<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14A-
6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
John Hancock Variable Series Trust I
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
JOHN HANCOCK VARIABLE SERIES TRUST I
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
A special meeting of shareholders of the John Hancock Variable Series Trust
I (the "Fund" or "Series Trust") will take place at 11:00 A.M., on Friday,
April 23, 1999. The meeting will be held at the offices of John Hancock
Variable Life Insurance Company ("JHVLICO"), 197 Clarendon Street, Boston,
Massachusetts 02117 (telephone 1-800-732-5543). At the meeting, the
shareholders will consider:
1. A proposal to elect six Trustees to the Board of Trustees.
2. A proposal to change the status of the investment objectives and
policies of the Growth & Income, Large Cap Growth, Real Estate Equity,
and Sovereign Bond Portfolios so that a shareholder vote will generally
not be required to make future changes in such investment objectives
and policies.
3. A proposal to permit the Managed, Growth & Income, Large Cap Growth,
Real Estate Equity, Sovereign Bond, and Money Market Portfolios to
engage in securities lending.
4. A proposal to change the investment restrictions of the Diversified Mid
Cap Growth and Short-Term Bond Portfolios with respect to illiquid
securities.
5. A proposal to (i) change the methodology for allocating certain of the
non-advisory expenses of the Series Trust among the Series Trust
Portfolios and (ii) reduce the "expense cap" in each of the Investment
Management Agreements between John Hancock and the Series Trust.
In addition, any other matters relating the conduct of the meeting may also
be transacted at the meeting.
<PAGE>
An owner of a variable life insurance policy or a variable annuity contract
will be entitled to vote only if he/she had policy assets invested in the Fund
at the close of business on February 26, 1999. John Hancock is soliciting
votes from owners invested in the following Portfolios with respect to matters
affecting those Portfolios:
<TABLE>
<CAPTION>
Proposals
-------------------
Portfolio 1. 2. 3. 4. 5.
--------- --- --- --- --- ---
<S> <C> <C> <C> <C> <C>
Managed.................................................... X X X
Growth & Income............................................ X X X X
Equity Index............................................... X X
Large Cap Value............................................ X X
Large Cap Growth........................................... X X X X
Mid Cap Value.............................................. X X
Mid Cap Growth............................................. X X
Diversified Mid Cap Growth................................. X X X
Real Estate Equity......................................... X X X X
Small/Mid Cap CORE......................................... X X
Small Cap Value............................................ X X
Small Cap Growth........................................... X X
Global Equity.............................................. X X
International Balanced..................................... X X
International Equity Index................................. X X
International Opportunities................................ X X
Emerging Market Equities................................... X X
Short-Term Bond............................................ X X X
Bond Index................................................. X X
Sovereign Bond............................................. X X X X
Strategic Bond............................................. X X
High Yield Bond............................................ X X
Money Market............................................... X X X
</TABLE>
Thomas J. Lee
Vice Chairman Board of Trustees
Boston, Massachusetts
March 19, 1999
WE HAVE ENCLOSED A VOTING INSTRUCTION FORM FOR EACH PORTFOLIO YOU ARE USING.
PLEASE COMPLETE AND RETURN ALL ENCLOSED VOTING INSTRUCTION FORM(S), EVEN IF
YOU EXPECT TO BE PRESENT AT THE MEETING. YOU MAY STILL VOTE IN PERSON IF YOU
ATTEND THE MEETING.
<PAGE>
PROXY STATEMENT
GENERAL
The management of the Fund is soliciting voting instructions from the
shareholders of all of its Portfolios for use at the special meeting on April
23, 1999. The solicitation includes all shares of the Fund attributable to
owners' assets in John Hancock Variable Life Accounts U, V, and S; John
Hancock Variable Annuity Accounts U, V, and I; and John Hancock Mutual
Variable Life Insurance Account UV (the "Accounts"). This proxy statement is
being furnished in connection with the solicitation.
The Fund will bear the cost of (1) printing and mailing this notice, proxy
statement, and accompanying voting instructions form and (2) tabulating the
votes. In addition to solicitations by mail, a number of regular employees of
John Hancock may solicit voting instructions in person or by telephone. Such
employees will receive no compensation for such services. The management of
the Fund first mailed solicitation materials to owners on March 19, 1999.
You may obtain, free of charge, a copy of the Series Trust's 1998 annual
report and a copy of its current prospectus. Requests for the copies should be
made to Fund at the address or toll-free telephone number shown in the notice
attached at the front of this proxy statement.
Voting Instructions
Although JHVLICO and John Hancock, through the Accounts, legally own all of
the Series Trust's shares, JHVLICO and John Hancock will vote all such shares
in accordance with the voting instructions given by the owners of variable
life insurance policies and variable annuity contracts (collectively referred
to as "contracts").
Any authorized voting instructions will be valid for any adjournment of the
special meeting. Only the owner executing the voting instructions can revoke
them. If the management of the Fund receives an insufficient number of votes
to approve the proposal, the special meeting may be adjourned to permit the
solicitation of additional votes. Those persons named as proxies in the voting
instructions have the discretion to vote for any such adjournment. The
approval of the proposal depends upon whether a sufficient number of votes are
cast for the proposal. Accordingly, an instruction to abstain from voting on
any proposal has the same practical effect as an instruction to vote against
that proposal.
Any person giving voting instructions may revoke them at any time prior to
exercising them by submitting, to the Series Trust, a superseding voting
instruction form or written notice of revocation. In addition, an owner
present at the special meeting my withdraw his/her voting instruction form and
vote in person. Mere
1
<PAGE>
attendance at the special meeting will not revoke the voting instructions.
JHVLICO and John Hancock will vote the Portfolio shares in accordance with all
properly executed and unrevoked voting instructions received in time for the
special meeting.
JHVLICO and John Hancock will vote the portfolio shares held in their
respective Accounts on a Portfolio-by-Portfolio basis. Portfolio shares that
are attributable to contracts will be voted by JHVLICO and John Hancock in
accordance with the voting instructions received from the owners participating
in that Portfolio. Portfolio shares which are not attributable to contracts or
for which no timely voting instructions are received will be voted by JHVLICO
or John Hancock in the same proportion as the voting instructions which are
received from all owners invested in the Portfolio through that Account.
Portfolio shares which are not attributable to contracts include shares
purchased with contributions made as "seed money" to the Portfolio by JHVLICO
or John Hancock.
Please refer to Appendix A to this proxy statement if you would like
additional information about the number of Portfolio shares attributable to
JHVLICO or John Hancock (rather than to owners).
Majority Voting
For the shareholders to approve any of the proposal in this proxy statement,
the proposal must receive the favorable vote of a majority of the outstanding
shares of that Portfolio. When used in this proxy statement, "a majority of
the outstanding voting shares" means either:
(1) the affirmative vote of more than 50% of the outstanding shares; or
(2) if less than 50% of the outstanding shares is present or represented
at the special meeting, then 67% or more of those shares actually present
or represented.
2
<PAGE>
PROPOSAL 1
ELECTION OF BOARD OF TRUSTEES
The persons named in the accompanying voting instruction form intend to
vote, at the special meeting, to elect the persons named below as members of
the Board of Trustees. If elected, these persons will serve until their
successors are elected and qualified. The Trustees have served as such since
the dates indicated below. Three of the six Trustees--William H. Dykstra,
Elizabeth G. Cook, and Thomas J. Lee--were last elected by a majority of the
owners of all then-current Fund Portfolios in April of 1995. Since that date,
the Board of Trustees has recommended three new Trustees--Michele G. Van Leer,
Diane C. Kessler, and Robert Verdonck--to fill vacancies on the Board of
Trustees occasioned by the resignations of three Trustees. With a proper
instruction to the persons named on the voting instructions form, an owner may
withhold his/her vote for one or more of the Trustees running for election.
Election of each Trustee to the Board of Trustees will require the vote of
more than 50% of the outstanding shares of all the Portfolios represented at
this special meeting.
THE BOARD OF TRUSTEES OF THE FUND RECOMMENDS THAT OWNERS GIVE INSTRUCTIONS
TO VOTE FOR THE ELECTION OF THE BELOW-NAMED TRUSTEES.
Information About the Trustees
The following table sets forth the position of each Trustee and his or her
principal occupation or employment during the last five years.
<TABLE>
<CAPTION>
Name and Position First Became
With the Board Principal Occupation a Member
----------------- -------------------- ------------
<S> <C> <C>
MICHELE G. Senior Vice President, September 16, 1998
VAN LEER Product and Market
Chairman and Member Management, John Hancock
Mutual Life Insurance
Company. Director, John
Hancock Variable Life
Insurance Company. Age 40.
