<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]
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Check the appropriate box:
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[__] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE
14A-6(E)(2)
[__] 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
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(Name of Registrant as Specified In Its Charter)
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(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:
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(3) Per unit price or other underlying value of transaction computed
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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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(4) Date Filed:
<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 "Trust") will be held at the offices of John Hancock Life Insurance
Company ("John Hancock"), 197 Clarendon Street, Boston Massachusetts (telephone
1-800-732-5443), at 11:00 A.M., on Thursday, September 28, 2000, to consider and
vote upon the following matters:
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1. A proposal to approve, as to the Real Estate Equity Fund, a multi-manager
approach that entails: (a) a new Sub-Investment Management Agreement among
the Trust, John Hancock, and Morgan Stanley Dean Witter Investment
Management Inc. ("MSDW"); (b) a new Sub-Investment Management Agreement
among the Trust, John Hancock, and Independence Investment Associates, Inc.
("IIA"); and (c) an amendment to the April 12, 1988 Investment Management
Agreement between the Trust and John Hancock, reflecting an increase in the
Investment Advisory Fee.
2. A proposal to approve, as to the International Opportunities Fund, a new
Sub-Investment Management Agreement among the Trust, John Hancock and T.
Rowe Price International, Inc. ("Price International").
3. A proposal to approve, as to the International Opportunities II Fund, an
interim Sub-Investment Management Agreement among the Trust, John Hancock
and Rowe Price-Fleming International, Inc. ("RFPI"), a new Sub-Investment
Management Agreement among the Trust, John Hancock and Price International,
and an amendment to the April 14, 1998 Investment Management Agreement
between the Trust and John Hancock, reflecting an increase in the
Investment Advisory Fee.
4. A proposal to approve, as to the Fundamental Growth Fund (formerly the
Fundamental Mid Cap Growth Fund), a new Sub-Investment Management Agreement
among the Trust, John Hancock, and Putnam Investment Management, Inc.
("Putnam") and an amendment to the March 14, 1996 Investment Management
Agreement between the Trust and John Hancock, reflecting an increase in the
Investment Advisory Fee.
5. As to the Global Bond Fund, a proposal to change the Fund's classification
from "diversified" to "non-diversified".
6. As to the Large Cap Growth Fund, a proposal to change the Fund's
classification from "diversified" to "non-diversified".
7. As to the Real Estate Equity Fund, a proposal to change the Fund's
classification from "diversified" to "non-diversified".
8. As to the Large Cap Growth Fund, a proposal to modify the fundamental
restrictions applicable to the Fund to permit it to invest in restricted
securities.
9. As to the Real Estate Equity Fund, a proposal to modify the fundamental
restrictions applicable to the Fund to permit it to invest in restricted
securities.
10. As to the Large Cap Growth Fund, a proposal to modify the fundamental
restrictions applicable to the Fund to permit it to invest in financial
futures.
11. As to the Real Estate Equity Fund, a proposal to modify the fundamental
restrictions applicable to the Fund to permit it to invest in financial
futures.
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<PAGE>
In addition, any other business as may properly come before the meeting or
any adjournment thereof, may be transacted at this Special Meeting.
An owner of a variable life insurance policy or a variable annuity contract
(Owner") will be entitled to give voting instructions only if he/she was the
Owner of record as of the close of business on July 31, 2000. John Hancock is
soliciting votes from Owners invested in the following Funds with respect to the
matters affecting those Funds:
<TABLE>
<CAPTION>
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Fund Proposal
1 2 3 4 5 6 7 8 9 10 11
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real Estate Equity X X X X
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International Opportunities X
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International Opportunities II X
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Fundamental Growth X
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Global Bond X
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Large Cap Growth X X X
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</TABLE>
MICHELE G. VAN LEER
Chairman, Board of Trustees
Boston, Massachusetts
August 18, 2000
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WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE COMPLETE AND
RETURN THE ENCLOSED FORM OF VOTING INSTRUCTIONS. THERE WILL BE MAILED TO YOU A
VOTING INSTRUCTION FORM FOR EACH FUND YOU ARE USING. PLEASE COMPLETE AND RETURN
----
ALL FORMS. YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING.
---
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<PAGE>
PROXY STATEMENT
GENERAL
This statement is furnished in connection with the solicitation of voting
instructions by the management of John Hancock Variable Series Trust I (the
"Trust") for use at the Special Meeting of its Shareholders (the "Meeting"), to
be held at the offices of John Hancock Life Insurance Company ("John Hancock"),
197 Clarendon Street, Boston, Massachusetts 02117, on Thursday, September 28,
2000 at 11:00 A.M. Boston time. This solicitation is being made of all shares of
several series (the "Funds") of the Trust which are attributable to the Owners'
interests in John Hancock Variable Life Accounts U, V, and S; John Hancock
Variable Annuity Accounts U, V, JF H and I; Separate Account IPL-1 of Investors
Partner Life Insurance Company ("IPL"); and John Hancock Mutual Variable Life
Insurance Account UV (collectively, the "Accounts"). Except with respect to
Proposals 2 and 3, the cost of printing and mailing this notice and statement
and the accompanying voting instructions form will be borne by the Funds. All
other expenses will be borne by John Hancock and, with respect to Proposals 2
and 3, by T. Rowe Price Associates, Inc. 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 not be compensated for such
services. Solicitation materials were first made available to Owners on or about
August 28, 2000.
THE TRUST WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS ANNUAL REPORT FOR
1999 TO ANY SHAREHOLDER UPON REQUEST. SUCH REQUEST MAY BE MADE BY MAIL OR BY
TELEPHONE, USING THE ADDRESS OR TOLL-FREE TELEPHONE NUMBER SHOWN ON THE COVER OF
THIS PROXY STATEMENT.
Voting Instructions
Although John Hancock and its subsidiaries, IPL and John Hancock Variable
Life Insurance Company ("JHVLICO"), through the Accounts, legally own all of the
Trust's shares, they will vote all of such shares in accordance with
instructions given by Owners of variable life insurance policies and variable
annuity contracts, as discussed below. For this purpose, the Owner of a variable
annuity contract during the period after annuity payments have commenced is the
annuitant.
Any authorized voting instructions will also be valid for any adjournment
of the meeting and will be revocable only at the direction of the Owner
executing them. If an insufficient number of affirmative votes are obtained to
approve any item, the meeting may be adjourned to permit the solicitation of
additional votes. Shares will be voted for any such adjournment in the
discretion of those persons named in the voting instructions. Whether a proposal
is approved 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
their exercise by submitting a superseding voting instruction form or a notice
of revocation to the Trust. In addition, although mere attendance at the meeting
will not revoke voting instructions, an Owner present at the meeting may
withdraw his/her voting instruction form and vote in person. John Hancock,
JHVLICO and IPL will vote Trust shares in accordance with all properly executed
and unrevoked voting instructions received in time for the meeting.
John Hancock, JHVLICO and IPL will vote the Trust shares of each Fund held
in their respective Accounts which are attributable to the policies and
contracts in accordance with the voting instructions received from the Owners
participating in that Fund. An Account's shares in any Fund which are not
attributable to policies or contracts or for which no timely voting instructions
are received will be represented and voted by John Hancock, JHVLICO or IPL in
the same proportion as the voting instructions which are received from all
Owners participating in the Fund through that Account. Fund shares which are not
attributable to policies and contracts include shares purchased with
contributions made as "seed money" to the Portfolios, by John Hancock or
JHVLICO.
<PAGE>
Please refer to Appendix A to this statement if you wish additional
information about the number of shares of each Fund that are outstanding or that
are attributable to John Hancock or JHVLICO (rather than to Owners).
Majority Voting
In order for the shareholders of any Fund to approve any of the proposals
in this statement, the proposal must receive the favorable vote of a majority of
the outstanding shares of that Fund. When used in this information statement, a
"majority vote of the outstanding voting shares" means the affirmative vote of
more than 50% of the outstanding shares or, if it is less, 67% or more of the
shares present or represented at the meeting.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE COMPLETE AND
RETURN THE ENCLOSED FORM OF VOTING INSTRUCTIONS. THERE WILL BE MAILED TO YOU A
VOTING INSTRUCTION FORM FOR EACH FUND YOU ARE USING. PLEASE COMPLETE AND RETURN
ALL FORMS. YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING.
<PAGE>
PROPOSAL 1
APPROVAL OF NEW SUB-INVESTMENT MANAGEMENT AGREEMENTS
AND AN AMENDMENT TO THE CURRENT INVESTMENT MANAGEMENT AGREEMENT
FOR THE REAL ESTATE EQUITY FUND
At its June 7, 2000 meeting, the Board of Trustees unanimously approved,
and voted to recommend that Owners approve, two new "multi-manager"
Sub-Investment Management Agreements and a related amendment to the Investment
Management Agreement that would increase fees payable by the Trust to John
Hancock for management of the Real Estate Equity Fund.
Reasons for this Proposal
The multi-manager Sub-Investment Management agreements, and a related
amendment to the Investment Management Agreement for the Real Estate Equity
Fund, are being submitted for shareholder approval at the Meeting because it
will be the first shareholders meeting of the Trust following the equal division
of the Fund into two sub-funds on June 30, 2000. One sub-fund is currently
managed on an interim basis by MSDW and the other is currently managed on an
interim basis by IIA. Such interim sub-investment management agreements do not
require shareholder approval, but the term of such agreements cannot exceed 150
days and the compensation payable to IIA and MSDW, in the aggregate, can be no
greater than the amounts that would have been payable under the sub-investment
management agreement in effect prior to June 30, 2000, as discussed below. Thus,
"final" Sub-Investment Management Agreements for the Real Estate Equity Fund
must be executed. It is those "final" agreements that are described in this
Proposal and that must be approved by Owners.
The Sub-Investment Management Agreements
Prior to June 30, 2000, John Hancock contracted with IIA to make investment
decisions, place investment orders, and provide certain recordkeeping functions
for all invested assets of the Real Estate Equity Fund.
In providing investment advisory services to the Trust, John Hancock has
observed the following with respect to certain funds of the Trust, in particular
the Real Estate Equity Fund:
. Investment managers often have very unique approaches and expertise in
managing investments within the same asset class or investment
category.
. Different investment strategies and managers produce different
investment results in different market environments - with no single
approach consistently outperforming others over extended periods.
. Even strong managers with sound and disciplined approaches and
strategies will move out of favor in certain market environments.
These observations have led John Hancock to seek to implement a multi-manager
approach for the Real Estate Equity Fund by selecting two sub-investment
managers that employ distinct investment strategies in the selection of real
estate equity securities and management of real estate equity portfolios. The
desired goal is to produce more consistent investment returns over long-term
market cycles. By combining different and complementary investment strategies,
the multi-manager approach seeks to reduce the Real Estate Equity Fund's
exposure to the risk of any one manager or strategy going out of favor in
certain market environments.
IIA, the original sub-investment manager to the Real Estate Equity Fund,
seeks to add value primarily by focusing its strategy on individual stock
selection. IIA's investment approach:
. emphasizes public equity research and analysis as the primary input
for evaluating real estate equity securities;
<PAGE>
. selects real estate stocks using a combination of proprietary, equity
research and quantitative tools to select stocks that are undervalued
relative to the stock's history and the market and have improving
earnings growth prospects; and
. employs risk control techniques to maintain risk, style and industry
characteristics similar to the public equity real estate market as
measured by the Wilshire Real Estate Securities Index.
IIA's investment approach has resulted in below average risk and returns
relative to other real estate funds. Given the Real Estate Equity Fund's
risk/return profile, John Hancock decided to recommend to the Board that it
select an additional sub-investment manager that would implement a complementary
investment approach in the management of real estate equity investments.
Among the factors that the Board of Trustees considered in selecting an
additional sub-investment manager were the following:
. Strong organization with experience and significant resources
(investment and operations personnel) dedicated to the development and
management of real estate equity portfolios.
. Disciplined and well-defined investment process for investing in
equity real estate securities.
. Strong long-term performance record in managing real estate equity
portfolios.
. Sub-investment advisory fee that is competitive relative to other real
estate equity portfolios.
. The degree to which the investment managers' historical and expected
investment returns are correlated with each other.
After evaluating possible replacements based on these criteria, John Hancock
recommended to the Board of Trustees that MSDW be retained as a complementary
sub-investment manager of the Real Estate Equity Fund.
MSDW seeks to add value by focusing its strategy on both property sector
allocation and individual stock selection decisions. MSDW's investment approach:
. emphasizes both public equity and private real estate research as
critical inputs in evaluating real estate sectors and securities;
. analyzes the overall market environment to identify undervalued
property sectors and geographic regions; and
. employs proprietary fundamental research to select companies that are
attractively priced relative to the value of the underlying real
estate assets.
The multi-manager approach for the Real Estate Equity Fund - combining the
investment expertise of both IIA and MSDW - seeks to provide investors with
diversification of investment strategies and the potential for more consistent
investment returns over long-term market cycles.
The sub-investment advisory fee to be charged by MSDW under its new
Sub-Investment Management Agreement is higher than that charged by IIA and
recognizes the greater degree of resources and analysis required of MSDW in
implementing a broader, more fundamental research-driven approach. Whereas John
Hancock will pay IIA a sub-investment advisory fee at an annual rate of 0.30%
for the first $300 million of the Fund's average daily net assets IIA manages;
0.25% of the next $500 million IIA manages; and 0.20% for any additional amounts
IIA manages, John Hancock will pay MSDW 0.70% for the first $50 million MSDW
manages; 0.60% for the next $50 million MSDW manages; 0.50% for the next $100
million MSDW manages; and 0.40% for any additional amounts MSDW manages. The
sub-investment advisory fee for IIA will be at the rate in effect prior to June
30, 2000.
The proposed forms of the "multi-manager" Sub-Investment Management
Agreements are included as Appendix B-1 to this statement. The agreements with
IIA and MSDW are substantially similar except with respect to the rate of
sub-advisory fees. As stated in the agreements, John Hancock will pay all
sub-advisory fees to the sub-investment managers. Therefore, any increase in the
sub-advisory fees will not, in and of itself, result in any additional charge to
the Trust or to Owners.
<PAGE>
The Current Investment Management Agreement and Proposed Amendment
Pursuant to its Investment Management Agreement with the Trust dated April
12, 1988, John Hancock advises the Trust in connection with policy decisions of
the Real Estate Equity Fund; provides administration of day-to-day operations;
provides personnel, office space, equipment and supplies for the Fund; maintains
records required by the Investment Company Act of 1940; values assets and
liabilities of the Fund; computes income, net asset value, and yield of the
Fund; and supervises activities of the sub-investment managers referred to
above.
For any fiscal year in which the normal operating costs and expenses of the
Real Estate Equity Fund, exclusive of the investment advisory fees, interest,
brokerage, commissions, taxes and extraordinary expenses outside the control of
John Hancock exceed 0.10% of that Fund's average daily net assets, the current
Investment Management Agreement provides that John Hancock will reimburse that
Fund promptly after the end of the fiscal year in an amount equal to such
excess. There was no reimbursement payable to the Real Estate Equity Fund for
the period ended December 31, 1999.
Under the current Investment Management Agreement, John Hancock is paid a
fee at the annual rate of 0.60% for the first $300 million of the Real Estate
Equity Fund's average daily net assets; 0.50% for the next $500 million and
0.40% for any additional amounts.
After evaluating the fees to be charged to the Real Estate Equity Fund for
a multi-manager approach, taking into account the cost of services to be
rendered by John Hancock and fees charged by the sub-investment managers, John
Hancock recommended to the Board of Trustees at its June 7, 2000 meeting, that
the current Investment Management Agreement be amended to reflect an increase in
the Fund's investment advisory fees to 1.10% for the first $50 million of the
Fund's average daily net assets; 1.00% for the next $50 million; 0.90% for the
next $100 million and 0.80% for any additional amounts Total expenses (including
advisory fees and other fund expenses capped as aforesaid) would be 0.10% higher
for each of those levels. If the increase had been in effect during 1999, (i)
the Trust would have paid John Hancock $1,398,966.00 on behalf of the Real
Estate Equity Fund, rather than the $835,184.00 paid under the current
Investment Management Agreement, and (ii) the ratio of total expenses to average
daily net assets would have been 1.11% rather than 0.70%. However, the 1.11%
ratio compares favorably with the total expense ratio incurred by funds that
support other variable insurance products and that have similar investment focus
and asset characteristics. The average total expense ratio for all such funds is
1.08%. The average total expense ratio for all such funds of a size comparable
to the Real Estate Equity Fund (i.e., less than $140 million in assets) is
1.15%. The foregoing analysis is based upon a study prepared for the Board using
data collected by Morningstar, Inc., an independent statistical service that
tracks fee data on variable insurance funds.
In all other respects, the current Investment Management Agreement, as
described in Appendix C to this statement, will remain unchanged.
Rationale For Proposed Changes In Management Fees
At a meeting held on June 7, 2000, the Board of Trustees, including all the
Trustees who are not "interested persons" of the Real Estate Equity Fund (the
"Independent Trustees"), unanimously approved a modified management fee schedule
for the Fund.
The Board is proposing that Shareholders approve an Amended and Restated
Investment Management Agreement between the Trust and John Hancock ("New
Management Agreement") in order to modify the current investment management fee
schedule and breakpoint schedule. The proposed new schedule of investment
management fee rates for the Real Estate Equity Fund are as stated above.
After conducting a complete review of the level of investment management
fees for real estate equity funds in general, John Hancock noted the following:
<PAGE>
. Since the Real Estate Equity Fund's inception, there has been a
substantial increase in the commitment of qualified personnel,
resources and sophisticated information systems and technology by John
Hancock to support its increasingly complex investment management
activities on behalf of the Trust.
. The multi-manager approach will further increase the complexity of
John Hancock's oversight and administration, requiring increased
resources and oversight for fund administration, investments, and
technology.
. The current investment management fee levels of the Fund (established
in 1988) were significantly below the average contractual fee levels
for other mutual funds within the variable insurance products
marketplace having similar investment focus and asset characteristics.
John Hancock wished to establish a new fee schedule for the Fund that would:
. remain competitive with other funds in the current variable insurance
products marketplace having a similar investment focus and asset
characteristics;
. provide appropriate long-term incentives, within the current
competitive environment, to support John Hancock's increased
allocation of personnel and resources to the Trust; and
. provide appropriate compensation to support the increased resources
and complexity for overseeing a multi-manager investment approach.
As a result of this review and analysis, John Hancock discussed with the
Board the changing nature of compensation in the variable insurance marketplace
and Hancock's position relative to marketplace trends in pricing. At the June 7,
2000 Board Meeting, the full Board met to review and consider John Hancock's
proposed recommendation to implement a new investment management fee schedule
for the Fund.
Basis For The Trustee's Recommendation
In evaluating and approving the New Management Agreement, the Board,
including the Independent Trustees and in consultation with independent counsel
to the Trust, requested and evaluated information provided by John Hancock
which, in the Board's opinion, constituted all the information reasonably
necessary for the Board to form a judgment as to whether the New Management
Agreement and management fee structure would be in the best interests of the
Real Estate Equity Fund and its Shareholders.
After consideration of all of the data and information provided to them,
the Board unanimously approved the modified management fee schedule set forth
below. In making their decisions, the Board considered, among other factors, the
following:
. The comparability of the investment management fees and other expenses
that would be paid by the Fund under the New Management Agreement to
those paid to other funds within the current variable insurance
marketplace having similar investment focus and asset characteristics.
. The significantly increased commitment of personnel and resources
required of John Hancock, since the inception of the Trust, to support
the investment management services provided to the Trust, and the
increased sophistication of the investment evaluation and monitoring
process used by John Hancock on behalf of the Trust.
. The significantly increased commitment required of John Hancock to
actively oversee the multi-manager approach being recommended for the
Fund, particularly the increased resources for investment oversight,
fund administration and technology.
. The impact of the proposed changes in investment management fee rates
and changes in other expenses of the Fund on the Fund's total expense
ratio and the continued willingness of John Hancock to agree to limit
total operating expenses for the Fund.
