[Federal Register Volume 63, Number 209 (Thursday, October 29, 1998)]
[Notices]
[Pages 58077-58078]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-29011]
[[Page 58077]]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 23506; 812-11308]
John Hancock Institutional Series Trust; Notice of Application
October 23, 1998.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of application for an exemption under section 17(b) of
the Investment Company Act of 1940 (the ``Act'') from section 17(a) of
the Act.
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Summary of Application: Applicant, John Hancock Institutional Series
Trust (the ``Trust''), on behalf of its series John Hancock Multi-
Sector Growth Fund (the ``Fund''), seeks an order to permit an in-kind
redemption of shares of the Fund held by certain affiliated persons of
the Fund.
Filing Dates: The application was filed on September 17, 1998 and
amended on October 22, 1998.
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 Commission's
Secretary and serving applicant with a copy of the request, personally
or by mail. Hearing requests should be received by the Commission by
5:30 p.m. on November 17, 1998 and should be accompanied by proof of
service on applicant, in the form of an affidavit or, for lawyers, a
certificate of service. Hearing requests should state the nature of the
writer's interest, the reason for the request, and the issues
contested. Persons may request notification of a hearing by writing to
the Commission's Secretary.
ADDRESSES: Secretary, Securities and Exchange Commission, 450 5th
Street NW, Washington, DC 20549. Applicant, 101 Huntington Avenue,
Boston, Massachusetts 02199.
FOR FURTHER INFORMATION CONTACT: Lawrence W. Pisto, Senior Counsel, at
(202) 942-0527, or May Kay Frech, Branch Chief at (202) 942-0564,
Office of Investment Company Regulation, Division of Investment
Management.
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee at the
Commission's Public Reference Branch, 450 5th Street, NW, Washington,
DC 20549 (tel. 202-942-8090).
Applicant's Representations
1. The Trust, a Massachusetts business trust, is an open-end
management investment company registered under the Act. The Fund is a
series of the Trust. John Hancock Advisers, Inc. (the ``Adviser''),
registered as an investment adviser under the Investment Advisers Act
of 1940, serves as the investment adviser to the Fund. The Adviser is
owned by John Hancock Mutual Life Insurance Company (``JHMLIC'').
2. The Investment-Incentive Plan for John Hancock Mutual Life
Insurance Company Employees (``TIP Plan'') and the John Hancock Savings
and Investment Plan (``SIP Plan'') (collectively, the ``Plans'') are
qualified retirement plans for the employees of JHMLIC and some of its
subsidiaries. Investors Bank & Trust Company (``IBT'') serves as
trustee for the Plans. As of September 1, 1998, the TIP Plan and the
SIP Plan beneficially owned approximately 46.03% and 3.99%,
respectively, of the outstanding shares of the Fund. IBT, as trustee
for the Plans, has advised the Fund that it intends to redeem all
shares of the Fund beneficially owned by the Plans.
3. The Fund's prospectus and statement of additional information
(together, the ``Prospectus'') provide that, in limited circumstances,
the Fund may satisfy all or part a redemption request by delivering
portfolio securities to a redeeming shareholder. The board of trustees
of the Trust (the ``Board''), including a majority of the non-
interested trustees, has determined that the Fund should redeem the
shares of the Plans in-kind to protect the Fund from the potentially
adverse impact of liquidating a significant amount of portfolio
securities if it satisfied the redemption request in cash.
4. The Fund proposes to redeem the shares of the Plans in the form
of a pro rata distribution of each portfolio security held by the Fund
after excluding: (a) securities which may not be publicly offered or
sold without registration under the Securities Act of 1933; (b)
securities issued by entities in countries which (i) restrict or
prohibit the holding of securities by non-nationals other than through
qualified investment vehicles, such as the Fund, or (ii) permit
transfers of ownership of securities to be effected only by
transactions conducted on a local stock exchange; (c) certain portfolio
positions (such as forward foreign currency contracts, futures and
options contracts, swap transactions and repurchase agreements) that,
although they may be liquid and marketable, involve the assumption of
contractual obligations, require special trading facilities or can only
be traded with the counterparty to the transaction to effect a change
in beneficial ownership; (d) cash equivalents (such as certificates of
deposit, commercial paper and repurchase agreements); and (e) other
assets which are not readily distributable (including receivables and
prepaid expenses). In addition, portfolio securities representing
fractional shares, odd lot securities and accruals on such securities
will be excluded from portfolio securities distributed in-kind to the
Plans.
