<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO.1)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
NASL Series Trust
(Name of Registrant as Specified in Its Charter)
NASL Series Trust
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[ ] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) or Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
Title of each class of securities to which transaction applies:
Aggregate number of securities to which transaction applies:
Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
Proposed maximum aggregate value of transaction:
Total fee paid:
* Set forth the amount on which the filing is calculated and state how it was
determined.
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
Amount previously paid:
Form, Schedule or Registration Statement No.:
Filing Party:
Date Filed:
<PAGE> 2
NASL SERIES TRUST
116 Huntington Avenue
Boston, MA 02116
November 15, 1996
TO OUR VARIABLE ANNUITY AND VARIABLE LIFE CONTRACT OWNERS:
A Special Meeting of Shareholders of NASL Series Trust (the "Trust") will
be held at the offices of the Trust, 116 Huntington Avenue, Boston,
Massachusetts 02116, on December 20, 1996, at 11:00 a.m., Eastern Standard Time,
for the purpose of considering the proposals (the "Proposals") described in the
enclosed Notice of Special Meeting of Shareholders (the "Meeting").
Shareholders of the Trust, first, are being asked to consider the election
of six Trustees to the Board of Trustees (the "Board").
In addition, shareholders of the Global Equity Trust, the Value Equity
Trust, the Blue Chip Growth Trust (prior to October 1, 1996, known as the
Pasadena Growth Trust) and the Money Market Trust, respectively, are being asked
to approve new subadvisory arrangements with Morgan Stanley Asset Management,
Inc. as subadviser to the Global Equity Trust, T. Rowe Price Associates as
subadviser to the Value Equity Trust and the Blue Chip Growth Trust, and
Manufacturers Adviser Corporation as subadviser to the Money Market Trust.
Shareholders of the Equity Trust, the Aggressive Asset Allocation Trust, the
Moderate Asset Allocation Trust and the Conservative Asset Allocation Trust are
being asked to approve an amended subadvisory agreement with Fidelity Management
Trust Company ("FMTC"). At a meeting held on September 27, 1996, the Board,
including the independent Trustees, approved the amended subadvisory agreement
with FMTC and the new subadvisory arrangements. In connection with the foregoing
subadvisory changes, the Board has proposed changing the investment objectives
of the Value Equity Trust and the Blue Chip Growth Trust to reflect the
investment strategies of the new subadvisers. In addition, the Board has
proposed changing certain fundamental investment policies of the Aggressive
Asset Allocation Trust, the Moderate Asset Allocation Trust and the Conservative
Asset Allocation Trust.
Shareholders of each series of the Trust (the "Portfolios") also are being
asked to approve a proposal giving the Adviser the ability, in the future, to
select and contract with one or more subadvisers to the Portfolios after
obtaining the approval of the Board but without obtaining shareholder approval.
In the Board's view, the proposal would save the Trust and the Portfolios the
additional time and expense of obtaining shareholder approval for certain
changes in subadvisory arrangements.
<PAGE> 3
Finally, shareholders of the Trust are being asked to ratify the selection
of independent accountants for the Trust for its fiscal year ending December 31,
1996.
THE BOARD OF TRUSTEES OF THE TRUST HAS UNANIMOUSLY VOTED IN FAVOR OF EACH
PROPOSAL AND RECOMMENDS THAT YOU VOTE FOR THEIR APPROVAL.
Although you are not a shareholder of the Trust, your purchase payments and
the earnings on such purchase payments under your variable annuity or variable
life contract (a "contract") issued by North American Security Life Insurance
Corporation ("Security Life"), First North American Life Assurance Company
("FNAL") or The Manufacturers Life Insurance Company of America ("Manufacturers
Life of America") are invested in shares of one or more of the Portfolios
through sub-accounts of separate accounts established by Security Life, FNAL or
Manufacturers Life of America for such purpose. Since the value of your contract
depends in part on the investment performance of Trust shares, you have the
right to instruct Security Life, FNAL or Manufacturers Life of America, as the
case may be, as to the manner in which Trust shares attributable to your
contract are voted. The number of votes as to each Portfolio for which you may
give instructions is determined by dividing your contract value (or the reserve
for a contract after its maturity date) allocated to the sub-account in which
such Portfolio shares are held by the value per share of that Portfolio.
Fractional votes are counted. Trust shares as to which no instructions are
received, including shares not attributable to contractholders, will be voted in
the same proportion as those for which instructions are received from
contractholders.
Enclosed you will find a Notice of Special Meeting of Shareholders, a Proxy
Statement for the Trust and a Voting Instructions Form for each Portfolio in
which your contract values were invested as of October 23, 1996, the record date
for the Meeting. The Proxy Statement provides background information and
explains the matters to be voted on at the Meeting. We urge you to read the
Proxy Statement and then complete and return each Voting Instructions Form on or
before December 19, 1996. YOUR VOTE IS EXTREMELY IMPORTANT AND YOUR PROMPT
RESPONSE WILL HELP SAVE THE EXPENSE OF ADDITIONAL SOLICITATION MAILINGS.
Sincerely yours,
/s/ John D. DesPrez III
-------------------------
John D. DesPrez III
President
NASL Series Trust
<PAGE> 4
NASL SERIES TRUST
116 Huntington Avenue
Boston, MA 02116
(800) 344-1029
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of
NASL SERIES TRUST:
Notice is hereby given that a special meeting (the "Meeting") of
shareholders of NASL Series Trust (the "Trust") will be held on December 20,
1996 at the offices of the Trust, 116 Huntington Avenue, Boston, MA 02116, at
11:00 a.m., Eastern Standard Time. A Proxy Statement which provides additional
information about the purpose of the Meeting is included with this Notice. At
the Meeting, shareholders of each series of the Trust (a "Portfolio"), unless
otherwise indicated below, will consider and vote upon the following proposals:
<TABLE>
<S> <C>
Proposal 1 Election of six trustees to serve as members of the
Board of Trustees of the Trust.
Proposal 2 Approval of a subadvisory agreement between NASL
Financial Services, Inc. (in such capacity, the
"Adviser") and Morgan Stanley Asset Management Inc. with
respect to the Global Equity Trust. (Only shareholders
of the Global Equity Trust will vote on Proposal 2.)
Proposal 3 Approval of a subadvisory agreement between the Adviser
and T. Rowe Price Associates, Inc. with respect to the
Value Equity Trust. (Only shareholders of the Value
Equity Trust will vote on Proposal 3.)
Proposal 4 Approval of a subadvisory agreement between the Adviser
and T. Rowe Price Associates, Inc. with respect to the
Blue Chip Growth Trust (formerly known as the Pasadena
Growth Trust). (Only shareholders of the Blue Chip
Growth Trust will vote on Proposal 4.)
Proposal 5 Approval of a subadvisory agreement between the Adviser
and Manufacturers Adviser Corporation with respect to
the Money Market Trust. (Only shareholders of the Money
Market Trust will vote on Proposal 5.)
Proposal 6A Approval of an amended subadvisory agreement between the
Adviser and Fidelity Management Trust Company ("FMTC")
increasing the subadvisory fee with respect to the
Equity Trust. (Only shareholders of the Equity Trust
will vote on Proposal 6A.)
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
Proposal 6B Approval of an amended subadvisory agreement between the
Adviser and FMTC increasing the subadvisory fee with
respect to the Aggressive Asset Allocation Trust. (Only
shareholders of the Aggressive Asset Allocation Trust
will vote on Proposal 6B.)
Proposal 6C Approval of an amended subadvisory agreement between the
Adviser and FMTC increasing the subadvisory fee with
respect to the Moderate Asset Allocation Trust. (Only
shareholders of the Moderate Asset Allocation Trust will
vote on Proposal 6C.)
Proposal 6D Approval of an amended subadvisory agreement between the
Adviser and FMTC increasing the subadvisory fee with
respect to the Conservative Asset Allocation Trust.
(Only shareholders of the Conservative Asset Allocation
Trust will vote on Proposal 6D.)
Because subadvisory fees are payable by the Adviser
out of its advisory fee, approval of Proposals 6A-6D
will not increase, directly or indirectly, the
advisory fee or any other expense fee paid by the
Equity Trust, Aggressive Asset Allocation Trust,
Moderate Asset Allocation Trust or Conservative
Asset Allocation Trust.
Proposal 7A Approval of a change to certain fundamental investment
policies of the Aggressive Asset Allocation Trust. (Only
shareholders of the Aggressive Asset Allocation Trust
will vote on Proposal 7A.)
Proposal 7B Approval of a change to certain fundamental investment
policies of the Moderate Asset Allocation Trust. (Only
shareholders of the Moderate Asset Allocation Trust will
vote on Proposal 7B.)
Proposal 7C Approval of a change to certain fundamental investment
policies of the Conservative Asset Allocation Trust.
(Only shareholders of the Conservative Asset Allocation
Trust will vote on Proposal 7C.)
Proposal 8 Approval of a change to the investment objective of the
Value Equity Trust. (Only shareholders of the Value
Equity Trust will vote on Proposal 8.)
Proposal 9 Approval of a change to the investment objective of the
Blue Chip Growth Trust. (Only shareholders of the Blue
Chip Growth Trust will vote on Proposal 9.)
Proposal 10 Approval of a proposal to permit the Adviser, in the
future, to select and contract with subadvisers for the
Portfolios after obtaining the approval of the Board of
Trustees but without obtaining shareholder approval.
</TABLE>
<PAGE> 6
<TABLE>
<S> <C>
Proposal 11 Ratification of the selection of Coopers & Lybrand
L.L.P. as the independent accountants for the Trust for
its fiscal year ending December 31, 1996; and
Any other business that may properly come before the
Meeting.
</TABLE>
THE BOARD OF TRUSTEES OF THE TRUST UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS
VOTE FOR PROPOSALS 1 THROUGH 11.
Each shareholder of record at the close of business on October 23, 1996 is
entitled to receive notice of and to vote at the Meeting and is invited to
attend the Meeting in person.
Sincerely,
/s/ James D. Gallagher
-----------------------------
James D. Gallagher
Secretary
November 15, 1996
Boston, Massachusetts
<PAGE> 7
NASL SERIES TRUST
116 Huntington Avenue
Boston, MA 02116
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 20, 1996
This proxy statement is furnished in connection with the solicitation by
the Board of Trustees (the "Board") of NASL Series Trust (the "Trust") of
proxies to be used at a special meeting (the "Meeting") of shareholders to be
held at the offices of the Trust, 116 Huntington Avenue, Boston, MA 02116, on
December 20, 1996, at 11:00 a.m., Eastern Standard Time, or any adjournment or
adjournments thereof. This statement and the enclosed proxy are first being
mailed on or about November 15, 1996. The Trust consists of seventeen series of
shares of beneficial interest: the Small/Mid Cap Trust, the International Small
Cap Trust, the Global Equity Trust, the Blue Chip Growth Trust (formerly known
as the Pasadena Growth Trust), the Equity Trust, the Growth Trust, the Value
Equity Trust, the Growth and Income Trust, the International Growth and Income
Trust, the Strategic Bond Trust, the Global Government Bond Trust, the
Investment Quality Bond Trust, the U.S. Government Securities Trust, the Money
Market Trust, the Aggressive Asset Allocation Trust, the Moderate Asset
Allocation Trust and the Conservative Asset Allocation Trust. Each of the
above-named series is referred to herein as a "Portfolio" and, collectively, as
the "Portfolios."
Pursuant to the Trust's Agreement and Declaration of Trust, the Board has
designated October 23, 1996 as the record date for determining shareholders
eligible to vote at the Meeting (the "Record Date"). All shareholders of record
at the close of business on October 23, 1996 are entitled to one vote for each
share of beneficial interest of the Trust held.
As of the Record Date, 100% of the Trust's shares were legally owned by
three shareholders: (i) North American Security Life Insurance Company ("NASL"),
a Delaware stock life insurance company whose address is 116 Huntington Avenue,
Boston, Massachusetts 02116, (ii) First North American Life Assurance Company
("FNAL"), a wholly owned subsidiary of NASL and a New York stock life insurance
company whose address is 555 Theodore Fremd Avenue, Rye, New York 10580 and
(iii) The Manufacturers Life Insurance Company of America ("Manufacturers Life
of America"), a stock life insurance company organized under the laws of
Pennsylvania and redomesticated under the laws of Michigan. Manufacturers Life
of America is a wholly owned subsidiary of The Manufacturers Life Insurance
Company of Michigan. NASL holds Trust shares attributable to variable annuity
contracts in NASL Variable Account and Trust shares attributable to variable
life contracts in NASL Variable Life Account, both of which are separate
accounts registered under the Investment Company Act of 1940 (the "1940 Act"),
as well as in an unregistered separate account. FNAL holds Trust shares
attributa-
1
<PAGE> 8
ble to variable contracts in FNAL Variable Account, a separate account
registered under the 1940 Act. Manufacturers Life of America holds Trust shares
attributable to variable contracts in Manufacturers Life of America Separate
Accounts Three and Four, which are separate accounts registered under the 1940
Act. NASL, FNAL and Manufacturers Life of America will solicit voting
instructions from contract owners and will vote all shares held in proportion to
the instructions received from contract holders. The ultimate parent of both
NASL and Manufacturers Life of America is The Manufacturers Life Insurance
Company ("Manulife"), a Canadian mutual life insurance company whose principal
address is 200 Bloor Street East, Toronto, Ontario, Canada M4W 1E5.
As of the Record Date, the number of votes eligible to be cast at the
Meeting with respect to each Portfolio is as follows:
<TABLE>
<CAPTION>
VOTES HELD BY
MANUFACTURERS
NUMBER OF VOTES HELD BY VOTES HELD BY LIFE OF
PORTFOLIO ELIGIBLE VOTES NASL* FNAL AMERICA
- ---------------------- --------------- --------------- -------------- -------------
<S> <C> <C> <C> <C>
Small/Mid Cap Trust 10,013,276.626 9,405,015.605 608,261.021 0.000
International Small
Cap Trust 6,229,192.275 5,933,503.992 295,688.283 0.000
Global Equity Trust 40,848,022.644 38,845,722.745 2,002,299.899 0.000
Blue Chip Growth Trust 28,865,650.475 27,352,488.948 1,513,161.527 0.000
Equity Trust 57,884,390.582 54,835,814.146 2,597,878.123 450,698.313
Growth Trust 2,504,963.035 2,428,624.530 76,338.505 0.000
Value Equity Trust 38,083,696.123 34,302,614.656 3,423,978.424 357,103.043
Growth and Income
Trust 51,894,418.890 49,009,788.403 2,586,211.567 298,418.920
International Growth
and Income Trust 14,824,188.366 13,841,167.390 983,020.976 0.000
Strategic Bond Trust 17,123,342.994 15,520,671.669 1,602,671.325 0.000
Global Government Bond
Trust 17,169,056.998 16,549,475.774 619,581.224 0.000
Investment Quality
Bond Trust 13,155,299.974 12,631,364.141 523,935.833 0.000
U.S. Government
Securities Trust 15,933,466.423 14,808,813.113 1,017,485.208 107,168.102
Money Market Trust 33,736,095.829 32,281,777.447 1,454,318.382 0.000
Aggressive Asset
Allocation Trust 17,250,490.082 16,426,187.090 746,693.246 77,609.746
Moderate Asset
Allocation Trust 51,783,832.976 50,066,046.728 1,640,080.952 77,705.296
Conservative Asset
Allocation Trust 19,159,741.044 18,623,328.429 498,680.274 37,732.341
Total: 436,459,125.336 412,862,404.806 22,190,284.769 1,406,435.761
</TABLE>
- ---------------
* Also includes shares held by NASL in its general account.
Trustees and officers of the Trust, in the aggregate, own, or have the
right to provide voting instructions for, less than 1% of the Trust's
outstanding shares.
2
<PAGE> 9
SUMMARY OF PROPOSALS
<TABLE>
<CAPTION>
PROPOSAL SHAREHOLDERS OF THE TRUST WHO WILL
NUMBER PROPOSAL VOTE ON THE PROPOSAL
- ------------- ---------------------------------- ----------------------------------
<C> <S> <C>
Proposal 1 Election of six trustees to serve All shareholders of the Trust will
as members of the Board vote on this proposal
Proposal 2 Approval of a subadvisory Shareholders of the Global Equity
agreement between NASL Financial Trust will vote on this proposal
Services, Inc. (in such capacity,
the "Adviser" or "NASL Financial")
and Morgan Stanley Asset
Management Inc. ("Morgan Stanley")
with respect to the Global Equity
Trust
Proposal 3 Approval of a subadvisory Shareholders of the Value Equity
agreement between the Adviser and Trust will vote on this proposal
T. Rowe Price Associates, Inc.
("T. Rowe Price") with respect to
the Value Equity Trust
Proposal 4 Approval of a subadvisory Shareholders of the Blue Chip
agreement between the Adviser and Growth Trust will vote on this
T. Rowe Price with respect to the proposal
Blue Chip Growth Trust
Proposal 5 Approval of a subadvisory Shareholders of the Money Market
agreement between the Adviser and Trust will vote on this proposal
Manufacturers Adviser Corporation
("MAC") with respect to the Money
Market Trust
Proposal 6A Approval of an amended subadvisory Shareholders of the Equity Trust
agreement between the Adviser and will vote on this proposal
Fidelity Management Trust Company
("FMTC") increasing the
subadvisory fee with respect to
the Equity Trust
Proposal 6B Approval of an amended subadvisory Shareholders of the Aggressive
agreement between the Adviser and Asset Allocation Trust will vote
FMTC increasing the subadvisory on this proposal
fee with respect to the Aggressive
Asset Allocation Trust
Proposal 6C Approval of an amended subadvisory Shareholders of the Moderate Asset
agreement between the Adviser and Allocation Trust will vote on this
FMTC increasing the subadvisory proposal
fee with respect to the Moderate
Asset Allocation Trust
Proposal 6D Approval of an amended subadvisory Shareholders of the Conservative
agreement between the Adviser and Asset Allocation Trust will vote
FMTC increasing the subadvisory on this proposal
fee with respect to the
Conservative Asset Allocation
Trust
Proposal 7A Approval of a change to certain Shareholders of the Aggressive
fundamental investment policies of Asset Allocation Trust will vote
the Aggressive Asset Allocation on this proposal
Trust
Proposal 7B Approval of a change to certain Shareholders of the Moderate Asset
fundamental investment policies of Allocation Trust will vote on this
the Moderate Asset Allocation proposal
Trust
Proposal 7C Approval of a change to certain Shareholders of the Conservative
fundamental investment policies of Asset Allocation Trust will vote
the Conservative Asset Allocation on this proposal
Trust
</TABLE>
3
<PAGE> 10
<TABLE>
<CAPTION>
PROPOSAL SHAREHOLDERS OF THE TRUST WHO WILL
NUMBER PROPOSAL VOTE ON THE PROPOSAL
- ------------- ---------------------------------- ----------------------------------
<C> <S> <C>
Proposal 8 Approval of a change to the Shareholders of the Value Equity
investment objective of the Value Trust will vote on this proposal
Equity Trust
Proposal 9 Approval of a change to the Shareholders of the Blue Chip
investment objective of the Blue Growth Trust will vote on this
Chip Growth Trust proposal
Proposal 10 Approval of a proposal to permit Shareholders of the Trust will
the Adviser, in the future, to vote together, and shareholders of
select and contract with each Portfolio will vote
subadvisers for the Portfolios separately, on this proposal
after obtaining the approval of
the Board but without obtaining
shareholder approval
Proposal 11 Ratification of selection of All shareholders of the Trust will
Coopers & Lybrand L.L.P. as vote on this proposal
independent accountants for the
Trust for its fiscal year ending
December 31, 1996
</TABLE>
Shares which represent interests in a particular Portfolio vote separately
on matters which pertain only to that Portfolio. All of the Proposals (except
the election of Trustees and the ratification of the selection of independent
accountants) will be voted on separately by shareholders of the relevant
Portfolios. Proposal 10 will be voted on by shareholders of the Trust voting
together and by shareholders of each Portfolio voting separately.
If the enclosed voting instructions form is properly executed and returned,
the shares represented thereby will be voted at the Meeting as indicated thereon
with respect to the Proposals stated therein. IF A VOTING INSTRUCTIONS FORM IS
RETURNED THAT DOES NOT SPECIFY HOW TO VOTE WITH RESPECT TO A PROPOSAL, THE
SHARES REPRESENTED THEREBY WILL BE VOTED "FOR" THAT PROPOSAL.
You are requested to indicate your voting instructions on the voting
instructions form; date and sign the voting instructions form; mail the voting
instructions form promptly in the enclosed postage-paid envelope; and allow
sufficient time for the voting instructions form to be received on or before
December 19, 1996.
The voting instructions form confers discretionary authority to vote on
other business, not currently contemplated, which may come before the Meeting.
Under the Trust's Agreement and Declaration of Trust, thirty percent of the
shares entitled to vote on a matter shall constitute a quorum for the
transaction of business on that matter. In the event that a quorum is not
present at the Meeting or that a quorum is present at the Meeting but sufficient
votes to approve a proposal are not received, the persons named as proxies may
propose one or more adjournments of the Meeting to permit further solicitation
of proxies. Any such adjournment will require the affirmative vote of a majority
of those shares represented at the Meeting in person or by proxy. THE PERSONS
NAMED AS PROXIES WILL VOTE THOSE PROXIES WHICH THEY ARE ENTITLED TO VOTE "FOR"
OR "AGAINST" ANY SUCH PROPOSAL IN THEIR DISCRETION. A shareholder vote may be
taken on one or more of the proposals in this proxy statement prior to any such
adjournment if sufficient votes have been received
4
<PAGE> 11
for approval. An adjourned session may be held within a reasonable time after
the adjournment and without further notice.
As used herein, a "Majority Vote" of a Portfolio or the Trust means the
affirmative vote of the lesser of (1) more than 50% of the outstanding shares of
the Portfolio or Trust, as applicable, or (2) 67% or more of the shares of the
Portfolio or Trust, as applicable, present at the Meeting or represented by
proxy if more than 50% of the outstanding shares of the Portfolio or Trust, as
applicable, are represented at the Meeting in person or by proxy.
