<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. ___)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] 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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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
<PAGE>
[John Hancock Variable Series Trust I Letterhead]
Dear Shareholder,
WE NEED YOUR VOTE!
The enclosed proxy statement contains information on some important and exciting
changes that are being proposed for one or more of the Funds in the Variable
Series Trust in which you are an investor. As you know, the Variable Series
Trust provides the investment options under your variable life policy or
variable annuity contract.
Also enclosed is a Questions & Answers booklet that explains the changes and the
simple steps you need to take to ensure that your vote is counted.
To get started, turn to the Questions & Answers booklet. Do it now - it should
only take a few minutes to read it.
Whether you are a large or small investor, your vote is important, and we urge
you to participate in this process. After thorough study, the Board of the
Variable Series Trust determined that the recommended changes are in the best
interest of all shareholders and voted unanimously to recommend these changes
for your Fund(s), your approval is needed to implement the changes.
Thank you!
Michele Van Leer
Chairman, John Hancock Variable Series Trust I
P.S. Please remember to complete, sign and mail your proxy cards in the enclosed
envelope today.
<PAGE>
Introduction
The Board of Trustees of John Hancock's Variable Series Trust I is unanimously
recommending that shareholders approve a number of important changes for your
Fund(s). These proposals will be voted on at the October 20, 2000 shareholders
meeting, and the Board is now seeking your approval of these changes by proxy
vote. If approved, these changes would become effective on November 1, 2000.
To assist you, the following questions and answers provide a brief overview of
the proposed changes and the simple steps you need to take to participate in the
vote. This overview should be read in conjunction with the complete proxy
statement, which explains all of these matters in more detail.
Q. Do I have to read the entire proxy statement?
A. Not necessarily. You only need to read the information on proposals that
deal with the Fund(s) in which you were invested on August 31. To determine
which proposals apply to you, check the enclosed voting cards. There is one card
for each Fund you were invested in.
The table below outlines which proposals apply to which Fund(s). For example, if
you were only invested in the Managed Fund, you only need to focus on Proposals
1A - 1D. If you were only invested in the Global Bond Fund, you only need to
focus on Proposal 4A - 4B.
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Fund Proposal Page
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Managed Fund 1A - 1D x - x
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Growth & Income 2A - 2F
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Active Bond 3A - 3B
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Small Value Cap 4A - 4B
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Global Balanced 4A - 4B
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Global Bond 4A - 4B
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Q. What are the changes being proposed?
A. There are several proposals for these Funds. Generally, these proposals focus
on changes to investment management agreements, investment strategies,
sub-investment managers, management fees and certain investment restrictions.
The enclosed Q & A and Proxy Statement explain the proposals in more detail.
Q. How do I vote?
A. There are four simple steps.
Step 1: First, refer to the table above to determine which proposal(s) apply to
your Fund(s). Each proposal is color coded to help you identify the
relevant information in this package.
<PAGE>
Step 2: Then, read the Q & A sections for your specific Fund(s). For example,
for the Managed Fund, read the Q & A's that follow the brown bar.
Step 3: Next, review the sections of the proxy statement that apply to your
Fund(s).
Step 4: Finally, complete the enclosed voting card for each of your Funds
and return it in the enclosed postage paid envelope. If you have more
than one card, you need to complete, sign and mail all of them.
Q. Does my vote make a difference?
A. Whether you are a large or small investor, your vote is important, and we
urge you to participate in this process to ensure that John Hancock represents
your wishes when it casts votes at the shareholder meeting. The Board voted
unanimously to recommend these changes for your Fund(s), and your approval is
needed to implement the changes.
<PAGE>
Managed Fund
PROPOSALS 1A - 1C: New Investment Management Agreements
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Q. What changes to the investment management agreements are being proposed for
the Managed Fund?
A. The Board unanimously approved, and is recommending that shareholders
approve, the following:
(1) two new Sub-Investment Management Agreements that reflect a
"multi-manager" investment approach and provide for the addition of a
second sub-advisor for the Fund; and
(2) a related amendment to the Investment Management Agreement that would
increase fees the Fund pays to John Hancock for management of the
Fund.
Q. What is a multi-manager approach? Why is it recommended for the Managed
Fund?
A. The multi-manager approach combines different investment managers and
strategies with the goal of producing more consistent investment performance
over market cycles. Performance consistency is considered a primary goal of the
Managed Fund since its balanced strategy makes it a core investment option for
investors. The Board is recommending the combination of two sub-advisors --
Independence Investment Associates (IIA), the current sub-advisor, with Capital
Guardian, a new sub-advisor -- to reduce the Fund's exposure to the risk of any
one manager or strategy being out of favor in certain market environments.
Q. Why Capital Guardian?
A. Capital Guardian provides:
. a strong organization with the experience, significant resources and a
well-defined investment process for the management of domestic
balanced portfolios;
. an excellent long-term performance record and competitive
sub-investment advisory fees in managing domestic balanced portfolios;
and,
. a premier reputation in the variable products marketplace and the
potential for increased growth in Fund assets with it as the new
sub-advisor.
Q. Why the combination of IIA and Capital Guardian?
A. IIA and Capital Guardian have distinct and complementary approaches in
managing domestic balanced portfolios. The goal in combining the two approaches
is to produce more consistent investment returns over market cycles.
<PAGE>
Q. Why is a change in the investment management fee recommended?
A. The proposed fee increase reflects the difference between Capital Guardian's
fee schedule and that of the current sub-advisor; the additional resources for
fund administration, investment oversight and technology that the multi-manager
approach requires; and an adjustment to the investment management fee paid to
John Hancock -- which has remained the same since the mid 1980s -- to compensate
for the significant increase since then in the complexity and cost of managing
and servicing the Fund.
Q. How will the investment management fee be modified?
A. The Board is recommending an increase in the annual percentage rates that
are applied to different levels of Fund assets to determine the amount the Fund
pays to John Hancock for investment management. Total fund expenses include
these investment management fees plus other non-advisory expenses (0.03% of
assets in 1999).
This means that if a shareholder had on average $10,000 in the Managed Fund
during 1999 and the proposed fee structure had been in place for all of 1999,
then the shareholder would have incurred about $35 in additional fund
expenses.
Q. How will the Fund compare with similar funds in terms of total fund
expenses?
A. The current expense ratio (total fund expenses divided by fund assets) for
the Fund is far below the average expense ratio for comparable funds within the
variable insurance products marketplace having a similar investment focus. Even
after the proposed change, the Fund's expense ratio will still be below the
average expense ratio for comparable funds.
Q. How did the Board reach its conclusion to recommend this proposal?
A. The Board, including the Independent Trustees in consultation with
independent counsel to the Trust, requested and evaluated a variety of
information provided by John Hancock. The Board carefully considered a number of
factors that are highlighted in this Q & A and detailed in the proxy statement.
These factors include the Fund's competitive performance and the increased
complexity and commitment of resources required by John Hancock in managing and
servicing the fund. After thorough study, the Board concluded that the new
management fee arrangements were fair and reasonable and would provide John
Hancock with the necessary financial incentives to promote the Fund within its
variable insurance products.
Q. How will you benefit from all of this?
A. As a shareholder, you will benefit from the multi-manager approach and gain
access to the investment talent and expertise of Capital Guardian, an investment
manager with significant investment resources and a strong performance record.
In addition, the increased fees will enable John Hancock to continue to dedicate
additional personnel and
<PAGE>
resources to the Fund, oversee the more complex multi-manager investment
approach and promote the Fund within its variable insurance products.
Q. What is the Board's recommendation regarding the modifications in Proposals
1A-1C?
A. The Board unanimously recommends that you vote "FOR" Proposals 1A-1C.
<PAGE>
Managed Fund
Proposal 1D: Non-diversified Status
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Q. Why is "non-diversified" status being recommended for the Managed Fund?
A. As a diversified fund, the Managed Fund is restricted to investing a maximum
of 5% in a single issuer with respect to 75% of the Fund's total assets. In a
multi-manager structure, using two separate and distinct investment strategies
could potentially cause the overall Fund to exceed those limits. In addition,
the markets have evolved such that many individual issuers represent close to or
more than 5% of the overall market or appropriate market benchmark. Therefore,
"non-diversified" status will provide the necessary flexibility for each
sub-advisor to implement its investment strategy within a multi-manager
framework.
Q. Will this increase the risk of investing in this Fund?
A. When it is exercised, non-diversified status presents the risk of higher
issuer concentration. However, the Fund will maintain overall risk control and
diversification through, among other things, diversity of managers, number of
securities, sector exposures and exposure to top 10 holdings.
Q. What is the Board's recommendation regarding the modifications in
Proposal 1D?
A. The Board unanimously recommends that you vote "FOR" Proposal 1D.
<PAGE>
Growth & Income Fund
ProposalS 2a-2C: New Investment Management Agreements
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Q. What modifications to the investment management agreements are being
proposed for the Growth & Income Fund?
A. The Board unanimously approved, and is recommending that shareholders
approve, the following:
(1) two new Sub-Investment Management Agreements that reflect a
"multi-style and multi-manager" investment approach and provide for
the addition of a second sub-advisor for the Fund; and
(2) a related amendment to the Investment Management Agreement that would
increase fees the Fund pays to John Hancock for managing the Fund.
Q. What is a multi-style and multi-manager approach? Why is it recommended for
the Growth & Income Fund?
A. The multi-style and multi-manager approach combines different investment
styles, strategies and managers with the goal of producing more consistent
investment performance over market cycles. Performance consistency is considered
a primary goal of the Growth & Income Fund since its large cap equity strategy
makes this a core investment option for investors. The Board is recommending the
combination of two sub-advisors - IIA, the current sub-advisor, with Putnam
Investments ("Putnam"), a new sub-advisor -- to reduce the Fund's exposure to
the risk of any one manager or strategy being out of favor in certain market
environments.
Q. Why Putnam?
A. Putnam provides:
. a strong organization with the experience, significant resources and a
well-defined investment process for the management of growth equity
portfolios;
. an excellent long-term performance record and competitive sub-investment
advisory fees in managing growth stock portfolios; and,
. a stellar reputation in the variable product marketplace and the
potential for increased growth in Fund assets with it as the new sub-
advisor.
Q. Why the combination of IIA and Putnam?
<PAGE>
A. IIA and Putnam have distinct and complementary investment approaches in
managing U.S. equity portfolios. The goal of combining these two managers is to
produce more consistent investment returns over market cycles.
Q. Why is a change in the investment management fee recommended?
A. The proposed fee increase is designed to account for the difference between
Putnam's fee schedule and that of the current sub-advisor; the additional
resources for fund administration, investment oversight and technology which the
multi-manager approach requires; and an adjustment to the investment management
fee paid to John Hancock -- which has remained the same since 1972 -- to
compensate for the significant increase since then in the complexity and cost of
managing and servicing the Fund.
Q. How will the investment management fee be modified?
A. The Board is recommending an increase in the annual percentage rates that
are applied to different levels of Fund assets to determine the amount the Fund
pays to John Hancock for investment management. Total fund expenses include
these investment management fees plus other non-advisory fund expenses (0.03% of
assets in 1999).
This means that if a shareholder had on average $10,000 in the Growth & Income
Fund during 1999 and the proposed fee structure had been in place for all of
1999, then the shareholder would have incurred about $42 in additional fund
expenses.
Q. How will the Fund compare with similar funds in terms of total fund
expenses?
A. The current expense ratio (total expenses divided by Fund assets) for the
Fund is far below the average expense ratio for comparable funds within the
variable insurance products marketplace having similar investment focus. Even
after the proposed modification, the Fund's expense will still be below the
average expense ratio for comparable funds.
Q. How did the Board reach its conclusion to recommend this proposal?
A. The Board, including the Independent Trustees in consultation with
independent counsel to the Trust, requested and evaluated a variety of
information provided by John Hancock. The Board carefully considered a number of
factors that are highlighted in this Q & A and detailed in the proxy statement.
These factors include the Fund's competitive performance and the increased
complexity and commitment of resources required by John Hancock in managing and
servicing the fund. After thorough study, the Board concluded that the new
management fee arrangements were fair and reasonable and would provide John
Hancock with the necessary financial incentives to promote the Fund within its
variable insurance products.
Q. How will you benefit from all of this?
<PAGE>
A. As a shareholder, you will benefit from the multi-manager approach and gain
access to the investment expertise of Putnam Investments, an investment manager
with significant investment resources and a strong record of performance. In
addition, the increased fees will enable John Hancock to continue to dedicate
additional personnel and resources to the Fund, oversee a more complex
multi-manager investment approach and promote the Fund within its variable
insurance products.
Q. What is the Board's recommendation regarding the modifications in
Proposals 2A-2C?
A. The Board unanimously recommends that you vote "FOR" Proposal 2A-2C.
<PAGE>
Growth & Income Fund
Proposal 2D: Non-Diversified Status
--------------------------------------------------------------------------------
Q. Why is "non-diversified" status being recommended for the Growth & Income
Fund?
A. As a diversified fund, the Growth & Income Fund is restricted to investing a
maximum of 5% in a single issuer with respect to 75% of the Fund's total assets.
In a multi-manager structure, using two separate and distinct investment
strategies could potentially cause the overall Fund to exceed those limits. In
addition, the markets have evolved such that many individual issuers represent
close to or more than 5% of the overall market or appropriate equity market
benchmark. Therefore, "non-diversified" status will provide the necessary
flexibility for each sub-advisor to implement its investment strategy within a
multi-manager framework.
Q. Will this increase the risk of investing in this Fund?
When it is exercised, non-diversified status presents the potential risk of
higher issuer concentration. However, the Fund will maintain overall risk
control and diversification through, among other things, diversity of managers,
number of securities, sector exposures and exposure to top 10 holdings.
Q. What is the Board's recommendation regarding the modifications in
Proposal 2D?
A. The Board unanimously recommends that you vote "FOR" Proposal 2D.
<PAGE>
Growth & Income Fund
Proposal 2E: Use of Restricted Securities
--------------------------------------------------------------------------------
Q. Why is the Board recommending that the Growth & Income Fund be permitted to
use "restricted" securities?
A. The Board is recommending that the use of "restricted" securities, including
Rule 144A securities, be permitted to bring the Growth & Income Fund in line
with similar practices of other funds in the Trust and in the industry. The
growing market in "restricted" securities has expanded the Fund's investment
opportunities beyond those available to the Fund when its investment
restrictions were first put in place.
Q. Will this action increase the risk of investing in this Fund?
A. Because we expect the Fund to use this flexibility to invest primarily in
liquid 144A securities, the proposed change is not expected to significantly
change the risk profile of the Fund.
Q. What is the Board's recommendation regarding the modifications in Proposal
2E?
A. The Board unanimously recommends that you vote "FOR" Proposal 2E.
<PAGE>
Growth & Income Fund
PROPOSAL 2F: Use of Financial Futures
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Q. Why is the Board recommending that the Growth & Income Fund be permitted to
use financial futures?
A. The Board is recommending that the use of financial futures be permitted to
bring the Growth & Income Fund in line with the practices of other funds in the
Trust and in the industry, where the use of financial futures has become
standard market practice. Currently, most of the other funds in the Trust are
permitted to invest in financial futures. These funds commonly use financial
futures as an efficient way of "equitizing" cash exposure, a technique by which
managers purchase equity index futures (e.g., S&P 500 Index futures) to
effectively manage cash flows into and out of a fund and maintain exposure to
the equity market consistent with the Fund's investment goals and strategies.
Q. Will this increase the risk of investing in this Fund?
A. We expect the Growth & Income Fund to use financial futures to a limited
extent and primarily to equitize cash exposure. Therefore, their use is not
expected to significantly change the Fund's risk profile.
Q. What is the Board's recommendation regarding the modifications in Proposal
2F?
A. The Board of Trustees unanimously recommends that you vote "FOR" Proposal
2F.
<PAGE>
Active Bond Fund
PROPOSAL 3A - 3B: New Investment Management Agreement
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Q. What modifications to the investment management agreements are being
proposed for the Active Bond Fund?
A. The Board unanimously approved, and is recommending that shareholders
approve, amendments to the Sub-Investment Management Agreement and the
Investment Management Agreement that would increase fees that John Hancock pays
to the sub-investment manager and increase fees that the Trust pays to John
Hancock for management of the Active Bond Fund.
Q. Why is this change being proposed?
A. John Hancock's current fee schedule has remained the same since the early
1970s (1972). Also, the Fund has delivered excellent long-term performance with
below average risk under the current sub-advisor (John Hancock Advisers). The
proposed fee reflects a new sub-advisory fee schedule and an adjustment to the
investment management fee paid to John Hancock to compensate for the significant
increase in the complexity and cost of managing and servicing the Fund since the
fees were first established.