. The historical investment record of John Hancock in managing the Fund,
as well as performance information regarding other funds within the
current variable insurance marketplace not advised or managed by John
Hancock but having similar investment focus and asset types.
. The Board's favorable evaluation of the nature, quality and breadth of
investment management services provided by John Hancock to the Fund
over the years.
<PAGE>
. Current and projected profitability and related other benefits to John
Hancock in providing investment management services to the Fund, both
under the current investment management fee schedule and the proposed
new investment management fee schedule, and the need to provide John
Hancock with sufficient long-term incentives, within the competitive
marketplace, to promote the Fund as a funding medium for variable
insurance products it may market in the future.
Based upon all of the above factors, the Board (including the Independent
Trustees) determined that the new management fee arrangement proposed by John
Hancock was fair and reasonable.
Additional Information
MSDW. As of December 31, 1999, MSDW, together with its affiliated asset
management companies, had over $184 billion of assets under management, $2.2
billion of which were in real estate equity securities. Appendix D to this
statement contains additional information concerning the MSDW Board of Directors
and executive officers.
IIA. IIA, a Delaware corporation organized in 1982, is a registered
investment adviser wholly-owned by John Hancock Subsidiaries, Inc., which in
turn is wholly-owned by John Hancock. At December 31, 1999, IIA and its
subsidiaries managed approximately $33 billion in assets for various clients.
Appendix D to this statement contains additional information concerning the IIA
Board of Directors and executive officers.
John Hancock. John Hancock began providing investment advice to investment
companies in 1972 when it organized a management separate account, invested
primarily in common stocks, for the purpose of funding individual variable
annuity contracts. Both before and after that date, John Hancock established a
number of separate accounts investing in common stocks, public bonds, or other
securities in connection with the funding of variable annuities and group
annuity contracts. Total assets under management by John Hancock and its
subsidiaries as of December 31, 1999, amounted to approximately $127 billion, of
which over $71 billion was owned by John Hancock. Appendix D to this statement
contains additional information concerning John Hancock and its Board of
Directors and executive officers.
Trustees' Recommendation
The Board of Trustees has determined that the Sub-Investment Management
Agreements and the amended Investment Management Agreement are in the best
interests of the Trust and the Owners of the Real Estate Equity Fund.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT OWNERS OF THE REAL ESTATE
EQUITY FUND GIVE INSTRUCTIONS TO VOTE FOR THE APPROVAL OF THE SUB-INVESTMENT
MANAGEMENT AGREEMENTS AND THE AMENDED INVESTMENT MANAGEMENT AGREEMENT.
<PAGE>
PROPOSAL 2:
APPROVAL OF NEW SUB-INVESTMENT MANAGEMENT AGREEMENT FOR THE
INTERNATIONAL OPPORTUNITIES FUND
At its June 7, 2000 meeting, the Board of Trustees also unanimously
approved a proposal by John Hancock to:
(1) reaffirm the appointment of Price International to act as
sub-investment manager for the International Opportunities Fund,
(2) enter into a new sub-investment management agreement for such Fund
with Price International, and
(3) recommend shareholder approval of such new sub-investment management
agreement.
Background Information
Under the terms of the current Sub-Investment Management Agreement, dated
March 29, 1996, John Hancock has contracted with Rowe Price-Fleming
International, Inc. ("RPFI"), a Maryland corporation, to make investment
decisions, place investment orders, and provide certain recordkeeping functions.
RFPI, a registered investment adviser, was incorporated in 1979 as a corporate
joint venture between T. Rowe Price Associates, Inc. ("T. Rowe") and Robert
Flemings Holdings Limited ("Flemings"). As of December 31, 1999, RFPI managed
approximately $42 billion in assets for various clients. RFPI's address is 100
East Pratt Street, Baltimore, Maryland 21202. It has offices in Baltimore,
London, Tokyo, Singapore, Hong Kong, Buenos Aries and Paris.
RFPI was formed in 1979 as a 50/50 joint venture between T. Rowe and
Flemings. On August 8, 2000, T. Rowe purchased the 50% joint venture interest
owned by Flemings. At the same time, T. Rowe changed the name of RFPI to T. Rowe
Price International, Inc. According to T. Rowe, the catalyst for its purchase
was the sale of Flemings to Chase Manhattan Corporation. The Chase acquisition
of Flemings would have significantly changed the nature of the joint venture.
According to T. Rowe, its purchase transaction will increase the depth and
breadth of T. Rowe's commitment to international investing, which is an integral
part of T. Rowe's overall strategy. The change in ownership structure is not
anticipated to affect the investment approach or operations of the International
Opportunities Fund, and Price International's leadership and equity professional
staff are expected to remain in place in the renamed entity.
Discussion
Under the Investment Company Act of 1940, any investment management
agreement with a registered investment company such as the Trust automatically
ends if it is assigned. T. Rowe has determined that its acquisition of Fleming's
interests in RFPI represents an acquisition of "control" of RFPI and a de facto
assignment by RFPI of its sub-investment management role under any
sub-investment management agreement. In order to avoid disruption of the
International Opportunities Fund's investment management program, the Trust's
Board of Trustees, in accordance with Rule15a-4 under the Investment Company Act
of 1940, approved an interim management agreement (the "Interim Agreement")
between and among the Trust, John Hancock and Price International. The Interim
Agreement has a maximum term of only 150 days from August 8, 2000. Therefore,
John Hancock and the Trust intend to execute a new sub-investment management
agreement with Price International, to be effective following Shareholder
approval.
Except for the names of the entities involved and the agreement's effective
date, the terms of the new agreement will be substantially identical to the
terms of the current sub-investment management agreement
<PAGE>
dated March 29, 1996. The new sub-investment management agreement will not
affect (a) the Fund's investment policies and guidelines, (b) the Price
International personnel responsible for managing the Fund, and (c) the
contractual duties of Price International. The contractual fees payable to Price
International (0.75% for the first $20 million of average daily net assets of
the Fund; 0.60% for the next $30 million; 0.50% for the next $150 million and
0.50% on all assets if Fund assets are $200 million or more) will remain
unchanged. The aggregate amount of advisory fees paid to RFPI during 1999 for
the International Opportunities Fund was $409,561.00.
A copy of the form of the new sub-investment management agreement is
attached as Appendix B-2 to this proxy statement. As stated in the agreement,
John Hancock will pay all sub-advisory fees to the sub-investment manager.
Therefore, the sub-investment management arrangement will result in no
additional charge to the Trust or to Owners.
Evaluation by the Board of Trustees
In reaffirming the appointment of Price International to act as
sub-investment manager for the International Opportunities Fund and authorizing
the execution of a new sub-investment management agreement, the Board of
Trustees reviewed the current relationship with Price International. The Board
considered whether Price International's investment management services have
been satisfactory and whether any aspect of that relationship had changed since
the Board last approved the original sub-investment management agreement at its
February 16, 2000 meeting. Specifically, the Board concluded that:
[] the nature, extent, and quality of the services provided by Price
International to date have been satisfactory and as originally
contemplated by the Board;
[] the nature and scope of the services provided Price International have
not changed since the Board's February 16, 2000 meeting;
[] neither Price International nor any affiliate derives any ancillary
benefits from their relationship with the Trust, except as described
in Proposal 3;
[] Price International's practices concerning placing or negotiating
portfolio investment transactions are not different from those
originally represented to the Board; and
[] no other developments have occurred that would make the Fund's
relationship with Price International less desirable than originally
contemplated by the Board.
Additional Information
Price International. As of June 30, 2000, Price International (under its
previous name, RFPI) had approximately $39.2 billion of assets under management,
approximately $16.7 billion of which were in 10 other investment companies
having an investment objective similar to that of the International
Opportunities Fund. Appendix D to this statement contains additional information
concerning the Price International Board of Directors and executive officers.
Appendix D also contains a table with information on funds managed by Price
International that have investment objectives similar to those of the
International Opportunities Fund.
Brokerage Commissions on Fund Transactions. To the maximum extent feasible,
Price International places orders for portfolio transactions through brokers and
dealers that it believes will offer best execution. When it can be done
consistently with the policy of obtaining the most favorable net results, Price
International may place such orders with broker/dealers who supply research,
market and statistical information to the Fund or to Price International.
Price International is authorized when placing portfolio transactions for
equity securities to pay a brokerage commission (to the extent applicable) in
excess of that which another broker might charge for executing the same
transaction on account of the receipt of research, market or statistical
information. In selecting brokers and dealers with which to place portfolio
transactions for the Fund, Price International will not consider sales of
portfolio shares currently advised by Price International as a decision-making
<PAGE>
factor, although it may place such transactions with brokers and dealers that
sell shares of funds currently advised by Price International. Allocation of
portfolio transactions is supervised by Price International.
The International Opportunities Fund has been authorized to use brokers
affiliated with RFPI in connection with the execution of portfolio transactions.
Those brokers ceased to be affiliates of the Fund on August 8, 2000 when Price
International became a wholly owned subsidiary of T. Rowe.
T. Rowe. T. Rowe, a Maryland corporation organized in 1937, is a publicly
traded, registered investment adviser. At December 31, 1999, it managed
approximately $180 billion in assets for various clients. Appendix D to this
statement contains additional information concerning the T. Rowe Board of
Directors and executive officers.
John Hancock. John Hancock serves as the investment manager for the
International Opportunities Fund pursuant to an investment management agreement
between the Trust and John Hancock, dated April 14, 1998. The terms of the
agreement will remain unaffected by this proposal and are summarized in Appendix
C to this statement. Proposal 1 contains additional information about John
Hancock.
Trustees' Recommendation
The Board of Trustees believes that the Sub-Investment Management Agreement
is in the best interests of the Trust and Owners investing in the International
Opportunities Fund.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT THE OWNERS GIVE VOTING
INSTRUCTIONS TO VOTE FOR APPROVAL OF THE SUB-INVESTMENT MANAGEMENT AGREEMENT
---
AMONG THE TRUST, JOHN HANCOCK, AND PRICE INTERNATIONAL.
<PAGE>
PROPOSAL 3
APPROVAL OF AN INTERIM SUB-INVESTMENT MANAGEMENT AGREEMENT, A NEW
SUB-INVESTMENT MANAGEMENT AGREEMENT AND AN AMENDMENT TO THE
INVESTMENT MANAGEMENT AGREEMENT FOR THE INTERNATIONAL
OPPORTUNITIES II FUND
At its June 7, 2000 meeting, the Board of Trustees also unanimously
approved, and voted to recommend that Owners approve, an interim sub-investment
management agreement with Rowe Price-Fleming International, Inc. ("RPFI"), a new
Sub-Investment Management Agreement with T. Rowe Price International, Inc.
("Price International") and a related amendment to the Investment Management
Agreement that would increase fees payable by the Trust to John Hancock for
management of the International Opportunities II Fund.
Reasons for this Proposal
The interim sub-investment management agreement with RFPI, the
Sub-Investment Management Agreement with Price International, and a related
amendment to the Investment Management Agreement for the Fund, are all being
submitted for shareholder approval at the Meeting because it will be the first
shareholders meeting of the Trust following the appointment of RPFI as an
interim sub-investment manager on June 13, 2000. As required by federal law, the
interim sub-investment management agreement with RFPI has a term of only 150
days. Thus, a "final" Sub-Investment Management Agreement for the Fund must be
executed with Price International.
The interim sub-investment management agreement contemplated certain
changes to RFPI which occurred on August 8, 2000. The changes effected on August
8, 2000 are fully described in Proposal 2 of this statement. Among other things,
the name of RFPI was changed to T. Rowe Price International, Inc. and an
acquisition of "control" occurred (as described in Proposal 2). As a consequence
of that acquisition of "control" and the resulting de facto assignment, the
Board of Trustees is recommending that Owners approve both the June 13, 2000
interim sub-investment management agreement with RFPI and the "final"
Sub-Investment Management Agreement with Price International.
The Sub-Investment Management Agreement
Prior to June 13, 2000, the Fund was known as the "Global Equity Fund" and
John Hancock contracted with a Scudder Kemper Investments Inc. ("Scudder
Kemper") to make investment decisions, place investment orders, and provide
certain recordkeeping functions for all invested assets of the Fund. The Fund
invested in global investments -- a blend of domestic and foreign securities.
John Hancock decided to seek out a new sub-investment manager that would follow
a focused international style -- investing in foreign securities only.
Among the factors that the Board of Trustees considered in selecting a new
sub-investment manager were the following:
[] Strong organization with experience and significant resources
(investment and operations personnel) dedicated to the development and
management of international equity portfolios.
[] Disciplined and well-defined investment process for investing in
international equity securities.
[] Strong long-term performance record in managing international equity
portfolios.
[] Sub-investment advisory fee that is competitive relative to other
international equity portfolios.
After evaluating possible replacements based on these criteria, John Hancock
recommended to the Board of Trustees that RFPI be retained as the new
sub-investment manager of the International Opportunities II Fund.
In making its recommendation, John Hancock also recommended that the name
of the Fund be changed to "International Opportunities II Fund" and that the
investment objective and strategy be revised to reflect a focus on international
(rather than global) equity investments. The recommended sub-
<PAGE>
investment advisory fee to be charged by Price International would also be
revised to recognize the greater expense involved in managing a portfolio of
exclusively foreign equity investments.
John Hancock currently pays RFPI an interim sub-investment advisory fee at
an annual rate that is no higher than that previously paid to Scudder Kemper.
Whereas this rate is now of 0.70% basis points for the first $50 million of the
Fund's average daily net assets; 0.60% of the next $100 million; and 0.50% for
all additional amounts, under this proposal John Hancock will pay Price
International 0.75% for the first $20 million; 0.60% for the next $30 million;
0.50% for the next $150 million and 0.50% on all assets if Fund assets are $200
million or more.
A copy of the form of the Sub-Investment Management Agreement is included
as Appendix B-2 to this statement. As stated in the agreement, John Hancock will
pay all sub-advisory fees to the sub-investment manager. Therefore, any increase
in the sub-advisory fees will not, in and of itself, result in any additional
charge to the Trust or to Owners.
The Current Investment Management Agreement and Proposed Amendment
Pursuant to its Investment Management Agreement with the Trust dated April
14, 1998, John Hancock advises the Trust in connection with policy decisions of
the International Opportunities II Fund; provides administration of day-to-day
operations; provides personnel, office space, equipment and supplies for the
Fund; maintains records required by the Investment Company Act of 1940; values
assets and liabilities of the Fund; computes income, net asset value, and yield
of the Fund; and supervises activities of the sub-investment managers referred
to above. Appendix C to this statement contains additional information on the
terms of the current Investment Management Agreement.
For any fiscal year in which the normal operating costs and expenses of the
Fund, exclusive of the investment advisory fees, interest, brokerage,
commissions, taxes and extraordinary expenses outside the control of John
Hancock exceed 0.10% of that Fund's average daily net assets, the current
Investment Management Agreement provides that John Hancock will reimburse that
Portfolio promptly after the end of the fiscal year in an amount equal to such
excess. The reimbursement paid to the International Opportunites II Fund for the
period ended December 31, 1999 was $62,210.00
Under the current Investment Management Agreement, John Hancock is paid a
fee at the annual rate of 0.90% for the first $50 million of the International
Opportunities II Fund's average daily net assets; 0.80% for the next $100
million and 0.70% for any additional amounts.
After evaluating the fees to be charged to the Fund for an international
strategy, in comparison to the cost of services to be rendered by John Hancock
and the fees to be charged by the new sub-investment manager, John Hancock
recommended to the Board of Trustees at its June 7, 2000 meeting, that the
current Investment Management Agreement be amended to reflect an increase in the
Fund's investment advisory fees to 1.00% for the first $20 million of the Fund's
average daily net assets; 0.85% for the next $30 million; and 0.75% for any
additional amounts. Total expenses (including advisory fees and other fund
expenses capped as aforesaid) would be 0,10% higher for each of those levels. If
the increase had been in effect during 1999, (i) the Trust would have paid John
Hancock $174,738.00 on behalf of the Global Equity Fund, rather than the
$157,808.00 paid under the current Investment Management Agreement, and (ii) the
ratio of total expenses to average daily net assets would have been 1.00% rather
than 0.90%. However, the 1.00% ratio compares favorably with the total expense
ratio incurred by funds that support other variable insurance products and that
have similar investment focus and asset characteristics. The average total
expense ratio for all such international equity funds is 1.07%. The foregoing
analysis is based upon a study prepared for the Board using data collected by
Morningstar, Inc., an independent statistical service that tracks fee data on
variable insurance funds.
Additional Information
Price International. Proposal 2 to this statement contains information on
Price International.
<PAGE>
John Hancock. Proposals 1 and 2 to this statement contains information on
John Hancock.
Trustees' Recommendation
The Board of Trustees has determined that the Sub-Investment Management
Agreement and the amended Investment Management Agreement are in the best
interests of the Trust and the Owners of the International Opportunites II Fund.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT OWNERS OF THE
INTERNATIONAL OPPORTUNITIES II FUND GIVE INSTRUCTIONS TO VOTE FOR THE APPROVAL
---
OF INTERIM SUB-INVESTMENT MANAGEMENT AGREEMENT WITH RFPI, THE NEW SUB-INVESTMENT
MANAGEMENT AGREEMENT WITH PRICE INTERNATIONAL AND THE AMENDED INVESTMENT
MANAGEMENT AGREEMENT WITH JOHN HANCOCK.
<PAGE>
PROPOSAL 4
APPROVAL OF A NEW SUB-INVESTMENT MANAGEMENT AGREEMENT AND
AMENDMENT TO THE INVESTMENT MANAGEMENT AGREEMENT
FOR THE FUNDAMENTAL GROWTH FUND
At its July 14, 2000 meeting, the Board of Trustees unanimously approved,
and voted to recommend that Owners approve, a new Sub-Investment Management
Agreement with Putnam and a related amendment to the Investment Management
Agreement that would increase fees payable by the Trust to John Hancock for
management of the Fundamental Growth Fund.
Reasons for this Proposal
The Sub-Investment Management Agreement, and a related amendment to the
Investment Management Agreement for the Fund, are being submitted for
shareholder approval at the Meeting because it will be the first shareholders
meeting of the Trust following the appointment of Putnam as an interim
sub-investment manager on August 1, 2000. Such interim sub-investment management
agreements do not require shareholder approval, but the term of such agreements
cannot exceed 150 days. Thus, a "final" Sub-Investment Management Agreement for
the Fundamental Growth Fund must be executed. It is that "final" agreement that
is described in this Proposal and that must be approved by Owners. The
appointment of Putnam was made at the July 14, 2000 Board of Trustees meeting.
At that same meeting, the Board changed the name of the Fund from Fundamental
Mid Cap Growth Fund to Fundamental Growth Fund to reflect a relatively minor
change in investment practices.
The Sub-Investment Management Agreement
On June 7, 2000, the Trust and John Hancock received notice from
OppenheimerFunds, Inc. that it intended to resign as the sub-investment manager
for the Fundamental Mid Cap Growth Fund within 90 days thereof. John Hancock
immediately began to seek out a new sub-investment manager that would follow a
consistent and disciplined approach consistent with an investment strategy
geared to mid-cap growth investments.
Among the factors that the Board of Trustees considered in selecting a new
sub-investment manager were the following:
[] Strong organization with experience and significant resources
(investment and operations personnel) dedicated to the development and
management of equity portfolios.
[] Disciplined and well-defined investment process for investing in
equity securities.
[] Strong long-term performance record in managing equity portfolios.
[] Sub-investment advisory fee that is competitive relative to other
equity portfolios with a similar investment focus.
After evaluating possible replacements based on these criteria, John Hancock
recommended to the Board of Trustees that Putnam be retained as the new
sub-investment manager of the Fundamental Growth Fund.