Abstentions are counted as shares eligible to vote at the Meeting in
determining whether a quorum is present, but do not count as votes cast with
respect to any proposal. Under the 1940 Act, the affirmative vote necessary to
approve a matter under consideration may be determined with reference to a
percentage of votes present at the Meeting, which would have the effect of
treating abstentions as if they were votes against the proposal. For purposes of
the election of Trustees, abstentions do not affect the plurality vote required
for Trustees.
Voting instructions may be revoked at any time prior to the voting of the
shares represented thereby by: (i) written instructions addressed to the
Secretary of the Trust at 116 Huntington Avenue, Boston, MA 02116 or (ii)
signing and returning a new voting instructions form, in each case if received
by the Trust by December 19, 1996.
The cost of the preparation and distribution of these proxy materials will
be borne by the Adviser or certain of its affiliates (other than the Trust). In
addition to the solicitation of proxies by the use of the mails, proxies may be
solicited by officers and employees of the Adviser or of its agents or
affiliates, personally or by telephone. Brokerage houses, banks and other
fiduciaries may be requested to forward soliciting material to their principals
and to obtain authorization for the execution of proxies. For those services,
they will be reimbursed by the Adviser or certain of its affiliates (other than
the Trust) for their out-of-pocket expenses.
THE TRUST WILL FURNISH, WITHOUT CHARGE, A COPY OF THE TRUST'S ANNUAL REPORT
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 AND THE TRUST'S SEMI-ANNUAL REPORT
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1996 TO A SHAREHOLDER UPON REQUEST. TO
OBTAIN A REPORT, PLEASE CONTACT THE TRUST BY CALLING (800) 344-1029 OR BY
WRITING TO 116 HUNTINGTON AVENUE, BOSTON, MASSACHUSETTS 02116, ATTN: KEVIN HILL.
5
<PAGE> 12
PROPOSAL 1 -- ELECTION OF TRUSTEES
Pursuant to the provisions of the Trust's Agreement and Declaration of
Trust, the Trustees have increased the size of the Board from five to six
Trustees. It is proposed that shareholders of the Trust elect each of the
individuals listed below (the "nominees") to the Board. Because the Trust does
not hold regular annual shareholder meetings, each nominee, if elected, will
hold office until his successor is elected and qualified or until he otherwise
dies, retires, resigns, is removed or becomes disqualified. All of the nominees,
other than Mr. John D. Richardson and Mr. F. David Rolwing, currently serve as
Trustees of the Trust. All of the current Trustees are nominees, other than Mr.
Moore who is not standing for reelection.
Due to an indirect change of control of NASL Financial in January 1996, the
Trust and the Board are required to comply with Section 15(f) of the 1940 Act.
The change of control occurred as result of the merger of Manulife and the
Adviser's then-parent, North American Life Assurance Company ("NAL"). Section
15(f) provides a non-exclusive safe harbor for an investment adviser or any of
its affiliated persons to receive any amount or benefit in connection with a
change of control of the investment adviser as long as certain conditions are
met. Among other things, for a period of three years after the transaction, at
least 75% of the members of the board of trustees of an investment company
advised by such investment adviser must not be "interested persons", as defined
in Section 2(a)(19) of the 1940 Act (an "Interested Person"), of either the
predecessor or successor investment adviser. All of the nominees, other than Mr.
Richardson, are not Interested Persons of NASL Financial, the Trust's investment
adviser and distributor. Mr. Rolwing was selected and nominated by the Trustees
who are not such Interested Persons.
The persons named as proxies intend, in the absence of contrary
instructions, to vote all proxies for the election of the nominees. If, prior to
the Meeting, any nominee becomes unable to serve for any reason, the persons
named as proxies reserve the right to substitute another person or persons of
their choice as nominee or nominees. All of the nominees have consented to being
named in this proxy statement and to serve if elected. The Trust knows of no
reason why any nominee would be unable or unwilling to serve if elected.
The following table presents certain information regarding the current
Trustees and the nominees, including their principal occupations, which, unless
specific dates are shown, are of more than five years duration. An asterisk
beside an individual's name indicates that he is an Interested Person of NASL
Financial.
6
<PAGE> 13
<TABLE>
<CAPTION>
YEAR FIRST PRINCIPLE OCCUPATIONS
BECAME A AND DIRECTORSHIPS
NAME AND POSITION WITH TRUST AGE TRUSTEE DURING THE LAST FIVE YEARS
- ---------------------------- --- ----------- ---------------------------
<S> <C> <C> <C>
DON B. ALLEN, 68 1988 Mr. Allen is a Senior
Trustee and Nominee Lecturer at University of
Rochester -- William Simon
Graduate School of Business
Administration.
CHARLES L. BARDELIS, 55 1988 Mr. Bardelis is the
Trustee and Nominee President and Chief
Executive Officer at Island
Commuter Corporation, a
marine transport company.
He is also a Director of
Neworld Bankcorp Inc.
SAMUEL HOAR, 67 1989 Mr. Hoar has been a Senior
Trustee and Nominee Mediator at Judicial
Arbitration Mediation
Services ("JAMS/Endispute")
since June 1, 1994. Prior
to that time, he was a
Partner at Goodwin, Proctor
and Hoar, a law firm.
BRIAN L. MOORE*, 52 1988 Since January 1, 1996, Mr.
Chairman of the Board of Moore has served as the
Trustees Executive Vice President,
Canadian Insurance
Operations, for Manulife.
From October 1993 to
December 31, 1995, he was
the Chief Executive Officer
of The North American
Group, an affiliate of NAL,
and prior thereto, Mr.
Moore was Executive Vice
President and Chief
Financial Officer of NAL.
ROBERT J. MYERS, 84 1988 Mr. Myers is a Director of
Trustee and Nominee Scudder AARP Investment
Funds and a member of the
Prospective Payment
Assessment Commission. He
is also a self-employed
actuarial consultant.
</TABLE>
7
<PAGE> 14
<TABLE>
<CAPTION>
YEAR FIRST PRINCIPLE OCCUPATIONS
BECAME A AND DIRECTORSHIPS
NAME AND POSITION WITH TRUST AGE TRUSTEE DURING THE LAST FIVE YEARS
- ---------------------------- --- ----------- ---------------------------
<S> <C> <C> <C>
JOHN D. RICHARDSON*, 58 Not Mr. Richardson is currently
Nominee Applicable the Senior Vice President
and General Manager of U.S.
Operations for Manulife,
the ultimate parent of NASL
Financial. From 1992 to
1994, he was Senior Vice
President and General
Manager of Canadian
Operations of Manulife and,
prior thereto, Senior Vice
President, Financial
Services for Manulife.
Prior to 1992, Mr.
Richardson was a Director,
Executive Vice Chairman and
Chief Financial Officer of
Canada Trust Financial
Services.
F. DAVID ROLWING, 62 Not Mr. Rolwing is the
Nominee Applicable President, Chairman and CEO
of Montgomery Mutual
Insurance Company. He is
also a Director of Manulife
Series Fund, Inc. an
investment company advised
by Manufacturers Adviser
Corporation, an affiliate
of NASL Financial.
</TABLE>
Messrs. Allen, Bardelis, Hoar, Moore and Myers are also Trustees of North
American Funds, an investment company with thirteen series, whose investment
adviser is NASL Financial. Messrs. Richardson and Rolwing are also Trustees of
Manulife Series Fund, Inc., an investment company with nine series, whose
investment adviser is MAC. MAC currently serves as subadviser to the Money
Market Trust. See Proposal 5 below. The ultimate parent of MAC is Manulife.
Compensation
Effective September 27, 1996, the Trust pays each Trustee who is not an
officer of the Adviser an annual retainer of $21,000 plus $5,500 per meeting
attended and $200 for any meeting conducted by telephone, together with such
Trustee's actual out-of-pocket expenses relating to attendance at meetings. For
the fiscal year ended December 31, 1995, the Trustees of the Trust as a group
received fees in the amount of $140,000.
8
<PAGE> 15
The table below sets forth the compensation received by each of the Trust's
current Trustees and by each of the nominees during the Trust's fiscal year
ended December 31, 1995.
COMPENSATION TABLE
<TABLE>
<CAPTION>
PENSION OR TOTAL
AGGREGATE RETIREMENT COMPENSATION
COMPENSATION BENEFITS ESTIMATED FROM TRUST
FROM TRUST FOR ACCRUED ANNUAL COMPLEX FOR
YEAR ENDED AS PART OF BENEFITS YEAR ENDED
DECEMBER 31, TRUST UPON DECEMBER 31,
NAME OF PERSON, POSITION 1995* EXPENSES RETIREMENT 1995*#
- ------------------------------- -------------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Don B. Allen, Trustee $ 35,000 $0 $0 $ 42,500
Charles L. Bardelis, Trustee $ 35,000 $0 $0 $ 42,500
Samuel Hoar, Trustee $ 35,000 $0 $0 $ 42,500
Brian L. Moore, Trustee $ 0 $0 $0 $ 0
Robert J. Myers, Trustee $ 35,000 $0 $0 $ 42,500
John D. Richardson, Nominee $ 0 $0 $0 $ 0
F. David Rolwing, Nominee $ 0 $0 $0 $ 12,000
</TABLE>
- ---------------
* Compensation received for services as Trustee.
# Trust Complex includes all Portfolios of the Trust, as well as all portfolios
of North American Funds and Manulife Series Fund, Inc.
The Board met four times during the Trust's last fiscal year. The Board
also has a standing Audit Committee composed of Messrs. Allen, Bardelis, Hoar
and Myers. The Audit Committee met two times during the Trust's last fiscal year
to review the internal and external accounting and auditing procedures of the
Trust and, among other things, to consider the selection of independent
accountants for the Trust, to approve all significant services proposed to be
performed by its independent accountants and to consider the possible effect of
such services on their independence. The Board has not created a Compensation
Committee or a Nominating Committee.
Executive Officers of the Trust
See "Additional Information -- Management of the Adviser and the Trust"
below for information regarding the executive officers of the Trust.
Adviser and Principal Underwriter of the Trust
NASL Financial, located at 116 Huntington Avenue, Boston, Massachusetts
02116, is the investment adviser and principal underwriter of the Trust. The
ultimate parent of NASL Financial is Manulife.
REQUIRED VOTE
Trustees are elected by a plurality of the votes cast by holders of shares
of the Trust present in person or represented by proxy at the Meeting.
9
<PAGE> 16
PROPOSAL 2 -- APPROVAL OF A SUBADVISORY AGREEMENT BETWEEN THE ADVISER AND MORGAN
STANLEY WITH RESPECT TO THE GLOBAL EQUITY TRUST
At a meeting held September 27, 1996, the Board, including the Trustees who
are not Interested Persons of NASL Financial, any of the subadvisers to the
Portfolios or the Trust (the "Disinterested Trustees"), voted to accept the
resignation of Oechsle International Advisors, L.P. ("Oechsle") as subadviser to
the Global Equity Trust and to approve a subadvisory agreement with Morgan
Stanley (the "Morgan Subadvisory Agreement") with respect to the Global Equity
Trust. On October 1, 1996, Morgan Stanley began serving as subadviser to the
Global Equity Trust in reliance on Rule 15a-4 under the 1940 Act, which permits
Morgan Stanley to serve as subadviser to the Portfolio, without shareholder
approval, for a period of up to 120 days following the termination of the
subadvisory agreement with Oechsle. Shareholders of the Global Equity Trust are
now being asked to approve the Morgan Subadvisory Agreement.
Subadvisory Agreement
The Morgan Subadvisory Agreement is substantially identical to the prior
subadvisory agreement for the Global Equity Trust, other than its effective
date. The effective date of the Morgan Subadvisory Agreement is October 1, 1996.
Under the terms of both the Morgan Subadvisory Agreement and the prior
subadvisory agreement for the Global Equity Trust, the subadviser manages the
investment and reinvestment of the assets of the Global Equity Trust, subject to
the supervision of the Board. The subadviser formulates a continuous investment
program for the Portfolio consistent with its investment objectives and policies
outlined in the Trust's Prospectus. The subadviser implements such programs by
purchases and sales of securities and regularly reports to the Adviser and the
Board with respect to the implementation of such programs. The subadviser, at
its expense, furnishes all necessary investment and management facilities,
including salaries of personnel required for it to execute its duties, as well
as administrative facilities, including bookkeeping, clerical personnel, and
equipment necessary for the conduct of the investment affairs of the Portfolio.
The foregoing description of the Morgan Subadvisory Agreement is not
intended to be complete and is qualified in its entirety by reference to the
text of that agreement, the form of which is attached hereto as Exhibit B. For
additional information regarding the Morgan Subadvisory Agreement, see
"Additional Information -- Certain Provisions in the Advisory and Subadvisory
Agreements" below.
Subadvisory Fee
As compensation for its services, Morgan Stanley receives a fee from the
Adviser. The fee is stated as an annual percentage of the current value of the
net assets of the Global Equity Trust. The fee, which is accrued daily and
payable monthly, is calculated for each day by multiplying the fraction of one
over the number of calendar days in the year by the annual percentage prescribed
for the
10
<PAGE> 17
Portfolio, and multiplying this product by the value of the net assets of the
Global Equity Trust at the close of business on the previous business day of the
Trust.
The following are the subadvisory fees the Adviser currently is obligated
(and, if the Morgan Subadvisory Agreement is approved by shareholders, will
continue to be obligated) to pay Morgan Stanley out of the advisory fee it
receives from the Global Equity Trust:
.500% of the first $50 million of the Portfolio's average daily net assets,
.450% of the Portfolio's average daily net assets between $50 million and
$200 million, .375% of the Portfolio's average daily net assets between $200
million and $500 million and .325% of the Portfolio's average net assets in
excess of $500 million.
The foregoing subadvisory fees are identical to the fees payable under the
prior subadvisory agreement for the Global Equity Trust, which has been
terminated as noted above.
Subadvisory Fees Paid
For the fiscal year ended December 31, 1995, the Adviser paid $2,415,918 in
subadvisory fees to Oechsle for management of the Global Equity Trust. The
Adviser would have paid the same amount to Morgan Stanley if the Morgan
Subadvisory Agreement had been effective for such period because the subadvisory
fees under the Morgan Subadvisory Agreement are identical to the subadvisory
fees under the prior subadvisory agreement for the Global Equity Trust.
Management and Control of Morgan Stanley
Morgan Stanley is located at 1221 Avenue of the Americas, New York, NY
10020 and is a wholly-owned subsidiary of Morgan Stanley Group Inc., a
corporation located at 1585 Broadway, New York, New York 10036. Morgan Stanley
conducts a worldwide portfolio management business and provides a broad range of
portfolio management services to customers in the United States and abroad. For
information on the principal executive officers and directors of Morgan Stanley,
see Exhibit A hereto.
Brokerage Transactions
A description of the brokerage transactions for the Global Equity Trust is
set forth under "Additional Information -- Portfolio Brokerage" below.
11
<PAGE> 18
Other Investment Companies Advised by Morgan Stanley
Morgan Stanley manages two funds with objectives similar to the Global
Equity Trust:
<TABLE>
<CAPTION>
NET ASSETS
FUND INVESTMENT OBJECTIVE ADVISORY FEE* (9/30/96)
- ---------------------- ------------------------ ------------------------- ------------
<S> <C> <C> <C>
Global Equity Long-term capital 0.80% of $ 84,850,857
Portfolio (a series appreciation by net assets
of the Morgan investing primarily in
Stanley equity securities of
Institutional Fund, issuers throughout the
Inc.) world, including U.S.
issuers
Global Equity Long-term capital 1.00% of $145,688,002
Allocation Fund (a appreciation by net assets
series of Morgan investing in equity
Stanley Fund, Inc.) securities of U.S. and
non-U.S. issuers
</TABLE>
- ---------------
* Morgan Stanley has agreed to waive a portion of the advisory fee payable by
the Global Equity Allocation Fund and/or reimburse expenses of that fund to
the extent that the total operating expenses of that fund exceed 1.70% of the
average daily net assets relating to the Class A shares, and 2.45% of the
average daily net assets relating to the Class B and Class C shares of that
fund. Morgan Stanley has also agreed to waive a portion of the advisory fee
payable by the Global Equity Portfolio listed above and/or reimburse expenses
of that fund to the extent that the total operating expenses of that fund
exceed 1.00% of the average daily net assets of the Class A shares and 1.25%
of the average daily net assets of the Class B shares of that fund. For the
Global Equity Allocation Fund's and the Global Equity Portfolio's most recent
fiscal year, Morgan Stanley waived advisory fees and/or reimbursed expenses
totalling $371,000 and $109,000, respectively.
Advisory Agreement
For more information on the advisory agreement between the Trust and NASL
Financial, see "Additional Information -- Advisory Arrangements" below.
Shareholder and Board Approval of the Subadvisory Agreements
The prior subadvisory agreement for the Global Equity Trust was approved by
the Board on September 28, 1995 and by the shareholders of the Global Equity
Trust on December 5, 1995. These approvals occurred in connection with the
indirect change in control of NASL Financial due to the merger of Manulife with
NASL Financial's then-parent, NAL.
The Morgan Subadvisory Agreement was approved by the Board, including a
majority of the Disinterested Trustees, on September 27, 1996. Pursuant to Rule
15a-4 under the 1940 Act, Morgan Stanley may act as subadviser to the Global
Equity Trust, without shareholder approval, for up to 120 days after the
termination date of the prior subadvisory agreement for the Global Equity Trust.
If shareholders do not approve the Morgan Subadvisory Agreement within this 120
day period, the Board will take such action as it deems advisable under the
circumstances.
12
<PAGE> 19
Board Considerations
The Board considered numerous factors in connection with accepting the
resignation of Oechsle and approving the Morgan Subadvisory Agreement,
including: (i) the nature and quality of the services being provided by Oechsle
and the fees payable therefor, (ii) the nature and quality of the services to be
provided by Morgan Stanley and the fees payable therefor, (iii) performance
information regarding the Global Equity Trust relative to funds with similar
investment objectives and policies, (iv) performance information regarding
Morgan Stanley's management of portfolios with investment objectives and
policies similar to the Global Equity Trust, (v) the cost and expected
profitability to Morgan Stanley of providing portfolio management services to
the Global Equity Trust and (vi) whether the proposed subadvisory fees and
expense ratio of the Portfolio would be consistent with the fees and expense
ratio of other comparable portfolios. In light of these factors, the Board
considered the proposed subadvisory fee schedule to be fair and reasonable.
In evaluating the Morgan Subadvisory Agreement, the Board focused primarily
on (i) the fact that the Portfolio had, for the prior two years, underperformed
in comparison to its peer group and (ii) the performance of similar funds
managed by Morgan Stanley. The Board also focused on the scope and quality of
services to be provided by Morgan Stanley, as well as comparative fee and
expense data. In addition, the Board took into account the fact that the Morgan
Subadvisory Agreement will not change the overall advisory fee or other expenses
paid by the Global Equity Trust or the subadvisory fee paid to the subadviser.
The Board also was provided with an analysis of its fiduciary obligations.
At the meeting held on September 27, 1996, the Board reviewed its fiduciary
duties and discussed the information provided regarding Morgan Stanley. A
representative of Morgan Stanley gave a presentation and responded to questions
from the Trustees. There was an extended discussion of, and questioning about,
Morgan Stanley's plans for the Global Equity Trust. Throughout the review
process, the Disinterested Trustees had the assistance of legal counsel.
REQUIRED VOTE
Approval of the Morgan Subadvisory Agreement will require a Majority Vote
of shareholders of the Global Equity Trust.
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES, UNANIMOUSLY RECOMMENDS
THAT SHAREHOLDERS OF THE GLOBAL EQUITY TRUST VOTE "FOR" PROPOSAL 2.
------------------------
13
<PAGE> 20
PROPOSAL 3 -- APPROVAL OF A SUBADVISORY AGREEMENT BETWEEN THE ADVISER AND T.
ROWE PRICE WITH RESPECT TO THE VALUE EQUITY TRUST
At a meeting held September 27, 1996, the Board, including the
Disinterested Trustees, voted to accept the resignation of Goldman Sachs Asset
Management ("Goldman") as subadviser to the Value Equity Trust and to approve a
subadvisory agreement between the Adviser and T. Rowe Price with respect to the
Value Equity Trust (the "Value Equity Subadvisory Agreement"). On October 1,
1996, T. Rowe Price began serving as subadviser to the Value Equity Trust in
reliance on Rule 15a-4 under the 1940 Act, which permits T. Rowe Price to serve
as subadviser to the Portfolio, without shareholder approval, for a period of up
to 120 days following the termination of the prior subadvisory agreement with
Goldman. Shareholders of the Value Equity Trust now are being asked to approve
the Value Equity Subadvisory Agreement.
In addition, due to the change in subadviser, on September 27, 1996, the
Board unanimously approved changing the investment objective and certain
non-fundamental policies of the Portfolio so that they would reflect T. Rowe
Price's proposed investment strategies. In connection with the foregoing, the
Board also approved changing the name of the Value Equity Trust to the
Equity-Income Trust, effective on or about January 1, 1997. See Proposal 8 below
for a description of the proposed change in the Portfolio's investment
objective.
Subadvisory Agreement
The Value Equity Subadvisory Agreement is substantially identical to the
prior subadvisory agreement for the Value Equity Trust, other than the effective
date. The effective date of the Value Equity Subadvisory Agreement is October 1,
1996.
Under the terms of both the Value Equity Subadvisory Agreement and the
prior subadvisory agreement for the Value Equity Trust, the subadviser manages
the investment and reinvestment of the assets of the Value Equity Trust, subject
to the supervision of the Board. The subadviser formulates a continuous
investment program for the Portfolio consistent with its investment objectives
and policies outlined in the Trust's Prospectus. The subadviser implements such
programs by purchases and sales of securities and regularly reports to the
Adviser and the Board with respect to the implementation of such programs. The
subadviser, at its expense, furnishes all necessary investment and management
facilities, including salaries of personnel required for it to execute its
duties, as well as administrative facilities, including bookkeeping, clerical
personnel, and equipment necessary for the conduct of the investment affairs of
the Portfolio.
