John Hancock Life Insurance Company, et al., 67768-67770 [E7-23205]

Download as PDF 67768 Federal Register / Vol. 72, No. 230 / Friday, November 30, 2007 / Notices The following is a summary of the Application. The complete Application is available for a fee from the Public Reference Branch of the Commission, 100 F Street, NE., Room 1580, Washington, DC 20549 (202–551–8090). SUPPLEMENTARY INFORMATION: SECURITIES AND EXCHANGE COMMISSION [Release No. IC–28065; File No. 812–13414] John Hancock Life Insurance Company, et al., Notice of Application Applicants’ Representations 1. John Hancock USA, formerly known as The Manufacturers Life Insurance Company (U.S.A.), is a stock life insurance company originally organized under the laws of Maine on August 20, 1955 by a special act of the Maine legislature. John Hancock USA redomesticated under the laws of Applicants: John Hancock Life Michigan on December 30, 1992. 2. Account H is registered under the Insurance Company (U.S.A.) (‘‘John Act as a unit investment trust (File No. Hancock USA’’), John Hancock Life 811–4113). The variable annuity Insurance Company (U.S.A.) Separate contracts funded by Account H that are Account H (‘‘Account H’’), John affected by this Application are Scudder Hancock Life Insurance Company of New York (‘‘John Hancock New York’’), Wealthmark Annuity (File Nos. 333– 70728 and 333–70730) and Scudder John Hancock Life Insurance Company Wealthmark ML3 Annuity (File No. of New York Separate Account A 333–70850). (‘‘Account A’’) and John Hancock Trust 3. John Hancock New York, formerly (‘‘JHT’’) (collectively the ‘‘Applicants’’). known as The Manufacturers Life SUMMARY: The Applicants hereby apply Insurance Company of New York, is a for an order of exemption pursuant to wholly-owned subsidiary of John Section 17(b) of the 1940 Act to permit Hancock USA and is a stock life in-kind purchases in connection with a insurance company organized under the substitution as described herein. Filing Date: The application was filed laws of New York on February 10, 1992. 4. Account A is registered under the on August 6, 2007 and amended and Act as a unit investment trust (File No. restated on November 19, 2007. Hearing or Notification of Hearing: An 811–6584). It is used to fund variable annuity contracts of John Hancock New order granting the application will be York. The variable annuity contracts issued unless the Commission orders a hearing. Interested persons may request funded by Account A that are affected by this application are Scudder a hearing by writing to the Secretary of the Commission and serving Applicants Wealthmark Annuity for New York (File with a copy of the request personally or Nos. 33–79112 and 33–46217) and Scudder Wealthmark ML3 Annuity for by mail. Hearing requests must be New York (File No. 333–83558). received by the Commission by 5:30 5. The individual and group variable p.m. on December 20, 2007, and should annuity contracts affected by this be accompanied by proof of service on Applicants in the form of an affidavit or, Application are collectively referred to as the ‘‘Contracts.’’ for lawyers, a certificate of service. 6. Each of the Contracts permits its Hearing requests should state the nature of the requester’s interest, the reason for owners to allocate the Contract’s accumulated value among numerous the request, and the issues contested. available Subaccounts, each of which Persons who wish to be notified of a invests in a different investment hearing may request notification by portfolio (‘‘Fund’’) of an underlying writing to the Secretary of the mutual fund. Commission. 7. Shares of JHT are sold exclusively ADDRESSES: Secretary, Securities and to insurance company separate accounts Exchange Commission, 100 F Street, to fund benefits under variable annuity NE., Washington, DC 20549–1090. contracts and variable life insurance Applicants, John Hancock Life policies sponsored by the Insurance Insurance Company (U.S.A.), 601 Companies or their affiliates, and to Congress Street, Boston, MA 02210. employer pension and profit sharing plans. JHT is registered under the Act as FOR FURTHER INFORMATION CONTACT: an open-end management investment Alison T. White, Senior Counsel, or company of the series type, and its Joyce M. Pickholz, Branch Chief, Office securities are registered under the of Insurance Products, Division of Securities Act of 1933, File Nos. 002– Investment Management, at (202) 551– 94157 and 811–04146. John Hancock 6795. November 26, 2007. The Securities and Exchange Commission (‘‘Commission’’). ACTION: Notice of application for an order of exemption pursuant to Section 17(b) of the Investment Company Act of 1940, as amended (the ‘‘1940 Act’’ or ‘‘Act’’). rwilkins on PROD1PC63 with NOTICES AGENCY: VerDate Aug<31>2005 16:27 Nov 29, 2007 Jkt 214001 PO 00000 Frm 00073 Fmt 4703 Sfmt 4703 Investment Management Services, LLC (formerly, Manufacturers Securities Services, LLC) (‘‘JHIMS’’), is the investment adviser to JHT, and each series has its own subadviser. 