John Hancock currently pays Putnam an interim sub-investment advisory fee
at an annual rate that is no higher than that previously paid to
OppeinheimerFunds, Inc. Whereas this rate is now 0.50% of the first $50 million
of the Fund's average daily net assets; 0.45% of the next $50 million; 0.40% of
the next $50 million and 0.35% for any additional amounts, under this proposal
John Hancock will pay Putnam 0.50% for the first $250 million; and 0.45% for any
additional amounts.
A copy of the form of the Sub-Investment Management Agreement is included
as Appendix B-2 to this statement. As stated in the agreement, John Hancock will
pay all sub-advisory fees to the sub-investment manager. Therefore, any increase
in the sub-advisory fees will not, in and of itself, result in any additional
charge to the Trust or to Owners.
The Current Investment Management Agreement and Proposed Amendment
<PAGE>
Pursuant to its Investment Management Agreement with the Trust dated March
14, 1996, John Hancock advises the Trust in connection with policy decisions of
the Fund; provides administration of day-to-day operations; provides personnel,
office space, equipment and supplies for the Fund; maintains records required by
the Investment Company Act of 1940; values assets and liabilities of the Fund;
computes income, net asset value, and yield of the Fund; and supervises
activities of the sub-investment managers referred to above. Appendix C to this
statement contains additional information on the terms of the current Investment
Management Agreement.
For any fiscal year in which the normal operating costs and expenses of the
Fund, exclusive of the investment advisory fees, interest, brokerage,
commissions, taxes and extraordinary expenses outside the control of John
Hancock exceed 0.10% of that Fund's average daily net assets, the current
Investment Management Agreement provides that John Hancock will reimburse that
Fund promptly after the end of the fiscal year in an amount equal to such
excess. The reimbursement paid to the Fundamental Growth Fund for the period
ended December 31, 1999 was $2,888.00
Under the current Investment Management Agreement, John Hancock is paid a
fee at the annual rate of 0.85% for the first $50 million of the Fund's average
daily net assets; 0.80% of the next $50 million, 0.75% for the next $50 million
and 0.70% for any additional amounts.
After evaluating the fees to be charged to the Fund in comparison to the
cost of services to be rendered by John Hancock and the fees to be paid to the
new sub-investment manager, John Hancock recommended to the Board of Trustees at
its July 13, 2000 meeting, that the current Investment Management Agreement be
amended to reflect an increase in the Fund's investment advisory fees to 0.90%
for the first $250 million of the Fund's average daily net assets and 0.85% for
any additional amounts. Total expenses (including advisory fees and other fund
expenses capped as aforesaid) would be 0.10% higher for each of those levels. If
the increase had been in effect during 1999, (i) the Trust would have paid John
Hancock $18,469.00 on behalf of the Fund, rather than the $17,491.00 paid under
the current Investment Management Agreement, and (ii) the ratio of total
expenses to average daily net assets would have been 0.90% rather than 0.85%.
However, the 0.90% ratio compares favorably with total expense ratio currently
incurred by funds that support other variable insurance products and that have
similar investment focus and asset characteristics. The average total expense
ratio for all such funds of a size comparable to the Fundamental Growth Fund
(i.e., less than $100 million in assets) is 1.02%. The foregoing analysis is
based upon a study prepared for the Board using data collected by Morningstar,
Inc., an independent statistical service that tracks fee data on variable
insurance funds.
Additional Information
Putnam Putnam has been managing mutual funds since 1937. As of June 30,
2000, Putnam and its affiliates managed $407.41 billion in assets. Putnam is a
wholly-owned subsidiary of Putnam Investments, Inc., which is itself owned
(other than a minority interest held by employees) by Marsh & McLennan
Companies, Inc., a publicly owned holding company whose principal businesses are
insurance and reinsurance brokerage, investment management and employee benefits
consulting.
John Hancock. Proposal 1 to this statement contains information on John
Hancock.
Trustees' Recommendation
The Board of Trustees has determined that the Sub-Investment Management
Agreement and the amended Investment Management Agreement are in the best
interests of the Trust and the Owners of the Mid-Cap Growth Equity Fund.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT OWNERS OF THE FUNDAMENTAL
MID CAP GROWTH FUND GIVE INSTRUCTIONS TO VOTE FOR THE
---
<PAGE>
APPROVAL OF THE SUB-INVESTMENT MANAGEMENT AGREEMENT AND THE AMENDED INVESTMENT
MANAGEMENT AGREEMENT.
<PAGE>
PROPOSAL 5
APPROVAL OF CLASSIFICATION OF THE GLOBAL BOND FUND AS "NON-DIVERSIFIED"
FUND
At its June 7, 2000 meeting, the Board of Trustees also unanimously
approved, and voted to recommend that Owners approve, John Hancock's
recommendations to change the classification of the Global Bond Fund from
"diversified" to "non-diversified".
Discussion
A current investment policy of the Global Bond Fund requires the Fund to be
"diversified." This requirement is satisfied if at least 75 % of the market
value of the Fund's total assets is invested in cash and cash items (including
receivables), Government securities, securities of other investment companies,
and other securities. For purposes of this calculation, investments with respect
of any one issuer (other than investments in the United States Government or its
agency or instrumentality) are limited to an amount not greater in value than 5%
of the value of the total assets of such issuer and to not more than 10% of the
outstanding voting securities of such issuer.
In general, "non-diversified" Funds are less restricted in the extent to
which they may invest more than 5% of their assets in any issuer or purchase
more than 10% of the voting securities of any issuer. Because a relatively high
percentage of a non-diversified Fund's assets may be invested in the obligations
of a limited number of issuers, the value of that Fund's shares may be more
volatile and more susceptible to any single economic, political, or regulatory
event, or to credit and market risks associated with a single issuer, than would
the shares of a diversified Fund. Three other Funds of the Trust, namely the
Large Cap Aggressive Growth, Mid Cap Growth and Global Balanced Funds, are
currently "non-diversified.," The remainder are "diversified."1
In making its recommendations, John Hancock noted that, with respect to the
fixed income markets, each foreign government is considered a single issuer for
purposes of measuring diversification and may represent more than 5% of the
relevant market or appropriate international or global bond benchmark. For the
Global Bond Fund, government bonds issued by Japan and the United Kingdom
represent more than 5% of the J.P. Morgan Global Government Bond Index. In
addition, government bonds are the only means of investing in fixed income
securities in particular countries. Therefore, it has become increasingly
difficult for the Global Bond Fund to remain a "diversified" fund and still
follow its stated strategy.
Trustees' Recommendation
The Board of Trustees believes that the proposed change of the Global Bond
Fund's classification to "non-diversified", and the corresponding modification
of the Fund's investment policy, is in the best interests of the Owners of the
Fund.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT THE OWNERS OF THE GLOBAL
BOND FUND GIVE INSTRUCTIONS TO VOTE FOR THE APPROVAL OF CLASSIFICATION OF THE
---
FUND AS "NON-DIVERSIFIED."
----------------------------------
1 The Large Cap Growth and Real Estate Equity Funds are also proposed to be
classified as "non-diversified" under Proposals 6 and 7, respectively.
<PAGE>
PROPOSAL 6
APPROVAL OF CLASSIFICATION OF THE LARGE CAP GROWTH FUND AS A "NON-
DIVERSIFIED" FUNDS
At its June 7, 2000 meeting, the Board of Trustees also unanimously
approved, and voted to recommend that Owners approve, John Hancock's
recommendations to change the classification of the Large Cap Growth Fund from
"diversified" to "non-diversified".
Discussion
A current investment policy of the Large Cap Growth Fund requires the Fund
to be "diversified." This requirement is satisfied if at least 75% of the market
value of the Fund's total assets is invested in cash and cash items (including
receivables), Government securities, securities of other investment companies,
and other securities. For purposes of this calculation, investments with respect
of any one issuer (other than investments in the United States Government or its
agency or instrumentality) are limited to an amount not greater in value than 5%
of the value of the total assets of such issuer and to not more than 10% of the
outstanding voting securities of such issuer.
In general, "non-diversified" Funds are less restricted in the extent to
which they may invest more than 5% of their assets in any issuer or purchase
more than 10% of the voting securities of any issuer. Because a relatively high
percentage of a non-diversified Fund's assets may be invested in the obligations
of a limited number of issuers, the value of that Fund's shares may be more
volatile and more susceptible to any single economic, political, or regulatory
event, or to credit and market risks associated with a single issuer, than would
the shares of a diversified Fund. Three other Funds of the Trust, namely the
Large Cap Aggressive Growth, Mid Cap Growth and Global Balanced Funds, are
currently "non-diversified." The remainder are "diversified."1
In making its recommendations, John Hancock noted that the domestic equity
market has evolved such that a significant number of individual issuers
represent close to or more than 5% of the relevant market or appropriate equity
market benchmark. For the Large Cap Growth Fund, the appropriate benchmark is
the Russell 1000 Growth Index. As of June 2000, the top 10 securities in this
benchmark represented over 39% of the total index. Therefore, it has become
increasingly difficult for the Large Cap Growth Fund to remain a "diversified"
fund and still follow its strategy of maintaining risk and industry
characteristics similar to the index.
Trustees' Recommendation
The Board of Trustees believes that the proposed change of the Large Cap
Growth Fund's classification to "non-diversified", and the corresponding
modification of the Fund's investment policy, is in the best interests of the
Owners of the Fund.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT THE OWNERS OF THE LARGE
CAP GROWTH FUND GIVE INSTRUCTIONS TO VOTE FOR THE APPROVAL OF CLASSIFICATION OF
---
THE FUND AS "NON-DIVERSIFIED."
----------------------------
2 The Global Bond and Real Estate Equity Funds are also proposed to be
classified as "non-diversified" under Proposals 5 and 7, respectively.
<PAGE>
PROPOSAL 7
APPROVAL OF CLASSIFICATION OF THE REAL ESTATE EQUITY FUND AS A "NON-
DIVERSIFIED" FUND
At its June 7, 2000 meeting, the Board of Trustees also unanimously
approved, and voted to recommend that Owners approve, John Hancock's
recommendations to change the classification of the Real Estate Equity Fund from
"diversified" to "non-diversified".
Discussion
A current investment policy of the Real Estate Equity Fund requires the
Fund to be "diversified." This requirement is satisfied if at least 75% of the
market value of the Fund's total assets is invested in cash and cash items
(including receivables), Government securities, securities of other investment
companies, and other securities. For purposes of this calculation, investments
with respect of any one issuer (other than investments in the United States
Government or its agency or instrumentality) are limited to an amount not
greater in value than 5% of the value of the total assets of such issuer and to
not more than 10% of the outstanding voting securities of such issuer.
In general, "non-diversified" Funds are less restricted in the extent to
which they may invest more than 5% of their assets in any issuer or purchase
more than 10% of the voting securities of any issuer. Because a relatively high
percentage of a non-diversified Fund's assets may be invested in the obligations
of a limited number of issuers, the value of that Fund's shares may be more
volatile and more susceptible to any single economic, political, or regulatory
event, or to credit and market risks associated with a single issuer, than would
the shares of a diversified Fund. Three other Funds of the Trust, namely the
Large Cap Aggressive Growth, Mid Cap Growth and Global Balanced Funds, are
currently "non-diversified." The remainder are "diversified."2
In making its recommendations, John Hancock noted that the domestic equity
market has evolved such that a significant number of individual issuers
represent close to or more than 5% of the relevant market or appropriate equity
market benchmark. For the Real Estate Equity Fund, the appropriate benchmark is
the Wilshire Real Estate Equities Securities Index. As of June 2000, the top 10
securities in this benchmark represented over 35% of the total index. Therefore,
it has become increasingly difficult for the Real Estate Equity Fund to remain a
"diversified" fund and still follow its strategies of maintaining risk, style
and industry characteristics similar to the public equity real estate market and
maintaining broad exposure to key property sectors.
Trustees' Recommendation
The Board of Trustees believes that the proposed change of the Real Estate
Equity Fund's classification to "non-diversified", and the corresponding
modification of the Fund's investment policy, is in the best interests of the
Owners of the Fund.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT THE OWNERS OF THE REAL
ESTATE EQUITY FUND GIVE INSTRUCTIONS TO VOTE FOR THE APPROVAL OF CLASSIFICATION
---
OF THE FUND AS "NON-DIVERSIFIED."
----------------------------
3 The Global Bond and Large Cap Growth Funds are also proposed to be classified
as "non-diversified" under Proposals 5 and 6, respectively.
<PAGE>
PROPOSAL 8
MODIFICATION TO THE INVESTMENT RESTRICTIONS OF THE LARGE CAP GROWTH
FUND TO PERMIT INVESTMENTS IN RESTRICTED SECURITIES
At its June 7, 2000 meeting, the Board of Trustees also unanimously
approved, and voted to recommend that Owners approve, a change in the investment
restrictions of the Large Cap Growth Fund to allow the Fund to purchase
"restricted" securities, including those eligible for resale to qualified
institutional buyers under Rule 144A of the Securities Act of 1933.
If approved by Owners, the Large Cap Growth Fund would have authority to
invest in securities of a type commonly referred to as "restricted," including
Rule 144A securities for the reasons and subject to the limitations set forth
below.
Discussion
As an open-end investment company, the Trust is limited in the amount of
illiquid securities that it may own because such securities may present problems
of accurate valuation and it is possible that the Trust could have difficulty
satisfying redemptions within seven days as required under the Investment
Company Act of 1940. In general, an illiquid security is one which cannot be
sold in the ordinary course of business within seven days at approximately the
value at which the Trust has valued the security. Illiquid securities generally
include securities which are subject to legal or contractual delays in or
restrictions on resale (commonly referred to as "restricted" securities).
However, the securities markets are evolving. For example, the markets for
various types of securities, including some corporate bonds and notes, are
almost exclusively institutional. These instruments are often either exempt from
registration or sold in transactions not requiring registration. Although these
securities may be legally classified as "restricted," institutional investors
will often justifiably rely on an efficient institutional market in which the
unregistered security can be readily resold. The fact that the securities may be
restricted because of legal or contractual restrictions on resale to the general
public will, therefore, not be dispositive of the liquidity of such investments.
In 1990, the SEC adopted Rule 144A to provide a safe harbor from
registration under the 1933 Act for the resale of privately placed securities to
qualified buyers. Rule 144A has increased the efficiency and liquidity of the
U.S. private placement market. Issuers that qualify for reliance on the Rule now
have access to a larger sophisticated investor base composed of both traditional
private and public institutional investors.. The size of Rule 144A issues is
larger than that of many traditional private placements.
In general, the Rule 144A market expands the opportunities beyond what was
available to the Fund when the Fund's investment restrictions were first put in
place. Given the growth in this market and its improving liquidity, John Hancock
believes that the Fund should be allowed to buy 144A securities. John Hancock or
the Fund's sub-investment manager will in each case determine whether any Rule
144A securities should be deemed to be illiquid. If so, those securities, plus
any other illiquid securities owned by the Fund, may not, at the time of
purchase, exceed 15% of the Fund's net assets.
Trustees' Recommendation
The Board of Trustees believes that the proposed changes to the Large Cap
Growth Fund's investment restrictions is in the best interests of the Owners of
the Fund.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT THE OWNERS OF THE LARGE
CAP GROWTH FUND GIVE INSTRUCTIONS TO VOTE FOR THE APPROVAL OF THE AFOREMENTIONED
---
CHANGES IN THE INVESTMENT RESTRICTIONS TO PERMIT FUND INVESTMENTS IN RESTRICTED
SECURITIES.
<PAGE>
PROPOSAL 9
MODIFICATION TO THE INVESTMENT RESTRICTIONS OF THE REAL ESTATE EQUITY
FUND TO PERMIT INVESTMENTS IN RESTRICTED SECURITIES
At its June 7, 2000 meeting, the Board of Trustees also unanimously
approved, and voted to recommend that Owners approve, a change in the investment
restrictions of the Real Estate Equity Fund to allow the Fund to purchase
"restricted"securities, including those eligible for resale to qualified
institutional buyers under Rule 144A of the Securities Act of 1933.
If approved by Owners, the Real Estate Equity Fund would have authority to
invest in securities of a type commonly referred to as "restricted," including
Rule 144A securities, for the reasons and subject to the limitations set forth
below.
Discussion
As an open-end investment company, the Trust is limited in the amount of
illiquid securities that it may own because such securities may present problems
of accurate valuation and it is possible that the Trust could have difficulty
satisfying redemptions within seven days as required under the Investment
Company Act of 1940. In general, an illiquid security is one which cannot be
sold in the ordinary course of business within seven days at approximately the
value at which the Trust has valued the security. Illiquid securities generally
include securities which are subject to legal or contractual delays in or
restrictions on resale (commonly referred to as "restricted" securities).
However, the securities markets are evolving. For example, the markets for
various types of securities, including some corporate bonds and notes, are
almost exclusively institutional. These instruments are often either exempt from
registration or sold in transactions not requiring registration. Although these
securities may be legally classified as "restricted," institutional investors
will often justifiably rely on an efficient institutional market in which the
unregistered security can be readily resold. The fact that the securities may be
restricted because of legal or contractual restrictions on resale to the general
public will, therefore, not be dispositive of the liquidity of such investments.
In 1990, the SEC adopted Rule 144A to provide a safe harbor from
registration under the 1933 Act for the resale of privately placed securities to
qualified buyers. Rule 144A has increased the efficiency and liquidity of the
U.S. private placement market. Issuers that qualify for reliance on the Rule now
have access to a larger sophisticated investor base composed of both traditional
private and public institutional investors. The size of Rule 144A issues is
larger than that of many traditional private placements.
In general, the Rule 144A market expands the opportunities beyond what was
available to the Fund when the Fund's investment restrictions were first put in
place. Given the growth in this market and its improving liquidity, John Hancock
believes that the Fund should be allowed to buy 144A securities. John Hancock or
the Fund's sub-investment manager will in each case determine whether any Rule
144A securities should be deemed to be illiquid. If so, those securities, plus
any other illiquid securities owned by the Fund, may not, at the time of
purchase, exceed 15% of the Fund's net assets.
Trustees' Recommendation
The Board of Trustees believes that the proposed changes to the Real Estate
Equity Fund's investment restrictions is in the best interests of the Owners of
the Fund.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT THE OWNERS OF THE REAL
ESTATE EQUITY FUND GIVE INSTRUCTIONS TO VOTE FOR THE APPROVAL OF THE
---
AFOREMENTIONED CHANGES IN THE INVESTMENT RESTRICTIONS TO PERMIT FUND INVESTMENTS
IN RESTRICTED SECURITIES.
<PAGE>
PROPOSAL 10
MODIFICATION TO INVESTMENT POLICIES TO PERMIT INVESTMENTS BY THE LARGE
CAP GROWTH FUND IN FINANCIAL FUTURES
At its June 7, 2000 meeting, the Board of Trustees also unanimously
approved, and voted to recommend that Owners of the Large Cap Growth Fund
approve, a change in the investment policies of the Trust to clearly allow the
Fund to purchase securities of a type commonly referred to as "financial
futures."
Discussion
A current investment policy of the Trust permits 22 funds3 other than the
Large Cap Growth Fund to invest in "financial futures." The term is used to
describe interest rate futures contracts, stock index futures contracts, and
currency futures contracts. Funds that invest in financial futures are also
generally authorized to buy and sell options on these contracts.
An interest rate futures contract is a contract to buy or sell specified
debt securities at a future time for a fixed price. A public market currently
exists for interest rate futures contracts on United States Treasury Bills,
United States Treasury Notes, bank certificates of deposit, and various other
domestic and foreign instruments and indexes.
Stock index futures contracts bind purchaser and seller to delivery at a
future date specified in the contract a cash amount equal to a multiple of the
difference between the value of a specified stock index on that date and a
settlement price specified by the contract. That is, the seller of the futures
contract must pay and the purchaser would receive a multiple of any excess of
the value of the index over the settlement price, and the purchaser must pay and
the seller would receive a multiple of any excess of the settlement price over
the value of the index. A public market currently exists for stock index futures
contracts based on the Standard & Poor's 500 Stock Index, the Standard & Poor's
Midcap Index, the New York Stock Exchange Composite Index, the Value Line Stock
Index, and various other domestic or foreign indexes.