The foregoing description of the Value Equity Subadvisory Agreement is not
intended to be complete and is qualified in its entirety by reference to the
text of that agreement, the form of which is attached hereto as Exhibit B. For
additional information regarding the Value Equity Subadvisory Agreement, see
"Additional
14
<PAGE> 21
Information -- Certain Provisions in the Advisory and Subadvisory Agreements"
below.
Subadvisory Fee
As compensation for its services, T. Rowe Price receives a fee from the
Adviser. The fee is stated as an annual percentage of the current value of the
net assets of the Value Equity Trust. The fee, which is accrued daily and
payable monthly, is calculated for each day by multiplying the fraction of one
over the number of calendar days in the year by the annual percentage prescribed
for the Portfolio, and multiplying this product by the value of the net assets
of the Value Equity Trust at the close of business on the previous business day
of the Trust.
The following are the subadvisory fees the Adviser currently is obligated
(and, if the Value Equity Subadvisory Agreement is approved by shareholders,
will continue to be obligated) to pay T. Rowe Price out of the advisory fee it
receives from the Value Equity Trust:
.400% of the first $50 million of the Portfolio's average daily net assets,
.300% of the Portfolio's average daily net assets between $50 million and
$200 million, and .200% of the Portfolio's average daily net assets in
excess of $200 million.
The foregoing subadvisory fees are identical to the fees under the prior
subadvisory agreement for the Value Equity Trust, which has been terminated as
noted above.
Subadvisory Fees Paid
For the fiscal year ending December 31, 1995, the Adviser paid $864,812 in
subadvisory fees to Goldman for management of the Value Equity Trust. The
Adviser would have paid the same amount to T. Rowe Price if the Value Equity
Subadvisory Agreement had been effective for such period because the subadvisory
fees under the Value Equity Subadvisory Agreement are identical to the
subadvisory fees under the prior subadvisory agreement for the Value Equity
Trust.
Management and Control of T. Rowe Price
T. Rowe Price, founded in 1937 by the late Thomas Rowe Price, Jr., is
located at 100 East Pratt Street, Baltimore, MD 21202. For information on the
principal executive officers and directors of T. Rowe Price, see Exhibit A
hereto.
Brokerage Transactions
A description of the brokerage transactions for the Value Equity Trust is
set forth under "Additional Information -- Portfolio Brokerage" below.
15
<PAGE> 22
Other Investment Companies Advised by T. Rowe Price
T. Rowe Price Associates, Inc. manages two investment company funds with
objectives similar to the investment objective of Value Equity Trust (assuming
that the changes proposed in Proposal 8 are approved by shareholders):
<TABLE>
<CAPTION>
NET ASSETS
FUND INVESTMENT OBJECTIVE ADVISORY FEE (8/31/96)
- ---------------------- ----------------------- ------------------------- --------------
<S> <C> <C> <C>
T. Rowe Price Equity Dividend income and 0.25% of net assets* $6,471,000,000
Income Fund capital growth
T. Rowe Price Equity Dividend income and 0.85% of net assets $ 60,700,000
Income Portfolio capital growth
</TABLE>
- ---------------
* For its services to such investment company, T. Rowe Price is paid a
management fee consisting of two elements: a "group" fee and an "individual"
fund fee. The "group" fee varies based on the combined net assets of certain
funds distributed by T. Rowe Price Investment Services, Inc. or by Rowe
Price -- Fleming International, Inc. (the "Combined Price Funds"). Each such
investment company pays, as a portion of the "group" fee, an amount equal to
the ratio of its daily net assets to the daily net assets of all the Combined
Price Funds. Each investment company pays a flat "individual" fund fee based
on its net assets. The current "group" fee rate at various asset levels of the
Combined Price Funds is: .480% first $1 billion; .450% next $1 billion; .420%
next $1 billion; .390% next $1 billion; .370% next $1 billion; .360% next $2
billion; .350% next $2 billion; .340% next $5 billion; .330% next $10 billion;
.320% next $10 billion; .310% next $16 billion; and .305% thereafter.
T. Rowe Price also acts as investment subadviser to several funds
("Non-Price Funds") having similar investment objectives to that of the Value
Equity Trust (assuming that Proposal 8 is approved by shareholders). For this
purpose, the Non-Price Funds are mutual funds that are not sponsored by T. Rowe
Price. These funds are:
<TABLE>
<CAPTION>
NET ASSETS
FUND INVESTMENT OBJECTIVE SUBADVISORY FEE (8/31/96)
- -------------------------- -------------------- ----------------------------- ------------
<S> <C> <C> <C>
Equity Income Portfolio Dividend income and .40% of net assets $ 53,000,000
(a series of the Endeavor capital growth
Series Trust)
Large Cap Value (a Dividend income and .50% of net assets $ 10,900,000
series of John Hancock capital growth
Variable Series Trust 1)
Maxim T. Rowe Price Dividend income and .50% of the first $20 million $ 33,100,000
Equity/Income (a series capital growth of net assets, .40% on the
of the Maxim Series next $80 million of net
Trust) assets, .40% on all assets
over $100 million
Series O (Equity Income Dividend income and .50% of the first $20 million $ 44,500,000
Series) (a series of the capital growth of net assets, .40% on the
SBL Fund) next $30 million of net
assets, .40% on all assets
over $50 million
Growth and Income Series Growth and income .35% of net assets $116,800,000
(a series of the Security
First Trust)
</TABLE>
16
<PAGE> 23
Advisory Agreement
For more information on the advisory agreement between the Trust and NASL
Financial, see "Additional Information -- Advisory Arrangements" below.
Shareholder and Board Approval of the Subadvisory Agreements
The prior subadvisory agreement for the Value Equity Trust was approved by
the Board on September 28, 1995 and by the shareholders of the Value Equity
Trust on December 5, 1995. These approvals occurred in connection with the
indirect change in control of NASL Financial due to the merger of Manulife with
NASL Financial's then-parent, NAL.
The Value Equity Subadvisory Agreement was approved by the Board, including
a majority of the Disinterested Trustees, on September 27, 1996. Pursuant to
Rule 15a-4 under the 1940 Act, T. Rowe Price may act as subadviser to the
Portfolio, without shareholder approval, for up to 120 days after the
termination date of the prior subadvisory agreement for the Portfolio. If
shareholders do not approve the Value Equity Subadvisory Agreement within this
120 day period, the Board will take such action as it deems advisable under the
circumstances.
Board Considerations
The Board considered numerous factors in connection with accepting the
resignation of Goldman and approving the Value Equity Subadvisory Agreement,
including: (i) the nature and quality of the services provided by Goldman and
the fees payable therefor, (ii) the nature and quality of the services to be
provided by T. Rowe Price and the fees payable therefor, (iii) performance
information regarding the Value Equity Trust relative to funds with similar
investment objectives and policies, (iv) performance information regarding T.
Rowe Price's management of portfolios with investment objectives and policies
similar to the Value Equity Trust (assuming the changes described in Proposal 8
below are approved), (v) the cost and expected profitability to T. Rowe Price
for performing portfolio management services to the Value Equity Trust and (vi)
whether the proposed subadvisory fees and expense ratio of the Portfolio would
be consistent with the fees and expense ratio of other comparable portfolios.
In evaluating the Value Equity Subadvisory Agreement, the Board focused
primarily on (i) the fact that the Portfolio had, for the prior year,
underperformed in comparison to its peer group and (ii) the performance of
similar funds managed by T. Rowe Price. The Board also focused on the scope and
quality of services to be provided by T. Rowe Price, as well as comparative fee
and expense data. In addition, the Board took into account the fact that the
Value Equity Subadvisory Agreement will not change the advisory fee or other
expenses paid by the Value Equity Trust or the subadvisory fee paid to the
subadviser.
The Board also was provided with an analysis of its fiduciary obligations.
At the meeting held on September 27, 1996, the Board reviewed its fiduciary
duties and
17
<PAGE> 24
discussed the information provided regarding T. Rowe Price. A representative of
T. Rowe Price gave a presentation and responded to questions from the Trustees.
There was an extended discussion of, and questioning about, T. Rowe Price's
plans for the Value Equity Trust. Throughout the review process, the
Disinterested Trustees had the assistance of legal counsel.
REQUIRED VOTE
Approval of the Value Equity Subadvisory Agreement will require a Majority
Vote of shareholders of the Value Equity Trust.
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES, UNANIMOUSLY RECOMMENDS
THAT SHAREHOLDERS OF THE VALUE EQUITY TRUST VOTE "FOR" PROPOSAL 3.
------------------------
PROPOSAL 4 -- APPROVAL OF A SUBADVISORY AGREEMENT BETWEEN THE ADVISER AND T.
ROWE PRICE WITH RESPECT TO THE BLUE CHIP GROWTH TRUST
At a meeting held September 27, 1996, the Board, including the
Disinterested Trustees, voted to accept the resignation of Roger Engemann
Management Co., Inc. ("REMC") as subadviser to the Blue Chip Growth Trust (prior
to October 1, 1996, known as the Pasadena Growth Trust) and to approve a
subadvisory agreement (the "Blue Chip Growth Subadvisory Agreement") between the
Adviser and T. Rowe Price, with respect to the Portfolio. On October 1, 1996, T.
Rowe Price began serving as subadviser to the Portfolio in reliance on Rule
15a-4 under the 1940 Act, which permits T. Rowe Price to serve as subadviser to
the Portfolio, without shareholder approval, for a period of up to 120 days
following the termination of the prior subadvisory agreement with REMC. The Blue
Chip Growth Subadvisory Agreement decreases the subadvisory fees paid by the
Adviser to the subadviser with respect to the Blue Chip Growth Trust and
eliminates an expense reimbursement commitment made by the prior subadviser. On
October 1, 1996, the advisory fees payable by the Portfolio to the Adviser were
reduced in an amount equal to the decrease in subadvisory fees under the Blue
Chip Growth Subadvisory Agreement. Shareholders of the Blue Chip Growth Trust
now are being asked to approve the Blue Chip Growth Subadvisory Agreement.
In addition, due to the change in subadviser, on September 27, 1996, the
Board unanimously approved changing the investment objective and certain
non-fundamental policies of the Portfolio so that they would reflect T. Rowe
Price's investment strategies. See Proposal 9 below for a description of the
proposed change in the Portfolio's investment objective.
Subadvisory Agreement
The Blue Chip Growth Subadvisory Agreement differs from the prior
subadvisory agreement with REMC as follows. First, the Blue Chip Growth
Subadvisory Agreement decreases the subadvisory fees paid by the Adviser to the
18
<PAGE> 25
subadviser of the Blue Chip Growth Portfolio. See "Subadvisory Fee" below.
Second, prior to October 1, 1996, REMC was required pursuant to its subadvisory
agreement to reimburse the Portfolio for certain expenses up to a maximum on an
annual basis of .15% of the Portfolio's average net assets; in contrast, the
Blue Chip Growth Subadvisory Agreement does not require T. Rowe Price to
reimburse any Portfolio expenses. Third, a provision contained in the prior
subadvisory agreement permitting the Portfolio to use the name "Pasadena" is not
included in the Blue Chip Growth Subadvisory Agreement. Other than such
differences and the agreement's October 1, 1996 effective date, the Blue Chip
Growth Subadvisory Agreement is substantially identical to the prior subadvisory
agreement with REMC.
As noted above, prior to October 1, 1996, REMC was required to reimburse
the Portfolio for certain expenses up to a maximum on an annual basis of .15% of
the average net assets of the Portfolio. Such reimbursed expenses included all
of the Portfolio's expenses other than taxes, portfolio brokerage commissions,
interest, litigation and indemnification expenses and other extraordinary
expenses not incurred in the ordinary course of the Portfolio's business,
advisory fees, and expenses for services provided by the Adviser under its
advisory agreement with the Trust. Pursuant to such commitment, REMC reimbursed
the Portfolio, for the Trust's fiscal year ended December 31, 1995, for expenses
equal to .06% of the Portfolio's average net assets. In contrast, the Blue Chip
Growth Subadvisory Agreement does not require T. Rowe Price to reimburse the
Blue Chip Growth Trust for any of the Portfolio's expenses. However, effective
October 1, 1996, the advisory and subadvisory fee were each reduced by .05% of
the Portfolio's average net assets.
Under the terms of both the Blue Chip Growth Subadvisory Agreement and the
prior subadvisory agreement with REMC, the subadviser manages the investment and
reinvestment of the assets of the Blue Chip Growth Trust, subject to the
supervision of the Board. The subadviser formulates a continuous investment
program for the Portfolio consistent with its investment objectives and policies
as outlined in the Trust's Prospectus. The subadviser implements such programs
by purchases and sales of securities and regularly reports to the Adviser and
the Board with respect to the implementation of such programs. The subadviser,
at its expense, furnishes all necessary investment and management facilities,
including salaries of personnel required for it to execute its duties, as well
as administrative facilities, including bookkeeping, clerical personnel, and
equipment necessary for the conduct of the investment affairs of the Portfolio.
The foregoing description of the Blue Chip Growth Subadvisory Agreement is
not intended to be complete and is qualified in its entirety by reference to the
text of that agreement, the form of which is attached hereto as Exhibit B. For
additional information regarding the Blue Chip Growth Subadvisory Agreement, see
"Additional Information -- Certain Provisions in the Advisory and Subadvisory
Agreements" below.
19
<PAGE> 26
Subadvisory Fee
As compensation for its services, T. Rowe Price receives a fee from the
Adviser. The fee is stated as an annual percentage of the current value of the
net assets of the Blue Chip Growth Trust. The fee, which is accrued daily and
payable monthly, is calculated for each day by multiplying the fraction of one
over the number of calendar days in the year by the annual percentage prescribed
for the Portfolio, and multiplying this product by the value of the net assets
of the Blue Chip Growth Trust at the close of business on the previous business
day of the Trust.
Current Subadvisory Fees. Effective October 1, 1996, the following are the
subadvisory fees the Adviser currently is obligated (and, if the Blue Chip
Growth Subadvisory Agreement is approved by shareholders, will continue to be
obligated) to pay T. Rowe Price out of the advisory fee it receives from the
Portfolio:
.500% of the first $50 million of the Portfolio's average daily net assets,
.450% of the Portfolio's average daily net assets between $50 million and
$200 million, .400% of the Portfolio's average daily net assets between
$200 million and $500 million, and .325% of the Portfolio's average daily
net assets in excess of $500 million.
Old Subadvisory Fees. Prior to October 1, 1996, the following are the
subadvisory fees the Adviser was required to pay the former subadviser out of
the advisory fee it received from the Portfolio:
.550% of the first $50 million of the Portfolio's average daily net assets,
.500% of the Portfolio's average daily net assets between $50 million and
$200 million, .450% of the Portfolio's average daily net assets between
$200 million and $500 million and .375% of the Portfolio's average daily
net assets in excess of $500 million.
Subadvisory Fees Paid and Expense Reimbursements
For the fiscal year ended December 31, 1995, the Adviser paid $1,097,159 in
subadvisory fees to REMC for management of the Portfolio. If the Blue Chip
Growth Subadvisory Agreement had been in effect for the fiscal year ended
December 31, 1995, the Adviser would have paid $992,870 in subadvisory fees to
T. Rowe Price. This represents a decrease of 11% from the fees actually paid
under the Portfolio's prior subadvisory agreement with REMC for such period.
However, for the fiscal year ended December 31, 1995, REMC reimbursed the
Portfolio for expenses in an amount equal to .06% of the Portfolio's average net
assets, or $119,013, while the Blue Chip Growth Subadvisory Agreement does not
require T. Rowe Price to reimburse the Blue Chip Growth Trust for any of the
Portfolio's expenses. As a result, if the Blue Chip Growth Subadvisory Agreement
had been in effect for the fiscal year ended December 31, 1995, T. Rowe Price
would have retained $14,724 more than REMC actually retained for such period
after expense
20
<PAGE> 27
reimbursements, which represents an increase of 1% from the amount actually
retained by REMC for such period.
Current and Pro Forma Fees and Expenses
The following expense table and example compares the fees and expenses that
a shareholder would incur either directly or indirectly as a holder of shares of
the Blue Chip Growth Trust currently and if the proposed Blue Chip Growth
Subadvisory Agreement is approved by shareholders. Except as otherwise noted,
the percentages shown below expressing existing annual fund operating expenses
are based on the actual expenses of the Blue Chip Growth Trust for the fiscal
year ended December 31, 1995 and the pro forma expenses of the Blue Chip Growth
Trust for such period assuming that the Blue Chip Growth Subadvisory Agreement
had been in effect at the commencement of the Portfolio's fiscal year ended
December 31, 1995.
<TABLE>
<CAPTION>
CURRENT PROPOSED
------- --------
<S> <C> <C>
ANNUAL FUND OPERATING EXPENSES
Management fees*............................................. .925% .925%
Other expenses............................................... .050%** .060%
Total fund operating expenses................................ .975%** .985%
</TABLE>
- ---------------
* During the fiscal year ended December 31, 1995, management fees were .975%;
the amount listed reflects the .05% reduction in the management fees payable
by the Portfolio, which reduction went into effect on October 1, 1996.
** The amount listed reflects the elimination of the expense reimbursement
commitment of the prior subadviser, as discussed under "Subadvisory
Agreement" above, and the fact that, effective October 1, 1996, the Adviser
voluntarily agreed to reimburse "other expenses" of the Portfolio in excess
of .05% of the Portfolio's average net assets on an annualized basis. The
Adviser's expense reimbursement commitment may be terminated at any time
after shareholder approval of the Blue Chip Growth Subadvisory Agreement and,
therefore, is not reflected in the amount listed in the "Proposed" column.
EXAMPLE
You would pay the following expenses on a $1,000 investment assuming a 5%
annual return:
<TABLE>
<CAPTION>
CURRENT PROPOSED
------- --------
<S> <C> <C>
1 Year......................................................... $10 $10
3 Years........................................................ $31 $31
5 Years........................................................ $54 $54
10 Years....................................................... $120 $121
</TABLE>
The purpose of the foregoing table and example is to assist investors in
understanding the various costs and expenses a shareholder of the Blue Chip
Growth Trust would bear, either directly or indirectly, under the current
advisory and subadvisory arrangements and if the Blue Chip Growth Subadvisory
Agreement is approved by shareholders. The payment of such costs and expenses
will reduce the investment return on an annual basis. Except where noted, the
information in the foregoing table does not reflect any fee waivers or expense
reimbursement
21
<PAGE> 28
arrangements that may be in effect. THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF FUTURE EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR LESS
THAN THOSE SHOWN. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL RETURN, THE
PORTFOLIO'S PERFORMANCE WILL VARY AND MAY RESULT IN A RETURN GREATER OR LESS
THAN 5%. The variable contracts issued by NASL, FNAL and Manufacturers Life of
America provide for charges not reflected in the foregoing table and example.
Management and Control of T. Rowe Price
T. Rowe Price, founded in 1937 by the late Thomas Rowe Price, Jr., is
located at 100 East Pratt Street, Baltimore, MD 21202. For information on the
principal executive officers and directors of T. Rowe Price, see Exhibit A
hereto.
Brokerage Transactions
A description of the brokerage transactions for the Blue Chip Growth Trust
is set forth under "Additional Information--Portfolio Brokerage" below.
Other Investment Companies Advised by T. Rowe Price
T. Rowe Price manages one Combined Price Fund (as defined in Proposal 3)
with an investment objective similar to the objective of Blue Chip Growth Trust
(assuming that Proposal 9 is approved by shareholders):
<TABLE>
<CAPTION>
NET ASSETS
FUND INVESTMENT OBJECTIVE ADVISORY FEE (9/30/96)
- ---------------------- -------------------------------- ------------------ --------------
<S> <C> <C> <C>
T. Rowe Price Blue Long term capital growth. Income 0.35% of net $292,300,000
Chip Growth Fund is secondary assets
</TABLE>
T. Rowe Price also manages one Non-Price Fund (as defined in Proposal 3)
with an investment objective similar to the investment objective of Blue Chip
Growth Trust (assuming that Proposal 9 is approved by shareholders):
<TABLE>
<CAPTION>
NET ASSETS
FUND INVESTMENT OBJECTIVE SUBADVISORY FEE (9/30/96)
- ---------------------- -------------------------------- ------------------ --------------
<S> <C> <C> <C>
Blue Chip Stock Series Long term capital growth. Income 0.50% of first $9,400,000
(a series of the is secondary $100 million;
Fortis Series Fund, 0.45% for assets
Inc.) over $100 million
</TABLE>
Advisory Agreement
For more information on the advisory agreement between the Trust and NASL
Financial, see "Additional Information--Advisory Arrangements" below.
Shareholder and Board Approval of the Subadvisory Agreements
The prior subadvisory agreement for the Blue Chip Growth Trust was approved
by the Board on September 28, 1995 and by the shareholders of the Portfolio on
December 5, 1995. This approval occurred in connection with the indirect change
in
22
<PAGE> 29
control of NASL Financial due to the merger of Manulife with NASL Financial's
then-parent, NAL.
The Blue Chip Growth Subadvisory Agreement was approved by the Board,
including a majority of the Disinterested Trustees, on September 27, 1996.
Pursuant to Rule 15a-4 under the 1940 Act, T. Rowe Price can act as subadviser
of the Portfolio, without shareholder approval, for up to 120 days after the
termination date of the prior subadvisory agreement if its fees during that
interim period do not exceed the prior subadvisory fees for the Portfolio. If
shareholders do not approve the Blue Chip Growth Subadvisory Agreement within
this 120 day period, the Board will take such action as it deems advisable under
the circumstances.
Board Considerations
The Board considered numerous factors in connection with accepting the
resignation of REMC and approving the Blue Chip Growth Subadvisory Agreement,
including: (i) the nature and quality of the services provided by REMC and the
fees payable therefor, (ii) the nature and quality of the services to be
provided by T. Rowe Price and the fees payable therefor, (iii) performance
information regarding the Blue Chip Growth Trust relative to funds with similar
investment objectives and policies, (iv) performance information regarding T.
Rowe Price's management of portfolios with investment objectives and policies
similar to the Blue Chip Growth Trust (assuming the changes described in
Proposal 9 below are approved), (v) the cost and expected profitability to T.