Q. How will the investment management fee be modified?
A. The Board is recommending an increase in the annual percentage rates that
are applied to different levels of Fund assets to determine the amount the Fund
pays to John Hancock for investment management. Total fund expenses include
these investment management fees plus other non-advisory fund expenses (0.03% of
assets in 1999).
This means that if a shareholder had on average $10,000 in the Active Bond Fund
during 1999 and the modification being proposed had been in place for all of
1999, then the shareholder would have incurred about $36 in additional fund
expenses.
Q. How will the Fund compare with similar funds in terms of total fund
expenses?
A. The current expense ratio (total fund expenses divided by Fund assets) is
far below the average expense ratio for comparable funds within the variable
insurance products marketplace having similar investment focus. Even after the
proposed modification, the expense ratio for the Fund will still be below the
average expense ratio for comparable funds.
Q. How did the Board reach its conclusion to recommend this proposal?
A. The Board, including the Independent Trustees in consultation with
independent counsel to the Trust, requested and evaluated a variety of
information provided by John
<PAGE>
Hancock. The Board carefully considered a number of factors that are highlighted
in this Q & A and detailed in the proxy statement. These factors include the
Fund's excellent performance and the increased complexity and commitment of
resources required by John Hancock in managing and servicing the fund. After
thorough study, the Board concluded that the new management fee arrangements
were fair and reasonable and would provide John Hancock with the necessary
financial incentives to promote the Fund within its variable insurance products.
Q. How will you benefit from this?
A. As a shareholder, you will benefit from the expertise of the current sub-
advisor and its strong performance track record. In addition, the increased fees
will enable John Hancock to continue to dedicate additional personnel and
resources to the Fund and promote the Fund within its variable insurance
products, thereby increasing the Fund's opportunities for asset growth.
Q. What is the Board's recommendation regarding the modifications in Proposal
3A - 3B?
A. The Board of Trustees unanimously recommends that you vote "FOR" Proposal
3A - 3B.
<PAGE>
Small Cap Value, Global Balanced & Global Bond Funds
PROPOSAL 4A - 4B: New Investment Management Agreements
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Q. What modifications to the investment management agreements are being
proposed for the Small Cap Value, Global Balanced and Global Bond Funds?
A. The Board unanimously approved, and is recommending that shareholders
approve, the following:
(1) a new Sub-Investment Management Agreement with Capital Guardian for
the Small Cap Value, Global Balanced and Global Bond Funds reflecting
a new sub-advisor to replace the three existing sub-advisors; and,
(2) a related amendment to the Investment Management Agreement that would
increase fees the Trust pays to John Hancock for managing these funds.
Q. Why is a new sub-advisor recommended for the Small Value Cap, Global
Balanced and Global Bond Funds?
A. John Hancock's goal is to improve the investment performance of these Funds
and to form a strategic partnership with a leading investment manager in the
variable insurance marketplace.
Q. Why Capital Guardian?
A. Capital Guardian provides:
. a strong organization with the experience, significant resources and a
well-defined investment process for the management of small cap equity,
global balanced and global bond strategies;
. an excellent long-term performance record and competitive sub-investment
advisory fees in managing small cap equity, global balanced and global bond
portfolios; and,
. a premier reputation in the variable insurance marketplace and the
potential for increased growth in Fund assets with it as the new
sub-advisor.
Q. Why are the changes to the investment management fees recommended?
A. The proposed fee increases reflect the higher fees of the new sub-advisor
and the increasing complexity and costs attributable to John Hancock's
investment management activities on behalf of these Funds. The fee modification,
as proposed, is designed to compensate John Hancock for these increased costs.
Q. How will the investment management fees be modified?
A. The Board is recommending an increase in the annual percentage rates that
are applied to different levels of Fund assets to determine the amount the Fund
pays to John Hancock for investment management. Total fund expenses include
these investment management fees plus other non-advisory fund expenses (capped
at 0.10% of assets).
<PAGE>
This means that if a shareholder had on average $10,000 in one of these Funds
during 1999 and the modification being proposed had been in place for all of
1999, then the shareholder would have incurred about $10 to $20 in additional
fund expenses (depending on which Fund the shareholder was invested in).
Q. How will these Funds compare with similar funds in terms of total fund
expenses?
A. The current expense ratios (total fund expenses divided by fund assets) for
the Small Cap Value, Global Bond and Global Balanced Funds are below the average
expense ratios for comparable funds within the variable insurance products
marketplace having a similar investment focus and asset size. After the proposed
modifications, the expense ratio of the Small Cap Value Fund will be only
slightly above the comparable fund average while the expense ratios for the
Global Balanced and Global Bond Funds will still be below the average expense
ratios of comparable funds.
Q. How did the Board reach its conclusion to recommend this proposal?
A. The Board, including the Independent Trustees in consultation with
independent counsel to the Trust, requested and evaluated a variety of
information provided by John Hancock. The Board carefully considered a number of
factors that are highlighted in this Q & A and detailed in the proxy statement.
These factors include the increased complexity and commitment of resources
required by John Hancock in managing and servicing these funds. After thorough
study, the Board concluded that the new management fee arrangements were fair
and reasonable and would provide John Hancock with the necessary financial
incentives to promote the Funds within its variable insurance products.
Q. How will you benefit from all this?
A. As a shareholder, you will gain access to the investment talent and
expertise of Capital Guardian, an investment manager with significant investment
resources and a strong performance record. In addition, the increased fees will
enable John Hancock to continue to dedicate additional personnel and resources
to the Funds and promote the Funds within its variable insurance products,
thereby increasing opportunities for asset growth.
Q. What is the Board's recommendation regarding the modifications in Proposal
4A -4B?
A. The Board unanimously recommends that you vote "FOR" Proposal 4A - 4B.
<PAGE>
Inside Back Cover of Q&A
[w/ photo of a sample proxy card]
WE NEED YOUR VOTE!
Because each fund must vote separately, you are being sent a proxy card for each
fund in which you were invested on August 31.
Please vote on all of the proposals shown on each proxy card you receive. A
"FOR" vote means that you approve a proposal. An "AGAINST" vote means that you
disapprove. You may also choose to abstain, but a vote to abstain has the same
practical effect as a vote against the proposal.
YOUR VOTE IS IMPORTANT.
To cast your vote(s):
. Complete your proxy card(s) by using blue or black ink to mark an X in one
of the three boxes next to each proposal.
. Sign and date your proxy card(s). If you are signing for a corporation,
trust or estate, please indicate your title or position.
. Mail your proxy card(s) in the enclosed envelope today.
The Board of Trustees of the John Hancock Variable Series Trust I
unanimously recommends that shareholders approve the proposed changes
for your fund(s).
<PAGE>
Back Cover of Q&A
[John Hancock Variable Series Trust I logo]
John Hancock Place
Boston, MA 02117
<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 Friday, October 20, 2000, to consider and
vote upon the following matters:
--------------------------------------------------------------------------------
1 Proposals to approve, as to the Managed Fund, a multi-manager approach that
entails:
A. a new Sub-Investment Management Agreement among the Trust, John
Hancock, and Capital Guardian Trust Company ("Capital Guardian")
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.
1D. A proposal to change the Managed Fund's classification from "diversified"
to "non-diversified".
2 Proposals to approve, as to the Growth & Income Fund, a multi-manager
approach that entails:
A. a new Sub-Investment Management Agreement among the Trust, John
Hancock, and Putnam Investment Management, Inc.;
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.
2D. A proposal to change the Growth & Income Fund's classification from
"diversified" to "non-diversified".
2E. A proposal to modify the fundamental restrictions applicable to the Growth
& Income Fund to permit it to invest in securities that are subject to
legal restrictions on resale.
2F. A proposal to modify the fundamental restrictions applicable to the Growth
& Income Fund to permit it to invest in financial futures.
3 Proposals to approve, as to the Active Bond Fund:
A. an amendment to the May 1, 1995 Sub-Investment Management Agreement
among the Trust, John Hancock and John Hancock Advisers, Inc.,
reflecting an increase in the Sub-Investment Advisory Fee; and
B. an amendment to the April 12, 1988 Investment Management Agreement
between the Trust and John Hancock, reflecting an increase in the
Investment Advisory Fee.
4 Proposals to approve, as to the Small Cap Value Fund, Global Balanced Fund
(formerly the International
Balanced Fund) and Global Bond Fund:
A. a new Sub-Investment Management Agreement among the Trust, John
Hancock and Capital Guardian; and
B. an amendment to the March 14, 1996 Investment Management Agreement
between the Trust and John Hancock, reflecting an increase in the
Investment Advisory Fee.
--------------------------------------------------------------------------------
In addition, any other business as may properly come before the meeting or
any adjournment thereof, may be transacted at this Special Meeting.
<PAGE>
An owner of a variable life insurance policy or a variable annuity contract
(Shareholder") will be entitled to give voting instructions only if he/she was
the Shareholder of record as of the close of business on August 31, 2000. John
Hancock is soliciting votes from Shareholders invested in the following Funds
with respect to the matters affecting those Funds:
<TABLE>
<CAPTION>
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FUND PROPOSAL
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1A 1B 1C 1D 2A 2B 2C 2D 2E 2F 3A 3B 4A 4B
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Managed X X X X
------------------------------------------------------------------------------------------------------------------------------------
Growth & Income X X X X X X
------------------------------------------------------------------------------------------------------------------------------------
Active Bond X X
------------------------------------------------------------------------------------------------------------------------------------
Small Cap Value X X
------------------------------------------------------------------------------------------------------------------------------------
Global Balanced X X
------------------------------------------------------------------------------------------------------------------------------------
Global Bond X X
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</TABLE>
MICHELE G. VAN LEER
Chairman, Board of Trustees
Boston, Massachusetts
September 11, 2000
--------------------------------------------------------------------------------
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>
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 Friday, October 20, 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
Shareholders' 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"). 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. 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 Shareholders on or about
September 13, 2000.
Only the Funds indicated in the chart on the attached notice will vote on
each proposal listed in that chart. Where the chart shows more than one Fund as
voting on a particular proposal, approval by any Fund will be effective as to
that Fund, even if one or more other Funds fail to approve the proposal.
THE TRUST WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS ANNUAL REPORT FOR
1999 AND WHEN AVAILABLE A COPY OF ITS MOST RECENT SEMI-ANNUAL REPORT FOR 2000 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 Shareholder
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, a Shareholder 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
Shareholders 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
<PAGE>
which are received from all Shareholders 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.
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 Shareholders).
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>
PROPOSALS 1A, 1B and 1C - MANAGED FUND
APPROVAL OF NEW SUB-INVESTMENT MANAGEMENT AGREEMENTS
AND AN AMENDMENT TO THE CURRENT INVESTMENT MANAGEMENT AGREEMENT
FOR THE MANAGED FUND
At its July 14, 2000 meeting, the Board of Trustees unanimously approved,
and voted to recommend that Shareholders 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 Managed Fund. Shareholders will need to approve
all three Proposals to implement the change to a multi-manager approach.
Reasons for these Proposals
The multi-manager Sub-Investment Management Agreements, and a related
amendment to the Investment Management Agreement for the Managed Fund, are being
submitted for shareholder approval at the Meeting. All three agreements must be
approved by Shareholders before any of them can go into effect.
The Sub-Investment Management Agreements
Currently, John Hancock contracts with IIA to make investment decisions,
place investment orders, and provide certain record keeping functions for all
invested assets of the Managed Fund. That agreement was last approved by
Shareholders on February 12, 1986.
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 Managed 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 observation have led John Hancock to seek to implement a
multi-manager approach for the Managed Fund by selecting two sub-investment
managers that employ distinct investment strategies in the management of
domestic balanced portfolios. The desired goal is to produce more consistent
investment returns over market cycles. By combining different and complementary
investment strategies, the multi-manager approach seeks to reduce the Managed
Fund's exposure to the risk of any one manager or strategy going out of favor in
certain market environments. Performance consistency is considered an important
goal for the Managed Fund since its broad-based balanced strategy makes this a
core investment option for investors.
IIA, the current sub-investment manager to the Managed Fund, seeks to add
value primarily by focusing its strategy on individual stock and bond selection.
IIA's investment approach for the Managed Fund:
. has a normal target mix of 60% stocks and 40% bonds;
. selects stocks and bonds using a combination of proprietary equity
research and quantitative tools;
. focuses on large cap stocks that are undervalued relative to the
stock's history and have improving earnings growth prospects;
. invests broadly across fixed income sectors and selects bonds believed
to be attractively priced and offer cheap, predictable cash flow;
<PAGE>
. uses a team approach in making investment decisions, with the lead
portfolio managers responsible for implementation of the team's
investment strategy; and,
. employs risk control techniques to maintain risk and industry
characteristics similar to the overall market.
IIA's investment approach has resulted in overall average risk and returns
relative to comparable domestic balanced funds, with periods of underperformance
in volatile and momentum-driven market environments. These market environments
proved challenging for most investment managers with a quantitative approach
that is sensitive to valuation characteristics. As a result, John Hancock
decided to select an additional sub-investment manager that would implement a
complementary and distinct investment approach in the management of domestic
balanced portfolios.
Among the factors that John Hancock and 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 domestic balanced portfolios.
. Disciplined and well-defined investment process for investing in
stocks and bonds.
. Strong long-term performance record in managing domestic balanced
portfolios.
. Sub-investment advisory fee that is competitive relative to other
domestic balanced portfolios.
. The degree to which the investment manager's historical and expected
investment returns are correlated with those of IIA.
. The sub-investment manager's reputation and presence in the variable
products marketplace and the sub-investment manager's potential for
increasing the growth in Fund assets.
After evaluating potential sub-investment managers based on these criteria, John
Hancock recommended to the Board of Trustees, and the Board unanimously
approved, that Capital Guardian be retained as a complementary manager for the
Managed Fund.
Capital Guardian seeks to add value by focusing its strategy on individual
stock and bond selection. Capital Guardian's investment approach:
. would have a normal target of 70% stocks and 30% bonds;
. selects stocks and bonds using a fundamental, bottom-up, research
driven approach;
. focuses on large and mid cap stocks that have attractive valuations
relative to long-term growth prospects and asset-rich companies with
strong balance sheets;
. invests broadly across undervalued fixed income sectors and
securities;
. employs a multiple-manager approach by which each portfolio manager
and the research analysts as a group each manage a separate portion of
the portfolio to capture the highest conviction ideas of the
investment team; and,
. achieves risk control and diversification through the diversity of
independent ideas of each portfolio manager and research analyst.
The multi-manager approach for the Managed Fund - combining the investment
expertise of both IIA and Capital Guardian - seeks to provide investors with
diversification of investment strategies and the potential for more consistent
investment returns over market cycles.
On or about November 1, 2000, the then-existing assets of the Fund will be
allocated between IIA and Capital Guardian. Capital Guardian will receive $500
million and IIA will receive the remainder. Based upon total Fund assets as of
June 30, 2000, this would result in an allocation of approximately 85% to IIA
and 15% to Capital Guardian. After November 1, 2000, investments in the Fund
will be allocated equally between the two sub-advisors while redemptions will be
allocated on asset-weighted basis. Such allocation methodology could be changed
in the future, but there is no present intention of doing so.
The sub-investment advisory fee to be charged by Capital Guardian under its
new Sub-Investment Management Agreement is higher than that charged by IIA and
recognizes, among other things, the greater degree of resources and analysis
required of Capital Guardian in implementing a more fundamental, research-driven
approach. Whereas John Hancock will pay IIA a sub-investment advisory fee at an
annual rate of 0.30% on the first $500 million of assets managed by IIA, 0.2625%
on the next $500 million
<PAGE>
managed by IIA and 0.2250% on any additional amounts managed by IIA, John
Hancock will pay Capital Guardian 0.50% for the first $150 million managed by
Capital Guardian, 0.45% for the next $150 million managed by Capital Guardian,
0.30% for the next $200 million managed by Capital Guardian, and 0.25% for any
additional amounts managed by Capital Guardian. The sub-investment advisory fee
for IIA will remain at the rate in effect prior to November 1, 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 Capital Guardian 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 need not necessarily result in any additional charge to
the Trust or to Shareholders. However, in this case the higher fees payable to
Capital Guardian will be reflected in the proposed increase to the investment
advisory fee to be paid by the Trust to John Hancock.
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 Managed 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; supervises activities of the
sub-investment managers referred to above; and supervises the activities of the
other providers of services to the Fund. That agreement was last approved by the
Shareholders on April 23, 1999.
For any fiscal year in which the normal operating costs and expenses of the
Managed 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 Managed 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 0.40% for the first $500 million of the Managed Fund's
average daily net assets; 0.35% for the next $500 million and 0.30% for any
additional amounts.
