Retail Marketing Alert [LOGO]
February 19, 2004
Important Announcement Affecting Your Client's - John Hancock Variable Series
Trust I (VST) Funds
In late February, variable life and variable annuity contract owners
participating in nine VST Funds (as of the record date shown below) will receive
a proxy statement outlining proposals for their consideration and vote. After
careful consideration, the VST Board of Trustees unanimously approved
recommendations by John Hancock Life Insurance Company to do the following:
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Affected Funds # Clients Date of
What (Record Date) Overview Mailing
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Proxy . Fundamental Growth (1/20/04) Proposals to approve agreements 85,000 2/20/2004
. Large Cap Aggressive Growth with new sub-managers. (total
(1/20/04) for all
Funds Affected)
. Emerging Markets Equity Proposal to decrease investment
(1/20/04) management fees paid to John Hancock
and to eliminate John Hancock's
obligation to reimburse Fund for
certain operating expenses.
. Overseas Equity (1/20/04) Proposal to increase investment
management fees paid to John
Hancock and to eliminate John
Hancock's obligation to
reimburse Fund for certain
operating expenses.
. International Opportunities Proposals to eliminate John
(1/20/04) Hancock's obligation to
. International Equity Index reimburse Fund for certain
(1/20/04) operating expenses.
. Global Bond (1/20/04)
. Health Sciences (1/20/04)
. Large Cap Value CORE (2/11/04) Proposal to increase investment
management fees paid to John
Hancock.
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Info Statement . Growth & Income (N/A - This Change in one of the sub-advisers. 250,000 2/24/2004
matter does not require a proxy T. Rowe Price replaces Putnam.
vote.)
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LPPSS-565 2/04 Not For Use With The Public. For Internal Use Only.
Notes on Proxy:
Proposals 1 and 2 - Fundamental Growth and Large Cap Growth B (formerly Large
Cap Aggressive Growth)
At its December 10, 2003 meeting, the Trust's Board of Trustees unanimously
approved the retention of Independence Investment, LLC to replace Putnam
Investment Management, LLC as the sub-manager for these Funds. Independence
Investment, a John Hancock affiliate, began its service on December 15, 2003
under temporary agreements. These Proposals seek approval of new sub-management
agreements to replace the temporary agreements so that Independence Investment
may continue indefinitely as the respective Fund's sub-manager. Total fees will
not be changed by either of the current proposals.
Proposal 3 - International Opportunities Fund
At its December 10, 2003 meeting, the Trust's Board of Trustees unanimously
approved an amendment to the management agreement with John Hancock for the
International Opportunities Fund to delete John Hancock's contractual obligation
to reimburse the Fund when certain expenses of the Fund exceed 0.10% per annum
of the Fund's average daily net assets. The Board recommended that shareholders
also approve the amendment, which is required before it can go into effect. At
the same time, the Board approved a recommendation to change the sub-manager of
the Fund to Capital Guardian Trust Company and the Fund's investment strategies
to match those of the Trust's Overseas Equities Fund. (These changes do not
require shareholder approval and are not part of the proxy.) It is proposed that
all these changes would take effect on or about May 3, 2004.
Proposal 4 - Emerging Markets Equity Fund
At its December 10, 2003 meeting, the Trust's Board of Trustees unanimously
approved an amendment to the management agreement with John Hancock for the
Emerging Markets Equity Fund to reduce the management fee paid by the Trust to
John Hancock and delete John Hancock's contractual obligation to reimburse the
Fund when certain expenses of the Fund exceed 0.10% per annum of the Fund's
average daily net assets. The Board recommended that shareholders also approve
the amendment, which is required before it can go into effect. At the same time,
the Board approved a recommendation to change the sub-manager of the Fund to
Capital Guardian Trust Company and the Fund's investment strategies to match
those of the Trust's Overseas Equities Fund. (These changes do not require
shareholder approval and are not part of the proxy.) It is proposed that all
these changes would take effect on or about May 3, 2004.
Proposal 5 - Overseas Equity Fund
At its December 10, 2003 meeting, the Trust's Board of Trustees unanimously
approved an amendment to the management agreement with John Hancock for the
Overseas Equity Fund to increase the management fee paid by the Trust to John
Hancock and delete John Hancock's contractual obligation to reimburse the Fund
when certain expenses of the Fund exceed 0.10% per annum of the Fund's average
daily net assets. The Board recommended that shareholders also approve the
amendment, which is required before it can go into effect. It is proposed that
these changes would take effect on or about May 3, 2004.
LPPSS-565 2/04 Not For Use With The Public. For Internal Use Only.