5. The Trust has elected to be governed by the provisions of rule
18f-1 under the Act which commits the Fund to pay in cash all requests
for redemption by any shareholder of record, limited in amount with
respect to each shareholder during any 90-day period to the lesser of
$250,000 or 1% of the Fund's net asset value (``NAV'') at the beginning
of such period. The Fund will comply with rule 18f-1.
Applicant's Legal Analysis
1. Section 17(a)(2) of the Act makes it unlawful for an affiliated
person of a registered investment company, or an affiliated person of
such a person, acting as principal, to knowingly purchase from the
registered investment company any security or other property (except
securities of which the seller is the issuer). Section 2(a)(3) of the
Act defines ``affiliated person'' to include any person owning 5% or
more of the outstanding voting securities of the other person; any
person controlling or under common control with the other person; and
an investment adviser to an investment company. The TIP Plan owns
beneficially in excess of 25% of the Fund's shares and, thus, is an
affiliated person of the Fund. The Plans and the Adviser may also be
deemed to be under common control of JHMLIC, and thus, the Plans may be
affiliated persons by an affiliated person of the Fund. Applicant
states that, to the extent that the proposed in-kind redemption would
involve the ``purchase'' of the Fund's portfolio securities by the
Plans, the proposed in-kind redemption would be prohibited by section
17(a)(2).
2. Section 17(b) of the Act provides that, notwithstanding section
17(a), the SEC shall exempt a proposed transaction from section 17(a)
if evidence establishes that: (a) The terms of the proposed transaction
are reasonable and fair and do not involve overreaching; (b) the
proposed transaction is consistent with the policy of each registered
investment company involved; and (c) the proposed transaction is
consistent with the general purposes of the Act.
[[Page 58078]]
3. Applicant submits that the terms of the proposed in-kind
redemption by the Plans meet the standards set forth in section 17(b)
of the act. The Plans will have no choice as to the type of
consideration to be received in the redemption and neither the Adviser
nor IBT as trustee for the Plans will have any opportunity to select
the portfolio securities to be distributed. Applicant also states that
the securities to be distributed to the Plans will be valued in the
same manner as they are valued for purposes of determining the Fund's
NAV. In addition, applicant states that the proposed in-kind redemption
is consistent with the investment policies of the Fund, as set forth in
the Fund's Prospectus.
Applicant's Conditions
Applicant agrees that any order granting the requested relief will
be subject to the following conditions:
1. The portfolio securities of the Fund distributed to the Plans
pursuant to the redemptions in-kind (the ``In-Kind Securities'') will
be limited to securities that are traded on a public securities market
or for which market quotations are available.
2. The In-Kind Securities will be distributed by the Fund on a pro
rata basis after excluding: (a) Securities which may not be publicly
offered or sold without registration under the Securities Act of 1933;
(b) securities issued by entities in countries which (i) restrict or
prohibit the holding of securities by non-nationals other than through
qualified investment vehicles, such as the Fund or (ii) permit
transfers of ownership of securities to be effected only by
transactions conducted on a local stock exchange; (c) certain portfolio
positions (such as forward foreign currency contracts, futures and
options contracts, swap transactions and repurchase agreements) that,
although they may be liquid and marketable, involve the assumption of
contractual obligations, require special trading facilities or can only
be traded with the counterparty to the transaction to effect a change
in beneficial ownership; (d) cash equivalents (such as certificates of
deposit, commercial paper and repurchase agreements); and (e) other
assets which are not readily distributable (including receivables and
prepaid expenses). In addition, portfolio securities representing
fractional shares, odd lot securities and accruals on such securities
may be excluded from portfolio securities distributed in-kind to the
Plans. Cash will be paid for the portion of the in-kind distribution
represented by the excluded assets set forth above less liabilities
(including accounts payable).
3. The In-Kind Securities distributed to the Plans will be valued
in the same manner as they would be valued for purposes of computing
the Fund's NAV, which in the case of securities traded on a public
securities market for which quotations are available, is their last
reported sales price on the exchange on which the securities are
primarily traded or at the last sales price on the national securities
market, or, if the securities are not listed on an exchange or the
national securities market or if there is no such reported price, the
most recent bid price.
4. The Fund will maintain and preserve for a period of not less
than six years from the end of the fiscal year in which the proposed
in-kind redemption by the Plans occurred, the first two years in an
easily accessible place, a written record of such redemption setting
forth a description of each security distributed in-kind, the identity
of the Plans, the terms of the in-kind distribution, and the
information or materials upon which the valuation was made.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-29011 Filed 10-28-98; 8:45 am]
BILLING CODE 8010-01-M