A currency futures contract is a contract to buy or sell a specified amount
of another currency at a future time for a fixed price.
The writer of an option on a financial futures contract agrees either to
buy or sell a financial futures contract at a specified price, if the purchaser
exercises the option and thereby assumes the opposite position in the financial
futures contract. A "put" option obligates the option writer to buy a financial
futures contract upon exercise of the option by the purchaser. If the option
writer agrees to sell a financial futures contract at the option of the
purchaser, it is commonly called a "call" option. As with other types of
options, the party that writes the option receives a premium for doing so, and
the party that purchases an option pays a premium therefor. However, there is no
exercise (or strike) price, as such. Rather, if the value of the futures
contract moves against the writer of the option, so that the option is (or is
likely to be) exercised, the option writer, in effect, has the obligation to pay
those losses.
More specifically, an option written by an authorized fund on a financial
futures contract requires the fund to pay any amount by which the fluctuating
price of the underlying debt instrument or index exceeds (in the case of a call
option) or is less than (in the case of a put option) the price specified in the
futures contract to which the option relates. Therefore, if the price of the
debt instrument or stock index on which the futures contract is based increases
(in the case of a call option written by a fund) or decreases (in the
----------------------------
4 These are the Managed, Aggressive Balanced, Mid Cap Growth, American Leaders
Large Cap Value, Large Cap Value CORE, Large Cap Aggressive Growth, Large/Mid
Cap Value, Small/Mid Cap Growth, Small/Mid Cap CORE, Small Cap Growth, Global
Balanced, International Equity Index, International Equity, International
Opportunities II, Emerging Markets Equity, Short-Term Bond, Bond Index, Global
Bond, and High Yield Bond Funds. In addition, Proposal 11 seeks approval for the
Real Estate Equity Fund to invest in financial futures.
<PAGE>
case of a put option written by a fund), the fund may incur losses that exceed
the amount of the premium received by the fund for writing the option.
Financial futures are generally used as a hedge to protect against possible
changes in interest rates and security prices. For example, to hedge against the
possibility that interest rates or other factors may result in a general decline
in prices of equity securities of a type owned by them, authorized funds may
sell stock index futures contracts. Similarly, to hedge against the possibility
that increases in interest rates may adversely affect the market values of debt
securities held by them, authorized funds may enter into interest rate futures
sales contracts.
The purchase of a futures contract could also enable an authorized fund to
take the approximate economic equivalent of a substantial position in bonds or
equity securities. In this way, the purchase and sale of stock index and
interest rate futures can be used to maintain market exposure and manage cash
flows.
Under the proposal, the Large Cap Growth Fund would be authorized to invest
in financial futures contracts and options on such futures contracts for "bona
fide hedging" purposes (as defined in the regulations of the Commodity Futures
Trading Commission), and for other permissible purposes that are consistent with
the Fund's investment objective. The Fund will not purchase, sell or write
futures contracts or options thereon, other than for "bona fide hedging"
purposes, if immediately thereafter the Fund's initial margin deposits on such
outstanding non-hedging futures and options positions, plus the amount of
premiums paid by the Fund for such out-standing non-hedging options on futures
contracts, exceeds 5% of the market value of the Fund's net assets.
Trustees' Recommendation
The Board of Trustees believes that the proposed modification of investment
policies to clearly permit the Large Cap Growth Fund to invest in financial
futures is in the best interests of the Owners of that Fund.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT THE OWNERS OF THE LARGE
CAP GROWTH FUND GIVE INSTRUCTIONS TO VOTE FOR THE APPROVAL OF THE MODIFICATION
---
OF INVESTMENT POLICIES TO PERMIT INVESTMENTS IN FINANCIAL FUTURES.
<PAGE>
PROPOSAL 11
MODIFICATION TO INVESTMENT POLICIES TO PERMIT INVESTMENTS BY THE REAL
ESTATE EQUITY FUND IN FINANCIAL FUTURES
At its June 7, 2000 meeting, the Board of Trustees also unanimously
approved, and voted to recommend that Owners of the Real Estate Equity Fund
approve, a change in the investment policies of the Trust to clearly allow the
Fund to purchase securities of a type commonly referred to as "financial
futures."
Discussion
A current investment policy of the Trust permits 22 funds4 other than the
Real Estate Equity Fund to invest in "financial futures." The term is used to
describe interest rate futures contracts, stock index futures contracts, and
currency futures contracts. Funds that invest in financial futures are also
generally authorized to buy and sell options on these contracts.
An interest rate futures contract is a contract to buy or sell specified
debt securities at a future time for a fixed price. A public market currently
exists for interest rate futures contracts on United States Treasury Bills,
United States Treasury Notes, bank certificates of deposit, and various other
domestic and foreign instruments and indexes.
Stock index futures contracts bind purchaser and seller to delivery at a
future date specified in the contract a cash amount equal to a multiple of the
difference between the value of a specified stock index on that date and a
settlement price specified by the contract. That is, the seller of the futures
contract must pay and the purchaser would receive a multiple of any excess of
the value of the index over the settlement price, and the purchaser must pay and
the seller would receive a multiple of any excess of the settlement price over
the value of the index. A public market currently exists for stock index futures
contracts based on the Standard & Poor's 500 Stock Index, the Standard & Poor's
Midcap Index, the New York Stock Exchange Composite Index, the Value Line Stock
Index, and various other domestic or foreign indexes.
A currency futures contract is a contract to buy or sell a specified amount
of another currency at a future time for a fixed price.
The writer of an option on a financial futures contract agrees either to
buy or sell a financial futures contract at a specified price, if the purchaser
exercises the option and thereby assumes the opposite position in the financial
futures contract. A "put" option obligates the option writer to buy a financial
futures contract upon exercise of the option by the purchaser. If the option
writer agrees to sell a financial futures contract at the option of the
purchaser, it is commonly called a "call" option. As with other types of
options, the party that writes the option receives a premium for doing so, and
the party that purchases an option pays a premium therefor. However, there is no
exercise (or strike) price, as such. Rather, if the value of the futures
contract moves against the writer of the option, so that the option is (or is
likely to be) exercised, the option writer, in effect, has the obligation to pay
those losses.
More specifically, an option written by an authorized fund on a financial
futures contract requires the fund to pay any amount by which the fluctuating
price of the underlying debt instrument or index exceeds (in the case of a call
option) or is less than (in the case of a put option) the price specified in the
futures contract to which the option relates. Therefore, if the price of the
debt instrument or stock index on which the futures contract is based increases
(in the case of a call option written by a fund) or decreases (in the
----------------------------
5 These are the Managed, Aggressive Balanced, Mid Cap Growth, American Leaders
Large Cap Value, Large Cap Value CORE, Large Cap Aggressive Growth, Large/Mid
Cap Value, Small/Mid Cap Growth, Small/Mid Cap CORE, Small Cap Growth, Global
Balanced, International Equity Index, International Equity, International
Opportunities II, Emerging Markets Equity, Short-Term Bond, Bond Index, Global
Bond, and High Yield Bond Funds. In addition, Proposal 10 seeks approval for the
Large Cap Growth Fund to invest in financial futures.
<PAGE>
case of a put option written by a fund), the fund may incur losses that exceed
the amount of the premium received by the fund for writing the option.
Financial futures are generally used as a hedge to protect against possible
changes in interest rates and security prices. For example, to hedge against the
possibility that interest rates or other factors may result in a general decline
in prices of equity securities of a type owned by them, authorized funds may
sell stock index futures contracts. Similarly, to hedge against the possibility
that increases in interest rates may adversely affect the market values of debt
securities held by them, authorized funds may enter into interest rate futures
sales contracts.
The purchase of a futures contract could also enable an authorized fund to
take the approximate economic equivalent of a substantial position in bonds or
equity securities. In this way, the purchase and sale of stock index and
interest rate futures can be used to maintain market exposure and manage cash
flows.
Under the proposal, the Real Estate Equity Fund would be authorized to
invest in financial futures contracts and options on such futures contracts for
"bona fide hedging" purposes (as defined in the regulations of the Commodity
Futures Trading Commission), and for other permissible purposes that are
consistent with the Fund's investment objective. The Fund will not purchase,
sell or write futures contracts or options thereon, other than for "bona fide
hedging" purposes, if immediately thereafter the Fund's initial margin deposits
on such outstanding non-hedging futures and options positions, plus the amount
of premiums paid by the Fund for such out-standing non-hedging options on
futures contracts, exceeds 5% of the market value of the Fund's net assets.
Trustees' Recommendation
The Board of Trustees believes that the proposed modification of investment
policies to clearly permit the Real Estate Equity Fund to invest in financial
futures is in the best interests of the Owners of that Fund.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT THE OWNERS OF THE REAL
ESTATE EQUITY FUND GIVE INSTRUCTIONS TO VOTE FOR THE APPROVAL OF THE
---
MODIFICATION OF INVESTMENT POLICIES TO PERMIT INVESTMENTS IN FINANCIAL FUTURES.
<PAGE>
Appendix A
RECORD DATE AND VOTING SHARES
As of the close of business on July 30, 2000 ("the record date"), there
were the following shares outstanding:
--------------------------------------------------------------------------------
Name of Fund Number of Shares
------------ ----------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Real Estate Equity
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
International Opportunities
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
International Opportunities II
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Fundamental Growth
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Global Bond
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Large Cap Growth
--------------------------------------------------------------------------------
Each Trust share is entitled to one vote, and fractional votes will be
counted.
The number of Trust Shares attributable to each Owner of a variable life
insurance policy ("policy") is determined by dividing, as of the record date of
the Meeting, a policy's cash (or account) value (less any outstanding
indebtedness) in the designated subaccount of the applicable Account by the net
asset value of one share in the corresponding Fund in which the assets of the
subaccount are invested. The number of Trust shares attributable to each Owner
of a variable annuity contract ("contract") is determined by dividing, as of the
record date of the Meeting, the value of the Accumulation Shares under a
contract (or for each contract under which annuity payments have commenced, the
equivalent determined by dividing the contract reserves by the value of one
Accumulation Share) in the designated subaccount of the applicable Account by
the net asset value of one share in the corresponding Fund in which the assets
of the subaccount are invested.
As of the close of business on July 30, 2000, John Hancock, JHVLICO and IPL
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:
--------------------------------------------------------------------------------
Percentage of Total
Name of Fund Number of Shares Shares Outstanding
------------ ---------------- -------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Real Estate Equity
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
International Opportunities
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
International Opportunities II
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Fundamental Growth
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Global Bond
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Large Cap Growth
--------------------------------------------------------------------------------
<PAGE>
Appendix B-1
PROPOSAL 1 - FORMS OF MULTI-MANAGER SUB-INVESTMENT
MANAGEMENT AGREEMENT
The MSDW Sub-Investment Management Agreement to be voted upon begins on the
following page. It will be dated and signed on or within a reasonable time after
approval by Owners of the Real Estate Equity Fund.
The IIA Sub-Investment Management Agreement to be voted upon begins on page
40. It will be dated and signed on or within a reasonable time after approval by
Owners of the Real Estate Equity Fund.
<PAGE>
(Real Estate Equity Fund)
SUB-INVESTMENT MANAGEMENT AGREEMENT
AMONG
JOHN HANCOCK VARIABLE SERIES TRUST I
MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT INC.
AND
JOHN HANCOCK LIFE INSURANCE COMPANY
<PAGE>
SUB-INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of the ___ day of ___, 2000 by and among John Hancock
Variable Series Trust I, a Massachusetts business trust (the "Trust"), Morgan
Stanley Dean Witter Investment Management Inc., a Delaware corporation ("Morgan
Stanley"), and John Hancock Life Insurance Company, a Massachusetts corporation
("JHLICO").
WHEREAS, the Trust is organized and is 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, JHLICO and Morgan Stanley are each engaged in the business of
rendering investment advice under the Investment Advisers Act of 1940; and
WHEREAS, the Trust is authorized to issue shares of capital stock in
separate classes with each such class representing interests in a separate
portfolio of securities and other assets; and
WHEREAS, the Trust offers shares in several series (collectively referred
to as the "Funds"), each of which pursues its investment objectives through
separate investment policies; and
WHEREAS, the Trust has retained JHLICO to render investment management
services to the Trust pursuant to an Investment Management Agreement dated as of
April 12, 1988 (the "Investment Management Agreement"), pursuant to which it may
contract with one or more sub-managers with respect to the assets of the Real
Estate Equity Fund (the "Subject Fund"), one of the Funds of the Trust.
NOW, THEREFORE, WITNESSETH: That it is hereby agreed between the parties
hereto as follows:
1. APPOINTMENT OF SUB-MANAGER
(a) Subject Fund. Morgan Stanley is hereby appointed and Morgan Stanley
------------
hereby accepts the appointment to act as an investment adviser and manager to
the Subject Fund for the period and on the terms herein set forth, for the
compensation herein provided.
(b) Incumbency Certificates. Morgan Stanley shall furnish to JHLICO,
-----------------------
immediately upon execution of this Agreement, a certificate of a senior officer
of Morgan Stanley setting forth (by name and title, and including specimen
signatures) those officers of Morgan Stanley who are authorized to make
investment decisions for the Subject Fund pursuant to the provisions of this
Agreement. Morgan Stanley shall promptly provide supplemental certificates, as
needed, to reflect all changes with respect to such authorized officers for the
Subject Fund. On behalf of the Trust, JHLICO shall instruct the custodian for
the Subject Fund to accept instructions with respect to the Subject Fund from
the officers of Morgan Stanley so named.
<PAGE>
(d) Independent Contractor. Morgan Stanley 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 Trust.
(e) Morgan Stanley's Representations. Morgan Stanley represents, warrants
--------------------------------
and agrees (i) that it is registered as an investment adviser under the
Investment Advisers Act of 1940, and that it will remain so registered and will
comply with the requirements of said Act, and the rules and regulations
thereunder, at all times while this Agreement remains in effect, (ii) that it
will promptly notify JHLICO if the foregoing representation and agreement shall
cease to be true (in any material respect) at any time during the term of this
Agreement, (iii) that it will promptly notify JHLICO of any material change in
the senior management or ownership of Morgan Stanley, or of any change in the
identity of the senior personnel of Morgan Stanley who manage the Subject Fund,
(iv) that it has adopted a code of ethics complying with the requirements of
Rule 17j-1 of the Securities and Exchange Commission (the "SEC") under the 1940
Act and has provided true and complete copies of such code to the Trust and to
JHLICO, and has adopted procedures designed to prevent violations of such code,
and (v) that it has furnished the Trust and JHLICO each with a copy of Morgan
Stanley's Form ADV, as most recently filed with the SEC, and will promptly
furnish updated copies at least annually.
2. PROVISION OF INVESTMENT MANAGEMENT SERVICES.
Morgan Stanley will provide for the Subject Fund's assets as may be
designated to it by JHLICO from time to time (the "Subject Assets") a continuing
and suitable investment program consistent with the investment policies,
objectives and restrictions of said Fund, as set forth in the Subject Fund's
current Prospectus and Statement of Additional Information. From time to time,
JHLICO or the Trust may provide Morgan Stanley in writing (including, without
limit, electronic communication) with additional or amended investment policies,
guidelines and restrictions. Morgan Stanley, as a sub-manager, will manage the
investment and reinvestment of the Subject Assets, and perform the functions set
forth below, subject to the overall supervision, direction, control and review
of JHLICO and the Board of Trustees of the Trust, consistent with the applicable
investment policies, guidelines and restrictions, the provisions of the Trust's
Declaration of Trust, Bylaws, prospectus, statement of additional information
(each as in effect from time to time), 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, each
as delivered to Morgan Stanley in writing by JHLICO or the Trust from time to
time). In the event that, in addition to Morgan Stanley, other investment
advisers or sub-managers are appointed by the Trust or JHLICO to render
investment advisory services to the Subject Fund, JHLICO and the Trust each
acknowledges and agrees that Morgan Stanley will not be held responsible for
such other investment advisers' or sub-managers' compliance with policies and
limitations applicable to the Subject Fund. By its signature below, Morgan
Stanley acknowledges receipt of a copy of the Trust's Declaration of Trust,
Bylaws, prospectus, and statement of additional information, each as in effect
on the date of this Agreement.
Morgan Stanley will, at its own expense:
34
<PAGE>
(a) advise the Subject Fund in connection with investment policy decisions
regarding the Subject Assets and, upon request, furnish the Trust with research,
economic and statistical data in connection with investments and investment
policies for the Subject Assets;
(b) submit such reports and information as JHLICO or the Trust's Board of
Trustees may reasonably request, to assist the custodian in its determination of
the market value of securities held in the Subject Assets;
(c) place orders for purchases and sales of portfolio investments for the
Subject Assets;
(d) give instructions to the Subject Fund's custodian concerning the
delivery of securities and transfer of cash for the Subject Assets;
(e) maintain and preserve the records relating to its activities hereunder
required by the 1940 Act to be maintained and preserved by the Trust, to the
extent not maintained by the custodian, transfer agent or JHLICO;
(f) at the close of business each day, provide JHLICO and the custodian
with copies of trade tickets, and a daily summary sufficient to verify trade
data received by the custodian from third parties for each transaction effected
for the Subject Assets;
(g) as soon as practicable following the end of each calendar month,
provide JHLICO with written statements showing all transactions effected for the
Subject Assets during the month, a summary listing all investments held in the
Subject Assets as of the last day of the month, and such other information as
JHLICO may reasonably request in connection with the accounting services that
JHLICO provides for the Subject Fund; and
(h) absent specific instructions to the contrary provided to it by JHLICO
and subject to Morgan Stanley's receipt of all necessary voting materials, vote
all proxies with respect to investments of the Subject Assets in accordance with
Morgan Stanley's proxy voting policy as most recently provided to JHLICO.
On its own initiative, Morgan Stanley will apprise JHLICO and the Trust of
important political and economic developments materially affecting the
marketplace or the Subject Assets, and will furnish JHLICO and the Trust's Board
of Trustees from time to time such information as is appropriate for this
purpose. Morgan Stanley will also make its personnel available in Boston or
other reasonable locations as often as annually, and at reasonable times, to
discuss the Subject Assets and Morgan Stanley's management thereof, to educate
JHLICO sales personnel with respect thereto, and for such other purposes as the
Trust or JHLICO may reasonably request.
The Trust and JHLICO will provide timely information to Morgan Stanley
regarding such matters as purchases and redemptions of shares in the Subject
Fund and the cash requirements of, and cash available for investment in, the
Subject Fund. JHLICO will timely provide Morgan Stanley with copies of monthly
accounting statements for the Subject Fund, and such other information
(including, without limitation, reports concerning the classification of
portfolio securities for purposes of Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code") and Treasury
35
<PAGE>
Regulations Section 1.817) as may be reasonably necessary or appropriate in
order for Morgan Stanley to perform its responsibilities hereunder.
Morgan Stanley may perform its services hereunder through its affiliates,
employees, officers or agents, and neither JHLICO nor the Trust shall be
entitled to the advice, recommendation or judgment of any specific person;
provided, however, that the persons identified in the prospectus relating to the
Subject Assets shall perform the portfolio management duties described therein
until Morgan Stanley notifies JHLICO that one or more other affiliates,
employees, officers or agents identified in such notice shall assume such duties
as of a specific date.
3. ALLOCATION OF EXPENSES.
Each party to this Agreement shall bear the costs and expenses of
performing its obligations hereunder. In this regard, the Trust specifically
agrees to assume the expense of:
(a) brokerage commissions for transactions in the portfolio investments of
the Trust, including the Subject Assets, and similar fees and charges for the
acquisition, disposition, lending or borrowing of such portfolio investments;
(b) custodian fees and expenses;
(c) all taxes, including issuance and transfer taxes, and reserves for
taxes payable by the Trust to federal, state or other governmental agencies;
(d) interest payable on the Trust's borrowings; and
(e) obtaining licenses and/or other forms of authorization to invest in
various countries.