THOMAS J. LEE Vice President, Life and February 8, 1994
Vice Chairman and Member Annuity Services, John
Hancock Mutual Life
Insurance Company.
Director, John Hancock
Variable Life Insurance
Company. Age 45.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Name and Position First Became
With the Board Principal Occupation a Member
----------------- -------------------- ------------
<S> <C> <C>
WILLIAM H. DYKSTRA Certified Public Accountant. May 17, 1979
Member Director and Member of the
Executive Committee, East
Boston Savings Bank.
Director, Arrow Mutual
Liability Company.
Director, Chase
Corporation. Age 70.
ELIZABETH G. COOK Former Executive Director, April 13, 1993
Member The Advertising Club of
Greater Boston. Age 62
DIANE C. KESSLER Executive Director, April 9, 1999
Member Massachusetts Council of
Churches. Age 50.
ROBERT VERDONCK President and CEO, East April 9, 1999
Member Boston Savings Bank. Age
53.
</TABLE>
Portfolio shares attributable to Trustees owning variable life insurance
policies and variable annuity contracts did not, in the aggregate, constitute
more than 1% of the outstanding shares of any Portfolio as of February 26,
1999.
The Board has two standing committees: the nominating committee and the
audit committee. The nominating committee was formed to draft criteria for the
selection of nominees to the Board, research possible Trustee candidates, and
to recommend candidates to the full Board for nomination. Currently, Mses.
Cook and Van Leer and Messrs. Dykstra and Lee serve as members of the
nominating committee.
The purpose of the audit committee is, among other things, to recommend
annually to the Board the selection of independent accountants to audit the
books and records of the Series Trust; to monitor the performance of such
accountants; to review each audit and determine if any additional audit is
needed, to review all fees paid to the independent accountants; to recommend
to the Trustees a resolution of any potential or actual conflict of interest;
and to facilitate communications between the independent accountants and the
Series Trust's officers and Trustees. Currently, Ms. Cook and Mr. Dykstra
serve as members of the audit committee.
Four meetings of the Board of Trustees were held during the last fiscal
year. Mr. Dykstra, Mr. Lee, and Ms. Cook attend all four meetings. Two audit
committee meeting and two nominating committee meetings were held during the
last fiscal year. All members of those committees attended those meetings.
Ms. Van Leer and Mr. Lee are "interested persons" as defined in the
Investment Company Act of 1940 by reason of their relationship with John
Hancock.
4
<PAGE>
John Hancock and JHVLICO compensate the officers of the Series Trust.
Trustees affiliated with John Hancock (Ms. Van Leer and Mr. Lee) serve without
compensation. All other Trustees are compensated by the Series Trust. For the
last fiscal year, the unaffiliated Trustees receive the following
compensation:
<TABLE>
<CAPTION>
Pension or Total
Retirement Compensation
Benefits Estimated from Registrant
Aggregate Accrued as Annual and Fund
Compensation Part of Fund Benefits Upon Complex Paid to
Name of Trustee from Registrant Expenses Retirement Directors
--------------- --------------- ------------ ------------- ---------------
<S> <C> <C> <C> <C>
WILLIAM DYKSTRA, Trustee $24,000 N/A N/A $24,000
ELIZABETH G. COOK,
Trustee $24,000 N/A N/A $24,000
</TABLE>
5
<PAGE>
PROPOSAL 2
APPROVAL TO MAKE NON-FUNDAMENTAL THE
INVESTMENT OBJECTIVES AND POLICIES OF
THE GROWTH & INCOME, LARGE CAP GROWTH,
REAL ESTATE EQUITY, AND SOVEREIGN BOND PORTFOLIOS
The Trustees have unanimously approved a proposal to make "non-fundamental"
the investment objectives and certain investment policies of the Growth &
Income, Large Cap Growth, Real Estate Equity, and Sovereign Bond Portfolios.
This means that future changes in these objectives and policies could be made
without the approval of owners who participate in these four Portfolios.
For a complete description of the current investment objective and policies
of each of these Portfolios, please consult the Fund's prospectus under the
caption "Investment Objectives and Policies." (If you wish to obtain a copy of
the Fund's current prospectus, free of charge, please direct your request to
the Fund at the address or telephone number given in the Notice of Special
Meeting at the beginning of this proxy statement.)
Neither John Hancock or the sub-investment managers of any of these
Portfolios is currently planning any such change. However, if such a change
were made, shareholders would not have a legal right to approve or disapprove
of it.
Reasons for Proposed Change
The investment objectives and policies for these Portfolios are currently
classified as "fundamental." A fundamental investment objective or policy may
be changed only by a vote of the Portfolio's owners. Under the Investment
Company Act of 1940, however, a Portfolio's investment objective and policies
are not required to be classified as fundamental.
The Trustees have approved the reclassification from fundamental to non-
fundamental of the investment objectives and policies of these Portfolios to
provide the Portfolios' sub-investment managers with enhanced investment
flexibility to respond to market, industry, or regulatory changes. A
Portfolio's non-fundamental investment objective or policy may be changed at
any time without the approval of the Portfolio's owners.
In former years, it was common practice for a mutual fund's investment
objectives and policies to be made "fundamental" even though they were not
required to be. This practice has grown increasingly inconvenient, however, as
the pace of innovation in the investment markets has accelerated. Accordingly,
the trend in the mutual fund industry has increasingly been to keep to a
minimum the number of investment objectives and policies that are designed as
fundamental.
6
<PAGE>
Indeed, that is the approach that has been followed with the Series Trust's
own more recently-created Portfolios.
Furthermore, as new Portfolios have been added to the Fund in recent years
it has been desirable to adjust the investment objectives and policies of some
of the older Portfolios in an effort to preserve the best overall "mix" of
investment options. Moreover, when a change is made that requires owner
approval, the Fund normally pays the cost of seeking such approval. Therefore,
to the extent that this Proposal 2 obviates the need for some such future
approvals, owners will reap the benefit of the cost savings.
Last year, a proposal identical to this Proposal 2 was approved by owners
participating in the Series Trust's Managed, Diversified Mid Cap Growth
(formerly, Special Opportunities), Short-Term Bond (formerly, Short-Term U.S.
Government), and International Equity Index (formerly, International Equities)
Portfolios.
Trustees' Recommendation
The Board of Trustees has determined that the proposal to make non-
fundamental the investment objectives and policies of the Growth & Income,
Large Cap Growth, Real Estate Equity, and Sovereign Bond Portfolios is in the
best interests of the Fund and the owners of those Portfolios.
THE BOARD OF TRUSTEES OF THE FUND RECOMMENDS THAT OWNERS OF THE GROWTH &
INCOME, LARGE CAP GROWTH, REAL ESTATE EQUITY, AND SOVEREIGN BOND PORTFOLIOS
GIVE INSTRUCTIONS TO VOTE FOR THE APPROVAL OF THIS PROPOSAL 2.
7
<PAGE>
PROPOSAL 3
APPROVAL TO PERMIT THE MANAGED, GROWTH & INCOME,
LARGE CAP GROWTH, REAL ESTATE EQUITY,
SOVEREIGN BOND, AND MONEY MARKET PORTFOLIOS
TO ENGAGE IN SECURITIES LENDING.
The current fundamental investment restrictions of the Fund contain a
general prohibition against the making of loans by any Portfolio. All of the
Portfolios other than the six listed above, however, are subject to an
exception from that prohibition that permits them to lend their portfolio
securities, in an amount not to exceed 33 1/3% of the respective Portfolio's
total assets. The purpose of this Proposal 3 is to extend that exception to
these six Portfolios as well.
Reasons for Proposed Change
Lending securities is a common portfolio management practice whose purpose
is to earn additional income from the ownership of the securities, by lending
them for temporary purposes to others. Such loans are used, for example, by
brokers in order to cover settlement failures in securities truncations. Any
such loans will be collateralized in a way that satisfies the relevant sub-
investment manager that the risk to the Portfolio is minimal. This change is
reflected in revised fundamental investment restriction (2), as follows
(deleted language in brackets; added language underscored):
"No Portfolio will:
* * *
(2) Make loans, other than through the acquisition of obligations in
which the Portfolio may invest consistent with its objective and
investment policies, except that [the Equity Index, Large Cap Value, Mid
Cap Value, Mid Cap Growth, Diversified Mid Cap Growth, Small/Mid Cap CORE,
Small Cap Value, Small Cap Growth, Global Equity, International Balanced,
International Equity Index, International Opportunities, Emerging Markets
Equity, Short-Term Bond, Bond Index, Strategic Bond, and High Yield Bond
Portfolios] each Portfolio may lend portfolio securities not having a
value in excess of 33 1/3% of the Portfolio's total assets."
