== =========== =========== ========== =========== Units outstanding 6,778,204 2,397,618 2,672,652 2,875,694 230,474 4,032,014 Unit value $ 16.17 $ 11.12 $ 13.85 $ 14.53 $ 6.40 $ 11.43 Shares 10,398,797 2,537,123 3,577,649 4,103,978 251,999 7,824,594 Cost $142,837,140 $44,840,751 $52,560,452 $59,447,238 $2,037,121 $67,049,754
14 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2008
Income & Income & Index International International High Yield Value Value Allocation Core Core Series II Series I Series II Series II Series I Series II ------------ ------------ ----------- ------------ ------------- ------------- TOTAL ASSETS Investments at fair value $50,595,088 $144,359,597 $42,340,351 $318,495,112 $37,670,124 $24,821,956 =========== ============ =========== ============ =========== =========== NET ASSETS Contracts in accumulation $50,545,391 $144,180,824 $42,340,351 $318,486,499 $37,561,838 $24,796,343 Contracts in payout (annuitization) 49,697 178,773 8,613 108,286 25,613 ----------- ------------ ----------- ------------ ----------- ----------- Total net assets $50,595,088 $144,359,597 $42,340,351 $318,495,112 $37,670,124 $24,821,956 =========== ============ =========== ============ =========== =========== Units outstanding 4,362,481 8,494,621 4,008,782 31,256,689 3,231,431 1,971,098 Unit value $ 11.60 $ 16.99 $ 10.56 $ 10.19 $ 11.66 $ 12.59 Shares 8,532,055 20,190,153 5,946,678 32,834,548 4,639,178 3,038,183 Cost $70,154,932 $207,371,650 $63,079,190 $415,946,768 $60,497,699 $42,361,552
15 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2008
International Equity International International International International Investment Index B Small Small Value Value Quality Series NAV Cap Series I Cap Series II Series I Series II Bond Series I ------------- ------------- ------------- ------------- ------------- -------------- TOTAL ASSETS Investments at fair value $20,582,730 $37,254,747 $20,948,518 $124,274,980 $104,996,878 $103,084,376 =========== =========== =========== ============ ============ ============ NET ASSETS Contracts in accumulation $20,562,205 $37,224,227 $20,948,518 $124,160,569 $104,948,853 $102,740,543 Contracts in payout (annuitization) 20,525 30,520 114,411 48,025 343,833 ----------- ----------- ----------- ------------ ------------ ------------ Total net assets $20,582,730 $37,254,747 $20,948,518 $124,274,980 $104,996,878 $103,084,376 =========== =========== =========== ============ ============ ============ Units outstanding 2,852,394 3,027,907 1,815,070 9,996,172 7,623,148 5,071,248 Unit value $ 7.22 $ 12.30 $ 11.54 $ 12.43 $ 13.77 $ 20.33 Shares 1,844,331 4,466,996 2,496,844 13,716,885 11,614,699 9,950,229 Cost $36,394,141 $89,801,063 $48,635,909 $215,552,913 $187,690,603 $113,982,376
16 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2008
John Hancock John Hancock Investment International International John Hancock Large Cap Large Cap Quality Bond Equity Index Equity Index Strategic Income Value Value Series II Series I Series II Series II Series I Series II ------------ ------------- ------------- ---------------- ----------- ----------- TOTAL ASSETS Investments at fair value $ 92,404,508 $12,492,766 $12,715,588 $ 9,163,669 $23,027,238 $19,316,098 ============ =========== =========== =========== =========== =========== NET ASSETS Contracts in accumulation $ 92,404,508 $12,462,177 $12,715,588 $ 9,163,669 $23,027,238 $19,305,802 Contracts in payout (annuitization) 30,589 10,296 ------------ ----------- ----------- ----------- ----------- ----------- Total net assets $ 92,404,508 $12,492,766 $12,715,588 $ 9,163,669 $23,027,238 $19,316,098 ============ =========== =========== =========== =========== =========== Units outstanding 6,301,640 964,039 996,311 711,330 1,450,254 1,228,957 Unit value $ 14.66 $ 12.96 $ 12.76 $ 12.88 $ 15.88 $ 15.72 Shares 8,919,354 1,046,295 1,064,066 816,726 1,638,949 1,377,753 Cost $101,021,981 $20,621,214 $20,122,102 $10,857,136 $36,274,340 $29,820,434
17 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2008
Lifestyle Lifestyle Lifestyle Lifestyle Lifestyle Lifestyle Aggressive Aggressive Balanced Balanced Conservative Conservative Series I Series II Series I Series II Series I Series II ------------ ------------ ------------ -------------- ------------ -------------- TOTAL ASSETS Investments at fair value $ 78,077,502 $140,031,483 $488,815,865 $6,354,575,304 $143,843,541 $1,171,315,497 ============ ============ ============ ============== ============ ============== NET ASSETS Contracts in accumulation $ 78,077,022 $140,031,483 $488,693,037 $6,353,783,064 $143,803,924 $1,171,315,497 Contracts in payout (annuitization) 480 122,828 792,240 39,617 ------------ ------------ ------------ -------------- ------------ -------------- Total net assets $ 78,077,502 $140,031,483 $488,815,865 $6,354,575,304 $143,843,541 $1,171,315,497 ============ ============ ============ ============== ============ ============== Units outstanding 7,208,200 12,730,138 35,215,875 536,639,432 8,661,797 89,201,134 Unit value $ 10.83 $ 11.00 $ 13.88 $ 11.84 $ 16.61 $ 13.13 Shares 14,378,914 25,836,067 56,905,223 742,356,928 14,019,839 114,610,127 Cost $143,967,392 $260,783,351 $729,566,396 $9,544,051,156 $172,989,747 $1,410,303,733
18 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2008
LMFC LMFC Lifestyle Lifestyle Lifestyle Lifestyle Core Core Growth Growth Moderate Moderate Equity Equity Series I Series II Series I Series II Series I Series II ------------ --------------- ------------ -------------- -------- ----------- TOTAL ASSETS Investments at fair value $410,760,328 $ 8,170,434,029 $188,774,055 $1,689,787,030 $ 77,273 $16,044,782 ============ =============== ============ ============== ======== =========== NET ASSETS Contracts in accumulation $410,100,784 $ 8,170,378,893 $187,156,447 $1,689,785,898 $ 77,273 $16,044,782 Contracts in payout (annuitization) 659,544 55,136 1,617,608 1,132 ------------ --------------- ------------ -------------- -------- ----------- Total net assets $410,760,328 $ 8,170,434,029 $188,774,055 $1,689,787,030 $ 77,273 $16,044,782 ============ =============== ============ ============== ======== =========== Units outstanding 33,091,302 739,884,660 12,358,584 137,848,366 12,269 2,544,371 Unit value $ 12.41 $ 11.04 $ 15.27 $ 12.26 $ 6.30 $ 6.31 Shares 51,409,303 1,023,863,914 20,631,044 185,283,665 16,371 3,428,372 Cost $651,703,685 $13,216,516,656 $255,330,549 $2,302,937,633 $159,368 $36,250,478
19 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2008
Marisco International Mid Cap Mid Cap Mid Cap Mid Cap Mid Cap Opportunities Index Index Intersection Intersection Stock Series II Series I Series II Series I Series II Series I ------------- ----------- ----------- ------------ ------------ ------------ TOTAL ASSETS Investments at fair value $29,250,221 $32,196,125 $59,487,997 $4,851 $2,481,865 $148,054,706 =========== =========== =========== ====== ========== ============ NET ASSETS Contracts in accumulation $29,250,221 $32,183,423 $59,482,261 $4,851 $2,481,865 $148,013,276 Contracts in payout (annuitization) 12,702 5,736 41,430 ----------- ----------- ----------- ------ ---------- ------------ Total net assets $29,250,221 $32,196,125 $59,487,997 $4,851 $2,481,865 $148,054,706 =========== =========== =========== ====== ========== ============ Units outstanding 2,820,676 2,545,090 5,042,423 626 379,032 13,282,484 Unit value $ 10.37 $ 12.65 $ 11.80 $ 7.75 $ 6.55 $ 11.15 Shares 3,536,907 3,017,444 5,585,727 721 369,325 16,939,898 Cost $60,226,921 $52,985,920 $98,965,008 $5,116 $3,728,008 $246,513,802
20 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2008
Mid Cap Mid Cap Mid Cap Money Money Stock Value Value ML Global Market B Market Series II Series I Series II Allocation Series NAV Series I ------------- ------------ ------------ ---------- ------------ ------------ TOTAL ASSETS Investments at fair value $ 93,272,294 $ 66,824,204 $ 68,823,555 $1,037,664 $38,238,802 $365,001,241 ============ ============ ============ ========== =========== ============ NET ASSETS Contracts in accumulation $ 93,271,957 $ 66,767,127 $ 68,823,555 $1,037,664 $38,238,802 $364,786,688 Contracts in payout (annuitization) 337 57,077 214,553 ------------ ------------ ------------ ---------- ----------- ------------ Total net assets $ 93,272,294 $ 66,824,204 $ 68,823,555 $1,037,664 $38,238,802 $365,001,241 ============ ============ ============ ========== =========== ============ Units outstanding 6,953,618 5,626,646 6,017,297 79,691 2,981,744 22,608,467 Unit value $ 13.41 $ 11.88 $ 11.44 $ 13.02 $ 12.82 $ 16.14 Shares 10,845,615 9,141,478 9,440,817 82,814 38,238,802 36,500,124 Cost $159,919,511 $131,943,091 $138,352,817 $1,001,575 $38,238,802 $365,001,241
21 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2008
Mutual Natural Optimized Optimized Money Market Shares Resources All Cap Value Pacific Rim Series II Series I Series II Series II Series II Series I -------------- ----------- ------------ ------------ ------------ ----------- TOTAL ASSETS Investments at fair value $1,383,024,119 $18,359,522 $103,282,484 $ 57,016,741 $ 11,036,947 $18,180,312 ============== =========== ============ ============ ============ =========== NET ASSETS Contracts in accumulation $1,382,746,214 $18,359,522 $103,177,488 $ 57,016,741 $ 11,032,286 $18,174,797 Contracts in payout (annuitization) 277,905 104,996 4,661 5,515 -------------- ----------- ------------ ------------ ------------ ----------- Total net assets $1,383,024,119 $18,359,522 $103,282,484 $ 57,016,741 $ 11,036,947 $18,180,312 ============== =========== ============ ============ ============ =========== Units outstanding 107,096,820 2,191,280 4,519,846 4,770,992 1,107,167 2,021,114 Unit value $ 12.91 $ 8.38 $ 22.85 $ 11.95 $ 9.97 $ 9.00 Shares 138,302,412 2,508,131 7,748,123 6,622,154 1,516,064 3,035,110 Cost $1,383,024,119 $21,789,838 $213,737,074 $110,706,337 $ 21,483,822 $33,079,996
22 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2008
PIM Classic PIMCO VIT Real Estate Real Estate Real Return Pacific Value All Asset Securities Securities Bond Rim Series II Series II Series II Series I Series II Series II ------------- ----------- ----------- ------------ ------------ ----------- TOTAL ASSETS Investments at fair value $14,432,831 $ 9,430,778 $20,097,369 $ 46,812,843 $ 53,640,588 $77,729,384 =========== =========== =========== ============ ============ =========== NET ASSETS Contracts in accumulation $14,432,831 $ 9,430,778 $20,097,369 $ 46,741,327 $ 53,626,690 $77,709,719 Contracts in payout (annuitization) 71,516 13,898 19,665 ----------- ----------- ----------- ------------ ------------ ----------- Total net assets $14,432,831 $ 9,430,778 $20,097,369 $ 46,812,843 $ 53,640,588 $77,729,384 =========== =========== =========== ============ ============ =========== Units outstanding 1,096,257 1,237,677 1,541,751 2,583,952 3,569,226 5,990,033 Unit value $ 13.17 $ 7.62 $ 13.04 $ 18.12 $ 15.03 $ 12.98 Shares 2,413,517 1,475,865 2,177,396 6,593,358 7,544,386 6,729,817 Cost $25,125,682 $16,259,590 $25,038,388 $102,798,526 $112,969,762 $90,099,223
23 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2008
Science & Science & Scudder Scudder Small Cap Small Cap Technology Technology Equity Index Fixed Index Index Series I Series II 500 -- B Income -- B Series I Series II ------------- ----------- ------------ ----------- ------------ ----------- TOTAL ASSETS Investments at fair value $ 77,390,411 $27,164,775 $15,769,341 $28,914,339 $15,410,060 $52,120,970 ============ =========== =========== =========== =========== =========== NET ASSETS: Contracts in accumulation $ 77,321,181 $27,164,139 $15,763,541 $28,914,339 $15,386,536 $52,098,007 Contracts in payout (annuitization) 69,230 636 5,800 23,524 22,963 ------------ ----------- ----------- ----------- ----------- ----------- Total net assets $ 77,390,411 $27,164,775 $15,769,341 $28,914,339 $15,410,060 $52,120,970 ============ =========== =========== =========== =========== =========== Units outstanding 11,304,471 3,148,519 1,125,518 2,614,051 1,374,591 4,455,488 Unit value $ 6.85 $ 8.63 $ 14.01 $ 11.06 $ 11.21 $ 11.70 Shares 9,380,656 3,324,942 1,652,971 3,256,119 1,682,321 5,702,513 Cost $102,979,006 $43,576,989 $21,972,927 $37,715,230 $24,315,944 $87,209,306
24 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2008
Small Cap Small Cap Small Cap Small Small Strategic Opportunities Opportunities Value Company Value Company Value Bond Series I Series II Focus Series I Series II Series I ------------- ------------- ---------- ------------- ------------- ----------- TOTAL ASSETS Investments at fair value $26,145,036 $22,320,689 $4,838,382 $ 79,387,635 $ 71,273,170 $66,522,375 =========== =========== ========== ============ ============ =========== NET ASSETS: Contracts in accumulation $26,138,534 $22,320,689 $4,838,382 $ 79,284,676 $ 71,273,170 $66,464,037 Contracts in payout (annuitization) 6,502 102,959 58,338 ----------- ----------- ---------- ------------ ------------ ----------- Total net assets $26,145,036 $22,320,689 $4,838,382 $ 79,387,635 $ 71,273,170 $66,522,375 =========== =========== ========== ============ ============ =========== Units outstanding 2,041,130 1,804,827 224,622 4,835,477 5,166,412 3,956,841 Unit value $ 12.81 $ 12.37 $ 21.54 $ 16.42 $ 13.80 $ 16.81 Shares 2,317,822 1,984,061 448,830 6,120,866 5,533,631 7,900,520 Cost $47,935,985 $40,846,047 $9,765,495 $123,737,354 $110,211,964 $88,594,748
25 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2008
Strategic T Rowe Price Total Stock Total Stock Bond Mid Value Total Return Total Return Market Index Market Index Series II Series II Series I Series II Series I Series II ------------ ------------ ------------ ------------ ------------ ------------- TOTAL ASSETS Investments at fair value $ 51,325,835 $ 7,325,441 $237,527,484 $233,586,950 $11,554,747 $36,103,662 ============ =========== ============ ============ =========== =========== NET ASSETS: Contracts in accumulation $ 51,325,835 $ 7,325,441 $237,401,526 $233,423,996 $11,508,051 $36,049,268 Contracts in payout (annuitization) 125,958 162,954 46,696 54,394 ------------ ----------- ------------ ------------ ----------- ----------- Total net assets $ 51,325,835 $ 7,325,441 $237,527,484 $233,586,950 $11,554,747 $36,103,662 ============ =========== ============ ============ =========== =========== Units outstanding 3,982,811 700,153 13,162,475 15,079,563 1,405,412 3,347,656 Unit value $ 12.89 $ 10.46 $ 18.05 $ 15.49 $ 8.22 $ 10.78 Shares 6,088,474 1,086,861 17,633,815 17,354,157 1,449,780 4,535,636 Cost $ 68,241,773 $12,220,037 $242,765,288 $239,188,671 $16,227,089 $57,035,275
26 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2008
U.S. Government U.S. Government U.S. High U.S Large U.S. Large UBS Securities Securities Yield Cap Value Cap Value Large Cap Series I Series II Series II Series I Series II Series I --------------- --------------- ---------- ------------ ----------- ------------ TOTAL ASSETS Investments at fair value $105,227,595 $81,096,626 $2,054,777 $ 93,284,231 $41,217,329 $117,779,033 ============ =========== ========== ============ =========== ============ NET ASSETS: Contracts in accumulation $105,118,622 $81,039,481 $2,054,777 $ 93,133,739 $41,184,876 $117,594,615 Contracts in payout (annuitization) 108,973 57,145 150,492 32,453 184,418 ------------ ----------- ---------- ------------ ----------- ------------ Total net assets $105,227,595 $81,096,626 $2,054,777 $ 93,284,231 $41,217,329 $117,779,033 ============ =========== ========== ============ =========== ============ Units outstanding 5,539,269 6,098,393 188,712 10,546,256 4,425,095 12,717,322 Unit value $ 19.00 $ 13.30 $ 10.89 $ 8.85 $ 9.31 $ 9.26 Shares 8,646,475 6,658,180 222,861 9,871,347 4,366,242 13,775,325 Cost $112,556,540 $84,855,376 $2,444,055 $129,560,875 $58,440,928 $215,851,122
27 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2008
Wellington UBS Large Cap Utilities Utilities Value Value Small Cap Growth Series II Series I Series II Series I Series II Series I ------------- ----------- ----------- ------------ ----------- ---------------- TOTAL ASSETS Investments at fair value $ 8,533,061 $22,338,646 $25,714,181 $ 67,974,241 $24,020,835 $17,226 =========== =========== =========== ============ =========== ======= NET ASSETS: Contracts in accumulation $ 8,532,799 $22,323,453 $25,714,181 $ 67,828,649 $24,020,835 $17,226 Contracts in payout (annuitization) 262 15,193 145,592 ----------- ----------- ----------- ------------ ----------- ------- Total net assets $ 8,533,061 $22,338,646 $25,714,181 $ 67,974,241 $24,020,835 $17,226 =========== =========== =========== ============ =========== ======= Units outstanding 932,080 1,674,898 1,289,627 4,527,802 2,059,738 2,080 Unit value $ 9.15 $ 13.34 $ 19.94 $ 15.01 $ 11.66 $ 8.28 Shares 1,000,359 2,737,579 3,170,676 6,907,951 2,446,114 2,797 Cost $14,919,884 $38,353,174 $43,578,269 $127,958,615 $44,788,560 $22,584
28 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2008
Wellington Small Wellington Small Wellington Small Wells Capital Core Cap Growth Series II Cap Value Series I Cap Value Series II Bond Series II -------------------- ------------------ ------------------- ------------------ TOTAL ASSETS Investments at fair value $25,136,541 $8,040 $45,278,526 $8,459,957 =========== ====== =========== ========== NET ASSETS: Contracts in accumulation $25,136,541 $8,040 $45,277,166 $8,459,957 Contracts in payout (annuitization) 1,360 ----------- ------ ----------- ---------- Total net assets $25,136,541 $8,040 $45,278,526 $8,459,957 =========== ====== =========== ========== Units outstanding 2,215,159 823 3,963,530 628,118 Unit value $ 11.35 $ 9.77 $ 11.42 $ 13.47 Shares 4,120,744 684 3,860,062 686,128 Cost $37,518,707 $8,585 $66,012,813 $8,576,021
29 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31,