Nothing in this Agreement shall alter the allocation of expenses and costs
agreed upon between the Trust and JHLICO in the Investment Management Agreement
or any other agreement to which they are parties.
4. SUB-ADVISORY FEES.
For all of the services rendered with respect to the Subject Assets as
herein provided, JHLICO shall pay to Morgan Stanley a fee (for the payment of
which the Trust shall have no obligation or liability), based on the Current Net
Assets (as defined below) of the Subject Assets, as set forth in Schedule I
attached hereto and made a part hereof. Such fee shall be accrued daily and
payable monthly, as soon as practicable after the last day of each calendar
month. In the case of termination of this Agreement with respect to the Subject
Assets during any calendar month, the fee with respect to the Subject Assets
accrued to but excluding the date of termination shall be paid promptly
following such termination. For purposes of computing the amount of advisory fee
accrued for any day, "Current Net Assets" shall mean the net assets of the
Subject Assets as of the most recent preceding day for which the Subject Fund's
net assets were computed.
36
<PAGE>
5. PORTFOLIO TRANSACTIONS.
In connection with the investment and reinvestment of the Subject Assets,
Morgan Stanley is authorized to select the brokers or dealers that will execute
purchase and sale transactions for the Subject Assets and to use its best
efforts to obtain the most favorable price and execution with respect to all
such purchases and sales of portfolio securities for said Subject Assets. Such
brokers or dealers may be affiliates of Morgan Stanley, provided such
transactions comply with the 1940 Act and the procedures approved by the Trust's
Board of Trustees. Morgan Stanley 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 Subject Fund and its
shareholders, Morgan Stanley shall have the right subject to the control of the
Board of Trustees, and to the extent authorized by the Securities Exchange Act
of 1934, to follow a policy of selecting brokers who furnish brokerage and
research services to the Subject Fund and Morgan Stanley, and who may charge a
higher commission rate to the Subject Fund than may result when allocating
brokerage solely on the basis of seeking the most favorable price and execution.
Morgan Stanley shall determine in good faith that any such higher cost was
reasonable in relation to the value of the brokerage and research services
provided to Morgan Stanley with respect to the Subject Assets.
Morgan Stanley will not retain, but shall pay over or credit to the Subject
Fund, any tender offer solicitation fees or similar payments received in
connection with the tender of investments of the Subject Fund. The foregoing
sentence, however, shall not prevent affiliates of Morgan Stanley from receiving
fees or payments in connection with transactions in which such affiliates have
been retained to act as financial adviser, dealer, manager or other capacity.
6. OWNERSHIP OF INFORMATION, RECORDS, AND CONFIDENTIALITY.
The Trust shall own and control all records maintained hereunder by Morgan
Stanley on the Trust's behalf and, in the event of termination of this Agreement
with respect to the Subject Assets for any reason, all records relating to the
Subject Fund shall be promptly returned to the Trust, free from any claim or
retention of rights by Morgan Stanley, provided that (subject to the last
paragraph of this Section 6) Morgan Stanley may retain copies of such records.
Morgan Stanley also agrees, upon request of the Trust, promptly to surrender
such books and records or, at its expense, copies thereof, to the Trust or make
such books and records available for audit or inspection, during normal business
hours, by representatives of regulatory authorities or other persons reasonably
designated by the Trust. Morgan Stanley 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, and to supply
all information requested by any insurance regulatory authorities to determine
whether applicable insurance laws and regulations are being complied with.
Morgan Stanley shall supply the Board of Trustees and officers of the Trust and
JHLICO with all statistical information regarding investments made on behalf of
the Subject Assets which is reasonably required and requested by them and
reasonably available to Morgan Stanley.
Morgan Stanley 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 Trust or JHLICO has authorized such
disclosure, if such disclosure is expressly required by applicable federal or
state
37
<PAGE>
regulatory authorities, or if such information otherwise becomes available to
the public through no fault of Morgan Stanley.
7. LIABILITY; STANDARD OF CARE.
No provision of this Agreement shall be deemed to protect Morgan Stanley or
JHLICO against any liability to the Trust 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 or the Investment Management
Agreement, as applicable. Nor shall any provision hereof be deemed to protect
any trustee or officer of the Trust against any such liability to which he might
otherwise be subject by reason of any willful misfeasance, bad faith or
negligence in the performance his duties or the reckless disregard of his
obligations and duties.
Morgan Stanley shall employ only qualified personnel to manage the Subject
Assets; shall comply with all applicable laws and regulations in the discharge
of its duties under this Agreement; shall (as provided in Section 2 above)
comply with the investment policies, guidelines and restrictions of the Subject
Fund and with the provisions of the Trust's Declaration of Trust, Bylaws,
prospectus and statement of additional information; shall manage the Subject
Assets (subject to the receipt of, and based upon the information contained in,
periodic reports from JHLICO or the custodian concerning the classification of
portfolio securities for such purposes) as a regulated investment company in
accordance with Subchapter M of the , and Treasury Regulations Section
1.817-5(b); shall act at all times in the best interests of the Subject Fund;
and shall discharge its duties with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent person acting in a like
capacity and familiar with such matters would use in the conduct of a similar
enterprise. However, Morgan Stanley shall not be obligated to perform any
service not described in this Agreement, and shall not be deemed by virtue of
this Agreement to have made any representation or warranty that any level of
investment performance or level of investment results will be achieved by the
Subject Assets or the Subject Fund.
8. DURATION AND TERMINATION OF THIS AGREEMENT.
(a) Duration. This Agreement shall become effective on the date hereof.
--------
Unless terminated as herein provided, this Agreement shall remain in full force
and effect for two years from the date hereof and shall continue in full force
and effect thereafter so long as such continuance is approved at least annually
(a) by either the Board of Trustees of the Trust or by vote of a majority of the
outstanding voting shares of the Subject Fund, and (b) in either event by the
vote of a majority of the trustees of the Trust 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.
Any approval of this Agreement by the holders of a majority of the outstanding
shares of the Subject Fund shall be effective to continue this Agreement
notwithstanding (a) that this Agreement has not been approved by the holders of
a majority of the outstanding shares of any other Fund affected hereby, and (b)
that this Agreement has not been approved by the vote of a majority of the
outstanding shares of the Trust, 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
38
<PAGE>
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 at any time, without
-----------
payment of any penalty, by the Trust pursuant to a vote of the trustees of the
Trust or a vote of a majority of the outstanding shares of the Subject Fund,
which termination shall be effective immediately upon delivery of notice thereof
to Morgan Stanley and JHLICO. This Agreement may be terminated by Morgan Stanley
on at least ninety days' prior written notice to the Trust and JHLICO, and may
be terminated by JHLICO on at least ninety days' prior written notice to the
Trust and Morgan Stanley.
(c) Automatic Termination. This Agreement shall automatically and
---------------------
immediately terminate in the event of its assignment or if the Investment
Management Agreement is terminated.
9. SERVICES NOT EXCLUSIVE; USE OF MORGAN STANLEY'S NAME AND LOGO.
The services of Morgan Stanley to the Trust hereunder are not to be deemed
exclusive and it 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 Morgan Stanley 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 to
other investment advisory clients.
During the term of this Agreement, JHLICO and the Trust shall have the
non-exclusive and non-transferable right to use Morgan Stanley's name and logo
in all materials relating to the Subject Fund, including all prospectuses, proxy
statements, reports to shareholders, sales literature and other written
materials prepared for distribution to shareholders of the Trust or the public.
However, prior to distribution of any materials which refer to Morgan Stanley,
JHLICO shall consult with Morgan Stanley and shall furnish to Morgan Stanley a
copy of such materials. Morgan Stanley agrees to cooperate with JHLICO and to
review such materials promptly. JHLICO shall not distribute such materials if
Morgan Stanley reasonably objects in writing, within five (5) business days of
its receipt of such copy (or such other time as may be mutually agreed), to the
manner in which its name and logo are used.
10. AVOIDANCE OF INCONSISTENT POSITION.
Except as permitted by the 1940 Act, the rules promulgated thereunder, and
the procedures adopted by the Trust's Board of Trustees (as provided in writing
to Morgan Stanley), Morgan Stanley and its directors, officers and employees
will not act as principal or agent or receive any commission in connection with
the purchase and sale of portfolio securities of the Subject Fund. Nothing in
this Agreement, however, shall preclude the combination of orders for the sale
or purchase of portfolio securities of the Subject Fund with those for other
registered investment companies and portfolios or accounts of other advisory
clients managed by Morgan Stanley or its affiliates, if such orders are
allocated among the accounts in a manner deemed equitable by Morgan Stanley.
39
<PAGE>
11. 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 until approved specifically by (a) the Board of
Trustees of the Trust, or by vote of a majority of the outstanding shares of the
Subject Fund, and (b) by vote of a majority of those trustees of the Trust 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, unless otherwise
permitted by the SEC, the 1940 Act or the rules promulgated thereunder.
12. LIMITATION OF LIABILITY.
It is expressly agreed that the obligations of the Trust hereunder shall
not be binding upon any of the trustees, shareholders, officers, agents or
employees of the Trust personally, but only bind the trust property of the
Trust, as provided in the Trust's Declaration of Trust.
13. NOTICES
Notices and other communications required or permitted under this Agreement
shall be in writing, shall be deemed to be effectively delivered when actually
received, and may be delivered by US mail (first class, postage prepaid), by
facsimile transmission, by hand or by commercial overnight delivery service,
addressed as follows:
SUB-MANAGER: Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, NY 10021
Attn: General Counsel
Fax #: 212-762-7377
JHLICO: John Hancock Life Insurance Company
200 Clarendon Street
P.O. Box 111
Boston, MA 02117
Attention: Raymond F. Skiba
Fax #: 617-375-4835
TRUST: John Hancock Variable Series Trust I
200 Clarendon Street
P.O. Box 111
Boston, MA 02117
Attention: Raymond F. Skiba
Fax #: 617-375-4835
40
<PAGE>
14. 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 day first set forth above.
ATTEST: JOHN HANCOCK VARIABLE SERIES
TRUST I
By:
------------------------------------------
Title: Chairman
ATTEST: JOHN HANCOCK LIFE
INSURANCE COMPANY
By:
------------------------------------------
Title: Vice President (Investment and Pension)
ATTEST: MORGAN STANLEY DEAN WITTER
INVESTMENT MANAGEMENT INC.
By:
------------------------------------------
Title:
41
<PAGE>
SCHEDULE I
FEES
----
<TABLE>
<CAPTION>
Current Net Assets Under Management Sub-Advisory Fee
----------------------------------- ----------------
<S> <C>
On the first $50 million of the Subject Assets 70 basis points (0.70%) per annum
On the next $50 million of the Subject Assets 60 basis points (0.60%) per annum
On the next $100 million of the Subject Assets 50 basis points (0.50%) per annum
On the Subject Assets over $200 million 40 basis points (0.40%) per annum
</TABLE>
42
<PAGE>
(Real Estate Equity Fund)
SUB-INVESTMENT MANAGEMENT AGREEMENT
AMONG
JOHN HANCOCK VARIABLE SERIES TRUST I
INDEPENDENCE INVESTMENT ASSOCIATES, INC.
AND
JOHN HANCOCK LIFE INSURANCE COMPANY
<PAGE>
SUB-INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of the day of , 2000 by and among John Hancock Variable
Series Trust I, a Massachusetts business trust (the "Trust"), Independence
Investment Associates, Inc., a Delaware corporation ("IIA"), and John Hancock
Life Insurance Company, a Massachusetts corporation ("JHLICO").
WHEREAS, the Trust is organized and is 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, JHLICO and IIA are engaged in the business of rendering investment
advice under the Investment Advisers Act of 1940; and
WHEREAS, the Trust is authorized to issue shares of capital stock in
separate classes with each such class representing interests in a separate
portfolio of securities and other assets; and
WHEREAS, the Trust offers shares in several classes, one of which is
designated as the Real Estate Equity Fund, (together with all other classes
established by the Trust, the "Funds"), each of which pursues its investment
objectives through separate investment policies; and
WHEREAS, the Trust has retained JHLICO to render investment management
services to the Trust pursuant to an Investment Management Agreement dated as of
April 12, 1988 (the "Investment Management Agreement"), pursuant to which it may
contract with one or more investment advisers as provided for herein;
NOW, THEREFORE, WITNESSETH: That it is hereby agreed between the parties
hereto as follows:
1. APPOINTMENT OF SUB-MANAGER
(a) Subject Fund. IIA is hereby appointed and IIA hereby accepts the
------------
appointment to act as an investment adviser and manager to the Real Estate
Equity Fund (the "Subject Fund"), effective _____, 2000, for the period and on
the terms herein set forth, for the compensation herein provided.
<PAGE>
(b) Additional Subject Funds. In the event that the Trust and JHLICO desire
------------------------
to retain IIA to render investment advisory services hereunder for any other
Fund, they shall so notify IIA in writing. If it is willing to render such
services, IIA shall notify the Trust in writing, whereupon such Fund shall
become a Subject Fund hereunder.
(c) Independent Contractor. IIA 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 Trust.
2. PROVISION OF INVESTMENT MANAGEMENT SERVICES.
IIA will provide for such portion of the Subject Fund's assets as may be
designated to it by JHLICO from time to time (the "Subject Assets") a continuing
and suitable investment program consistent with the investment policies,
objectives and restrictions of said Fund, as furnished to IIA by JHLICO in
writing from time to time. IIA will manage the investment and reinvestment of
the the Subject Assets, and perform the functions set forth below, subject to
the overall supervision, direction, control and review of the Board of Trustees
of the Trust, JHLICO and, as in effect from time to time, the provisions of the
Trust's Declaration of Trust, Bylaws, prospectus, statement of additional
information (all as furnished to IIA by JHLICO in writing from time to time),
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, all as delivered to IIA in
writing by JHLICO or the Trust from time to time).
IIA will have investment discretion with respect to the Subject Assets and
will, at its own expense:
(a) upon request, advise the Trust in connection with investment decisions
to be made by its Board of Trustees or any committee thereof regarding the
Subject Assets and furnish the Trust with research, economic and statistical
data in connection with investments and investment policies for the Subject
Assets;
(b) submit such reports relating to the valuation of the Subject Assets as
the Trust's Board of Trustees may reasonably request;
<PAGE>
(c) place orders for purchases and sales of portfolio investments for the
Subject Assets;
(d) maintain and preserve the records relating to its activities hereunder,
including those records required by the 1940 Act to be maintained by it and
preserved by the Trust, to the extent not maintained by the Trust's custodian,
transfer agent or JHLICO; and
(e) subject to its receipt of all necessary voting materials, in its
discretion, as it deems advisable in the best interests of the Subject Fund,
vote, or cause to be voted, any or all proxies with respect to the Subject
Assets in accordance with IIA's proxy voting policy as most recently provided to
JHLICO.
The Trust and JHLICO will provide timely information to IIA regarding such
matters as purchases and redemptions of shares with respect to the Subject
Assets and the cash requirements of, and cash available for investment in, the
Subject Assets, and all information (including, without limitation, reports
concerning the classification of Fund securities for purposes of Subchapter M of
the Internal Revenue Code and Treasury Regulations Section 1.817) as may be
reasonably necessary or appropriate in order for IIA to perform its
responsibilities hereunder. On its own initiative, IIA will apprise JHLICO and
the Trust of important developments materially affecting the Subject Assets and
will furnish JHLICO and the Trust's Board of Trustees from time to time such
information as is appropriate for this purpose.
3. ALLOCATION OF EXPENSES.
Each party to this Agreement shall bear the costs and expenses of
performing its obligations hereunder. In this regard, the Trust specifically
agrees, without limitation, to assume the expense of:
(i) brokerage commissions for transactions in the portfolio investments of
the Subject Assets and similar fees, charges and expenses incurred in connection
with the acquisition, disposition, lending or borrowing of such portfolio
investments;
(ii) all taxes, including issuance and transfer taxes, and reserves for
taxes payable by the Trust to federal, state or other governmental agencies; and
(iii) interest payable on the Trust's borrowings.
<PAGE>
Nothing in this Agreement shall alter the allocation of expenses and costs
agreed upon between the Trust and JHLICO in the Investment Management Agreement
or any other agreement to which they are parties.
4. SUB-ADVISORY FEES.
For all of the services rendered as herein provided, JHLICO shall pay to
IIA a fee (for payment of which the Trust shall have no obligation or liability)
based on the Current Net Assets of the Subject Assets, as set forth in Schedule
I attached hereto and made a part hereof. The fee shall be accrued daily and
payable monthly, as soon as practicable after the last day of each calendar
month. In the case of termination of this Agreement with respect to the Subject
Assets during any calendar month, the fee with respect to such Subject Assets
accrued to termination shall be paid promptly following such termination.
"Current Net Assets" of the Subject Assets for purposes of computing the
amount of advisory fee accrued for any day shall mean the net assets of the
Subject Assets as of the most recent preceding day for which the Subject Assets'
net assets were computed.
5. FUND TRANSACTIONS.
In connection with the investment and reinvestment of the assets of the
Subject Fund, IIA is authorized to select the brokers or dealers that will
execute purchase and sale transactions for the Subject Assets and to use its
best efforts to obtain best execution with respect to all such purchases and
sales of Fund securities for said Subject Assets. IIA shall maintain records
reasonably adequate to demonstrate compliance with this requirement. Subject to
this primary requirement, and maintaining as its first consideration the
benefits to the Subject Fund and its shareholders, IIA shall have the right
subject to the control of the Board of Trustees, and to the extent authorized by
the Securities Exchange Act of 1934, to follow a policy of selecting brokers who
furnish brokerage and research services to the Subject Fund or to IIA, and who
charge a higher commission rate to the Subject Fund than may result when
allocating brokerage solely on the basis of seeking the most favorable price and
execution. IIA shall determine in
<PAGE>
good faith that such higher cost was reasonable in relation to the value of the
brokerage and research services provided.
The fees payable to IIA by JHLICO hereunder shall be reduced by any tender
offer solicitation fees or similar payments received by IIA, in connection with
the tender of investments of any Subject Assets (less direct expenses incurred
by IIA in connection with obtaining such fees or payments), to the extent not
otherwise paid or credited to the Subject Fund.
6. INFORMATION, RECORDS, AND CONFIDENTIALITY.
The Trust shall own and control all records maintained hereunder by IIA on
the Trust's behalf and, in the event of termination of this Agreement with
respect to the Subject Fund for any reason, all records (or true and complete
copies thereof) relating to that Fund shall be promptly returned to the Trust,
free from any claim or retention of rights by IIA. IIA also agrees, upon request
of the Trust, promptly to surrender such books and records or, at its expense,
copies thereof, to the Trust or make such books and records available for
inspection by representatives of regulatory authorities or other persons
reasonably designated by the Trust. IIA 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 and to supply
all information in its possession or reasonably available to it, requested by
any insurance regulatory authorities to determine whether all insurance laws and
regulations are being complied with.
IIA 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 (i) to John Hancock Life Insurance Company, or to any other
person or entity that directly or indirectly owns all or substantially all of
the IIA's capital stock; (ii) if the Trust or JHLICO has authorized such
disclosure, or (iii) if such disclosure is expressly required by applicable
federal or state regulatory authorities or court proceedings.
IIA shall supply the Board of Trustees and officers of the Trust and JHLICO
with all statistical information regarding investments which is reasonably
required by them and reasonably available to it.