Proposal 6 - International Equity Index Fund
At its December 10, 2003 meeting, the Trust's Board of Trustees unanimously
approved an amendment to the management agreement with John Hancock for the
International Equity Index Fund to delete John Hancock's contractual obligation
to reimburse the Fund when certain expenses of the Fund exceed 0.10% per annum
of the Fund's average daily net assets. The Board recommended that shareholders
also approve the amendment, which is required before it can go into effect. At
the same time, the Board also approved a recommendation to change the
sub-manager of the Fund to SsgA Funds Management, Inc. and the Fund's investment
strategies to match those of the Trust's Overseas Equities Fund. (These changes
do not require shareholder approval and are not part of the proxy.) It is
proposed that all these changes would take effect on or about May 3, 2004.
Proposals 7 and 8 - Global Bond Fund and Health Sciences Fund
At its December 10, 2003 meeting, the Trust's Board of Trustees unanimously
approved amendments to the management agreements with John Hancock for these
Funds to delete John Hancock's contractual obligation to reimburse the
respective Fund when certain expenses of that Fund exceed 0.10% per annum of the
Fund's average daily net assets. The Board recommended that shareholders of each
Fund also approve the respective amendment, which is required before it can go
into effect. It is proposed that these changes would take effect on or about May
3, 2004.
Proposal 9 - Large Cap Value CORE Fund
At its December 10, 2003 meeting, the Trust's Board of Trustees unanimously
approved a recommendation to change the sub-manager of the Fund and the Fund's
investment strategies to match those of the Trust's Fundamental Value Fund.
These changes do not require shareholder approval and are not part of the proxy.
Subsequently, at its February 11, 2004 meeting, the Board approved and
recommended that shareholders approve an amendment to the management agreement
with John Hancock for the Large Cap Value CORE Fund to change the management fee
paid by the Trust to John Hancock to equal the higher rate paid by the Trust to
John Hancock for the Fundamental Value Fund. It is proposed that all these
changes would take effect on or about May 3, 2004.
Note on Growth & Income Fund Info Statement Mailing
On December 15/th/, 2003, T.Rowe Price Associates, Inc replaced Putnam
Investments as a sub-manager. The Growth & Income Fund's other sub-manager,
Independence Investment LLC, was not affected by this action. This change in
sub-managers has no effect on the fees and other Fund operating expenses that
contract holders bear. This change was recommended by John Hancock and approved
by the Board to be in the best interest of the shareholders.
LPPSS-565 2/04 Not For Use With The Public. For Internal Use Only.
Q&A
What does "delete John Hancock's contractual obligation to reimburse the Fund
when certain expenses of the Fund exceed 0.10% per annum of the Fund's average
daily net assets" mean?
Today, the management agreements provide that, for any fiscal year in which the
normal operating costs and expenses* of a Fund exceed 0.10% of the Fund's
average daily net assets, John Hancock will reimburse the Fund. Under proposals
3, 4, 5, 6 7 and 8, this expense "cap" would be eliminated for International
Opportunities, Emerging Markets Equity, Overseas Equity, International Equity
Index, Global Bond and Health Sciences Funds. This change makes the funds more
economically viable for John Hancock to continue using them as investment
options in the variable products. This results in an overall higher expense
total for the consumer.
*(exclusive of its investment management fees, interest, brokerage commissions,
taxes and extraordinary expenses outside the control of John Hancock)
Why was it proposed to change sub-manager for Fundamental Growth?
The sub-manager was changed to address concerns that Putnam's reputation and
stability would be adversely impacted by recent allegations of improper trading
practices by its personnel, loss of certain significant accounts and assets
under management, and the turnover of key personnel (ii) the trailing 12 month
performance of Putnam-managed mid-cap growth equity accounts was below other mid
cap growth accounts managed by Putnam's peers (iii) John Hancock's belief that
the Fund's new investment program with Independence is the most attractive
option.
Will the investment strategy for Fundamental Growth change?
Independence Investment intends to follow an investment strategy for the
Fundamental Growth Fund that is substantially the same as the investment
strategy it now pursues for the Trust's Large Cap Growth Fund. John Hancock
anticipates that the Fundamental Growth Fund's investment program will be more
focused on "large cap" growth investing and not on a mix of "large cap" and
"mid-cap" growth investing.
Why was it proposed to change sub-manager for Large Cap Growth B?
Concerns that Janus' reputation and stability would be adversely impacted by
recent allegations of improper trading practices by its personnel and the
turnover of key personnel (ii) John Hancock's belief that the Funds new
investment program with Independence is the most attractive option.
Will the investment strategy for Large Cap Growth B change?
Independence Investment intends to follow an investment strategy for the Large
Cap Growth B Fund that is substantially the same as the investment strategy it
now pursues for the Trust's Large Cap Growth Fund. John Hancock anticipates that
the Large Cap Growth B Fund's investment program will continue to be focused on
the selection and maintenance of a portfolio of securities of "large cap" US
companies.
Why was it proposed to change sub-manager and the investment strategy for
International Opportunities?