8. John Hancock USA and John Hancock New York (collectively the ‘‘Insurance Companies’’) and Account H and Account A (collectively the ‘‘Separate Accounts’’) previously applied for and were granted an Order of the Commission pursuant to Section 26(c) of the Act (Inv. Co. Act Rel. No. 27781, the ‘‘Section 26(c) Order’’) approving the substitution of shares of certain series of JHT for shares of comparable series of various registered investment companies, the majority of which were series of DWS Variable Series II. The Section 26(c) Order approved, among others, the substitution of shares of JHT Investment Quality Bond Trust—Series II of JHT (such series being referred to herein as the ‘‘Replacement Fund’’) for shares of DWS Core Fixed Income VIP—Series II, Class B of DWS Variable Series II (such series being referred to herein as the ‘‘Existing Fund’’). All of the substitutions approved in the Section 26(c) Order, except that involving the Existing Fund and the Replacement Fund, were completed or are in the process of being completed. 9. The reason that the substitution involving the Existing Fund and the Replacement Fund has not been completed is that Deutsche Investment Management Americas Inc. (‘‘DeIM’’), the investment advisor of the Existing Fund, has informed the Insurance Companies that the redemption of the shares of the Existing Fund that are held by the Separate Accounts may be effected partly in cash and partly inkind. 10. The Insurance Companies, on behalf of the Separate Accounts, propose to redeem the shares held by the Separate Accounts in the Existing Fund for a combination of cash and securities. The redemption will be done on a pro-rata basis. The in-kind redemption from the Existing Fund will be effected in accordance with the conditions set forth in the Commission’s no-action letter issued to Signature Financial Group, Inc. (available December 28, 1999). 11. The Insurance Companies, after redeeming the shares held by the Separate Accounts in the Existing Fund for a combination of cash and securities, will then use such redemption proceeds to purchase shares of the Replacement Fund. 12. The Applicants request an order under Section 17(b) exempting them from the provisions of Section 17(a) to E:\FR\FM\30NON1.SGM 30NON1 rwilkins on PROD1PC63 with NOTICES Federal Register / Vol. 72, No. 230 / Friday, November 30, 2007 / Notices the extent necessary to permit the Insurance Companies to carry out the proposed substitution. 13. Section 17(a)(1) of the Act, in relevant part, prohibits any affiliated person of a registered investment company, or any affiliated person of such person, acting as principal, from knowingly selling any security or other property to that company. Section 17(a)(2) of the Act generally prohibits the persons acting as principals, from knowingly purchasing any security or other property from the registered company. 14. Because shares held by a separate account of an insurance company are legally owned by the insurance company, the Insurance Companies and their affiliates collectively own of record substantially all of the shares of JHT. Therefore, JHT and the Replacement Fund are arguably under the control of the Insurance Companies notwithstanding the fact that Contract owners may be considered the beneficial owners of those shares held in the Separate Accounts. If JHT and the Replacement Fund are under the control of the Insurance Companies, then each Insurance Company is an affiliated person or an affiliated person of an affiliated person of JHT and the Replacement Fund. If JHT and the Replacement Fund are under the control of the Insurance Companies, then JHT and the Replacement Fund are affiliated persons of the Insurance Companies. 15. Regardless of whether or not the Insurance Companies can be considered to control JHT and the Replacement Fund, because the Insurance Companies own of record more than 5% of the shares of each of them and are under common control with the Replacement Funds’ investment adviser, the Insurance Companies are affiliated persons of JHT and the Replacement Fund. Likewise, the Replacement Fund is an affiliated person of the Insurance Companies. 16. The Insurance Companies, through their Separate Accounts, in the aggregate own more than 5% of the outstanding shares of the Existing Fund. Therefore, each Insurance Company is an affiliated person of the Existing Fund. 17. Because the substitution may be effected, in whole or in part, by means of in-kind redemptions and purchases, the substitution may be deemed to involve one or more purchases or sales of securities or property between affiliated persons. The proposed transactions will involve a transfer of portfolio securities by the Existing Fund to the Insurance Companies; immediately thereafter, the Insurance VerDate Aug<31>2005 16:27 Nov 29, 2007 Jkt 214001 Companies, on behalf of the Separate Accounts, will purchase shares of the Replacement Fund with the portfolio securities received from the Existing Fund. Accordingly, the Insurance Companies and the Existing Fund, and the Insurance Companies and the Replacement Fund could be viewed as affiliated persons of one another under Section 2(a)(3) of the Act. It is conceivable that this aspect