<PAGE>
7. LIABILITY; STANDARD OF CARE.
No provision of this Agreement shall be deemed to protect IIA or JHLICO
against any liability to the Trust 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 or the Investment Management
Agreement, as applicable. Nor shall any provision hereof be deemed to protect
any trustee or officer of the Trust 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. IIA shall employ only qualified personnel to manage the
Subject Assets; shall comply with all applicable laws and regulations in the
discharge of its duties under this Agreement (provided that copies of any
applicable investment restrictions imposed by state insurance laws and
regulations shall be furnished to IIA by JHLICO); shall (as provided in Section
2 above) comply with the investment policies, guidelines and restrictions of the
Subject Fund and with the provisions of the Trust's Declaration of Trust,
Bylaws, prospectus and statement of additional information, all as furnished to
IIA by JHLICO in writing from time to time; shall manage the Subject Assets
(subject to the receipt of, and based upon the information contained in,
periodic reports from JHLICO or the custodian concerning the classification of
Fund securities for such purposes) as a regulated investment company in
accordance with subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"), and Treasury Regulations Section 1.817-5(b); shall act in its
management of the Subject Assets in the best interests of the Trust, subject
however to its duties to other clients as described in Section 9 below; and
shall discharge its duties with the care, skill, prudence and diligence under
the circumstances then prevailing that a prudent person acting in a like
capacity and familiar with such matters would use in the conduct of a similar
enterprise. However, IIA shall not be obligated to perform any service not
described in this Agreement, and shall not be deemed by virtue of this Agreement
to have made any representation or warranty that any level of investment
performance or level of investment results will be achieved.
<PAGE>
8. DURATION AND TERMINATION OF THIS AGREEMENT.
(a) Duration. This Agreement shall become effective with respect to the
--------
Real Estate Equity Fund on the date set forth in Section 1(a) hereof and, with
respect to any additional Subject Fund, on the date of receipt by the Trust of
notice from IIA in accordance with Paragraph 1(b) hereof that it is willing to
serve with respect to such Fund. 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 Subject Fund and, with respect to each
additional Subject Fund, until two years following the date on which such Fund
becomes a Subject Fund hereunder, and shall continue in full force and effect
thereafter with respect to each Subject Fund so long as such continuance with
respect to any such Fund is approved at least annually (a) by either the Board
of Trustees of the Trust or by vote of a majority of the outstanding voting
shares of such Fund, and (b) in either event by the vote of a majority of the
trustees of the Trust 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.
Any approval of this Agreement by the holders of a majority of the
outstanding shares of any Subject Fund shall be effective to continue this
Agreement with respect to any such Fund notwithstanding (A) that this Agreement
has not been approved by the holders of a majority of the outstanding shares of
any other Fund affected hereby, and (B) that this Agreement has not been
approved by the vote of a majority of the outstanding shares of the Trust,
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
-----------
Subject Fund at any time, without payment of any penalty, by the Trust pursuant
to a vote of the trustees of the Trust or a vote of a majority of the
outstanding shares of such Fund, which termination shall be effective
immediately upon delivery of notice thereof to IIA and JHLICO. This Agreement
may be terminated by IIA on at least sixty days' prior written notice to the
Trust and JHLICO, or by JHLICO on at least sixty days' prior written
<PAGE>
notice to the Trust and IIA. Transactions already entered into by IIA but not
yet settled at the time of any such termination shall settle for the account of
the Trust.
(c) Automatic Termination. This Agreement shall automatically and
---------------------
immediately terminate in the event of its assignment or if the Investment
Management Agreement is terminated.
9. SERVICES NOT EXCLUSIVE.
The services of IIA to the Trust are not to be deemed exclusive and it
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 IIA 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.
Nothing in this Agreement shall limit or restrict IIA or any of its
officers, affiliates or employees from buying, selling or trading in any
securities for its or their own accounts; provided, however, that no such person
shall purchase securities from or sell securities to the Subject Fund except as
permitted under applicable laws and regulations, including without limitation
the 1940 Act and the Investment Advisers Act of 1940, and the rules and
regulations thereunder. The Trust acknowledges that IIA and its officers,
affiliates and employees, and its and their other clients, may at any time have,
acquire, increase, decrease or dispose of positions in investments which are at
the same time being acquired or disposed of under this Agreement. IIA shall have
no obligation to acquire for the Subject Fund a position in any investment which
IIA, its officers, affiliates or employees may acquire for their own accounts or
for the account of another client, if in the sole discretion of IIA it is not
feasible or desirable to do so.
10. AVOIDANCE OF INCONSISTENT POSITION.
In connection with the purchase and sale of portfolio securities of the
Subject Assets, IIA and its directors, officers and employees will not act as
principal or agent or receive any commission, except as may be permitted under
applicable laws and regulations and the policies and procedures of the Trust in
<PAGE>
effect from time to time. Nothing in this Agreement, however, shall preclude the
combination of orders for the sale or purchase of portfolio securities of the
Subject Assets with those for other accounts managed by IIA or its affiliates,
if orders are allocated in a manner deemed equitable by IIA among the accounts
and at a price approximately averaged.
11. AMENDMENT.
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by a duly
authorized officer of the party or parties intending to be bound thereby. No
amendment of this Agreement shall be effective until approved specifically by
(a) the Board of Trustees of the Trust, or by vote of a majority of the
outstanding shares of the Subject Fund, and (b) by vote of a majority of those
Trustees of the Trust 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.
12. LIMITATION OF LIABILITY.
It is expressly agreed that the obligations of the Trust hereunder shall
not be binding upon any of the trustees, shareholders, officers, agents or
employees of the Trust personally, but only bind the trust property of the
Trust, as provided in the Trust's Declaration of Trust.
13. 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.
14. NOTICES.
Notices and other communications required or permitted under this Agreement
shall be in writing, shall be deemed to be effectively delivered when actually
received, and may be delivered by US mail
<PAGE>
(first class, postage prepaid), by facsimile transmission (provided that any
notice delivered by facsimile shall be followed promptly by a duplicate notice
delivered by another permitted method of delivery), by hand or by commercial
overnight delivery service, addressed as follows:
IIA: Independence Investment Associates, Inc.
53 State Street
Boston, MA 02109
Attention: President
Fax #: 617-228-8895
JHMLICO: John Hancock Life Insurance Company
200 Clarendon Street
P.O. Box 111
Boston, MA 02117
Attention: Raymond F. Skiba
Fax #: 617-375-4835
TRUST: John Hancock Variable Trust Trust I
200 Clarendon Street
P.O. Box 111
Boston, MA 02117
Attention: Raymond F. Skiba
Fax #: 617-375-4835
5. ASSIGNMENT.
This Agreement may not be assigned by any party, either in whole or in
part.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the day first set forth above.
JOHN HANCOCK VARIABLE SERIES TRUST I
By:
--------------------------------------
Title: Chairman and CEO
JOHN HANCOCK LIFE INSURANCE
COMPANY
By:
--------------------------------------
Title: Vice President
INDEPENDENCE INVESTMENT
ASSOCIATES, INC.
By:
--------------------------------------
Title:
<PAGE>
SCHEDULE I
FEES
Current Net Assets Under Management Sub-Advisory Fee
----------------------------------- ----------------
On the first $300 million 30 basis points (0.30%) per annum
On the next $500 million 25 basis points (0.25%) per annum
On amounts over $800 million 20 basis points (0.20%) per annum
<PAGE>
Appendix B-2
PROPOSALS 2 and 3 - SPECIMEN FORM OF SUB-INVESTMENT
MANAGEMENT AGREEMENT
The following agreement for the International Opportunities Fund will be signed
and dated on or within a reasonable time after the date of approval by Owners of
the International Opportunities Fund (Proposal 2).
The "final" agreement for the International Opportunities II Fund is
substantially similar to the foregoing, except for the name of the "Subject
Fund" and the date of the referenced Investment Management Agreement between the
Trust and JHLICO. This Sub-Investment Management Agreement will be signed and
dated on or within a reasonable time after the date of approval by Owners of the
International Opportunities II Fund. The interim agreement for the International
Opportunities II Fund is substantially similar to the "final" agreement, except
for the Schedule of Fees (Proposal 3).
<PAGE>
SUB-INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of the ___ day of __________, 2000 by and among John
Hancock Variable Series Trust I, a Massachusetts business trust (the "Trust"),
T. Rowe Price International, Inc., a Maryland corporation ("Adviser"), and John
Hancock Life Insurance Company, a Massachusetts corporation ("JHLICO").
WHEREAS, the Trust is organized and is 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, JHLICO and Adviser are each engaged in the business of rendering
investment advice under the Investment Adviser Act of 1940; and
WHEREAS, the Trust is authorized to issue shares of capital stock in
separate classes with each such class representing interests in a separate
portfolio of securities and other assets; and
WHEREAS, the Trust offers shares in several classes, one of which is
designated as the International Opportunities Fund, (together with all other
classes established by the Trust, collectively referred to as the "Funds"), each
of which pursues its investment objectives through separate investment policies;
and
WHEREAS, the Trust has retained JHLICO to render investment management
services to the Trust pursuant to an Investment Management Agreement dated as of
April 14, 1998 (the "Investment Management Agreement"), pursuant to which it may
contract with Adviser as a sub-manager as provided for herein;
NOW, THEREFORE, WITNESSETH: That it is hereby agreed between the parties
hereto as follows:
1. APPOINTMENT OF SUB-MANAGER
(a) Subject Fund. Adviser is hereby appointed and Adviser hereby accepts
------------
the appointment to act as investment adviser and manager to the International
Opportunities Fund (the "Subject Fund") for the period and on the terms herein
set forth, for the compensation herein provided.
(b) Additional Subject Funds. In the event that the Trust and JHLICO desire
------------------------
to retain Adviser to render investment advisory services hereunder for any other
Fund, they shall so notify Adviser in writing. If it is willing to render such
services, Adviser shall notify the Trust in writing, whereupon such Fund shall
become a Subject Fund hereunder.
(c) Incumbency Certificates. Adviser shall furnish to JHLICO, immediately
-----------------------
upon execution of this Agreement, a certificate of a senior officer of Adviser
setting forth (by name and title, and including specimen signatures) those
officers of Adviser who are authorized to make investment decisions for the
Subject Fund pursuant to the provisions of this Agreement. Adviser shall
promptly provide supplemental certificates in connection with each additional
Subject Fund (if any) and further supplemental certificates, as needed, to
reflect all changes
<PAGE>
with respect to such authorized officers for any Subject Fund. On behalf of the
Trust, JHLICO shall instruct the custodian for the Subject Fund to accept
instructions with respect to the Subject Fund from the officers of Adviser so
named.
(d) Independent Contractor. Adviser 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 Trust.
(e) Adviser' Representations. Adviser represents, warrants and agrees (I)
------------------------
that it is registered as an investment adviser under the Investment Adviser Act
of 1940, and that it will remain so registered and will comply with the
requirements of said Act, and the rules and regulations thereunder, at all times
while this Agreement remains in effect, (ii) that it will promptly notify JHLICO
if the foregoing representation and agreement shall cease to be true (in any
material respect) at any time during the term of this Agreement, (iii) that it
will promptly notify JHLICO of any material change in the senior management or
ownership of Adviser, or of any change in the identity of the personnel who
manage the Subject Fund, (iv) that it has adopted a code of ethics complying
with the requirements of Rule 17j-1 of the Securities and Exchange Commission
(the "SEC") under the 1940 Act and has provided true and complete copies of such
code to the Trust and to JHLICO, and has adopted procedures designed to prevent
violations of such code, and (v) that it has furnished the Trust and JHLICO each
with a copy of Adviser' Form ADV, as most recently filed with the SEC, and will
promptly furnish copies of each future amendment thereto.
2. PROVISION OF INVESTMENT MANAGEMENT SERVICES.
Adviser will provide for the Subject Fund a continuing and suitable
investment program consistent with the investment policies, objectives and
restrictions of said Fund, as established by the Trust and JHLICO. From time to
time, the Board of Trustees of the Trust may provide Adviser with additional or
amended investment policies, guidelines and restrictions. Adviser, as
sub-manager, will manage the investment and reinvestment of the assets in the
Subject Fund, and perform the functions set forth below, subject to the overall
supervision, direction, control and review of JHLICO and the Board of Trustees
of the Trust, consistent with the applicable investment policies, guidelines and
restrictions, the provisions of the Trust's Declaration of Trust, Bylaws,
prospectus, statement of additional information (each as in effect from time to
time), 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 Adviser in writing by
JHLICO or the Trust from time to time). By its signature below, Adviser
acknowledges receipt of a copy of the Trust's Declaration of Trust, Bylaws,
prospectus, and statement of additional information, each as in effect on the
date of this Agreement.
Adviser will, at its own expense:
(a) advise the Trust in connection with investment policy decisions to be
made by its Board of Trustees or any committee thereof regarding the Subject
Fund and, upon request, furnish the Trust with research, economic and
statistical data in connection with said Fund's investments and investment
policies;
(b) submit such reports and information as JHLICO or the Trust' s Board of
Trustees may reasonably request, to assist the custodian in its determination of
the market value of securities held in the Subject Fund to the extent such
securities are not otherwise priceable using an approved pricing service;
<PAGE>
(c) place orders for purchases and sales of portfolio investments for the
Subject Fund;
(d) give instructions to the Subject Fund's custodian concerning the
delivery of securities and transfer of cash for the Subject Fund in connection
with the settlement of trades;
(e) maintain and preserve the records relating to its activities hereunder
required by the 1940 Act to be maintained and preserved by the Trust, to the
extent not maintained by the custodian, transfer agent or JHLICO;
(f) each business day, provide JHLICO with a written daily statement of the
transactions effected for the Subject Fund on the previous business day;
(g) as soon as practicable following the end of each calendar month,
provide JHLICO with a summary listing of all investments held in such Fund as of
the last day of the month, together with the average purchase price per unit of
each investment and such other information as JHLICO may reasonably request; and
(h) absent specific instructions to the contrary provided to it by JHLICO
and subject to its receipt of all necessary voting materials, vote all proxies
with respect to investments of the Subject Fund in accordance with Adviser's
proxy voting policy as most recently provided to JHLICO.
The Trust and JHLICO will provide timely information to Adviser regarding
such matters as purchases and redemptions of shares in the Subject Fund and the
cash requirements of, and cash available for investment in, the Fund. JHLICO
will timely provide Adviser with copies of monthly accounting statements for the
Subject Fund, and such other information (including, without limitation, reports
concerning the classification of Portfolio securities for purposes of Subchapter
M of the Internal Revenue Code and Treasury Regulation Section 1.817) as may be
reasonably necessary or appropriate in order for Adviser to perform its
responsibilities hereunder. Adviser will apprise JHLICO and the Trust of
important political and economic developments materially affecting the
marketplace or the Subject Fund, and will furnish JHLICO and the Trust's Board
of Trustees from time to time such information as is appropriate for this
purpose. Adviser will also make such personnel as it deems appropriate available
in Boston or other reasonable locations as often as quarterly to discuss the
Subject Fund and Adviser's management thereof, to educate JHLICO sales personnel
with respect thereto, and for such other purposes as the Trust or JHLICO may
reasonably request.
3. ALLOCATION OF EXPENSES.
Each party to this Agreement shall bear the costs and expenses of
performing its obligations hereunder. In this regard, the Trust specifically
agrees to assume the expense of:
(a) brokerage commissions for transactions in the portfolio investments of
the Trust and similar fees and charges for the acquisition, disposition, lending
or borrowing of such portfolio investments;
(b) custodian fees and expenses;
<PAGE>
(c) all taxes, including issuance and transfer taxes, and reserves for
taxes payable by the Trust to federal, state or other governmental agencies; and
(d) interest payable on the Trust's borrowings. Nothing in this Agreement
shall alter the allocation of expenses and costs agreed upon between the Trust
and JHLICO in the Investment Management Agreement or any other agreement to
which they are parties.
4. SUB-ADVISORY FEES.
For all of the services rendered with respect to the Subject Fund as herein
provided, JHLICO shall pay to Adviser a fee (for the payment of which the Trust
shall have no obligation or liability), based on the Current Net Assets of the
Subject Fund, as set forth in Schedule I attached hereto and made a part hereof.
Such fee shall be accrued daily and payable monthly, as soon as practicable
after the last day of each calendar month. In the case of termination of this
Agreement with respect to the Subject Fund during any calendar month, the fee
with respect to such Fund accrued to but excluding the date of termination shall
be paid promptly following such termination. For purposes of computing the
amount of advisory fee accrued for any day, "Current Net Assets" shall mean the
Subject Fund's net assets as of the most recent preceding day for which the
Subject Fund's net assets were computed.
5. FUND TRANSACTIONS.
In connection with the investment and reinvestment of the assets of the
Subject Fund, Adviser is authorized to select the brokers or dealers that will
execute purchase and sale transactions for the Fund and to use reasonable
efforts to obtain the best available price and most favorable execution with
respect to all such purchases and sales of portfolio securities for said Fund.
Adviser shall maintain records adequate to demonstrate compliance with this
requirement. Adviser shall have the right subject to the control of the Trust's
Board of Trustees, and to the extent authorized by the Securities Exchange Act
of 1934, to follow a policy of selecting brokers who furnish brokerage and
research services to the Subject Fund or to Adviser, and who charge a higher
commission rate to the Subject Fund than may result when allocating brokerage
solely on the basis of seeking the most favorable price and execution. Adviser
shall determine in good faith that such higher cost was reasonable in relation
to the value of the brokerage and research services provided.
Adviser will not receive any tender offer solicitation fees or similar
payments in connection with the tender of investments of any Fund
6. OWNERSHIP OF INFORMATION, RECORDS, AND CONFIDENTIALITY.
The Trust shall own and control all records maintained hereunder by Adviser
on the Trust's behalf and, in the event of termination of this Agreement with
respect to any Fund for any reason, all records relating to that Fund shall be
promptly returned to the Trust, free from any claim or retention of rights by
Adviser, provided that (subject to the last paragraph of this Section 6) Adviser
may retain copies of such records. Adviser also agrees, upon request of the
Trust, promptly to surrender such books and records or, at its expense, copies
thereof, to the Trust or make such books and records available for audit or
inspection by representatives of regulatory authorities or other persons
reasonably designated by the Trust. Adviser 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. Adviser also
<PAGE>
agrees to supply all information in its possession required by any insurance
regulatory authorities to determine whether all insurance laws and regulations
are being complied with. Adviser shall supply the Board of Trustees and officers
of the Trust and JHLICO with all statistical information regarding the
investments in the Subject Fund which is reasonably required by them and
reasonably available to Adviser, provided that Adviser shall not be required to
incur any additional expense in connection therewith.
Adviser 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 Trust has authorized such disclosure, or
if such disclosure is expressly required by applicable federal or state
regulatory authorities.
7. LIABILITY; STANDARD OF CARE.
No provision of this Agreement shall be deemed to protect Adviser or JHLICO
against any liability to the Trust 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 or the Investment Management
Agreement. Nor shall any provision hereof be deemed to protect any trustee or
officer of the Trust against any such liability to which he might otherwise be
subject by reason of any willful misfeasance, bad faith or gross negligence in
the performance his duties or the reckless disregard of his obligations and
duties. Adviser shall employ only qualified personnel to manage the Subject
Fund; shall comply with all applicable laws and regulations in the discharge of
its duties under this Agreement; shall (as provided in Section 2 above) comply
with the investment policies, guidelines and restrictions of the Subject Fund
and with the provisions of the Trust's Declaration of Trust, Bylaws, prospectus
and statement of additional information; shall manage the Subject Fund (subject
to the receipt of and based upon the information contained in periodic reports
from JHLICO or the custodian concerning the classification of Portfolio
securities for such purposes) as a regulated investment company in accordance
with subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"),
and Treasury Regulations to Section 1.817-5(b). However, Adviser shall not be
obligated to perform any service not described in this Agreement, and shall not
be deemed by virtue of this Agreement to have made any representation or
warranty that any level of investment performance or level of investment results
will be achieved.
JHLICO agrees to hold harmless Adviser, its directors and officers and each
person if any, who controls Adviser within the meaning of Section 15 of the
Securities Act of 1933, as amended, from and against any and all losses, claims,
damages liabilities and expenses (including reasonable attorneys' fees and
expenses and costs of investigation) arising out of or based upon (a) the
failure of the Trust's Registration Statement, including the prospectus and
statement of additional information, or any amendment or supplement thereto, any
preliminary prospectus, any other written communication with investors or any
other submission to governmental bodies or self-regulatory bodies filed on or
subsequent to the date of this Agreement (collectively, the "Disclosure
Documents") to comply with the requirements of applicable federal and state
securities, insurance or other laws; (b) any untrue statement or alleged untrue
statement of a material fact contained in any Disclosure Document; or (c) any
omission or alleged omission in any Disclosure Document to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading; except insofar as such losses, claims damages, liabilities and
expenses arise out
<PAGE>
of or are based upon any such statement or omission which is in turn based upon
information furnished in writing to JHLICO or the Trust by Adviser and which
Adviser was informed or otherwise knew was to be used in the Disclosure
Document.