Rowe Price for performing portfolio management services to the Blue Chip Growth
Trust and (vi) whether the proposed subadvisory fees and expense ratio of the
Portfolio would be consistent with the fees and expense ratios of other
comparable portfolios. In light of these factors, the Board considered the
proposed subadvisory fee schedule to be fair and reasonable.
In evaluating the Blue Chip Growth Subadvisory Agreement, the Board focused
primarily on (i) the fact that the Portfolio had, for the past three years,
underperformed in comparison to its peer group and (ii) the performance of
similar funds managed by T. Rowe Price. The Board also focused on the scope and
quality of services to be provided by T. Rowe Price, as well as comparative fee
and expense data.
The Board also was provided with an analysis of its fiduciary obligations.
At the meeting held on September 27, 1996, the Board reviewed its fiduciary
duties and discussed the information provided regarding T. Rowe Price. A
representative of T. Rowe Price gave a presentation and responded to questions
from the Trustees. There was an extended discussion of, and questioning about,
T. Rowe Price's plans for the Blue Chip Growth Trust. Throughout the review
process, the Disinterested Trustees had the assistance of legal counsel.
REQUIRED VOTE
Approval of the Blue Chip Growth Subadvisory Agreement will require a
Majority Vote of the shareholders of the Blue Chip Growth Trust.
23
<PAGE> 30
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES, UNANIMOUSLY RECOMMENDS
THAT SHAREHOLDERS OF THE BLUE CHIP GROWTH TRUST VOTE "FOR" PROPOSAL 4.
------------------------
PROPOSAL 5 -- APPROVAL OF A SUBADVISORY AGREEMENT BETWEEN THE ADVISER AND
MANUFACTURERS ADVISER CORPORATION WITH RESPECT TO THE MONEY MARKET
TRUST
At a meeting held September 27, 1996, the Board, including the
Disinterested Trustees, voted to accept the resignation of Wellington Management
Company ("Wellington") as subadviser to the Money Market Trust and to approve a
subadvisory agreement with MAC with respect to the Money Market Trust (the "MAC
Subadvisory Agreement"). On October 1, 1996, MAC began serving as subadviser to
the Money Market Trust in reliance on Rule 15a-4 under the 1940 Act, which
permits MAC to serve as subadviser to the Portfolio, without shareholder
approval, for a period of up to 120 days following the termination of the prior
subadvisory agreement with Wellington. Shareholders of the Money Market Trust
are now being asked to approve the MAC Subadvisory Agreement.
Subadvisory Agreement
The MAC Subadvisory Agreement is substantially identical to the prior
subadvisory agreement for the Money Market Trust, other than its effective date.
The effective date of the MAC Subadvisory Agreement is October 1, 1996.
Under the terms of both the MAC Subadvisory Agreement and the prior
subadvisory agreement for the Money Market Trust, the subadviser manages the
investment and reinvestment of the assets of the Money Market Trust, subject to
the supervision of the Board. The subadviser formulates a continuous investment
program for the Portfolio consistent with its investment objectives and policies
outlined in the Trust's Prospectus. The subadviser implements such programs by
purchases and sales of securities and regularly reports to the Adviser and the
Board with respect to the implementation of such programs. The subadviser, at
its expense, furnishes all necessary investment and management facilities,
including salaries of personnel required for it to execute its duties, as well
as administrative facilities, including bookkeeping, clerical personnel, and
equipment necessary for the conduct of the investment affairs of the Portfolio.
The foregoing description of the MAC Subadvisory Agreement is not intended
to be complete and is qualified in its entirety by reference to the text of that
agreement, the form of which is attached hereto as Exhibit B. For additional
information regarding the MAC Subadvisory Agreement, see "Additional
Information -- Certain Provisions in the Advisory and Subadvisory Agreements"
below.
24
<PAGE> 31
Subadvisory Fee
As compensation for its services, MAC receives a fee from the Adviser. The
fee is stated as an annual percentage of the current value of the net assets of
the Money Market Trust. The fee, which is accrued daily and payable monthly, is
calculated for each day by multiplying the fraction of one over the number of
calendar days in the year by the annual percentage prescribed for the Portfolio,
and multiplying this product by the value of the net assets of the Money Market
Trust at the close of business on the previous business day of the Trust.
The following are the subadvisory fees the Adviser currently is obligated
(and, if the MAC Subadvisory Agreement is approved by shareholders, will
continue to be obligated) to pay MAC out of the advisory fee it receives from
the Money Market Trust:
.075% of the first $500 million of the Portfolio's average daily net assets
and .020% of the Portfolio's average daily net assets in excess of $500
million.
The foregoing subadvisory fees are identical to the fees payable under the
prior subadvisory agreement for the Money Market Trust, which has been
terminated as noted above.
Subadvisory Fees Paid
For the fiscal year ended December 31, 1995, the Adviser paid $197,786 in
subadvisory fees to Wellington for management of the Money Market Trust. The
Adviser would have paid the same amount to MAC if the MAC Subadvisory Agreement
had been effective for such period because the subadvisory fees under the MAC
Subadvisory Agreement are identical to the subadvisory fees under the prior
subadvisory agreement for the Money Market Trust.
Management and Control of MAC
MAC, founded in 1970, is an indirect wholly-owned subsidiary of Manulife,
the ultimate parent of the Adviser. As a result, MAC is an "affiliated person"
(as defined in the 1940 Act) of the Adviser. MAC and Manulife are located at 200
Bloor Street East, Toronto, Ontario, Canada M4W 1E5. For information on the
principal executive officers and directors of MAC, see Exhibit A hereto.
Brokerage Transactions
A description of the brokerage transactions for the Money Market Trust is
set forth under "Additional Information -- Portfolio Brokerage" below.
Other Investment Companies Advised by MAC
MAC serves as adviser to the Money Market Fund, a series of Manulife Series
Fund, Inc., and as subadviser to the Money Market Fund of North American
25
<PAGE> 32
Funds, each of which has an investment objective similar to the investment
objective of the Money Market Trust.
<TABLE>
<CAPTION>
NET ASSETS
FUND INVESTMENT OBJECTIVE ADVISORY/SUBADVISORY FEE (9/30/96)
- ---------------------- ------------------------ ---------------------------- -----------
<S> <C> <C> <C>
Money Market Fund Maximize current income Advisory fee of 0.50% of ne t $44,437,819
(a series of Manulife consistent with assets*
Series Fund, Inc.) preservation of
principal and liquidity
Money Market Fund Maximize current income Subadvisory fee of .075% of $19,510,769
(a series of North consistent with the first $500 million of
American Funds) preservation of net assets; .020% of net
principal and liquidity assets above $500 million
</TABLE>
- ---------------
* MAC has agreed to pay expenses of the Money Market Fund of Manulife Series
Fund, Inc., including custody fees, registration fees, audit fees, trustees'
fees, insurance fees and other miscellaneous expenses (other than brokerage
commissions on portfolio transactions and other direct costs relating to the
acquisition, disposition, lending or borrowing of portfolio investments,
taxes, interest and other costs related to borrowings, and any extraordinary
or non-recurring expenses such as legal claims and liabilities and litigation
costs an any indemnification related thereto) in excess of 0.50% of the
average daily net assets of such fund.
Advisory Agreement
For more information on the advisory agreement between the Trust and NASL
Financial, see "Additional Information -- Advisory Arrangements" below.
Shareholder and Board Approval of the Subadvisory Agreements
The prior subadvisory agreement for the Money Market Trust was approved by
the Board on September 28, 1995 and by the shareholders of the Money Market
Trust on December 5, 1995. These approvals occurred in connection with the
indirect change in control of NASL Financial due to the merger of Manulife with
NASL Financial's then-parent, NAL.
The MAC Subadvisory Agreement was approved by the Board, including a
majority of the Disinterested Trustees, on September 27, 1996. Pursuant to Rule
15a-4 under the 1940 Act, MAC may act as subadviser to the Portfolio, without
shareholder approval, for up to 120 days after the termination date of the prior
subadvisory agreement for the Portfolio. If shareholders do not approve the MAC
Subadvisory Agreement within this 120 day period, the Board will take such
action as it deems advisable under the circumstances.
Board Considerations
The Board considered numerous factors in connection with accepting the
resignation of Wellington and the approval of the MAC Subadvisory Agreement,
including: (i) the nature and quality of the services being provided by
Wellington and the fees payable therefor, (ii) the nature and quality of the
services to be provided by MAC and the fees payable therefor, (iii) performance
information regarding the Money Market Trust, (iv) performance information
regarding MAC's
26
<PAGE> 33
management of a portfolio with investment objectives and policies similar to the
Money Market Trust, (v) the cost and expected profitability to MAC of providing
portfolio management services to the Portfolio and (vi) whether the proposed
advisory fees and expense ratio of the Portfolio would be consistent with fees
and expense ratios of other comparable portfolios. In light of these factors,
the Board considered the proposed subadvisory fee schedule to be fair and
reasonable.
In evaluating the MAC Subadvisory Agreement, the Board, in particular,
focused on the scope and quality of services to be provided by MAC, as well as
comparative fee and expense data. In addition, the Board took into account the
fact that the MAC Subadvisory Agreement will not change the advisory fee or
other expenses paid by the Money Market Trust or the subadvisory fee paid to the
subadviser.
The Board was also provided with an analysis of the Board's fiduciary
obligations. At the meeting held on September 27, 1996, the Board reviewed its
fiduciary duties and discussed the information provided regarding MAC. A
representative of MAC gave a presentation and responded to questions from the
Trustees. There was an extended discussion of, and questioning about, MAC's
plans for the Money Market Trust. Throughout the review process, the
Disinterested Trustees had the assistance of legal counsel.
REQUIRED VOTE
Approval of the MAC Subadvisory Agreement will require a Majority Vote of
shareholders of the Money Market Trust.
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES, UNANIMOUSLY RECOMMENDS
THAT SHAREHOLDERS OF THE MONEY MARKET TRUST VOTE "FOR" PROPOSAL 5.
------------------------
27
<PAGE> 34
PROPOSAL 6A -- APPROVAL OF AN AMENDED SUBADVISORY AGREEMENT BETWEEN THE ADVISER
AND FMTC INCREASING THE SUBADVISORY FEE WITH RESPECT TO THE
EQUITY TRUST
PROPOSAL 6B -- APPROVAL OF AN AMENDED SUBADVISORY AGREEMENT BETWEEN THE ADVISER
AND FMTC INCREASING THE SUBADVISORY FEE WITH RESPECT TO THE
AGGRESSIVE ASSET ALLOCATION TRUST
PROPOSAL 6C -- APPROVAL OF AN AMENDED SUBADVISORY AGREEMENT BETWEEN THE ADVISER
AND FMTC INCREASING THE SUBADVISORY FEE WITH RESPECT TO THE
MODERATE ASSET ALLOCATION TRUST
PROPOSAL 6D -- APPROVAL OF AN AMENDED SUBADVISORY AGREEMENT BETWEEN THE ADVISER
AND FMTC INCREASING THE SUBADVISORY FEE WITH RESPECT TO THE
CONSERVATIVE ASSET ALLOCATION TRUST
FMTC currently serves as subadviser for the Equity Trust, the Aggressive
Asset Allocation Trust, the Moderate Asset Allocation Trust and the Conservative
Asset Allocation Trust (the "FMTC Portfolios") pursuant to a subadvisory
agreement with the Adviser dated January 1, 1996 (the "Existing FMTC Subadvisory
Agreement"). At a meeting held March 21, 1996, the Board, including the
Disinterested Trustees, approved an amended subadvisory agreement between the
Adviser and FMTC with respect to the FMTC Portfolios (as so amended, the "New
FMTC Subadvisory Agreement"). The New FMTC Subadvisory Agreement would, subject
to shareholder approval, increase the subadvisory fees paid by the Adviser to
FMTC with respect to the FMTC Portfolios, effective on or about January 1, 1997.
Shareholders of each FMTC Portfolio are now being asked to approve the New FMTC
Subadvisory Agreement as it applies to such Portfolio.
In addition, on September 27, 1996, the Board unanimously approved changing
certain fundamental investment policies of the Aggressive Asset Allocation,
Moderate Asset Allocation, and Conservative Asset Allocation Trusts. See
Proposals 7A-7C for a description of the proposed changes in the fundamental
investment policies of such Portfolios.
Subadvisory Agreement
The New FMTC Subadvisory Agreement would increase the fees paid by the
Adviser to the subadviser of the FMTC Portfolios. See "Subadvisory Fee" below.
If approved by shareholders, the New FMTC Subadvisory Agreement including the
proposed increase in subadvisory fees, will go into effect on or about January
1, 1997. BECAUSE THE SUBADVISORY FEE WITH RESPECT TO EACH FMTC PORTFOLIO IS PAID
BY THE ADVISER OUT OF ITS ADVISORY FEE, APPROVAL OF THE NEW FMTC SUBADVISORY
AGREEMENT WILL NOT INCREASE DIRECTLY OR INDIRECTLY THE ADVISORY FEE OR ANY OTHER
EXPENSES BORNE BY ANY FMTC PORTFOLIO.
Under the terms of both the Existing FMTC Subadvisory Agreement and the New
FMTC Subadvisory Agreement, the subadviser manages the investment and
reinvestment of the assets of the FMTC Portfolios, subject to the supervision of
the
28
<PAGE> 35
Board. The subadviser formulates a continuous investment program for each FMTC
Portfolio consistent with its investment objectives and policies as outlined in
the Trust's Prospectus. The subadviser implements such programs by purchases and
sales of securities and regularly reports to the Adviser and the Board with
respect to the implementation of such programs. The subadviser, at its expense,
furnishes all necessary investment and management facilities, including salaries
of personnel required for it to execute its duties, as well as administrative
facilities, including bookkeeping, clerical personnel, and equipment necessary
for the conduct of the investment affairs of the FMTC Portfolios.
The foregoing description of the New FMTC Subadvisory Agreement is not
intended to be complete and is qualified in its entirety by reference to the
text of that agreement, the form of which is attached hereto as Exhibit B. For
additional information regarding the New FMTC Subadvisory Agreement, see
"Additional Information -- Certain Provisions in the Advisory and Subadvisory
Agreements" below.
Subadvisory Fee
As compensation for its services, FMTC receives fees from the Adviser
computed separately for each FMTC Portfolio. The fee for each FMTC Portfolio is
stated as an annual percentage of the current value of the net assets of the
FMTC Portfolio. The fee, which is accrued daily and payable monthly, is
calculated for each day by multiplying the fraction of one over the number of
calendar days in the year by the annual percentage prescribed for the Portfolio,
and multiplying this product by the value of the net assets of that Portfolio at
the close of business on the previous business day of the Trust.
Proposed Subadvisory Fees. The following are the subadvisory fees the
Adviser would be obligated to pay FMTC, out of the advisory fee it receives from
each FMTC Portfolio, if the New FMTC Subadvisory Agreement is approved by
shareholders of each FMTC Portfolio:
<TABLE>
<CAPTION>
BETWEEN BETWEEN
FIRST $50,000,000 $200,000,000
$50,000,000 AND AND EXCESS OVER
PORTFOLIO OF NET ASSETS $200,000,000 $500,000,000 $500,000,000
- -------------------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Equity Trust.............. .375% .325% .275% .200%
Aggressive Asset
Allocation Trust........ .400% .350% .300% .225%
Moderate Asset Allocation
Trust................... .375% .325% .275% .200%
Conservative Asset
Allocation Trust........ .350% .300% .250% .175%
</TABLE>
29
<PAGE> 36
Current Subadvisory Fees. The following are the subadvisory fees the
Adviser, pursuant to the Existing FMTC Subadvisory Agreement, is currently
required to pay FMTC out of the advisory fee it receives from each FMTC
Portfolio:
<TABLE>
<CAPTION>
BETWEEN BETWEEN
FIRST $50,000,000 $200,000,000
$50,000,000 AND AND EXCESS OVER
PORTFOLIO OF NET ASSETS $200,000,000 $500,000,000 $500,000,000
- -------------------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Equity Trust.............. .325% .275% .225% .150%
Aggressive Asset
Allocation Trust........ .325% .275% .225% .150%
Moderate Asset Allocation
Trust................... .325% .275% .225% .150%
Conservative Asset
Allocation Trust........ .325% .275% .225% .150%
</TABLE>
Subadvisory Fees Paid
For the Trust's fiscal year ended December 31, 1995, the Adviser paid
subadvisory fees to FMTC as follows:
<TABLE>
<S> <C>
Equity Trust............................................... $1,628,673
Aggressive Asset Allocation Trust.......................... $ 560,019
Moderate Asset Allocation Trust............................ $1,433,417
Conservative Asset Allocation Trust........................ $ 616,971
</TABLE>
If the New FMTC Subadvisory Agreement had been in effect for the Trust's
fiscal year ended December 31, 1995, the Adviser would have paid subadvisory
fees to FMTC as follows:
<TABLE>
<S> <C>
Equity Trust........................................... $ 2,004,897*
Aggressive Asset Allocation Trust...................... $ 707,930**
Moderate Asset Allocation Trust........................ $ 1,744,550***
Conservative Asset Allocation Trust.................... $ 671,634****
</TABLE>
- ---------------
* An increase of 23% over the fees actually paid under the Existing FMTC
Subadvisory Agreement for the fiscal year ended December 31, 1995.
** An increase of 26% over the fees actually paid under the Existing FMTC
Subadvisory Agreement for the fiscal year ended December 31, 1995.
*** An increase of 22% over the fees actually paid under the Existing FMTC
Subadvisory Agreement for the fiscal year ended December 31, 1995.
**** An increase of 9% over the fees actually paid under the Existing FMTC
Subadvisory Agreement for the fiscal year ended December 31, 1995.
Management and Control of FMTC
FMTC, founded in 1981, is located at 82 Devonshire Street, Boston,
Massachusetts 02109 and is a whollyowned subsidiary of FMR Corp, a Massachusetts
30
<PAGE> 37
corporation located at the same address. FMTC serves as investment manager to
institutional clients, managing assets for insurance companies, tax-exempt
retirement funds, endowments, foundations and other institutional investors. For
information on the principal executive officers and directors of FMTC, see
Exhibit A.
Brokerage Transactions
A description of the brokerage transactions for each FMTC Portfolio is set
forth under "Additional Information--Portfolio Brokerage" below.
Other Investment Companies Advised by FMTC or its Affiliates
An affiliate of FMTC manages two funds with investment objectives similar
to the Equity Trust:
<TABLE>
<CAPTION>
NET ASSETS
FUND INVESTMENT OBJECTIVE ADVISORY FEE (9/30/96)
- ---------------------- ----------------------- ------------------------- --------------
<S> <C> <C> <C>
Fidelity Advisor Long term capital 0.61% of net assets $3,244,600,000
Equity appreciation
Portfolio-Growth
Growth Company Long term capital 0.67% of net assets $8,924,800,000
appreciation
</TABLE>
An affiliate of FMTC manages one fund with an investment objective similar
to that of the Aggressive Asset Allocation Trust:
<TABLE>
<CAPTION>
NET ASSETS
FUND INVESTMENT OBJECTIVE ADVISORY FEE (9/30/96)
- ---------------------- ---------------------- ------------------------- ---------------
<S> <C> <C> <C>
Fidelity Asset Maximum total return 0.61% of net assets $ 3,101,800,000
Manager-Growth over the long term
</TABLE>
An affiliate of FMTC manages one fund with an investment objective similar
to that of the Moderate Asset Allocation Trust:
<TABLE>
<CAPTION>
NET ASSETS
FUND INVESTMENT OBJECTIVE ADVISORY FEE (9/30/96)
- ---------------------- ---------------------- ------------------------- ---------------
<S> <C> <C> <C>
Fidelity Asset Manager High total return with 0.56% of net assets $10,675,900,000
reduced risk over the
long term
</TABLE>
An affiliate of FMTC manages one fund with an investment objective similar
to that of the Conservative Asset Allocation Trust:
<TABLE>
<CAPTION>
NET ASSETS
FUND INVESTMENT OBJECTIVE ADVISORY FEE (9/30/96)
- ---------------------- ---------------------- ------------------------- ---------------
<S> <C> <C> <C>
Fidelity Asset High level of current 0.45% of net assets $566,000,000
Manager-Income income. In addition,
the fund considers the
potential for capital
appreciation.
</TABLE>
Advisory Agreement
For more information on the advisory agreement between the Trust and NASL
Financial, see "Additional Information -- Advisory Arrangements" below.
31
<PAGE> 38
Shareholder and Board Approval of the Subadvisory Agreements
The Existing FMTC Subadvisory Agreement was approved by the Board on
September 28, 1995 and by the shareholders of each of the Equity Trust,
Conservative Asset Allocation Trust, Moderate Asset Allocation Trust and
Aggressive Asset Allocation Trust on December 5, 1995. This approval occurred in
connection with the indirect change in control of NASL Financial due to the
merger of Manulife with NASL Financial's then-parent, NAL.
The New FMTC Subadvisory Agreement was approved by the Board, including a
majority of the Disinterested Trustees, on March 21, 1996.
Board Considerations
The Board considered numerous factors in connection with the approval of
the New FMTC Subadvisory Agreement as it applies to each FMTC Portfolio,
including: (i) the nature and quality of the services provided by FMTC, (ii)
performance information regarding the FMTC Portfolios relative to funds with
similar objectives and policies, (iii) performance information regarding FMTC's
management of portfolios with investment objectives and policies similar to
those of the FMTC Portfolios, (iv) the cost and expected profitability to FMTC
of providing portfolio management services to the FMTC Portfolios and (vi)
whether the proposed subadvisory fees and expense ratio of the FMTC Portfolios
would be consistent with the fees and expense ratios of other comparable
portfolios. In light of these factors, the Board considered the proposed
subadvisory fee schedule to be fair and reasonable.
In evaluating the New FMTC Subadvisory Agreement, the Board, in particular,
focused on the fact that the Equity Trust has had, over the past several years,
a strong performance record and the fact that the Aggressive Asset Allocation
Trust, the Moderate Asset Allocation Trust and the Conservative Asset Allocation
Trust have been restructured, over the past two years, to include additional
asset classes such as high yield debt (in the Moderate Asset Allocation Trust
and Aggressive Asset Allocation Trust only) and international securities, both
of which require additional management resources. The Board also focused on the
scope and quality of services to be provided by FMTC, as well as comparative fee
and expense data. In addition, the Board took into account the fact that the New
FMTC Subadvisory Agreement will not change the overall advisory fee or other
expenses paid by the FMTC Portfolios.