A complete list of the Fund's investment restrictions is contained in the
Fund's current Statement of Additional Information ("SAI"). (If you wish to
obtain a copy of the Fund's current SAI, free of charge, please direct your
request to the Fund at the address or telephone number given in the Notice of
Special Meeting at the beginning of this proxy statement.)
8
<PAGE>
Trustees' Recommendation
The Board of Trustees has determined that the proposal to extend the ability
of the Managed, Growth & Income, Large Cap Growth, Real Estate Equity,
Sovereign Bond, and Money Market Portfolios to make loans of their portfolio
securities on the same basis as the other Portfolios is in the best interests
of the Fund and the owners of those named Portfolios.
THE BOARD OF TRUSTEES RECOMMENDS THAT THE OWNERS OF THE MANAGED, GROWTH &
INCOME, LARGE CAP GROWTH, REAL ESTATE EQUITY, SOVEREIGN BOND, AND MONEY MARKET
PORTFOLIOS GIVE INSTRUCTIONS TO VOTE FOR APPROVAL OF THIS PROPOSAL 3.
9
<PAGE>
PROPOSAL 4
APPROVAL OF CHANGES IN THE INVESTMENT RESTRICTIONS
OF THE DIVERSIFIED MID CAP GROWTH
AND SHORT-TERM BOND PORTFOLIOS
At a meeting of the Fund's Board of Trustees held on March 2, 1999, the
Trustees unanimously approved a proposal to eliminate a current restriction
that prohibits the Diversified Mid Cap Growth and Short-Term Bond Portfolios,
absent shareholders approval, from investing in repurchase agreements maturing
in more than seven days, other restricted securities, or other securities that
are not directly marketable, if the total of all such securities owned by the
Portfolio in question would exceed 10% of its assets.
The restriction, however, is a "fundamental" investment restriction. Its
elimination, therefore, requires the approval of the Portfolios' shareholders.
This Proposal 4 seeks that approval.
Reasons for the Proposal
This Proposal 4 would eliminate a current restriction that prohibits the
Diversified Mid Cap Growth and Short-Term Bond Portfolios, absent owner
approval, from investing in repurchase agreements maturing in more than seven
days, other restricted securities, or other securities that are not directly
marketable, if the total of all such securities owned by the Portfolio in
question would exceed 10% of its assets. This restriction was put in place at
a time when the SEC imposed a maximum of 10% on fund ownership of illiquid
securities. Now the SEC-imposed limit is 15%. In order to be able to adjust
more easily to such administrative changes, and to provide enhanced
flexibility, relatively few mutual funds now make their policy on illiquid
securities "fundamental." If this Proposal 4 is approved, these Portfolios,
similarly, would have no "fundamental" policy about illiquid investments and
therefore could change their practices in this regard from time to time
without a vote of owners (or any expense or delay that such a vote might
involve).
Nevertheless, in conformity with the current SEC position mentioned above,
each Portfolio intends for the foreseeable future to observe a 15% limit on
its illiquid securities, as a non-fundamental policy. Given the relative
stability of owners' allocations to the Fund's Portfolios, John Hancock does
not believe that increasing the maximum amount of illiquid securities from 10%
to 15% is likely to have any adverse impact on either Portfolio's ability to
meet redemption requests on a timely basis. Moreover, increasing the limit
could in at least some, perhaps unlikely, circumstances reduce transaction
costs that otherwise might arise from the need to dispose of illiquid
securities.
10
<PAGE>
Trustees' Recommendation
The Board of Trustees has determined that the proposed changes to the
investment restrictions are in the best interests of the Fund and the owners
of the Diversified Mid Cap Growth and Short-Term Bond Portfolios.
THE BOARD OF TRUSTEES RECOMMENDS THAT THE OWNERS OF THE DIVERSIFIED MID CAP
GROWTH AND SHORT-TERM BOND PORTFOLIOS GIVE INSTRUCTIONS TO VOTE FOR APPROVAL
OF THIS PROPOSAL 4.
11
<PAGE>
PROPOSAL 5
APPROVAL OF CHANGES IN METHODOLOGY FOR ALLOCATING
EXPENSES AND REDUCTION OF EXPENSE CAP
At a meeting of the Fund's Board of Trustees held on March 8, 1999, the
Trustees unanimously approved, and voted to recommend that the owners approve,
a proposal to
(i) change the methodology for allocating certain of the non-advisory
expenses of the Fund among the Fund Portfolios as set forth below and
(ii) reduce the level above which John Hancock will reimburse the
Portfolios for annual non-advisory expenses (the "expense cap") in each of
the five current investment management agreements ("Management
Agreements") between John Hancock and the Fund.
The following Management Agreements were last approved by the owners on
April 14, 1997:
(1) the Management Agreement, dated April 12, 1988, relating to the
Growth & Income, Sovereign Bond, Money Market, Large Cap Growth, and
Managed Portfolio;
(2) the Management Agreement, dated April 12, 1988, relating to the Real
Estate Equity Portfolio;
(3) the Management Agreement, dated April 15, 1994, relating to the
Short-Term Bond and Diversified Mid Cap Growth Portfolios; and
(4) the Management Agreement, dated April 15, 1996, relating to the
Equity Index, Large Cap Value, Mid Cap Growth, Mid Cap Value, Small Cap
Growth, Small Cap Value, Strategic Bond, International Opportunities, and
International Balanced Portfolios.
This approval was obtained because of a reallocation to the Fund of certain
expenses relating to the administration and operation of the Fund.
The Management Agreement, dated April 12, 1988, relating to the
International Equity Index Portfolio was last approved by owners on April 27,
1998. This approval was obtained to change the Portfolio's investment program.
The Management Agreement, dated April 14, 1998, relating to the Small/Mid
Cap CORE, High Yield Bond, Bond Index, Global Equity, and Emerging Markets
Equity Portfolios was last approved by owners in May, 1998. This was the
initial approval of that Management Agreement.
A copy of the form of Management Agreement is included as Appendix B to this
proxy statement. A table of fees paid to John Hancock under the current
12
<PAGE>
Management Agreements is included as Appendix C to this statement. Additional
information concerning John Hancock and the Management Agreements is set forth
in Appendix D to this proxy statement.
Reallocation of Non-advisory Fund Expenses
Section 3 of all of the above-cited Management Agreements pertains
specifically to the allocation of expenses incurred in connection with those
Management Agreements. The expenses allocated to the Fund include, among other
things, the following:
(1) the charges and expenses of any custodian or depository appointed by
the Fund (i) for the safekeeping of its cash, portfolio securities and
other property, (ii) for providing accounting and valuation services, and
(iii) for monitoring compliance with federal laws and regulations;
(2) the charges and expenses of the Fund's independent auditors;
(3) the cost of the Fund's fidelity bond;
(4) the expenses in preparing, printing and distributing voting
instruction information statements (commonly referred to as "proxy
statements") and in tabulating proxy votes;
(5) the expenses in printing and distributing annual and semi-annual
reports of the Fund to owners;
(6) the fees and expenses involved in registering and maintaining
registrations of the Fund and its shares with the SEC (i.e., the printing
and filing, but not printing in bulk, of the Fund prospectuses); and
(7) the fees and costs for legal services provided to or on behalf of
the Fund by John Hancock lawyers and outside counsel incurred in the
conduct of the business and affairs of the Fund (including the development
of such things as prospectuses, proxy statements, Fund resolutions and
Fund procedures).
The above items constitute the bulk of non-advisory expenses allocable to
the Fund. This Proposal 5 relates to how these non-advisory Fund expenses are
allocated by the Fund among the various Fund Portfolios.
The allocation of Fund expenses must be made in accordance with the terms of
the Fund's Declaration of Trust. Subsection 3.3(a)(2) of the Declaration of
Trust contains the following relevant statements: "The assets belonging to
each particular Portfolio shall be charged with the liabilities of the [Fund]
with respect to that Portfolio and all expenses, costs, charges, and reserves
attributable to that Portfolio. Any general liabilities, expenses, costs,
charges, or reserves of the [Fund] which are not readily identifiable as
belonging to any particular Portfolio shall be allocated by the Trustees to
any one or more of the Portfolios established by the
13
<PAGE>
Trustees." (Emphasis added.) In short, if an expense is not "readily
identifiable" to a particular Portfolio, the Trustees are free to allocate
that expense among the Portfolios on any basis that, in their reasonable
judgement, appears fair and equitable.