After evaluating the fees to be charged to the Managed 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 July 14, 2000 meeting that the
current Investment Management Agreement be amended to reflect an increase in the
Fund's investment advisory fees to 0.74% for the first $500 million of the
Fund's average daily net assets; 0.68% for the next $500 million, and 0.650% for
any additional amounts. At each of those levels, total expenses (i.e., advisory
fees plus other fund expenses capped as previously noted) would be 0.03% higher
(based upon 1999 expenses). If the increase had been in effect during 1999, (i)
the Trust would have paid John Hancock $22,352,466.00 on behalf of the Managed
Fund, rather than the $10,789,553.00 paid under the current Investment
Management Agreement (a 107.2% increase), and (ii) the ratio of total expenses
to average daily net assets would have been 0.70% rather than 0.35%. However,
0.70% 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 0.72%. The foregoing analysis is based upon a study prepared for the
Board by John Hancock using data collected by Morningstar, Inc., an independent
statistical service that tracks expense data on variable insurance funds. See
the table in Appendix A-1 for a tabular comparison of the actual expense ratios
-------
for 1999 with expense ratios that would have been produced by the proposed
modifications had they been in effect during 1999.
In all other respects, the current Investment Management Agreement, as
described in Appendix C to this statement, will remain unchanged.
<PAGE>
Rationale For Proposed Changes In Management Fees
After conducting a complete review of the level of investment management
fees for balanced funds in general, John Hancock noted the following:
. Since the Managed 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 the mid-1980's) are far 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 financial incentives, within the current
competitive environment, to support John Hancock's increased
allocation of personnel and resources to the Fund; and
. provide appropriate financial incentives to support the increased
resources and complexity for overseeing a multi-manager investment
approach; and
. provide a level of financial incentive that would make it easier for
John Hancock to include the Fund as an investment option in its new
insurance products.
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 John Hancock's position relative to marketplace trends in pricing. At the
July 14, 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 Trustees' Recommendation
At a meeting held on July 14, 2000, the Board of Trustees, including all
the Trustees who are not "interested persons" of the Managed 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. The proposed new schedule of investment management fee
rates for the Managed Fund is as stated above.
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
Managed Fund and its Shareholders.
In making its decision to approve the modified management fee schedule, 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 increased commitment of personnel and resources required of John
Hancock, since the inception of the Fund, to support the investment
management services provided to the Fund, and
<PAGE>
the increased sophistication of the investment evaluation and
monitoring process used by John Hancock on behalf of the Fund.
. 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 expected benefits to the Fund of the new multi-manager approach.
. 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.
. 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.
. Current and projected profits to John Hancock, both under the current
investment management fee schedule and the proposed new investment
management fee schedule, from providing investment management services
to the Trust and from the John Hancock insurance products which use
the Trust as a funding medium.
. The need to provide sufficient revenues to John Hancock, 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, reasonable and in the best interests of the Fund and its
Shareholders.
Additional Information
Capital Guardian. As of December 31, 1999, Capital Guardian, together with
its affiliated asset management companies, had over $130 billion of assets under
management, $1.7 billion of which were in domestic balanced portfolios. Appendix
D to this statement contains additional information concerning the Capital
Guardian 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 Shareholders of the Managed Fund.
<PAGE>
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS OF THE
MANAGED FUND GIVE INSTRUCTIONS TO VOTE FOR THE APPROVAL OF EACH OF THE
---
FOLLOWING:
PROPOSAL 1A -- THE NEW SUB-INVESTMENT MANAGEMENT AGREEMENT WITH
CAPITAL GUARDIAN
PROPOSAL 1B -- THE NEW SUB-INVESTMENT MANAGEMENT AGREEMENT WITH IIA
PROPOSAL 1C -- THE AMENDED INVESTMENT MANAGEMENT AGREEMENT WITH
JOHN HANCOCK
<PAGE>
PROPOSAL 1D - MANAGED FUND
APPROVAL OF CLASSIFICATION OF THE MANAGED FUND AS A "NON-DIVERSIFIED" FUND
At its July 14, 2000 meeting, the Board of Trustees also unanimously approved,
and voted to recommend that Shareholders approve, John Hancock's recommendations
to change the classification of the Managed Fund from "diversified" to "non-
diversified".
Discussion
A current investment policy of the Managed Fund requires the Fund to be
"diversified."/1/ 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. The value of a
non-diversified 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
because a relatively high percentage of a non-diversified fund's assets may be
invested in the obligations of a limited number of issuers. Most of the funds of
the Trust are "diversified.
In making its recommendation, John Hancock noted that "non-diversified"
status would provide necessary flexibility for each sub-investment manager of
the Managed Fund to implement its investment strategy within the multi-manager
framework. The implementation of two distinct investment strategies could
potentially result in the overall Fund exceeding diversification limits. John
Hancock also 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. Therefore, it has
become increasingly difficult for certain funds of the Trust to remain
"diversified" and still follow their investment strategies and make active bets
relative to their benchmarks.
Trustees' Recommendation
The Board of Trustees believes that the proposed change of the Managed
Fund's classification to "non-diversified", and the corresponding modification
of the Fund's investment policy, is in the best interests of the Shareholders of
the Fund.
------------------
/1/ Fundamental policy (10) of the Trust provides that a Fund shall not purchase
securities of any issuer, if (a) with respect to 75% of the market value of its
total assets, more than 5% of the Fund's total assets taken at market value
would at the time be invested in the securities of such issuer, unless such
issuer is the United States Government or its agency or instrumentality, or (b)
such purchase would result in more than 10% of the outstanding voting securities
of such issuer being held by the Fund. This restriction does not currently apply
to the Large Cap Aggressive Growth, Mid Cap Growth or Global Balanced Funds. In
addition, Proposals to be voted upon at a September 28, 2000 shareholder meeting
seek approval for the Large Cap Growth, Real Estate Equity and Global Bond Funds
to be added to the list of Funds to which the restriction does not apply. The
Growth & Income Fund is also proposed to be classified as "non-diversified"
under Proposal 2D in this statement.
<PAGE>
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMEND THAT THE SHAREHOLDERS OF THE
MANAGED FUND GIVE INSTRUCTIONS TO VOTE FOR THE APPROVAL OF CLASSIFICATION OF THE
---
FUND AS "NON-DIVERSIFIED."
<PAGE>
PROPOSALS 2A, 2B and 2C -- GROWTH & INCOME FUND
APPROVAL OF NEW SUB-INVESTMENT MANAGEMENT AGREEMENTS AND AN AMENDMENT TO THE
CURRENT INVESTMENT MANAGEMENT AGREEMENT FOR THE GROWTH & INCOME FUND
At its July 14, 2000 meeting, the Board of Trustees unanimously approved,
and voted to recommend that Shareholders 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 Growth & Income Fund. Shareholders will need to
approve all three Proposals to implement the change to a multi-manager approach.
Reasons for these Proposals
The multi-manager Sub-Investment Management agreements, and a related
amendment to the Investment Management Agreement for the Growth & Income Fund,
are being submitted for shareholder approval at the Meeting. All three
agreements must be approved by Shareholders before any of them can go into
effect.
The Sub-Investment Management Agreements
Currently, John Hancock contracts with IIA to make investment decisions,
place investment orders, and provide certain record keeping functions for all
invested assets of the Growth & Income Fund. That agreement was last approved by
Shareholders on February 12, 1986.
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 Growth & Income Fund:
. Investment managers often have very unique approaches and expertise in
managing investments within the same asset class or investment
category.
. Different investment styles and managers produce different investment
results in different market environments - with no single style or
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 Growth & Income Fund by selecting two
sub-investment managers that employ distinct investment strategies in the
management of domestic equity portfolios. The desired goal is to produce more
consistent investment returns over market cycles. By combining different and
complementary investment strategies, the multi-manager approach seeks to reduce
the Growth & Income Fund's exposure to the risk of any one manager or strategy
going out of favor in certain market environments. Performance consistency is
considered an important goal for the Growth & Income Fund since its broad equity
strategy of investing in large cap stocks makes this a core investment option
for investors.
IIA, the current sub-investment manager to the Growth & Income Fund, seeks
to add value primarily by focusing its strategy on individual stock selection.
IIA's investment approach for the Growth & Income Fund:
. focuses on large cap stocks that are undervalued relative to the
stock's history and have improving earnings growth prospects;
. selects stocks using a combination of proprietary equity research and
quantitative tools;
. uses a team approach in making investment decisions, with the lead
portfolio managers responsible for implementation of the team's
investment strategy; and,
. employs risk control techniques to maintain risk and industry
characteristics similar to the Fund's benchmark.
<PAGE>
IIA's investment approach has resulted in overall average risk and returns
relative to comparable domestic equity funds, with periods of underperformance
in volatile and momentum-driven market environments. These market environments
proved challenging for most investment managers with a quantitative approach
that is sensitive to valuation characteristics. As a result, John Hancock
decided to select an additional sub-investment manager that would implement a
complementary and distinct investment approach in the management of equity
portfolios.
Among the factors that John Hancock and 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 growth style equity portfolios.
. Disciplined and well-defined investment process for investing in
growth stocks.
. Strong long-term performance record in managing growth stock
portfolios.
. Sub-investment advisory fee that is competitive relative to other
growth stock portfolios.
. The degree to which the investment manager's historical and expected
investment returns are correlated with those of IIA.
. The sub-investment manager's reputation and presence in the variable
products marketplace and the sub-investment manager's potential for
increasing the growth in Fund assets.
After evaluating potential sub-investment managers based on these criteria, John
Hancock recommended to the Board of Trustees, and the Board unanimously
approved, that Putnam be retained as a complementary manager for the Growth &
Income Fund.
Putnam seeks to add value by focusing its strategy on individual stock
selection decisions. Putnam's investment approach:
. focuses on large and mid-size growth stocks;
. selects stocks using proprietary bottom-up, fundamental research and a
systematic screening process;
. selects stocks with above-average potential for growth in revenues and
earnings that meet screening criteria for earnings surprise and
momentum, valuation and financial strength;
. uses a team approach in making investment decisions, with the lead
portfolio managers responsible for implementation of the team's
investment strategy; and,
. employs risk management tools and qualitative judgement to determine
sector, industry and stock specific weightings and seeks broad
industry sector diversification.
The multi-manager approach for the Growth & Income Fund - combining the
investment expertise of both IIA and Putnam - seeks to provide investors with
diversification of investment strategies and the potential for more consistent
investment returns over market cycles.
On or about November 1, 2000, the then-existing assets of the Fund will be
allocated between IIA and Putnam. Putnam will receive $1 billion and IIA will
receive the remainder. Based upon total Fund assets as of June 30, 2000, this
would result in an allocation of approximately 75% to IIA and 25% to Putnam.
After November 1, 2000, investments in the Fund will be allocated equally
between the two sub-advisors while redemptions will be allocated on an
asset-weighted basis. Such allocation methodology could be changed in the
future, but there is no present intention of doing so.
The sub-investment advisory fee to be charged by Putnam under its new
Sub-Investment Management Agreement is higher than that charged by IIA and
recognizes, among other things, the greater degree of resources and analysis
required of Putnam in implementing a more fundamental, research-driven approach.
Whereas John Hancock will pay IIA a sub-investment advisory fee at an annual
rate of 0.1875% on all assets managed by IIA, John Hancock will pay Putnam 0.50%
for the first $150 million managed by Putnam; 0.45% for the next $150 million
managed by Putnam; and 0.35% for any additional amounts managed by Putnam. The
sub-investment advisory fee for IIA will remain at the rate in effect prior to
November 1, 2000.
<PAGE>
The proposed forms of the "multi-manager" Sub-Investment Management
Agreements are included as Appendix B-2 to this statement. The agreements with
IIA and Putnam 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 need not necessarily result in any additional charge to the
Trust or to Shareholders. However, in this case the higher fees payable to
Putnam will be reflected in the proposed increase to the investment advisory fee
to be paid by the Trust to John Hancock.
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 Growth & Income 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; supervises activities of
the sub-investment managers referred to above; and supervises the activities of
the other providers of services to the Fund. That agreement was last approved by
the Shareholders on April 23, 1999.
For any fiscal year in which the normal operating costs and expenses of
the Growth & Income 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 Growth & Income 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 0.25% of the Growth & Income Fund's average daily net
assets.
After evaluating the fees to be charged to the Growth & Income 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 July 14, 2000 meeting, that the
current Investment Management Agreement be amended to reflect an increase in the
Fund's investment advisory fees to 0.71% for the first $150 million of the
Fund's average daily net assets; 0.69% for the next $150 million, and 0.67% for
any additional amounts. At each of those levels, total expenses (i.e., advisory
fees plus other fund expenses capped as previously noted) would be 0.03% higher
(based upon 1999 expenses). If the increase had been in effect during 1999, (i)
the Trust would have paid John Hancock $26,373,126.00 on behalf of the Growth &
Income Fund, rather than the $9,806,770.00 paid under the current Investment
Management Agreement (a 168.9% increase), and (ii) the ratio of total expenses
to average daily net assets would have been 0.70% rather than 0.28%. However,
the 0.70% 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 0.78%. The foregoing analysis is based upon a study prepared
for the Board by John Hancock using data collected by Morningstar, Inc., an
independent statistical service that tracks expense data on variable insurance
funds. See the table in Appendix A-1 for a tabular comparison of the actual
-------
expense ratios for 1999 with expense ratios that would have been produced by the
proposed modifications had they been in effect during 1999.
In all other respects, the current Investment Management Agreement, as
described in Appendix C to this statement, will remain unchanged.
<PAGE>
Rationale For Proposed Changes In Management Fees
After conducting a complete review of the level of investment management
fees for equity blend funds in general, John Hancock noted the following:
. Since the Growth & Income 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 1972) are far 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 financial incentives, within the current
competitive environment, to support John Hancock's increased
allocation of personnel and resources to the Fund; and
. provide appropriate financial incentives to support the increased
resources and complexity for overseeing a multi-manager investment
approach; and
. provide a level of financial incentive that would make it easier for
John Hancock to include the Fund as an investment option in its new
insurance products.
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 John Hancock's position relative to marketplace trends in pricing. At the
July 14, 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 Trustees' Recommendation
At a meeting held on July 14, 2000, the Board of Trustees, including all
the Trustees who are not "interested persons" of the Growth & Income 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. The proposed new schedule of investment management fee
rates for the Growth & Income Fund is as stated above.
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
Growth & Income Fund and its Shareholders.
In making its decision to approve the modified management fee schedule, 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.
<PAGE>
. The significantly increased commitment of personnel and resources
required of John Hancock, since the inception of the Fund, to support
the investment management services provided to the Fund, and the
increased sophistication of the investment evaluation and monitoring
process used by John Hancock on behalf of the Fund.
. 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 expected benefits to the Fund of the new multi-manager approach.
. 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.
. 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.
. Current and projected profits to John Hancock, both under the current
investment management fee schedule and the proposed new investment
management fee schedule, from providing investment management services
to the Trust and from the John Hancock insurance products which use
the Trust as a funding medium.
. The need to provide sufficient revenues to John Hancock, 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, reasonable and in the best interests of the Fund and its
Shareholders.
Additional Information
Putnam. As of June 30, 2000, Putnam, together with its affiliated asset
management companies, had over $407 billion of assets under management,
$ of which were in balanced portfolios. Appendix D to this statement
---------
contains additional information concerning the Putnam Board of Directors and
executive officers.
IIA. See Proposals 1A - 1C of this statement for information on IIA.
John Hancock. See Proposals 1A - 1C of this statement for information on
John Hancock.
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 Shareholders of the Growth & Income Fund.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS OF THE
GROWTH & INCOME FUND GIVE INSTRUCTIONS TO VOTE FOR THE APPROVAL OF THE
---
FOLLOWING:
PROPOSAL 2A -- THE NEW SUB-INVESTMENT MANAGEMENT AGREEMENT WITH PUTNAM
PROPOSAL 2B -- THE NEW SUB-INVESTMENT MANAGEMENT AGREEMENT WITH IIA
PROPOSAL 2C -- THE AMENDED INVESTMENT MANAGEMENT AGREEMENT WITH JOHN
HANCOCK
<PAGE>
PROPOSAL 2D -- GROWTH & INCOME FUND
APPROVAL OF CLASSIFICATION OF THE GROWTH & INCOME FUND
AS A "NON-DIVERSIFIED" FUND
At its July 14, 2000 meeting, the Board of Trustees also unanimously
approved, and voted to recommend that Shareholders approve, John Hancock's
recommendations to change the classification of the Growth & Income Fund from
"diversified" to "non-diversified".
Discussion
A current investment policy of the Growth & Income Fund requires the Fund
to be "diversified."/3/ 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. The value of a
non-diversified 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
because a relatively high percentage of a non-diversified fund's assets may be
invested in the obligations of a limited number of issuers. Most of the funds of
the Trust are "diversified."
