[Federal Register Volume 68, Number 129 (Monday, July 7, 2003)]
[Notices]
[Pages 40312-40313]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-17052]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 26091; 812-12919]


John Hancock Variable Series Trust I and John Hancock Life 
Insurance Company; Notice of Application

June 30, 2003.
AGENCY: Securities and Exchange Commission (``SEC'' or ``Commission'').

ACTION: Notice of an application for an order under section 6(c) of the 
Investment Company Act of 1940 (the ``Act'') for an exemption from 
section 15(a) of the Act and rule 18f-2 under the Act.

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Summary of the Application: John Hancock Variable Series Trust I (the 
``Trust'') and John Hancock Life Insurance Company (``John Hancock'') 
(together, ``Applicants'') request an order (the ``Order'') that would 
permit them to enter into and materially amend subadvisory agreements 
without shareholder approval.

Filing Dates: The application was filed on January 17, 2003, and June 
30, 2003.

Hearing or Notification of Hearing: An order granting the application 
will be issued unless the SEC orders a hearing. Interested persons may 
request a hearing by writing to the SEC's Secretary and serving 
Applicants with a copy of the request, personally or by mail. Hearing 
requests should be received by the SEC by 5:30 p.m. on July 25, 2003, 
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 may request 
notification of a hearing by writing to the SEC's Secretary.

ADDRESSES: Secretary, SEC, 450 5th Street, NW., Washington, DC 20549-
0609. Applicants, John Hancock Place, P.O. Box 111, Boston, MA 02117.

FOR FURTHER INFORMATION CONTACT: Christine Y. Greenlees, Senior 
Counsel, at (202) 942-0581, or Mary Kay Frech, Branch Chief, at (202) 
942-0564 (Division of Investment Management, Office of Investment 
Company Regulation).

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 5th Street, NW, Washington, DC 
20549-0102 (telephone (202) 942-8090).

Applicants' Representations

    1. The Trust, a Massachusetts business trust, is registered under 
the Act as an open-end management investment company. The Trust 
currently is comprised of 27 series (the ``Existing Funds''), each with 
its own investment objectives and policies.\1\ The Existing Funds 
currently serve as the investment medium for variable annuity and 
variable life insurance contracts issued by John Hancock and John 
Hancock Variable Life Insurance Company.
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    \1\ Applicants also request relief with respect to: (a) Each 
existing and future series of the Trust and each existing and future 
series (together with the Existing Funds, the ``Subadvised Funds'') 
of any other existing or future registered open-end management 
investment company that (i) is advised by John Hancock or any entity 
controlling, controlled by, or under common control with John 
Hancock; (ii) uses the manager of managers arrangement described in 
the application; and (iii) complies with the terms and conditions in 
the application; and (b) any entity controlling, controlled by, or 
under common control with John Hancock that is an investment adviser 
of a Subadvised Fund and is registered as an investment adviser 
under the Advisers Act or exempt from such registration. The Trust 
is the only registered investment company that currently intends to 
rely on the requested order. If the name of any Subadvised Fund 
contains the name of a Sub-Adviser (as defined below), the Hancock 
name (or, if different, the name of the entity controlling, 
controlled by, or under common control with John Hancock that serves 
as the primary adviser to such Fund) will precede the name of the 
Sub-Adviser.
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    2. John Hancock is registered under the Investment Advisers Act of 
1940 (the ``Advisers Act'') and serves as the investment adviser to the 
Existing Funds. John Hancock, a stock life insurance company and 
publicly-held financial services company, is a subsidiary of John 
Hancock Financial Services, Inc., a publicly-traded holding company.
    3. The Trust has entered into several investment advisory 
agreements with John Hancock (``Advisory Agreements'') that were 
approved by the board of trustees (the ``Board''), including a majority 
of the trustees who are not ``interested persons,'' as defined in 
section 2(a)(19) of the Act (``Independent Trustees''), and the Owners 
of each Existing Fund.\2\ Under the terms of the Advisory Agreements, 
John Hancock provides investment management services for each Existing 
Fund and may hire one or more sub-advisers (``Sub-Advisers'') to 
exercise day-to-day investment discretion over all or a portion of the 
assets of the Existing Funds pursuant to separate investment sub-
advisory agreements (``Sub-Advisory Agreements''). Each current Sub-
Advisers is, and any future Sub-Adviser will be registered under the 
Advisers Act or exempt from such registration. Sub-Advisers are 
recommended to the Board by John Hancock and selected and approved by 
the Board, including a majority of the Independent Trustees. The Sub-
Advisers' fees will be paid out of the advisory fees that the 
Subadvised Funds pay to John Hancock.
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    \2\ The term ``Owner'' includes variable annuity and variable 
life contract holders that participate in any insurance company 
separate account for which a Subadvised Fund's shares serve as a 
funding medium, as well as the holders of any other shares that the 
Subadvised Fund has outstanding.
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    4. Subject to Board review, John Hancock selects Sub-Advisers for 
the Subadvised Funds, monitors and evaluates Sub-Adviser performance, 
and oversees Sub-Adviser compliance with the Subadvised Funds' 
investment objectives, policies, and restrictions. John Hancock 
recommends Sub-Advisers based upon a number of factors used to evaluate 
their skills in managing assets pursuant to particular investment 
objectives. John Hancock also recommends to the Board whether a 
Subadvisory Agreement should be renewed, modified or terminated.
    5. Applicants request relief to permit John Hancock, subject to 
Board approval, and the Trust, on behalf of its series, to enter into 
and materially amend Sub-Advisory Agreements without approval by the 
vote of a majority of the outstanding voting securities (as defined in 
section 2(a)(42) of the Act) of each such series. The requested relief 
will not extend to a Sub-Adviser that is an affiliated person,