The Board also was provided with an analysis of its fiduciary obligations.
At the meeting held on March 21, 1996, the Board reviewed its fiduciary duties
and discussed the information provided regarding FMTC. A representative of FMTC
gave a presentation and responded to questions from the Trustees. There was an
extended discussion of, and questioning about, FMTC's plans for the FMTC
Portfolios. Throughout the review process, the Disinterested Trustees had the
assistance of legal counsel.
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<PAGE> 39
REQUIRED VOTE
Approval of the New FMTC Subadvisory Agreement with respect to each FMTC
Portfolio will require a Majority Vote of such Portfolio.
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES, RECOMMENDS THAT
SHAREHOLDERS OF THE EQUITY TRUST VOTE "FOR" PROPOSAL 6A.
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES, RECOMMENDS THAT
SHAREHOLDERS OF THE AGGRESSIVE ASSET ALLOCATION TRUST VOTE "FOR" PROPOSAL 6B.
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES, RECOMMENDS THAT
SHAREHOLDERS OF THE MODERATE ASSET ALLOCATION TRUST VOTE "FOR" PROPOSAL 6C.
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES, RECOMMENDS THAT
SHAREHOLDERS OF THE CONSERVATIVE ASSET ALLOCATION TRUST VOTE "FOR" PROPOSAL 6D.
------------------------
PROPOSAL 7A -- APPROVAL OF A CHANGE TO CERTAIN FUNDAMENTAL INVESTMENTS POLICIES
OF THE AGGRESSIVE ASSET ALLOCATION TRUST
PROPOSAL 7B -- APPROVAL OF A CHANGE TO CERTAIN FUNDAMENTAL INVESTMENT POLICIES
THE MODERATE ASSET ALLOCATION TRUST
PROPOSAL 7C -- APPROVAL OF A CHANGE TO CERTAIN FUNDAMENTAL INVESTMENT POLICIES
OF THE CONSERVATIVE ASSET ALLOCATION TRUST
At a meeting on September 27, 1996, the Board, including the Disinterested
Trustees, considered and unanimously approved (on the recommendation of the
Adviser) certain changes to the fundamental investment policies of the
Aggressive Asset Allocation Trust, the Moderate Asset Allocation Trust and the
Conservative Asset Allocation Trust (collectively, the "Asset Allocation
Portfolios"). Under the 1940 Act, changes to an Asset Allocation Portfolio's
fundamental investment policies require the approval of shareholders of that
Portfolio. Shareholders of each of the Asset Allocation Portfolios are now being
asked to approve the changes that apply to that Portfolio, which changes are
described below.
If approved by shareholders of the Asset Allocation Portfolios, such
changes will become effective on or about January 1, 1997.
Aggressive Asset Allocation Trust
The investment objective of the Aggressive Asset Allocation Trust is to
seek the highest total return consistent with an aggressive level of risk
tolerance. As a fundamental investment policy, the Aggressive Asset Allocation
Trust currently
33
<PAGE> 40
attempts to limit the decline in its portfolio value in very adverse market
conditions to 15% over any 12 month period.
If Proposal 7A is approved by shareholders of the Aggressive Asset
Allocation Trust, the Portfolio's investment objective will not change. However,
instead of the foregoing current limitation, the Portfolio will attempt to limit
the decline in its portfolio value in very adverse market conditions to 15% over
any 36 month (rather than 12 month) period. Moreover, the foregoing policy will
become a non-fundamental policy of the Portfolio and, as a result, the Board
thereafter will be able to change the policy without shareholder approval. The
change from 12 to 36 months is being proposed to enable the Portfolio's
subadviser to take a longer-term approach to portfolio management. As a result
of this change, shareholders investing in the Portfolio may be subject to a
greater short-term risk of decline in portfolio value during adverse market
conditions, and shareholders redeeming shares less than 36 months after purchase
may realize losses in excess of 15%. There can be no assurance that the
Portfolio will attain its investment objective or successfully limit declines in
portfolio value under either its current or proposed limitation.
Moderate Asset Allocation Trust
The investment objective of the Moderate Asset Allocation Trust is to seek
the highest total return consistent with a moderate level of risk tolerance. As
a fundamental investment policy, the Moderate Asset Allocation Trust currently
attempts to limit the decline in its portfolio value in very adverse market
conditions to 10% over any 12 month period.
If Proposal 7B is approved by shareholders of the Moderate Asset Allocation
Trust, the Portfolio's investment objective will not change. However, instead of
the foregoing current limitation, the Portfolio will attempt to limit the
decline in its portfolio value in very adverse market conditions to 10% over any
36 month (rather than 12 month) period. Moreover, the foregoing policy will
become a non-fundamental policy of the Portfolio and, as a result, the Board
thereafter will be able to change the policy without shareholder approval. The
change from 12 to 36 months is being proposed to enable the Portfolio's
subadviser to take a longer-term approach to portfolio management. As a result
of this change, shareholders investing in the Portfolio may be subject to a
greater short-term risk of decline in portfolio value during adverse market
conditions, and shareholders redeeming shares less than 36 months after purchase
may realize losses in excess of 10%. There can be no assurance that the
Portfolio will attain its investment objective or successfully limit declines in
portfolio value under either its current or proposed limitation.
Conservative Asset Allocation Trust
The investment objective of the Conservative Asset Allocation Trust is to
seek the highest total return consistent with a conservative level of risk
tolerance. As a fundamental investment policy, the Conservative Asset Allocation
currently
34
<PAGE> 41
attempts to limit the decline in its portfolio value in very adverse market
conditions to 5% over any 12 month period.
If Proposal 7B is approved by shareholders of the Conservative Asset
Allocation Trust, the Portfolio's investment objective will not change. However,
instead of the foregoing current limitation, the Portfolio will attempt to limit
the decline in its portfolio value in very adverse market conditions to 5% over
any 36 month (rather than 12 month) period. Moreover, the foregoing policy will
become a non-fundamental policy of the Portfolio and, as a result, the Board
thereafter will be able to change the policy without shareholder approval. The
change from 12 to 36 months is being proposed to enable the Portfolio's
subadviser to take a longer-term approach to portfolio management. As a result
of this change, shareholders investing in the Portfolio may be subject to a
greater short-term risk of decline in portfolio value during adverse market
conditions, and shareholders redeeming shares less than 36 months after purchase
may realize losses in excess of 5%. There can be no assurance that the Portfolio
will attain its investment objective or successfully limit declines in portfolio
value under either its current or proposed limitation.
REQUIRED VOTE
Approval of Proposals 7A, 7B and 7C, respectively, will require a Majority
Vote of the shareholders of the Aggressive Asset Allocation Trust, the Moderate
Asset Allocation Trust and the Conservative Asset Allocation Trust,
respectively.
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES, UNANIMOUSLY RECOMMENDS
THAT SHAREHOLDERS OF THE AGGRESSIVE ASSET ALLOCATION TRUST VOTE "FOR" PROPOSAL
7A.
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES, UNANIMOUSLY RECOMMENDS
THAT SHAREHOLDERS OF THE MODERATE ASSET ALLOCATION TRUST VOTE "FOR" PROPOSAL 7B.
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES, UNANIMOUSLY RECOMMENDS
THAT SHAREHOLDERS OF THE CONSERVATIVE ASSET ALLOCATION TRUST VOTE "FOR" PROPOSAL
7C.
------------------------
PROPOSAL 8 -- APPROVAL OF A CHANGE TO THE INVESTMENT OBJECTIVE OF THE VALUE
EQUITY TRUST
As described in Proposal 3, effective October 1, 1996, T. Rowe Price
replaced Goldman as subadviser to the Value Equity Trust pursuant to Rule 15a-4
under the 1940 Act. Due to the change in subadviser, the Board, including each
of the Disinterested Trustees, has considered and unanimously approved (on the
recommendation of the Adviser) changing the investment objective and certain
non-fundamental policies of the Portfolio to reflect the proposed investment
strategy of T. Rowe Price.
35
<PAGE> 42
The current investment objective of the Value Equity Trust is to seek long-
term growth of capital. If shareholders approve this Proposal, the Portfolio's
investment objective instead will be to seek to provide substantial dividend
income as well as long-term capital appreciation. If this proposed change in
investment objective is approved, the Portfolio may be a relatively safer
investment as a result, due to the fact that it will invest primarily in common
stocks of established companies paying above-average dividends. There can be no
assurance that the Portfolio will attain its investment objective. In connection
with this change, the Board has approved changing the name of the Portfolio to
the Equity-Income Trust, effective on or about January 1, 1997. The investment
objective of the Portfolio is a fundamental policy which means that, under the
1940 Act, it may not be changed without the approval of shareholders of that
Portfolio.
The changes to the Portfolio's non-fundamental investment policies do not
require shareholder approval. Such changes will be implemented upon the
effectiveness of the change to the Portfolio's fundamental investment objective
proposed above. Upon implementation of such changes, T. Rowe Price will seek to
attain the Portfolio's investment objective by investing primarily in
dividend-paying common stocks, particularly of established companies with
favorable prospects for both increasing dividends and capital appreciation.
Under normal circumstances, the Portfolio will invest at least 65% of total
assets in the common stocks of established companies paying above-average
dividends. The Portfolio will generally consider companies with the following
characteristics: (i) established operating histories; (ii) above-average current
dividend yield relative to the average yield of the S&P 500; (iii) low
price/earnings ratios relative to the S&P 500; (iv) sound balance sheets and
other financial characteristics; and (v) low stock price relative to a company's
underlying value as measured by assets, earnings, cash flow, or business
franchises.
The Portfolio will tend to take a "value" approach and invest in stocks and
other securities that appear to be temporarily undervalued by various measures,
such as price/earnings ratios. Value investors seek to buy a stock (or other
security) when its price is low in relation to what they believe to be its real
worth or future prospects. By identifying companies whose stocks are currently
out of favor, value investors hope to realize significant appreciation as other
investors recognize the stock's intrinsic value and the price rises accordingly.
Finding undervalued stocks requires considerable research to identify the
particular stock, to analyze the company's underlying financial condition and
prospects, and to assess the likelihood that the stock's underlying value will
be recognized by the market and reflected in its price.
The Portfolio also will be able to purchase other types of securities, for
example, foreign securities, preferred stocks, convertible stocks and bonds, and
warrants, when considered consistent with the Portfolio's investment objective
and program. The Portfolio will hold a certain portion of its assets in U.S. and
foreign dollar-denominated money market securities, including repurchase
agreements, in
36
<PAGE> 43
the two highest rating categories, maturing in one year or less. For temporary,
defensive purposes, the Portfolio will be able to invest without limitation in
such securities. This reserve position provides flexibility in meeting
redemptions, expenses and the timing of new investments and serves as a
short-term defense during periods of unusual market volatility.
The Portfolio also will be able to invest in debt securities of any type
including municipal securities without regard to quality or rating. The total
return and yield of lower-quality (high-yield/high-risk) bonds, commonly
referred to as "junk" bonds, can be expected to fluctuate more than the total
return and yield of higher-quality, shorter-term bonds, but not as much as
common stocks. Junk bonds (those rated below BBB or in default) are regarded as
predominantly speculative with respect to the issuer's continuing ability to
meet principal and interest payments. The Portfolio will not purchase a
noninvestment-grade debt security (or junk bond) if immediately after such
purchase the Portfolio would have more than 10% of its total assets invested in
such securities.
The Portfolio also will be able to engage in a variety of investment
management practices, such as buying and selling futures and options. Risks
associated with these investment management practices are described in the
Trust's current Prospectus. The Portfolio also will be able to invest up to 10%
of its total assets in hybrid instruments, which are a type of high-risk
derivative which can combine the characteristics of securities, futures and
options. For example, the principal amount, redemption or conversion terms of a
security could be related to the market price of some commodity, currency or
securities index. Such securities may bear interest or pay dividends at below
market (or even relatively nominal) rates. The risks of investing in such hybrid
instruments reflect a combination of the risks of investing in securities,
options, futures and currencies. Reference is made to the Trust's current
Prospectus for a description of such risks. Hybrid instruments are potentially
more volatile and carry greater market risks than traditional debt instruments.
Hybrid instruments may also carry greater liquidity risks because the
instruments are often "customized" to meet the portfolio needs of a particular
investor and, therefore, the number of investors that are willing to buy such
instruments in the secondary market may be smaller than for more traditional
debt securities. The various risks described above, particularly the market risk
of such instruments, may in turn cause significant fluctuations in the net asset
value of the Portfolio.
The Portfolio will be subject to special risks as a result of its ability
to invest up to 25% of its total assets in foreign securities. These include
nondollar-denominated securities traded outside of the U.S. and
dollar-denominated securities of foreign issuers traded in the U.S. (such as
American Depositary Receipts). Risks associated with such investments are
described in the Trust's current Prospectus. The Portfolio will also be
authorized to use all of the various investment strategies referred to under
"Hedging and Strategic Transactions" in the Trust's current Prospectus. The
Trust's current Statement of Additional Information contains a description of
these strategies and of certain risks associated therewith.
37
<PAGE> 44
REQUIRED VOTE
Approval of the proposal to change the Portfolio's investment objective
will require a Majority Vote of the shareholders of the Portfolio.
If shareholders approve the proposed change to the Portfolio's investment
objective, such change will become effective on or about January 1, 1997.
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES, UNANIMOUSLY RECOMMENDS
THAT SHAREHOLDERS OF THE VALUE EQUITY TRUST VOTE "FOR" PROPOSAL 8.
------------------------
PROPOSAL 9 -- APPROVAL OF A CHANGE TO THE INVESTMENT OBJECTIVE OF THE BLUE CHIP
GROWTH TRUST
As described in Proposal 4, effective October 1, 1996, T. Rowe Price
replaced REMC as subadviser to the Blue Chip Growth Trust (which was known as
the Pasadena Growth Trust prior to that date) pursuant to Rule 15a-4 under the
1940 Act. Due to the change in subadviser, the Board, including the
Disinterested Trustees, has considered and unanimously approved (on the
recommendation of the Adviser) changing the investment objective and certain
non-fundamental policies of the Portfolio to reflect the investment strategies
of T. Rowe Price. In connection with the foregoing, the Board changed the name
of the Portfolio to the Blue Chip Growth Trust, effective October 1, 1996.
The current investment objective of the Blue Chip Growth Trust is to seek
to achieve long-term growth of capital by emphasizing investments in companies
with rapidly growing earnings per share, some of which may be smaller emerging
growth companies. If shareholders approve this Proposal, the Portfolio's
investment objective instead will be to seek to achieve long-term growth of
capital, with current income as a secondary objective. If this proposed change
in investment objective is approved, the Portfolio may be a relatively safer
investment as a result, due to the fact that, as described below, it will invest
primarily in common stocks of established companies having the potential for
above-average growth in earnings. There can be no assurance that the Portfolio
will attain its investment objective. The investment objective of the Portfolio
is a fundamental policy, which means that, under the 1940 Act, it may not be
changed without the approval of shareholders of the Portfolio.
The changes to the Portfolio's non-fundamental investment policies did not
require shareholder approval, and became effective on October 1, 1996. Among
other things, such changes modified the Portfolio's investment policies to
require it to invest at least 65% of its total assets in the common stocks of
large and medium-sized blue chip companies. Blue chip companies are companies
that are well established in their industries and have the potential for
above-average growth in earnings. The changes that have been made to the
Portfolio's non-fundamental investment policies, and risks
38
<PAGE> 45
associated therewith, are fully set forth in the Trust's current Prospectus, as
supplemented by a prospectus supplement dated October 1, 1996.
REQUIRED VOTE
Approval of the proposed change to the Portfolio's investment objective
will require a Majority Vote of the shareholders of the Portfolio.
If shareholders approve the proposed change to the Portfolio's investment
objective, such change will become effective on or about January 1, 1997.
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES, UNANIMOUSLY RECOMMENDS
THAT SHAREHOLDERS OF THE BLUE CHIP GROWTH TRUST VOTE "FOR" PROPOSAL 9.
------------------------
PROPOSAL 10 -- APPROVAL OF A PROPOSAL TO PERMIT THE ADVISER, IN THE FUTURE, TO
SELECT AND CONTRACT WITH SUBADVISERS FOR THE PORTFOLIOS AFTER
OBTAINING BOARD APPROVAL BUT WITHOUT OBTAINING SHAREHOLDER
APPROVAL
On August 29, 1996, the Trust and the Adviser filed an exemptive
application with the Securities and Exchange Commission ("SEC") requesting
relief from the requirement of Section 15 of the 1940 Act that any subadviser to
a Portfolio that is party to a contract with the Adviser may serve only pursuant
to a written contract approved by the shareholders of such Portfolio. If the
requested relief is granted, a subadviser to a Portfolio may serve as subadviser
to such Portfolio pursuant to a written contract with the Adviser that has not
been approved by shareholders of such Portfolio. The requested relief also would
apply where a subadviser to a Portfolio is serving pursuant to a contract that
is terminated as a result of an assignment of the contract due to a change of
control of the subadviser. In such case, the subadviser could continue to act as
subadviser to such Portfolio under a new agreement that had not been approved by
shareholders of the Portfolio. The Board, including the Disinterested Trustees,
will continue to approve new contracts between the Adviser and a subadviser as
well as changes to existing contracts. The requested relief will not apply to
the advisory agreement between the Adviser and the Trust, and changes to that
agreement will continue to require approval of shareholders.
If the requested relief is granted, the Trust also would be permitted in a
situation where there is more than one subadviser to a Portfolio to disclose
(both as a dollar amount and as a percentage of the Portfolio's net assets) in
its Prospectus, financial statements and certain other documents only (i) fees
paid to the Adviser by that Portfolio, (ii) aggregate fees paid by the Adviser
to subadvisers to that Portfolio, (iii) net advisory fees retained by the
Adviser with respect to that Portfolio after payment of subadvisory fees and
(iv) fees paid by the Adviser to any "affiliated person" (as defined below)
serving as subadviser to that Portfolio.
39
<PAGE> 46
Therefore, in such a situation, the Trust would not have to disclose separately
the fees paid by the Adviser to a particular subadviser.
The application currently is pending at the SEC. While there can be no
assurance that the SEC will grant the requested relief, if the SEC grants the
requested relief, one of the conditions to such relief is expected to be that
this change also be approved by shareholders of the Trust and of each Portfolio
prior to being effective for such Portfolio. Therefore, shareholders of each
Portfolio are being asked to vote on this proposal. If the requested relief is
granted and shareholder approval is obtained, the Trust and the Adviser will be
required to agree to conditions imposed by the SEC in connection with the
relief. Such conditions are expected to include, but may not be limited to, the
following requirements:
(i) Before a Portfolio may rely on the requested relief, this proposal will
be approved by a Majority Vote of the shareholders of the Trust and of such
Portfolio or, in the case of a new Portfolio whose public shareholders
purchase shares on the basis of a prospectus containing the disclosure
contemplated by condition (ii) below, by the sole initial shareholders(s)
before shares of such Portfolio are offered to the public;
(ii) Any Portfolio relying on the requested relief will disclose in the
Trust's Prospectus the existence, substance and effect of the SEC order
granting such relief;
(iii) The Adviser will provide management and administrative services to
the Portfolios, including overall supervisory responsibility for the
general management and investment of each Portfolio's securities portfolio
and, subject to review and approval of the Board, will (a) set the
Portfolios' overall investment strategies, (b) select subadvisers, (c) when
appropriate, allocate and reallocate a Portfolio's assets among multiple
subadvisers, (d) monitor and evaluate the investment performance of the
subadvisers and (e) ensure that the subadvisers comply with the Portfolios'
investment objectives, policies and restrictions;
(iv) The Adviser will not enter into subadvisory contracts with any
subadviser that is an "affiliated person" (as defined in the 1940 Act) of
the Trust or the Adviser (other than by reason of serving as a subadviser
to one or more of the Portfolios or any other portfolio managed by the
Adviser or any of its affiliates) without such agreement being approved by
the shareholders of the applicable Portfolio(s); and
(v) Within 60 days of the hiring of any new subadviser or the
implementation of any material change in a subadvisory contract, the Trust
will furnish to the shareholders of the affected Portfolio(s) all
information about the new subadviser and/or material change that would be
included in a proxy statement, except that the fee disclosure will be as
noted above in the case of Portfolios with more than one subadviser. Such
information will include any change in such disclosure caused by the
addition of a new subadviser and any material change in the subadvisory
contract. The Trust will ensure that such
40
<PAGE> 47
information is furnished to contractholders with assets allocated to any
registered separate account for which the Trust serves as a funding medium.
If the requested relief is granted by the SEC and shareholders of the
Portfolios approve this proposal, the Adviser will have the ability, subject to
the approval of the Board, to hire and terminate subadvisers to the Portfolios
and to change materially the terms of the subadvisory contracts, including the
compensation paid to the subadvisers, without the approval of the shareholders
of the Portfolios. SUCH CHANGES IN SUBADVISORY ARRANGEMENTS WOULD NOT INCREASE
THE FEES PAID BY A PORTFOLIO FOR INVESTMENT ADVISORY SERVICES SINCE SUBADVISORY
FEES ARE PAID BY THE ADVISER OUT OF ITS ADVISORY FEE AND ARE NOT ADDITIONAL
CHARGES TO A PORTFOLIO.
While the Adviser expects its relationship with the subadvisers to the
Portfolios to be long-term and stable over time, approval of this proposal will
permit the Adviser to act quickly in situations where the Adviser and the Board
believe that a change in subadvisers or to a subadvisory agreement, including
any fee paid to a subadviser, is warranted. This proposal will eliminate the
delay of convening a meeting of shareholders to approve certain subadvisory
changes.
The Board, including the Disinterested Trustees, has unanimously approved
the proposal.
REQUIRED VOTE
Approval of this proposal will require (i) a Majority Vote of the Trust and
(ii) with respect to each Portfolio, a Majority Vote of that Portfolio.