500 Index Fund B Series NAV 500 Index Series I 500 Index Series II --------------------------- -------------------------- -------------------------- 2008 2007 2008 2007 2008 2007 ------------ ------------- ------------ ------------ ------------ ------------ Income: Dividend distributions received $ 1,318,297 $1,185,404.00 $ 542,663 $ 2,817,093 $ 267,282 $ 1,642,904 Expenses: Mortality and expense risk and administrative charges (1,008,054) (979,381) (1,219,922) (1,945,557) (935,526) (1,409,749) ------------ ------------- ------------ ------------ ------------ ------------ Net investment income (loss) 310,243 206,023 (677,259) 871,536 (668,244) 233,155 ------------ ------------- ------------ ------------ ------------ ------------ Realized gains (losses) on investments: Capital gain distributions received 424,905 -- -- -- -- -- Net realized gain (loss) (3,268,258) 66,994 3,691,425 15,937,425 2,427,563 8,422,935 ------------ ------------- ------------ ------------ ------------ ------------ Realized gains (losses) (2,843,353) 66,994 3,691,425 15,937,425 2,427,563 8,422,935 ------------ ------------- ------------ ------------ ------------ ------------ Unrealized appreciation (depreciation) during the period (26,676,615) (2,118,017) (39,048,825) (11,807,528) (27,950,733) (5,600,283) ------------ ------------- ------------ ------------ ------------ ------------ Net increase (decrease) in contract owners' equity from operations (29,209,725) (1,845,000) (36,034,659) 5,001,433 (26,191,414) 3,055,807 ------------ ------------- ------------ ------------ ------------ ------------ Changes from principal transactions: Purchase payments 460,754 447,091 429,158 819,907 683,459 1,369,707 Transfers between sub-accounts and the company (4,541,018) 97,865,220 (6,652,835) (16,458,496) (4,647,012) (4,858,891) Withdrawals (7,019,941) (11,357,297) (13,783,715) (19,222,284) (6,923,452) (17,474,802) Annual contract fee (340,583) (237,935) (246,051) (314,909) (235,683) (301,456) ------------ ------------- ------------ ------------ ------------ ------------ Net increase (decrease) in contract owners' equity from principal transactions (11,440,788) 86,717,079 (20,253,443) (35,175,782) (11,122,688) (21,265,442) ------------ ------------- ------------ ------------ ------------ ------------ Total increase (decrease) in contract owners' equity (40,650,513) 84,872,079 (56,288,102) (30,174,349) (37,314,102) (18,209,635) Contract owners' equity at beginning of period 84,872,079 -- 109,738,959 139,913,308 76,992,779 95,202,414 ------------ ------------- ------------ ------------ ------------ ------------ Contract owners' equity at end of period $ 44,221,566 $ 84,872,079 $ 53,450,857 $109,738,959 $ 39,678,677 $ 76,992,779 ============ ============= ============ ============ ============ ============
2008 2007 2008 2007 2008 2007 ------------ ------------- ------------ ------------ ------------ ------------ Units, beginning of period 6,935,607 -- 8,812,912 11,609,646 4,686,816 5,988,819 Units issued 228,404 8,769,817 941,760 930,613 506,860 417,368 Units redeemed 1,320,371 1,834,210 2,815,879 3,727,347 1,276,904 1,719,371 ------------ ------------- ------------ ------------ ------------ ------------ Units, end of period 5,843,640 6,935,607 6,938,793 8,812,912 3,916,772 4,686,816 ============ ============= ============ ============ ============ ============
See accompanying notes. 30 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31,
Active Bond Series I Active Bond Series II All Cap Core Series I -------------------------- --------------------------- -------------------------- 2008 2007 2008 2007 2008 2007 ------------ ------------ ------------- ------------ ------------ ------------ Income: Dividend distributions received $ 4,201,451 $ 8,953,422 $ 18,890,211 $ 41,486,707 $ 1,207,258 $ 1,784,311 Expenses: Mortality and expense risk and administrative charges (1,230,763) (1,569,728) (6,568,679) (8,366,544) (1,132,794) (1,879,902) ------------ ------------ ------------- ------------ ------------ ------------ Net investment income (loss) 2,970,688 7,383,694 12,321,532 33,120,163 74,464 (95,591) ------------ ------------ ------------- ------------ ------------ ------------ Realized gains (losses) on investments: Capital gain distributions received -- -- -- -- -- -- Net realized gain (loss) (1,761,783) 426,727 (15,381,272) 604,989 5,224,361 17,088,895 ------------ ------------ ------------- ------------ ------------ ------------ Realized gains (losses) (1,761,783) 426,727 (15,381,272) 604,989 5,224,361 17,088,895 ------------ ------------ ------------- ------------ ------------ ------------ Unrealized appreciation (depreciation) during the period (11,032,009) (5,256,061) (44,381,072) (23,452,814) (42,000,670) (14,414,472) ------------ ------------ ------------- ------------ ------------ ------------ Net increase (decrease) in contract owners' equity from operations (9,823,104) 2,554,360 (47,440,812) 10,272,338 (36,701,845) 2,578,832 ------------ ------------ ------------- ------------ ------------ ------------ Changes from principal transactions: Purchase payments 111,116 481,364 3,751,348 7,844,947 366,846 372,083 Transfers between sub-accounts and the company (7,375,399) (1,673,681) (109,120,307) 37,715,343 (8,905,600) (19,212,491) Withdrawals (13,814,483) (19,435,655) (61,534,371) (52,749,065) (11,311,545) (22,337,945) Annual contract fee (122,610) (134,175) (1,466,818) (1,447,458) (154,339) (248,111) ------------ ------------ ------------- ------------ ------------ ------------ Net increase (decrease) in contract owners' equity from principal transactions (21,201,376) (20,762,147) (168,370,148) (8,636,233) (20,004,638) (41,426,464) ------------ ------------ ------------- ------------ ------------ ------------ Total increase (decrease) in contract owners' equity (31,024,480) (18,207,787) (215,810,960) 1,636,105 (56,706,483) (38,847,632) Contract owners' equity at beginning of period 95,920,962 114,128,749 491,156,836 489,520,731 105,085,163 143,932,795 ------------ ------------ ------------- ------------ ------------ ------------ Contract owners' equity at end of period $ 64,896,482 $ 95,920,962 $ 275,345,876 $491,156,836 $ 48,378,680 $105,085,163 ============ ============ ============= ============ ============ ============
2008 2007 2008 2007 2008 2007 ------------ ------------ ------------- ------------ ------------ ------------ Units, beginning of period 7,221,980 8,812,410 37,399,025 38,059,136 5,690,761 7,796,201 Units issued 172,373 555,557 291,217 6,393,736 150,841 227,374 Units redeemed 1,851,911 2,145,987 13,843,428 7,053,847 1,436,619 2,332,814 ------------ ------------ ------------- ------------ ------------ ------------ Units, end of period 5,542,442 7,221,980 23,846,814 37,399,025 4,404,983 5,690,761 ============ ============ ============= ============ ============ ============
See accompanying notes. 31 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31,
All Cap Core Series II All Cap Growth Series I All Cap Growth Series II ------------------------ -------------------------- ------------------------- 2008 2007 2008 2007 2008 2007 ----------- ----------- ------------ ------------ ------------ ----------- Income: Dividend distributions received $ 159,045 $ 142,063 $ 346,103 $ 82,531 $ 17,029 $ -- Expenses: Mortality and expense risk and administrative charges (187,392) (249,507) (1,781,512) (2,817,670) (267,164) (391,368) ----------- ----------- ------------ ------------ ------------ ----------- Net investment income (loss) (28,347) (107,444) (1,435,409) (2,735,139) (250,135) (391,368) ----------- ----------- ------------ ------------ ------------ ----------- Realized gains (losses) on investments: Capital gain distributions received -- -- -- -- -- -- Net realized gain (loss) (359,796) 846,992 5,136,944 11,605,892 943,715 1,904,305 ----------- ----------- ------------ ------------ ------------ ----------- Realized gains (losses) (359,796) 846,992 5,136,944 11,605,892 943,715 1,904,305 ----------- ----------- ------------ ------------ ------------ ----------- Unrealized appreciation (depreciation) during the period (5,366,452) (1,051,713) (68,086,055) 10,747,593 (9,707,571) 822,762 ----------- ----------- ------------ ------------ ------------ ----------- Net increase (decrease) in contract owners' equity from operations (5,754,595) (312,165) (64,384,520) 19,618,346 (9,013,991) 2,335,699 ----------- ----------- ------------ ------------ ------------ ----------- Changes from principal transactions: Purchase payments 134,900 126,213 783,785 947,993 300,787 511,908 Transfers between sub-accounts and the company (2,132,855) 9,073,226 (11,904,048) (24,087,976) (3,121,836) (280,428) Withdrawals (974,994) (2,569,335) (19,338,558) (29,602,649) (1,812,455) (3,741,921) Annual contract fee (55,633) (57,565) (264,833) (352,973) (66,439) (87,406) ----------- ----------- ------------ ------------ ------------ ----------- Net increase (decrease) in contract owners' equity from principal transactions (3,028,582) 6,572,539 (30,723,654) (53,095,605) (4,699,943) (3,597,847) ----------- ----------- ------------ ------------ ------------ ----------- Total increase (decrease) in contract owners' equity (8,783,177) 6,260,374 (95,108,174) (33,477,259) (13,713,934) (1,262,148) Contract owners' equity at beginning of period 16,332,384 10,072,010 171,682,145 205,159,404 24,474,277 25,736,425 ----------- ----------- ------------ ------------ ------------ ----------- Contract owners' equity at end of period $ 7,549,207 $16,332,384 $ 76,573,971 $171,682,145 $ 10,760,343 $24,474,277 =========== =========== ============ ============ ============ ===========
2008 2007 2008 2007 2008 2007 ----------- ----------- ------------ ------------ ------------ ----------- Units, beginning of period 875,613 546,094 8,855,075 11,560,384 1,505,198 1,742,991 Units issued 64,431 658,910 240,422 175,483 104,533 188,468 Units redeemed 258,146 329,391 2,183,054 2,880,792 450,496 426,261 ----------- ----------- ------------ ------------ ------------ ----------- Units, end of period 681,898 875,613 6,912,443 8,855,075 1,159,235 1,505,198 =========== =========== ============ ============ ============ ===========
See accompanying notes. 32 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31,
American Asset Allocation All Cap Value Series I All Cap Value Series II Series II -------------------------- -------------------------- --------------------------- 2008 2007 2008 2007 2008 2007 ------------ ------------ ------------ ------------ ------------- ------------ Income: Dividend distributions received $ 288,163 $ 895,830 $ 189,619 $ 689,728 $ 20,708,165 $ 8,163,001 Expenses: Mortality and expense risk and administrative charges (562,401) (808,603) (572,561) (842,851) (10,337,101) (2,259,829) ------------ ------------ ------------ ------------ ------------- ------------ Net investment income (loss) (274,238) 87,227 (382,942) (153,123) 10,371,064 5,903,172 ------------ ------------ ------------ ------------ ------------- ------------ Realized gains (losses) on investments: Capital gain distributions received 952,054 20,369,994 898,673 19,569,370 -- 1,443,147 Net realized gain (loss) (12,972,718) 915,987 (10,598,634) 686,526 (7,394,649) 51,454 ------------ ------------ ------------ ------------ ------------- ------------ Realized gains (losses) (12,020,664) 21,285,981 (9,699,961) 20,255,896 (7,394,649) 1,494,601 ------------ ------------ ------------ ------------ ------------- ------------ Unrealized appreciation (depreciation) during the period (351,694) (17,785,834) (2,150,710) (16,698,231) (255,052,729) (16,398,511) ------------ ------------ ------------ ------------ ------------- ------------ Net increase (decrease) in contract owners' equity from operations (12,646,596) 3,587,374 (12,233,613) 3,404,542 (252,076,314) (9,000,738) ------------ ------------ ------------ ------------ ------------- ------------ Changes from principal transactions: Purchase payments 136,424 175,923 267,264 653,495 402,943,796 314,012,454 Transfers between sub-accounts and the company (2,858,317) (6,419,851) (3,049,452) (6,420,161) 176,831,837 172,186,930 Withdrawals (5,155,534) (7,891,608) (4,321,189) (9,910,998) (25,599,131) (4,236,386) Annual contract fee (101,304) (119,837) (133,195) (165,858) (3,070,797) (139,792) ------------ ------------ ------------ ------------ ------------- ------------ Net increase (decrease) in contract owners' equity from principal transactions (7,978,731) (14,255,373) (7,236,572) (15,843,522) 551,105,705 481,823,206 ------------ ------------ ------------ ------------ ------------- ------------ Total increase (decrease) in contract owners' equity (20,625,327) (10,667,999) (19,470,185) (12,438,980) 299,029,391 472,822,468 Contract owners' equity at beginning of period 47,389,756 58,057,755 45,032,309 57,471,289 472,822,468 -- ------------ ------------ ------------ ------------ ------------- ------------ Contract owners' equity at end of period $ 26,764,429 $ 47,389,756 $ 25,562,124 $ 45,032,309 $ 771,851,859 $472,822,468 ============ ============ ============ ============ ============= ============
2008 2007 2008 2007 2008 2007 ------------ ------------ ------------ ------------ ------------- ------------ Units, beginning of period 2,757,009 3,602,546 2,483,069 3,376,358 37,748,943 -- Units issued 400,393 190,361 238,010 84,325 55,753,323 38,813,867 Units redeemed 934,556 1,035,898 712,473 977,614 4,295,915 1,064,924 ------------ ------------ ------------ ------------ ------------- ------------ Units, end of period 2,222,846 2,757,009 2,008,606 2,483,069 89,206,351 37,748,943 ============ ============ ============ ============ ============= ============
See accompanying notes. 33 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31,
American Asset High- American Income Asset Bond Allocation American Asset High- Series American Blue-Chip Income Series III Income Bond Series II III & Growth Series II ----------- --------------------------- -------- -------------------------- 2008 2008 2007 2008 2008 2007 ------------ ------------ ------------ -------- ------------ ------------ Income: Dividend distributions received $ 1,062,719 $ 2,751,493 $ 2,590,110 $ 7,723 $ 3,889,251 $ 3,337,506 Expenses: Mortality and expense risk and administrative charges (97,912) (670,762) (205,874) (170) (1,621,514) (2,595,358) ------------ ------------ ------------ -------- ------------ ------------ Net investment income (loss) 964,807 2,080,731 2,384,236 7,553 2,267,737 742,148 ------------ ------------ ------------ -------- ------------ ------------ Realized gains (losses) on investments: Capital gain distributions received -- -- -- -- 1,241,777 28,106,953 Net realized gain (loss) (253,998) (3,144,120) 480,954 (55) (9,337,874) 7,120,428 ------------ ------------ ------------ -------- ------------ ------------ Realized gains (losses) (253,998) (3,144,120) 480,954 (55) (8,096,097) 35,227,381 ------------ ------------ ------------ -------- ------------ ------------ Unrealized appreciation (depreciation) during the period (5,825,725) (10,633,232) (3,185,626) (12,350) (39,876,529) (34,659,804) ------------ ------------ ------------ -------- ------------ ------------ Net increase (decrease) in contract owners' equity from operations (5,114,916) (11,696,621) (320,436) (4,852) (45,704,889) 1,309,725 ------------ ------------ ------------ -------- ------------ ------------ Changes from principal transactions: Purchase payments 13,558,932 6,149,547 26,307,025 75,340 1,036,994 1,779,463 Transfers between sub-accounts and the company 25,833,961 (2,801,841) 18,361,070 33,067 (9,266,346) (11,722,118) Withdrawals (89,518) (2,721,639) (1,053,246) (625) (17,804,176) (29,351,559) Annual contract fee -- (211,922) (13,713) -- (293,214) (401,522) ------------ ------------ ------------ -------- ------------ ------------ Net increase (decrease) in contract owners' equity from principal transactions 39,303,375 414,145 43,601,136 107,782 (26,326,742) (39,695,736) ------------ ------------ ------------ -------- ------------ ------------ Total increase (decrease) in contract owners' equity 34,188,459 (11,282,476) 43,280,700 102,930 (72,031,631) (38,386,011) Contract owners' equity at beginning of period -- 43,280,700 -- -- 138,674,562 177,060,573 ------------ ------------ ------------ -------- ------------ ------------ Contract owners' equity at end of period $ 34,188,459 $ 31,998,224 $ 43,280,700 $102,930 $ 66,642,931 $138,674,562 ============ ============ ============ ======== ============ ============
2008 2008 2007 2008 2008 2007 ------------ ------------ ------------ -------- ------------ ------------ Units, beginning of period -- 3,619,489 -- -- 7,007,692 8,938,256 Units issued 3,790,875 1,454,956 3,872,590 11,152 376,062 515,866 Units redeemed 87,978 1,480,467 253,101 576 1,974,018 2,446,430 ------------ ------------ ------------ -------- ------------ ------------ Units, end of period 3,702,897 3,593,978 3,619,489 10,576 5,409,736 7,007,692 ============ ============ ============ ======== ============ ============
See accompanying notes. 34 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31,
American Blue-Chip Income & American Growth American Bond Bond American Century - Series III Series II Series III Small Company Series II ----------- --------------------------- ----------- ------------------------ 2008 2008 2007 2008 2008 2007 ----------- ------------- ------------ ----------- ----------- ----------- Income: Dividend distributions received $ 565,414 $ 71,942,006 $ 30,153,733 $ 1,236,312 $ -- $ -- Expenses: Mortality and expense risk and administrative charges (41,681) (12,620,196) (10,741,645) (53,537) (48,828) (94,932) ----------- ------------- ------------ ----------- ----------- ----------- Net investment income (loss) 523,733 59,321,810 19,412,088 1,182,775 (48,828) (94,932) ----------- ------------- ------------ ----------- ----------- ----------- Realized gains (losses) on investments: Capital gain distributions received 6,385 24,545 234,401 19 4,381 840,660 Net realized gain (loss) (74,190) (21,215,725) 2,413,221 (271,307) (753,788) (111,439) ----------- ------------- ------------ ----------- ----------- ----------- Realized gains (losses) (67,805) (21,191,180) 2,647,622 (271,288) (749,407) 729,221 ----------- ------------- ------------ ----------- ----------- ----------- Unrealized appreciation (depreciation) during the period (3,044,664) (130,282,833) (15,531,297) (1,669,253) (791,428) (918,074) ----------- ------------- ------------ ----------- ----------- ----------- Net increase (decrease) in contract owners' equity from operations (2,588,736) (92,152,203) 6,528,413 (757,766) (1,589,663) (283,785) ----------- ------------- ------------ ----------- ----------- ----------- Changes from principal transactions: Purchase payments 6,333,211 43,389,497 307,145,643 7,560,048 13,463 104,246 Transfers between sub-accounts and the company 11,950,755 (192,584,445) 114,087,412 12,383,043 (303,019) (2,418,076) Withdrawals (70,535) (44,809,156) (26,376,978) (84,098) (468,305) (1,063,467) Annual contract fee (183,746) (4,047,811) (1,824,914) -- (5,622) (11,128) ----------- ------------- ------------ ----------- ----------- ----------- Net increase (decrease) in contract owners' equity from principal transactions 18,029,685 (198,051,915) 393,031,163 19,858,993 (763,483) (3,388,425) ----------- ------------- ------------ ----------- ----------- ----------- Total increase (decrease) in contract owners' equity 15,440,949 (290,204,118) 399,559,576 19,101,227 (2,353,146) (3,672,210) Contract owners' equity at beginning of period -- 875,494,021 475,934,445 -- 4,287,130 7,959,340 ----------- ------------- ------------ ----------- ----------- ----------- Contract owners' equity at end of period $15,440,949 $ 585,289,903 $875,494,021 $19,101,227 $ 1,933,984 $ 4,287,130 =========== ============= ============ =========== =========== ===========