Appendix E to this proxy statement is a listing of the various non-advisory
Fund expenses identified above, in some cases further subdivided into
constituent parts. Appendix E shows how each of these expense items (or sub-
items) is currently allocated to the Portfolios and how those expenses would
be allocated in the future, if this proposal is approved. In most cases, as
shown in Appendix E, the allocation among the Portfolios would be made on an
asset-weighted basis rather than on the current basis (which is generally an
equal allocation across all affected Portfolios). John Hancock acknowledges
that, in order to fully implement this proposal, it will be necessary to
renegotiate the compensation arrangements with State Street Bank and Trust
Company under the Custodian Agreement and the Sub-Administration Agreement to
reflect the proposed expense allocation methodology.
Reduction in Expense Cap
Under the Management Agreements, John Hancock currently reimburses each
Portfolio for annual non-advisory expenses (excluding certain expenses such as
brokerage and taxes) that exceed 0.25% of the Portfolio's average daily net
assets. John Hancock has proposed that the Fund amend the Management
Agreements to reduce this "expense cap" to 0.10% of a Portfolio's average
daily net assets. Ordinarily, a reduction in the "expense cap" would be
expected to result in an increase in the amount of John Hancock's
reimbursement to the Fund. However, because of the proposed reallocation of
Series Trust expenses, the amount of John Hancock's reimbursement to the Fund
would actually be expected to decrease if this proposal is adopted. In 1998,
John Hancock's expense reimbursement to the Fund totaled about $1.3 million
for all Portfolios. Appendix F to this proxy statement shows the expense
reimbursement for each Portfolio in 1998 and an estimate of what that expense
reimbursement would have been had this proposal for reallocation of Fund
expenses and reduction in the expense cap been in effect in 1998.
Reasons for This Proposal
Fairness of Allocation Methodology
The rationale for the expense reallocation depends upon the type of expense
involved. For those expenses (such as printing and distribution of annual
reports and proxy statements for multiple Portfolios) that are driven by the
number of owners receiving the document in question, the Trustees have
determined that it is reasonable to allocate more of the expense to the larger
Portfolios that have more owners. Although asset size is not an exact proxy
for the number of owners, there is clearly a rough correlation. For those
expenses (such as domestic custodianship
14
<PAGE>
fees and general legal costs) that are of general utility to the Fund as a
whole, the Trustees have determined that it is reasonable to expect each
owner, regardless of Portfolio, to bear a roughly equal share of the expense
burden. This is accomplished more nearly by an asset-weighted allocation than
by the current methodology.
For those expenses that are clearly identifiable to a specific Portfolio
(i.e., transaction charges and proxy statements for a single Portfolio), the
only change in allocation methodology is with respect to legal costs for proxy
statements. Also, no change is recommended for foreign custodianship fees
because such fees are considerably higher than domestic custodianship fees and
vary widely from country to country. The Trustees have determined that it
would be inappropriate to allocate such fees to any Portfolio that did not
invest in foreign securities or to allocate such fees equally across global
and international Portfolios that differ widely in their country selections.
Benefits to Owners
Although the five largest Portfolios would incur relatively modest increases
in expenses under Proposal 5 (in each case less than 0.03%), there would be
significant decreases in the expense ratio for each of the remaining 18
Portfolios (as shown in Appendix G to this proxy statement). Such expense
reductions would allow producers and agents who sell Fund-supported variable
life insurance and variable annuity products to use higher net investment
return assumptions in product illustrations. John Hancock is convinced that
the enhanced product performance shown in those illustrations will
significantly improve the competitive position of the Fund-supported products,
thereby increasing sales of the products and generating more rapid growth in
Fund assets. More rapid growth in Fund assets will benefit the various
Portfolios because breakpoints at which management fees decrease will be
reached more rapidly. Moreover, Proposal 5 would result in less variance among
the Portfolios' expense ratios. This would benefit all owners in that it would
significantly reduce the expense cost barriers to reallocation of funds to
most of the Portfolios (while increasing that barrier only very modestly with
respect to only five Portfolios).
Trustees' Recommendation
The Board of Trustees has determined that the proposal to change the
methodology for allocating expenses and reduce the expense cap is in the best
interests of the Fund and its owners.
THE BOARD OF TRUSTEES OF THE FUND RECOMMENDS THAT OWNERS GIVE INSTRUCTIONS
TO VOTE FOR THE APPROVAL OF THIS PROPOSAL 5.
15
<PAGE>
APPENDIX A
RECORD DATE AND VOTING SHARES
As of the close of business on February 26, 1999 ("the record date"), the
following shares were outstanding:
<TABLE>
<CAPTION>
Name of Number
Portfolio of shares
- --------- ---------------
<S> <C>
Managed......................................................... 43,607,698.895
Growth & Income................................................. 92,256,685.959
Equity Index.................................................... 1,058,259.982
Large Cap Value................................................. 11,220,292.219
Large Cap Growth................................................ 1,575,409.773
Mid Cap Value................................................... 6,029,058.096
Mid Cap Growth.................................................. 2,711,738.509
Diversified Mid Cap Growth...................................... 6,802,590.110
Real Estate Equity.............................................. 9,086,469.509
Small/Mid Cap CORE.............................................. 38,756,401.220
Small Cap Value................................................. 7,755,054.444
Small Cap Growth................................................ 11,809,630.044
Global Equity................................................... 2,878,400.859
International Equity Index...................................... 571,041.460
International Balanced.......................................... 12,018,584.939
International Opportunities..................................... 188,814,985.179
Emerging Market Equities........................................ 211,296,365.619
Short-Term Bond................................................. 7,687,258.894
Bond Index...................................................... 5,742,753.904
Sovereign Bond.................................................. 5,482,435.092
Strategic Bond.................................................. 14,375,224.916
High Yield Bond................................................. 1,753,985.148
Money Market.................................................... 6,732,808.680
</TABLE>
Each Fund share is entitled to one vote, and fractional votes will be
counted.
The number of Fund shares attributable to each owner of a variable life
insurance policy ("policy") is determined by dividing, as of the record date
of the special meeting, the policy's cash (or account) value (less any
outstanding indebtedness) in the corresponding subaccount of the applicable
Account by the net asset value of one share in the corresponding Fund
Portfolio in which the assets of the subaccount are invested.
The number of Fund shares attributable to each owner of a variable annuity
contract ("contract") is determined by dividing, as of the record date of the
special meeting, the value of the accumulation shares under a contract (or for
each contract under which annuity payments have commenced, the contract
reserves) in the
16
<PAGE>
corresponding subaccount of the applicable Account by the net asset value of
one share in the corresponding Fund portfolio in which the assets of the
subaccount are invested.
As of the close of business on February 26, 1999, JHVLICO and John Hancock
had in the aggregate the following numbers of shares representing their
contributions and other amounts in the Accounts that are in excess of the
amounts attributable to policies and contracts:
<TABLE>
<CAPTION>
Percentage of
Name of Number Total Shares
Portfolio of Shares Outstanding
- --------- ------------- -------------
<S> <C> <C>
Managed............................................. 69,058.991 0.2%
Growth & Income..................................... 71,710.828 0.1%
Equity Index........................................ 1,004,847.295 95.0%
Large Cap Value..................................... 72,714.151 0.6%
Large Cap Growth.................................... 1,510,959.433 95.9%
Mid Cap Value....................................... 0.000 0.0%
Mid Cap Growth...................................... 1,068,236.689 39.4%
Diversified Mid Cap Growth.......................... 0.000 0.0%
Real Estate Equity.................................. 0.000 0.0%
Small/Mid Cap CORE.................................. 35,692.440 0.1%
Small Cap Value..................................... 0.000 0.0%
Small Cap Growth.................................... 61,108.183 0.5%
Global Equity....................................... 2,642,890.854 91.8%
International Balanced.............................. 500,000.000 87.6%
International Equity Index.......................... 98,414.787 0.8%
International Opportunities......................... 143,764.226 0.1%
Emerging Market Equities............................ 0.000 0.0%
Short-Term Bond..................................... 65,575.918 0.9%
Bond Index.......................................... 0.000 0.0%
Sovereign Bond...................................... 0.000 0.0%
Strategic Bond...................................... 0.000 0.0%
High Yield Bond..................................... 1,057,615.388 60.3%
Money Market........................................ 0.000 0.0%
</TABLE>
17
<PAGE>
APPENDIX B
FORM OF MANAGEMENT AGREEMENT
AGREEMENT made as of the day of , 19 by and between John Hancock
Variable Series Trust I, a Massachusetts business trust having a place of
business at John Hancock Place, Boston, Massachusetts 02117 (hereinafter
called the "Series") and John Hancock Mutual Life Insurance Company, a
Massachusetts corporation having its principal place of business at John
Hancock Place, Boston, Massachusetts 02117 (hereinafter called "JHMLICO").