In making its recommendation, John Hancock noted that "non-diversified"
status would provide necessary flexibility for each sub-investment manager of
the Growth & Income Fund to implement its investment strategy within the
multi-manager framework. The implementation of two distinct investment
strategies could potentially result in the overall Fund exceeding
diversification limits. John Hancock also 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. Therefore, it has become increasingly difficult for certain funds of
the Trust to remain "diversified" and still follow their investment strategies
and make active bets relative to their benchmarks.
Trustees' Recommendation
The Board of Trustees believes that the proposed change of the Growth &
Income Fund's classification to "non-diversified", and the corresponding
modification of the Fund's investment policy, is in the best interests of the
Shareholders of the Fund.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMEND THAT THE SHAREHOLDERS OF THE
GROWTH & INCOME FUND GIVE INSTRUCTIONS TO VOTE FOR THE APPROVAL OF
---
CLASSIFICATION OF THE FUND AS "NON-DIVERSIFIED."
-------------------
/3/ See Footnote 1 under Proposal 1D for a description of this policy and a list
of other non-diversified funds of the Trust.
<PAGE>
PROPOSAL 2E -- GROWTH & INCOME FUND
MODIFICATION TO THE INVESTMENT RESTRICTIONS OF THE GROWTH & INCOME FUND TO
PERMIT INVESTMENTS IN SECURITIES THAT ARE SUBJECT TO LEGAL RESTRICTIONS ON
RESALE
At its July 14, 2000 meeting, the Board of Trustees also unanimously
approved, and voted to recommend that Shareholders approve, a change in the
investment restrictions of the Growth & Income Fund to allow the Fund to
purchase securities which are subject to legal or contractual delays in or
restrictions on resale (commonly referred to as "restricted securities"),
including those eligible for resale to qualified institutional buyers under Rule
144A of the Securities Act of 1933.
If approved by Shareholders, the Growth & Income Fund would have authority
to invest in restricted securities, 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 restricted securities.
However, the securities markets are evolving. For example, the markets for
various types of securities 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 market in restricted securities 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
restricted securities, including 144A securities. John Hancock or the Fund's
sub-investment manager will in each case determine whether any such restricted
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 Growth &
Income Fund's investment restrictions is in the best interests of the
Shareholders of the Fund.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMEND THAT THE SHAREHOLDERS OF THE
GROWTH & INCOME FUND GIVE INSTRUCTIONS TO VOTE
<PAGE>
FOR THE APPROVAL OF THE AFOREMENTIONED CHANGES IN THE INVESTMENT RESTRICTIONS TO
---
PERMIT FUND INVESTMENT IN RESTRICTED SECURITIES.
<PAGE>
PROPOSAL 2F -- GROWTH & INCOME FUND
MODIFICATION TO INVESTMENT POLICIES TO PERMIT INVESTMENT BY THE
GROWTH & INCOME FUND IN FINANCIAL FUTURES
At its July 14, 2000 meeting, the Board of Trustees also unanimously
approved, and voted to recommend that Shareholders of the Growth & Income 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 funds/5/ other than
the Growth & Income 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 of 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
-------------------
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, a Proposal to be voted upon at a
September 28, 2000 shareholder meeting seeks approval for the Real Estate Equity
Fund to invest in financial futures.
<PAGE>
the futures contract is based increases (in the case of a call option written by
a fund) or decreases (in the 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 this Proposal, the Growth & Income 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 Growth & Income Fund to invest in
financial futures is in the best interests of the Shareholders of that Fund.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMEND THAT THE SHAREHOLDERS OF THE
GROWTH & INCOME FUND GIVE INSTRUCTIONS TO VOTE FOR THE APPROVAL OF THE
---
MODIFICATION OF INVESTMENT POLICIES TO PERMIT INVESTMENTS IN FINANCIAL FUTURES.
<PAGE>
PROPOSALS 3A and 3B -- ACTIVE BOND FUND
AMENDMENTS TO THE SUB-INVESTMENT MANAGEMENT AGREEMENT
AND TO THE INVESTMENT MANAGEMENT AGREEMENT
FOR THE ACTIVE BOND FUND
At its July 14, 2000 meeting, the Board of Trustees unanimously approved,
and voted to recommend that Shareholders approve, amendments to the
Sub-Investment Management Agreement and the Investment Management Agreement that
would increase fees payable by John Hancock to the sub-investment manager and
increase fees payable by the Trust to John Hancock for management of the Active
Bond Fund. Shareholders will need to approve both Proposals in order to
implement either.
Reasons for these Proposals
The amendments to the Sub-Investment Management Agreement and the
Investment Management Agreement for the Fund are being submitted for shareholder
approval at the Meeting. Both amendments must be approved by Shareholders before
either of them can go into effect.
The Proposed Amendment to the Sub-Investment Management Agreement
The current sub-investment manager for the Active Bond Fund is John
Hancock Advisers, Inc. ("Advisers"). Advisers has been the Fund's sub-investment
manager since May 1, 1995, pursuant to a Sub-Investment Management Agreement
with the Trust and John Hancock. That agreement was last approved by
Shareholders of the Fund on April 14, 1997. Under the Sub-Investment Management
Agreement, Advisers provides a continuing and suitable investment program for
the Fund consistent with the investment policies, objectives and restrictions of
the Fund. Advisers manages the investment and reinvestment of the assets of the
Fund subject to the overall supervision, direction, control and review of John
Hancock and the Trust.
In recommending to the Trustees the increase in sub-investment advisory
fees for Advisers, John Hancock noted that Advisers had provided excellent
long-term performance while maintaining a below-average risk profile as compared
to other funds of this type. The Active Bond Fund has outperformed its benchmark
in 4 of the 5 years that Advisers has been the sub-investment manager.
Under the current Sub-Investment Management Agreement, Advisers is paid a
fee at the annual rate of 0.1875% of the Fund's average daily net assets. Under
this Proposal, John Hancock will pay Advisers 0.25% of the first $100 million of
the Fund's average daily net assets, 0.20% of the next $150 million, 0.16% of
the next $250 million, 0.125% of the next $500 million, and 0.10% of any
additional amounts. There will be no other changes to the agreement.
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
need not necessarily result in any additional charge to the Trust or to
Shareholders. However, in this case the higher fees payable to Advisers will be
reflected in the proposed increase to the investment advisory fee to be paid by
the Trust to John Hancock.
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 Active Bond 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; supervises activities of the
sub-investment managers referred to above; and supervises the activities of the
other providers of services to the Fund. That agreement was last approved by the
Shareholders on April 23, 1999.
<PAGE>
For any fiscal year in which the normal operating costs and expenses of
the Active Bond 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 Active Bond 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 0.25% of the Fund's average daily net assets.
After evaluating the fees to be charged to the Active Bond Fund in
comparison to the cost of services to be rendered by John Hancock, John Hancock
recommended to the Board of Trustees at its July 14, 2000 meeting that the
current Investment Management Agreement be amended to reflect an increase in the
Fund's investment advisory fees to 0.70% for the first $100 million of the
Fund's average daily net assets, 0.65% of the next $150 million, 0.61% of the
next $250 million, 0.58% of the next $500 million, and 0.55% for any additional
amounts. At each of those levels, total expenses (i.e., advisory fees plus other
fund expenses capped as previously noted) would be 0.03% higher (based upon 1999
expenses). If the increase had been in effect during 1999, (i) the Trust would
have paid John Hancock $5,438,730.00 on behalf of the Active Bond Fund, rather
than the $2,214,912.00 paid under the current Investment Management Agreement
(a 145.6% increase), and (ii) the ratio of total expenses to average daily net
assets would have been 0.64% rather than 0.28%. However, the 0.64% 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 is
0.66%. The foregoing analysis is based upon a study prepared for the Board by
John Hancock using data collected by Morningstar, Inc., an independent
statistical service that tracks expense data on variable insurance funds. See
the table in Appendix A-1 for a tabular comparison of the actual expense ratios
-------
for 1999 with expense ratios that would have been produced by the proposed
modifications had they been in effect during 1999.
Rationale For Proposed Changes In Management Fees
After conducting a complete review of the level of investment
management fees for comparable bond funds, John Hancock noted the following:
. Since the inception of the Active Bond Fund, 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 current investment management fee level of the Fund (established
in 1972) is significantly below the average contractual fee level 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 financial incentives, within the current
competitive environment, to support John Hancock's increased
allocation of personnel and resources to the Trust; and
. provide a level of financial incentive that would make it easier for
John Hancock to include the Fund as an investment option in its new
insurance products.
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 John Hancock's position relative to marketplace trends in pricing. At the
July 14, 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.
<PAGE>
Basis For The Trustees' Recommendation
At a meeting held on July 14, 2000, the Board of Trustees, including all
the Trustees who are not "interested persons" of the Fund (the "Independent
Trustees"), unanimously approved a modified management fee schedule for the
Active Bond 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. The proposed new schedule of investment management fee
rates for the Active Bond Fund is as stated above.
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
Active Bond Fund and its Shareholders.
In making its decision to approve the modified management fee schedule, 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 Fund, to support
the investment management services provided to the Fund, and the
increased sophistication of the investment evaluation and monitoring
process used by John Hancock on behalf of the Fund.
. 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.
. 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
since its inception.
. Current and projected profits to John Hancock, both under the current
investment management fee schedule and the proposed new investment
management fee schedule, from providing investment management services
to the Trust and from the John Hancock insurance products which use
the Trust as a funding medium.
. The need to provide sufficient revenues to John Hancock, 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, reasonable and in the best interests of the Fund and its
Shareholders.
Additional Information
Advisers has been managing mutual funds since 1968. As of June 30,
--------
2000, Advisers and its affiliates managed $__ billion in assets of which
$________ were in bond portfolios. Advisers is a an indirect wholly-owned
subsidiary of John Hancock. Appendix D to this statement contains additional
information concerning the Advisers Board of Directors and executive officers.
John Hancock. See Proposals 1A-1C of this statement for information on John
------------
Hancock.
Trustees' Recommendation
<PAGE>
The Board of Trustees has determined that the amended Sub-Investment
Management Agreement and the amended Investment Management Agreement are in the
best interests of the Trust and the Shareholders of the Active Bond Fund.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS OF THE
ACTIVE BOND FUND GIVE INSTRUCTIONS TO VOTE FOR THE APPROVAL OF THE FOLLOWING:
---
PROPOSAL 3A -- THE AMENDED SUB-INVESTMENT MANAGEMENT AGREEMENT WITH
ADVISERS
PROPOSAL 3B -- THE AMENDED INVESTMENT MANAGEMENT AGREEMENT WITH JOHN
HANCOCK
<PAGE>
PROPOSALS 4A and 4B
SMALL CAP VALUE, GLOBAL BALANCED AND GLOBAL BOND FUNDS
APPROVAL OF A NEW SUB-INVESTMENT MANAGEMENT AGREEMENT AND
AMENDMENT TO THE INVESTMENT MANAGEMENT AGREEMENT
FOR THE SMALL CAP VALUE, GLOBAL BALANCED AND GLOBAL BOND FUNDS
At its July 14, 2000 meeting, the Board of Trustees unanimously approved,
and voted to recommend that Shareholders approve, a new Sub-Investment
Management Agreement with Capital Guardian and a related amendment to the
Investment Management Agreement that would increase fees payable by the Trust to
John Hancock for management of the Small Cap Value Fund, Global Balanced Fund
and Global Bond Fund. Shareholders of any of the Funds will need to approve both
Proposals in order to implement either. Approval of both Proposals by any Fund
will be effective as to that Fund, even if either or both of the other Funds
fail to approve both Proposals.
Reasons for these Proposals
The Sub-Investment Management Agreement with Capital Guardian, and a
related amendment to the Investment Management Agreement for the Funds, are
being submitted for shareholder approval at the Meeting. Both agreements must be
approved by Shareholders of any Fund before either of them can go into effect.
The Sub-Investment Management Agreement with Capital Guardian
The current sub-investment managers for the Funds are as follows:
. Small Cap Value Fund - - INVESCO Management & Research, Inc.
("INVESCO")
. Global Balanced Fund - - Brinson Partners, Inc. ("Brinson")
. Global Bond - - J.P. Morgan Investment Management, Inc. ("J.P.
Morgan").
At its meeting on July 14, 2000, the Board, upon John Hancock's recommendation,
decided that the Funds' sub-investment management relationships with INVESCO,
Brinson and J.P. Morgan should be terminated, and that Capital Guardian should
be appointed as successor for the reasons described in greater detail below. The
terminations would only take effect upon shareholder approval of the
Sub-Investment Management Agreement with Capital Guardian that is the subject of
this Proposal.
The principal reasons for John Hancock's recommendation to replace the
current sub-investment managers were (i) to seek improved investment performance
for the Fund, and (ii) the opportunity to form a strategic relationship with a
premier investment manager. Such a strategic relationship is expected to result
in more effective management and oversight of these Funds by reducing the number
of sub-advisors from three to one. Among the factors that the John Hancock
considered in focusing upon Capital Guardian were the following:
. Strong organization with experience and significant resources
(investment and operations personnel) dedicated to the development and
management of small cap equity, global balanced and global bond
portfolios.
. Disciplined and well-defined investment process for investing in
equity and fixed income securities.
. Strong long-term performance record in managing small cap equity,
global balanced and global bond portfolios.
. Sub-investment advisory fees that are competitive relative to other
portfolios with a similar investment focus.
. Capital Guardian's reputation and presence in the variable products
marketplace and its potential for increasing the growth in Fund assets.
John Hancock recommended to the Board of Trustees that Capital Guardian be
retained as the new sub-investment manager of all three Funds.
<PAGE>
For the Small Cap Value Fund, John Hancock currently pays INVESCO a
sub-investment advisory fee of 0.55% of the first $100 million of the Fund's
average daily net assets; 0.50% of the next $100 million; and 0.40% of any
additional amounts. Under this Proposal, John Hancock will pay Capital Guardian
0.65% of the first $150 million; 0.50% of the next $150 million, 0.40% of the
next $200 million, and 0.35% of any additional amounts.
For the Global Balanced Fund, John Hancock currently pays Brinson a
sub-investment advisory fee of 0.50% of the first $100 million of the Fund's
average daily net assets; and 0.35% of any additional amounts. Under this
Proposal, John Hancock will pay Capital Guardian 0.65% of the first $150
million; 0.55% of the next $150 million, 0.40% of the next $200 million, and
0.35% of any additional amounts.
For the Global Bond Fund, John Hancock currently pays J.P. Morgan a
sub-investment advisory fee of 0.50% of the first $25 million of the Fund's
average daily net assets; 0.40% of the next $50 million; 0.30% of the next $75
million, and 0.25% of any additional amounts. Under this Proposal, John Hancock
will pay Capital Guardian 0.40% of the first $150 million; 0.35% of the next
$150 million, 0.30% of the next $200 million, and 0.25% of any additional
amounts.
A copy of the form of the Sub-Investment Management Agreement is included
as Appendix B-3 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 need not necessarily result in any additional charge to
the Trust or to Shareholders. However, in this case the higher fees payable to
Capital Guardian will be reflected in the proposed increase to the investment
advisory fee to be paid by the Trust to John Hancock.
The Current Investment Management Agreement with John Hancock and Proposed
Amendment
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 Funds; provides administration of day-to-day operations; provides personnel,
office space, equipment and supplies for the Funds; maintains records required
by the Investment Company Act of 1940; supervises activities of the
sub-investment managers referred to above; and supervises the activities of the
other providers of services to the Funds. That agreement was last approved by
the Shareholders on April 23, 1999.
For any fiscal year in which the normal operating costs and expenses of
any of the Funds, 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 Funds for the period ended December 31,
1999 was as follows: Small Cap Value Fund - $6,224.00, Global Balanced Fund -
$91,146.00, and Global Bond Fund - $1,445.00
Under the current Investment Management Agreement, John Hancock is paid
advisory fees at the following annual rates:
. Small Cap Value Fund - 0.80% of the first $100 million of the Fund's
average daily net assets; 0.75% of the next $100 million, and 0.65%
of any additional amounts.
. Global Balanced Fund - 0.85% of the first $100 million of the Fund's
average daily net assets; and 0.70% of any additional amounts.
. Global Bond Fund - 0.75% of the first $25 million of the Fund's average
daily net assets; 0.65% of the next $50 million, 0.55% of the next $75
million and 0.50% of any additional amounts.
After evaluating the fees to be charged to the Funds 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 14, 2000 meeting that the current Investment Management Agreement be
amended to reflect an increase in each Fund's investment advisory fees to the
following levels:
<PAGE>
. Small Cap Value Fund - 0.90% of the first $150 million of the Fund's
average daily net assets, 0.75% of the next $150 million, 0.65% of the
next $200 million, and 0.60% of any additional amounts.