This proposal will become effective with respect to a Portfolio upon the
later to occur of: (i) approval of the proposal by a Majority Vote of the Trust
and a Majority Vote of the shareholders of such Portfolio, (ii) receipt by the
Adviser and the Trust of the exemptive relief described above and (iii)
disclosure in the Trust's Prospectus of the existence, substance and effect of
the exemptive relief.
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES, UNANIMOUSLY RECOMMENDS
THAT SHAREHOLDERS OF EACH PORTFOLIO VOTE "FOR" PROPOSAL 10.
------------------------
PROPOSAL 11 -- RATIFICATION OF COOPERS & LYBRAND L.L.P. AS THE INDEPENDENT
ACCOUNTANTS FOR THE TRUST FOR ITS FISCAL YEAR ENDING DECEMBER 31,
1996
The Board, including each of the Disinterested Trustees, has selected
Coopers & Lybrand L.L.P. to serve as the independent accountants for the Trust
for the Trust's fiscal year ending December 31, 1996, subject to the right of
the Trust to terminate such employment immediately without penalty by vote of a
majority of the outstanding voting securities of the Trust at any meeting called
for such purpose. Proxies not limited to the contrary will be voted in favor of
ratifying the selection of
41
<PAGE> 48
Coopers & Lybrand L.L.P., under Section 32(a) of the 1940 Act, as the
independent accountants for the Trust.
Coopers & Lybrand L.L.P. served as the independent accountants for the
Trust during its most recent fiscal year ended December 31, 1995. Apart from its
fees received for its services as the Trust's independent accountants, Coopers &
Lybrand L.L.P. has no direct or material indirect interest in the Trust. A
representative of Coopers & Lybrand L.L.P. is expected to be present at the
Meeting (or available at the Meeting via telephone), and will have an
opportunity to make a statement if he or she desires to do so. Such
representative is also expected to be available to respond to appropriate
questions.
REQUIRED VOTE
Ratification of the selection of Coopers & Lybrand L.L.P. as the
independent accountants for the Trust requires the affirmative vote of a
majority of the outstanding shares of the Trust present in person or represented
by proxy at the Meeting, assuming that a quorum is present.
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES, RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" PROPOSAL 11.
*** *** *** ***
ADDITIONAL INFORMATION
ADVISORY ARRANGEMENTS
Pursuant to the terms of the Advisory Agreement between the Trust and the
Adviser, the Adviser administers the business and affairs of the Trust. The
Adviser is responsible for performing or paying for various administrative
services for the Trust, including providing at the Adviser's expense (i) office
space and all necessary office facilities and equipment, (ii) necessary
executive and other personnel for managing the affairs of the Trust and for
performing certain clerical, accounting and other office functions, and (iii)
all other information and services, other than services of counsel, independent
accountants or investment subadvisory services provided by any subadviser under
a subadvisory agreement, required in connection with the preparation of all tax
returns and documents required to comply with the federal securities laws. The
Adviser pays the cost of any advertising or sales literature relating solely to
the Trust, the cost of printing and mailing prospectuses to persons other than
current holders of Trust shares or of variable contracts funded by Trust shares
and the compensation of the Trust's officers and Trustees who are officers,
directors or employees of the Adviser or its affiliates. In addition, advisory
fees are reduced or the Adviser reimburses the Trust if the total of all
expenses (excluding advisory fees, taxes, portfolio brokerage commissions,
interest, litigation and indemnification expenses and other extraordinary
expenses not incurred in the ordinary course of the Trust's business) applicable
to a Portfolio exceeds an annual
42
<PAGE> 49
rate of .75%, in the case of the Global Equity Trust, or .50%, in the case of
the other Portfolios described in Proposals 2 through 6 of this proxy statement,
of the average net asset value of such Portfolios. The expense limitation will
continue in effect from year to year unless otherwise terminated at any year end
by the Adviser on 30 days' notice to the Trust. No expense reimbursements were
applicable for the fiscal year ended December 31, 1995.
In addition to providing the services and expense limitation described
above, the Adviser selects, contracts with and compensates subadvisers to manage
the investment and reinvestment of the assets of the Portfolios. The Adviser
monitors the compliance of the subadvisers with the investment objectives and
related policies of each Portfolio and reviews the performance of such
subadvisers and reports periodically on such performance to the Board. The
Adviser serves as investment adviser to one other investment company, North
American Funds, and its portfolios.
CERTAIN PROVISIONS IN THE ADVISORY AND SUBADVISORY AGREEMENTS
The Advisory Agreement and the subadvisory agreements discussed in
Proposals 2 through 6 of this proxy statement (the "Subadvisory Agreements", and
together with the Advisory Agreement, the "Agreements") continue in effect as to
a Portfolio for a period no more than two years from the date of execution only
so long as such continuance is specifically approved at least annually either by
the Board or by a Majority Vote of the outstanding voting securities of the
Trust, provided that in either event such continuance shall also be approved by
the vote of the majority of the Board members who are not Interested Persons of
any party to the Agreements, cast in person at a meeting called for the purpose
of voting on such approval. Shareholder approval of any continuance of any of
the Agreements shall be effective with respect to any Portfolio if there is a
Majority Vote of that Portfolio to approve such continuance, notwithstanding
that such continuance may not have been approved by a Majority Vote of (i) any
other Portfolio affected by the Agreement or (ii) all of the Portfolios.
If shareholders of any Portfolio fail to approve any continuance of one or
more of the Agreements, the Adviser or subadviser, as applicable, will continue
to act as investment adviser or subadviser with respect to such Portfolio
pending the required approval of the continuance of such Agreement, of a new
contract with the Adviser or subadviser, as applicable, or different adviser or
subadviser, or other definitive action.
Each of the Agreements may be terminated at any time without the payment of
any penalty on 60 days written notice to the other party or parties to the
Agreements, and to the Trust in the case of the Subadvisory Agreement, (i) by
the Board; (ii) by a Majority Vote of the outstanding voting securities of the
Trust, or with respect to any Portfolio, by a Majority Vote of the outstanding
voting securities of such Portfolio; or (iii) by the Adviser, and in the case of
the Subadvisory Agreements, by the respective subadvisers. As required by
Section 15 of the 1940
43
<PAGE> 50
Act, each of the Agreements will automatically terminate in the event of its
assignment.
Each of the Agreements may be amended by the parties thereto provided that
such amendment is specifically approved by a Majority Vote of the outstanding
voting securities of the Trust or applicable Portfolio(s), as the case may be,
and by the vote of a majority of the Board members who are not Interested
Persons of the Trust, of the Adviser or of the applicable subadviser, cast in
person at a meeting called for the purpose of voting upon such approval.
Shareholder approval of any amendment shall be effective with respect to any
Portfolio if there is a Majority Vote of the outstanding voting securities of
that Portfolio vote to approve the amendment, notwithstanding that the amendment
may not be approved by a majority of the outstanding voting securities of (i)
any other Portfolio affected by the amendment or (ii) all the Portfolios. If
Proposal 10 is approved by shareholders of the Portfolios, the Adviser will not
need shareholder approval, but will continue to need Board approval, for certain
subadvisory changes. See Proposal 10.
Each Subadvisory Agreement provides that the subadviser will not be liable
to the Trust or the Adviser for any losses resulting from matters to which the
agreement relates other than losses resulting from the subadviser's willful
misfeasance, bad faith or gross negligence in the performance of, or from
reckless disregard of, its duties.
ADVISORY FEE SCHEDULE
As compensation for its services, the Adviser receives a fee from the Trust
computed separately for each Portfolio. The fee for each Portfolio is stated as
an annual percentage of the current value of the net assets of the Portfolio.
The fee, which is accrued daily and payable monthly, is calculated for each day
by multiplying the fraction of one over the number of calendar days in the year
by the annual percentage prescribed for a Portfolio, and multiplying this
product by the value of the net assets of the Portfolio at the close of business
on the previous business day of the Trust. The following is a schedule of the
fees each Portfolio discussed in Proposals 2 through 6 currently is obligated to
pay the Adviser under the Advisory Agreement:
<TABLE>
<CAPTION>
PORTFOLIO FEE
- ----------------------------------------------------------------- ----
<S> <C>
Global Equity Trust.............................................. .900%
Blue Chip Growth Trust
(formerly known as the Pasadena Growth Trust).................. .925%
Value Equity Trust............................................... .800%
Equity Trust..................................................... .750%
Money Market Trust............................................... .500%
Aggressive Asset Allocation Trust................................ .750%
Moderate Asset Allocation Trust.................................. .750%
Conservative Asset Allocation Trust.............................. .750%
</TABLE>
44
<PAGE> 51
CERTAIN ADVISORY FEES PAID
For the fiscal year ended December 31, 1995, the Trust paid total advisory
fees to the Adviser of $33,808,255. No expense reimbursements were applicable
for this period. The amounts paid with respect to each of the FMTC Portfolios,
the Global Equity Trust, the Value Equity Trust, the Blue Chip Growth Trust and
the Money Market Trust were as follows:
<TABLE>
<CAPTION>
PORTFOLIO FEES PAID
- ----------------------------------------------------------- ----------
<S> <C>
Equity Trust............................................... $5,643,363
Aggressive Asset Allocation Trust.......................... $1,463,421
Moderate Asset Allocation Trust............................ $4,667,061
Conservative Asset Allocation Trust........................ $1,639,903
Global Equity Trust........................................ $5,513,312
Value Equity Trust......................................... $2,459,247
Blue Chip Growth Trust..................................... $2,115,434
Money Market Trust......................................... $1,318,573
</TABLE>
MANAGEMENT OF THE ADVISER AND OF THE TRUST
The table below provides information regarding the directors and executive
officers of the Trust and the Adviser.
<TABLE>
<CAPTION>
POSITION WITH
TRUST AND YEAR OF
ELECTION OR POSITION WITH
NAME, ADDRESS AND AGE APPOINTMENT* NASL FINANCIAL* BUSINESS EXPERIENCE
- ----------------------- ------------------- ------------------ -------------------------
<S> <C> <C> <C>
Brian L. Moore Chairman Director and Executive Vice President,
200 Bloor Street 1989 Chairman Canadian Insurance
11th Floor Operations, of Manulife,
North Tower January 1, 1996 to date;
Toronto, Ontario Chief Executive Officer,
Canada M4W 1ES North American Life
Age: 52 Assurance Company,
October 1993 to December
1995; Executive Vice
President and Chief
Financial Officer, North
American Life Assurance
Company, September 1988
to October 1993.
</TABLE>
45
<PAGE> 52
<TABLE>
<CAPTION>
POSITION WITH
TRUST AND YEAR OF
ELECTION OR POSITION WITH
NAME, ADDRESS AND AGE APPOINTMENT* NASL FINANCIAL* BUSINESS EXPERIENCE
- ----------------------- ------------------- ------------------ -------------------------
<S> <C> <C> <C>
John D. DesPrez III President Director Vice President, Annuities
116 Huntington Avenue of Manulife, September
Boston MA 02116 1996 to present;
Age: 39 President and Director,
North American Security
Life Insurance Company,
September 1996 to
present; President, North
American Funds, March
1993 to September 1996;
Vice President and
General Counsel, North
American Security Life
Insurance Company, 1991
to 1994.
John G. Vyrsen Vice President Vice President Vice President, Chief
116 Huntington Avenue 1988 Financial Officer, U.S.
Boston, MA 02116 Operations, of Manulife,
Age: 41 January 1, 1996 to date;
Vice President and Chief
Actuary, NASL.
James D. Gallagher Secretary Not Applicable Vice President, Legal
116 Huntington Avenue Services, of Manulife,
Boston, MA 02116 January 1, 1996 to date;
Age: 42 Vice President and
General Counsel, June
1994 to date, NASL; Vice
President and Associate
General Counsel,
1990-1994, The Prudential
Insurance Company of
America.
Richard C. Hirtle Treasurer Vice President and Vice President, Chief
116 Huntington Avenue Treasurer Financial Officer,
Boston, MA 02116 Annuities and Mutual
Age: 40 Funds, of Manulife,
January 1, 1996 to date;
Vice President, Treasurer
and Chief Financial
Officer, NASL
</TABLE>
- ---------------
* Each officer of the Trust and the Adviser serves until his successor is chosen
and qualified or until he sooner dies, resigns, is removed or becomes
disqualified.
PORTFOLIO BROKERAGE
Pursuant to the Subadvisory Agreements, the subadvisers are responsible for
placing all orders for the purchase and sale of portfolio securities of the
Trust. The subadvisers have no formula for the distribution of the Trust's
brokerage business, their intention being to place orders for the purchase and
sale of securities with the primary objective of obtaining the most favorable
overall results for the Trust.
In selecting brokers or dealers through whom to effect transactions, the
subadvisers will give consideration to a number of factors, including price,
dealer spread or commission, if any, the reliability, integrity and financial
condition of the
46
<PAGE> 53
broker-dealer, size of the transaction and difficulty of execution. In selecting
brokers and dealers, the subadvisers will also give consideration to the value
and quality of any research, statistical, quotation or valuation services
provided by the broker or dealer. In placing a purchase or sale order, a
subadviser may use a broker whose commission in effecting the transaction is
higher than that of some other broker if the subadviser determines in good faith
that the amount of the higher commission is reasonable in relation to the value
of the brokerage and research services provided by such broker, viewed in terms
of either the particular transaction or the subadviser's overall
responsibilities with respect to the Trust and any other accounts managed by the
subadviser.
To the extent research services are used by the subadvisers in rendering
investment advice to the Trust, such services would tend to reduce the
subadvisers' expenses. However, the subadvisers do not believe that an exact
dollar value can be assigned to these services. Research services received by
the subadvisers from brokers or dealers executing transactions for the Trust
will be available also for the benefit of other portfolios managed by the
subadvisers.
For the fiscal year ended December 31, 1995, the Trust paid brokerage
commissions in connection with portfolio transactions of $6,609,957, including
the following amounts in connection with the FMTC Portfolios, the Global Equity
Trust, the Value Equity Trust, the Blue Chip Growth Trust and the Money Market
Trust:
<TABLE>
<CAPTION>
YEAR-ENDED
PORTFOLIO 12/31/95
- ----------------------------------------------------------- ----------
<S> <C>
Equity Trust............................................... $ 861,497
Aggressive Asset Allocation Trust.......................... $ 286,517
Moderate Asset Allocation Trust............................ $ 604,766
Conservative Asset Allocation Trust........................ $ 104,521
Global Equity Trust........................................ $2,684,254
Value Equity Trust......................................... $ 606,918
Blue Chip Growth Trust..................................... $ 388,904
Money Market Trust......................................... $ 0
</TABLE>
Prior to October 1, 1996, Goldman Sachs & Co. ("Goldman Sachs") may be
deemed to have been an affiliated broker of the Value Equity Trust due to the
position of Goldman as subadviser to that Portfolio. In addition, Dresdner Bank
may be deemed to have been an affiliated broker of the Global Equity Trust due
to the position of Oechsle as subadviser to that Portfolio. As described above
in Proposal 4, Goldman has resigned as subadviser to the Value Equity Fund,
effective October 1, 1996 and, as described in Proposal 3, Oechsle has resigned
as subadviser to the Global Equity Trust, effective October 1, 1996. Following
October 1, 1996, affiliates of T. Rowe Price may be deemed to be affiliated
brokers of the Value Equity Trust and the Blue Chip Growth Trust due to the
position of T. Rowe Price as subadviser to that Portfolio and affiliates of
Morgan Stanley may be deemed to be affiliated
47
<PAGE> 54
brokers of the Global Equity Trust due to the position of Morgan Stanley as
subadviser to that Portfolio. Fidelity Capital Markets may be deemed to be an
affiliated broker of the FMTC Portfolios due to the position of FMTC as
subadviser to those Portfolios. Salomon Brothers Inc. ("Salomon") and J.P.
Morgan Securities Ltd. ("J.P. Morgan") may also be deemed to be affiliated
brokers of the Trust due to the positions of their affiliates as subadvisers to
certain Portfolios.
For the year ended December 31, 1995, brokerage commissions were paid to
Goldman, Sachs & Co. by the FMTC Portfolios, the Global Equity Trust, the Value
Equity Trust and the Blue Chip Growth Trust as follows:
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
PORTFOLIO'S AGGREGATE
BROKERAGE COMMISSIONS DOLLAR AMOUNT
REPRESENTED FOR THE OF TRANSACTIONS
PORTFOLIO COMMISSIONS PERIOD FOR THE PERIOD
- ---------------------------- ----------- --------------------- ---------------
<S> <C> <C> <C>
Equity Trust................ $13,799 1.60% 0.62%
Aggressive Asset Allocation
Trust..................... $ 7,202 2.51% 0.43%
Moderate Asset Allocation
Trust..................... $11,975 1.98% 0.69%
Conservative Asset
Allocation Trust.......... $ 2,080 1.99% 0.80%
Global Equity Trust......... $ 6,951 0.26% 0.08%
Value Equity Trust.......... $63,836 10.52% 0.19%
Blue Chip Growth Trust...... $24,855 6.39% 0.52%
</TABLE>
For the year ended December 31, 1995, no brokerage commissions were paid to
Dresdner Bank by the Asset Allocation Portfolios, the Global Equity Trust, the
Value Equity Trust, the Blue Chip Growth Trust or the Money Market Trust. During
such period, the Equity Trust paid $277 of commissions to Dresdner Bank, which
represented .03% of the Portfolio's brokerage commission for such period.
48
<PAGE> 55
For the year ended December 31, 1995, brokerage commissions were paid to
Fidelity Capital Markets by the Global Equity Trust and the Asset Allocation
Portfolios as follows:
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
PORTFOLIO'S AGGREGATE
BROKERAGE COMMISSIONS DOLLAR AMOUNT
REPRESENTED FOR THE OF TRANSACTIONS
PORTFOLIO COMMISSIONS PERIOD FOR THE PERIOD
- ---------------------------- ----------- --------------------- ---------------
<S> <C> <C> <C>
Global Equity Trust......... $31,110 1.16% 0.77%
Aggressive Asset Allocation
Trust..................... $ 3,240 1.13% 0.08%
Moderate Asset Allocation
Trust..................... $ 8,815 1.46% 0.07%
Conservative Asset
Allocation Trust.......... $ 1,920 1.84% 0.05%
</TABLE>
For the year ended December 31, 1995, brokerage commissions were paid to
Salomon by the FMTC Portfolios, the Global Equity Trust, the Value Equity Trust
and the Blue Chip Growth Trust as follows:
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
PORTFOLIO'S AGGREGATE
BROKERAGE COMMISSIONS DOLLAR AMOUNT
REPRESENTED FOR THE OF TRANSACTIONS
PORTFOLIO COMMISSIONS PERIOD FOR THE PERIOD
- ---------------------------- ----------- --------------------- ---------------
<S> <C> <C> <C>
Equity Trust................ $13,968 1.62% 0.14%
Aggressive Asset Allocation
Trust..................... $ 3,072 1.07% 0.88%
Moderate Asset Allocation
Trust..................... $ 3,967 0.66% 1.42%
Conservative Asset
Allocation Trust.......... $ 999 0.96% 1.87%
Global Equity Trust......... $34,352 1.28% 0.19%
Value Equity Trust.......... $35,568 5.86% 0.14%
Blue Chip Growth Trust...... $16,380 4.21% 0.26%
</TABLE>
49
<PAGE> 56
For the year ended December 31, 1995, brokerage commissions were paid to
J.P. Morgan by the FMTC Portfolios, the Global Equity Trust, the Value Equity
Trust and the Blue Chip Growth Trust as follows:
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
PORTFOLIO'S AGGREGATE
BROKERAGE COMMISSIONS DOLLAR AMOUNT
REPRESENTED FOR THE OF TRANSACTIONS
PORTFOLIO COMMISSIONS PERIOD FOR THE PERIOD
- ---------------------------- ----------- --------------------- ---------------
<S> <C> <C> <C>
Equity Trust................ $ 8,890 1.03% 0.06%
Aggressive Asset Allocation
Trust..................... $ 721 0.25% 0.24%
Moderate Asset Allocation
Trust..................... $ 1,680 0.28% 0.31%
Conservative Asset
Allocation Trust.......... $ 397 0.38% 0.14%
Global Equity Trust......... $15,349 0.57% 0.90%
Value Equity Trust.......... $40,142 6.61% 0.20%
Blue Chip Growth Trust...... $ 2,482 0.64% 0.03%
</TABLE>
OTHER MATTERS
The Board does not know of any matters to be presented at the Meeting other
than those mentioned in this Proxy Statement. If any other matters properly come
before the Meeting, the shares represented by proxies will be voted with respect
thereto in accordance with the best judgment of the person or persons voting the
proxies.
Shareholder proposals to be presented at any future meeting of shareholders
of the Trust must be received by the Trust a reasonable time before the Trust's
solicitation of proxies for that meeting in order for such proposals to be
considered for inclusion in the proxy materials related to that meeting.
BY ORDER OF THE BOARD OF TRUSTEES
November 15, 1996
Boston, Massachusetts
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, SHAREHOLDERS
WHO DO NOT EXPECT TO ATTEND THE MEETING IN PERSON ARE URGED TO COMPLETE, SIGN,
DATE AND RETURN THE PROXY CARD IN THE ENCLOSED ENVELOPE.
50
<PAGE> 57
EXHIBIT A
EXECUTIVE OFFICERS AND DIRECTORS OF SUBADVISERS
FIDELITY MANAGEMENT TRUST CO.
The principal executive officers and directors of Fidelity Management Trust
Co. and their principal occupations are shown below. The business address of
each officer and director is 82 Devonshire Street, Boston, MA 02109.