WHEREAS, the Series is organized and engaged in business as an open-end
management investment company and is so registered under the Investment
Company Act of 1940 (the "1940 Act"); and
WHEREAS, JHMLICO is engaged in the business of rendering investment
management services and is registered as an investment adviser under the
Investment Advisers Act of 1940; and
WHEREAS, the Series is authorized to issue shares of beneficial interest in
separate classes with each such class representing interests in a separate
portfolio of securities and other assets; and
WHEREAS, the Series currently offers shares of beneficial interest in
eighteen classes which are subject to separate management agreements with
JHMLICO that do not apply to the Portfolios referred to below, and
WHEREAS, the Series intends to offer shares of beneficial interest in five
additional classes (the "Initial Portfolios" under this Agreement) designated
[name of individual Portfolios], (together with other classes subsequently
established by the Series, the "Portfolios) and the Series desires to retain
JHMLICO to render investment advisory services under this Agreement, and
JHMLICO is willing to do so.
NOW, THEREFORE, WITNESSETH: That it is hereby agreed between the parties
hereto as follows:
1. APPOINTMENT OF JHMLICO AS MANAGER.
(a) Initial Portfolios. The Series hereby appoints JHMLICO and JHMLICO
hereby accepts the appointment, to act as investment adviser and manager to
each of the Initial Portfolios for the period and on the terms herein set
forth, for the compensation herein provided.
(b) Additional Portfolios. In the event that the Series establishes one or
more classes of shares other than the Initial Portfolios with respect to which
it
18
<PAGE>
desires to retain JHMLICO to render investment advisory and management
services hereunder, it shall so notify JHMLICO in writing. If it is willing to
render such services JHMLICO shall notify the Series in writing, whereupon
such class of shares shall become a Portfolio hereunder.
(c) Independent Contractor. JHMLICO shall for all purposes herein be deemed
to be an independent contractor and shall, unless otherwise expressly provided
or authorized, have no authority to act for or be deemed an agent of the
Series.
2. PROVISION OF INVESTMENT MANAGEMENT SERVICES.
JHMLICO will provide to the Portfolios a continuing and suitable investment
program consistent with the investment policies, objectives and restrictions
of the Series. JHMLICO will manage the investment and reinvestment of the
assets in the Portfolios, and perform the other functions set forth below,
subject to the overall supervision, direction, control and review of the Board
of Trustees of the Series and, as in effect from time to time, the provisions
of the Series' Declaration of Trust, Bylaws, prospectus, statement of
additional information, the 1940 Act and all other applicable laws and
regulations (including any applicable investment restrictions imposed by state
insurance laws and regulations) or any directions or instructions delivered to
JHMLICO in writing by the Series from time to time.
Except to the extent that the Board of Trustees approves performance of any
of the following functions by any custodian, transfer agent, independent
counsel, or other independent agent, JHMLICO will, with respect to the
Portfolios:
(a) advise the Series in connection with policy decisions to be made by
its Board of Trustees or any committee thereof and, upon request, furnish
the Series with research, economic and statistical data in connection with
the Series' investments and investment policies;
(b) provide administration of the day to day operations of the Series;
(c) submit such reports relating to the valuation of the Series'
securities as its Board of Trustees may reasonably request;
(d) assist the Series in any negotiations relating to its investments
with issuers, investment banking firms, securities brokers or dealers and
other institutions or investors and place orders for purchases and sales
of portfolio investments;
(e) provide office space and office equipment and supplies (including
telephone and other utility services), accounting and data processing
equipment and necessary executive, legal, accounting, clerical and
secretarial personnel for the administration of the affairs of the Series;
19
<PAGE>
(f) maintain and preserve the records required by the 1940 Act to be
maintained and preserved by the Series, to the extent not maintained by
the Series' custodian, distributor, transfer agent or any Sub-Investment
Manager;
(g) oversee, and use its best efforts to assure the performance of all
the activities and services of any custodian, distributor, transfer agent
or other similar agent retained by the Series;
(h) value the assets and liabilities of the Series, compute the daily
income, net asset value and yield of each Portfolio; and
(i) supervise the activities of each Sub-Investment Manager.
The Series will provide timely information to JHMLICO regarding such matters
as purchases and redemptions of shares in each Portfolio and the cash
requirements of, and cash available for investment in, each Portfolio, and all
other information as may be reasonably necessary or appropriate in order for
JHMLICO to perform its responsibilities hereunder.
3. ALLOCATION OF EXPENSES.
Except as set forth below, each party to this Agreement shall bear the costs
and expenses of performing its obligations hereunder.
(a) The Series agrees to assume the Portfolios' share of the expense of:
(i) brokerage commissions for transactions in the portfolio investments
of the Series and similar fees and charges for the acquisition,
disposition, lending or borrowing of such portfolio investments;
(ii) the advisory fees called for in this Agreement;
(iii) all taxes, including issuance and transfer taxes, and reserves for
taxes payable by the Series to federal, state or other governmental
agencies, and the expenses and costs associated with the preparation and
filing of all tax returns;
(iv) interest payable on the Series' borrowings;
(v) extraordinary or non-recurring expenses, such as legal claims and
liabilities and litigation costs and indemnification payments by the
Series in connection therewith;
(vi) the charges and expenses of any custodian or depository appointed
by the Series for the safekeeping of its cash, portfolio securities and
other property, for providing accounting and valuation services, and for
monitoring compliance with federal laws and regulations, subject to the
Board of Trustees' approval as to the scope of such accounting, valuation,
and monitoring functions;
(vii) the charges and expenses of its independent auditors;
(viii) the cost of the fidelity bond required by 1940 Act Rule 17g-l;
20
<PAGE>
(ix) the compensation and travel expenses of trustees who are not
"interested persons" within the meaning of the 1940 Act;
(x) the expenses in preparing, printing and distributing voting
instruction information statements to persons entitled to give voting
instructions in tabulating proxy votes and in printing and distributing to
policyowners and contractowners annual and semi-annual reports;
(xi) fees and costs for legal services provided to or on behalf of the
Series (including fees and costs of independent counsel and an allocable
portion of the cost of JHMLICO's Law Department rendering such services)
(for this purpose, "legal services" includes (but is not limited to) the
services of such independent counsel or Law Department employees in the
course of administering the business and affairs of the Series);
(xii) charges of any independent agents (other than independent counsel)
approved by the Board of Trustees;
(xiii) the fees and expenses involved in registering and maintaining
registrations of the Series and its shares with the Securities and
Exchange Commission and various states and other jurisdictions; and
(xiv) membership or association dues for the Investment Company
Institute, the National Association of Variable Annuities, or similar
trade association or for any self-regularly organization.
(b) To the extent not assumed by the Series pursuant to (a) above, JHMLICO
agrees to assume the Portfolios' share of the expense of:
(i) the charges and expenses of any registrar, stock transfer or
dividend disbursing agent;
(ii) the cost of any stock certificates representing shares of the
Series;
(iii) the expenses of shareholders' meetings; trustees' meetings;
printing and distributing Prospectuses and statements of additional
information to prospective and existing policyowners and contractowners;
preparing, printing, and distributing any advertising or sales literature
to prospective and existing policyowners and contractowners; and any other
activity and related legal services primarily intended to result in the
sale of the Series' shares;
(vi) the expense of furnishing each shareholder statements of account;
and
(v) the cost of and any errors and omissions insurance or other
liability insurance covering the Series and/or its officers, directors and
employees.
(vi) fees and costs of independent counsel to Series not incurred in the
actual conduct of the Series' affairs.
21
<PAGE>
4. SUB-INVESTMENT MANAGERS.
Notwithstanding any other provision hereof, JHMLICO, with the approval of
the Series, may contract with one or more Sub-Investment Managers to perform
any of the investment management services required of JHMLICO under this
Agreement; provided, however, that the compensation of any such Sub-Investment
Manager will be the sole responsibility of JHMLICO and the duties and
responsibilities of any such Sub-Investment Manager shall be as set forth in
an agreement between the Series, JHMLICO and such Sub-Investment Manager. It
is anticipated that JHMLICO and the Series will agree to contract initially
[list of names of sub-investment managers].
JHMLICO shall exercise reasonable care in selecting, for approval by the
Series, any Sub-Investment Manager and in monitoring and supervising the
performance of any Sub-Investment Manager but, except as provided in Section
14 hereof, shall not otherwise be legally responsible or liable for any action
of any Sub-Investment Manager. It shall be a particular responsibility of
JHMLICO to evaluate the investment performance of Sub-Investment Managers and
that of potential Sub-Investment Managers and to supervise and monitor the
practices of Sub-Investment Managers in selecting brokers and dealers to
effect portfolio transactions, including the negotiation of commissions and
the evaluation of services provided by such brokers and dealers.