of the substitution could be viewed as being prohibited by Section 17(a). Therefore, the Applicants have determined to seek relief from Section 17(a) for the in-kind purchases and sales of the shares of the Replacement Fund. 18. Section 17(b) of the Act provides that the Commission may, upon application, grant an order exempting any transaction from the prohibitions of Section 17(a) if the evidence establishes that: (1) The terms of the proposed transaction, including the consideration to be paid or received, are reasonable and fair and do not involve overreaching on the part of any person concerned; (2) the proposed transaction is consistent with the policy of each registered investment company concerned, as recited in its registration statement and records filed under the Act; and (3) the proposed transaction is consistent with the general purposes of the Act. 19. The Applicants submit that the terms of the proposed in-kind purchases of shares of the Replacement Fund, including the consideration to be paid and received, as described in this Application, are reasonable and fair and do not involve overreaching on the part of any persons concerned. The Applicants also submit that the proposed in-kind purchases by the Insurance Companies will be consistent with the investment policies of the Replacement Fund. The Insurance Companies’ redemption of the shares held by the Separate Accounts in the Existing Fund and the Insurance Companies’ subsequent purchase of shares of the Replacement Fund with such redemption proceeds are scheduled to occur on the same day. The Replacement Fund may opt to sell all or a portion of such in-kind securities received. The Applicants submit that the proposed substitution is consistent with the general purposes of the Act. 20. Applicants assert that, to the extent that the in-kind purchases are deemed to involve principal transactions among affiliated persons, the procedures described below should be sufficient to assure that the terms of the proposed transactions are reasonable and fair to all participants. The PO 00000 Frm 00074 Fmt 4703 Sfmt 4703 67769 Applicants maintain that the terms of the proposed in-kind purchase transactions, including the consideration to be paid and received by each fund involved, are reasonable, fair and do not involve overreaching. Applicants represent that the transactions will conform with all but one of the conditions enumerated in Rule 17a–7. The proposed transactions will take place at relative net asset value in conformity with the requirements of Section 22(c) of the Act and Rule 22c– 1 thereunder with no change in the amount of any Contract owner’s contract value or death benefit or in the dollar value of his or her investment in any of the Separate Accounts. Contract owners will not suffer any adverse tax consequences as a result of the substitution. The fees and charges under the Contracts will not increase because of the substitution. Even though the Separate Accounts, the Insurance Companies and JHT may not rely on Rule 17a–7, the Applicants believe that the Rule’s conditions outline the type of safeguards that result in transactions that are fair and reasonable to registered investment company participants and preclude overreaching in connection with an investment company by its affiliated persons. 21. The board of JHT has adopted procedures, as required by paragraph (e)(1) of Rule 17a–7, pursuant to which its series may purchase and sell securities to and from their affiliates. The Applicants will carry out the proposed Insurance Company in-kind purchases in conformity with all of the conditions of Rule 17a–7 and the Replacement Fund’s procedures thereunder, except that the consideration paid for the securities being purchased or sold may not be entirely cash. Nevertheless, the circumstances surrounding the proposed substitution will be such as to offer the same degree of protection to the Replacement Fund from overreaching that Rule 17a–7 provides to it generally in connection with their purchase and sale of securities under that Rule in the ordinary course of their business. In particular, the proposed transactions will not be effected at a price that is disadvantageous to the Replacement Fund. Although the transactions may not be entirely for cash, each will be effected based upon (1) the independent market price of the portfolio securities valued as specified in paragraph (b) of Rule 17a–7, and (2) the net asset value per share of each fund involved valued in accordance with the procedures disclosed in its respective registration statement and as E:\FR\FM\30NON1.SGM 30NON1 67770 Federal Register / Vol. 72, No. 230 / Friday, November 30, 2007 / Notices required by Rule 22c–1 under the Act. Any brokerage commission, fee, or other cost incurred in connection with the proposed transactions will be paid for by the Insurance Companies and not by the Contract owners. 