. Global Balanced Fund - 1.05% of the first $150 million of the Fund's
average daily net assets, 0.95% of the next $150 million, 0.80% of the
next $200 million, and 0.75% of any additional amounts.
. Global Bond Fund - 0.85% of the first $150 million of the Fund's
average daily net assets, 0.80% of the next $150 million, 0.75% of the
next $200 million, and 0.70% of any additional amounts.
At each breakpoint level of each Fund, total expenses (i.e., advisory fees plus
-----
other fund expenses capped as previously noted) would be 0.10% higher.
If the increases had been in effect during 1999 for the Small Cap Value
Fund, (i) the Trust would have paid John Hancock $576,718.00 on behalf of the
Small Cap Value Fund, rather than the $512,633.00 paid under the current
Investment Management Agreement (a 12.5% increase), 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 total expense ratios currently
incurred by funds that support other variable insurance products, that have
similar investment focus and asset characteristics, and that are of a size
comparable to the Small Cap Value Fund (i.e., less than $100 million in assets).
The average total expense ratio for all such funds is 0.93%.
If the increases had been in effect during 1999 for the Global Balanced
Fund, (i) the Trust would have paid John Hancock $312,578.00 on behalf of the
Global Balanced Fund, rather than the $253,044.00 paid under the current
Investment Management Agreement (a 23.5% increase), and (ii) the ratio of total
expenses to average daily net assets would have been 1.15% rather than 0.95%.
However, the 1.15% ratio compares favorably with total expense ratios currently
incurred by funds that support other variable insurance products, that have
similar investment focus and asset characteristics, and that are of a size
comparable to the Global Balanced Fund (i.e., less than $100 million in assets).
The average total expense ratio for all such funds is 1.18%.
If the increases had been in effect during 1999 for the Global Bond Fund, (i)
the Trust would have paid John Hancock $605,565.00 on behalf of the Global
Balanced Fund, rather than the $488,070.00 paid under the current Investment
Management Agreement (a 24.1% increase), and (ii) the ratio of total expenses to
average daily net assets would have been 0.95% rather than 0.79%. However, the
0.95% ratio compares favorably with total expense ratios 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 is 1.06%.
The foregoing analysis for each of the Funds is based upon a study
prepared for the Board by John Hancock using data collected by Morningstar,
Inc., an independent statistical service that tracks expense data on variable
insurance funds. See the table in Appendix A-1 for a tabular comparison of the
-------
actual expense ratios for 1999 with expense ratios that would have been produced
by the proposed modifications had they been in effect during 1999.
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
After conducting a complete review of the level of investment management
fees for comparable funds, John Hancock noted the following:
. Since the inception of the Funds, there has been an 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.
<PAGE>
. The current investment management fee levels of the Funds are below
the average contractual fee levels for other mutual funds within the
variable insurance products marketplace having similar investment
focus and asset characteristics (significantly below with respect to
-------------
the Global Balanced and Global Bond Funds).
John Hancock wished to establish a new fee schedule for each of the Funds that
would:
. remain competitive with other funds in the current variable insurance
products marketplace having a similar investment focus and asset
characteristics; and
. provide appropriate financial incentives, within the current
competitive environment, to support John Hancock's increased
allocation of personnel and resources to the Funds.
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 John Hancock's position relative to marketplace trends in pricing. At the
July 14, 2000 Board Meeting, the full Board met to review and consider John
Hancock's proposed recommendation to implement new investment management fee
schedules for the Funds.
Basis For The Trustee's Recommendation
At a meeting held on July 14, 2000, the Board of Trustees, including all
the Trustees who are not "interested persons" of the Funds (the "Independent
Trustees"), unanimously approved a modified management fee schedule for each of
the Funds. 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 schedules. The proposed new schedule of investment management fee
rates for the Small Cap Value, Global Balanced and Global Bond Funds is as
stated above.
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
Small Cap Value, Global Balanced and Global Bond Fund and their Shareholders.
In making its decision to approve the modified management fee schedule,
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 Funds, to support
the investment management services provided to the Funds, and the
increased sophistication of the investment evaluation and monitoring
process used by John Hancock on behalf of the Funds.
. The impact of the proposed changes in investment management fee rates
and changes in other expenses of each Fund on each Fund's total
expense ratio and the continued willingness of John Hancock to agree
to limit total operating expenses for each Fund.
. The historical investment record of John Hancock in managing each of
the Funds, 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 Funds
since their inception.
. Current and projected profits to John Hancock, both under the current
investment management fee schedule and the proposed new investment
management fee schedule, from providing investment
<PAGE>
management services to the Trust and from the John Hancock insurance
products which use the Trust as a funding medium.
. The need to provide sufficient revenues to John Hancock, within the
competitive marketplace, to promote the Funds as a funding medium for
variable insurance products it may market in the future and increase
the opportunities for growth in the Funds' assets.
.
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, reasonable and in the best interests of the Funds and the
Funds' Shareholders.
Additional Information
Capital Guardian. See Proposals 1A-1C of this statement for information on
----------------
Capital Guardian.
John Hancock. See Proposals 1A-1C of this statement for 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 Shareholders of the Small Cap Value, Global
Balanced and Global Bond Funds.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS OF THE SMALL
CAP VALUE FUND, GLOBAL BALANCED FUND AND GLOBAL BOND FUND GIVE INSTRUCTIONS TO
VOTE FOR THE APPROVAL OF THE FOLLOWING:
---
PROPOSAL 4A -- THE NEW SUB-INVESTMENT MANAGEMENT AGREEMENT WITH CAPITAL
GUARDIAN
PROPOSAL 4B -- THE AMENDED INVESTMENT MANAGEMENT AGREEMENT WITH JOHN
HANCOCK
<PAGE>
Appendix A
RECORD DATE AND VOTING SHARES
As of the close of business on August 31, 2000 ("the record date"), there
were the following shares outstanding:
--------------------------------------------------------------------------------
Name of Fund Number of Shares
------------ ----------------
--------------------------------------------------------------------------------
Managed
--------------------------------------------------------------------------------
Growth & Income
--------------------------------------------------------------------------------
Small Cap Value
--------------------------------------------------------------------------------
Global Balanced
--------------------------------------------------------------------------------
Active Bond
--------------------------------------------------------------------------------
Global Bond
--------------------------------------------------------------------------------
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 August 31, 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
------------ ---------------- ------------------
--------------------------------------------------------------------------------
Managed
--------------------------------------------------------------------------------
Growth & Income
--------------------------------------------------------------------------------
Small Cap Value
--------------------------------------------------------------------------------
Global Balanced
--------------------------------------------------------------------------------
Active Bond
--------------------------------------------------------------------------------
Global Bond
--------------------------------------------------------------------------------
<PAGE>
Appendix A-1
ANNUAL FEES AND EXPENSES INCURRED UNDER CURRENT
MANAGEMENT AGREEMENTS AND UNDER PROPOSED
AMENDMENTS TO MANAGEMENT AGREEMENTS
The tables below are based on the specified Fund's average net assets during the
fiscal year ended December 31, 199 and show (1) the current annualized level of
-------
all fees and expenses for the specified Fund under the current investment
management fee schedule; and (2) the pro-forma annualized level of all fees and
---------
expenses that would have been incurred by the specified Fund under the proposed
investment management fee schedule. The percentages shown reflect management
fees and other fund expenses based on the allocation methodology and expense
reimbursement policy adopted by the Trust on April 23, 1999. Under the policy,
John Hancock Life Insurance Company voluntarily reimburses each Fund shown when
that Fund's "other fund expenses" exceed 0.10% of that Fund's average daily net
assets. The tables do not reflect separate account expenses, including sales
load and other contract-level expenses.
MANAGED FUND (Proposals 1A, 1B and 1C)
--------------------------------------------------------------------------------
Current Pro-Forma
------- ---------
Management Fees 0.32% 0.70%
Distribution and Service (12b-1) Fees N/A N/A
Other Operating Expenses Absent Reimbursement 0.03% 0.03%
----- -----
Total Fund Expenses Absent Reimbursement 0.35% 0.73%
Expense Reimbursement (including fee waivers) (0.00%) (0.00%)
------ ------
Total Fund Expenses After Reimbursement 0.35% 0.73%
--------------------------------------------------------------------------------
GROWTH & INCOME FUND (Proposals 2A, 2B and 2C)
--------------------------------------------------------------------------------
Current Pro-Forma
------- ---------
Management Fees 0.25% 0.72%
Distribution and Service (12b-1) Fees N/A N/A
Other Operating Expenses Absent Reimbursement 0.03% 0.03%
----- -----
Total Fund Expenses Absent Reimbursement 0.28% 0.75%
Expense Reimbursement (including fee waivers) (0.00%) (0.00%)
------ ------
Total Fund Expenses After Reimbursement 0.28% 0.75%
--------------------------------------------------------------------------------
ACTIVE BOND FUND (Proposal 3)
--------------------------------------------------------------------------------
Current Pro-Forma
------- ---------
Management Fees 0.25% 0.66%
Distribution and Service (12b-1) Fees N/A N/A
Other Operating Expenses Absent Reimbursement 0.03% 0.03%
----- -----
Total Fund Expenses Absent Reimbursement 0.28% 0.69%
Expense Reimbursement (including fee waivers) (0.00%) (0.00%)
------ ------
Total Fund Expenses After Reimbursement 0.28% 0.69%
--------------------------------------------------------------------------------
<PAGE>
SMALL CAP VALUE FUND (Proposals 4A and 4B)
--------------------------------------------------------------------------------
Current Pro-Forma
------- ---------
Management Fees 0.80% 0.91%
Distribution and Service (12b-1) Fees N/A N/A
Other Operating Expenses Absent Reimbursement 0.16% 0.16%
----- -----
Total Fund Expenses Absent Reimbursement 0.96% 1.07%
Expense Reimbursement (including fee waivers) (0.06%) (0.06%)
------ ------
Total Fund Expenses After Reimbursement 0.90% 1.01%
--------------------------------------------------------------------------------
GLOBAL BALANCED FUND (Proposals 4A and 4B)
--------------------------------------------------------------------------------
Current Pro-Forma
------- ---------
Management Fees 0.85% 1.07%
Distribution and Service (12b-1) Fees N/A N/A
Other Operating Expenses Absent Reimbursement 0.46% 0.46%
----- -----
Total Fund Expenses Absent Reimbursement 1.31% 1.53%
Expense Reimbursement (including fee waivers) (0.36%) (0.36%)
------ ------
Total Fund Expenses After Reimbursement 0.95% 1.17%
--------------------------------------------------------------------------------
GLOBAL BOND FUND (Proposals 4A and 4B)
--------------------------------------------------------------------------------
Current Pro-Forma
------- ---------
Management Fees 0.69% 0.88%
Distribution and Service (12b-1) Fees N/A N/A
Other Operating Expenses Absent Reimbursement 0.15% 0.15%
----- -----
Total Fund Expenses Absent Reimbursement 0.84% 1.03%
Expense Reimbursement (including fee waivers) (0.05%) (0.05%)
------ ------
Total Fund Expenses After Reimbursement 0.79% 0.98%
--------------------------------------------------------------------------------
<PAGE>
Appendix B-1
PROPOSALS 1A and 1B - FORMS OF MULTI-MANAGER SUB-
INVESTMENT MANAGEMENT AGREEMENT
The Capital Guardian 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 Shareholders of the Managed Fund.
The IIA Sub-Investment Management Agreement to be voted upon begins on
page __. It will be dated and signed on or within a reasonable time after
approval by Shareholders of the Managed Fund.
<PAGE>
(Managed Fund)
SUB-INVESTMENT MANAGEMENT AGREEMENT
AMONG
JOHN HANCOCK VARIABLE SERIES TRUST I
JOHN HANCOCK LIFE INSURANCE COMPANY
AND
CAPITAL GUARDIAN TRUST 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"),
John Hancock Life Insurance Company, a Massachusetts corporation ("JHLICO"), and
Capital Guardian Trust Company, a California corporation ("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 is engaged in the business of rendering investment advice
under the Investment Advisers Act of 1940, and the Advisers is a state-chartered
bank exempt from registration 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 Managed 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 12, 1988 (the "Investment Management Agreement"), pursuant to which it may
contract with one or more sub-managers with respect to the Managed Fund;
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 an investment adviser and manager to the
Managed Fund (the "Subject Fund") for the period and on the terms
herein set forth, for the compensation herein provided.
(b) Incumbency Certificates. Advisers shall furnish to JHLICO, immediately
-----------------------
upon execution of this Agreement, a certificate of authorized
personnel of Advisers setting forth (by name and title, and including
specimen signatures) those individuals of Advisers who are authorized
to act on behalf of the Subject Fund pursuant to the provisions of
this Agreement. Advisers shall promptly provide further supplemental
certificates, as needed, to reflect all changes with respect to such
authorized personnel 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 authorized
personnel of Advisers so named.
(c) 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.
(d) Advisers' Representations. Advisers represents, warrants and agrees
-------------------------
(i) that it is a "bank" as defined in the Investment Advisers Act of
1940 and exempt from registration as an
<PAGE>
-2-
investment adviser under the Investment Advisers Act of 1940, (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 reasonably designed to prevent
violations of such code, and (v) that, if applicable, 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 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 established by the Trust and JHLICO. From time to
time, JHLICO or the Trust may provide Advisers in writing (including, without
limit, electronic communication) with additional or amended investment policies,
procedures, guidelines and restrictions with the opportunity for prior review by
Advisers. Advisers, as a sub-manager, will use due care to 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), provisions of the 1940 Act and all other
applicable laws and regulations deemed to be Sub-Advisers' duty under the
Subject Funds' compliance manual and procedures (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) as is mutually agreed to from time to time, such
agreement not to be unreasonably withheld. In the event that, in addition to
Advisers, 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 Advisers 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,
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) upon request, furnish the Trust with research, economic and
statistical data in connection with said Fund's investments and
investment policies including , without limit, investment policy
decisions to be made by the Trust's Board of Trustees or any committee
thereof regarding the Subject Fund;
(b) submit such reports and information as JHLICO or the Trust's Board of
Trustees may reasonably request, to reasonably 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;
<PAGE>
-3-
(e) maintain and preserve the records relating to its activities hereunder
required by the 1940 Act to be maintained and preserved by 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 Assets, 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 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;
(h) subject to its receipt of all necessary voting materials, vote all
proxies with respect to investments of the Subject Assets in
accordance with Advisers' proxy voting policy as most recently
supplied to JHLICO, or in such other manner as JHLICO and Advisers may
reasonably agree upon from time to time; and
(i) provide timely information to JHLICO and the Trust concerning Advisers
and its activities hereunder in connection with the Subject Assets to
assure accurate disclosure of such matters (or information necessary
to make the statements not misleading) in any Prospectus, Statement of
Additional Information or registration statement of the Trust or
JHLICO, or in any sales literature or materials for the sale or
distribution of the Trust's shares, it being understood that JHLICO
and the Trust shall otherwise be solely responsible for the accuracy
of such documents.
On its own initiative, Advisers will apprise JHLICO and the Trust of
important 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. Advisers will
also make its personnel available in Boston or other reasonable locations as
often as quarterly to discuss the Subject Assets and Advisers' management
thereof, to educate JHLICO sales personnel with respect thereto (in such manner
and format as the parties reasonably agree upon from time to time), 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 Subject 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.
Advisers shall have no duty or obligation to the Trust or to JHLICO, and
shall not be expected or responsible to perform any service or function with
respect thereto, except as is expressly stated in this Agreement.
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:
<PAGE>
-4-
(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.
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 Advisers 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 as of the
most recent preceding day for which that Subject Fund's net assets were
determined by the Subject Fund's Custodian or by the Subject Fund's
administrator, as the case may be.
5. PORTFOLIO TRANSACTIONS.
In connection with the investment and reinvestment of the assets of the
Subject Assets, Advisers 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 best available price and most favorable execution
with respect to all such purchases and sales of portfolio securities for said
Subject Assets. 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.
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 the Subject Assets for any reason, upon request of the
Trust or its designee, all records relating to the Subject Fund shall be
<PAGE>
-5-
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 that with respect to
its activities hereunder, it shall maintain, prepare and preserve such books and
records as are required in accordance with the 1940 Act and rules thereunder,
including but not limited to Rules 31a-1 and 31a-2, and supply all information
requested by any insurance regulatory authorities to determine whether all
insurance laws and regulations are being complied with. Advisers 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 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
(after reasonable notice to the Trust) if such disclosure is expressly requested
by applicable federal or state regulatory authorities.
