[Federal Register Volume 65, Number 235 (Wednesday, December 6, 2000)]
[Notices]
[Pages 76313-76314]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-31023]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-24776; File No. 812-12300]


John Hancock Variable Series Trust I, et al.; Notice of 
Application

November 30, 2000.
AGENCY: Securities and Exchange Commission (``SEC'' or ``Commission'').

ACTION: Notice of an application under Section 17(b) of the Investment 
Company Act of 1940 (``1940 Act'') for an exemption from Section 17(a) 
of the 1940 Act.

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Summary of Application: Applicants request an order to permit one 
series of John Hancock Variable Series Trust I (the ``Trust'') to 
acquire all of the assets and liabilities of another series of the 
Trust. Because of certain affiliations, applicants may not be able to 
rely on rule 17a-8 under the 1940 Act.

Applicants: John Hancock Variable Series Trust I (``Trust'') and John 
Hancock Life Insurance Company (``John Hancock'').

Filing Date: The application was filed on October 13, 2000.

Hearing or Notification of Hearing: An order granting the Application 
will be issued unless the Commission orders a hearing. Interested 
persons may request a hearing by writing to the Commission's Secretary 
and serving applicants with a copy of the request, personally or by 
mail. Hearing requests should be received by the Commission by 5:30 
p.m., on December 21, 2000, and should be accompanied by proof of 
service on Applicants, in the form of an affidavit, or, for lawyers, a 
certificate of service. Hearing requests should state the nature of the 
writer's interest, the reason for the request, and the issues 
contested. Persons who wish to be notified of a hearing may request 
notification by writing to the Commission's Secretary.

ADDRESSES: Secretary, Securities and Exchange Commission, 450 Fifth 
Street, NW., Washington, DC 20549-0609. Applicants, c/o Arnold R. 
Bergman, Esquire, P.O. Box 111, John Hancock Place, Boston, MA 02117.

FOR FURTHER INFORMATION CONTACT: Ronald A. Holinsky, Senior Counsel, or 
Lorna J. MacLeod, Branch Chief, Division of Investment Management, 
Office of Insurance Products at (202) 942-0670.

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained for a fee at the 
SEC's Public Reference Branch, 450 Fifth Street, NW., Washington, DC 
20549-0102 (tel. (202) 942-8090).

Applicants' Representations

    1. The Trust, a Massachusetts business trust, is registered under 
the 1940 Act as an open-end diversified management investment company 
and is currently comprised of 33 series (``Funds'').
    2. Two of these Funds are party to the transaction for which 
Applicants seek exemptive relief: the International Opportunities II 
Fund (the ``Acquired Fund'') and the International Opportunities Fund 
(the ``Acquiring Fund'').
    3. John Hancock serves as investment adviser to both the Acquired 
Fund and the Acquiring Fund. John Hancock is a wholly-owned subsidiary 
of John Hancock Financial Services, Inc., a publicly-owned diversified 
financial services company whose shares are traded on the New York 
Stock Exchange.
    4. T. Rowe Price International, Inc. (``T. Rowe Price'') serves as 
sub-adviser to both the Acquired Fund and the Acquiring Fund. T. Rowe 
Price uses substantially the same personnel and analytical techniques 
in managing each fund. Applicants assert that the reorganization will 
not change the Acquiring Fund's Investment strategies or the analytical 
techniques or personnel that T. Rowe Price uses to implement them. 
Prior to June 13, 2000, the Acquired Fund had been called the Global 
Equity Fund reflecting a ``global'' investment strategy and was sub-
advised by Scudder Kemper investments, Inc. The current sub-investment 
management with T. Rowe Price was approved by a vote of the Acquired 
Fund's shareholders (based on instructions received from participating 
contract owners).
    5. The shares of the Acquired Fund and the Acquiring Fund are 
currently sold exclusively to John Hancock and certain insurance 
companies affiliated with John Hancock (collectively, the ``Insurance 
Companies'') for allocation to separate accounts (the ``Separate 
Accounts'') established to fund the benefits under variable annuity 
contracts and variable life insurance policies (collectively, the 
``Contracts'') issued by these companies. The Separate Accounts are 
registered as investment companies of the unit investment trust type 
under the 1940 Act. As a result of investing ``seed money'' in the 
Acquired Fund, John Hancock beneficially owner more than 5% of the 
Acquired Fund's outstanding shares.
    6. Owners of the Contracts (``Owners'') may choose to allocate 
their Contract premiums and account values among various investment 
options, including the Acquired Fund and/or the Acquiring Fund. As a 
result, Owners may participate, indirectly, in the performance of one 
or both of the funds.
    7. Applicants assert that except for the fact that the Acquiring 
Fund is significantly larger than the Acquired Fund, the two funds are 
identical (including with respect to their investment programs, the 
identity of their investment and sub-investment adviser, their advisory 
fee schedules, and the types of other costs and expenses that they 
bear).
    8. On September 27, 2000, the Trust's board, including all of the 
trustees who are not ``interested persons,'' as defined in section 
2(a)(19) of the 1940 Act (``Independent Trustees''), unanimously 
approved a reorganization of the Acquired Fund into the Acquiring Fund 
(the ``Reorganization Agreement'' or ``Plan''). The reorganization is 
expected to occur on December 22, 2000 (the ``Closing Date''). Under 
the Plan, the Acquiring Fund will acquire substantially all of the 
assets, subject to the liabilities, of the Acquired Fund in 
consideration of the issuance by the Acquiring Fund of shares having an 
aggregate net asset value (``NAV'') equal to the aggregate NAV of the 
Acquired Fund's shares, determined as of 4:00 p.m. Eastern Time (the 
``Effective Time'') on the Closing Date. The NAV of each Fund's shares 
for these purposes