2008 2008 2007 2008 2008 2007 ----------- ------------- ------------ ----------- ----------- ----------- Units, beginning of period -- 66,523,018 36,599,574 -- 285,978 487,905 Units issued 1,859,198 4,889,850 33,810,717 1,856,695 59,238 14,935 Units redeemed 41,976 21,324,896 3,887,273 148,280 114,227 216,862 ----------- ------------- ------------ ----------- ----------- ----------- Units, end of period 1,817,222 50,087,972 66,523,018 1,708,415 230,989 285,978 =========== ============= ============ =========== =========== ===========
See accompanying notes. 35 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31,
American Fundamental American Fundamental Holdings American Global Holdings Series II Series III Diversification Series II -------------------------- ----------- --------------------------- 2008 2007 2008 2008 2007 ------------- ----------- ----------- ------------- ------------ Income: Dividend distributions received $ 19,364,338 $ 686,627 $ 572,839 $ 19,001,604 $ 1,516,520 Expenses: Mortality and expense risk and administrative charges (5,210,895) (47,421) (48,187) (6,392,924) (112,334) ------------- ----------- ----------- ------------- ------------ Net investment income (loss) 14,153,443 639,206 524,652 12,608,680 1,404,186 ------------- ----------- ----------- ------------- ------------ Realized gains (losses) on investments: Capital gain distributions received 19,142,194 -- 484,720 24,634,868 -- Net realized gain (loss) (2,370,049) 15,973 (68,985) (13,504,024) 3,975 ------------- ----------- ----------- ------------- ------------ Realized gains (losses) 16,772,145 15,973 415,735 11,130,844 3,975 ------------- ----------- ----------- ------------- ------------ Unrealized appreciation (depreciation) during the period (185,146,030) (840,884) (3,635,281) (229,764,545) (1,032,221) ------------- ----------- ----------- ------------- ------------ Net increase (decrease) in contract owners' equity from operations (154,220,442) (185,705) (2,694,894) (206,025,021) 375,940 ------------- ----------- ----------- ------------- ------------ Changes from principal transactions: Purchase payments 433,455,108 38,842,412 5,776,563 406,316,461 44,222,801 Transfers between sub-accounts and the company 229,623,579 14,410,764 11,328,587 216,383,245 59,374,273 Withdrawals (7,657,149) (59,812) (91,489) (15,269,374) (342,256) Annual contract fee (732,003) (4,382) -- (948,189) (19,641) ------------- ----------- ----------- ------------- ------------ Net increase (decrease) in contract owners' equity from principal transactions 654,689,535 53,188,982 17,013,661 606,482,143 103,235,177 ------------- ----------- ----------- ------------- ------------ Total increase (decrease) in contract owners' equity 500,469,093 53,003,277 14,318,767 400,457,122 103,611,117 Contract owners' equity at beginning of period 53,003,277 -- -- 103,611,117 -- ------------- ----------- ----------- ------------- ------------ Contract owners' equity at end of period $ 553,472,370 $53,003,277 $14,318,767 $ 504,068,239 $103,611,117 ============= =========== =========== ============= ============
2008 2007 2008 2008 2007 ------------- ----------- ----------- ------------- ------------ Units, beginning of period 4,218,758 -- -- 8,251,405 -- Units issued 61,885,840 4,262,049 1,605,930 58,785,338 8,298,364 Units redeemed 1,300,702 43,291 29,828 4,461,060 46,959 ------------- ----------- ----------- ------------- ------------ Units, end of period 64,803,896 4,218,758 1,576,102 62,575,683 8,251,405 ============= =========== =========== ============= ============
See accompanying notes. 36 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31,
American American Global Global Small Growth Capitalization American Global Series American Global Small Series Growth Series II III Capitalization Series II III -------------------------- -------- -------------------------- -------------- 2008 2007 2008 2008 2007 2008 ------------ ------------ -------- ------------ ------------ -------------- Income: Dividend distributions received $ 4,604,919 $ 3,107,671 $ 10,690 $ 807,499 $ 1,018,515 $ 128,180 Expenses: Mortality and expense risk and administrative charges (3,080,878) (991,665) (802) (1,021,370) (402,123) (12,505) ------------ ------------ -------- ------------ ------------ ----------- Net investment income (loss) 1,524,041 2,116,006 9,888 (213,871) 616,392 115,675 ------------ ------------ -------- ------------ ------------ ----------- Realized gains (losses) on investments: Capital gain distributions received -- 811,439 -- -- 409,559 -- Net realized gain (loss) (10,585,616) 185,952 (3,475) (9,004,279) (30,373) (19,757) ------------ ------------ -------- ------------ ------------ ----------- Realized gains (losses) (10,585,616) 997,391 (3,475) (9,004,279) 379,186 (19,757) ------------ ------------ -------- ------------ ------------ ----------- Unrealized appreciation (depreciation) during the period (85,909,493) (60,677) (60,309) (38,033,588) (3,237,722) (1,556,077) ------------ ------------ -------- ------------ ------------ ----------- Net increase (decrease) in contract owners' equity from operations (94,971,068) 3,052,720 (53,896) (47,251,738) (2,242,144) (1,460,159) ------------ ------------ -------- ------------ ------------ ----------- Changes from principal transactions: Purchase payments 27,264,794 131,363,919 137,545 8,908,037 41,129,729 1,995,997 Transfers between sub-accounts and the company 4,329,141 82,512,127 187,803 4,757,164 44,536,829 4,501,964 Withdrawals (9,814,801) (2,786,218) (1,782) (4,023,001) (1,781,120) (20,510) Annual contract fee (1,106,824) (72,745) -- (364,452) (32,660) -- ------------ ------------ -------- ------------ ------------ ----------- Net increase (decrease) in contract owners' equity from principal transactions 20,672,310 211,017,083 323,566 9,277,748 83,852,778 6,477,451 ------------ ------------ -------- ------------ ------------ ----------- Total increase (decrease) in contract owners' equity (74,298,758) 214,069,803 269,670 (37,973,990) 81,610,634 5,017,292 Contract owners' equity at beginning of period 214,069,803 -- -- 81,610,634 -- -- ------------ ------------ -------- ------------ ------------ ----------- Contract owners' equity at end of period $139,771,045 $214,069,803 $269,670 $ 43,636,644 $ 81,610,634 $ 5,017,292 ============ ============ ======== ============ ============ ===========
2008 2007 2008 2008 2007 2008 ------------ ------------ -------- ------------ ------------ -------------- Units, beginning of period 16,199,088 -- -- 6,051,069 -- -- Units issued 5,663,523 16,942,499 33,004 3,524,092 6,743,003 780,139 Units redeemed 4,346,159 743,411 688 2,464,066 691,934 2,891 ------------ ------------ -------- ------------ ------------ ----------- Units, end of period 17,516,452 16,199,088 32,316 7,111,095 6,051,069 777,248 ============ ============ ======== ============ ============ ===========
See accompanying notes. 37 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31,
American American Growth Growth - Series American Growth-Income Income American Growth Series II III Series II Series III ------------------------------ ----------- ------------------------------ ----------- 2008 2007 2008 2008 2007 2008 -------------- -------------- ----------- -------------- -------------- ----------- Income: Dividend distributions received $ 20,552,342 $ 14,247,204 $ 273,370 $ 19,538,774 $ 34,191,426 $ 382,894 Expenses: Mortality and expense risk and administrative charges (19,417,062) (23,466,327) (25,020) (16,331,695) (19,407,358) (33,067) -------------- -------------- ----------- -------------- -------------- ----------- Net investment income (loss) 1,135,280 (9,219,123) 248,350 3,207,079 14,784,068 349,827 -------------- -------------- ----------- -------------- -------------- ----------- Realized gains (losses) on investments: Capital gain distributions received 14,592,485 149,632,572 4,309 18,812,171 55,362,794 7,716 Net realized gain (loss) 18,992,637 67,560,237 (14,088) (561,432) 34,534,463 (30,505) -------------- -------------- ----------- -------------- -------------- ----------- Realized gains (losses) 33,585,122 217,192,809 (9,779) 18,250,739 89,897,257 (22,789) -------------- -------------- ----------- -------------- -------------- ----------- Unrealized appreciation (depreciation) during the period (705,810,557) (73,580,296) (2,549,080) (498,390,994) (75,251,563) (2,729,005) -------------- -------------- ----------- -------------- -------------- ----------- Net increase (decrease) in contract owners' equity from operations (671,090,155) 134,393,390 (2,310,509) (476,933,176) 29,429,762 (2,401,967) -------------- -------------- ----------- -------------- -------------- ----------- Changes from principal transactions: Purchase payments 43,849,237 230,583,461 3,932,377 35,685,749 222,272,719 4,795,080 Transfers between sub-accounts and the company 71,602,459 10,228,895 8,009,220 11,088,027 33,685,369 9,686,839 Withdrawals (123,681,555) (151,699,530) (42,551) (100,612,124) (107,384,054) (51,694) Annual contract fee (4,628,605) (3,871,870) -- (4,055,220) (3,170,077) -- -------------- -------------- ----------- -------------- -------------- ----------- Net increase (decrease) in contract owners' equity from principal transactions (12,858,464) 85,240,956 11,899,046 (57,893,568) 145,403,957 14,430,225 -------------- -------------- ----------- -------------- -------------- ----------- Total increase (decrease) in contract owners' equity (683,948,619) 219,634,346 9,588,537 (534,826,744) 174,833,719 12,028,258 Contract owners' equity at beginning of period 1,544,152,005 1,324,517,659 -- 1,269,653,304 1,094,819,585 -- -------------- -------------- ----------- -------------- -------------- ----------- Contract owners' equity at end of period $ 860,203,386 $1,544,152,005 $ 9,588,537 $ 734,826,560 $1,269,653,304 $12,028,258 ============== ============== =========== ============== ============== ===========
2008 2007 2008 2008 2007 2008 -------------- -------------- ----------- -------------- -------------- ----------- Units, beginning of period 71,979,329 65,701,092 -- 66,655,734 57,499,647 -- Units issued 14,208,930 14,741,670 1,285,543 7,507,307 15,011,068 1,451,403 Units redeemed 12,120,948 8,463,433 2,459 10,220,982 5,854,981 6,012 -------------- -------------- ----------- -------------- -------------- ----------- Units, end of period 74,067,311 71,979,329 1,283,084 63,942,059 66,655,734 1,445,391 ============== ============== =========== ============== ============== ===========
See accompanying notes. 38 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31,
American American American International International American New World Series II Series III New World Series II Series III ------------------------------ ------------- ------------------------- ---------- 2008 2007 2008 2008 2007 2008 -------------- -------------- ------------- ------------ ----------- ---------- Income: Dividend distributions received $ 29,971,147 $ 20,954,937 $ 13,786 $ 1,403,946 $ 1,299,463 $ 4,753 Expenses: Mortality and expense risk and administrative charges (12,988,471) (15,685,269) (1,010) (1,007,174) (330,312) (316) -------------- -------------- --------- ------------ ----------- -------- Net investment income (loss) 16,982,676 5,269,668 12,776 396,772 969,151 4,437 -------------- -------------- --------- ------------ ----------- -------- Realized gains (losses) on investments: Capital gain distributions received 17,077,309 83,638,104 168 -- 361,105 -- Net realized gain (loss) 15,294,108 52,268,631 (2,355) (8,418,269) 607,534 (928) -------------- -------------- --------- ------------ ----------- -------- Realized gains (losses) 32,371,417 135,906,735 (2,187) (8,418,269) 968,639 (928) -------------- -------------- --------- ------------ ----------- -------- Unrealized appreciation (depreciation) during the period (492,330,975) 15,243,393 (105,246) (26,541,964) 2,392,064 (29,010) -------------- -------------- --------- ------------ ----------- -------- Net increase (decrease) in contract owners' equity from operations (442,976,882) 156,419,796 (94,657) (34,563,461) 4,329,854 (25,501) -------------- -------------- --------- ------------ ----------- -------- Changes from principal transactions: Purchase payments 26,388,471 158,583,384 83,349 7,671,437 17,510,196 55,943 Transfers between sub-accounts and the company 16,352,021 (32,652,334) 290,864 (5,562,701) 58,640,220 85,942 Withdrawals (76,677,481) (86,218,862) (899) (7,403,899) (1,693,426) (1,754) Annual contract fee (3,017,483) (2,545,407) -- (211,333) (34,499) -- -------------- -------------- --------- ------------ ----------- -------- Net increase (decrease) in contract owners' equity from principal transactions (36,954,472) 37,166,781 373,314 (5,506,496) 74,422,491 140,131 -------------- -------------- --------- ------------ ----------- -------- Total increase (decrease) in contract owners' equity (479,931,354) 193,586,577 278,657 (40,069,957) 78,752,345 114,630 Contract owners' equity at beginning of period 1,049,618,724 856,032,147 -- 78,752,345 -- -- -------------- -------------- --------- ------------ ----------- -------- Contract owners' equity at end of period $ 569,687,370 $1,049,618,724 $ 278,657 $ 38,682,388 $78,752,345 $114,630 ============== ============== ========= ============ =========== ========
2008 2007 2008 2008 2007 2008 -------------- -------------- --------- ------------ ----------- -------- Units, beginning of period 36,872,706 33,554,049 -- 5,281,901 -- -- Units issued 5,675,655 8,655,033 34,821 3,698,920 5,905,540 14,840 Units redeemed 6,476,984 5,336,376 414 4,386,662 623,639 195 -------------- -------------- --------- ------------ ----------- -------- Units, end of period 36,071,377 36,872,706 34,407 4,594,159 5,281,901 14,645 ============== ============== ========= ============ =========== ========
See accompanying notes. 39 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31,
Basic Value Focus Blue Chip Growth Series I Blue Chip Growth Series II ------------------------- ---------------------------- --------------------------- 2008 2007 2008 2007 2008 2007 ------------ ----------- ------------- ------------- ------------ ------------- Income: Dividend distributions received $ 271,432 $ 284,982 $ 1,104,638 $ 3,777,120 $ 179,828 $ 610,167 Expenses: Mortality and expense risk and administrative charges (217,350) (368,798) (5,284,031) (7,735,245) (2,049,044) (2,524,142) ------------ ----------- ------------- ------------- ------------ ------------- Net investment income (loss) 54,082 (83,816) (4,179,393) (3,958,125) (1,869,216) (1,913,975) ------------ ----------- ------------- ------------- ------------ ------------- Realized gains (losses) on investments: Capital gain distributions received 137,259 2,664,225 6,248,923 -- 2,154,360 -- Net realized gain (loss) (736,797) 1,499,531 12,209,123 17,016,368 4,684,511 12,180,590 ------------ ----------- ------------- ------------- ------------ ------------- Realized gains (losses) (599,538) 4,163,756 18,458,046 17,016,368 6,838,871 12,180,590 ------------ ----------- ------------- ------------- ------------ ------------- Unrealized appreciation (depreciation) during the period (5,917,541) (3,731,975) (202,521,389) 42,840,304 (73,363,952) 5,175,223 ------------ ----------- ------------- ------------- ------------ ------------- Net increase (decrease) in contract owners' equity from operations (6,462,997) 347,965 (188,242,736) 55,898,547 (68,394,297) 15,441,838 ------------ ----------- ------------- ------------- ------------ ------------- Changes from principal transactions: Purchase payments 5,664 6,798 1,503,003 2,189,625 3,171,152 7,011,045 Transfers between sub-accounts and the company (1,956,781) (2,891,392) (6,128,251) (39,559,634) 16,309,288 (289,585) Withdrawals (2,772,329) (5,233,086) (60,859,790) (93,170,031) (16,996,216) (20,705,772) Annual contract fee (40,485) (57,044) (725,310) (856,915) (459,644) (490,464) ------------ ----------- ------------- ------------- ------------ ------------- Net increase (decrease) in contract owners' equity from principal transactions (4,763,931) (8,174,724) (66,210,348) (131,396,955) 2,024,580 (14,474,776) ------------ ----------- ------------- ------------- ------------ ------------- Total increase (decrease) in contract owners' equity (11,226,928) (7,826,759) (254,453,084) (75,498,408) (66,369,717) 967,062 Contract owners' equity at beginning of period 20,420,415 28,247,174 478,935,412 554,433,820 155,552,153 154,585,091 ------------ ----------- ------------- ------------- ------------ ------------- Contract owners' equity at end of period $ 9,193,487 $20,420,415 $ 224,482,328 $ 478,935,412 $ 89,182,436 $ 155,552,153 ============ =========== ============= ============= ============ =============
2008 2007 2008 2007 2008 2007 ------------ ----------- ------------- ------------- ------------ ------------- Units, beginning of period 771,091 1,057,639 21,089,264 26,906,895 9,256,377 10,160,181 Units issued 13,339 11,549 2,076,577 874,680 2,753,965 1,567,499 Units redeemed 224,011 298,097 5,550,378 6,692,311 2,616,920 2,471,303 ------------ ----------- ------------- ------------- ------------ ------------- Units, end of period 560,419 771,091 17,615,463 21,089,264 9,393,422 9,256,377 ============ =========== ============= ============= ============ =============