<TABLE>
<CAPTION>
NAME POSITION WITH FMTC PRINCIPAL OCCUPATION
- -------------------- ------------------------- --------------------------------
<S> <C> <C>
Denis M. McCarthy Chairman of the Board, Interim President of FMTC
President and CEO
Edward E. Madden Vice Chairman of the Executive Vice President,
Board Marketing of FMTC
John P. O'Reilly Executive Vice President, Executive Vice President,
Administration, and Administration of FMTC
Director
Cynthia Egan Executive Vice President Executive Vice President of FMTC
John Begley Senior Vice President, Senior Vice President, CFO, and
CFO, Treasurer, and Treasurer of FMTC
Director
Walter Downey Senior Vice President, Senior Vice President,
Investments (Equity) Investments (Equity) of FMTC
Cesar Hernandez Senior Vice President, Senior Vice President,
Investments (Equity) Investments (Equity) of FMTC
Robert L. Macdonald Senior Vice President, Senior Vice President,
Investments (Equity) Investments (Equity) of FMTC
John McDowell Senior Vice President, Senior Vice President,
Investments (Equity) Investments (Equity) of FMTC
Neal Miller Senior Vice President, Senior Vice President,
Investments (Equity) Investments (Equity) of FMTC
Stephen Petersen Senior Vice President, Senior Vice President,
Investments (Equity) Investments (Equity) of FMTC
Kennedy Richardson Senior Vice President, Senior Vice President,
Investments (Equity) Investments (Equity) of FMTC
Scott Stewart Senior Vice President, Senior Vice President,
Investments (Equity) Investments (Equity) of FMTC
Beth Terrana Senior Vice President, Senior Vice President,
Investments (Equity) Investments (Equity) of FMTC
Dwight Churchill Senior Vice President, Senior Vice President,
Investments (Fixed Investments (Fixed Income) of
Income) FMTC
Margaret Eagle Senior Vice President, Senior Vice President,
Investments (Fixed Investments (Fixed Income) of
Income) FMTC
Boyce Greer Senior Vice President, Senior Vice President,
Investments (Fixed Investments (Fixed Income) of
Income) FMTC
</TABLE>
A-1
<PAGE> 58
<TABLE>
<CAPTION>
NAME POSITION WITH FMTC PRINCIPAL OCCUPATION
- -------------------- ------------------------- --------------------------------
<S> <C> <C>
Robert Middlebrook Senior Vice President, Senior Vice President,
Investments (Fixed Investments (Fixed Income) of
Income) FMTC
Robert Lawrence Senior Vice President, Senior Vice President,
Investments (High Yield) Investments (High Yield) of FMTC
John Appleton Senior Vice President, Senior Vice President,
Investments (MIG) Investments (MIG) of FMTC
Barry Greenfield Senior Vice President, Senior Vice President,
Investments (Real Estate) Investments (Real Estate) of
FMTC
Michael E. Miles Senior Vice President, Senior Vice President,
Investments (Real Estate) Investments (Real Estate) of
FMTC
Lee Sandwen Senior Vice President, Senior Vice President,
Investments (Real Estate) Investments (Real Estate) of
FMTC
Jeffrey Lagarce Senior Vice President, Senior Vice President, Sales
Sales Management Management of FMTC
William A. Bagby Senior Vice President, Senior Vice President,
Marketing Marketing of FMTC
Dan H. Blanks Senior Vice President, Senior Vice President,
Marketing Marketing of FMTC
James E. Delisle, Senior Vice President, Senior Vice President,
Jr. Marketing Marketing of FMTC
William Fink Senior Vice President, Senior Vice President,
Marketing Marketing of FMTC
Michael Forrester Senior Vice President, Senior Vice President,
Marketing Marketing of FMTC
Oliver St. Clair Senior Vice President, Senior Vice President,
Franklin Marketing Marketing of FMTC
Arthur J. Greewood Senior Vice President, Senior Vice President,
Marketing Marketing of FMTC
Walter Lindsay Senior Vice President, Senior Vice President,
Marketing Marketing of FMTC
William Lynch Senior Vice President, Senior Vice President,
Marketing Marketing of FMTC
R. Ruel Stanley Senior Vice President, Senior Vice President,
Marketing Marketing of FMTC
David Yearwood Senior Vice President, Senior Vice President,
Marketing Marketing of FMTC
Theresa M. Messina Senior Vice President, Senior Vice President,
Operations Marketing of FMTC
</TABLE>
A-2
<PAGE> 59
<TABLE>
<CAPTION>
NAME POSITION WITH FMTC PRINCIPAL OCCUPATION
- -------------------- ------------------------- --------------------------------
<S> <C> <C>
Ellen McCarthy Senior Vice President, Senior Vice President, Human
Human Resources Resources of FMTC
Andrew Hunter Senior Vice President, Senior Vice President, Personal
Personal Trust Trust of FMTC
J. Gary Burkhead Director Director of FMTC
William Hayes Director Director of FMTC
Fred L. Henning, Jr. Director Director of FMTC
Robert Reynolds Director Director of FMTC
Ralph B. Vogel Director Director of FMTC
John P. Wilkens Director Director of FMTC
</TABLE>
MORGAN STANLEY ASSET MANAGEMENT INC.
The principal executive officers and Directors of Morgan Stanley Asset
Management Inc. and their principal occupations are set forth below. The
business address of each such person is 1221 Avenue of the Americas, New York,
New York 10020.
<TABLE>
<CAPTION>
NAME POSITIONS WITH MSAM PRINCIPAL OCCUPATION
- -------------------- ------------------------- --------------------------------
<S> <C> <C>
Barton M. Biggs Chairman, Director and Managing Director of Morgan
Managing Director Stanley & Co. Incorporated;
Chairman of Morgan Stanley Asset
Management Limited
Peter A. Nadosy Vice Chairman, Director Managing Director of Morgan
and Managing Director Stanley & Co. Incorporated;
Director of Morgan Stanley Asset
Management Limited
James M. Allwin President, Director and Managing Director of Morgan
Managing Director Stanley & Co.Incorporated;
President of Morgan Stanley
Realty Inc.
Gordon S. Gray Director and Managing Managing Director of Morgan
Director Stanley & Co. Incorporated;
Director of Morgan Stanley Asset
Management Limited
Dennis G. Sherva Director and Managing Managing Director of Morgan
Director Stanley & Co. Incorporated
</TABLE>
A-3
<PAGE> 60
T. ROWE PRICE ASSOCIATES, INC.
The principal executive officers and directors of T. Rowe Price Associates,
Inc. and their principal occupations are shown below. The business address of
each such person, unless otherwise indicated, is 100 East Pratt Street,
Baltimore, Maryland 21202.
<TABLE>
<CAPTION>
POSITION WITH T. ROWE
NAME PRICE PRINCIPAL OCCUPATION
- -------------------- ------------------------- --------------------------------
<S> <C> <C>
George J. Collins Chief Executive Officer, Director of Rowe Price-Fleming
President and Managing International, Inc.
Director ("Price-Fleming")
James E. Halbkat, Director President of U.S. Monitor Corp.
Jr. P.O. Box 23109
Hilton Head Island, SC
29925
Richard L. Menschel Director Limited Partner of Goldman Sachs
85 Broad St., 2nd Floor Group L.P.
New York, NY 10004
John W. Rosenblum Director Tayloe Murphy Professor of the
P.O. Box 6550 University of Virginia; Director
Charlottesville, VA 22906 of: Chesapeake Corporation,
Camdus Communications Corp.,
Comdial Corp. and Cone Mills
Corp.
Robert L. Strickland Director Chairman of Loew's Companies,
604 Two Piedmont Plaza Inc.; Director of Hannaford
Bldg. Winston-Salem, NC Bros., Co.
27104
Phillip C. Walsh Director Consultant to Cyprus Annex
200 East 66th Street, Minerals Company; Director of
Apt. A-1005 Piedmont Mining Company, Inc.
New York, NY 10021
Anne Marie Director Partner of the law firm of
Whittemore One James Center McGuire, Woods, Battle & Booth;
Richmond, VA 23219 Director of Owens and Minor,
Inc., USF&G Corp. and James
River Corp.
George A. Roche Chief Financial Officer Vice President and Director of
and Managing Director Price-Fleming
M. David Testa Managing Director Chairman of the Board
Price-Fleming
Carter O. Hoffman Managing Director Director of TRP Finance, Inc.
Henry H. Hopkins Managing Director Vice President of Price-Fleming
Charles P. Smith Managing Director Vice President of Price-Fleming
Peter Van Dyke Managing Director Vice President of Price-Fleming
Alvin M. Younger, Managing Director Secretary and Treasurer of
Jr. Secretary and Treasurer Price-Fleming
</TABLE>
A-4
<PAGE> 61
MANUFACTURERS ADVISER CORPORATION
The principal executive officers and directors of Manufacturers Adviser
Corporation and their principal occupations are shown below. The business
address of each such person, unless otherwise indicated, is 200 Bloor Street
East, Toronto, Ontario, Canada, M4W 1E5.
<TABLE>
<CAPTION>
POSITION WITH
MANUFACTURERS
NAME ADVISER CORP. PRINCIPAL OCCUPATION
- -------------------- ------------------------- --------------------------------
<S> <C> <C>
George Corey Director President, Exxel Management and
Marketing Corp., Flemington, NJ
since 1983
Bernadette B. Murphy Director Executive Director, Strategies
and Selections, M. Kimelan &
Co.,
New York, NY
George Slye Director Founding Partner, Vice Chairman
and part owner, Spaulding and
Slye Corp., Burlington, MA;
Director, Hill Development
Corp., Middletown, CT
Richard R. Schmaltz Director Director of Research, Neuberger
& Berman, New York, NY, 1992 to
present
Joseph B. Mounsey President Senior Vice President,
Investments, Manufacturers Life
Insurance Co., Toronto, CA,
1994-present
Robert Laughton Vice President Investment Management, U.S.
Fixed Income, Manufacturers Life
Insurance Co., Toronto, CA
Mark A. Schmeer Vice President Investment Management, U.S.
Equities, Manufacturers Life
Insurance Co., 1995-present;
Vice President, Sun Investment
Management, 1993-1995
Douglas H. Myers Vice President, Assistant Vice President and
Compliance; Vice Controller, U.S. Individual,
President, Finance; 1988-present; Vice President,
Treasurer Sun Life Investment Management,
1993-1995
David Chia Vice President, Compliance Audit Officer,
Compliance (London Manufacturers Life Insurance
Branch) Co., 1993-present
Catherine Addison Vice President Investment Management,
Manufacturers Life Insurance Co.
Stephen Hill Vice President Investment Management,
Manufacturers Life Insurance Co.
(London), 1995-present;
Director, Invesco Asset
Management, 1993-1994
Emilia Pandero Perez Vice President Investment Management,
Manufacturers Life Insurance Co.
(London)
</TABLE>
A-5
<PAGE> 62
<TABLE>
<CAPTION>
POSITION WITH
MANUFACTURERS
NAME ADVISER CORP. PRINCIPAL OCCUPATION
- -------------------- ------------------------- --------------------------------
<S> <C> <C>
Robert Lutzko Vice President Investment Management, U.S.
Equities, Manufacturers Life
Insurance Co., 1995-present;
U.S. Investment Manager, Workers
Compensation Board, Toronto,
1994-1995
Ronald R. Otsuki Vice President Investment Management, Capital
Markets, Manufacturers Life
Insurance Co., 1995-present;
Executive Director, Capital
Markets Division, Toronto,
1994-1995
David Howarth Vice President Assistant Vice President,
Capital Markets, Manufacturers
Life Insurance Co.,
1996-present; Director Risk
Control, Toronto, 1994-1995
Mark Andrew Hirst Vice President Investment Management,
Manufacturers Life Insurance Co.
(London)
Richard James Crook Vice President Investment Management,
Manufacturers Life Insurance Co.
(London)
Leslie Grober Vice President Investment Management, U.S.
Equities, Manufacturers Life
Insurance Co., Toronto,
1994-present; Investment
Representative, Toronto-Dominion
Bank, 1991-1993
Rhonda Chang Vice President Investment Management,
Manufacturers Life Insurance
Co., Toronto, 1994-present;
Investment Analyst, American
International Group, 1990-1994
Sheri L. Kocen Secretary and Senior Counsel, 1990-present,
General Counsel Manufacturers Life Insurance
Co., Toronto
</TABLE>
A-6
<PAGE> 63
EXHIBIT B
NASL SERIES TRUST
FORM OF SUBADVISORY AGREEMENT1
AGREEMENT made this 1st day of [October, 1996]2, between NASL Financial
Services, Inc., a Massachusetts corporation ("NASL Financial" or the "Adviser"),
and 3 (the "Subadviser"). In consideration of the
mutual covenants contained herein, the parties agree as follows:
1. APPOINTMENT OF SUBADVISER
The Subadviser undertakes to act as investment subadviser to, and, subject
to the supervision of the Trustees of NASL Series Trust (the "Trust") and the
terms of this Agreement, to manage the investment and reinvestment of the assets
of [the Portfolios]4 specified in Appendix A to this Agreement as it shall be
amended by the Adviser and the Subadviser from time to time (the "Portfolios"5).
The Subadviser will be an independent contractor and will have no authority to
act for or represent the Trust or Adviser in any way [except as]6 expressly
authorized in this Agreement or another writing by the Trust and Adviser.
2. SERVICES TO BE RENDERED BY THE SUBADVISER TO THE TRUST
- ---------------
1 This form of subadvisory agreement is a composite of four subadvisory
agreements, which have been combined for purposes of presentation. The
subadvisers to these agreements are: Morgan Stanley Asset Management Inc.
("Morgan Stanley"), Fidelity Management Trust Company ("FMTC"), T. Rowe Price
Associates, Inc. ("T. Rowe Price"), and Manufacturers Adviser Corporation
("MAC").
2 FMTC agreement replaces bracketed clause with: "January, 1996, as amended
December 31, 1996".
3 Morgan Stanley Asset Management Inc., a Delaware Corporation; Fidelity
Management Trust Company, a Massachusetts Corporation; T. Rowe Price
Associates, Inc., a Maryland Corporation; or Manufacturers Adviser Corp., a
Colorado Corporation.
4 FMTC agreement substitutes "each of the portfolios of the Trust" for the
bracketed clause.
5 FMTC agreement adds 'or "Portfolios"' where indicated.
6 FMTC agreement substitutes "or otherwise be deemed as" for bracketed clause.
B-1
<PAGE> 64
a. [Subject always to the direction and control of the Trustees of the
Trust,]7 the Subadviser will manage the investments and determine the
composition of the assets of the Portfolios8 in accordance with the
[Portfolios']9 registration statement[, as amended]10. In fulfilling
its obligations to manage the investments and reinvestments of the
assets of the Portfolios, the Subadviser will:
i. obtain and evaluate pertinent economic, statistical, financial
and other information affecting the economy generally and
individual companies or industries the securities of which are
included in the Portfolios or are under consideration for
inclusion in the Portfolios;
ii. formulate and implement a continuous investment program for each
Portfolio consistent with the investment objectives and related
investment policies for each such Portfolio as described in the
Trust's registration statement, as amended;
iii. take whatever steps are necessary to implement these investment
programs by the purchase and sale of securities11 including the
placing of orders for such purchases and sales;
iv. regularly report to the Trustees of the Trust with respect to the
implementation of these investment programs; and
v. provide [determinations, in accordance with procedures and methods
established by the Trustees of the Trust, of]12 the fair value
of13 securities [held by the Portfolios for which]14 market
quotations are
- ---------------
7 FMTC agreement omits the bracketed clause.
8 FMTC agreement adds ", subject always to the direction and control of the
Trustees of the Trust, and" where indicated.
9 FMTC agreement substitutes "provisions of the Trust's" for the bracketed
language.
10 FMTC agreement omits the bracketed clause.
11 FMTC agreement adds "and other investments authorized under the Trust's
registration statement" where indicated.
12 FMTC agreement omits the bracketed clause; T. Rowe Price agreement
substitutes "assistance to the Trust's Custodian regarding" for the bracketed
language.
13 FMTC agreement adds "certain" where indicated.
14 FMTC agreement substitutes "when" for the bracketed clause.
B-2
<PAGE> 65
not readily available [for purposes of enabling the Trust's
Custodian to calculate net asset value].15
b. The Subadviser, at its expense, will furnish (i) all necessary
investment and management facilities, including salaries of personnel
required for it to execute its duties faithfully, and (ii)
administrative facilities, including bookkeeping, clerical personnel and
equipment necessary for the efficient conduct of the investment affairs
of the Portfolios (excluding determination of net asset value and
shareholder accounting services).
c. The Subadviser will select brokers and dealers to effect all
transactions subject to the following conditions: The Subadviser will
place all16 orders with brokers, dealers, or issuers, and will negotiate
brokerage commissions if applicable. The Subadviser is directed at all
times to seek to execute brokerage transactions for the Portfolios in
accordance with such policies or practices as may be established by the
Trustees and described in the Trust's registration statement as amended.
The Subadviser may pay a broker-dealer which provides research and
brokerage services a higher [spread or]17 commission for a particular
transaction than otherwise might have been charged by another
broker-dealer, if the Subadviser determines that the higher spread or
commission is reasonable in relation to the value of the brokerage and
research services that such broker-dealer provides, viewed in terms of
either the particular transaction or the Subadviser's overall
responsibilities with respect to accounts managed by the Subadviser. The
Subadviser may use for the benefit of the Subadviser's other clients, or
make available to companies affiliated with the Subadviser or to its
directors for the benefit of its clients, any such brokerage and
research services that the Subadviser obtains from brokers or dealers.
[In accordance with Section 11(a) of the Securities Exchange Act of
1934, as amended and Rule 11a2-2(T) thereunder, and subject to any other
applicable laws and regulations including Section 17(e) of the
Investment Company Act of 1940 (the "1940 Act") and Rule 17e-1
thereunder, the Subadviser may engage its affiliates as broker-dealers
to effect portfolio transactions in securities for the Portfolios.]18
- ---------------
15 FMTC agreement substitutes "for purposes of calculating net asset value for
the Trust's Custodian in accordance with procedures and methods established
by the Trustees of the Trust" for the bracketed language; T. Rowe Price
agreement omits that bracketed language.
16 FMTC agreement adds "necessary" where indicated.
17 FMTC agreement omits the bracketed clause.
18 Bracketed paragraph applies for Morgan Stanley agreement only.
B-3
<PAGE> 66
[d. On occasions when the Subadviser deems the purchase or sale of a
security to be in the best interest of the Portfolio as well as other
clients of the Subadviser, the Subadviser to the extent permitted by
applicable laws and regulations, may, but shall be under no obligation
to, aggregate the securities to be purchased or sold to attempt to
obtain a more favorable price or lower brokerage commissions and
efficient execution. In such event, allocation of the securities so
purchased or sold, as well as the expenses incurred in the transaction,
will be made by the Subadviser in the manner the Subadviser considers
to be the most equitable and consistent with its fiduciary obligations
to the Portfolio and to its other clients.]19
d. The Subadviser will maintain all accounts, books and records with
respect to the Portfolios as are required of an investment adviser of a
registered investment company pursuant to the Investment Company Act of
1940 (the "Investment Company Act") and Investment Advisers Act of 1940
(the "Investment Advisers Act") and the rules thereunder.
3. COMPENSATION OF SUBADVISER
The Adviser will pay the Subadviser with respect to each Portfolio the
compensation specified in Appendix A to this Agreement.
4. LIABILITY OF SUBADVISER
Neither the Subadviser nor any of its [affiliates, officers, partners or]20
employees [nor anyone who controls the Subadviser (or any of its affiliates,
officers, partners or employees) within the meaning of Section 15 of the
Securities Act of 1933 (the "1933 Act")]21 shall be liable to the Adviser or
Trust for any loss suffered by the Adviser or Trust resulting from [any error of
judgment made in the good faith exercise of the Subadviser's investment
discretion in connection with selecting Portfolio investments]22 except for
losses resulting from willful misfeasance, bad faith or gross negligence23 of,
or from reckless disregard of, the duties of the
- ---------------
19 Bracketed paragraph applies for T. Rowe Price agreement only.
20 FMTC agreement omits "affiliates" and "partners" and adds "directors"; T.
Rowe Price agreement omits the bracketed clause; MAC agreement omits
"affiliates" and "partners".
21 Bracketed clause applies for Morgan Stanley agreement only.
22 FMTC agreement substitutes "its acts or omissions as Subadviser to the
Portfolios" for the bracketed clause.
23 FMTC agreement adds "in the performance" where indicated.
B-4
<PAGE> 67
Subadviser or any of its [affiliates, partners]24 or employees[; and
neither the Subadviser nor any of its [affiliates, officers, partners or]25
employees[, nor anyone who controls the Subadviser (or any of its affiliates,
officers, partners or employees) within the meaning of Section 15 of the 1933
Act]26 shall be liable to the Adviser or Trust for any loss suffered by the
Adviser or Trust resulting from any other matters to which this Agreement
relates (i.e., those other matters specified in Sections 2 and 8 of this
Agreement), except for losses resulting from willful misfeasance, bad faith, or
gross negligence in the performance of, or from disregard of, the duties of the
Subadviser or any of its [affiliates, partners or]27 employees]28.
5. SUPPLEMENTAL ARRANGEMENTS
The Subadviser may enter into arrangements with other persons affiliated
with the Subadviser29 to better enable it to fulfill its obligations under this
Agreement for the provision of certain personnel and facilities to the
Subadviser.
6. CONFLICTS OF INTEREST
It is understood that trustees, officers, agents and shareholders of the
Trust are or may be interested in the Subadviser as trustees, officers[,
partners]30 or otherwise; that directors, officers, agents and [partners]31 of
the Subadviser are or may be interested in the Trust as trustees, officers,
shareholders or otherwise; that the Subadviser may be interested in the Trust;
and that the existence of any such
- ---------------
24 FMTC agreement substitutes "directors, officers" for the bracketed clause; T.
Rowe Price agreement omits "affiliates,"; MAC agreement substitutes
"officers" for the bracketed clause.
25 T. Rowe Price agreement omits the bracketed clause; MAC agreement omits
"affiliates" and "partners".
26 Bracketed clause applies for Morgan Stanley agreement only.
27 T. Rowe Price agreement omits "affiliates"; MAC agreement omits bracketed
clause.
28 FMTC agreement substitutes "The Subadviser, its directors, officers or
employees shall not be liable to the Adviser or Trust for any loss suffered
as a consequence of any action or inaction of the Custodian in failing to
observe the instructions of the Subadviser" for the bracketed clause.
29 Morgan Stanley agreement adds ", including but not limited to, Morgan Stanley
Asset Management Limited," where indicated.