[[Page 76314]]

will be computed in the manner set forth in the Trust's Form N-1A 
registration statement as currently in effect with the Commission. The 
aforementioned Acquiring Fund shares will be issued pro-rata to the 
Acquired Fund's shareholders of record as of the Effective Time.
    9. The Trust's Board, including all of the Independent Trustees, 
determined that participation in the reorganization is in the best 
interests of the shareholders and Contract Owners participating in each 
of the Acquired and Acquiring Funds and that the interests of existing 
shareholders and Owners will not be diluted as a result of the 
reorganization. In approving the reorganization, the following factors, 
among others, were relevant to the Board: (a) That, because of 
breakpoints, combining the Acquired Fund and the Acquiring Fund will 
result in a lower effective rate of advisory fees and other expenses 
for the Acquired Fund and, to a lesser extent, for the Acquiring Fund; 
(b) that the funds' investment programs are essentially identical, 
which means that there will be no need to liquidate and reinvest any 
portfolio securities in connection with the reorganization; (c) the 
fact that John Hancock will bear all other direct or indirect costs and 
expenses associated with the reorganization; (d) the tax-free nature of 
the reorganization; and (e) that the reorganization presents no 
foreseeable disadvantages to either fund or to any Owner.
    10. The Plan is subject to a number of conditions precedent, 
including that the reorganization will have been approved by the vote 
of shareholders of the Acquired Fund. In connection with that vote, the 
Insurance Companies have solicited instructions from Owners as to how 
to vote the Acquired Fund's outstanding shares. This solicitation will 
be made pursuant to a Form N-14 registration statement that the Trust 
filed with the Commission on October 10, 2000. Applicants assert that 
shares of the Acquired Fund for which no instructions are received in 
time to be voted will be represented by the Insurance Companies at the 
meeting and voted in the same proportion as shares for which 
instructions have been received in time to be voted. Applicants further 
assert that Acquired Fund shares not attributable to policies or 
contracts represented by Insurance Companies, including shares held by 
John Hancock reflecting ``seed money,'' will be voted in the same 
proportion as shares for which instructions have been received in time 
to be voted.
    11. The Plan may be terminated at any time by mutual agreement 
between the Trust and John Hancock. Applicants have agreed to the 
relief they are requesting being conditioned on their obtaining prior 
approval from the Commission of any material change in the Plan.

Applicants' Legal Analysis

    1. Section 17(a) of the 1940 Act generally prohibits an affiliated 
person of a registered investment company, or an affiliated person of 
such a person, acting as principal, from selling any security to, or 
purchasing any security from the company. Section 2(a)(3) of the 1940 
Act defines an ``affiliated person'' of another person to include: (a) 
Any person directly or indirectly owning, controlling, or holding with 
power to vote 5% or more of the outstanding voting securities of the 
other person; (b) any person 5% of more of whose securities are 
directly or indirectly owned, controlled, or held with power to vote by 
the other person; (c) any person directly or indirectly controlling, 
controlled by, or under common control with the other person; and (d) 
if the other person is an investment company, any investment adviser of 
that company. Applicants state that the Acquired Fund and the Acquiring 
Fund may be deemed affiliated persons and, thus, absent an exemption, 
the reorganization may be prohibited by Section 17(a).
    2. Rule 17a-8 under the 1940 Act exempts from the prohibitions of 
Section 17(a) mergers, consolidations, or purchases or sales of 
substantially all of the assets of registered investment companies that 
are affiliated persons, or affiliated persons of an affiliated person, 
solely by reason of having a common investment adviser, common 
directors, and/or common officers, provided that certain conditions set 
forth in the rules are satisfied.
    3. Applicants believe that rule 17a-8 may be unavailable in 
connection with the reorganization because the funds may be deemed to 
be affiliated for reasons other than those set forth in the rule. In 
particular, John Hancock may be an affiliated person of the Acquired 
Fund, because Acquired Fund shares held by John Hancock and reflecting 
``seed money'' that John Hancock has maintained in the Acquired Fund 
constitute more than 5% of the Acquired Fund's outstanding shares.
    4. Section 17(b) of the 1940 Act provides that the Commission may 
exempt a transaction from the provisions of Section 17(a) if the 
evidence establishes that the terms of the proposed transaction, 
including the consideration to be paid, are reasonable and fair and do 
not involve overreaching on the part of any person concerned, and that 
the proposed transaction is consistent with the policy of each 
registered investment company concerned and with the general purposes 
of the 1940 Act.
    5. Applicants request an order under Section 17(b) of the 1940 Act 
exempting them from Section 17(a) of the 1940 Act to the extent 
necessary to permit applicants to consummate the reorganization. 
Applicants submit that the reorganization satisfies the standards of 
Section 17(b) of the 1940 Act. Applicants assert that the proposed 
reorganization will not in any way affect the price or value of 
outstanding shares of the Acquired Fund or the Acquiring Fund, nor will 
it in any way affect the Contract values or interests of Owners. 
Applicants assert that John Hancock will pay all costs and expenses 
directly or indirectly associated with the reorganization. Applicants 
further assert that the investment programs and fundamental investment 
policies of the Acquired Fund and the Acquiring Fund are identical in 
all material respects. Finally, Applicants note that investors in the 
Acquired Fund will have the opportunity to approve or disapprove the 
reorganization.
    6. Applicants believe that such relief is warranted because of (a) 
the advantages of the reorganization to the Acquired Fund and, to a 
lesser extent, the Acquiring Fund and, by extension, to the 
shareholders of and Contract Owners participating in those Funds, 
coupled with (b) the absence of any foreseeable disadvantages that the 
reorganization might have for any of them.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-31023 Filed 12-5-00; 8:45 am]
BILLING CODE 8010-01-M