John Hancock Life Insurance Company, et al., 67768-67770 [E7-23205]
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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’’).
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AGENCY:
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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
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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
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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
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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
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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:
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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).
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2 The Commission has modified the text of the
summaries prepared by FICC.
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]]>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'').
-----------------------------------------------------------------------
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