See accompanying notes. 40 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31,
Bond Index Trust A Capital Capital Appreciation Series II Appreciation Series I Series II -------- -------- ------------ ------------ ------------ ------------ 2008 2007 2008 2007 2008 2007 -------- -------- ------------ ------------ ------------ ------------ Income: Dividend distributions received $ 12,126 $ 14,490 $ 581,848 $ 550,443 $ 142,109 $ 70,531 Expenses: Mortality and expense risk and administrative charges (8,406) (5,575) (2,040,151) (3,005,611) (1,054,832) (1,505,936) -------- -------- ------------ ------------ ------------ ------------ Net investment income (loss) 3,720 8,915 (1,458,303) (2,455,168) (912,723) (1,435,405) -------- -------- ------------ ------------ ------------ ------------ Realized gains (losses) on investments: Capital gain distributions received 1,571 -- -- 887,837 -- 413,245 Net realized gain (loss) 2,127 6,996 (2,019,102) 4,462,816 (932,608) 1,640,438 -------- -------- ------------ ------------ ------------ ------------ Realized gains (losses) 3,698 6,996 (2,019,102) 5,350,653 (932,608) 2,053,683 -------- -------- ------------ ------------ ------------ ------------ Unrealized appreciation (depreciation) during the period 22,682 803 (57,750,981) 16,289,686 (28,103,678) 7,854,861 -------- -------- ------------ ------------ ------------ ------------ Net increase (decrease) in contract owners' equity from operations 30,100 16,714 (61,228,386) 19,185,171 (29,949,009) 8,473,139 -------- -------- ------------ ------------ ------------ ------------ Changes from principal transactions: Purchase payments 3,000 -- 683,465 1,099,588 2,060,397 2,373,727 Transfers between sub-accounts and the company 475,928 494,359 (12,218,656) (23,089,651) (3,676,521) (9,664,290) Withdrawals (60,359) (51,047) (20,173,579) (32,453,889) (7,746,323) (15,800,557) Annual contract fee (2,132) (869) (350,721) (445,823) (257,412) (314,021) -------- -------- ------------ ------------ ------------ ------------ Net increase (decrease) in contract owners' equity from principal transactions 416,437 442,443 (32,059,491) (54,889,775) (9,619,859) (23,405,141) -------- -------- ------------ ------------ ------------ ------------ Total increase (decrease) in contract owners' equity 446,537 459,157 (93,287,877) (35,704,604) (39,568,868) (14,932,002) Contract owners' equity at beginning of period 459,157 -- 182,897,729 218,602,333 85,348,809 100,280,811 -------- -------- ------------ ------------ ------------ ------------ Contract owners' equity at end of period $905,694 $459,157 $ 89,609,852 $182,897,729 $ 45,779,941 $ 85,348,809 ======== ======== ============ ============ ============ ============
2008 2007 2008 2007 2008 2007 -------- -------- ------------ ------------ ------------ ------------ Units, beginning of period 35,455 -- 17,485,893 22,981,087 5,413,753 6,968,696 Units issued 87,435 68,421 668,710 941,095 633,863 627,437 Units redeemed 55,555 32,966 4,317,554 6,436,289 1,336,146 2,182,380 -------- -------- ------------ ------------ ------------ ------------ Units, end of period 67,335 35,455 13,837,049 17,485,893 4,711,470 5,413,753 ======== ======== ============ ============ ============ ============
See accompanying notes. 41 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31,
Capital Core Core Appreciation Allocation Allocation Disciplined Value CGTC Overseas Plus Plus Diversification Series II Equity Series II Series I Series II Series II ------------ ------------------------ ---------- ----------- --------------- 2008 2008 2007 2008 2008 2008 ------------ ----------- ----------- ---------- ----------- --------------- Income: Dividend distributions received $ 749,700 $ 81,934 $ 133,878 $ 26,831 $ 201,088 $ 700,640 Expenses: Mortality and expense risk and administrative charges (516,719) (81,128) (108,345) (10,881) (159,241) (314,228) ------------ ----------- ----------- ---------- ----------- ----------- Net investment income (loss) 232,981 806 25,533 15,950 41,847 386,412 ------------ ----------- ----------- ---------- ----------- ----------- Realized gains (losses) on investments: Capital gain distributions received -- 316,330 803,382 -- -- 45,697 Net realized gain (loss) (1,179,858) (612,379) 540,347 (24,081) (379,989) (856,229) ------------ ----------- ----------- ---------- ----------- ----------- Realized gains (losses) (1,179,858) (296,049) 1,343,729 (24,081) (379,989) (810,532) ------------ ----------- ----------- ---------- ----------- ----------- Unrealized appreciation (depreciation) during the period (18,975,182) (2,499,687) (681,160) (505,923) (4,372,731) (9,295,623) ------------ ----------- ----------- ---------- ----------- ----------- Net increase (decrease) in contract owners' equity from operations (19,922,059) (2,794,930) 688,102 (514,054) (4,710,873) (9,719,743) ------------ ----------- ----------- ---------- ----------- ----------- Changes from principal transactions: Purchase payments 56,532,963 50,155 169,504 1,804,277 28,288,771 40,772,562 Transfers between sub-accounts and the company 94,137,306 (412,848) 204,078 2,909,096 23,002,397 48,669,466 Withdrawals (1,062,081) (497,571) (1,016,687) (6,950) (255,264) (568,199) Annual contract fee (125,895) (11,621) (13,433) (45,649) (30,068) (68,076) ------------ ----------- ----------- ---------- ----------- ----------- Net increase (decrease) in contract owners' equity from principal transactions 149,482,293 (871,885) (656,538) 4,660,774 51,005,836 88,805,753 ------------ ----------- ----------- ---------- ----------- ----------- Total increase (decrease) in contract owners' equity 129,560,234 (3,666,815) 31,564 4,146,720 46,294,963 79,086,010 Contract owners' equity at beginning of period -- 6,852,771 6,821,207 -- -- -- ------------ ----------- ----------- ---------- ----------- ----------- Contract owners' equity at end of period $129,560,234 $ 3,185,956 $ 6,852,771 $4,146,720 $46,294,963 $79,086,010 ============ =========== =========== ========== =========== ===========
2008 2008 2007 2008 2008 2008 ------------ ----------- ----------- ---------- ----------- ----------- Units, beginning of period -- 347,689 382,354 -- -- -- Units issued 14,928,187 108,133 178,453 502,457 5,519,145 9,435,817 Units redeemed 628,927 171,710 213,118 42,879 224,731 772,808 ------------ ----------- ----------- ---------- ----------- ----------- Units, end of period 14,299,260 284,112 347,689 459,578 5,294,414 8,663,009 ============ =========== =========== ========== =========== ===========
See accompanying notes. 42 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31,
Emerging Dynamic Growth Series I Dynamic Growth Series II Growth Series II -------------------------- ------------------------- ------------------------ 2008 2007 2008 2007 2008 2007 ------------ ------------ ------------ ----------- ----------- ----------- Income: Dividend distributions received $ -- $ -- $ -- $ -- $ 25,614 $ -- Expenses: Mortality and expense risk and administrative charges (263,750) (1,163,082) (105,693) (477,629) (81,139) (145,741) ------------ ------------ ------------ ----------- ----------- ----------- Net investment income (loss) (263,750) (1,163,082) (105,693) (477,629) (55,525) (145,741) ------------ ------------ ------------ ----------- ----------- ----------- Realized gains (losses) on investments: Capital gain distributions received -- -- -- -- 65,028 2,728,015 Net realized gain (loss) 14,189,995 13,232,411 2,703,963 3,976,618 (5,135,714) (909,307) ------------ ------------ ------------ ----------- ----------- ----------- Realized gains (losses) 14,189,995 13,232,411 2,703,963 3,976,618 (5,070,686) 1,818,708 ------------ ------------ ------------ ----------- ----------- ----------- Unrealized appreciation (depreciation) during the period (20,538,522) (6,098,188) (5,295,610) (1,210,437) 1,455,807 (1,381,617) ------------ ------------ ------------ ----------- ----------- ----------- Net increase (decrease) in contract owners' equity from operations (6,612,277) 5,971,141 (2,697,340) 2,288,552 (3,670,404) 291,350 ------------ ------------ ------------ ----------- ----------- ----------- Changes from principal transactions: Purchase payments 162,935 524,182 60,882 274,989 49,296 110,576 Transfers between sub-accounts and the company (56,458,788) (9,319,174) (22,220,559) (2,502,419) (3,710,596) (2,053,208) Withdrawals (2,581,009) (11,599,570) (913,285) (5,101,887) (828,466) (1,461,538) Annual contract fee (50,393) (225,692) (18,024) (104,764) (13,745) (21,447) ------------ ------------ ------------ ----------- ----------- ----------- Net increase (decrease) in contract owners' equity from principal transactions (58,927,255) (20,620,254) (23,090,986) (7,434,081) (4,503,511) (3,425,617) ------------ ------------ ------------ ----------- ----------- ----------- Total increase (decrease) in contract owners' equity (65,539,532) (14,649,113) (25,788,326) (5,145,529) (8,173,915) (3,134,267) Contract owners' equity at beginning of period 65,539,532 80,188,645 25,788,326 30,933,855 8,173,915 11,308,182 ------------ ------------ ------------ ----------- ----------- ----------- Contract owners' equity at end of period $ -- $ 65,539,532 $ -- $25,788,326 $ -- $ 8,173,915 ============ ============ ============ =========== =========== ===========
2008 2007 2008 2007 2008 2007 ------------ ------------ ------------ ----------- ----------- ----------- Units, beginning of period 10,219,055 13,496,709 1,447,435 1,868,970 406,524 574,185 Units issued 447,951 1,350,534 21,270 215,874 125,364 268,414 Units redeemed 10,667,006 4,628,188 1,468,705 637,409 531,888 436,075 ------------ ------------ ------------ ----------- ----------- ----------- Units, end of period -- 10,219,055 -- 1,447,435 -- 406,524 ============ ============ ============ =========== =========== ===========
See accompanying notes. 43 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31,
Emerging Small Emerging Small Company Series I Company Series II Equity-Income Series I -------------------------- -------------------------- ---------------------------- 2008 2007 2008 2007 2008 2007 ------------ ------------ ------------ ------------ ------------- ------------- Income: Dividend distributions received $ -- $ -- $ -- $ -- $ 9,021,653 $ 17,388,236 Expenses: Mortality and expense risk and administrative charges (796,246) (1,365,451) (446,248) (720,304) (5,977,367) (9,211,383) ------------ ------------ ------------ ------------ ------------- ------------- Net investment income (loss) (796,246) (1,365,451) (446,248) (720,304) 3,044,286 8,176,853 ------------ ------------ ------------ ------------ ------------- ------------- Realized gains (losses) on investments: Capital gain distributions received 30,423 21,508,750 15,997 10,410,736 11,015,627 67,438,355 Net realized gain (loss) (4,504,153) 3,246,400 (3,625,126) 530,635 (6,060,436) 32,063,058 ------------ ------------ ------------ ------------ ------------- ------------- Realized gains (losses) (4,473,730) 24,755,150 (3,609,129) 10,941,371 4,955,191 99,501,413 ------------ ------------ ------------ ------------ ------------- ------------- Unrealized appreciation (depreciation) during the period (24,138,718) (16,838,402) (11,013,101) (7,348,046) (181,284,470) (93,130,808) ------------ ------------ ------------ ------------ ------------- ------------- Net increase (decrease) in contract owners' equity from operations (29,408,694) 6,551,297 (15,068,478) 2,873,021 (173,284,993) 14,547,458 ------------ ------------ ------------ ------------ ------------- ------------- Changes from principal transactions: Purchase payments 217,186 471,644 231,853 411,287 1,320,288 2,383,063 Transfers between sub-accounts and the company (7,581,442) (13,146,246) (2,397,617) (4,734,828) (37,050,937) (29,121,965) Withdrawals (7,891,248) (13,761,982) (2,955,120) (7,753,972) (68,790,261) (108,987,405) Annual contract fee (151,336) (206,216) (116,428) (154,899) (663,499) (835,847) ------------ ------------ ------------ ------------ ------------- ------------- Net increase (decrease) in contract owners' equity from principal transactions (15,406,840) (26,642,800) (5,237,312) (12,232,412) (105,184,409) (136,562,154) ------------ ------------ ------------ ------------ ------------- ------------- Total increase (decrease) in contract owners' equity (44,815,534) (20,091,503) (20,305,790) (9,359,391) (278,469,402) (122,014,696) Contract owners' equity at beginning of period 78,404,208 98,495,711 38,605,809 47,965,200 540,216,012 662,230,708 ------------ ------------ ------------ ------------ ------------- ------------- Contract owners' equity at end of period $ 33,588,674 $ 78,404,208 $ 18,300,019 $ 38,605,809 $ 261,746,610 $ 540,216,012 ============ ============ ============ ============ ============= =============
2008 2007 2008 2007 2008 2007 ------------ ------------ ------------ ------------ ------------- ------------- Units, beginning of period 4,312,201 5,675,377 2,456,363 3,257,290 17,778,494 22,179,215 Units issued 435,906 262,016 613,260 340,863 492,550 794,836 Units redeemed 1,399,883 1,625,192 981,702 1,141,790 4,620,884 5,195,557 ------------ ------------ ------------ ------------ ------------- ------------- Units, end of period 3,348,224 4,312,201 2,087,921 2,456,363 13,650,160 17,778,494 ============ ============ ============ ============ ============= =============
See accompanying notes. 44 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31,
Equity-Income Series II Financial Services Series I Financial Services Series II --------------------------- --------------------------- ---------------------------- 2008 2007 2008 2007 2008 2007 ------------- ------------ ------------ ------------ ------------ ------------ Income: Dividend distributions received $ 3,841,513 $ 6,716,901 $ 181,604 $ 436,437 $ 207,480 $ 411,328 Expenses: Mortality and expense risk and administrative charges (2,928,888) (4,411,822) (339,617) (563,556) (504,285) (767,716) ------------- ------------ ------------ ------------ ------------ ------------ Net investment income (loss) 912,625 2,305,079 (158,013) (127,119) (296,805) (356,388) ------------- ------------ ------------ ------------ ------------ ------------ Realized gains (losses) on investments: Capital gain distributions received 4,915,020 29,672,644 1,312,891 4,426,762 1,803,649 5,889,936 Net realized gain (loss) (6,794,681) 19,079,402 (4,866,715) 6,968,256 (4,873,523) 8,394,691 ------------- ------------ ------------ ------------ ------------ ------------ Realized gains (losses) (1,879,661) 48,752,046 (3,553,824) 11,395,018 (3,069,874) 14,284,627 ------------- ------------ ------------ ------------ ------------ ------------ Unrealized appreciation (depreciation) during the period (78,878,235) (46,297,632) (9,098,558) (13,886,589) (15,331,635) (17,577,154) ------------- ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in contract owners' equity from operations (79,845,271) 4,759,493 (12,810,395) (2,618,690) (18,698,314) (3,648,915) ------------- ------------ ------------ ------------ ------------ ------------ Changes from principal transactions: Purchase payments 5,299,955 13,385,711 164,921 266,513 2,563,900 3,660,618 Transfers between sub-accounts and the company (16,530,043) (18,118,964) 1,316,868 (8,040,021) 4,716,645 (10,975,935) Withdrawals (23,768,978) (39,379,487) (3,140,515) (5,938,859) (3,624,567) (6,225,931) Annual contract fee (614,022) (811,357) (79,773) (99,523) (110,448) (150,993) ------------- ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in contract owners' equity from principal transactions (35,613,088) (44,924,097) (1,738,499) (13,811,890) 3,545,530 (13,692,241) ------------- ------------ ------------ ------------ ------------ ------------ Total increase (decrease) in contract owners' equity (115,458,359) (40,164,604) (14,548,894) (16,430,580) (15,152,784) (17,341,156) Contract owners' equity at beginning of period 241,866,912 282,031,516 28,749,293 45,179,873 38,360,203 55,701,359 ------------- ------------ ------------ ------------ ------------ ------------ Contract owners' equity at end of period $ 126,408,553 $241,866,912 $ 14,200,399 $ 28,749,293 $ 23,207,419 $ 38,360,203 ============= ============ ============ ============ ============ ============
2008 2007 2008 2007 2008 2007 ------------- ------------ ------------ ------------ ------------ ------------ Units, beginning of period 13,764,913 16,211,703 1,791,838 2,583,144 2,221,999 2,933,691 Units issued 1,543,962 2,022,979 710,713 487,144 1,184,859 605,797 Units redeemed 3,819,732 4,469,769 878,939 1,278,450 930,165 1,317,489 ------------- ------------ ------------ ------------ ------------ ------------ Units, end of period 11,489,143 13,764,913 1,623,612 1,791,838 2,476,693 2,221,999 ============= ============ ============ ============ ============ ============
See accompanying notes. 45 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31,