22. The sale of shares of the Replacement Fund for investment securities, as contemplated by the proposed in-kind purchases, will be consistent with the investment policy and restrictions of the Replacement Fund because (1) the shares will be sold at their net asset value, and (2) the portfolio securities will be of the type and quality that the Replacement Fund could have acquired with the proceeds from share sales had the shares been sold for cash. To assure that the second of these conditions is met, the investment adviser and sub-adviser of the Replacement Fund will examine the portfolio securities being offered to the Replacement Fund and accept only those securities as consideration for shares that they could have acquired for the Replacement Fund in a cash transaction. 23. The Applicants submit that the Insurance Companies’ in-kind purchases are consistent with the general purposes of the Act as stated in the Findings and Declaration of Policy in Section 1 of the Act and that the proposed transactions do not present any of the conditions or abuses that the Act was designed to prevent. 24. The Applicants represent that the proposed in-kind purchases meet all of the requirements of Section 17(b) of the Act and request that the Commission issue an order pursuant to Section 17(b) of the Act exempting the Separate Accounts, the Insurance Companies, JHT, and the Replacement Fund from the provisions of Section 17(a) of the Act to the extent necessary to permit the Insurance Companies on behalf of the Separate Accounts to carry out, as part of the substitution, the in-kind purchases of shares of the Replacement Fund which may be deemed to be prohibited by Section 17(a) of the Act. Conclusion Applicants assert that for the reasons summarized above the proposed substitution and related transactions are consistent with the standards of Section 17(b) of the Act and that the requested orders should be granted. For the Commission, by the Division of Investment Management pursuant to delegated authority. Nancy M. Morris, Secretary. [FR Doc. E7–23205 Filed 11–29–07; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–56837; File No. SR–FICC– 2007–10] Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Filing of Proposed Rule Change To Replace the Mortgage-Backed Securities Division Clearing Fund Calculation Methodology With a YieldDriven Value-at-Risk Methodology November 26, 2007. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 notice is hereby given that on August 31, 2007, the Fixed Income Clearing Corporation (‘‘FICC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) and on September 27, 2007, amended the proposed rule change as described in Items I, II, and III below, which items have been prepared primarily by FICC. The Commission is publishing this notice to solicit comments on the proposed rule change from interested parties. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change FICC is seeking to replace the Mortgage-Backed Securities Division (‘‘MBSD’’) margin calculation methodology with a Value-at-Risk (‘‘VaR’’) methodology. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, FICC included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. FICC has prepared summaries, set forth in sections (A), (B), and (C) below, of the most significant aspects of these statements.2 (A) Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change Clearing participants of MBSD are required to maintain participants’ fund deposits. Each participant’s required deposit is calculated daily to ensure enough funds are available to cover the risks associated with that participant’s activities. The purpose served by the participants fund is to have on deposit from each participant assets sufficient to satisfy any losses that may otherwise be incurred by MBSD participants as the result of the default by the participant and the resultant closeout of that participant’s settlement positions. FICC proposes to replace the current participants fund methodology, which uses haircuts and offsets, with a VaR model. FICC expects the VaR model to better reflect market volatility and to more thoroughly distinguish levels of risk presented by individual securities. Specifically, FICC is proposing to replace the existing MBSD margin calculation with a yield-driven VaR model. VaR is defined to be the maximum amount of money that may be lost on a portfolio over a given period of time within a given level of confidence. With respect to the MBSD, FICC is proposing a 99 percent threeday VaR. The changes to the components that comprise the current participants fund calculation versus the proposed VaR calculation in relation to the risks addressed by the components are summarized as follows: rwilkins on PROD1PC63 with NOTICES Existing methodology Risk addressed Proposed methodology Market Margin Differential, which is the greater of:. (i) the P&L Requirement or (ii) the Market Volatility Requirement Adjusting contract price to market price and post mark-to-market fluctuations in security prices. The sum of: (i) Mark-to-market and (ii) Interest rate or index-driven model, as appropriate.3 1 15 U.S.C. 78s(b)(1). VerDate Aug<31>2005 16:27 Nov 29, 2007 2 The Commission has modified the text of the summaries prepared by FICC. Jkt 214001 PO 00000 Frm 00075 Fmt 4703 Sfmt 4703 E:\FR\FM\30NON1.SGM 30NON1