5. INVESTMENT ADVISORY FEE AND EXPENSE LIMITATION.
For all of the services rendered, facilities furnished and expenses paid or
assumed as herein provided, the Series shall pay to JHMLICO a fee, which fee
shall, with respect to each Portfolio, be at an effective rate of:
[list of investment advisory fees for each Portfolio on an annual basis.]
The fee shall be accrued daily and payable monthly as soon as possible after
the last day of each calendar month. In the case of termination of this
Agreement with respect to any Portfolio during any calendar month, the amount
of the fee accrued to the date of termination shall be paid.
"Current Net Assets" of any Portfolio for purposes of computing the amount
of advisory fee accrued for any day shall mean that Portfolio's net assets for
the most recent preceding day for which that Portfolio's net assets were
computed.
For any fiscal year in which the normal operating costs and expenses of any
Portfolio of the Series, exclusive of the investment advisory fee, interest,
brokerage commissions, taxes and extraordinary expenses outside the control of
JHMLICO exceed 0.25% of that Portfolio's average daily net assets, JHMLICO
will reimburse that Portfolio promptly after the end of the fiscal year in an
amount equal to such excess. In the event of termination of this Agreement as
of a date other than the
22
<PAGE>
last day of Series' fiscal year, JHMLICO shall pay any Portfolio of Series the
amount by which such expenses incurred by that Portfolio prior to the date of
termination exceeds a pro rata portion of the expense limitation.
6. PORTFOLIO TRANSACTIONS.
In connection with the investment and reinvestment of the assets of the
Portfolios, JHMLICO is authorized to select the brokers or dealers that will
execute purchase and sale transactions for the Series and to use its best
efforts to obtain the best available price and most favorable execution with
respect to all such purchases and sales of portfolio securities for the
Series. JHMLICO shall maintain records adequate to demonstrate compliance with
this requirement. Subject to this primary requirement, and maintaining as its
first consideration the benefits to the Series and its shareholders, JHMLICO
shall have the right, subject to the control of the Board of Trustees, and to
the extent authorized by the Securities and Exchange Act of 1934, to follow a
policy of selecting brokers who furnish brokerage and research services to the
Series or to JHMLICO, who charge a higher commission rate to the Series than
may result when allocating brokerage solely on the basis of seeking the most
favorable price and execution. JHMLICO shall determine in good faith that such
higher cost was reasonable in relation to the value of the brokerage and
research services provided.
The fees payable to JHMLICO by the Series hereunder shall be reduced by any
tender solicitation fees or similar payments received by JHMLICO, or any
affiliated person of JHMLICO, in connection with the tender of investments of
any Portfolio (less any direct expenses incurred by JHMLICO, or any affiliated
person of JHMLICO, in connection with obtaining such fees or payments).
JHMLICO shall use its best efforts to recapture all available tender offer
solicitation fees and similar payments in connection with tenders of the
securities of any Portfolio, provided, however, that neither JHMLICO nor any
affiliated person shall be required to register as a broker-dealer for this
purpose. JHMLICO shall advise the Board of Trustees of any fees or payments of
whatever type which it may be possible for JHMLICO or an affiliate of JHMLICO
to receive in connection with the purchase or sale of investment securities
for any Portfolio.
7. INFORMATION, RECORDS, AND CONFIDENTIALITY.
The Series shall own and control all records maintained hereunder by JHMLICO
on the Series' behalf and, in the event of termination of this Agreement with
respect to any Portfolio for any reason, all records relating to that
Portfolio shall promptly be returned to the Series, free from any claim or
retention of rights by JHMLICO. JHMLICO also agrees, upon request of the
Series, promptly to surrender such books and records or, at JHMLICO's expense,
copies thereof to the Series or make such books and records available for
inspection by representatives of regulatory authorities or other persons
reasonably designated by the Series.
23
<PAGE>
JHMLICO further agrees to maintain, prepare and preserve such books and
records in accordance with the 1940 Act and rules thereunder, including but
not limited to, Rules 31a-1 and 31a-2. JHMLICO shall supply all information
requested by any insurance regulatory authorities to determine whether all
insurance laws and regulations are being complied with.
JHMLICO shall not disclose or use any records or information obtained
pursuant hereto in any manner whatsoever except as expressly authorized
herein, and will keep confidential any information obtained pursuant hereto,
and disclose such information only if the Series has authorized such
disclosure, or if such disclosure is expressly required by applicable Federal
or state regulatory authorities.
JHMLICO shall supply the Board of Trustees and officers of the Series with
all statistical information regarding investments of the Portfolios which is
reasonably required by them and reasonably available to JHMLICO.
8. LIABILITY.
No provision of this Agreement shall be deemed to protect JHMLICO against
any liability to the Series or its shareholders to which it might otherwise be
subject by reason of any willful misfeasance, bad faith or negligence in the
performance of its duties or the reckless disregard of its obligations and
duties under this Agreement. Nor shall any provision hereof be deemed to
protect any Trustee or officer of the Series against any such liability to
which he might otherwise be subject by reason of any willful misfeasance, bad
faith or negligence in the performance of his duties or the reckless disregard
of his obligations and duties.
9. DURATION AND TERMINATION OF THIS AGREEMENT.
(a) Duration. This Agreement shall become effective with respect to each
Initial Portfolio on the date hereof and, with respect to any additional
Portfolio, on the date of receipt by the Series of notice from JHMLICO in
accordance with Paragraph 1(b) hereof that JHMLICO is willing to serve with
respect to such Portfolio. Unless terminated as herein provided, this
Agreement shall remain in full force and effect for two years from the date
hereof with respect to the Initial Portfolios and, with respect to each
additional Portfolio until two years following the date on which such
Portfolio becomes a Portfolio hereunder, and shall continue in full force and
effect thereafter with respect to each Portfolio so long as such continuance
with respect to any such Portfolio is approved at least annually (i) by either
the Board of Trustees of the Series or by vote of a majority of the
outstanding voting shares of such Portfolio, and (ii) in either event by the
vote of a majority of the Board of Trustees of the Series who are not parties
to this Agreement or "interested persons" of any such party, cast in person at
a meeting called for the purpose of voting on such approval.
24
<PAGE>
Any approval of this Agreement by the holders of a majority of the
outstanding shares of any Portfolio shall be effective to continue this
Agreement with respect to any such Portfolio notwithstanding (A) that this
Agreement has not been approved by the holders of a majority of the
outstanding shares of any other Portfolio affected hereby, and (B) that this
Agreement has not been approved by the vote of a majority of the outstanding
shares of the Series, unless such approval shall be required by any other
applicable law or otherwise. The terms "assignment", "vote of a majority of
the outstanding shares" and "interested person", when used in this Agreement,
shall have the respective meanings specified in the 1940 Act and rules
thereunder.
(b) Termination. This Agreement may be terminated with respect to any
Portfolio at any time, without payment of any penalty, by vote of the Board of
Trustees of the Series, by vote of a majority of the outstanding shares of
such Portfolio, or by JHMLICO on at least sixty (60) days written notice to
the Series.
(c) Automatic Termination. This Agreement shall automatically and
immediately terminate in the event of its assignment.
10. NAME OF JOHN HANCOCK.
It is understood that the name "John Hancock", or any name derived from or
similar to that name, and any logo associated with that name, is the valuable
property of JHMLICO, and that the Series has the right to include "John
Hancock" as a part of its name only so long as this Agreement shall continue.
Upon termination of this Agreement the Series shall forthwith cease to use the
John Hancock name and logos and shall submit to its shareholders, if
necessary, an amendment to its Declaration of Trust to change the Series'
name.
11. SERVICES NOT EXCLUSIVE.
The services of JHMLICO to the Series with respect to the Portfolios are not
to be deemed exclusive and JHMLICO shall be free to render similar services to
others so long as its services hereunder are not impaired thereby. It is
specifically understood that directors, officers and employees of JHMLICO and
of its subsidiaries and affiliates may continue to engage in providing
portfolio management services and advice to other investment companies,
whether or not registered, and other investment advisory clients.
12. AVOIDANCE OF INCONSISTENT POSITION.
In connection with the purchase and sale of portfolio securities of the
Portfolios, JHMLICO and its directors, officers and employees will not act as
principal or agent or receive any commission. Nothing in this Agreement,
however, shall preclude the combination of orders for the sale or purchase of
portfolio
25
<PAGE>
securities of the Series with those for other registered investment companies
managed by JHMLICO or its affiliates, if orders are allocated in a manner
deemed equitable by JHMLICO among the accounts and at a price approximately
averaged.
13. AMENDMENT.
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing. No amendment of this
Agreement shall be effective with respect to any Portfolio until approved
specifically by (a) the Board of Trustees of the Series, or by vote of a
majority of the outstanding shares of that Portfolio, and (b) by vote of a
majority of those Trustees of the Series who are not interested persons of any
party to this Agreement cast in person at a meeting called for the purpose of
voting on such approval.