7. LIABILITY; STANDARD OF CARE.
No provision of this Agreement shall be deemed to protect Advisers 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. No provision of this Agreement shall be deemed to
protect 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 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 negligence in the performance his duties
or the reckless disregard of his obligations and duties. Advisers 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) use due care to 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 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, unless terminated as herein
provided, 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
<PAGE>
-6-
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 the Subject Fund shall be effective to continue
this Agreement with respect to 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 the
-----------
Subject Fund at any time, without payment of any penalty, by vote of
the trustees of the Trust or by vote of a majority of the outstanding
shares of such Fund, by Advisers on at least sixty days' written
notice to the Trust and JHLICO, or by JHLICO on at least sixty days'
written notice to the Trust and Advisers.
(c) Automatic Termination. This Agreement shall automatically and
---------------------
immediately terminate in the event of its assignment (other than as
permitted pursuant to Section 15 below) 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) The parties agree that the name "Capital Guardian Trust Company", the
names of the Advisers' affiliates within The Capital Group Companies,
Inc. as listed on Schedule II to this Agreement, and any logo or trade
or service mark (including but not limited to the American Funds Group
of mutual funds) (collectivley referred to as the "Protected
Information"), are the valuable property of the Advisers and its
affiliates. The Trust and JHLICO shall have the right to use the
Protected Information provided that, prior to distribution of any
materials which refer to Advisers or the Protected Information, 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 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 the Protected Information
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 accounts 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.
<PAGE>
-7-
11. AMENDMENT.
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing agreed to by the parties
hereto. Additionally, no amendment of this Agreement shall be effective with
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. 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 Capital Guardian Trust Company
333 South Hope Street
Los Angeles, CA 90072
Attn: Treasurer
Fax #: (213) 486-9218
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>
-8-
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: CAPITAL GUARDIAN TRUST COMPANY
By:
--------------------------- -------------------------------
Title:
--------------------------- ----------------------------
<PAGE>
SCHEDULE I
FEES
<TABLE>
<CAPTION>
Current Net Assets Under Management Sub-Advisory Fee
----------------------------------- ----------------
<S> <C>
On the first $150 million of Subject Assets 50 basis points (0.50%) per annum
On the next $150 million of Subject Assets 45 basis points (0.45%) per annum
On the first $200 million of Subject Assets 30 basis points (0.30%) per annum
On Subject Assets over $ 500 million 25 basis points (0.25%) per annum
</TABLE>
<PAGE>
-10-
SCHEDULE II
The Capital Group Companies, Inc. and its Affiliates
1. AFD American Funds Distributors, Inc.
2. AFS American Funds Service Company
3. CGC The Capital Group Companies, Inc.
4. CGII Capital Group International, Inc.
5. CGRI Capital Group Research, Inc.
6. CGCI Capital Guardian (Canada), Inc.
7. CGRC Capital Guardian Research Company
8. CGTC Capital Guardian Trust Company
9. CGTN Capital Guardian Trust Company, a Nevada Corporation
10. CIAC Capital International Advisory Company S.A.
11. CIACFMC Capital International All Countries Fund Management
Company S.A.
12. CIEFMC Capital International Europe Fund Management Company
13. CIGSMC Capital International Global Small Cap Fund Management
Company S.A.
14. CII Capital International, Inc.
15. CIKK Capital International K.K.
16. CIKFMC Capital International Kokusai Fund Management Company S.A.
17. CIL Capital International Limited
18. CIL-B Capital International Limited (Bermuda)
19. CIMC Capital International Management Company S.A.
20. CIRI Capital International Research, Inc.
21. CISA Capital International S.A.
22. CMS Capital Management Services, Inc.
23. CRC Capital Research Company
24. CRMC Capital Research and Management Company
25. CSR Capital Strategy Research, Inc.
26. CIHACFMC CIHAC Fund Management Company S.A.
<PAGE>
(Managed 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 Managed 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 Managed Fund (the
"Subject Fund"), effective , 2000, for the period and on the terms herein
-----
set forth, for the compensation herein provided.
<PAGE>
-13-
(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>
-14-
(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>
-15-
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>
-16-
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>
-17-
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>
-18-
8. DURATION AND TERMINATION OF THIS AGREEMENT.
(a) Duration. This Agreement shall become effective with respect to the
--------
Managed 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>
-19-
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>
-20-
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>
-21-
(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 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>
-22-
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>
-23-
SCHEDULE I
FEES
----
Current Net Assets Under Management Sub-Advisory Fee
----------------------------------- ----------------
On the first $500 million 30 basis points (0.30%) per annum
On the next $500 million 26.25 basis points (0.2625%) per annum
On amounts over $1 billion 22.5 basis points (0.225%) per annum
<PAGE>
Appendix B-2
PROPOSALS 2A and 2B - FORMS OF MULTI-MANAGER SUB-
INVESTMENT MANAGEMENT AGREEMENT
The Putnam 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 Shareholders of the Growth & Income Fund.
The IIA Sub-Investment Management Agreement to be voted upon begins on
page __. It will be dated and signed on or within a reasonable time after
approval by Shareholders of the Growth & Income Fund.
<PAGE>
-25-
(Growth & Income)
SUB-INVESTMENT MANAGEMENT AGREEMENT
AMONG
JOHN HANCOCK VARIABLE SERIES TRUST I
JOHN HANCOCK LIFE INSURANCE COMPANY
AND
PUTNAM INVESTMENT MANAGEMENT, INC.
<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 Growth & Income 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 12, 1988 (the "Investment Management Agreement"), pursuant to which it may
contract with one or more sub-managers with respect to the Growth & Income Fund.
NOW, THEREFORE, WITNESSETH: That it is hereby agreed between the parties
hereto as follows:
1. APPOINTMENT OF SUB-MANAGER
(e) Subject Fund. Advisers is hereby appointed and Advisers hereby accepts
------------
the appointment to act as an investment adviser and manager to the
Growth & Income Fund (the "Subject Fund") for the period and on the
terms herein set forth, for the compensation herein provided.
(f) 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, 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.
(g) 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.
(h) 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
<PAGE>
-2-
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 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 Advisers in writing (including, without limit, electronic
communication) with additional or amended investment policies, guidelines and
restrictions. Advisers, 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 Advisers in writing by JHLICO or the Trust from time to time). In
the event that, in addition to Advisers, 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 Advisers 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, 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 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 (it being understood
that Advisers is not responsible for the pricing of 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;
<PAGE>
-3-
(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 (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 Assets in accordance with Advisers'
proxy voting policy as most recently provided 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 Assets, 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 Assets 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 Subject 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 for purposes of
Subchapter M of the Internal Revenue Code of 1986, as amended (the "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:
(e) 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;
(f) custodian fees and expenses;
(g) all taxes, including issuance and transfer taxes, and reserves for
taxes payable by the Trust to federal, state or other governmental
agencies; and
(h) 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.
<PAGE>
-4-
4. SUB-ADVISORY FEES.
For all of the services rendered with respect to the Subject Assets 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(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 as of the
most recent preceding day for which the Subject Fund's net assets were computed.
5. PORTFOLIO TRANSACTIONS.
In connection with the investment and reinvestment of the Subject Assets,
Advisers 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 best available price and most favorable execution with
respect to all such purchases and sales of portfolio securities for said Subject
Assets. 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 the Subject Assets for any
reason, all records relating to the Subject Fund 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 officers of the Trust and JHLICO with all statistical
information regarding investments made on behalf of the Subject Assets which is
reasonably required by them and reasonably available to Advisers.
<PAGE>
-5-
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 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 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, 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 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 the 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
<PAGE>
-6-
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 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 Advisers and JHLICO. This Agreement may
be terminated by Advisers 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 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.
(c) 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.
(d) 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 Assets, 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 Assets 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 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.
<PAGE>
-7-
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:
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>
-8-
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
----
<TABLE>
<CAPTION>
Current Net Assets Under Management Sub-Advisory Fee
----------------------------------- ----------------
<S> <C>
On the first $150,000,000 of Subject Assets 50 basis points (0.50%) per annum
On the next $150,000,000 of Subject Assets 45 basis points (0.45%) per annum
On Subject Assets over $300,000 35 basis points (0.35%) per annum
</TABLE>
<PAGE>
-10-
(Growth & Income 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 Growth & Income 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 Growth & Income
Fund (the "Subject Fund"), effective , 2000, for the period and on the
-----
terms herein set forth, for the compensation herein provided.
<PAGE>
-12-
(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>
-13-
(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>
-14-
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>
-15-
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>
-16-
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>
-17-
8. DURATION AND TERMINATION OF THIS AGREEMENT.
(a) Duration. This Agreement shall become effective with respect to the
--------
Growth & Income 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>
-18-
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>
-19-
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>
-20-
(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 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>
-21-
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>
-22-
SCHEDULE I
FEES
----
Current Net Assets Under Management Sub-Advisory Fee
----------------------------------- ----------------
All assets 18.75 basis points (0.1875%) per annum
<PAGE>
-23-
Appendix B-3
PROPOSAL 4A - SPECIMEN FORM OF SUB-INVESTMENT MANAGEMENT AGREEMENT
Proposal 4: Proposed Sub-Investment Management Agreement with Capital Guardian.
The following agreement will be signed and dated on or within a reasonable time
after the date of approval by Shareholders of the Small Cap Value, Global
Balanced and Global Bond Funds.
<PAGE>
-24-
(Small Cap, Global Balanced and Global Bond Funds)
SUB-INVESTMENT MANAGEMENT AGREEMENT
AMONG
JOHN HANCOCK VARIABLE SERIES TRUST I
JOHN HANCOCK LIFE INSURANCE COMPANY
AND
CAPITAL GUARDIAN TRUST COMPANY
<PAGE>
-1-
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
Capital Guardian Trust Company, a California corporation ("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 is engaged in the business of rendering investment advice
under the Investment Advisers Act of 1940, and the Advisers is a state-chartered
bank exempt from registration 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, including, without
limit, the Small Cap Fund, the Global Balanced Fund and the Global Bond 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
March 14, 1996 (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
(i) Initial Subject Funds. Advisers is hereby appointed and Advisers
---------------------
hereby accepts the appointment to act as investment adviser and
manager to the Small Cap Fund, the Global Balanced Fund and the Global
Bond Fund (the "Subject Funds") for the period and on the terms herein
set forth, for the compensation herein provided.
(j) 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.
(k) Incumbency Certificates. Advisers shall furnish to JHLICO, immediately
-----------------------
upon execution of this Agreement, a certificate of authorized
personnel of Advisers setting forth (by name and title, and including
specimen signatures) those individuals of Advisers who are authorized
to act on behalf of the Subject Funds pursuant to the provisions of
this Agreement. Advisers shall promptly provide supplemental
certificates in connection with each additional Subject Fund (if any)
and further supplemental certificates, as needed, to reflect all
changes with respect to such authorized personnel for any Subject
Fund. On behalf of the Trust, JHLICO
<PAGE>
-2-
shall instruct the custodian for each Subject Fund to accept
instructions with respect to that Subject Fund from the authorized
personnel of Advisers so named.
(l) 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.
(m) Advisers' Representations. Advisers represents, warrants and agrees
-------------------------
(i) that it is a "bank" as defined in the Investment Advisers Act of
1940 and exempt from registration as an investment adviser under the
Investment Advisers Act of 1940, (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 reasonably designed to prevent violations of such code, and
(v) that, if applicable, 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. From time to
time, JHLICO or the Trust may provide Advisers in writing (including, without
limit, electronic communication) with additional or amended investment policies,
procedures, guidelines and restrictions with the opportunity for prior review by
Advisers. Advisers, as Sub-Manager, will use due care to 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), provisions of the 1940 Act
and all other applicable laws and regulations deemed to be Sub-Advisers' duty
under the Subject Funds' compliance manual and procedures (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) as is mutually agreed to from time to
time, such agreement not to be unreasonably withheld. 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:
(j) upon request, furnish the Trust with research, economic and
statistical data in connection with said Fund's investments and
investment policies including , without limit, investment policy
decisions to be made by the Trust's Board of Trustees or any committee
thereof regarding the Subject Fund;
(k) submit such reports and information as JHLICO or the Trust's Board of
Trustees may reasonably request, to reasonably assist the custodian in
its determination of the market value of securities held in the
Subject Assets;
(l) place orders for purchases and sales of portfolio investments for the
Subject Assets;
<PAGE>
-3-
(m) give instructions to the Subject Funds' custodian concerning the
delivery of securities and transfer of cash for the Subject Funds;
(n) maintain and preserve the records relating to its activities hereunder
required by the 1940 Act to be maintained and preserved by the Trust;
(o) at the close of business each day, provide JHLICO and the custodian
with copies of trade tickets for each transaction effected for the
Subject Funds, and promptly forward to the custodian copies of all
brokerage or dealer confirmations;
(p) as soon as practicable following the end of each calendar month,
provide JHLICO with written statements showing all transactions
effected for the Subject Funds during the month, a summary listing all
investments held in the Subject Funds 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 Funds;
(q) subject to its receipt of all necessary voting materials, vote all
proxies with respect to investments of the Subject Funds in accordance
with Advisers' proxy voting policy as most recently supplied to
JHLICO, or in such other manner as JHLICO and Advisers may reasonably
agree upon from time to time; and
(r) provide timely information to JHLICO and the Trust concerning Advisers
and its activities hereunder in connection with the Subject Funds to
assure accurate disclosure of such matters (including information
necessary to make the statements not misleading) in any Prospectus,
Statement of Additional Information or registration statement of the
Trust or JHLICO, or in any sales literature or materials for the sale
or distribution of the Trust's shares, it being understood that JHLICO
and the Trust shall otherwise be solely responsible for the accuracy
of such documents.
On its own initiative, Advisers will apprise JHLICO and the Trust of
important economic developments materially affecting the marketplace or the
Subject Funds, 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 Funds and Advisers' management
thereof, to educate JHLICO sales personnel with respect thereto (in such manner
and format as the parties reasonably agree upon from time to time), 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 Funds and the
cash requirements of, and cash available for investment in, the Subject Funds.
JHLICO will timely provide Advisers with copies of monthly accounting statements
for the Subject Funds, and such other information (including, without
limitation, reports concerning the classification of portfolio securities of the
Subject Funds 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.
Advisers shall have no duty or obligation to the Trust or to JHLICO, and
shall not be expected or responsible to perform any service or function with
respect thereto, except as is expressly stated in this Agreement.
<PAGE>
-4-
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:
(i) 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;
(j) custodian fees and expenses;
(k) all taxes, including issuance and transfer taxes, and reserves for
taxes payable by the Trust to federal, state or other governmental
agencies; and
(l) 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 Funds 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 (as defined below) of the Subject Funds, 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 a 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 a Subject Fund's net assets as of the
most recent preceding day for which that Subject Fund's net assets were
determined by the Subject Fund's Custodian or by the Subject Fund's
administrator, as the case may be.
5. FUND TRANSACTIONS.
In connection with the investment and reinvestment of the assets of a
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.
<PAGE>
-5-
6. OWNERSHIP OF INFORMATION, RECORDS, AND CONFIDENTIALITY.
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, upon request of the
Trust or its designee, all records relating to that Fund 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 that with respect to its activities
hereunder, it shall maintain, prepare and preserve such books and records as are
required in accordance with the 1940 Act and rules thereunder, including but not
limited to Rules 31a-1 and 31a-2, and supply all information requested by any
insurance regulatory authorities to determine whether all insurance laws and
regulations are being complied with. Advisers 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
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
(after reasonable notice to the Trust) if such disclosure is expressly requested
by applicable federal or state regulatory authorities.
7. LIABILITY; STANDARD OF CARE.
No provision of this Agreement shall be deemed to protect Advisers 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. No provision of this Agreement shall be deemed to
protect 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 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 negligence in the performance his duties
or the reckless disregard of his obligations and duties. Advisers shall employ
only qualified personnel to manage a 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) use due care to comply with
the investment policies, guidelines and restrictions of each Subject Fund and
with the provisions of the Trust's Declaration of Trust, Bylaws, prospectus and
statement of additional information; shall manage each 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.
<PAGE>
-6-
8. DURATION AND TERMINATION OF THIS AGREEMENT.
(b) Duration. This Agreement shall become effective with respect to a
--------
Subject Fund described in paragraph 1(a) hereof on the later of (i)
the date of approval of this Agreement by shareholders of that Fund
and (ii) the date hereof; and, with respect to any additional Subject
Fund described in paragraph 1(b) hereof, on the date of receipt by the
Trust of notice from Advisers in accordance with said paragraph 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
with respect to a Subject Fund described in paragraph 1(a) hereof for
two years from the effective date with respect to that Fund and, with
respect to each additional Subject Fund described in paragraph 1(b)
hereof, until two years following the date on which such Fund becomes
a Subject Fund hereunder, and shall continue in full force and effect
thereafterwith 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.
(d) Termination. This Agreement may be terminated with respect to any
-----------
Subject Fund at any time, without payment of any penalty, by vote of
the trustees of the Trust or by vote of a majority of the outstanding
shares of such Fund, by Advisers on at least sixty days' written
notice to the Trust and JHLICO, or by JHLICO on at least sixty days'
written notice to the Trust and Advisers.