Agencies

[Federal Register Volume 72, Number 230 (Friday, November 30, 2007)]
[Notices]
[Pages 67768-67770]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-23205]



[[Page 67768]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-28065; File No. 812-13414]


John Hancock Life Insurance Company, et al., Notice of 
Application

November 26, 2007.
AGENCY: The Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an order of exemption pursuant to 
Section 17(b) of the Investment Company Act of 1940, as amended (the 
``1940 Act'' or ``Act'').

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    Applicants: John Hancock Life Insurance Company (U.S.A.) (``John 
Hancock USA''), John Hancock Life Insurance Company (U.S.A.) Separate 
Account H (``Account H''), John Hancock Life Insurance Company of New 
York (``John Hancock New York''), John Hancock Life Insurance Company 
of New York Separate Account A (``Account A'') and John Hancock Trust 
(``JHT'') (collectively the ``Applicants'').
SUMMARY: The Applicants hereby apply for an order of exemption pursuant 
to Section 17(b) of the 1940 Act to permit in-kind purchases in 
connection with a substitution as described herein.
    Filing Date: The application was filed on August 6, 2007 and 
amended and restated on November 19, 2007.
    Hearing or Notification of Hearing: An order granting the 
application will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by writing to the Secretary of 
the Commission and serving Applicants with a copy of the request 
personally or by mail. Hearing requests must be received by the 
Commission by 5:30 p.m. on December 20, 2007, and should be accompanied 
by proof of service on Applicants in the form of an affidavit or, for 
lawyers, a certificate of service. Hearing requests should state the 
nature of the requester's interest, the reason for the request, and the 
issues contested. Persons who wish to be notified of a hearing may 
request notification by writing to the Secretary of the Commission.

ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street, 
NE., Washington, DC 20549-1090. Applicants, John Hancock Life Insurance 
Company (U.S.A.), 601 Congress Street, Boston, MA 02210.

FOR FURTHER INFORMATION CONTACT: Alison T. White, Senior Counsel, or 
Joyce M. Pickholz, Branch Chief, Office of Insurance Products, Division 
of Investment Management, at (202) 551-6795.

SUPPLEMENTARY INFORMATION: The following is a summary of the 
Application. The complete Application is available for a fee from the 
Public Reference Branch of the Commission, 100 F Street, NE., Room 
1580, Washington, DC 20549 (202-551-8090).