14. INDEMNIFICATION
Except to the extent that a member of the Board of Trustees would thereby be
protected against any liability to the Series or its shareholders to which he
or she would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of the member's duties, or by reason of
the member's reckless disregard either of the member's obligations and duties
under this Agreement or of the duties involved in the conduct of the member's
office, JHMLICO hereby indemnifies each person who is or has been a member of
the Board of Trustees and will hold each harmless against any and all losses,
claims, damages, liabilities or litigation (including legal and other
expenses) to which the member may become subject under the 1940 Act or any
other statute or at common law or otherwise, by reason of his or her failure
or alleged failure to take any action relating to the investment or
reinvestment of assets in the Portfolios, regardless of whether a Sub-
Investment Manager has been retained in connection with the Portfolio
concerned, including any failure or alleged failure to seek or retain
investment advice or management in addition to or in place of that provided by
JHMLICO and its Sub-Investment Managers, if any. With respect to any losses,
claims, damages, liabilities or litigation arising out of events occurring
prior to the termination of this Agreement, this indemnity shall survive said
termination.
15. LIMITATION OF LIABILITY
It is expressly agreed that the obligations of the Series hereunder shall
not be binding upon any of the Trustees, shareholders, officers, agents or
employees of Series personally, but bind only the trust property of the
Series, as provided in the Series' Declaration of Trust.
26
<PAGE>
16. GOVERNING LAW.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts and the applicable provisions of the 1940 Act
and rules thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
John Hancock Variable Series Trust I
Attest:
_____________________________________ By: _________________________________
Title: Chairman and CEO
John Hancock Mutual Life Insurance
Company
Attest:
_____________________________________ By: _________________________________
Title: Vice President
27
<PAGE>
APPENDIX C
<TABLE>
<CAPTION>
Investment Advisory Fee as
an Annual Percentage of Each
Portion of
the Portfolios
Portfolio Average Daily Net Assets
--------- ----------------------------
<S> <C>
Managed .40% of first $500 million; .35% of
Large Cap Growth next $500 million; .30% of net assets
above $1 billion
Growth & Income .25% of all net assets
Sovereign Bond
Money Market
Large Cap Value .75% of all net assets
Small Cap Growth
Equity Index .15% of first $75 million; .14% of
next $50 million; .13% of net assets
above $125 million
Small Cap Value .80% of first $100 million; .75% of
next $100 million; .65% of net assets
above $200 million
Mid Cap Value .80% of first $250 million; .775% of
next $250 million; .75% of next $250
million; .725% of net assets above
$750 million
Mid Cap Growth .85% of first $100 million; .80% of
net assets above $100 million
Diversified Mid Cap Growth .75% of first $250 million; .70% of
next $250 million; .65% of net assets
above $500 million
Real Estate Equity .60% of first $300 million; .50% of
next $500 million; .40% of net assets
above $800 million
Small/Mid Cap CORE .80% of first $50 million; .70% of net
assets above $50 million
Global Equity .90% of first $50 million; .80% of
next $100 million; .70% of net assets
above $150 million
International Balanced .85% of first $100 million; .70% of
net assets above $100 million
International Equity Index .18% of first $100 million; .15% of
next $100 million; .11% of net assets
above $200 million
International Opportunities 1% of first $20 million; .85% of next
$30 million; .75% of net assets above
$50 million
Emerging Markets Equity 1.30% of first $10 million; 1.20% of
next $140 million; 1.10% of net assets
above $150 million
Short-Term Bond .30% of all net assets
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
Investment Advisory Fee as
an Annual Percentage of Each
Portion of
the Portfolios
Portfolio Average Daily Net Assets
--------- ----------------------------
<S> <C>
Bond Index .15% of first $100 million; .13% on
next $150 million; .11% of net assets
over $250 million
Strategic Bond .75% of first $25 million; .65% of
next $50 million; .55% of next $75
million; .50% of net assets above $150
million
High Yield Bond .65% of first $100 million; .60% on
next $100 million; .50% of net assets
above $200 million
</TABLE>
29
<PAGE>
APPENDIX D
JHVLICO AND JOHN HANCOCK;
THE SUB-INVESTMENT MANAGERS; A SUMMARY OF THE SUB-INVESTMENT MANAGEMENT
AGREEMENTS; BROKERAGE TRANSACTIONS
JHVLICO and John Hancock
JHVLICO, John Hancock Place, Boston, Massachusetts 02117, is a stock life
insurance company chartered in 1979 under Massachusetts law. It is a wholly-
owned subsidiary of John Hancock, authorized to transact a life insurance and
annuities business in 49 states. JHVLICO began selling variable life insurance
policies in 1980 and its Accounts owned Fund shares representing 43.4% of the
total net assets of the Fund on December 31, 1998.
John Hancock, John Hancock Place, Boston, Massachusetts 02117, is a mutual
life insurance company chartered in Massachusetts in 1862. It is authorized to
transact a life insurance and annuity business in all fifty states. John
Hancock began selling variable annuity contracts in 1971 and variable life
insurance policies in 1993. Its Accounts owned Fund shares representing 56.4%
of the total net assets of the Fund on December 31, 1998. John Hancock acts as
"principal underwriter" of the Fund's shares pursuant to an Underwriting and
Administrative Services Agreement, dated January 17, 1986, to which John
Hancock and the Fund are parties. Under the Agreement, John Hancock collects
no additional charges or commissions in connection with its duties as
principal underwriter.
John Hancock is managed by its Board of Directors, the members of which are
elected by its policyholders. All of the Directors must be policyholders of
John Hancock. The business address of all Directors and Executive Officers of
John Hancock is John Hancock Place, Boston, Massachusetts 02117.
The following are the Directors and Executive Officers of John Hancock:
<TABLE>
<CAPTION>
Name Principal Occupation
---- --------------------
<C> <S>
NELSON F. GIFFORD Principal, Fleetwing Capital Management (financial
services)
STEPHEN L. BROWN Chairman of the Board and Chief Executive Officer, John
Hancock
E. JAMES MORTON Director, formerly Chairman of the Board and Chief
Executive Officer, John Hancock
DAVID F. D'ALESSANDRO President and Chief Operating Officer, John Hancock
FOSTER L. ABORN Vice Chairman of the Board, John Hancock
JOAN T. BOK Chairman of the Board, New England Electric System
(electric utility)
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Name Principal Occupation
---- --------------------
<C> <S>
ROBERT E. FAST Senior Partner, Hale and Dorr (law firm)
JOHN M. CONNORS, JR. President and Chief Executive Officer and Director,
Hill, Holiday Connors Cosmopulos (advertising)
I. MACALLISTER BOOTH Retired Chairman of the Board and Chief Executive
Officer, Polaroid Corporation (photographic products)
SAMUEL W. BODMAN Chairman of the Board and Chief Executive Officer, Cabot
Corporation (chemicals)
KATHLEEN F. FELDSTEIN President, Economic Studies, Inc. (economic consulting)
RICHARD F. SYRON Chairman of the Board and Chief Executive Officer,
American Stock Exchange
MICHAEL C. HAWLEY President and Chief Operating Officer, The Gillette
Company (razors, etc.)
ROBERT J. TARR, JR. Former President, Chief Executive Officer, Chief
Operations Officer; Harcourt General, Inc. (publishing)
EDWARD H. LINDE President and Chief Executive Officer, Boston
Properties, Inc.
WAYNE A. BUDD Group President, Bell Atlantic--New England
(telecommunications)
</TABLE>
Brokerage Commissions on Portfolio Transactions
Orders for the purchase and sale of portfolio securities of the Portfolios
of the Series Trust are placed in such a manner as in the opinion of John
Hancock or the sub-investment manager will offer the best price and market for
the execution of each transaction. In seeking best price and execution for
securities traded in the over-the-counter market, John Hancock and the
respective sub-investment managers normally deal directly with the principal
market-makers. Evaluations of the overall reasonableness of any brokers'
commissions are made by the persons placing transactions for the Portfolio on
the basis of their experience and judgment. Such persons are authorized to pay
a brokerage commission on a particular transaction that is in excess of what
another broker might have charged in recognition of the value of the brokerage
and research services received from the broker, although such authority is
expected to be used very infrequently.
Research and statistical services furnished by brokers handling transactions
for the Portfolios may include analysts' reports on companies and industries,
market forecasts, economic analyses, and the like. Such materials may be used
by John Hancock and the sub-investment manager for the benefit of all the
Portfolios
31
<PAGE>
managed by John Hancock and the sub-investment manager and, accordingly, not
all such research and statistical services may be used in connection with the
Portfolios.