Founding Allocation Series I Founding Allocation Series II Fundamental Value Series I ----------- ------------------------------ -------------------------- 2008 2008 2007 2008 2007 ----------- -------------- -------------- ------------ ------------ Income: Dividend distributions received $ 397,302 $ 33,688,116 $ 5,644,106 $ 3,633,166 $ 2,602,728 Expenses: Mortality and expense risk and administrative charges (45,571) (17,987,324) (6,157,527) (2,295,833) (2,560,887) ----------- -------------- -------------- ------------ ------------ Net investment income (loss) 351,731 15,700,792 (513,421) 1,337,333 41,841 ----------- -------------- -------------- ------------ ------------ Realized gains (losses) on investments: Capital gain distributions received 22,327 19,560,910 -- 1,389,688 6,784,480 Net realized gain (loss) (61,022) (29,150,793) (1,077,383) 1,118,802 15,355,935 ----------- -------------- -------------- ------------ ------------ Realized gains (losses) (38,695) (9,589,883) (1,077,383) 2,508,490 22,140,415 ----------- -------------- -------------- ------------ ------------ Unrealized appreciation (depreciation) during the period (3,219,829) (530,271,317) (32,297,354) (72,977,006) (17,636,871) ----------- -------------- -------------- ------------ ------------ Net increase (decrease) in contract owners' equity from operations (2,906,793) (524,160,408) (33,888,158) (69,131,183) 4,545,385 ----------- -------------- -------------- ------------ ------------ Changes from principal transactions: Purchase payments 5,783,857 421,542,017 712,584,325 509,250 634,200 Transfers between sub-accounts and the company 8,833,278 119,555,263 399,961,337 276,667,711 (8,800,047) Withdrawals (39,040) (42,576,555) (11,175,367) (20,452,365) (22,315,403) Annual contract fee -- (5,665,751) (434,435) (374,548) (363,030) ----------- -------------- -------------- ------------ ------------ Net increase (decrease) in contract owners' equity from principal transactions 14,578,095 492,854,974 1,100,935,860 256,350,048 (30,844,280) ----------- -------------- -------------- ------------ ------------ Total increase (decrease) in contract owners' equity 11,671,302 (31,305,434) 1,067,047,702 187,218,865 (26,298,895) Contract owners' equity at beginning of period -- 1,067,047,702 -- 148,941,621 175,240,516 ----------- -------------- -------------- ------------ ------------ Contract owners' equity at end of period $11,671,302 $1,035,742,268 $1,067,047,702 $336,160,486 $148,941,621 =========== ============== ============== ============ ============
2008 2008 2007 2008 2007 ----------- -------------- -------------- ------------ ------------ Units, beginning of period -- 88,894,665 -- 8,885,514 10,714,532 Units issued 1,385,406 57,225,144 92,525,181 28,092,605 655,865 Units redeemed 40,679 10,037,514 3,630,516 3,511,788 2,484,883 ----------- -------------- -------------- ------------ ------------ Units, end of period 1,344,727 136,082,295 88,894,665 33,466,331 8,885,514 =========== ============== ============== ============ ============
See accompanying notes. 46 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31,
Fundamental Value Series II Global Allocation Series I Global Allocation Series II --------------------------- -------------------------- --------------------------- 2008 2007 2008 2007 2008 2007 ------------- ------------ ------------ ------------ ------------ ------------ Income: Dividend distributions received $ 2,063,219 $ 5,045,257 $ 1,943,605 $ 3,863,715 $ 8,236,558 $ 12,945,590 Expenses: Mortality and expense risk and administrative charges (5,170,376) (6,496,564) (661,007) (953,767) (2,772,015) (3,335,812) ------------- ------------ ------------ ------------ ------------ ------------ Net investment income (loss) (3,107,157) (1,451,307) 1,282,598 2,909,948 5,464,543 9,609,778 ------------- ------------ ------------ ------------ ------------ ------------ Realized gains (losses) on investments: Capital gain distributions received 3,962,716 15,902,627 93,230 6,214,380 365,472 21,600,617 Net realized gain (loss) 2,098,093 23,309,677 147,150 6,258,163 (3,849,049) 6,301,831 ------------- ------------ ------------ ------------ ------------ ------------ Realized gains (losses) 6,060,809 39,212,304 240,380 12,472,543 (3,483,577) 27,902,448 ------------- ------------ ------------ ------------ ------------ ------------ Unrealized appreciation (depreciation) during the period (156,084,796) (30,355,023) (18,300,333) (13,067,292) (71,263,026) (31,127,022) ------------- ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in contract owners' equity from operations (153,131,144) 7,405,974 (16,777,355) 2,315,199 (69,282,060) 6,385,204 ------------- ------------ ------------ ------------ ------------ ------------ Changes from principal transactions: Purchase payments 7,156,968 43,309,873 118,388 1,141,709 4,369,832 33,763,340 Transfers between sub-accounts and the company 25,816,742 36,511,809 (5,670,135) (5,792,377) (11,001,526) (1,542,174) Withdrawals (26,830,932) (40,066,720) (7,243,918) (7,395,942) (10,677,235) (11,196,696) Annual contract fee (1,251,646) (1,171,125) (119,876) (156,049) (672,546) (581,228) ------------- ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in contract owners' equity from principal transactions 4,891,132 38,583,837 (12,915,541) (12,202,659) (17,981,475) 20,443,242 ------------- ------------ ------------ ------------ ------------ ------------ Total increase (decrease) in contract owners' equity (148,240,012) 45,989,811 (29,692,896) (9,887,460) (87,263,535) 26,828,446 Contract owners' equity at beginning of period 399,580,641 353,590,830 56,387,027 66,274,487 208,609,331 181,780,885 ------------- ------------ ------------ ------------ ------------ ------------ Contract owners' equity at end of period $ 251,340,629 $399,580,641 $ 26,694,131 $ 56,387,027 $121,345,796 $208,609,331 ============= ============ ============ ============ ============ ============
2008 2007 2008 2007 2008 2007 ------------- ------------ ------------ ------------ ------------ ------------ Units, beginning of period 22,519,590 20,166,674 4,328,109 5,264,129 12,997,587 11,570,456 Units issued 5,515,795 6,622,950 292,168 746,035 847,593 3,264,148 Units redeemed 4,249,314 4,270,034 1,454,051 1,682,055 2,115,824 1,837,017 ------------- ------------ ------------ ------------ ------------ ------------ Units, end of period 23,786,071 22,519,590 3,166,226 4,328,109 11,729,356 12,997,587 ============= ============ ============ ============ ============ ============
See accompanying notes. 47 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31,
Global Bond Series I Global Bond Series II Global Trust Series I -------------------------- -------------------------- --------------------------- 2008 2007 2008 2007 2008 2007 ------------ ------------ ------------ ------------ ------------- ------------ Income: Dividend distributions received $ 649,442 $ 7,002,033 $ 1,212,809 $ 14,417,594 $ 3,012,465 $ 5,530,443 Expenses: Mortality and expense risk and administrative charges (1,527,062) (1,406,088) (3,391,656) (3,280,649) (2,276,418) (3,521,255) ------------ ------------ ------------ ------------ ------------- ------------ Net investment income (loss) (877,620) 5,595,945 (2,178,847) 11,136,945 736,047 2,009,188 ------------ ------------ ------------ ------------ ------------- ------------ Realized gains (losses) on investments: Capital gain distributions received -- -- -- -- -- 12,011,113 Net realized gain (loss) 1,514,310 1,685,949 2,450,004 (280,966) 3,987,054 15,789,193 ------------ ------------ ------------ ------------ ------------- ------------ Realized gains (losses) 1,514,310 1,685,949 2,450,004 (280,966) 3,987,054 27,800,306 ------------ ------------ ------------ ------------ ------------- ------------ Unrealized appreciation (depreciation) during the period (7,405,737) (118,969) (12,928,375) 4,838,748 (83,299,898) (28,911,528) ------------ ------------ ------------ ------------ ------------- ------------ Net increase (decrease) in contract owners' equity from operations (6,769,047) 7,162,925 (12,657,218) 15,694,727 (78,576,797) 897,966 ------------ ------------ ------------ ------------ ------------- ------------ Changes from principal transactions: Purchase payments 349,179 373,723 6,523,946 26,551,946 3,729,870 917,172 Transfers between sub-accounts and the company 11,350,992 9,809,512 (30,778,489) 2,945,378 (4,147,064) (11,374,979) Withdrawals (20,554,112) (17,281,795) (20,702,524) (14,401,865) (23,887,014) (38,254,438) Annual contract fee (178,934) (128,072) (786,187) (594,111) (181,532) (231,673) ------------ ------------ ------------ ------------ ------------- ------------ Net increase (decrease) in contract owners' equity from principal transactions (9,032,875) (7,226,632) (45,743,254) 14,501,348 (24,485,740) (48,943,918) ------------ ------------ ------------ ------------ ------------- ------------ Total increase (decrease) in contract owners' equity (15,801,922) (63,707) (58,400,472) 30,196,075 (103,062,537) (48,045,952) Contract owners' equity at beginning of period 97,297,582 97,361,289 212,896,283 182,700,208 212,665,854 260,711,806 ------------ ------------ ------------ ------------ ------------- ------------ Contract owners' equity at end of period $ 81,495,660 $ 97,297,582 $154,495,811 $212,896,283 $ 109,603,317 $212,665,854 ============ ============ ============ ============ ============= ============
2008 2007 2008 2007 2008 2007 ------------ ------------ ------------ ------------ ------------- ------------ Units, beginning of period 3,988,009 4,254,622 12,098,539 11,017,535 7,318,177 8,922,244 Units issued 2,013,405 1,185,186 3,827,529 3,688,261 1,030,270 154,977 Units redeemed 2,398,839 1,451,799 6,551,893 2,607,257 1,570,243 1,759,044 ------------ ------------ ------------ ------------ ------------- ------------ Units, end of period 3,602,575 3,988,009 9,374,175 12,098,539 6,778,204 7,318,177 ============ ============ ============ ============ ============= ============
See accompanying notes. 48 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31,
Global Trust Series II Health Sciences Series I Health Sciences Series II -------------------------- -------------------------- --------------------------- 2008 2007 2008 2007 2008 2007 ------------ ------------ ------------ ------------ ------------- ------------ Income: Dividend distributions received $ 652,087 $ 817,355 $ -- $ -- $ -- $ -- Expenses: Mortality and expense risk and administrative charges (640,750) (876,156) (815,616) (1,083,819) (926,858) (1,181,237) ------------ ------------ ------------ ------------ ------------- ------------ Net investment income (loss) 11,337 (58,801) (815,616) (1,083,819) (926,858) (1,181,237) ------------ ------------ ------------ ------------ ------------- ------------ Realized gains (losses) on investments: Capital gain distributions received -- 3,214,660 1,320,154 13,720,974 1,414,032 14,333,046 Net realized gain (loss) (1,895,434) 3,686,693 (3,707,824) 4,131,458 (5,004,708) 3,079,355 ------------ ------------ ------------ ------------ ------------- ------------ Realized gains (losses) (1,895,434) 6,901,353 (2,387,670) 17,852,432 (3,590,676) 17,412,401 ------------ ------------ ------------ ------------ ------------- ------------ Unrealized appreciation (depreciation) during the period (18,480,451) (8,396,717) (16,359,010) (6,418,484) (17,376,825) (5,725,687) ------------ ------------ ------------ ------------ ------------- ------------ Net increase (decrease) in contract owners' equity from operations (20,364,548) (1,554,165) (19,562,296) 10,350,129 (21,894,359) 10,505,477 ------------ ------------ ------------ ------------ ------------- ------------ Changes from principal transactions: Purchase payments 406,670 492,024 223,777 515,260 2,861,459 3,211,893 Transfers between sub-accounts and the company (5,809,661) 31,459,627 (5,111,921) (1,961,959) (3,233,466) (2,794,017) Withdrawals (4,004,802) (9,465,257) (8,155,545) (10,923,880) (7,583,995) (11,664,200) Annual contract fee (172,669) (171,282) (176,389) (188,571) (225,865) (252,450) ------------ ------------ ------------ ------------ ------------- ------------ Net increase (decrease) in contract owners' equity from principal transactions (9,580,462) 22,315,112 (13,220,078) (12,559,150) (8,181,867) (11,498,774) ------------ ------------ ------------ ------------ ------------- ------------ Total increase (decrease) in contract owners' equity (29,945,010) 20,760,947 (32,782,374) (2,209,021) (30,076,226) (993,297) Contract owners' equity at beginning of period 56,610,167 35,849,220 69,811,044 72,020,065 71,854,720 72,848,017 ------------ ------------ ------------ ------------ ------------- ------------ Contract owners' equity at end of period $ 26,665,157 $ 56,610,167 $ 37,028,670 $ 69,811,044 $ 41,778,494 $ 71,854,720 ============ ============ ============ ============ ============= ============
2008 2007 2008 2007 2008 2007 ------------ ------------ ------------ ------------ ------------- ------------ Units, beginning of period 3,028,072 1,910,631 3,480,258 4,162,723 3,393,566 3,953,949 Units issued 163,109 2,218,723 706,174 794,963 1,112,534 797,272 Units redeemed 793,563 1,101,282 1,513,780 1,477,428 1,630,406 1,357,655 ------------ ------------ ------------ ------------ ------------- ------------ Units, end of period 2,397,618 3,028,072 2,672,652 3,480,258 2,875,694 3,393,566 ============ ============ ============ ============ ============= ============
See accompanying notes. 49 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31,
High Income Series II High Yield Series I High Yield Series II -------------------------- -------------------------- --------------------------- 2008 2007 2008 2007 2008 2007 ------------ ------------ ------------ ------------ ------------- ------------ Income: Dividend distributions received $ 116,272 $ 49,101 $ 5,160,702 $ 12,280,074 $ 4,337,770 $ 9,596,331 Expenses: Mortality and expense risk and administrative charges (16,567) (37,118) (961,506) (1,514,790) (880,455) (1,320,056) ------------ ------------ ------------ ------------ ------------- ------------ Net investment income (loss) 99,705 11,983 4,199,196 10,765,284 3,457,315 8,276,275 ------------ ------------ ------------ ------------ ------------- ------------ Realized gains (losses) on investments: Capital gain distributions received 7,402 42,734 -- -- -- -- Net realized gain (loss) (390,139) (454,246) (7,712,686) 2,068,423 (4,474,476) 1,326,107 ------------ ------------ ------------ ------------ ------------- ------------ Realized gains (losses) (382,737) (411,512) (7,712,686) 2,068,423 (4,474,476) 1,326,107 ------------ ------------ ------------ ------------ ------------- ------------ Unrealized appreciation (depreciation) during the period (408,757) (154,167) (15,723,592) (12,195,223) (15,164,632) (9,411,684) ------------ ------------ ------------ ------------ ------------- ------------ Net increase (decrease) in contract owners' equity from operations (691,789) (553,696) (19,237,082) 638,484 (16,181,793) 190,698 ------------ ------------ ------------ ------------ ------------- ------------ Changes from principal transactions: Purchase payments 121,121 4,017,913 195,189 324,757 1,113,459 3,999,753 Transfers between sub-accounts and the company 1,076,751 (1,611,872) (4,520,928) (16,586,042) 6,278,564 (12,148,594) Withdrawals (99,184) (780,960) (12,064,933) (18,482,610) (7,222,517) (13,871,473) Annual contract fee (3,380) (706) (110,152) (144,042) (160,750) (219,597) ------------ ------------ ------------ ------------ ------------- ------------ Net increase (decrease) in contract owners' equity from principal transactions 1,095,308 1,624,375 (16,500,824) (34,887,937) 8,756 (22,239,911) ------------ ------------ ------------ ------------ ------------- ------------ Total increase (decrease) in contract owners' equity 403,519 1,070,679 (35,737,906) (34,249,453) (16,173,037) (22,049,213) Contract owners' equity at beginning of period 1,070,679 -- 81,824,764 116,074,217 66,768,125 88,817,338 ------------ ------------ ------------ ------------ ------------- ------------ Contract owners' equity at end of period $ 1,474,198 $ 1,070,679 $ 46,086,858 $ 81,824,764 $ 50,595,088 $ 66,768,125 ============ ============ ============ ============ ============= ============
2008 2007 2008 2007 2008 2007 ------------ ------------ ------------ ------------ ------------- ------------ Units, beginning of period 92,897 -- 4,962,992 7,027,050 3,941,905 5,215,195 Units issued 301,541 959,474 1,925,258 1,801,233 2,629,033 1,440,766 Units redeemed 163,964 866,577 2,856,236 3,865,291 2,208,457 2,714,056 ------------ ------------ ------------ ------------ ------------- ------------ Units, end of period 230,474 92,897 4,032,014 4,962,992 4,362,481 3,941,905 ============ ============ ============ ============ ============= ============
See accompanying notes. 50 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31,
Independence Investment Income & Value Series I Income & Value Series II LLC Small Cap Series II --------------------------- -------------------------- ----------------------- 2008 2007 2008 2007 2008 2007 ------------- ------------ ------------ ------------ ----------- ---------- Income: Dividend distributions $ 6,028,356 $ 11,957,448 $ 1,642,532 $ 3,135,538 $ -- $ -- Expenses: Mortality and expense risk and administrative charges (3,037,075) (4,462,702) (982,252) (1,402,132) (13,023) (20,029) ------------- ------------ ------------ ------------ ----------- ---------- Net investment income (loss) 2,991,281 7,494,746 660,280 1,733,406 (13,023) (20,029) ------------- ------------ ------------ ------------ ----------- ---------- Realized gains (losses) on investments: Capital gain distributions 4,639,746 19,745,367 1,374,197 5,828,767 13,559 206,276 Net realized gain (loss) (3,197,671) 14,298,012 (1,887,851) 3,462,246 (750,770) (15,911) ------------- ------------ ------------ ------------ ----------- ---------- Realized gains (losses) 1,442,075 34,043,379 (513,654) 9,291,013 (737,211) 190,365 ------------- ------------ ------------ ------------ ----------- ---------- Unrealized appreciation (depreciation) during the period (77,922,580) (40,886,201) (21,867,554) (11,338,349) 201,823 (184,543) ------------- ------------ ------------ ------------ ----------- ---------- Net increase (decrease) in contract owners' equity from operations (73,489,224) 651,924 (21,720,928) (313,930) (548,411) (14,207) ------------- ------------ ------------ ------------ ----------- ---------- Changes from principal transactions: Purchase payments 594,251 1,182,055 986,408 3,391,545 17,467 35,588 Transfers between sub-accounts and the company (14,755,453) (11,973,303) (7,972,235) (3,889,713) (607,808) (28,851) Withdrawals (34,895,906) (52,656,727) (7,686,792) (11,315,407) (54,124) (95,925) Annual contract fee (284,999) (335,802) (209,230) (261,245) (796) (1,229) ------------- ------------ ------------ ------------ ----------- ---------- Net increase (decrease) in contract owners' equity from principal transactions (49,342,107) (63,783,777) (14,881,849) (12,074,820) (645,261) (90,417) ------------- ------------ ------------ ------------ ----------- ---------- Total increase (decrease) in contract owners' equity (122,831,331) (63,131,853) (36,602,777) (12,388,750) (1,193,672) (104,624) Contract owners' equity at beginning of period 267,190,928 330,322,781 78,943,128 91,331,878 1,193,672 1,298,296 ------------- ------------ ------------ ------------ ----------- ---------- Contract owners' equity at end of period $ 144,359,597 $267,190,928 $ 42,340,351 $ 78,943,128 $ -- $1,193,672 ============= ============ ============ ============ =========== ==========