Applicants' Representations

    1. John Hancock USA, formerly known as The Manufacturers Life 
Insurance Company (U.S.A.), is a stock life insurance company 
originally organized under the laws of Maine on August 20, 1955 by a 
special act of the Maine legislature. John Hancock USA redomesticated 
under the laws of Michigan on December 30, 1992.
    2. Account H is registered under the Act as a unit investment trust 
(File No. 811-4113). The variable annuity contracts funded by Account H 
that are affected by this Application are Scudder Wealthmark Annuity 
(File Nos. 333-70728 and 333-70730) and Scudder Wealthmark ML3 Annuity 
(File No. 333-70850).
    3. John Hancock New York, formerly known as The Manufacturers Life 
Insurance Company of New York, is a wholly-owned subsidiary of John 
Hancock USA and is a stock life insurance company organized under the 
laws of New York on February 10, 1992.
    4. Account A is registered under the Act as a unit investment trust 
(File No. 811-6584). It is used to fund variable annuity contracts of 
John Hancock New York. The variable annuity contracts funded by Account 
A that are affected by this application are Scudder Wealthmark Annuity 
for New York (File Nos. 33-79112 and 33-46217) and Scudder Wealthmark 
ML3 Annuity for New York (File No. 333-83558).
    5. The individual and group variable annuity contracts affected by 
this Application are collectively referred to as the ``Contracts.''
    6. Each of the Contracts permits its owners to allocate the 
Contract's accumulated value among numerous available Subaccounts, each 
of which invests in a different investment portfolio (``Fund'') of an 
underlying mutual fund.
    7. Shares of JHT are sold exclusively to insurance company separate 
accounts to fund benefits under variable annuity contracts and variable 
life insurance policies sponsored by the Insurance Companies or their 
affiliates, and to employer pension and profit sharing plans. JHT is 
registered under the Act as an open-end management investment company 
of the series type, and its securities are registered under the 
Securities Act of 1933, File Nos. 002-94157 and 811-04146. John Hancock 
Investment Management Services, LLC (formerly, Manufacturers Securities 
Services, LLC) (``JHIMS''), is the investment adviser to JHT, and each 
series has its own subadviser.
    8. John Hancock USA and John Hancock New York (collectively the 
``Insurance Companies'') and Account H and Account A (collectively the 
``Separate Accounts'') previously applied for and were granted an Order 
of the Commission pursuant to Section 26(c) of the Act (Inv. Co. Act 
Rel. No. 27781, the ``Section 26(c) Order'') approving the substitution 
of shares of certain series of JHT for shares of comparable series of 
various registered investment companies, the majority of which were 
series of DWS Variable Series II. The Section 26(c) Order approved, 
among others, the substitution of shares of JHT Investment Quality Bond 
Trust--Series II of JHT (such series being referred to herein as the 
``Replacement Fund'') for shares of DWS Core Fixed Income VIP--Series 
II, Class B of DWS Variable Series II (such series being referred to 
herein as the ``Existing Fund''). All of the substitutions approved in 
the Section 26(c) Order, except that involving the Existing Fund and 
the Replacement Fund, were completed or are in the process of being 
completed.
    9. The reason that the substitution involving the Existing Fund and 
the Replacement Fund has not been completed is that Deutsche Investment 
Management Americas Inc. (``DeIM''), the investment advisor of the 
Existing Fund, has informed the Insurance Companies that the redemption 
of the shares of the Existing Fund that are held by the Separate 
Accounts may be effected partly in cash and partly in-kind.
    10. The Insurance Companies, on behalf of the Separate Accounts, 
propose to redeem the shares held by the Separate Accounts in the 
Existing Fund for a combination of cash and securities. The redemption 
will be done on a pro-rata basis. The in-kind redemption from the 
Existing Fund will be effected in accordance with the conditions set 
forth in the Commission's no-action letter issued to Signature 
Financial Group, Inc. (available December 28, 1999).
    11. The Insurance Companies, after redeeming the shares held by the 
Separate Accounts in the Existing Fund for a combination of cash and 
securities, will then use such redemption proceeds to purchase shares 
of the Replacement Fund.
    12. The Applicants request an order under Section 17(b) exempting 
them from the provisions of Section 17(a) to