8. DURATION AND TERMINATION OF THIS AGREEMENT.
(a) Duration. This Agreement shall become effective with respect to the
--------
Subject Fund on the date hereof and, with respect to any additional Subject
Fund, on the date of receipt by the Trust of notice from Adviser in accordance
with Paragraph 1(b) hereof that it is willing to serve with respect to such
Fund. 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
Subject Fund and, with respect to each additional Subject Fund, until two years
following the date on which such Fund becomes a Subject Fund hereunder, and
shall continue in full force and effect thereafter with respect to each Subject
Fund so long as such continuance with respect to any such Fund is approved at
least annually (a) by either the Board of Trustees of the Trust or by vote of a
majority of the outstanding voting shares of such Fund, and (b) in either event
by the vote of a majority of the trustees of the Trust 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.
Any approval of this Agreement by the holders of a majority of the
outstanding shares of any Subject Fund shall be effective to continue this
Agreement with respect to any such Fund notwithstanding (A) that this Agreement
has not been approved by the holders of a majority of the outstanding shares of
any other Fund affected hereby, and (B) that this Agreement has not been
approved by the vote of a majority of the outstanding shares of the Trust,
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. The Trust may terminate this Agreement with respect to any
-----------
Fund at any time, without payment of any penalty, pursuant to a vote of the
trustees of the Trust or a vote of a majority of the outstanding shares of such
Fund, by giving written notice thereof to Advisers and to JHLICO. Any such
termination shall be effective as of the later of the date specified in such
notice or the date such notice is delivered to Advisers. Advisers may terminate
this Agreement with respect to any Fund on at least sixty days' prior written
notice delivered to the Trust and to JHLICO. JHLICO may terminate this Agreement
with respect to any Fund on at least sixty days' prior written notice delivered
to the Trust and to Advisers.
(c) Automatic Termination. This Agreement shall automatically and
---------------------
immediately terminate in the event of its assignment (other than as permitted in
Section 15 below) or if the Investment Management Agreement is terminated.
<PAGE>
9. SERVICES NOT EXCLUSIVE; USE OF ADVISER'S NAME AND LOGO.
The services of Adviser to the Trust are not to be deemed exclusive and it
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 Adviser 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.
During the term of this Agreement, and subject to a separate agreement
among JHLICO, the Trust and Adviser, JHLICO and the Trust shall have the
non-exclusive, non-transferable right to use Adviser' name and logo as set forth
in Exhibit A hereto in all materials relating to the Subject Fund, including all
prospectuses, proxy statements, reports to shareholders, sales literature and
other written materials prepared for distribution to shareholders of the Trust
or the public. However, prior to distribution of any materials which refer to
Adviser, JHLICO shall consult with Adviser and shall furnish to Adviser a copy
of such materials. Adviser agrees to cooperate with JHLICO and to review such
materials promptly. JHLICO shall not distribute such materials if Adviser
reasonably objects in writing, within five (5) business days of its receipt of
such copy (or such other time as may be mutually agreed), to the manner in which
its name and logo are used.
10. AVOIDANCE OF INCONSISTENT POSITION.
In connection with the purchase and sale of portfolio securities of the
Subject Fund, Adviser and its directors, officers and employees will not act as
principal. Nothing in this Agreement shall preclude the combination of orders
for the sale or purchase of portfolio securities of the Subject Fund with those
for other registered investment companies managed by Adviser or its affiliates,
if orders are allocated in a manner deemed equitable by Adviser among the
accounts and at a price approximately averaged.
11. 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 Fund until approved
specifically by (a) the Board of Trustees of the Trust, or by vote of a majority
of the outstanding shares of that Fund, and (b) by vote of a majority of those
trustees of the Trust 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.
12. LIMITATION OF LIABILITY.
It is expressly agreed that the obligations of the Trust hereunder shall
not be binding upon any of the trustees, shareholders, officers, agents or
employees of Trust personally, but only bind the trust property of the Trust, as
provided in the Trust's Declaration of Trust.
<PAGE>
13. NOTICES
Notices and other communications required or permitted under this Agreement
shall be in writing, shall be deemed to be effectively delivered when actually
received, and may be delivered by US mail (first class, postage prepaid), by
facsimile transmission, by hand or by commercial overnight delivery service,
addressed as follows:
Adviser: T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, MD 21202
Attention: John H. Cammack
Fax #: (410) 986-3618
cc: Henry H. Hopkins, Esq.
T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, MD 21202
Fax #: (410) 547-0180
JHLICO: John Hancock Life Insurance Company
200 Clarendon Street
P.O. Box 111
Boston, MA 02117
Attention: Raymond F. Skiba
Fax #: (617) 572-4953
TRUST: John Hancock Variable Series Trust I
200 Clarendon Street
P.O. Box 111
Boston, MA 02117
Attention: Raymond F. Skiba
Fax #: (617) 572-4953
14. 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.
<PAGE>
15. ASSIGNMENT.
This Agreement may not be assigned by any party, either in whole or in
part, without the prior written consent of each other party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the day first set forth above.
ATTEST: JOHN HANCOCK VARIABLE SERIES
TRUST I
By:
----------------------------------------
Title:
ATTEST: JOHN HANCOCK LIFE
INSURANCE COMPANY
By:
----------------------------------------
Title:
ATTEST: T. ROWE PRICE
INTERNATIONAL, INC.
By:
----------------------------------------
Title:
<PAGE>
SCHEDULE I
FEES
Current Net Assets Under Management Sub-Advisory Fee
----------------------------------- ----------------
When Amounts under Management are less than $200 million:
On the first $20 million 75 basis points (0.75%) per annum
On the next $30 million 60 basis points (0.60%) per annum
On Amounts over $50 million 50 basis points (0.50%) per annum
When Amounts under Management are $200 million or more:
All Amounts 50 basis points (0.50%) per annum
<PAGE>
Appendix B-3
PROPOSAL 4 - SPECIMEN FORM OF SUB-INVESTMENT
MANAGEMENT AGREEMENT
Proposal 4: Proposed Sub-Investment Management Agreement with Putnam.
The following agreement will be signed and dated on or within a reasonable time
after the date of approval by Owners of the Fundamental Growth Fund.
<PAGE>
SUB-INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of the ___ day of ____, 2000 by and among John Hancock
Variable Series Trust I, a Massachusetts business trust (the "Trust"), John
Hancock Life Insurance Company, a Massachusetts corporation ("JHLICO"), and
Putnam Investment Management, Inc.("Advisers");
WHEREAS, the Trust is organized and is 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, JHLICO and Advisers are each engaged in the business of rendering
investment advice under the Investment Advisers Act of 1940; and
WHEREAS, the Trust is authorized to issue shares of capital stock in
separate classes with each such class representing interests in a separate
portfolio of securities and other assets; and
WHEREAS, the Trust offers shares in several classes, one of which is
designated as the Fundamental Growth Fund, (together with all other classes
established by the Trust, collectively referred to as the "Funds"), each of
which pursues its investment objectives through separate investment policies;
and
WHEREAS, the Trust has retained JHLICO to render investment management
services to the Trust pursuant to an Investment Management Agreement dated as of
July 28, 1999 (the "Investment Management Agreement"), pursuant to which it may
contract with Advisers as a Sub-Manager as provided for herein;
NOW, THEREFORE, WITNESSETH: That it is hereby agreed between the parties
hereto as follows:
1. APPOINTMENT OF SUB-MANAGER
(a) Subject Fund. Advisers is hereby appointed and Advisers hereby accepts
------------
the appointment to act as investment adviser and manager to the
Fundamental Growth Fund (the "Subject Fund") for the period and on the
terms herein set forth, for the compensation herein provided.
(b) Additional Subject Funds. In the event that the Trust and JHLICO
------------------------
desire to retain Advisers to render investment advisory services
hereunder for any other Fund, they shall so notify Advisers in
writing. If it is willing to render such services, Advisers shall
notify the Trust in writing, whereupon such Fund shall become a
Subject Fund hereunder.
(c) Incumbency Certificates. Advisers shall furnish to JHLICO, immediately
-----------------------
upon execution of this Agreement, a certificate of a senior officer of
Advisers setting forth (by name and title, and including specimen
signatures) those employees of Advisers who are authorized to issue
instructions for trades for the Subject Fund pursuant to the
provisions of this Agreement. Advisers shall promptly provide
supplemental certificates, as needed, in connection with each
additional Subject Fund (if any) and further supplemental
certificates, as needed, to reflect all changes with respect to such
employees for any Subject Fund. On behalf of the Trust, JHLICO shall
instruct the custodian for the Subject Fund to accept instructions
with respect to the Subject Fund from the employees of Advisers so
named.
<PAGE>
(d) Independent Contractor. Advisers 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 Trust.
(e) Advisers' Representations. Advisers represents, warrants and agrees
-------------------------
(i) that it is registered as an investment adviser under the
Investment Advisers Act of 1940, and that it will remain so registered
and will comply with the requirements of said Act, and the rules and
regulations thereunder, at all times while this Agreement remains in
effect, (ii) that it will promptly notify JHLICO if the foregoing
representation and agreement shall cease to be true (in any material
respect) at any time during the term of this Agreement, (iii) that it
will promptly notify JHLICO of any material change in the senior
management or ownership of Advisers, or of any change in the identity
of the personnel who manage the Subject Fund(s), (iv) that it has
adopted a code of ethics complying with the requirements of Rule 17j-1
of the Securities and Exchange Commission (the "SEC") under the 1940
Act and has provided true and complete copies of such code to the
Trust and to JHLICO, and has adopted procedures designed to prevent
violations of such code, and (v) that it has furnished the Trust and
JHLICO each with a copy of Advisers' Form ADV, as most recently filed
with the SEC, and will promptly furnish copies of each future
amendment thereto.
2. PROVISION OF INVESTMENT MANAGEMENT SERVICES.
Advisers will provide for each Subject Fund a continuing and suitable
investment program consistent with the investment policies, objectives and
restrictions of said Fund, as established by the Trust and JHLICO and as
delivered in writing to Advisers. From time to time, JHLICO or the Trust may
provide Advisers with additional or amended investment policies, guidelines and
restrictions. Advisers, as Sub-Manager, will manage the investment and
reinvestment of the assets in the Subject Fund, and perform the functions set
forth below, subject to the overall supervision, direction, control and review
of JHLICO and the Board of Trustees of the Trust, consistent with the applicable
investment policies, guidelines and restrictions, the provisions of the Trust's
Declaration of Trust, Bylaws, prospectus, statement of additional information
(each as in effect from time to time), 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 Advisers in writing by JHLICO or the Trust from time to time). By
its signature below, Advisers acknowledges receipt of a copy of the Trust's
Declaration of Trust, Bylaws, prospectus, and statement of additional
information, each as in effect on the date of this Agreement.
Advisers will, at its own expense:
(a) advise the Trust in connection with investment policy decisions to be
made by its Board of Trustees or any committee thereof regarding the
Subject Fund and, upon request, furnish the Trust with research,
economic and statistical data in connection with said Fund's
investments and investment policies;
(b) submit such reports and information as JHLICO or the Trust's Board of
Trustees may reasonably request, to assist the custodian in its
determination of the market value of securities held in the Subject
Fund for which market prices or quotations are not available (it being
understood that Adviser is not responsible for the pricing of the
Trust's assets);
(c) place orders for purchases and sales of portfolio investments for the
Subject Fund;
(d) give instructions to the Subject Fund's custodian concerning the
delivery of securities and transfer of cash for the Subject Fund;
<PAGE>
(e) maintain and preserve the records relating to its activities hereunder
required by the 1940 Act to be maintained and preserved by it as
investment adviser to the Trust
(f) at the close of business each day, provide JHLICO and the custodian
with copies of trade tickets for each transaction effected for the
Subject Fund, and promptly forward to the custodian copies of all
brokerage or dealer confirmations;
(g) as soon as practicable following the end of each calendar month,
provide JHLICO with written statements showing all transactions
effected for the Subject Fund during the month, a summary listing all
investments held in such Fund as of the last day of the month, and
such other information as JHLICO may reasonably request in connection
with the accounting services that JHLICO provides for the Subject Fund
(it being understood that Advisers is not responsible for such
accounting services); and
(h) absent specific instructions to the contrary provided to it by JHLICO
and subject to its receipt of all necessary voting materials, vote all
proxies with respect to investments of the Subject Fund in accordance
with Advisers' proxy voting policy as most recently supplied to
JHLICO.
On its own initiative, Advisers will apprise JHLICO and the Trust of
important political and economic developments materially affecting the
marketplace or the Subject Fund, and will furnish JHLICO and the Trust's Board
of Trustees from time to time such information as is appropriate for this
purpose. Advisers will also make its personnel available in Boston or other
reasonable locations as often as quarterly to discuss the Subject Fund and
Advisers' management thereof, to educate JHLICO sales personnel with respect
thereto, and for such other purposes as the Trust or JHLICO may reasonably
request.
The Trust and JHLICO will provide timely information to Advisers regarding
such matters as purchases and redemptions of shares in the Subject Fund and the
cash requirements of, and cash available for investment in, the Fund. JHLICO
will timely provide Advisers with copies of monthly accounting statements for
the Subject Fund, and such other information (including, without limitation,
reports concerning the classification of portfolio securities of the Subject
Fund for purposes of Subchapter M of the Internal Revenue Code and Treasury
Regulations Section 1.817) as may be reasonably necessary or appropriate in
order for Advisers to perform its responsibilities hereunder.
3. ALLOCATION OF EXPENSES.
Each party to this Agreement shall bear the costs and expenses of
performing its obligations hereunder. In this regard, the Trust specifically
agrees to assume the expense of:
(a) brokerage commissions for transactions in the portfolio investments of
the Trust and similar fees and charges for the acquisition,
disposition, lending or borrowing of such portfolio investments;
(b) custodian fees and expenses;
(c) all taxes, including issuance and transfer taxes, and reserves for
taxes payable by the Trust to federal, state or other governmental
agencies; and
(d) interest payable on the Trust's borrowings.
<PAGE>
Nothing in this Agreement shall alter the allocation of expenses and costs
agreed upon between the Trust and JHLICO in the Investment Management Agreement
or any other agreement to which they are parties.
4. SUB-ADVISORY FEES.
For all of the services rendered with respect to the Subject Fund as herein
provided, JHLICO shall pay to Advisers a fee (for the payment of which the Trust
shall have no obligation or liability), based on the Current Net Assets of the
Subject Fund, as set forth in Schedule I attached hereto and made a part hereof.
Such fee shall be accrued daily and payable monthly, as soon as practicable
after the last day of each calendar month. In the case of termination of this
Agreement with respect to the Subject Fund during any calendar month, the fee
with respect to such Fund accrued to but excluding the date of termination shall
be paid promptly following such termination. For purposes of computing the
amount of advisory fee accrued for any day, "Current Net Assets" shall mean the
Subject Fund's net assets as of the most recent preceding day for which that
Subject Fund's net assets were computed.
5. FUND TRANSACTIONS.
In connection with the investment and reinvestment of the assets of the
Subject Fund, Advisers is authorized to select the brokers or dealers that will
execute purchase and sale transactions for the Fund 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 said Fund. Advisers
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 Subject Fund and its shareholders, Advisers shall have the
right subject to the control of the Board of Trustees, and to the extent
authorized by the Securities Exchange Act of 1934, to follow a policy of
selecting brokers who furnish brokerage and research services to the Subject
Fund or to the Advisers, and who charge a higher commission rate to the Subject
Fund than may result when allocating brokerage solely on the basis of seeking
the most favorable price and execution. Advisers shall determine in good faith
that such higher cost was reasonable in relation to the value of the brokerage
and research services provided.
Advisers will not receive any tender offer solicitation fees or similar
payments in connection with the tender of investments of any Fund.
6. OWNERSHIP OF INFORMATION, RECORDS, AND CONFIDENTIALITY.
Except for such records Advisers is required to maintain under the
Investment Advisers Act of 1940, as amended, the Trust shall own and control all
records maintained hereunder by Advisers on the Trust's behalf and, in the event
of termination of this Agreement with respect to any Subject Fund for any
reason, all records relating to that Fund and owned by the Trust shall be
promptly returned to the Trust, free from any claim or retention of rights by
Advisers, provided that (subject to the last paragraph of this Section 6)
Advisers may retain copies of such records. Advisers also agrees, upon request
of the Trust, promptly to surrender such books and records or, at its expense,
copies thereof, to the Trust or make such books and records available for audit
or inspection by representatives of regulatory authorities or other persons
reasonably designated by the Trust. Advisers further agrees to maintain, prepare
and preserve such books and records as it is required to as an investment
sub-adviser to the Trust in accordance with the 1940 Act and rules thereunder,
including but not limited to Rules 31a-1 and 31a-2, and to supply all such
information related to the Subject Fund as may be requested by any insurance
regulatory authorities in connection with such insurance authorities'
administration of insurance laws and regulations. Advisers shall supply the
Board of Trustees and
<PAGE>
officers of the Trust and JHLICO with all statistical information regarding
investments which is reasonably required by them and reasonably available to
Advisers.
Advisers 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 Trust has authorized such disclosure, or
if such disclosure is expressly requested by applicable federal or state
regulatory authorities. Advisers shall provide reasonable notice to the Trust of
any such disclosure to applicable federal or state regulatory officials in
connection with any audit of the Subject Fund or the Trust, and in any event,
Advisers shall provide reasonable notice to the Trust of any threatened, pending
or final regulatory enforcement or other disciplinary action involving Advisers.
7. LIABILITY; STANDARD OF CARE.
Advisers shall be liable to JHLICO, the Trust or the Trust's shareholders
for losses resulting from any willful misfeasance, bad faith or negligence in
the performance of Advisers' duties or the reckless disregard of its obligations
and duties under this Agreement or the Investment Management Agreement. No
provision hereof shall be deemed to protect any trustee or officer of the Trust
against any such liability to which he might otherwise be subject by reason of
any willful misfeasance, bad faith or negligence in the performance his duties
or the reckless disregard of his obligations and duties. Adviser shall employ
only qualified personnel to manage the Subject Fund; shall comply with all
applicable laws and regulations in the discharge of its duties under this
Agreement; shall (as provided in Section 2 above) comply with the investment
policies, guidelines and restrictions of the Subject Fund and with the
provisions of the Trust's Declaration of Trust, Bylaws, prospectus and statement
of additional information; shall manage the Subject Fund (subject to the receipt
of, and based upon the information contained in, periodic reports from JHLICO or
the custodian concerning the classification of Fund securities for such
purposes) as a regulated investment company in accordance with subchapter M of
the Internal Revenue Code of 1986, as amended (the "Code"), and Treasury
Regulations Section 1.817-5(b); shall act at all times in the best interests of
the Trust; and shall discharge its duties with the care, skill, prudence and
diligence under the circumstances then prevailing that a prudent person acting
in a like capacity and familiar with such matters would use in the conduct of a
similar enterprise. However, Advisers shall not be obligated to perform any
service not described in this Agreement, and shall not be deemed by virtue of
this Agreement to have made any representation or warranty that any level of
investment performance or level of investment results will be achieved.
8. DURATION AND TERMINATION OF THIS AGREEMENT.
(a) Duration. This Agreement shall become effective with respect to the
--------
Subject Fund on the date hereof and, with respect to any additional
Subject Fund, on the date of receipt by the Trust of notice from
Advisers in accordance with Paragraph 1(b) hereof that it is willing
to serve with respect to such Fund. 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 Subject Fund
and, with respect to each additional Subject Fund, until two years
following the date on which such Fund becomes a Subject Fund
hereunder, and shall continue in full force and effect thereafter with
respect to each Subject Fund so long as such continuance with respect
to any such Fund is approved at least annually (a) by either the Board
of Trustees of the Trust or by vote of a majority of the outstanding
voting shares of such Fund, and (b) in either event by the vote of a
majority of the trustees of the Trust 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.