(e) Automatic Termination. This Agreement shall automatically and
---------------------
immediately terminate in the event of its assignment (other than as
permitted pursuant to Section 15 below) or if the Investment
Management Agreement is terminated.
9. SERVICES NOT EXCLUSIVE; USE OF ADVISERS' NAME AND LOGO.
(e) 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.
(f) The parties agree that the name "Capital Guardian Trust Company", the
names of the Advisers' affiliates within The Capital Group Companies,
Inc. as listed on Schedule II to this Agreement, and any logo or trade
or service mark (including but not limited to the American Funds Group
of mutual funds) (collectively referred to as the "Protected
Information"), are the valuable property of the Advisers and its
affiliates. The Trust and JHLICO shall have the right to use the
Protected Information provided that, prior to distribution of any
materials which refer to Advisers or the Protected Information, JHLICO
<PAGE>
-7-
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 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 the Protected Information
are used.
10. AVOIDANCE OF INCONSISTENT POSITION.
In connection with the purchase and sale of portfolio securities of a
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 accounts 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 agreed to by the parties
hereto. Additionally, 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 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:
ADVISERS: Capital Guardian Trust Company
333 South Hope Street
Los Angeles, CA 90072
Attn: Treasurer
Fax #: (213) 486-9218
JHLICO: John Hancock Life Insurance Company
200 Clarendon Street
P.O. Box 111
Boston, MA 02117
Attention: Raymond F. Skiba
Fax #: 617-572-4953
<PAGE>
-8-
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.
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: CAPITAL GUARDIAN TRUST COMPANY
By:
--------------------------- -------------------------
Title:
--------------------------- ----------------------
<PAGE>
SCHEDULE I
FEES
----
Current Net Assets Under Management Sub-Advisory Fee
----------------------------------- ----------------
For the Small Cap Fund:
-----------------------
On the first $150 million 65 basis points (0.65%) per annum
On the next $150 million 50 basis points (0.50%) per annum
On the next $200 million 40 basis points (0.40%) per annum
On amounts over $500 million 35 basis points (0.35%) per annum
For the Global Balanced Fund:
----------------------------
On the first $150 million 65 basis points (0.65%) per annum
On the next $150 million 55 basis points (0.55%) per annum
On the next $200 million 40 basis points (0.40%) per annum
On amounts over $500 million 35 basis points (0.35%) per annum
For the Global Bond Fund:
------------------------
On the first $150 million 40 basis points (0.40%) per annum
On the next $150 million 35 basis points (0.35%) per annum
On the next $200 million 30 basis points (0.30%) per annum
On amounts over $500 million 25 basis points (0.25%) per annum
<PAGE>
SCHEDULE II
The Capital Group Companies, Inc. and its Affiliates
----------------------------------------------------
27. AFD American Funds Distributors, Inc.
28. AFS American Funds Service Company
29. CGC The Capital Group Companies, Inc.
30. CGII Capital Group International, Inc.
31. CGRI Capital Group Research, Inc.
32. CGCI Capital Guardian (Canada), Inc.
33. CGRC Capital Guardian Research Company
34. CGTC Capital Guardian Trust Company
35. CGTN Capital Guardian Trust Company, a Nevada Corporation
36. CIAC Capital International Advisory Company S.A.
37. CIACFMC Capital International All Countries Fund Management Company S.A.
38. CIEFMC Capital International Europe Fund Management Company
39. CIGSMC Capital International Global Small Cap Fund Management Company
S.A.
40. CII Capital International, Inc.
41. CIKK Capital International K.K.
42. CIKFMC Capital International Kokusai Fund Management Company S.A.
43. CIL Capital International Limited
44. CIL-B Capital International Limited (Bermuda)
45. CIMC Capital International Management Company S.A.
46. CIRI Capital International Research, Inc.
47. CISA Capital International S.A.
48. CMS Capital Management Services, Inc.
49. CRC Capital Research Company
50. CRMC Capital Research and Management Company
51. CSR Capital Strategy Research, Inc.
52. CIHACFMC CIHAC Fund Management Company S.A.
<PAGE>
Appendix C
PROPOSALS 1C, 2C, 3B and 4B -- 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 each
Fund 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(s), if any.
For its investment management and advisory services, John Hancock is paid a
fee by each Fund 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 Shareholders the Trust's
annual and semi-annual reports, the cost of printing, distributing to
Shareholders, and tabulating proxy materials, compensation paid for certain
accounting, valuation and compliance services, legal fees and expenses, any
securities registration expenses, any organizational expenses, association dues
and any 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 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:
Directors Principal Occupation
--------- --------------------
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)
<PAGE>
Other Executive Officers
------------------------
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
The following employees of John Hancock (or an affiliate) are also
Directors or principal officers of the John Hancock Variable Series Trust I:
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
CAPITAL GUARDIAN TRUST COMPANY
Capital Guardian's Board of Directors and executive officers are as
follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Name Affiliations Within Last Two Years
------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Director, Capital Guardian Trust Company, Capital Research and Management Company and Capital Management
Timothy D. Armour Services, Inc.; Chairman and Chief Executive Officer, Capital Research Company.
------------------------------------------------------------------------------------------------------------------------------------
Senior Vice President, Capital Guardian Trust Company; Vice President, Capital International, Inc. and
Donnalisa Barnum Capital International Limited.
------------------------------------------------------------------------------------------------------------------------------------
Andrew F. Barth Director, Capital Guardian Trust Company and, Capital Research and Management Company; Director and Research
Director, Capital International Research, Inc.; President, Capital Guardian Research Company; Formerly
Director and Executive Vice President, Capital Guardian Research Company.
------------------------------------------------------------------------------------------------------------------------------------
Michael D. Beckman Director, Senior Vice President and Treasurer, Capital Guardian Trust Company; Director, Capital Guardian
Trust Company of Nevada; Treasurer, Capital International Research, Inc. and Capital Guardian Research
Company; Director and Treasurer, Capital Guardian (Canada), Inc.; Formerly Chairman and Director, Capital
International Asia Pacific Management Company.
------------------------------------------------------------------------------------------------------------------------------------
Michael A. Burik Senior Counsel, The Capital Group Companies, Inc.; Senior Vice President, Capital Guardian Trust Company.
------------------------------------------------------------------------------------------------------------------------------------
Elizabeth A. Burns Senior Vice President, Capital Guardian Trust Company.
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Larry P. Clemmensen Director, Capital Guardian Trust Company and American Funds Distributors, Inc.; Chairman and Director,
American Funds Service Company; Director and President, The Capital Group Companies, Inc. and Capital
Management Services, Inc.; Senior Vice President and Director, Capital Research and Management Company,
Treasurer, Capital Strategy, Inc.
------------------------------------------------------------------------------------------------------------------------------------
Kevin G. Clifford Director and President, American Funds Distributors, Inc.; Director, Capital Guardian Trust Company
------------------------------------------------------------------------------------------------------------------------------------
Roberta A. Conroy Senior Vice President, Director and Counsel, Capital Guardian Trust Company; Senior Vice President and
Secretary, Capital International, Inc.; Assistant General Counsel, The Capital Group Companies, Inc.,
Secretary, Capital Guardian International, Inc.; Formerly, Secretary, Capital Management Services, Inc.
------------------------------------------------------------------------------------------------------------------------------------
Jon B. Emerson Senior Vice President, Capital Guardian Trust Company; Director, Capital Guardian Trust Company, a
Nevada Corporation
------------------------------------------------------------------------------------------------------------------------------------
Michael Ericksen Director and Senior Vice President, Capital Guardian Trust Company; Director and Senior Vice President,
Capital International Limited
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
David I. Fisher Vice Chairman and Director, Capital International, Inc., Capital International Limited and Capital
International K.K.; Chairman and Director, Capital International S. A. and Capital Guardian Trust
Company; Director and President, Capital International Limited (Bermuda); Director, The Capital Group
Companies, Inc., Capital International Research, Inc., Capital Group Research, Inc. and Capital Research
and Management Company.
------------------------------------------------------------------------------------------------------------------------------------
Richard N. Havas Senior Vice President, Capital Guardian Trust Company, Capital International, Inc. and Capital
International Limited; Director and Senior Vice President, Capital International Research, Inc.;
Director and Senior Vice President Capital Guardian (Canada), Inc.
------------------------------------------------------------------------------------------------------------------------------------
Frederick M. Hughes, Jr Senior Vice President, Capital Guardian Trust Company.
------------------------------------------------------------------------------------------------------------------------------------
Director and Senior Vice President, Capital Guardian Trust Company; Chairman and Director, Capital
William H. Hurt Guardian Trust Company, a Nevada Corporation and Capital Strategy Research, Inc.; Formerly, Director,
The Capital Group Companies, Inc.
------------------------------------------------------------------------------------------------------------------------------------
Senior Vice President, Capital Guardian Trust Company; Assistant General Counsel, The Capital Group
Peter C. Kelly Companies, Inc.; Director and Senior Vice President, Capital International, Inc.
------------------------------------------------------------------------------------------------------------------------------------
Robert G. Kirby Chairman Emeritus, Capital Guardian Trust Company; Senior Partner, The Capital Group Companies, Inc.
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Nancy J. Kyle Director and Senior Vice President, Capital Guardian Trust Company; President and Director, Capital
Guardian (Canada), Inc.
------------------------------------------------------------------------------------------------------------------------------------
Karin L. Larson Director, The Capital Group Companies, Inc., Capital Group Research, Inc., Capital Guardian Trust Company,
Director and Chairman, Capital Guardian Research Company and Capital International Research, Inc.,
Formerly, Director and Senior Vice President, Capital Guardian Research Company.
------------------------------------------------------------------------------------------------------------------------------------
D. James Martin Director, Capital Guardian Trust Company, and Director and Senior Vice President of Capital International
Research Inc.
------------------------------------------------------------------------------------------------------------------------------------
James R. Mulally Director and Senior Vice President, Capital Guardian Trust Company; Senior Vice President, Capital
International Limited; Vice President, Capital Research Company; Formerly, Director, Capital Guardian
Research Company.
------------------------------------------------------------------------------------------------------------------------------------
Shelby Notkin Senior Vice President, Capital Guardian Trust Company; Director, Capital Guardian Trust Company, a Nevada
Corporation.
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
Mary M. O'Hern Senior Vice President, Capital Guardian Trust Company and Capital International Limited; Vice President,
Capital International, Inc.
------------------------------------------------------------------------------------------------------------------------------------
Jeffrey C. Paster Senior Vice President, Capital Guardian Trust Company.
------------------------------------------------------------------------------------------------------------------------------------
Robert V. Pennington Senior Vice President, Capital Guardian Trust Company; President and Director Capital Guardian Trust
Company, a Nevada Corporation Company.
------------------------------------------------------------------------------------------------------------------------------------
Jason M. Pilalas Director, Capital Guardian Trust Company; Senior Vice President and Director, Capital International
Research, Inc.; Formerly, Director and Senior Vice President, Capital Guardian Research Company.
------------------------------------------------------------------------------------------------------------------------------------
George L. Romine, Jr. Senior Vice President, Capital Guardian Trust Company
------------------------------------------------------------------------------------------------------------------------------------
Robert Ronus Director and President, Capital Guardian Trust Company; Chairman and Director, Capital Guardian (Canada),
Inc., Director, Capital International, Inc. and Capital Guardian Research Company; Senior Vice President,
Capital International, Inc.; Capital International Limited and Capital International S.A.; Formerly,
Chairman, Capital Guardian International Research Company and Director, Capital International, Inc.
------------------------------------------------------------------------------------------------------------------------------------
Director, American Funds Distributors, Inc., American Funds Service Company, The Capital Group Companies,
James F. Rothenberg Inc., Capital Group Research, Inc., Capital Guardian Trust Company and Capital Management Services, Inc.;
Director and President, Capital Research and Management, Inc.; Formerly, Director of Capital Guardian
Trust Company, a Nevada Corporation, and Capital Research Company.
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Theodore R. Samuels Director and Senior Vice President, Capital Guardian Trust Company; Director, Capital International
Research, Inc.; Formerly, Director, Capital Guardian Research Company
------------------------------------------------------------------------------------------------------------------------------------
Lionel A. Sauvage Director and Senior Vice President, Capital Guardian Trust Company; Vice President, Capital International
Research, Inc.; Formerly, Director, Capital Guardian Research Company.
------------------------------------------------------------------------------------------------------------------------------------
John H. Seiter Director and Executive Vice President, Capital Guardian Trust Company; Senior Vice President, Capital Group
International, Inc.; and Vice President, The Capital Group Companies, Inc.
------------------------------------------------------------------------------------------------------------------------------------
Eugene P. Stein Director and Executive Vice President, Capital Guardian Trust Company; Formerly, Director, Capital Guardian
Research Company.
------------------------------------------------------------------------------------------------------------------------------------
Phil A. Swan Senior Vice President, Capital Guardian Trust Company.
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
Shaw B. Wagener Director, Capital Guardian Trust Company, Capital International Asia Pacific Management Company S.A.,
Capital Research and Management Company and Capital International Management Company S.A.; President and
Director, Capital International, Inc.; Senior Vice President, Capital Group International, Inc.
------------------------------------------------------------------------------------------------------------------------------------
Joanne Weckbacher Senior Vice President, Capital Guardian Trust Company.
------------------------------------------------------------------------------------------------------------------------------------
Eugene M. Waldron Senior Vice President, Capital Guardian Trust Company.
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The business address of all directors and executive officers is One Market,
Steuart Tower, San Francisco, California 94105.
The following table contains information concerning registered funds sub-advised
by Capital Guardian that have investment objectives similar to those of the
Managed Fund:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Name Fee Schedule* Assets at 3/31/00
---- ------------- -----------------
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
American General Balanced Fund First $25 million 0.550% $ 13,063.736
Next $25 million 0.400%
Over $50 million 0.200%
------------------------------------------------------------------------------------------------------------------------------------
Manulife - Income and Value Trust First $500 million 0.350% $610,093,773
Over $500 million 0.300%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Fees may vary between accounts due to the level of services that may be
provided by Capital Guardian or its affiliates.
The following table contains information concerning registered funds sub-advised
by Capital Guardian that have investment objectives similar to those of the
Small Cap Value Fund:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Name Fee Schedule* Assets at 3/31/00
---- ------------- -----------------
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pacific Select Fund First $30 million 0.500% $611,234,435
Next $30 million 0.400%
Over $60 million 0.300%
------------------------------------------------------------------------------------------------------------------------------------
Manulife - Small Cap Blend Trust On all assets 0.550% $ 90,057,029
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GCG Trust - Small Cap Services First $500 million 0.550% $514,239,047
Over $500 million 0.350%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Fees may vary between accounts due to the level of services that may be
provided by Capital Guardian or its affiliates.
Capital Guardian does not currently sub-advise any registered funds that are
comparable to the Global Balanced Fund or the Global Bond Fund.
INDEPENDENCE INVESTMENT ASSOCIATES, INC.
IIA's Board of Directors and executive officers are as follows:
Name Principal Occupation
---- --------------------
Mark C. Lapman 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
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
The business address for Messrs. Lapman, 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.
The following table contains information concerning funds subadvised by IIA
that have investment objectives similar to those of the Managed Fund or the
Growth & Income Fund.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Investment
Name Objective Fee Schedule Assets at 6/30/00
---- --------- ------------ -----------------
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
John Hancock Core Above-average total .407% of assets $988,752,763
Equity Fund return (capital
appreciation plus
income)
------------------------------------------------------------------------------------------------------------------------------------
John Hancock Above-average total .40% of assets $417,010,980
Independence Diversified return, consisting of
Core Equity Fund II capital appreciation
and income
------------------------------------------------------------------------------------------------------------------------------------
John Hancock Declaration Above-average total .385% of assets $44,095,542
Funds V.A. Core Equity return (capital (waived until April 30, 2001)
Fund appreciation plus
income)
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Investment
Name Objective Fee Schedule Assets at 6/30/00
---- --------- ------------ -----------------
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
John Hancock Variable Series Long-term growth in .325% on the first $250 million
Trust I Aggressive Balanced income and capital .275% on the next $250 million $14,749,670
Fund .25% above $500 million
------------------------------------------------------------------------------------------------------------------------------------
John Hancock Independence Above-average total .352% of assets $61,691,550
Balanced Fund return through capital
appreciation and income
------------------------------------------------------------------------------------------------------------------------------------
American AAdvantage Balanced Income and capital .60% on the first $25 million $144,798,492
Mileage Fund* appreciation .50% on the next $25 million
.35% on the next $50 million
.25% on the next $50 million
.20% on the balance of assets
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*The investment strategy for the equity portfolio of this fund differs
materially from that of the Growth & Income Fund.