2008 2007 2008 2007 2008 2007 ------------- ------------ ------------ ------------ ----------- ---------- Units, beginning of period 10,864,738 13,421,722 5,129,616 5,879,600 80,794 86,775 Units issued 174,397 255,706 225,373 403,055 36,900 56,288 Units redeemed 2,544,514 2,812,690 1,346,207 1,153,039 117,694 62,269 ------------- ------------ ------------ ------------ ----------- ---------- Units, end of period 8,494,621 10,864,738 4,008,782 5,129,616 -- 80,794 ============= ============ ============ ============ =========== ==========
See accompanying notes. 51 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31,
International International Index Allocation Series II Core Series I Core Series II --------------------------- -------------------------- ------------------------- 2008 2007 2008 2007 2008 2007 ------------- ------------ ------------ ------------ ------------ ----------- Income: Dividend distributions $ 4,392,641 $ 9,168,652 $ 2,769,566 $ 1,927,711 $ 1,720,300 $ 928,589 Expenses: Mortality and expense risk and administrative charges (4,902,445) (3,320,552) (876,947) (1,349,459) (593,413) (812,333) ------------ ------------ ------------ ------------ ------------ ----------- Net investment income (loss) (509,804) 5,848,100 1,892,619 578,252 1,126,887 116,256 ------------ ------------ ------------ ------------ ------------ ----------- Realized gains (losses) on investments: Capital gain distributions 121,084 5,774,361 845,469 11,230,376 528,730 6,460,116 Net realized gain (loss) (4,731,996) 1,229,414 4,394,808 15,820,002 (2,491,804) 5,909,490 ------------ ------------ ------------ ------------ ------------ ----------- Realized gains (losses) (4,610,912) 7,003,775 5,240,277 27,050,378 (1,963,074) 12,369,606 ------------ ------------ ------------ ------------ ------------ ----------- Unrealized appreciation (depreciation) during the period (94,980,131) (7,058,468) (35,038,329) (18,844,013) (17,102,515) (8,240,130) ------------ ------------ ------------ ------------ ------------ ----------- Net increase (decrease) in contract owners' equity from operations (100,100,847) 5,793,407 (27,905,433) 8,784,617 (17,938,702) 4,245,732 ------------ ------------ ------------ ------------ ------------ ----------- Changes from principal transactions: Purchase payments 101,253,572 137,203,935 243,363 421,676 1,843,974 3,963,420 Transfers between sub-accounts and the company 35,789,373 64,543,297 (5,934,214) (6,237,252) (5,472,780) 5,631,252 Withdrawals (12,977,700) (7,531,942) (8,925,702) (15,777,183) (3,440,279) (6,417,349) Annual contract fee (1,415,911) (525,033) (126,111) (160,648) (121,208) (144,372) ------------ ------------ ------------ ------------ ------------ ----------- Net increase (decrease) in contract owners' equity from principal transactions 122,649,334 193,690,257 (14,742,664) (21,753,407) (7,190,293) 3,032,951 ------------ ------------ ------------ ------------ ------------ ----------- Total increase (decrease) in contract owners' equity 22,548,487 199,483,664 (42,648,097) (12,968,790) (25,128,995) 7,278,683 Contract owners' equity at beginning of period 295,946,625 96,462,961 80,318,221 93,287,011 49,950,951 42,672,268 ============ ============ ============ ============ ============ =========== Contract owners' equity at end of period $318,495,112 $295,946,625 $ 37,670,124 $ 80,318,221 $ 24,821,956 $49,950,951
2008 2007 2008 2007 2008 2007 ------------- ------------ ------------ ------------ ------------ ----------- Units, beginning of period 21,010,365 7,176,021 4,161,014 5,288,392 2,355,907 2,166,288 Units issued 13,935,443 15,364,484 325,350 725,878 456,018 1,220,592 Units redeemed 3,689,119 1,530,140 1,254,933 1,853,256 840,827 1,030,973 ------------ ------------ ------------ ------------ ------------ ----------- Units, end of period 31,256,689 21,010,365 3,231,431 4,161,014 1,971,098 2,355,907 ============ ============ ============ ============ ============ ===========
See accompanying notes. 52 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31,
International Equity International International Index B Series NAV Small Cap Series I Small Cap Series II --------------------------- -------------------------- -------------------------- 2008 2007 2008 2007 2008 2007 ------------- ------------ ------------ ------------ ------------ ------------ Income: Dividend distributions $ 824,983 $ 942,862 $ 1,768,359 $ 3,563,632 $ 854,749 $ 1,634,670 Expenses: Mortality and expense risk and administrative charges (498,212) (509,691) (1,091,250) (1,938,982) (626,845) (1,085,659 ------------ ------------ ------------ ------------ ------------ ------------ Net investment income (loss) 326,771 433,171 677,109 1,624,650 227,904 549,011 ------------ ------------ ------------ ------------ ------------ ------------ Realized gains (losses) on investments: Capital gain distributions 318,509 824,473 1,144,000 36,019,204 613,544 18,334,625 Net realized gain (loss) (1,590,395) 610,406 (3,470,099) 24,815,074 (10,419,608) 6,967,270 ------------ ------------ ------------ ------------ ------------ ------------ Realized gains (losses) (1,271,886) 1,434,879 (2,326,099) 60,834,278 (9,806,064) 25,301,895 ------------ ------------ ------------ ------------ ------------ ------------ Unrealized appreciation (depreciation) during the period (16,647,056) 835,646 (47,391,024) (51,406,279) (16,562,566) (21,903,214 ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in contract owners' equity from operations (17,592,171) 2,703,696 (49,040,014) 11,052,649 (26,140,726) 3,947,692 ------------ ------------ ------------ ------------ ------------ ------------ Changes from principal transactions: Purchase payments 216,216 274,528 505,762 773,700 1,617,212 5,522,488 Transfers between sub-accounts and the company (2,120,409) 46,155,442 (13,982,662) (4,590,605) (12,259,118) 10,928,598 Withdrawals (2,868,942) (5,886,655) (12,055,015) (20,822,565) (5,232,127) (9,411,969 Annual contract fee (173,778) (125,197) (158,644) (266,411) (127,632) (192,808 ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in contract owners' equity from principal transactions (4,946,913) 40,418,118 (25,690,559) (24,905,881) (16,001,665) 6,846,309 ------------ ------------ ------------ ------------ ------------ ------------ Total increase (decrease) in contract owners' equity (22,539,084) 43,121,814 (74,730,573) (13,853,232) (42,142,391) 10,794,001 Contract owners' equity at beginning of period 43,121,814 -- 111,985,320 125,838,552 63,090,909 52,296,908 ------------ ------------ ------------ ------------ ------------ ------------ Contract owners' equity at end of period $ 20,582,730 $ 43,121,814 $ 37,254,747 $111,985,320 $ 20,948,518 $ 63,090,909 ============ ============ ============ ============ ============ ============
2008 2007 2008 2007 2008 2007 ------------- ------------ ------------ ------------ ------------ ------------ Units, beginning of period 3,271,721 -- 4,226,430 5,089,895 2,476,541 2,156,299 Units issued 213,680 4,777,886 303,971 1,291,418 437,208 1,570,538 Units redeemed 633,007 1,506,165 1,502,494 2,154,883 1,098,679 1,250,296 ------------ ------------ ------------ ------------ ------------ ------------ Units, end of period 2,852,394 3,271,721 3,027,907 4,226,430 1,815,070 2,476,541 ============ ============ ============ ============ ============ ============
See accompanying notes. 53 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31,
Investment Quality International Value Series I International Value Series II Bond Series I ---------------------------- ----------------------------- -------------------------- 2008 2007 2008 2007 2008 2007 ------------- ------------- ------------- -------------- ------------ ------------ Income: Dividend distributions $ 6,461,729 $ 14,063,976 $ 5,017,181 $ 9,114,750 $ 7,226,785 $ 11,278,630 Expenses: Mortality and expense risk and administrative charges (3,052,368) (5,005,210) (2,616,336) (3,884,025) (1,616,315) (1,892,475) ------------- ------------ ------------- ------------ ------------ ------------ Net investment income (loss) 3,409,361 9,058,766 2,400,845 5,230,725 5,610,470 9,386,155 ------------- ------------ ------------- ------------ ------------ ------------ Realized gains (losses) on investments: Capital gain distributions 6,979,706 52,572,925 5,544,306 35,993,231 -- -- Net realized gain (loss) (3,612,213) 29,642,868 (3,695,565) 23,456,830 (4,216,804) (1,763,106) ------------- ------------ ------------- ------------ ------------ ------------ Realized gains (losses) 3,367,493 82,215,793 1,848,741 59,450,061 (4,216,804) (1,763,106) ------------- ------------ ------------- ------------ ------------ ------------ Unrealized appreciation (depreciation) during the period (116,371,114) (65,390,804) (92,828,837) (48,578,471) (4,764,581) (2,041,094) ------------- ------------ ------------- ------------ ------------ ------------ Net increase (decrease) in contract owners' equity from operations (109,594,260) 25,883,755 (88,579,251) 16,102,315 (3,370,915) 5,581,955 ------------- ------------ ------------- ------------ ------------ ------------ Changes from principal transactions: Purchase payments 859,861 2,076,898 3,527,097 12,970,349 4,496,865 346,064 Transfers between sub-accounts and the company (28,733,970) (34,339,935) (22,021,210) 14,225,862 2,778,485 799,872 Withdrawals (33,047,663) (59,743,274) (18,667,330) (39,311,327) (20,928,545) (23,014,969) Annual contract fee (435,696) (595,190) (586,089) (762,827) (284,715) (154,003) ------------- ------------ ------------- ------------ ------------ ------------ Net increase (decrease) in contract owners' equity from principal transactions (61,357,468) (92,601,501) (37,747,532) (12,877,943) (13,937,910) (22,023,036) ------------- ------------ ------------- ------------ ------------ ------------ Total increase (decrease) in contract owners' equity (170,951,728) (66,717,746) (126,326,783) 3,224,372 (17,308,825) (16,441,081) Contract owners' equity at beginning of period 295,226,708 361,944,454 231,323,661 228,099,289 120,393,201 136,834,282 ------------- ------------ ------------- ------------ ------------ ------------ Contract owners' equity at end of period $ 124,274,980 $295,226,708 $ 104,996,878 $231,323,661 $103,084,376 $120,393,201 ============= ============ ============= ============ ============ ============
2008 2007 2008 2007 2008 2007 ------------- ------------- ------------- -------------- ------------ ------------ Units, beginning of period 13,413,023 17,751,048 9,361,392 9,830,367 5,273,996 6,261,499 Units issued 395,143 890,893 783,932 2,770,146 1,559,024 626,523 Units redeemed 3,811,994 5,228,918 2,522,176 3,239,121 1,761,772 1,614,026 ------------- ------------ ------------- ------------ ------------ ------------ Units, end of period 9,996,172 13,413,023 7,623,148 9,361,392 5,071,248 5,273,996 ============= ============ ============= ============ ============ ============
See accompanying notes. 54 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31,
Investment Quality John Hancock International John Hancock International Bond Series II Equity Index Series I Equity Index Series II -------------------------- -------------------------- -------------------------- 2008 2007 2008 2007 2008 2007 ------------ ------------ ------------ ------------ ------------ ------------ Income: Dividend distributions $ 7,034,178 $ 11,191,489 $ 415,017 $ 1,286,706 $ 366,074 $ 1,132,008 Expenses: Mortality and expense risk and administrative charges (1,904,249) (2,041,246) (333,187) (536,269) (344,319) (532,739) ------------ ------------ ------------ ------------ ------------ ------------ Net investment income (loss) 5,129,929 9,150,243 81,830 750,437 21,755 599,269 ------------ ------------ ------------ ------------ ------------ ------------ Realized gains (losses) on investments: Capital gain distributions -- -- 186,587 1,510,651 178,343 1,464,840 Net realized gain (loss) (4,362,528) (1,687,032) 217,620 7,281,013 455,465 5,822,601 ------------ ------------ ------------ ------------ ------------ ------------ Realized gains (losses) (4,362,528) (1,687,032) 404,207 8,791,664 633,808 7,287,441 ------------ ------------ ------------ ------------ ------------ ------------ Unrealized appreciation (depreciation) during the period (5,015,525) (2,034,299) (12,557,707) (4,921,312) (12,776,744) (3,725,783) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in contract owners' equity from operations (4,248,124) 5,428,912 (12,071,670) 4,620,789 (12,121,181) 4,160,927 ------------ ------------ ------------ ------------ ------------ ------------ Changes from principal transactions: Purchase payments 3,011,605 16,998,111 84,478 168,570 160,492 483,792 Transfers between sub-accounts and the company (22,483,659) 3,324,789 (2,476,445) (16,036,905) (3,543,619) (8,635,963) Withdrawals 14,321,612) (10,338,946) (3,961,360) (6,448,021) (2,139,506) (5,437,801) Annual contract fee (479,410) (394,523) (60,093) (73,319) (93,125) (117,100) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in contract owners' equity from principal transactions (34,273,076) 9,589,431 (6,413,420) (22,389,675) (5,615,758) (13,707,072) ------------ ------------ ------------ ------------ ------------ ------------ Total increase (decrease) in contract owners' equity (38,521,200) 15,018,343 (18,485,090) (17,768,886) (17,736,939) (9,546,145) Contract owners' equity at beginning of period 130,925,708 115,907,365 30,977,856 48,746,742 30,452,527 39,998,672 ------------ ------------ ------------ ------------ ------------ ------------ Contract owners' equity at end of period $ 92,404,508 $130,925,708 $ 12,492,766 $ 30,977,856 $ 12,715,588 $ 30,452,527 ============ ============ ============ ============ ============ ============
2008 2007 2008 2007 2008 2007 ------------ ------------ ------------ ------------ ------------ ------------ Units, beginning of period 8,638,664 7,917,447 1,306,598 2,339,248 1,300,693 1,937,249 Units issued 1,513,057 2,374,769 162,169 250,862 329,601 246,369 Units redeemed 3,850,081 1,653,552 504,728 1,283,512 633,983 882,925 ------------ ------------ ------------ ------------ ------------ ------------ Units, end of period 6,301,640 8,638,664 964,039 1,306,598 996,311 1,300,693 ============ ============ ============ ============ ============ ============
See accompanying notes. 55 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31,
John Hancock Strategic Income Series II Large Cap Value Series I Large Cap Value Series II ------------------------ -------------------------- -------------------------- 2008 2007 2008 2007 2008 2007 ----------- ----------- ------------ ------------ ------------ ------------ Income: Dividend distributions $ 1,161,653 $ 286,342 $ 507,963 $ 580,013 $ 348,508 $ 301,874 Expenses: Mortality and expense risk and administrative charges (198,986) (254,753) (555,609) (943,714) (460,042) (811,597) ----------- ----------- ------------ ------------ ------------ ------------ Net investment income (loss) 962,667 31,589 (47,646) (363,701) (111,534) (509,723) ----------- ----------- ------------ ------------ ------------ ------------ Realized gains (losses) on investments: Capital gain distributions -- -- -- 3,669,213 -- 2,895,102 Net realized gain (loss) (141,609) 117,388 (4,091,489) 1,329,815 (1,555,539) 2,117,803 ----------- ----------- ------------ ------------ ------------ ------------ Realized gains (losses) (141,609) 117,388 (4,091,489) 4,999,028 (1,555,539) 5,012,905 ----------- ----------- ------------ ------------ ------------ ------------ Unrealized appreciation (depreciation) during the period (2,001,074) 434,286 (11,955,074) (2,385,694) (10,985,348) (2,903,026) ----------- ----------- ------------ ------------ ------------ ------------ Net increase (decrease) in contract owners' equity from operations (1,180,016) 583,263 (16,094,209) 2,249,633 (12,652,421) 1,600,156 ----------- ----------- ------------ ------------ ------------ ------------ Changes from principal transactions: Purchase payments 62,417 131,957 150,293 228,356 406,331 737,365 Transfers between sub-accounts and the company (2,800,934) 112,536 (6,090,354) (11,084,359) (5,020,566) (8,286,466) Withdrawals (1,786,315) (3,368,648) (6,123,077) (10,242,636) (3,451,200) (8,449,623) Annual contract fee (28,009) (29,543) (117,774) (137,157) (97,534) (143,104) ----------- ----------- ------------ ------------ ------------ ------------ Net increase (decrease) in contract owners' equity from principal transactions (4,552,841) (3,153,698) (12,180,912) (21,235,796) (8,162,969) (16,141,828) ----------- ----------- ------------ ------------ ------------ ------------ Total increase (decrease) in contract owners' equity (5,732,857) (2,570,435) (28,275,121) (18,986,163) (20,815,390) (14,541,672) Contract owners' equity at beginning of period 14,896,526 17,466,961 51,302,359 70,288,522 40,131,488 54,673,160 ----------- ----------- ------------ ------------ ------------ ------------ Contract owners' equity at end of period $ 9,163,669 $14,896,526 $ 23,027,238 $ 51,302,359 $ 19,316,098 $ 40,131,488 =========== =========== ============ ============ ============ ============
2008 2007 2008 2007 2008 2007 ----------- ----------- ------------ ------------ ------------ ------------ Units, beginning of period 1,038,263 1,264,469 2,039,124 2,872,716 1,607,730 2,246,431 Units issued 252,603 342,830 350,132 456,525 313,806 317,719 Units redeemed 579,536 569,036 939,002 1,290,117 692,579 956,420 ----------- ----------- ------------ ------------ ------------ ------------ Units, end of period 711,330 1,038,263 1,450,254 2,039,124 1,228,957 1,607,730 =========== =========== ============ ============ ============ ============
See accompanying notes. 56 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31,