[[Page 67769]]

the extent necessary to permit the Insurance Companies to carry out the 
proposed substitution.
    13. Section 17(a)(1) of the Act, in relevant part, prohibits any 
affiliated person of a registered investment company, or any affiliated 
person of such person, acting as principal, from knowingly selling any 
security or other property to that company. Section 17(a)(2) of the Act 
generally prohibits the persons acting as principals, from knowingly 
purchasing any security or other property from the registered company.
    14. Because shares held by a separate account of an insurance 
company are legally owned by the insurance company, the Insurance 
Companies and their affiliates collectively own of record substantially 
all of the shares of JHT. Therefore, JHT and the Replacement Fund are 
arguably under the control of the Insurance Companies notwithstanding 
the fact that Contract owners may be considered the beneficial owners 
of those shares held in the Separate Accounts. If JHT and the 
Replacement Fund are under the control of the Insurance Companies, then 
each Insurance Company is an affiliated person or an affiliated person 
of an affiliated person of JHT and the Replacement Fund. If JHT and the 
Replacement Fund are under the control of the Insurance Companies, then 
JHT and the Replacement Fund are affiliated persons of the Insurance 
Companies.
    15. Regardless of whether or not the Insurance Companies can be 
considered to control JHT and the Replacement Fund, because the 
Insurance Companies own of record more than 5% of the shares of each of 
them and are under common control with the Replacement Funds' 
investment adviser, the Insurance Companies are affiliated persons of 
JHT and the Replacement Fund. Likewise, the Replacement Fund is an 
affiliated person of the Insurance Companies.
    16. The Insurance Companies, through their Separate Accounts, in 
the aggregate own more than 5% of the outstanding shares of the 
Existing Fund. Therefore, each Insurance Company is an affiliated 
person of the Existing Fund.
    17. Because the substitution may be effected, in whole or in part, 
by means of in-kind redemptions and purchases, the substitution may be 
deemed to involve one or more purchases or sales of securities or 
property between affiliated persons. The proposed transactions will 
involve a transfer of portfolio securities by the Existing Fund to the 
Insurance Companies; immediately thereafter, the Insurance Companies, 
on behalf of the Separate Accounts, will purchase shares of the 
Replacement Fund with the portfolio securities received from the 
Existing Fund. Accordingly, the Insurance Companies and the Existing 
Fund, and the Insurance Companies and the Replacement Fund could be 
viewed as affiliated persons of one another under Section 2(a)(3) of 
the Act. It is conceivable that this aspect of the substitution could 
be viewed as being prohibited by Section 17(a). Therefore, the 
Applicants have determined to seek relief from Section 17(a) for the 
in-kind purchases and sales of the shares of the Replacement Fund.
    18. Section 17(b) of the Act provides that the Commission may, upon 
application, grant an order exempting any transaction from the 
prohibitions of Section 17(a) if the evidence establishes that: (1) The 
terms of the proposed transaction, including the consideration to be 
paid or received, are reasonable and fair and do not involve 
overreaching on the part of any person concerned; (2) the proposed 
transaction is consistent with the policy of each registered investment 
company concerned, as recited in its registration statement and records 
filed under the Act; and (3) the proposed transaction is consistent 
with the general purposes of the Act.
    19. The Applicants submit that the terms of the proposed in-kind 
purchases of shares of the Replacement Fund, including the 
consideration to be paid and received, as described in this 
Application, are reasonable and fair and do not involve overreaching on 
the part of any persons concerned. The Applicants also submit that the 
proposed in-kind purchases by the Insurance Companies will be 
consistent with the investment policies of the Replacement Fund. The 
Insurance Companies' redemption of the shares held by the Separate 
Accounts in the Existing Fund and the Insurance Companies' subsequent 
purchase of shares of the Replacement Fund with such redemption 
proceeds are scheduled to occur on the same day. The Replacement Fund 
may opt to sell all or a portion of such in-kind securities received. 
The Applicants submit that the proposed substitution is consistent with 
the general purposes of the Act.
    20. Applicants assert that, to the extent that the in-kind 
purchases are deemed to involve principal transactions among affiliated 
persons, the procedures described below should be sufficient to assure 
that the terms of the proposed transactions are reasonable and fair to 
all participants. The Applicants maintain that the terms of the 
proposed in-kind purchase transactions, including the consideration to 
be paid and received by each fund involved, are reasonable, fair and do 
not involve overreaching. Applicants represent that the transactions 
will conform with all but one of the conditions enumerated in Rule 17a-
7. The proposed transactions will take place at relative net asset 
value in conformity with the requirements of Section 22(c) of the Act 
and Rule 22c-1 thereunder with no change in the amount of any Contract 
owner's contract value or death benefit or in the dollar value of his 
or her investment in any of the Separate Accounts. Contract owners will 
not suffer any adverse tax consequences as a result of the 
substitution. The fees and charges under the Contracts will not 
increase because of the substitution. Even though the Separate 
Accounts, the Insurance Companies and JHT may not rely on Rule 17a-7, 
the Applicants believe that the Rule's conditions outline the type of 
safeguards that result in transactions that are fair and reasonable to 
registered investment company participants and preclude overreaching in 
connection with an investment company by its affiliated persons.
    21. The board of JHT has adopted procedures, as required by 
paragraph (e)(1) of Rule 17a-7, pursuant to which its series may 
purchase and sell securities to and from their affiliates. The 
Applicants will carry out the proposed Insurance Company in-kind 
purchases in conformity with all of the conditions of Rule 17a-7 and 
the Replacement Fund's procedures thereunder, except that the 
consideration paid for the securities being purchased or sold may not 
be entirely cash. Nevertheless, the circumstances surrounding the 
proposed substitution will be such as to offer the same degree of 
protection to the Replacement Fund from overreaching that Rule 17a-7 
provides to it generally in connection with their purchase and sale of 
securities under that Rule in the ordinary course of their business. In 
particular, the proposed transactions will not be effected at a price 
that is disadvantageous to the Replacement Fund. Although the 
transactions may not be entirely for cash, each will be effected based 
upon (1) the independent market price of the portfolio securities 
valued as specified in paragraph (b) of Rule 17a-7, and (2) the net 
asset value per share of each fund involved valued in accordance with 
the procedures disclosed in its respective registration statement and 
as