(b) Any approval of this Agreement by the holders of a majority of the
outstanding shares of any Subject Fund shall be effective to continue
this Agreement with respect to any such Fund
<PAGE>
notwithstanding (A) that this Agreement has not been approved by the
holders of a majority of the outstanding shares of any other Fund
affected hereby, and (B) that this Agreement has not been approved by
the vote of a majority of the outstanding shares of the Trust, 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.
(c) Termination. This Agreement may be terminated with respect to any
-----------
Subject Fund at any time, without payment of any penalty, by the Trust
pursuant to a vote of the trustees of the Trust or a vote of a
majority of the outstanding shares of the Subject Portfolio, which
termination shall be effective immediately upon delivery of notice
thereof to Advisers and JHLICO. This Agreement may be terminated by
Advisers on at least ninety days' prior written notice to the Series
and JHLICO, and may be terminated by JHLICO on at least ninety days'
prior written notice to the Trust and Advisers.
(d) Automatic Termination. This Agreement shall automatically and
---------------------
immediately terminate in the event of its assignment or if the
Investment Management Agreement is terminated.
9. SERVICES NOT EXCLUSIVE; USE OF ADVISERS' NAME AND LOGO.
(a) The services of Advisers to the Trust are not to be deemed exclusive
and it 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 Advisers and of
its subsidiaries and affiliates may continue to engage in providing
Fund management services and advice to other investment companies,
whether or not registered, and other investment advisory clients.
(b) During the term of this Agreement, JHLICO and the Trust shall have the
non-exclusive and non-transferable right to use Advisers' name and
logo in all materials relating to the Subject Fund, including all
prospectuses, proxy statements, reports to shareholders, sales
literature and other written materials prepared for distribution to
shareholders of the Trust or the public. However, prior to
distribution of any materials which refer to Advisers or use its logo,
JHLICO shall consult with Advisers and shall furnish to Advisers a
copy of such materials. Advisers agrees to cooperate with JHLICO and
to review such materials promptly. JHLICO shall not distribute such
materials if Advisers reasonably objects in writing, within ten (10)
days of its receipt of such copy (or such other time as may be
mutually agreed), to the manner in which its name and logo are used.
10. AVOIDANCE OF INCONSISTENT POSITION.
In connection with the purchase and sale of portfolio securities of the
Subject Fund, Advisers 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 securities of the Subject Fund with those for other registered
investment companies managed by Advisers or its affiliates, if orders are
allocated in a manner deemed equitable by Advisers among the accounts and at a
price approximately averaged.
11. 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 Fund until approved
specifically by (a) the Board of Trustees of the Trust, or by vote of a majority
of the outstanding shares of that Fund, and (b) by vote of a majority of those
trustees of the Trust who are not
<PAGE>
interested persons of any party to this Agreement cast in person at a meeting
called for the purpose of voting on such approval.
12. LIMITATION OF LIABILITY.
It is expressly agreed that the obligations of the Trust hereunder shall
not be binding upon any of the trustees, shareholders, officers, agents or
employees of Trust personally, but only bind the trust property of the Trust, as
provided in the Trust's Declaration of Trust.
13. NOTICES
Notices and other communications required or permitted under this Agreement
shall be in writing, shall be deemed to be effectively delivered when actually
received, and may be delivered by US mail (first class, postage prepaid), by
facsimile transmission, by hand or by commercial overnight delivery service,
addressed as follows:
ADVISERS Putnam Investment Management, Inc.
One Post Office Square
Boston, Mass 02109
Fax #: 617-292-1625
JHLICO: John Hancock Life Insurance Company
200 Clarendon Street
P.O. Box 111
Boston, MA 02117
Attention: Raymond F. Skiba
Fax #: 617-572-4953
TRUST: John Hancock Variable Series Trust I
200 Clarendon Street
P.O. Box 111
Boston, MA 02117
Attention: Raymond F. Skiba
Fax #: 617-572-4953
14. 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.
15. ASSIGNMENT.
This Agreement may not be assigned by any party, either in whole or in
part, without the prior written consent of each other party.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the day first set forth above.
ATTEST: JOHN HANCOCK VARIABLE SERIES
TRUST I
By:
--------------------------- --------------------------------
Title:
--------------------------- ------------------------------
ATTEST: JOHN HANCOCK LIFE INSURANCE COMPANY
By:
--------------------------- --------------------------------
Title:
--------------------------- ------------------------------
ATTEST: PUTNAM INVESTMENT MANAGEMENT, INC.
By:
--------------------------- --------------------------------
Title:
--------------------------- ------------------------------
<PAGE>
SCHEDULE I
FEES
Current Net Assets Under Management Sub-Advisory Fee
----------------------------------- -----------------
On the first $250,000,000 50 basis points (0.50%) per annum
On amounts over $250,000,000 45 basis points (0.45%) per annum
<PAGE>
Appendix C
PROPOSALS 1, 2, 3 and 4 - SUMMARY OF CURRENT INVESTMENT
MANAGEMENT AGREEMENTS
The current investment management agreements between the Trust and John
Hancock are summarized below.
Pursuant to the investment management agreements, John Hancock advises the
Subject Fund(s) in connection with policy decisions; provides administration of
day-to-day operations; provides personnel, office space, equipment and supplies
for the Fund; maintains records required by the Investment Company Act of 1940;
and supervises activities of the Fund's sub-investment manager.
For its investment management and advisory services, John Hancock is paid a
fee by the Subject Fund(s) at a specified rate that will vary by Fund.
The investment management agreements also provide that for any fiscal year
in which the normal operating costs and expenses of Fund, exclusive of its
investment advisory fees, interest, brokerage commissions, taxes and
extraordinary expenses outside the control of John Hancock, exceed 0.10% of the
Fund's average daily net assets, John Hancock will reimburse the Fund promptly
after the end of the fiscal year in an amount equal to such excess.
Under the investment management agreements, John Hancock also pays the
compensation of Trust officers and employees and the expenses of clerical
services relating to the administration of the Trust. The Trust bears all of its
expenses not specifically assumed by John Hancock. These include, but are not
limited to, taxes, custodian and auditing fees, brokerage commissions, advisory
fees, the compensation of unaffiliated Trustees, the cost of the Trust's
fidelity bond, the cost of printing and distributing to Owners the Trust's
annual and semi-annual reports, the cost of printing, distributing to Owners,
and tabulating proxy materials, compensation paid for certain accounting,
valuation and compliance services, legal fees, securities registration expenses,
organizational expenses, association dues and other expenses related to the
Trust's operations.
John Hancock also indemnifies each member of the Board of Trustees against
losses by reason of failure (other than through willful misfeasance, bad faith,
gross negligence or reckless disregard of duties) to take any action relating to
the investment or reinvestment of assets in the Trust, including failure to seek
or retain investment advice or management in addition to or in place of that
provided by John Hancock or the sub-investment managers.
Unless modified or terminated, the investment management agreement will
continue with respect to the Fund from year to year but only so long as such
continuance is specifically approved at least annually by (a) a majority of the
Board of Trustees who are not interested persons of JHVLICO, John Hancock or the
Trust, cast in person at a meeting called for the purpose of voting on such
approval, and (b) either a vote of the Board of Trustees or a majority of the
outstanding voting shares of the Fund. The investment management agreement also
provides that it may, on 60 days' notice, be terminated at any time without
penalty by the Board of Trustees, by majority vote of the outstanding voting
shares of the Fund, or by John Hancock. The investment management agreement
automatically terminates in the event of its assignment.
<PAGE>
Appendix D
JOHN HANCOCK AND THE SUB-INVESTMENT MANAGERS
JOHN HANCOCK
John Hancock, John Hancock Place, Boston, Massachusetts 02117, is a 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 Trust shares representing ___% of the net
assets of the Trust on December 31,1999. John Hancock acts as "principal
underwriter" of the Trust's shares pursuant to an Underwriting and
Administrative Services Agreement, dated January 17, 1986, to which John Hancock
and the Trust 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 Directors and Executive Officers of John Hancock are as follows:
<TABLE>
<CAPTION>
Directors Principal Occupation
--------- --------------------
<S> <C>
Stephen L. Brown Chairman of the Board, John Hancock
David F. D'Alessandro President and Chief Executive Officer, John Hancock
Foster L. Aborn Director, formerly Vice Chairman of the Board and Chief Investment Officer,
John Hancock
Samuel W. Bodman Chairman of the Board and Chief Executive Officer, Cabot Corporation
(chemicals)
I. MacAllister Booth Retired Chairman of the Board and Chief Executive Officer, Polaroid
Corporation (photographic products)
Wayne A. Budd Executive Vice President and General Counsel-elect, John Hancock
John M. Connors, Jr. Chairman and Chief Executive Officer and Director, Hill, Holliday, Connors,
Cosmopoulos, Inc. (advertising).
Robert E. Fast Senior Partner, Hale and Dorr (law firm).
Kathleen F. Feldstein President, Economic Studies, Inc. (economic consulting).
Nelson S. Gifford Principal, Fleetwing Capital Management (financial services)
Michael C. Hawley Chairman and Chief Executive Officer, The Gillette Company (razors, etc.)
Edward H. Linde President and Chief Executive Officer, Boston Properties, Inc. (real estate)
Judith A. McHale President and Chief Operating Officer, Discovery Communications, Inc.
(multimedia communications)
E. James Morton Director, formerly Chairman of the Board and Chief Executive Officer, John
Hancock
Richard F. Syron Chairman of the Board, President and Chief Executive Officer, Thermo Electron
Corp. (scientific and industrial instruments)
Robert J. Tarr, Jr. Former President, Chief Executive Officer and Chief Operations Officer,
Harcourt General, Inc. (publishing)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Other Executive Officers
------------------------
<S> <C>
Thomas E. Moloney Chief Financial Officer
Richard S. Scipione General Counsel
Derek Chilvers Chairman and Chief Executive Officer of John Hancock International Holdings,
Inc.
John M. DeCiccio Executive Vice President and Chief Investment Officer
Maureen R. Ford President, Broker-Dealer Distribution and Financial Advisory Network
Kathleen M. Graveline Executive Vice President - Retail
Barry J. Rubenstein Vice President, Counsel and Secretary
</TABLE>
The following employees of John Hancock (or an affiliate) are also
Directors or principal officers of the John Hancock Variable Series Trust I:
<TABLE>
<S> <C>
Michele G. Van Leer Chairman of the Board of Trustees of the Trust
Thomas J. Lee Vice Chairman of the Board of Trustees of the Trust
Raymond F. Skiba Treasurer of the Trust
Karen Q. Visconti Secretary of the Trust
Jude Curtis Compliance Officer of the Trust
</TABLE>
MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT, INC.
MSDW's Board of Directors and executive officers are as follows:
<TABLE>
<CAPTION>
Name Principal Occupation
---- ---------------------
<S> <C>
Barton M. Biggs Chairman, Managing Director & Director of MSDW Investment
Management; Managing Director of Morgan Stanley & Co.
Incorporated ("MS&Co.", an affiliate of MSDW).
Richard B. Worley Chief Executive Officer, President, Managing Director of
MSDW; Managing Director of MS&Co.
Marna C. Whittington Chief Operating Officer, Managing Director of MSDW;
Managing Director of MS&Co.
</TABLE>
The business address is 1221 Avenue of the Americas, New York, NY 10020.
INDEPENDENCE INVESTMENT ASSOCIATES, INC.
IIA's Board of Directors and executive officers are as follows:
<TABLE>
<CAPTION>
Name Principal Occupation
---- --------------------
<S> <C>
Mark C. Lapham Chairman of the Board and President, IIA
Stephen L. Brown Director of IIA; Chairman of the Board, John Hancock Life Insurance
Company
John M. DeCiccio Director of IIA; Executive Vice President and Chief Investment Officer,
John Hancock Life Insurance Company
Kathleen M. Graveline Director of IIA; Executive Vice President - Retail, John Hancock Life
Insurance Company
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Klaus O. Shigley Director of IIA; Vice President - GSFP, John Hancock Life Insurance
Company
Gregory P. Winn Director of IIA; Vice President and Treasurer, John Hancock Life
Insurance Company
John F. DeSantis Executive Vice President, IIA
John S. Montgomery Executive Vice President, IIA
Miriam F. Cooper Senior Vice President and Chief Operating Officer, IIA
</TABLE>
The business address for Messrs. Lapham, DeSantis and Montgomery and for
Ms. Cooper is 53 State Street, Boston, Massachusetts 02109. The business address
of the other directors is John Hancock Life Insurance Company, John Hancock
Place, Boston, Massachusetts 02117.
T. ROWE PRICE ASSOCIATES, INC.
T. Rowe's Board of Directors and executive officers are as follows:
<TABLE>
<CAPTION>
Name Principal Occupation
---- --------------------
<S> <C>
George A. Roche Chairman of the Board, President and Managing Director, T. Rowe; Vice President,
Price-Fleming
James S. Riepe Vice Chairman of the Board and Managing Director, T. Rowe; Director,
Price-Fleming
M. David Testa Vice Chairman of the Board, Chief Investment Officer, T. Rowe; Chairman of
the Board, Price-Fleming
James E. Halbkat, Jr. President of U.S. Monitor Corporation
Donald B. Hebb, Jr. Managing General Partner of ABS Capital Partners
Richard L. Menschel Limited Partner of Goldman Sachs Group L.P.
John W. Rosenblum Dean of the Jepson School of Leadership Studies at the
University of Richmond
Robert L. Strickland Chairman of Lowe's Companies, Inc.
Phillip C. Walsh Retired mining industry executive
Anne Marie Whittemore Partner of the law firm of McQuire, Woods, Battle & Booth
William T. Reynolds Director, Managing Director, T. Rowe
Brian C. Rogers Director, Managing Director, T. Rowe
Henry H. Hopkins Director, Managing Director, T. Rowe; Vice President, Price-Fleming
James A. C. Kennedy Director, Managing Director, T. Rowe
Edward C. Bernard Director, Managing Director, T. Rowe
John H. Laporte, Jr. Director, Managing Director, T. Rowe
</TABLE>
The business address for the directors of T. Rowe is 100 East Pratt Street,
Baltimore, MD 21202.
T. ROWE PRICE INTERNATIONAL, INC.
Price International's Board of Directors and executive officers are as
follows:
<TABLE>
<CAPTION>
Name Principal Occupation
---- --------------------
<S> <C>
M. David Testa Chairman of the Board, Price International; Vice Chairman of
the Board, Chief Investment Officer, and Managing Director of
T. Rowe
George A. Roche Director, Price International; Chairman of the Board,
</TABLE>
<PAGE>
<TABLE>
<S> <C>
D. William Garrett - expected to resign prior to
Aug. 8 President, and Managing Director of T. Rowe
Chairman of Robert Fleming Securities Limited, a Director of
Robert Fleming Holdings Limited ("Robert Fleming Holdings")
Paul T. Bateman Director, Price International
James S. Riepe Vice Chairman of the Board and Managing Director of T. Rowe
John R. Ford Chief Investment Officer and Executive Vice President of
Price International
George A. Murnaghan Executive Vice President, Price International; Managing
Director, T. Rowe
David J.L. Warren President, Price International
Chief Executive Officer, Price International; Director of T.
Martin G. Wade Rowe and Robert Fleming Holdings
</TABLE>
The business address for the directors and executive officers of Price
International is 100 East Pratt Street, Baltimore, Maryland 21202.
The following table contains information concerning funds managed by Price
International that have investment objectives similar to those of the
International Opportunities Fund:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
Investment Company Name Investment Objective Annual Rate of Compensation Net Assets
as of
6/30/00
------------------------------------------------------------------------------------------------------------------------
T. Rowe Price Mutual Funds:
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
T. Rowe Price International Long-term growth of .35% (individual fee) $12,011,954,289
Funds, Inc.: capital .32% (group fee)
T. Rowe Price International
Stock Fund
--------------------------------- ------------------------ --------------------------------------- ---------------------
Long-term growth of .70% (Covers both investment $3,361,796
Foreign Equity Fund capital management and operating expenses)
--------------------------------- ------------------------ --------------------------------------- ---------------------
T. Rowe Price International Long-term growth of 1.05% (Covers both investment $767,025,048
Series, Inc.: capital management and operating expenses)
T. Rowe Price International
Stock Portfolio
------------------------------------------------------------------------------------------------------------------------
Subadvised Mutual Funds:
------------------------------------------------------------------------------------------------------------------------
.75% of the first $20 million
The Commerce Funds Long-term growth of .60% of the next $30 million $180,392,806
The International Equity Fund capital .50% above $50 million*
--------------------------------- ------------------------ --------------------------------------- ---------------------
.75% of the first $20 million
Endeavor Series Trust Long-term growth of .60% of the next $30 million $223,607,007
T. Rowe Price International capital .50% above $50 million*
Stock Portfolio
--------------------------------- ------------------------ --------------------------------------- ---------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
Investment Company Name Investment Objective Annual Rate of Compensation Net Assets
as of
6/30/00
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
.75% of the first $20 million
EQ Advisors Trust Long-term growth of .60% of the next $30 million $244,639,219
T. Rowe Price International capital .50% above $50 million*
Stock Portfolio
--------------------------------- ------------------------ --------------------------------------- ---------------------
John Hancock Variable Series Long-term growth of .75% of the first $20 million $102,751,707
Trust I capital .60% of the next $30 million
International Opportunities .50% above $50 million*
Portfolio
International Opportunities II $26,108,462
Portfolio
--------------------------------- ------------------------ --------------------------------------- ---------------------
LB Series Fund, Inc. Long-term growth of .75% of the first $20 million
World Growth Portfolio capital .60% of the next $30 million $600,967,249
.50% above $50 million
Lutheran Brotherhood Family of .50% on all assets once assets exceed
Funds $200 million** $142,639,184
Lutheran Brotherhood World
Growth Fund
--------------------------------- ------------------------ --------------------------------------- ---------------------
.75% of the first $50 million
Manufacturers Investment Trust Long-term growth of .50% of the next $150 million $286,236,497
International Stock Trust capital .50% on all assets once assets exceed
$200 million**
--------------------------------- ------------------------ --------------------------------------- ---------------------
.75% of the first $20 million
SunAmerica Style Select Series, Long-term growth of .60% of the next $30 million $61,475,923
Inc. capital .50% above $50 million*
International Equity Portfolio
--------------------------------- ------------------------ --------------------------------------- ---------------------
.75% of the first $20 million
The Vantagepoint Funds Long-term growth of .60% of the next $30 million $112,455,766
International Fund capital .50% above $50 million*
--------------------------------- ------------------------ --------------------------------------- ---------------------
</TABLE>
Please note that the net asset figures for subadvised funds are based on
internal T. Rowe Price market value records.
* Rowe Price-Fleming International, Inc. ("RPFI") has agreed to waive its
fees so that at $200 million, the Sub-Advisory fee would be .50% on all
assets.
** Rowe Price-Fleming International, Inc. ("RPFI") has agreed to waive its
fees so that at $500 million, the Sub-Advisory fee would be .45% on all
assets.
PUTNAM INVESTMENT MANAGEMENT, INC.
Putnam's Board of Directors and executive officers are as follows:
<PAGE>
Name Principal Occupation
---- --------------------
Lawrence J. Lasser President and Director
Kathleen M. Collman Senior Managing Director
Karnig H. Durgarian Senior Managing Director
Irene M. Esteves Senior Managing Director
Ian C. Ferguson Senior Managing Director
Stephen M Oristaglio Senior Managing Director
Gordon H. Silver Senior Managing Director and
Director
Steven Spiegel Senior Managing Director
The business address for the directors and executive officers of Putnam is
One Post Office Square, Boston, Massachusetts 02109.