Lifestyle Aggressive Lifestyle Aggressive Series I Series II Lifestyle Balanced Series I -------------------------- --------------------------- ---------------------------- 2008 2007 2008 2007 2008 2007 ------------ ------------ ------------- ------------ ------------- ------------- Income: Dividend distributions $ 2,051,394 $ 18,108,432 $ 3,259,631 $ 27,367,263 $ 21,104,432 $ 73,692,096 Expenses: Mortality and expense risk and administrative charges (1,870,481) (2,920,344) (3,496,874) (4,845,860) (11,048,172) (15,011,048) ------------ ------------ ------------- ------------ ------------- ------------- Net investment income (loss) 180,913 15,188,088 (237,243) 22,521,403 10,056,260 58,681,048 ------------ ------------ ------------- ------------ ------------- ------------- Realized gains (losses) on investments: Capital gain distributions 16,397,124 4,602,479 28,674,934 7,258,485 32,307,836 1,514,890 Net realized gain (loss) (20,821,945) 4,142,147 (30,016,466) 2,859,146 (17,509,486) 41,397,000 ------------ ------------ ------------- ------------ ------------- ------------- Realized gains (losses) (4,424,821) 8,744,626 (1,341,532) 10,117,631 14,798,350 42,911,890 ------------ ------------ ------------- ------------ ------------- ------------- Unrealized appreciation (depreciation) during the period (60,053,584) (10,638,717) (112,832,563) (12,871,076) (286,297,665) (54,903,288) ------------ ------------ ------------- ------------ ------------- ------------- Net increase (decrease) in contract owners' equity from operations (64,297,492) 13,293,997 (114,411,338) 19,767,958 (261,443,055) 46,689,650 ------------ ------------ ------------- ------------ ------------- ------------- Changes from principal transactions: Purchase payments 1,076,813 1,855,942 10,555,764 30,316,319 8,226,431 5,480,938 Transfers between sub-accounts and the company (15,829,397) (29,948,369) (16,095,569) (21,489,801) (29,496,287) 43,060,147 Withdrawals (17,977,245) (23,255,031) (24,467,543) (51,414,733) (146,081,690) (159,953,844) Annual contract fee (420,536) (503,127) (829,772) (1,060,910) (1,670,130) (1,776,167) ------------ ------------ ------------- ------------ ------------- ------------- Net increase (decrease) in contract owners' equity from principal transactions (33,150,365) (51,850,585) (30,837,120) (43,649,125) (169,021,676) (113,188,926) ------------ ------------ ------------- ------------ ------------- ------------- Total increase (decrease) in contract owners' equity (97,447,857) (38,556,588) (145,248,458) (23,881,167) (430,464,731) (66,499,276) Contract owners' equity at beginning of period 175,525,359 214,081,947 285,279,941 309,161,108 919,280,596 985,779,872 ------------ ------------ ------------- ------------ ------------- ------------- Contract owners' equity at end of period $ 78,077,502 $175,525,359 $ 140,031,483 $285,279,941 $ 488,815,865 $ 919,280,596 ============ ============ ============= ============ ============= =============
2008 2007 2008 2007 2008 2007 ------------ ------------ ------------- ------------ ------------- ------------- Units, beginning of period 9,206,081 12,037,626 14,689,016 16,595,790 44,018,959 49,449,565 Units issued 1,113,039 2,222,009 2,741,253 2,705,962 5,822,138 5,840,326 Units redeemed 3,110,920 5,053,554 4,700,131 4,612,736 14,625,222 11,270,932 ------------ ------------ ------------- ------------ ------------- ------------- Units, end of period 7,208,200 9,206,081 12,730,138 14,689,016 35,215,875 44,018,959 ============ ============ ============= ============ ============= =============
See accompanying notes. 57 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31,
Lifestyle Conservative Lifestyle Conservative Lifestyle Balanced Series II Series I Series II ------------------------------- -------------------------- ---------------------------- 2008 2007 2008 2007 2008 2007 --------------- -------------- ------------ ------------ -------------- ------------ Income: Dividend distributions $ 255,979,201 $ 580,410,541 $ 6,950,196 $ 12,210,765 $ 53,922,455 $ 43,732,333 Expenses: Mortality and expense risk and administrative charges (125,279,342) (126,475,818) (2,416,831) (2,366,597) (15,946,692) (9,100,739) --------------- -------------- ------------ ------------ -------------- ------------ Net investment income (loss) 130,699,859 453,934,723 4,533,365 9,844,168 37,975,763 34,631,594 --------------- -------------- ------------ ------------ -------------- ------------ Realized gains (losses) on investments: Capital gain distributions 332,347,496 14,253,450 3,043,724 372,544 17,671,531 1,572,829 Net realized gain (loss) (36,130,581) 46,467,232 (8,907,738) 1,553,585 (18,529,100) (1,710,743) --------------- -------------- ------------ ------------ -------------- ------------ Realized gains (losses) 296,216,915 60,720,682 (5,864,014) 1,926,129 (857,569) (137,914) --------------- -------------- ------------ ------------ -------------- ------------ Unrealized appreciation (depreciation) during the period (3,386,656,144) (198,827,457) (27,657,318) (5,701,673) (231,379,820) (14,850,623) --------------- -------------- ------------ ------------ -------------- ------------ Net increase (decrease) in contract owners' equity from operations (2,959,739,370) 315,827,948 (28,987,967) 6,068,624 (194,261,626) 19,643,057 --------------- -------------- ------------ ------------ -------------- ------------ Changes from principal transactions: Purchase payments 1,217,486,360 1,765,667,249 1,488,289 938,121 205,918,396 113,338,482 Transfers between sub-accounts and the company 87,607,388 496,358,958 61,928,838 28,708,780 633,691,482 141,736,397 Withdrawals (628,640,072) (569,136,456) (40,954,217) (30,828,472) (124,203,732) (73,909,838) Annual contract fee (31,720,147) (22,563,716) (320,294) (246,545) (3,651,363) (1,519,060) --------------- -------------- ------------ ------------ -------------- ------------ Net increase (decrease) in contract owners' equity from principal transactions 644,733,529 1,670,326,035 22,142,616 (1,428,116) 711,754,783 179,645,981 --------------- -------------- ------------ ------------ -------------- ------------ Total increase (decrease) in contract owners' equity (2,315,005,841) 1,986,153,983 (6,845,351) 4,640,508 517,493,157 199,289,038 Contract owners' equity at beginning of period 8,669,581,145 6,683,427,162 150,688,892 146,048,384 653,822,340 454,533,302 --------------- -------------- ------------ ------------ -------------- ------------ Contract owners' equity at end of period $ 6,354,575,304 $8,669,581,145 $143,843,541 $150,688,892 $1,171,315,497 $653,822,340 =============== ============== ============ ============ ============== ============
2008 2007 2008 2007 2008 2007 --------------- -------------- ------------ ------------ -------------- ------------ Units, beginning of period 485,068,665 381,237,428 7,414,141 7,446,440 40,759,257 29,038,716 Units issued 87,278,815 116,699,623 5,934,947 5,681,037 61,475,512 22,918,557 Units redeemed 35,708,048 12,868,386 4,687,291 5,713,336 13,033,635 11,198,016 --------------- -------------- ------------ ------------ -------------- ------------ Units, end of period 536,639,432 485,068,665 8,661,797 7,414,141 89,201,134 40,759,257 =============== ============== ============ ============ ============== ============
See accompanying notes. 58 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31,
Lifestyle Growth Series I Lifestyle Growth Series II Lifestyle Moderate Series I ---------------------------- -------------------------------- --------------------------- 2008 2007 2008 2007 2008 2007 ------------- ------------- --------------- --------------- ------------- ------------ Income: Dividend distributions $ 14,538,612 $ 65,287,699 $ 264,929,568 $ 786,403,559 $ 9,215,889 $ 23,288,401 Expenses: Mortality and expense risk and administrative charges (9,131,164) (12,863,834) (167,052,894) (171,622,119) (3,781,175) (4,639,698) ------------- ------------- --------------- --------------- ------------- ------------ Net investment income (loss) 5,407,448 52,423,865 97,876,674 614,781,440 5,434,714 18,648,703 ------------- ------------- --------------- --------------- ------------- ------------ Realized gains (losses) on investments: Capital gain distributions 33,782,212 4,279,510 570,288,667 52,864,721 6,027,762 383,443 Net realized gain (loss) (14,709,134) 43,175,181 (33,875,909) 87,169,991 (12,460,405) 10,655,198 ------------- ------------- --------------- --------------- ------------- ------------ Realized gains (losses) 19,073,078 47,454,691 536,412,758 140,034,712 (6,432,643) 11,038,641 ------------- ------------- --------------- --------------- ------------- ------------ Unrealized appreciation (depreciation) during the period (289,463,027) (50,304,765) (5,376,451,274) (247,312,295) (67,185,245) (18,595,801) ------------- ------------- --------------- --------------- ------------- ------------ Net increase (decrease) in contract owners' equity from operations (264,982,501) 49,573,791 (4,742,161,842) 507,503,857 (68,183,174) 11,091,543 ------------- ------------- --------------- --------------- ------------- ------------ Changes from principal transactions: Purchase payments 10,468,134 7,538,596 1,785,988,369 3,099,758,346 3,983,588 1,909,458 Transfers between sub-accounts and the company (29,343,029) (14,427,467) (242,199,046) 217,481,003 13,379,229 28,123,231 Withdrawals (84,905,527) (139,229,750) (610,886,468) (612,079,154) (50,068,434) (54,074,248) Annual contract fee (1,704,740) (1,847,224) (47,330,509) (31,149,274) (536,418) (496,583) ------------- ------------- --------------- --------------- ------------- ------------ Net increase (decrease) in contract owners' equity from principal transactions (105,485,162) (147,965,845) 885,572,346 2,674,010,921 (33,242,035) (24,538,142) ------------- ------------- --------------- --------------- ------------- ------------ Total increase (decrease) in contract owners' equity (370,467,663) (98,392,054) (3,856,589,496) 3,181,514,778 (101,425,209) (13,446,599) Contract owners' equity at beginning of period 781,227,991 879,620,045 12,027,023,525 8,845,508,747 290,199,264 303,645,863 ------------- ------------- --------------- --------------- ------------- ------------ Contract owners' equity at end of period $ 410,760,328 $ 781,227,991 $ 8,170,434,029 $12,027,023,525 $ 188,774,055 $290,199,264 ============= ============= =============== =============== ============= ============
2008 2007 2008 2007 2008 2007 ------------- ------------- --------------- --------------- ------------- ------------ Units, beginning of period 38,655,362 46,043,879 667,866,837 501,634,818 14,006,009 15,204,994 Units issued 6,392,610 6,286,547 110,982,072 183,427,768 3,574,962 3,699,273 Units redeemed 11,956,670 13,675,064 38,964,249 17,195,749 5,222,387 4,898,258 ------------- ------------- --------------- --------------- ------------- ------------ Units, end of period 33,091,302 38,655,362 739,884,660 667,866,837 12,358,584 14,006,009 ============= ============= =============== =============== ============= ============
See accompanying notes. 59 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31,
LMFC Core Equity LMFC Core Equity Lifestyle Moderate Series II Series I Series II ------------------------------ -------- ------------ ----------- 2008 2007 2008 2008 2007 -------------- -------------- -------- ------------ ----------- Income: Dividend distributions $ 78,909,309 $ 122,195,776 $ 15,340 $ 2,855,068 $ -- Expenses: Mortality and expense risk and administrative charges (29,665,102) (26,091,934) (660) (412,401) (717,073) -------------- -------------- -------- ------------ ----------- Net investment income (loss) 49,244,207 96,103,842 14,680 2,442,667 (717,073) -------------- -------------- -------- ------------ ----------- Realized gains (losses) on investments: Capital gain distributions 42,593,493 2,395,730 3,031 819,697 3,145,663 Net realized gain (loss) (25,454,904) 11,642,869 (248) (6,015,249) 1,145,474 -------------- -------------- -------- ------------ ----------- Realized gains (losses) 17,138,589 14,038,599 2,783 (5,195,552) 4,291,137 -------------- -------------- -------- ------------ ----------- Unrealized appreciation (depreciation) during the period (605,021,613) (60,104,793) (82,096) (16,911,966) (6,644,337) -------------- -------------- -------- ------------ ----------- Net increase (decrease) in contract owners' equity from operations (538,638,817) 50,037,648 (64,633) (19,664,851) (3,070,273) -------------- -------------- -------- ------------ ----------- Changes from principal transactions: Purchase payments 358,580,229 365,675,289 121,875 500,759 1,595,172 Transfers between sub-accounts and the company 233,574,001 168,831,108 20,031 893,347 (3,929,813) Withdrawals (174,496,021) (150,085,176) -- (3,880,360) (4,067,375) Annual contract fee (6,957,082) (4,500,570) -- (81,165) (102,381) -------------- -------------- -------- ------------ ----------- Net increase (decrease) in contract owners' equity from principal transactions 410,701,127 379,920,651 141,906 (2,567,419) (6,504,397) -------------- -------------- -------- ------------ ----------- Total increase (decrease) in contract owners' equity (127,937,690) 429,958,299 77,273 (22,232,270) (9,574,670) Contract owners' equity at beginning of period 1,817,724,720 1,387,766,421 -- 38,277,052 47,851,722 -------------- -------------- -------- ------------ ----------- Contract owners' equity at end of period $1,689,787,030 $1,817,724,720 $ 77,273 $ 16,044,782 $38,277,052 ============== ============== ======== ============ ===========
2008 2007 2008 2008 2007 -------------- -------------- -------- ------------ ----------- Units, beginning of period 108,763,250 84,168,309 -- 2,707,898 3,122,725 Units issued 41,548,148 32,964,001 12,269 950,785 655,089 Units redeemed 12,463,032 8,369,060 -- 1,114,312 1,069,916 -------------- -------------- -------- ------------ ----------- Units, end of period 137,848,366 108,763,250 12,269 2,544,371 2,707,898 ============== ============== ======== ============ ===========
See accompanying notes. 60 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31,
Marisco International Opportunities Series II Mid Cap Index Series I Mid Cap Index Series II ------------------------- -------------------------- -------------------------- 2008 2007 2008 2007 2008 2007 ------------ ----------- ------------ ------------ ------------ ------------ Income: Dividend distributions $ 470,252 $ 869,601 $ 446,905 $ 846,388 $ 578,365 $ 871,742 Expenses: Mortality and expense risk and administrative charges (803,962) (970,853) (735,156) (1,016,745) (1,327,442) (1,478,812) ------------ ----------- ------------ ------------ ------------ ------------ Net investment income (loss) (333,710) (101,252) (288,251) (170,357) (749,077) (607,070) ------------ ----------- ------------ ------------ ------------ ------------ Realized gains (losses) on investments: Capital gain distributions 2,389,786 13,136,111 1,219,004 7,749,589 1,966,692 11,457,319 Net realized gain (loss) (8,934,403) 4,296,411 (2,228,863) 7,957,223 (6,294,591) 6,268,781 ------------ ----------- ------------ ------------ ------------ ------------ Realized gains (losses) (6,544,617) 17,432,522 (1,009,859) 15,706,812 (4,327,899) 17,726,100 ------------ ----------- ------------ ------------ ------------ ------------ Unrealized appreciation (depreciation) during the period (27,507,687) (7,401,897) (19,766,713) (11,189,080) (32,611,910) (14,142,089) ------------ ----------- ------------ ------------ ------------ ------------ Net increase (decrease) in contract owners' equity from operations (34,386,014) 9,929,373 (21,064,823) 4,347,375 (37,688,886) 2,976,941 ------------ ----------- ------------ ------------ ------------ ------------ Changes from principal transactions: Purchase payments 3,165,893 5,504,327 249,492 389,796 1,987,954 3,575,207 Transfers between sub-accounts and the company (8,477,008) 30,374,952 3,302,820 (6,257,122) 15,278,245 28,139,513 Withdrawals (9,075,794) (8,523,790) (7,382,051) (10,835,468) (9,499,194) (15,299,061) Annual contract fee (128,835) (129,690) (127,197) (144,396) (361,366) (316,187) ------------ ----------- ------------ ------------ ------------ ------------ Net increase (decrease) in contract owners' equity from principal transactions (14,515,744) 27,225,799 (3,956,936) (16,847,190) 7,405,639 16,099,472 ------------ ----------- ------------ ------------ ------------ ------------ Total increase (decrease) in contract owners' equity (48,901,758) 37,155,172 (25,021,759) (12,499,815) (30,283,247) 19,076,413 Contract owners' equity at beginning of period 78,151,979 40,996,807 57,217,884 69,717,699 89,771,244 70,694,831 ------------ ----------- ------------ ------------ ------------ ------------ Contract owners' equity at end of period $ 29,250,221 $78,151,979 $ 32,196,125 $ 57,217,884 $ 59,487,997 $ 89,771,244 ============ =========== ============ ============ ============ ============
2008 2007 2008 2007 2008 2007 ------------ ----------- ------------ ------------ ------------ ------------ Units, beginning of period 3,613,945 2,220,125 2,827,829 3,647,695 4,746,817 3,930,705 Units issued 950,834 3,314,026 801,631 405,618 1,877,266 2,544,392 Units redeemed 1,744,103 1,920,206 1,084,370 1,225,484 1,581,660 1,728,280 ------------ ----------- ------------ ------------ ------------ ------------ Units, end of period 2,820,676 3,613,945 2,545,090 2,827,829 5,042,423 4,746,817 ============ =========== ============ ============ ============ ============
See accompanying notes. 61 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31,