[[Page 40313]]

as defined in section 2(a)(3) of the Act, of a Subadvised Fund or of 
John Hancock, other than by reason of serving as a Sub-Adviser to one 
or more of the Subadvised Funds (an ``Affiliated Sub-Adviser'').

Applicants' Legal Analysis

    1. Section 15(a) of the Act provides, in relevant part, that it is 
unlawful for any person to act as an investment adviser to a registered 
investment company except pursuant to a written contract that has been 
approved by the vote of a majority of the company's outstanding voting 
securities. Rule 18f-2 under the Act provides that each series or class 
of stock in a series company affected by a matter must approve the 
matter if the Act requires shareholder approval.
    2. Section 6(c) of the Act provides that the Commission may exempt 
any person, security, or transaction or any class or classes of 
persons, securities, or transactions from any provision of the Act, or 
from any rule thereunder, if such exemption is necessary or appropriate 
in the public interest and consistent with the protection of investors 
and the purposes fairly intended by the policy and provisions of the 
Act. Applicants believe that the requested relief meets this standard 
for the reasons discussed below.
    3. The investment structure of the Portfolios is different from 
that of traditional investment companies. Applicants assert that 
investors are relying on John Hancock's experience to select one or 
more Sub-Advisers best suited to achieve a Subadvised Fund's desired 
investment objectives. Applicants assert that, from the perspective of 
the investor, the role of the Sub-Advisers is comparable to that of 
individual portfolio managers employed by other investment advisory 
firms. Applicants contend that requiring shareholder approval of the 
Sub-Advisory Agreements would impose unnecessary costs and delays on 
the Subadvised Funds, and may preclude John Hancock from acting 
promptly in a manner considered advisable by the Board. Applicants note 
that the Advisory Agreements will remain subject to the Owner approval 
requirements of section 15(a) of the Act and rule 18f-2 under the Act.