While John Hancock and each sub-investment manager will be responsible for
the allocation of the corresponding Portfolio's brokerage, their policies and
practices in this regard must be consistent with the foregoing and will at all
times be subject to review by the Trustees of the Series Trust.
32
<PAGE>
APPENDIX E
<TABLE>
<CAPTION>
Current Proposed
Allocation Method Allocation Method
----------------- -----------------
<S> <C> <C>
Custodial and Administrative Costs:
Domestic Custodianship Fees........
On a Portfolio- On an asset-weighted
specific basis basis among all
domestic and global
Portfolios
Foreign Custodianship Fees.........
On a Portfolio- No change
specific basis
Transaction Charges................ On a Portfolio- No change
specific basis
Accounting Fee..................... Equally across all On an asset-weighted
Portfolios basis among all
Portfolios
Valuation Fee...................... Equal basic fee for No change
all Portfolios plus
a Portfolio-specific
fee
Fund Administrative Service Fees...
Equally across all On an asset-weighted
Portfolios basis among all
Portfolios
Proxy Vote Costs................... One-half equally On an asset-weighted
across all basis among all
Portfolios to which Portfolios to which
the proxy applies the proxy applies
and one-half on an
asset-weighted basis
among all such
Portfolios
Annual/Semi-Annual Report Costs....
One-half equally On an asset-weighted
across all basis among all
Portfolios and one- Portfolios
half on an asset-
weighted basis among
all Portfolios
Trust Prospectus Costs............. Equally across all On an asset-weighted
Portfolios basis among all
Portfolios
Legal Costs:
Trust Prospectus................... Equally across all On an asset-weighted
Portfolios basis among all
Portfolios
Proxy Votes........................ Equally across all On an asset-weighted
Portfolios basis among all
Portfolios to which
the proxy applies
General............................ Equally across all On an asset-weighted
Portfolios basis among all
Portfolios
Auditing Costs..................... One-half equally On an asset-weighted
across all basis among all
Portfolios and one- Portfolios
half on an asset-
weighted basis among
all Portfolios
Fidelity Bond Costs................ Equally across all On an asset-weighted
Portfolios basis among all
Portfolios
</TABLE>
33
<PAGE>
APPENDIX F
1998 VARIABLE SERIES TRUST NON-ADVISORY EXPENSES
($000)
<TABLE>
<CAPTION>
Actual Allocation for 1998 Revised Allocation
--------------------------- ----------------------------
Non-Advisory JH Non-Advisory JH
Portfolio Expenses Reimbursement* Expenses Reimbursement**
--------- ------------ -------------- ------------ ---------------
<S> <C> <C> <C> <C>
Large Cap Growth........ 319 0 534 0
Sovereign Bond.......... 331 0 446 0
Emerging Markets Equity. 125 112 50 43
International Equity
Index................. 528 124 399 226
Global Equity........... 150 126 77 61
Small Cap Growth........ 167 27 59 0
International Balanced.. 269 199 196 165
Mid Cap Growth.......... 164 15 71 0
Large Cap Value......... 173 0 84 0
Money Market............ 167 0 194 0
Mid Cap Value........... 142 0 50 0
Diversified Mid Cap
Growth................ 270 0 104 0
Bond Index.............. 100 55 14 0
Small/Mid Cap CORE...... 115 107 12 6
Real Estate Equities.... 158 0 74 0
Growth & Income......... 787 0 1726 0
Managed................. 1141 0 1594 0
Short Term Bond......... 149 0 38 0
Small Cap Value......... 156 17 43 0
International
Opportunities......... 267 145 203 138
Equity Index............ 272 272 188 0
High Yield Bond......... 105 86 10 0
Strategic Bond.......... 149 31 39 0
TOTALS.................. 6,203 1,316 6,203 639
</TABLE>
34
<PAGE>
APPENDIX G
1998 VARIABLE SERIES TRUST NON-ADVISORY EXPENSE RATIOS
(in percentages)
<TABLE>
<CAPTION>
Based Upon Actual Based Upon
Allocation for Revised Change in
Portfolio 1998* Allocation** Expense Ratio
--------- ----------------- ------------ -------------
<S> <C> <C> <C>
Large Cap Growth.................. .028 .047 +.019
Sovereign Bond.................... .037 .049 +.012
Emerging Markets Equity........... .250 .100 -.150
International Equity Index........ .250 .100 -.150
Global Equity..................... .250 .100 -.150
Small Cap Growth.................. .223 .078 -.145
International Balanced............ .250 .100 -.150
Mid Cap Growth.................... .174 .075 -.099
Large Cap Value................... .140 .068 -.072
Money Market...................... .042 .049 +.007
Mid Cap Value..................... .150 .053 -.097
Diversified Mid Cap Growth........ .139 .054 -.085
Bond Index........................ .250 .050 -.200
Small/Mid Cap CORE................ .250 .100 -.150
Real Estate Equities.............. .103 .048 -.055
Growth & Income................... .021 .047 +.026
Managed........................... .035 .048 +.013
Short Term Bond................... .193 .049 -.144
Small Cap Value................... .244 .067 -.177
International Opportunities....... .250 .100 -.150
Equity Index...................... .117 .081 -.036
High Yield Bond................... .250 .065 -.185
Strategic Bond.................... .223 .059 -.164
ARITHMETIC AVERAGE................ .168 .069 -.099
</TABLE>
- -----------
* Based upon 0.25% expense cap
** Based upon 0.10% expense cap
35
<PAGE>
VOTING INSTRUCTIONS FORM
JOHN HANCOCK VARIABLE SERIES TRUST 1
PLEASE SIGN, DATE AND RETURN ALL VOTING INSTRUCTION FORMS RECEIVED IN THE
ENCLOSED POSTAGE-PAID ENVELOPE
THESE VOTING INSTRUCTIONS ARE SOLICITED BY THE TRUSTEES SPECIAL MEETING OF
SHAREHOLDERS--APRIL 23, 1999--11:00 AM 197 CLARENDON STREET, BOSTON,
MASSACHUSETTS
A Special Meeting of Shareholders of the John Hancock Variable Series Trust 1
(the Fund") will be held at the office of John Hancock Variable Life Insurance
Company, 197 Clarendon Street, Boston, Massachusetts, (telephone 1-800-732-
5543) at 11:00 a.m., on Friday, April 23, 1999. By signing and dating below,
you instruct the persons named below to, and they will, vote each applicable
proposal on the reverse side as marked or, if not marked, to vote "FOR" each
applicable proposal, on the reverse side, and to use their discretion to vote
any other matter incident to the conduct of the special meeting. If you do not
intend personally to attend the special meeting, please complete, detach and
mail this form in the enclosed envelope at once.
Thomas J. Lee and Michele G. Van Leer, and each of them, with power of
substitution in each, are hereby instructed to vote the shares held in the fund
portfolio attributable to the undersigned at the Special Meeting of
Shareholders and at any adjournment thereof.
Date: __________________________________
Please be sure to sign and date this
proxy.
________________________________________
________________________________________
Signature(s) of Shareholder(s)
<PAGE>
A Special Meeting of Shareholders of the Variable Series Trust I ("the Fund")
will be held at the office of John Hancock Life Insurance Company, 197
Clarendon Street, Boston, Massachusetts (telephone 1-800-732-5543) at 11:00
a.m. on Friday, April 23, 1999 for the following purposes:
Please vote by filling in the appropriate box(es) below.
<TABLE>
<S> <C> <C> <C>
For All
except
1. (All Portfolios) To elect Trustees to the as Marked to Withhold
Board of Trustees For All the Left All
Michele G. Van Leer, Thomas J. Lee, William H.
Dysktra, Elizabeth G. Cook, Diane C. Kessler
and Robert Verdonck [_] [_] [_]
To withhold authority for any individual
nominee, print that nominee's name on the line
below.
_______________________________________________
2. (For the Growth & Income, Large Cap Growth,
Real Estate Equity, and Sovereign Bond
Portfolios only) For Against Abstain
Approval to make non-fundamental the investment
objectives and policies of the portfolio [_] [_] [_]
3. (For the Managed, Growth & Income, Large Cap
Growth, Real Estate Equity, Sovereign Bond,
and Money Market Portfolios only)
Approval to permit the portfolio to engage in [_] [_] [_]
securities lending.
4. (For the Diversified Mid Cap Growth and
Short-Term Bond Portfolios only)
Approval to change the investment restrictions [_] [_] [_]
of the portfolio.
5. (All Portfolios) Approval to change the
methodology for allocating non-advisory [_] [_] [_]
expenses and reduce the "expense cap" in the
investment management agreements.
</TABLE>