John Hancock recommended that the Fund employ Capital Guardian, the current
sub-manager for the Trust's Overseas Equity Fund, because of the strength and
depth of their resources and capabilities and the investment performance of the
Overseas Equity Fund. Capital Guardian will manage the fund using substantially
the same investment program that it currently uses for the Overseas Equity Fund,
and will continue to be focused on the selection and maintenance of a portfolio
of equity securities of large established and medium-sized foreign companies
located outside the US, primarily in developed countries and in emerging markets
to a lesser extent.
LPPSS-565 2/04 Not For Use With The Public. For Internal Use Only.
Why was it proposed to change sub-manager and the investment strategy for the
Emerging Markets Equity Fund?
John Hancock recommended that the Fund employ Capital Guardian, the current
sub-manager for the Trust's Overseas Equity Fund, because of the strength and
depth of their resources and capabilities and the investment performance of the
Overseas Equity Fund. The Fund would continue as an international stock fund,
but with a revised investment strategy that places less focus on companies
economically linked to emerging or developing nations. Capital Guardian will
manage the fund using substantially the same investment program that it
currently uses for the Overseas Equity Fund.
Why was it proposed to increase the management fee paid by the Trust to John
Hancock for the Overseas Equity Fund?
After conducting a review of the Overseas Equity Fund's operating expenses in
comparison with other funds, John Hancock concluded that the current expense cap
and current level of the Overseas Equity Fund's investment management fee, have
combined with other factors to create a situation in which John Hancock's level
of compensation is not high enough to allow John Hancock to continue to support
the Fund on a long term basis. It was recommended that the fund be restructured
to make it an economically viable component of the international funds that John
Hancock offers.
What changed with the International Equity Index Fund?
Independence was no longer interested in managing international index funds.
Therefore, it was recommended that the Fund should continue as an international
stock index fund, but with a different sub-manager. John Hancock recommended
that the Fund employ SSgA, the current sub-manager for the Trust's Equity Index
Fund.
Why was it proposed to change the sub-manager and the investment strategy of the
Large Cap Value CORE Fund?
(i) John Hancock was concerned about the funds inability to attract new
investors; (ii) John Hancock's belief that the Funds new investment program with
Wellington Management Company is the most attractive option. Wellington
Management will follow an investment strategy for the Large Cap Value CORE Fund
that is substantially the same as the investment strategy it now pursues for the
Trust's Fundamental Value Fund. Under that strategy, the Large Cap Value CORE
Fund will continue to invest primarily in a mix of common stocks of US companies
that are believed to offer favorable prospects for increasing dividends and
growth in capital. John Hancock anticipates that the Fund's investment program
will be somewhat more oriented toward a mix of "large cap" and "mid cap" value
investing and lest oriented to "large cap" value investing.
Why was the sub-manager replaced in the Growth & Income fund?
The principal reasons were (i) concerns that Putnam's reputation and stability
would be adversely impacted by recent allegations of improper trading practices
by its personnel, loss of certain significant accounts and assets under its
management, and the turnover of key investment personnel, and (ii) the Fund's
new investment program with T. Rowe Price is the most attractive option that is
available to the Fund.
LPPSS-565 2/04 Not For Use With The Public. For Internal Use Only.
What will T. Rowe manage?
T. Rowe will have day-to-day responsibility for deciding what investments to
purchase and sell for the "growth style" portion of the Fund. T. Rowe Price
initially will manage approximately 18% of the Growth & Income Fund and
Independence Investment would manage the remainder.
How will T. Rowe manage the Fund?
T. Rowe Price intends to follow an investment strategy for its portion of the
Growth & Income Fund that selects stock using proprietary fundamental research
to look for companies that it believes have (i) above-average earnings growth
and cash flow relative to their peers and the general economy, (ii) sustainable
earnings momentum even during times of slow economic growth and (iii) profitable
niches in the economy that enable companies to expand even during times of slow
growth. John Hancock anticipates that the "growth style" portion of the Growth &
Income Fund under T. Rowe Price will continue to invest primarily in a mix of
common stocks of large and mid-sized U.S. companies. T. Rowe Price, however,
normally will invest its portion of the Fund in a somewhat lower number of
stocks (40 to 80) than was anticipated (65 to 120) under Putnam.
Contact
If you have any questions, please call your Sales Support Group at
1-800-270-1700.
Distribution
This Announcement is being sent to all Managing Directors, Agency Compliance
Specialists, Office Managers, Sales Managers, Brokerage Managers and Home Office
Retail Sector Management.
Insurance products are issued by
John Hancock Life Insurance Company
John Hancock Variable Life Insurance Company (not licensed in New York)
Boston, MA 02117
Securities products are distributed by
Signator Investors, Inc., Member NASD, SIPC,
197 Clarendon Street, Boston, MA 02116
LPPSS-565 2/04 Not For Use With The Public. For Internal Use Only.