JOHN HANCOCK ADVISERS, INC.
Advisers' Board of Directors and executive officers are as follows:
Name Principal Occupation
---- --------------------
The business address for the directors and executive officers is 101
Huntington Avenue, Boston, Massachusetts 02199.
[Fees on comparable funds to be provided by Advisers]
PUTNAM INVESTMENT MANAGEMENT, INC.
Putnam's Board of Directors and executive officers are as follows:
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
<PAGE>
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.
[fees on comparable funds to be provided by Putnam]
<PAGE>
JOHN HANCOCK
VARIABLE SERIES TRUST
VOTING INSTRUCTION FORM
PLEASE SIGN, DATE AND RETURN ALL VOTING
INSTRUCTION FORMS RECEIVED IN THE ENCLOSED POSTAGE-PAID
ENVELOPE
THESE VOTING INSTRUCTIONS ARE SOLICITED BY THE TRUSTEES
FOR THE SPECIAL MEETING OF SHAREHOLDERS-OCTOBER 20, 2000-11:00 A.M. EASTERN
TIME,
197 CLARENDON STREET, BOSTON, MASSACHUSETTS
Please fold and detach card at perforation before mailing
MANAGED FUND
--------------------------------------------------------------------------------
MANAGED FUND
A Special Meeting of Shareholders of the John Hancock Variable Series
Trust I (the "Trust") will be held at the office of John Hancock Life Insurance
Company ("John Hancock"), 197 Clarendon Street, Boston, Massachusetts,
(telephone 1-800-732-5543) at 11:00 a.m. Eastern Time, on Friday, October 20,
2000. By signing and dating below, you instruct the persons named below to, and
they will, vote the proposal(s) on the reverse side as marked or, if not marked,
to vote "FOR" the proposal(s) on the reverse side, and to use their discretion
to vote any other matter incident to the conduct of the Special Meeting. If you
do not intend to personally attend the Special Meeting, please complete, detach
and mail this form in the enclosed envelope at once.
Thomas J. Lee and Michele G. Van Leer, and each of them, with power of
substitution in each, are hereby instructed to vote the shares of the above
named Fund held in the Trust attributable to the undersigned at the Special
Meeting of Shareholders and at any adjournment thereof.
DATE:
Please be sure to sign and date this proxy.
Signature(s) of Shareholder(s)
<PAGE>
MANAGED FUND
Please detach at perforation before mailing.
--------------------------------------------------------------------------------
Please vote by filling in the appropriate boxes below.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 Managed Fund: To implement a multi-manager approach that
entails the following proposals:
[_] [_] [_] A. To approve a new Sub-Investment Management Agreement
among the Trust, John Hancock, and Capital Guardian Trust
Company;
[_] [_] [_] B. To approve a new Sub-Investment Management Agreement
among the Trust, John Hancock, and Independence Investment
Associates, Inc.; and
[_] [_] [_] C. To approve an amendment to the April 12,
1988 Investment Management Agreement between
the Trust and John Hancock, reflecting an
increase in the Investment Advisory Fee.
----------------------------------------------------------------------------------------------
[_] [_] [_] 1D. Managed Fund: To change the Fund's classification from
"diversified" to "non-diversified".
----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
JOHN HANCOCK
VARIABLE SERIES TRUST
VOTING INSTRUCTION FORM
PLEASE SIGN, DATE AND RETURN ALL VOTING
INSTRUCTION FORMS RECEIVED IN THE ENCLOSED POSTAGE-PAID
ENVELOPE
THESE VOTING INSTRUCTIONS ARE SOLICITED BY THE TRUSTEES
FOR THE SPECIAL MEETING OF SHAREHOLDERS-OCTOBER 20, 2000-11:00 A.M. EASTERN
TIME,
197 CLARENDON STREET, BOSTON, MASSACHUSETTS
Please fold and detach card at perforation before mailing
GROWTH & INCOME FUND
--------------------------------------------------------------------------------
GROWTH & INCOME FUND
A Special Meeting of Shareholders of the John Hancock Variable Series
Trust I (the "Trust") will be held at the office of John Hancock Life Insurance
Company ("John Hancock"), 197 Clarendon Street, Boston, Massachusetts,
(telephone 1-800-732-5543) at 11:00 a.m. Eastern Time, on Thursday, Friday,
October 20, 2000. By signing and dating below, you instruct the persons named
below to, and they will, vote the proposal(s) on the reverse side as marked or,
if not marked, to vote "FOR" the proposal(s) on the reverse side, and to use
their discretion to vote any other matter incident to the conduct of the Special
Meeting. If you do not intend to personally attend the Special Meeting, please
complete, detach and mail this form in the enclosed envelope at once.
Thomas J. Lee and Michele G. Van Leer, and each of them, with power of
substitution in each, are hereby instructed to vote the shares of the above
named Fund held in the Trust attributable to the undersigned at the Special
Meeting of Shareholders and at any adjournment thereof.
DATE:
Please be sure to sign and date this proxy.
Signature(s) of Shareholder(s)
<PAGE>
GROWTH & INCOME FUND
Please detach at perforation before mailing.
--------------------------------------------------------------------------------
Please vote by filling in the appropriate boxes below.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2 Growth & Income Fund: To implement a multi-manager
approach that entails the following proposals:
A. To approve a new Sub-Investment Management Agreement
among the Trust, John Hancock, and Putnam Investment
Management, Inc.;
B. To approve a new Sub-Investment Management Agreement
among the Trust, John Hancock, and Independence Investment
Associates, Inc.; and
[_] [_] [_] C. To approve an amendment to the April 12, 1988
Investment Management Agreement between the Trust and
John Hancock, reflecting an increase in the Investment Advisory Fee.
---------------------------------------------------------------------------------------------------
[_] [_] [_] 2D. Growth & Income Fund: To change the Fund's classification from
"diversified" to "non-diversified".
---------------------------------------------------------------------------------------------------
[_] [_] [_] 2E. Growth & Income Fund: To modify the fundamental restrictions
applicable to the Fund to permit it to invest in invest in securities
that are subject to legal restrictions on resale.
---------------------------------------------------------------------------------------------------
[_] [_] [_] 2F. Growth & Income Fund: To modify the fundamental restrictions
applicable to the Fund to permit it to invest in financial futures.
--------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
JOHN HANCOCK
VARIABLE SERIES TRUST
VOTING INSTRUCTION FORM
PLEASE SIGN, DATE AND RETURN ALL VOTING
INSTRUCTION FORMS RECEIVED IN THE ENCLOSED POSTAGE-PAID
ENVELOPE
THESE VOTING INSTRUCTIONS ARE SOLICITED BY THE TRUSTEES
FOR THE SPECIAL MEETING OF SHAREHOLDERS-OCTOBER 20, 2000-11:00 A.M. EASTERN
TIME,
197 CLARENDON STREET, BOSTON, MASSACHUSETTS
Please fold and detach card at perforation before mailing
ACTIVE BOND FUND
--------------------------------------------------------------------------------
ACTIVE BOND FUND
A Special Meeting of Shareholders of the John Hancock Variable Series
Trust I (the "Trust") will be held at the office of John Hancock Life Insurance
Company ("John Hancock"), 197 Clarendon Street, Boston, Massachusetts,
(telephone 1-800-732-5543) at 11:00 a.m. Eastern Time, on Friday, October 20,
2000. By signing and dating below, you instruct the persons named below to, and
they will, vote the proposal(s) on the reverse side as marked or, if not marked,
to vote "FOR" the proposal(s) on the reverse side, and to use their discretion
to vote any other matter incident to the conduct of the Special Meeting. If you
do not intend to personally attend the Special Meeting, please complete, detach
and mail this form in the enclosed envelope at once.
Thomas J. Lee and Michele G. Van Leer, and each of them, with power of
substitution in each, are hereby instructed to vote the shares of the above
named Fund held in the Trust attributable to the undersigned at the Special
Meeting of Shareholders and at any adjournment thereof.
DATE:
Please be sure to sign and date this proxy.
Signature(s) of Shareholder(s)
<PAGE>
ACTIVE BOND FUND
Please detach at perforation before mailing.
--------------------------------------------------------------------------------
Please vote by filling in the appropriate boxes below.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
3 To implement the following proposals as to the Active
Bond Fund:
[_] [_] [_] A. To approve an amendment to the May 1, 1995 Sub-Investment
Management Agreement among the Trust, John Hancock and John Hancock
Advisers, Inc., reflecting an increase in the Sub-Investment
Advisory Fee; and
[_] [_] [_] B. To approve an amendment to the April 12, 1988 Investment
Management Agreement between the Trust and John Hancock, reflecting
an increase in the Investment Advisory Fee.
------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
JOHN HANCOCK
VARIABLE SERIES TRUST
VOTING INSTRUCTION FORM
PLEASE SIGN, DATE AND RETURN ALL VOTING
INSTRUCTION FORMS RECEIVED IN THE ENCLOSED POSTAGE-PAID
ENVELOPE
THESE VOTING INSTRUCTIONS ARE SOLICITED BY THE TRUSTEES
FOR THE SPECIAL MEETING OF SHAREHOLDERS-OCTOBER 20, 2000-11:00 A.M. EASTERN
TIME,
197 CLARENDON STREET, BOSTON, MASSACHUSETTS
Please fold and detach card at perforation before mailing
SMALL CAP VALUE FUND
--------------------------------------------------------------------------------
SMALL CAP VALUE FUND
A Special Meeting of Shareholders of the John Hancock Variable Series
Trust I (the "Trust") will be held at the office of John Hancock Life Insurance
Company ("John Hancock"), 197 Clarendon Street, Boston, Massachusetts,
(telephone 1-800-732-5543) at 11:00 a.m. Eastern Time, on Friday, October 20,
2000. By signing and dating below, you instruct the persons named below to, and
they will, vote the proposal(s) on the reverse side as marked or, if not marked,
to vote "FOR" the proposal(s) on the reverse side, and to use their discretion
to vote any other matter incident to the conduct of the Special Meeting. If you
do not intend to personally attend the Special Meeting, please complete, detach
and mail this form in the enclosed envelope at once.
Thomas J. Lee and Michele G. Van Leer, and each of them, with power of
substitution in each, are hereby instructed to vote the shares of the above
named Fund held in the Trust attributable to the undersigned at the Special
Meeting of Shareholders and at any adjournment thereof.
DATE:
Please be sure to sign and date this proxy.
Signature(s) of Shareholder(s)
<PAGE>
SMALL CAP VALUE FUND
Please detach at perforation before mailing.
--------------------------------------------------------------------------------
Please vote by filling in the appropriate boxes below.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
4 To implement the following proposals as to the Small Cap
Value Fund:
[_] [_] [_] A. To approve a new Sub-Investment Management Agreement
among the Trust, John Hancock, and Capital Guardian Trust
Company; and
[_] [_] [_] B. To approve an amendment to the March 14, 1996 Investment
Management Agreement between the Trust and John Hancock,
reflecting an increase in the Investment Advisory Fee.
------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
JOHN HANCOCK
VARIABLE SERIES TRUST
VOTING INSTRUCTION FORM
PLEASE SIGN, DATE AND RETURN ALL VOTING
INSTRUCTION FORMS RECEIVED IN THE ENCLOSED POSTAGE-PAID
ENVELOPE
THESE VOTING INSTRUCTIONS ARE SOLICITED BY THE TRUSTEES
FOR THE SPECIAL MEETING OF SHAREHOLDERS-OCTOBER 20, 2000-11:00 A.M. EASTERN
TIME,
197 CLARENDON STREET, BOSTON, MASSACHUSETTS
Please fold and detach card at perforation before mailing
GLOBAL BALANCED FUND
--------------------------------------------------------------------------------
GLOBAL BALANCED FUND
A Special Meeting of Shareholders of the John Hancock Variable Series
Trust I (the "Trust") will be held at the office of John Hancock Life Insurance
Company ("John Hancock"), 197 Clarendon Street, Boston, Massachusetts,
(telephone 1-800-732-5543) at 11:00 a.m. Eastern Time, on Friday, October 20,
2000. By signing and dating below, you instruct the persons named below to, and
they will, vote the proposal(s) on the reverse side as marked or, if not marked,
to vote "FOR" the proposal(s) on the reverse side, and to use their discretion
to vote any other matter incident to the conduct of the Special Meeting. If you
do not intend to personally attend the Special Meeting, please complete, detach
and mail this form in the enclosed envelope at once.
Thomas J. Lee and Michele G. Van Leer, and each of them, with power of
substitution in each, are hereby instructed to vote the shares of the above
named Fund held in the Trust attributable to the undersigned at the Special
Meeting of Shareholders and at any adjournment thereof.
DATE:
Please be sure to sign and date this proxy.
Signature(s) of Shareholder(s)
<PAGE>
GLOBAL BALANCED FUND
Please detach at perforation before mailing.
--------------------------------------------------------------------------------
Please vote by filling in the appropriate boxes below.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
4 To implement the following proposals as to the Global
Balanced Fund (formerly the International Balanced Fund):
[_] [_] [_] A. To approve a new Sub-Investment Management Agreement
among the Trust, John Hancock, and Capital Guardian Trust
Company; and
[_] [_] [_] B. To approve an amendment to the March 14, 1996
Investment Management Agreement between the Trust and
John Hancock, reflecting an increase in the Investment Advisory Fee.
-------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
JOHN HANCOCK
VARIABLE SERIES TRUST
VOTING INSTRUCTION FORM
PLEASE SIGN, DATE AND RETURN ALL VOTING
INSTRUCTION FORMS RECEIVED IN THE ENCLOSED POSTAGE-PAID
ENVELOPE
THESE VOTING INSTRUCTIONS ARE SOLICITED BY THE TRUSTEES
FOR THE SPECIAL MEETING OF SHAREHOLDERS-OCTOBER 20, 2000-11:00 A.M. EASTERN
TIME,
197 CLARENDON STREET, BOSTON, MASSACHUSETTS
Please fold and detach card at perforation before mailing
GLOBAL BOND FUND
--------------------------------------------------------------------------------
GLOBAL BOND FUND
A Special Meeting of Shareholders of the John Hancock Variable Series
Trust I (the "Trust") will be held at the office of John Hancock Life Insurance
Company ("John Hancock"), 197 Clarendon Street, Boston, Massachusetts,
(telephone 1-800-732-5543) at 11:00 a.m. Eastern Time, on Friday, October 20,
2000. By signing and dating below, you instruct the persons named below to, and
they will, vote the proposal(s) on the reverse side as marked or, if not marked,
to vote "FOR" the proposal(s) on the reverse side, and to use their discretion
to vote any other matter incident to the conduct of the Special Meeting. If you
do not intend to personally attend the Special Meeting, please complete, detach
and mail this form in the enclosed envelope at once.
Thomas J. Lee and Michele G. Van Leer, and each of them, with power of
substitution in each, are hereby instructed to vote the shares of the above
named Fund held in the Trust attributable to the undersigned at the Special
Meeting of Shareholders and at any adjournment thereof.
DATE:
Please be sure to sign and date this proxy.
Signature(s) of Shareholder(s)
<PAGE>
GLOBAL BOND FUND
Please detach at perforation before mailing.
--------------------------------------------------------------------------------
Please vote by filling in the appropriate boxes below.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
4 To implement the following proposals as to the Global
Bond Fund:
[_] [_] [_] A. To approve a new Sub-Investment Management Agreement
among the Trust, John Hancock, and Capital Guardian Trust
Company; and
[_] [_] [_] B. To approve an amendment to the March 14, 1996 Investment
Management Agreement between the Trust and John Hancock,
reflecting an increase in the Investment Advisory Fee.
--------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
IMPORTANT SPECIAL NOTICE!
=========================
Proposal 1A and Proposal 3 in the enclosed proxy materials would
raise the investment advisory fees for the Growth & Income Fund and the Active
Bond Fund, respectively, if approved by the shareholders. However, our records
indicate that you, or someone in your household, purchased a John Hancock
variable life insurance policy that includes a special overall expense
limitation. That special limitation protects the policy from the effects of such
investment advisory fee increases. Such policies were issued sometime prior to
1987 and are hereafter referred to as "restricted policies". If Proposals 1A and
3 are approved by shareholders, we will make special adjustments so that your
restricted policy (and its policy values) will be the same as if the fee
increases had never taken place. No other policies will receive those
adjustments.
Proposals IA and 3 will be voted on by owners of all variable life
insurance policies and variable annuity contracts that are participating in the
Growth & Income Fund and/or Active Bond Fund, whether or not the policy or
contract provides the same kind of protection that is afforded under your
restricted policy.
Therefore, as the owner of a restricted policy, you have a particular
interest in voting FOR Proposal 1A and Proposal 3 because you will receive the
benefits of the Proposals while being protected from the effects of the
increases in fees.