Applicants' Conditions

    Applicants agree that any Order granting the requested relief will 
be subject to the following conditions:
    1. Before a Subadvised Fund may rely on the requested Order, the 
operation of the Subadvised Fund in the manner described in the 
application will be approved by a majority of the Subadvised Fund's 
outstanding voting securities, as defined in the Act, or, in the case 
of a Subadvised Fund whose Owners purchase shares on the basis of a 
prospectus containing the disclosure contemplated by condition 2 below, 
by the sole initial shareholder prior to offering shares of the 
Subadvised Fund to the public.
    2. Each Subadvised Fund will disclose in its prospectus the 
existence, substance, and effect of the Order. In addition, each 
Subadvised Fund relying on the Order will hold itself out to the public 
as employing the manager of managers arrangement described in the 
application. The prospectus relating to the Subadvised Fund will 
prominently disclose that John Hancock has ultimate responsibility 
(subject to oversight by the Board) to oversee Sub-Advisers and to 
recommend their hiring, termination and replacement.
    3. Before relying on the Order, each Subadvised Fund that sought 
its Owners' approval to operate in the manner described in the 
application prior to the date of the Order, and subsequently sold 
shares based on a prospectus that did not contain the disclosure 
described in condition 2 above, will provide its Owners with at least 
30 days prior written notice of (a) the substance and effect of the 
Order and (b) the fact that the Subadvised Fund intends to employ the 
manager of managers arrangement described in the application.
    4. Within 90 days of the hiring of a new Sub-Adviser, John Hancock 
will furnish Owners of the applicable Subadvised Fund all information 
about the new Sub-Adviser that would be included in a proxy statement. 
To meet this condition, John Hancock will provide Owners of the 
applicable Subadvised Fund with an information statement meeting the 
requirements of Regulation 14C, Schedule 14C, and Item 22 of Schedule 
14A under the Securities Exchange Act of 1934.
    5. John Hancock will not enter into a Sub-Advisory Agreement with 
any Affiliated Sub-Adviser without such agreement, including the 
compensation to be paid thereunder, being approved by the Owners of the 
relevant Subadvised Fund.
    6. At all times, a majority of the Board will be Independent 
Trustees, and the nomination of new or additional Independent Trustees 
will be placed within the discretion of the then-existing Independent 
Trustees.
    7. When a change of Sub-Adviser is proposed for a Subadvised Fund 
with an Affiliated Sub-Adviser, the Board, including a majority of the 
Independent Trustees, will make a separate finding, reflected in the 
Board minutes, that such change is in the best interests of the 
Subadvised Fund and its Owners and does not involve a conflict of 
interest from which John Hancock or an Affiliated Sub-Adviser derives 
an inappropriate advantage.
    8. John Hancock will provide management and certain administrative 
services to each Subadvised Fund relying on the Order, including 
overall supervisory responsibility for the general management and 
investment of the Subadvised Fund's assets, and, subject to review and 
approval by the Board, will: (i) Set the Subadvised Fund's overall 
investment strategies; (ii) evaluate, select, and recommend Sub-
Advisers to manage all or a part of the Subadvised Fund's assets; (iii) 
when appropriate, allocate and reallocate a Sub-Advised Fund's assets 
among multiple Sub-Advisers; (iv) monitor and evaluate the Sub-
Advisers' investment performance; and (v) implement procedures 
reasonably designed to ensure that the Sub-Advisers comply with the 
Subadvised Fund's investment objectives, policies, and restrictions.
    9. No trustee or officer of the Trust, or director or officer of 
John Hancock will own directly or indirectly (other than through a 
pooled investment vehicle over which such person does not have control) 
any interest in a Sub-Adviser except for: (i) Ownership of interests in 
John Hancock or any entity that controls, is controlled by, or is under 
common control with John Hancock; or (ii) ownership of less than 1% of 
the outstanding securities of any class of equity or debt of any other 
publicly traded company that is either a Sub-Adviser or an entity that 
controls, is controlled by, or is under common control with a Sub-
Adviser.

    For the Commission, by the Division of Investment Management, 
under delegated authority.

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-17052 Filed 7-3-03; 8:45 am]
BILLING CODE 8010-01-P