[[Page 67770]]

required by Rule 22c-1 under the Act. Any brokerage commission, fee, or 
other cost incurred in connection with the proposed transactions will 
be paid for by the Insurance Companies and not by the Contract owners.
    22. The sale of shares of the Replacement Fund for investment 
securities, as contemplated by the proposed in-kind purchases, will be 
consistent with the investment policy and restrictions of the 
Replacement Fund because (1) the shares will be sold at their net asset 
value, and (2) the portfolio securities will be of the type and quality 
that the Replacement Fund could have acquired with the proceeds from 
share sales had the shares been sold for cash. To assure that the 
second of these conditions is met, the investment adviser and sub-
adviser of the Replacement Fund will examine the portfolio securities 
being offered to the Replacement Fund and accept only those securities 
as consideration for shares that they could have acquired for the 
Replacement Fund in a cash transaction.
    23. The Applicants submit that the Insurance Companies' in-kind 
purchases are consistent with the general purposes of the Act as stated 
in the Findings and Declaration of Policy in Section 1 of the Act and 
that the proposed transactions do not present any of the conditions or 
abuses that the Act was designed to prevent.
    24. The Applicants represent that the proposed in-kind purchases 
meet all of the requirements of Section 17(b) of the Act and request 
that the Commission issue an order pursuant to Section 17(b) of the Act 
exempting the Separate Accounts, the Insurance Companies, JHT, and the 
Replacement Fund from the provisions of Section 17(a) of the Act to the 
extent necessary to permit the Insurance Companies on behalf of the 
Separate Accounts to carry out, as part of the substitution, the in-
kind purchases of shares of the Replacement Fund which may be deemed to 
be prohibited by Section 17(a) of the Act.

Conclusion

    Applicants assert that for the reasons summarized above the 
proposed substitution and related transactions are consistent with the 
standards of Section 17(b) of the Act and that the requested orders 
should be granted.

    For the Commission, by the Division of Investment Management 
pursuant to delegated authority.
Nancy M. Morris,
Secretary.
[FR Doc. E7-23205 Filed 11-29-07; 8:45 am]
BILLING CODE 8011-01-P