Mid Cap Intersection Mid Cap Intersection Series I Series II Mid Cap Stock Series I ------------ ----------------------- --------------------------- 2008 2008 2007 2008 2007 ------------ ----------- ---------- ------------- ------------ Income: Dividend distributions $ 8 $ -- $ -- $ -- $ -- Expenses: Mortality and expense risk and administrative charges (12) (53,544) (9,784) (3,482,936) (4,573,792) ------- ----------- ---------- ------------- ------------ Net investment income (loss) (4) (53,544) (9,784) (3,482,936) (4,573,792) ------- ----------- ---------- ------------- ------------ Realized gains (losses) on investments: Capital gain distributions -- -- -- 6,455,363 75,725,472 Net realized gain (loss) (666) (736,655) (9,921) 365,002 28,922,481 ------- ----------- ---------- ------------- ------------ Realized gains (losses) (666) (736,655) (9,921) 6,820,365 104,647,953 ------- ----------- ---------- ------------- ------------ Unrealized appreciation (depreciation) during the period (265) (1,160,563) (85,581) (133,461,580) (40,317,093) ------- ----------- ---------- ------------- ------------ Net increase (decrease) in contract owners' equity from operations (935) (1,950,762) (105,286) (130,124,151) 59,757,068 ------- ----------- ---------- ------------- ------------ Changes from principal transactions: Purchase payments -- 648,426 520,035 1,754,568 1,479,451 Transfers between sub-accounts and the company 7,493 2,032,860 1,712,748 21,716,699 (21,764,533) Withdrawals (1,707) (343,511) (21,874) (37,022,632) (51,110,535) Annual contract fee -- (8,444) (2,327) (680,893) (670,115) ------- ----------- ---------- ------------- ------------ Net increase (decrease) in contract owners' equity from principal transactions 5,786 2,329,331 2,208,582 (14,232,258) (72,065,732) ------- ----------- ---------- ------------- ------------ Total increase (decrease) in contract owners' equity 4,851 378,569 2,103,296 (144,356,409) (12,308,664) Contract owners' equity at beginning of period -- 2,103,296 -- 292,411,115 304,719,779 ------- ----------- ---------- ------------- ------------ Contract owners' equity at end of period $ 4,851 $ 2,481,865 $2,103,296 $ 148,054,706 $292,411,115 ======= =========== ========== ============= ============
2008 2008 2007 2008 2007 ------------ ----------- ---------- ------------- ------------ Units, beginning of period -- 182,898 -- 14,501,521 18,381,353 Units issued 814 769,367 206,965 4,087,196 1,351,248 Units redeemed 188 573,233 24,067 5,306,233 5,231,080 ------- ----------- ---------- ------------- ------------ Units, end of period 626 379,032 182,898 13,282,484 14,501,521 ======= =========== ========== ============= ============
See accompanying notes. 62 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31,
Mid Cap Stock Series II Mid Cap Value Series I Mid Cap Value Series II -------------------------- -------------------------- --------------------------- 2008 2007 2008 2007 2008 2007 ------------ ------------ ------------ ------------ ------------- ------------ Income: Dividend distributions $ -- $ -- $ 1,765,257 $ 1,959,777 $ 1,556,241 $ 1,301,043 Expenses: Mortality and expense risk and administrative charges (2,260,025) (2,806,949) (1,579,807) (2,779,953) (1,693,664) (2,888,833) ------------ ------------ ------------ ------------ ------------- ------------ Net investment income (loss) (2,260,025) (2,806,949) 185,450 (820,176) (137,423) (1,587,790) ------------ ------------ ------------ ------------ ------------- ------------ Realized gains (losses) on investments: Capital gain distributions 4,125,739 44,814,776 4,808,930 48,993,654 4,817,769 47,903,398 Net realized gain (loss) (3,186,634) 13,210,448 (22,834,402) 11,253,024 (18,134,584) 8,576,030 ------------ ------------ ------------ ------------ ------------- ------------ Realized gains (losses) 939,105 58,025,224 (18,025,472) 60,246,678 (13,316,815) 56,479,428 ------------ ------------ ------------ ------------ ------------- ------------ Unrealized appreciation (depreciation) during the period (77,666,071) (22,553,157) (32,744,100) (58,205,087) (37,519,906) (54,153,069) ------------ ------------ ------------ ------------ ------------- ------------ Net increase (decrease) in contract owners' equity from operations (78,986,991) 32,665,118 (50,584,122) 1,221,415 (50,974,144) 738,569 ------------ ------------ ------------ ------------ ------------- ------------ Changes from principal transactions: Purchase payments 4,829,257 8,579,313 1,660,633 722,275 804,786 2,140,208 Transfers between sub-accounts and the company 817,031 6,548,494 (14,956,428) (21,582,708) (11,178,743) (18,721,176) Withdrawals (15,018,681) (26,999,603) (15,639,825) (31,031,053) (12,994,706) (32,017,382) Annual contract fee (530,665) (560,008) (327,487) (418,662) (386,273) (564,382) ------------ ------------ ------------ ------------ ------------- ------------ Net increase (decrease) in contract owners' equity from principal transactions (9,903,058) (12,431,804) (29,263,107) (52,310,148) (23,754,936) (49,162,732) ------------ ------------ ------------ ------------ ------------- ------------ Total increase (decrease) in contract owners' equity (88,890,049) 20,233,314 (79,847,229) (51,088,733) (74,729,080) (48,424,163) Contract owners' equity at beginning of period 182,162,343 161,929,029 146,671,433 197,760,166 143,552,635 191,976,798 ------------ ------------ ------------ ------------ ------------- ------------ Contract owners' equity at end of period $ 93,272,294 $182,162,343 $ 66,824,204 $146,671,433 $ 68,823,555 $143,552,635 ============ ============ ============ ============ ============= ============
2008 2007 2008 2007 2008 2007 ------------ ------------ ------------ ------------ ------------- ------------ Units, beginning of period 7,457,432 7,959,255 7,236,421 9,675,201 7,510,604 9,922,000 Units issued 2,157,118 1,830,405 722,627 458,592 583,260 537,113 Units redeemed 2,660,932 2,332,228 2,332,402 2,897,372 2,076,567 2,948,509 ------------ ------------ ------------ ------------ ------------- ------------ Units, end of period 6,953,618 7,457,432 5,626,646 7,236,421 6,017,297 7,510,604 ============ ============ ============ ============ ============= ============
See accompanying notes. 63 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31,
ML Global Allocation Money Market B Series NAV Money Market Series I -------------------------- -------------------------- --------------------------- 2008 2007 2008 2007 2008 2007 ------------ ------------ ------------ ------------ ------------- ------------ Income: Dividend distributions $ 24,389 $ 39,289 $ 808,435 $ 1,491,846 $ 5,968,951 $ 14,996,014 Expenses: Mortality and expense risk and administrative charges (17,952) (23,117) (594,866) (505,830) (5,169,378) (5,041,339) ------------ ------------ ------------ ------------ ------------- ------------ Net investment income (loss) 6,437 16,172 213,569 986,016 799,573 9,954,675 ------------ ------------ ------------ ------------ ------------- ----------- Realized gains (losses) on investments: Capital gain distributions 4,696 69,798 -- -- -- -- Net realized gain (loss) 73,736 166,121 (309) (6,349) (26,146) (17,314) ------------ ------------ ------------ ------------ ------------- ----------- Realized gains (losses) 78,432 235,919 (309) (6,349) (26,146) (17,314) ------------ ------------ ------------ ------------ ------------- ----------- Unrealized appreciation (depreciation) during the period (360,331) (27,658) -- -- -- -- ------------ ------------ ------------ ------------ ------------- ------------ Net increase (decrease) in contract owners' equity from operations (275,462) 224,433 213,260 979,667 773,427 9,937,361 ------------ ------------ ------------ ------------ ------------- ------------ Changes from principal transactions: Purchase payments -- 519 429,466 309,668 5,523,089 21,430,654 Transfers between sub-accounts and the company (85,860) (239,790) 17,491,934 61,833,589 48,915,079 (30,143,644) Withdrawals (118,120) (232,333) (22,851,518) (19,858,013) (1,803,080) 597,626 Annual contract fee (2,955) (3,677) (184,515) (124,736) (854,523) (815,061) ------------ ------------ ------------ ------------ ------------- ------------ Net increase (decrease) in contract owners' equity from principal transactions (206,935) (475,281) (5,114,633) 42,160,508 51,780,565 (8,930,425) ------------ ------------ ------------ ------------ ------------- ------------ Total increase (decrease) in contract owners' equity (482,397) (250,848) (4,901,373) 43,140,175 52,553,992 1,006,936 Contract owners' equity at beginning of period 1,520,061 1,770,909 43,140,175 -- 312,447,249 311,440,313 ------------ ------------ ------------ ------------ ------------- ------------ Contract owners' equity at end of period $ 1,037,664 $ 1,520,061 $ 38,238,802 $ 43,140,175 $ 365,001,241 $312,447,249 ============ ============ ============ ============ ============= ============
2008 2007 2008 2007 2008 2007 ------------ ------------ ------------ ------------ ------------- ------------ Units, beginning of period 91,452 124,483 3,382,379 -- 19,224,624 19,704,917 Units issued 1,779 1,314 2,667,916 6,094,823 21,627,888 25,342,787 Units redeemed 13,540 34,345 3,068,551 2,712,444 18,244,045 25,823,080 ------------ ------------ ------------ ------------ ------------- ------------ Units, end of period 79,691 91,452 2,981,744 3,382,379 22,608,467 19,224,624 ============ ============ ============ ============ ============= ============
See accompanying notes. 64 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31,
Mutual Shares Money Market Series II Series I Natural Resources Series II ----------------------------- ----------- --------------------------- 2008 2007 2008 2008 2007 -------------- ------------- ----------- ------------- ------------ Income: Dividend distributions $ 11,696,916 $ 17,173,017 $ 193,407 $ 647,704 $ 2,040,688 Expenses: Mortality and expense risk and administrative charges (13,603,692) (6,636,489) (50,306) (3,605,425) (3,919,593) -------------- ------------- ----------- ------------- ------------ Net investment income (loss) (1,906,776) 10,536,528 143,101 (2,957,721) (1,878,905) -------------- ------------- ----------- ------------- ------------ Realized gains (losses) on investments: Capital gain distributions -- -- -- 7,826,683 99,374,761 Net realized gain (loss) 131,354 (315,519) (44,713) (54,696,669) 19,217,740 -------------- ------------- ----------- ------------- ------------ Realized gains (losses) 131,354 (315,519) (44,713) (46,869,986) 118,592,501 -------------- ------------- ----------- ------------- ------------ Unrealized appreciation (depreciation) during the period -- -- (3,430,317) (84,040,000) (38,478,502) -------------- ------------- ----------- ------------- ------------ Net increase (decrease) in contract owners' equity from operations (1,775,422) 10,221,009 (3,331,929) (133,867,707) 78,235,094 -------------- ------------- ----------- ------------- ------------ Changes from principal transactions: Purchase payments 422,101,771 355,786,691 7,661,346 8,428,173 11,469,313 Transfers between sub-accounts and the company 881,751,341 16,633,788 14,329,106 (19,092,203) 4,495,133 Withdrawals (350,479,994) (253,110,361) (81,632) (31,200,606) (36,219,795) Annual contract fee (2,850,772) (1,134,223) (217,369) (638,791) (632,912) -------------- ------------- ----------- ------------- ------------ Net increase (decrease) in contract owners' equity from principal transactions 950,522,346 118,175,895 21,691,451 (42,503,427) (20,888,261) -------------- ------------- ----------- ------------- ------------ Total increase (decrease) in contract owners' equity 948,746,924 128,396,904 18,359,522 (176,371,134) 57,346,833 Contract owners' equity at beginning of period 434,277,195 305,880,291 -- 279,653,618 222,306,785 -------------- ------------- ----------- ------------- ------------ Contract owners' equity at end of period $1,383,024,119 $ 434,277,195 $18,359,522 $ 103,282,484 $279,653,618 ============== ============= =========== ============= ============
2008 2007 2008 2008 2007 -------------- ------------- ----------- ------------- ------------ Units, beginning of period 33,634,489 24,353,986 -- 5,632,699 5,989,474 Units issued 104,361,951 55,780,577 2,229,538 2,393,190 2,588,471 Units redeemed 30,899,620 46,500,074 38,258 3,506,043 2,945,246 -------------- ------------- ----------- ------------- ------------ Units, end of period 107,096,820 33,634,489 2,191,280 4,519,846 5,632,699 ============== ============= =========== ============= ============
See accompanying notes. 65 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31,
Optimized All Cap Series II Optimized Value Series II Pacific Rim Series I -------------------------- -------------------------- --------------------------- 2008 2007 2008 2007 2008 2007 ------------ ------------ ------------ ------------ ------------- ------------ Income: Dividend distributions $ 538,531 $ 1,188,366 $ 351,919 $ 285,509 $ 433,583 $ 896,325 Expenses: Mortality and expense risk and administrative charges (1,359,407) (1,432,374) (262,817) (317,438) (453,187) (742,993) ------------ ------------ ------------ ------------ ------------- ------------ Net investment income (loss) (820,876) (244,008) 89,102 (31,929) (19,604) 153,332 ------------ ------------ ------------ ------------ ------------- ------------ Realized gains (losses) on investments: Capital gain distributions -- 12,431,349 -- 1,179,565 795,947 12,192,862 Net realized gain (loss) (9,286,750) 304,502 (1,615,709) (179,836) (6,863,162) 7,144,072 ------------ ------------ ------------ ------------ ------------- ------------ Realized gains (losses) (9,286,750) 12,735,851 (1,615,709) 999,729 (6,067,215) 19,336,934 ------------ ------------ ------------ ------------ ------------- ------------ Unrealized appreciation (depreciation) during the period (36,664,216) (17,110,335) (7,023,729) (3,738,411) (8,925,616) (15,706,396) ------------ ------------ ------------ ------------ ------------- ------------ Net increase (decrease) in contract owners' equity from operations (46,771,842) (4,618,492) (8,550,336) (2,770,611) (15,012,435) 3,783,870 ------------ ------------ ------------ ------------ ------------- ------------ Changes from principal transactions: Purchase payments 651,755 550,717 119,760 122,302 409,106 244,003 Transfers between sub-accounts and the company (7,536,657) 138,472,582 (2,015,968) 25,361,755 (6,396,722) (6,042,518) Withdrawals (8,918,010) (17,302,097) (1,874,603) (4,342,514) (4,667,985) (9,853,721) Annual contract fee (451,856) (353,309) (84,272) (67,704) (77,884) (107,156) ------------ ------------ ------------ ------------ ------------- ------------ Net increase (decrease) in contract owners' equity from principal transactions (16,254,768) 121,367,893 (3,855,083) 21,073,839 (10,733,485) (15,759,392) ------------ ------------ ------------ ------------ ------------- ------------ Total increase (decrease) in contract owners' equity (63,026,610) 116,749,401 (12,405,419) 18,303,228 (25,745,920) (11,975,522) Contract owners' equity at beginning of period 120,043,351 3,293,950 23,442,366 5,139,138 43,926,232 55,901,754 ------------ ------------ ------------ ------------ ------------- ------------ Contract owners' equity at end of period $ 57,016,741 $120,043,351 $ 11,036,947 $ 23,442,366 $ 18,180,312 $ 43,926,232 ============ ============ ============ ============ ============= ============
2008 2007 2008 2007 2008 2007 ------------ ------------ ------------ ------------ ------------- ------------ Units, beginning of period 5,614,030 157,118 1,358,278 277,591 2,850,036 3,952,042 Units issued 405,956 7,357,908 66,171 1,546,360 449,046 724,565 Units redeemed 1,248,994 1,900,996 317,282 465,673 1,277,968 1,826,571 ------------ ------------ ------------ ------------ ------------- ------------ Units, end of period 4,770,992 5,614,030 1,107,167 1,358,278 2,021,114 2,850,036 ============ ============ ============ ============ ============= ============
See accompanying notes. 66 JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31,
Pacific Rim Series II PIM Classic Value Series II PIMCO VIT All Asset Series II -------------------------- -------------------------- ----------------------------- 2008 2007 2008 2007 2008 2007 ------------ ------------ ------------ ------------ ------------- ------------ Income: Dividend distributions $ 294,067 $ 611,897 $ 230,577 $ 325,916 $ 1,400,989 $ 2,082,438 Expenses: Mortality and expense risk and administrative charges (419,391) (671,401) (231,884) (425,338) (412,119) (499,408) ------------ ------------ ------------ ------------ ------------- ------------ Net investment income (loss) (125,324) (59,504) (1,307) (99,422) 988,870 1,583,030 ------------ ------------ ------------ ------------ ------------- ------------ Realized gains (losses) on investments: Capital gain distributions 734,533 10,513,543 238,983 2,614,838 68,363 -- Net realized gain (loss) (9,059,248) 2,672,521 (7,770,212) 1,459,806 (1,470,470) 19,885 ------------ ------------ ------------ ------------ ------------- ------------ Realized gains (losses) (8,324,715) 13,186,064 (7,531,229) 4,074,644 (1,402,107) 19,885 ------------ ------------ ------------ ------------ ------------- ------------ Unrealized appreciation (depreciation) during the period (3,966,829) (10,507,804) (1,437,862) (7,219,595) (4,773,598) 255,180 ------------ ------------ ------------ ------------ ------------- ------------ Net increase (decrease) in contract owners' equity from operations (12,416,868) 2,618,756 (8,970,398) (3,244,373) (5,186,835) 1,858,095 ------------ ------------ ------------ ------------ ------------- ------------ Changes from principal transactions: Purchase payments 1,337,254 2,655,871 766,577 1,682,561 77,274 217,632 Transfers between sub-accounts and the company (10,458,588) 230,133 (995,049) (8,818,530) 1,070,045 (9,789,441) Withdrawals (3,696,646) (5,352,696) (1,942,031) (3,137,811) (3,600,384) (4,568,246) Annual contract fee (85,128) (123,256) (42,064) (56,939) (71,473) (76,170) ------------ ------------ ------------ ------------ ------------- ------------ Net increase (decrease) in contract owners' equity from principal transactions (12,903,108) (2,589,948) (2,212,567) (10,330,719) (2,524,538) (14,216,225) ------------ ------------ ------------ ------------ ------------- ------------ Total increase (decrease) in contract owners' equity (25,319,976) 28,808 (11,182,965) (13,575,092) (7,711,373) (12,358,130) Contract owners' equity at beginning of period 39,752,807 39,723,999 20,613,743 34,188,835 27,808,742 40,166,872 ------------ ------------ ------------ ------------ ------------- ------------ Contract owners' equity at end of period $ 14,432,831 $ 39,752,807 $ 9,430,778 $ 20,613,743 $ 20,097,369 $ 27,808,742 ============ ============ ============ ============ ============= ============
2008 2007 2008 2007 2008 2007 ------------ ------------ ------------ ------------ ------------- ------------ Units, beginning of period 1,748,484 1,839,479 1,439,118 2,036,668 1,761,138 2,705,463 Units issued 504,336 888,191 1,118,127 682,343 646,784 319,786 Units redeemed 1,156,563 979,186 1,319,568 1,279,893 866,171 1,264,111 ------------ ------------ ------------ ------------ -