30 FMTC agreement substitutes ", stockholders" for bracketed clause; MAC
agreement omits bracketed clause.
31 FMTC agreement substitutes "stockholders" for bracketed clause; MAC agreement
omits bracketed clause.
B-5
<PAGE> 68
dual interest shall not affect the validity hereof or of any transactions
hereunder except as otherwise provided in the Agreement and Declaration of Trust
of the Trust and the [Certificate]32 of Incorporation of the Subadviser,
respectively, or by specific provision of applicable law.
7. REGULATION
The Subadviser shall submit to all regulatory and administrative bodies
having jurisdiction over the services provided pursuant to this Agreement any
information, reports or other material which any such body by reason of this
Agreement may request or require pursuant to applicable laws and regulations.
8. DURATION AND TERMINATION OF AGREEMENT
This Agreement shall become effective with respect to each Portfolio on the
later of (i) its execution[, (ii) the effective date of the registration
statement of the Portfolio and (iii) with respect to each Portfolio except the
________________________33, the date of the meeting of the shareholders of the
Portfolio, at which meeting this Agreement is approved]34 by the vote of a
majority of the outstanding voting securities (as defined in the Investment
Company Act) of the Portfolio. [The]35 Agreement will continue in effect for a
period more than two years from the date of its execution only so long as such
continuance is specifically approved at least annually either by the Trustees of
the Trust or by a majority of the outstanding voting securities of each of the
Portfolios, provided that in either event such continuance shall also be
approved by the vote of a majority of the Trustees of the Trust who are not
interested persons (as defined in the Investment Company Act) of any party to
this Agreement cast in person at a meeting called for the purpose of voting on
such approval. The required shareholder approval of the Agreement or of any
continuance of the Agreement shall be effective with respect to any Portfolio if
a majority of the outstanding voting securities of [the series (as defined in
Rule 18f-2(h) under the Investment Company Act) of shares of that Portfolio
votes]36 to approve the Agreement or its continuance, notwithstanding that the
Agreement or its continuance may not have been approved by a majority of the
- ---------------
32 FMTC agreement substitutes "Articles" for bracketed clause.
33 For Morgan Stanley agreement, insert "Global Equity Portfolio" where
indicated; For T. Rowe Price agreement, insert "Value Equity and Blue Chip
Growth Portfolios" where indicated; For MAC agreement, insert "Money Market
Portfolio" where indicated.
34 FMTC agreement substitutes "and (ii) approval" for the bracketed language.
35 FMTC agreement substitutes "Thereafter, the" for the bracketed clause.
36 FMTC agreement substitutes "that Portfolio vote" for the bracketed clause.
B-6
<PAGE> 69
outstanding voting securities of (a) any other Portfolio affected by the
Agreement or (b) all the portfolios of the Trust.
If the shareholders of any Portfolio fail to approve the Agreement or any
continuance of the Agreement37, the Subadviser will continue to act as
investment subadviser with respect to such Portfolio pending the required
approval of the Agreement or its continuance or of any contract with the
Subadviser or a different adviser or subadviser or other definitive action;
provided, that the compensation received by the Subadviser in respect of such
Portfolio during such period is in compliance with Rule 15a-4 under the
Investment Company Act.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Trustees of the Trust38, by the vote [of a majority of the
outstanding voting securities of the Trust, or with respect to any Portfolio by
the vote]39 of a majority of the outstanding voting securities of such
Portfolio, on sixty days' written notice to the Adviser and the Subadviser, or
by the Adviser or Subadviser on sixty days' written notice to the Trust and the
other party. This agreement will automatically terminate, without the payment of
any penalty, in the event of its assignment (as defined in the Investment
Company Act) or in the event the Advisory Agreement between the Adviser and the
Trust terminates for any reason.
9. PROVISION OF CERTAIN INFORMATION BY SUBADVISER
The Subadviser will promptly notify the Adviser in writing of the
occurrence of any of the following events:
a. the Subadviser fails to be registered as an investment adviser under the
Investment Advisers Act or under the laws of any jurisdiction in which
the Subadviser is required to be registered as an investment adviser in
order to perform its obligations under this Agreement;
b. the Subadviser is served or otherwise receives notice of any action,
suit, proceeding, inquiry or investigation, at law or in equity, before
or by any court, public board or body, involving the affairs of the
Trust; and
- ---------------
37 Morgan Stanley agreement adds "that is submitted to shareholders for
approval" where indicated.
38 FMTC agreement adds "or, with respect to any Portfolio," where indicated.
39 FMTC agreement omits the bracketed clause.
B-7
<PAGE> 70
c. [[any]40 change [in actual]41 control or management of the Subadviser
[or]42]43 the portfolio manager of any Portfolio 44.
[10. USE OF SUBADVISER'S NAME
The Adviser will not use the Subadviser's name (or that of any affiliate)
in Trust literature without prior review and approval by the Subadviser, which
will not be unreasonably withheld or delayed.]45
[10. PROVISION OF CERTAIN INFORMATION BY THE ADVISER
The Adviser shall furnish the Subadviser with copies of the Trust's
Prospectus and Statement of Additional Information, and any reports made by the
Trust to its shareholders, as soon as practicable after such documents become
available. The Adviser shall furnish the Subadviser with any further documents,
materials or information that the Subadviser may reasonably request to enable it
to perform its duties pursuant to this Agreement."
11. SERVICES TO OTHER CLIENTS
The Adviser understand, and has advised the Trust's Board of Trustees, that
the Subadviser now acts, or may in the future act, as an investment adviser to
fiduciary and other managed accounts and as investment adviser or subadviser to
other investment companies. Further, the Adviser understands, and has advised
the Trust's Board of Trustees that the Subadviser and its affiliates may give
advice and take action for its accounts, including investment companies, which
differs from advice given on the timing or nature of action taken for the
Portfolio. The Subadviser is not obligated to initiate transaction for the
Portfolio in any security which the Subadviser, its principals, affiliates or
employees may purchase or sell for their own accounts or other clients."]46
- ---------------
40 Morgan Stanley subadvisory agreement substitutes "there is" for bracketed
clause.
41 Morgan Stanley agreement substitutes "of" for bracketed clause.
42 Morgan Stanley agreement substitutes "which constitutes an assignment of the
Agreement under the 1940 Act" for the bracketed clause.
43 FMTC agreement substitutes "the chief executive officer or controlling
stockholder of the Subadviser or" for the bracketed clause.
44 Morgan Stanley and FMTC agreements adds "changes" where indicated.
45 Bracketed paragraph applies to FMTC agreement only.
46 Bracketed paragraphs apply to T. Rowe Price agreement only.
B-8
<PAGE> 71
10. 47AMENDMENTS TO THE AGREEMENT
This Agreement may be amended by the parties only if such amendment is
specifically approved by the vote of a majority of the outstanding voting
securities of each of the Portfolios affected by the amendment and by the vote
of a majority of the Trustees of the Trust who are not interested persons of any
party to this Agreement cast in person at a meeting called for the purpose of
voting on such approval. The required shareholder approval shall be effective
with respect to any Portfolio if a majority of the outstanding voting securities
of that Portfolio vote to approve the amendment, notwithstanding that the
amendment may not have been approved by a majority of the outstanding voting
securities of (a) any other Portfolio affected by the amendment or (b) all the
portfolios of the Trust.
[11. 48ENTIRE AGREEMENT
This Agreement contains the entire understanding and agreement of the
parties49]50
12. HEADINGS
The headings in the sections of this Agreement are inserted for convenience
of reference only and shall not constitute a part hereof.
13. NOTICES
All notices required to be given pursuant to this Agreement shall be
delivered or mailed to the last known business address of the Trust or
applicable party in person or by registered mail or a private mail or delivery
service providing the sender with notice of receipt. Notice shall be deemed
given on the date delivered or mailed in accordance with this paragraph.
14. SEVERABILITY
Should any portion of this Agreement for any reason be held to be void in
law or in equity, the Agreement shall be construed, insofar as is possible, as
if such portion had never been contained herein.
- ---------------
47 Note: paragraph 10 is numbered 11 on the FMTC agreement and 12 on the T. Rowe
Price agreement due to the presence of the additional paragraph(s) noted
above in those agreements.
48 Note: This paragraph is paragraph 12 in the FMTC agreement, and paragraph 13
in the T. Rowe Price agreement.
49 FMTC agreement adds "with respect to the Portfolios listed in Appendix A"
where indicated.
50 The bracketed paragraph is omitted from the Morgan Stanley agreement.
B-9
<PAGE> 72
15. GOVERNING LAW
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of The Commonwealth of Massachusetts, or any of the
applicable provisions of the Investment Company Act. To the extent that the laws
of The Commonwealth of Massachusetts, or any of the provisions in this
Agreement, conflict with applicable provisions of the Investment Company Act,
the latter shall control.
16. LIMITATION OF LIABILITY
The [Agreement and]51 Declaration of Trust52 dated September 28, 1988, a
copy of which, together with all amendments thereto (the "Declaration"), is on
file in the office of the Secretary of The Commonwealth of Massachusetts,
provides that the name "NASL Series Trust" refers to the Trustees under the
Declaration collectively as Trustees, but not as individuals or personally; and
no Trustee, shareholder, officer, employee or agent of the Trust shall be held
to any personal liability, nor shall resort be had to their private property,
for the satisfaction of any obligation or claim, in connection with the affairs
of the Trust or any portfolio thereof, but only the assets belonging to the
Trust, or to the particular portfolio with which the obligee or claimant dealt,
shall be liable.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal by their duly authorized officers as of the date first
mentioned above.
<TABLE>
<S> <C>
[SEAL] NASL FINANCIAL SERVICES, INC.
by:
------------------------------------
[SEAL] [SUBADVISER](53)
by:
------------------------------------
</TABLE>
- ---------------
51 FMTC agreement omits the bracketed clause.
52 FMTC agreement adds "establishing the Trust" where indicated.
(53) Fidelity Management Trust Company; Morgan Stanley Asset Management
Inc.; T. Rowe Price Associates, Inc.; or Manufacturers Adviser
Corporation.
B-10
<PAGE> 73
APPENDIX A
The Subadviser shall serve as investment subadviser for the following
[portfolio]54 of the Trust. The Adviser will pay the Subadviser, as full
compensation for all services provided under this Agreement, the fee computed
separately for each such Portfolio at an annual rate as follows (the "Subadviser
Percentage Fee"):
MORGAN STANLEY ASSET MANAGEMENT INC.;
Global Equity Portfolio: .500% of the first $50,000,000, .450% between
$50,000,000 and $200,000,000, .375% between $200,000,000 and $500,000,000
and .325% on the excess over $500,000,000 of the current value of the net
assets of the Portfolio;
FIDELITY MANAGEMENT TRUST CO.;
Equity Trust -- .375% of the first $50,000,000 and .325% between
$50,000,000 and $200,000,000, .275% between $200,000,000 and $500,000,000
and .200% on the excess over $500,000,000 of the current value of the net
assets of the Portfolio;
Conservative Asset Allocation Trust -- .350% of the first $50,000,000 and
.300% between $50,000,000 and $200,000,000, .250% between $200,000,000 and
$500,000,000 and .175% on the excess over $500,000,000 of the current value
of the net assets of the Portfolio;
Moderate Asset Allocation Trust -- .375% of the first $50,000,000 and .325%
between $50,000,000 and $200,000,000, .275% between $200,000,000 and
$500,000,000 and .200% on the excess over $500,000,000 of the current value
of the net assets of the Portfolio;
Aggressive Asset Allocation Trust -- .400% of the first $50,000,000 and
.350% between $50,000,000 and $200,000,000, .300% between $200,000,000 and
$500,000,000 and .225% on the excess over $500,000,000 of the current value
of the net assets of the Portfolio;
T. ROWE PRICE ASSOCIATES, INC.; OR
Value Equity Portfolio: .400% of the first $50,000,000, .300% between
$50,000,000 and $200,000,000, .200% between $200,000,000 and $500,000,000
and .200% on the excess over $500,000,000 of the current value of the net
assets of the Portfolio;
Blue Chip Growth Portfolio (formerly the Pasadena Growth Trust): .500% of
the first $50,000,000, .450% between $50,000,000 and $200,000,000, .400%
- ---------------
54 FMTC and T. Rowe Price agreements substitutes "portfolios" for bracketed
clause.
B-11
<PAGE> 74
between $200,000,000 and $500,000,000 and .325% on the excess over
$500,000,000 of the current value of the net assets of the Portfolio;
MANUFACTURERS ADVISER CORP.
Money Market Portfolio: .075% of the first $50,000,000, .075% between
$50,000,000 and $200,000,000, .075% between $200,000,000 and $500,000,000
and .020% on the excess over $500,000,000 of the current value of the net
assets of the Portfolio;
The Subadviser Percentage Fee for each Portfolio shall be accrued for each
calendar day and the sum of the daily fee accruals shall be paid monthly to the
Subadviser. The daily fee accruals will be computed by multiplying the fraction
of one over the number of calendar days in the year by the applicable annual
rate described in the preceding paragraph, and multiplying this product by the
net assets of the Portfolio as determined in accordance with the Trust's
prospectus and statement of additional information as of the close of business
on the previous business day on which the Trust was open for business.
If this Agreement becomes effective or terminates before the end of any
month, the fee (if any) for the period from the effective date to the end of
such month or from the beginning of such month to the date of termination, as
the case may be, shall be prorated according to the proportion which such period
bears to the full month in which such effectiveness or termination occurs.
B-12
<PAGE> 75
[NORTH AMERICAN SECURITY VOTING INSTRUCTIONS FORM
LIFE INSURANCE CORPORATION/
FIRST NORTH AMERICAN VOTING PURSUANT TO THESE INSTRUCTIONS WILL
LIFE ASSURANCE COMPANY/THE BE SPECIFIED. IF NO SPECIFICATION IS MADE
MANUFACTURERS LIFE INSURANCE AS TO AN ITEM, VOTING WILL BE FOR SUCH ITEM.
COMPANY OF AMERICA] ---
VOTING INSTRUCTIONS MUST BE RECEIVED BY
DECEMBER 19, 1996 TO BE VOTED FOR THE
MEETING TO BE HELD ON DECEMBER 20, 1996.
- --------------------------------------------------------------------------------
[NAME OF PORTFOLIO]
THESE VOTING INSTRUCTIONS ARE SOLICITED BY NORTH AMERICAN SECURITY LIFE
INSURANCE CORPORATION IN CONNECTION WITH A SOLICITATION OF PROXIES BY THE
TRUSTEES OF NASL SERIES TRUST.
The undersigned hereby instructs [North American Security Life Insurance
Corporation/First North American Life Assurance Company/The Manufacturers Life
Insurance Company of America] to vote the shares of NASL Series Trust (the
"Trust") attributable to his or her variable annuity contract at the Meeting of
Shareholders to be held at 116 Huntington Avenue, Boston, Massachusetts at
11:00 a.m., December 20, 1996, and any adjournments thereof, as indicated
below.
DATE: ________________________
PLEASE SIGN IN BOX BELOW
If a contract is held jointly, each contract
owner should sign. If only one signs, his or
her signature will be binding. If the contract
owner is a corporation, the President or a
Vice President should sign in his or her own
name, indicating title. If the contract owner
is a partnership, a partner should sign in his
or her own name, indicating that he or she is
a "Partner." If the contract owner is a trust,
the trustee should sign his or her own name,
indicating that he or she is a "Trustee."
_______________________________________________
_______________________________________________
Signature(s) Title(s), if applicable
<PAGE> 76
<TABLE>
<CAPTION>
[ALTERNATIVE A]
INDICATE YOUR VOTE BELOW BY FILLING IN THE APPROPRIATE BOXES IN THIS MANNER
USE BLUE OR BLACK INK OR DARK PENCIL. PLEASE DO NOT USE RED INK.
THIS VOTING INSTRUCTION, IF PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY THE CONTRACTHOLDER.
IF NO DIRECTION IS MADE, THIS VOTING INSTRUCTION WILL BE VOTED FOR ALL PROPOSALS.
---
PLEASE REFER TO THE PROXY STATEMENT FOR A DISCUSSION OF THE PROPOSALS.
PLEASE MARK YOUR VOTING INSTRUCTIONS FORM, DATE AND SIGN IT ON THE REVERSE SIDE, AND RETURN IT PROMPTLY
* Please fold and detach card at perforation before mailing *
<S> <C> <C> <C>
1. ALL PORTFOLIOS Election of Don B. Allen, Charles L. Bardelis, Samuel Hoar, FOR WITHHOLD
Robert J. Myers, John D. Richardson and F. David Rolwing to serve as members [ ] [ ]
of the Board of Trustees of the Trust.
___________________________________________________________________________________ FOR AGAINST ABSTAIN
2. GLOBAL EQUITY TRUST CONTRACTHOLDERS ONLY Approval of a subadvisory [ ] [ ] [ ]
agreement between the Adviser and Morgan Stanley Asset Management Inc.
5. MONEY MARKET TRUST CONTRACTHOLDERS ONLY Approval of a subadvisory [ ] [ ] [ ]
agreement between the Adviser and Manufacturers Adviser Corporation.
6a. EQUITY TRUST CONTRACTHOLDERS ONLY Approval of an amended subadvisory [ ] [ ] [ ]
agreement between the Adviser and Fidelity Management Trust Company
increasing the subadvisory fee.
10. ALL PORTFOLIOS Approval of a proposal to permit the Adviser, in the [ ] [ ] [ ]
future, to select and contract with subadvisers for the Portfolios after
obtaining approval of the Board of Trustees but without obtaining
shareholder approval.
11. ALL PORTFOLIOS Ratification of the selection of Coopers & Lybrand LLP, [ ] [ ] [ ]
as the independent accountants for the Trust for its fiscal year
ending December 31, 1996, and
To transact such other business as may properly come before the meeting.
</TABLE>
<PAGE> 77
<TABLE>
<CAPTION>
[ALTERNATIVE B]
INDICATE YOUR VOTE BELOW BY FILLING IN THE APPROPRIATE BOXES IN THIS MANNER
USE BLUE OR BLACK INK OR DARK PENCIL. PLEASE DO NOT USE RED INK.
THIS VOTING INSTRUCTION, IF PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY THE CONTRACTHOLDER.
IF NO DIRECTION IS MADE, THIS VOTING INSTRUCTION WILL BE VOTED FOR ALL PROPOSALS.
---
PLEASE REFER TO THE PROXY STATEMENT FOR A DISCUSSION OF THE PROPOSALS.
PLEASE MARK YOUR VOTING INSTRUCTIONS FORM, DATE AND SIGN IT ON THE REVERSE SIDE, AND RETURN IT PROMPTLY
IN THE ACCOMPANYING ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
* Please fold and detach card at perforation before mailing *
<S> <C> <C> <C>
1. ALL PORTFOLIOS Election of Don B. Allen, Charles L. Bardelis, Samuel Hoar, FOR WITHHOLD
Robert J. Myers, John D. Richardson and F. David Rolwing to serve as members [ ] [ ]
of the Board of Trustees of the Trust.
INSTRUCTION: To withhold authority to vote on any individual nominee's, write
the nominee's name on the line below.
___________________________________________________________________________________
FOR AGAINST ABSTAIN
6. Approval of an amended subadvisory agreement between the Advisor and
Fidelity Management Trust Company increasing the subadvisory fee.
b. AGGRESSIVE ASSET ALLOCATION TRUST CONTRACTHOLDERS ONLY [ ] [ ] [ ]
c. MODERATE ASSET ALLOCATION TRUST CONTRACTHOLDERS ONLY [ ] [ ] [ ]
d. CONSERVATIVE ASSET ALLOCATION TRUST CONTRACTHOLDER ONLY [ ] [ ] [ ]
7. Approval of changes to certain fundamental investment policies of the Trust.
a. AGGRESSIVE ASSET ALLOCATION TRUST CONTRACTHOLDERS ONLY [ ] [ ] [ ]
b. MODERATE ASSET ALLOCATION TRUST CONTRACTHOLDERS ONLY [ ] [ ] [ ]
c. CONSERVATIVE ASSET ALLOCATION TRUST CONTRACTHOLDER ONLY [ ] [ ] [ ]
10. ALL PORTFOLIOS Approval of a proposal to permit the Adviser, in the [ ] [ ] [ ]
future, to select and contract with subadvisers for the Portfolios after
obtaining approval of the Board of Trustees but without obtaining
shareholder approval.
11. ALL PORTFOLIOS Ratification of the selection of Coopers & Lybrand LLP, [ ] [ ] [ ]
as the independent accountants for the Trust for its fiscal year
ending December 31, 1996, and
To transact such other business as may properly come before the meeting.
</TABLE>
<PAGE> 78
<TABLE>
<CAPTION>
[ALTERNATIVE C]
INDICATE YOUR VOTE BELOW BY FILLING IN THE APPROPRIATE BOXES IN THIS MANNER
USE BLUE OR BLACK INK OR DARK PENCIL. PLEASE DO NOT USE RED INK.
THIS VOTING INSTRUCTION, IF PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY THE CONTRACTHOLDER.
IF NO DIRECTION IS MADE, THIS VOTING INSTRUCTION WILL BE VOTED FOR ALL PROPOSALS.
---
PLEASE REFER TO THE PROXY STATEMENT FOR A DISCUSSION OF THE PROPOSALS.
PLEASE MARK YOUR VOTING INSTRUCTIONS FORM, DATE AND SIGN IT ON THE REVERSE SIDE, AND RETURN IT PROMPTLY
IN THE ACCOMPANYING ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
* Please fold and detach card at perforation before mailing *
<S> <C> <C> <C>
1. ALL PORTFOLIOS Election of Don B. Allen, Charles L. Bardelis, Samuel Hoar, FOR WITHHOLD
Robert J. Myers, John D. Richardson and F. David Rolwing to serve as members [ ] [ ]
of the Board of Trustees of the Trust.
INSTRUCTION: To withhold authority to vote on any individual nominee's, write
name on the line below.
___________________________________________________________________________________
FOR AGAINST ABSTAIN
3. VALUE EQUITY TRUST CONTRACTHOLDERS ONLY Approval of a subadvisory [ ] [ ] [ ]
agreement between the Adviser and T. Rowe Price Associates, Inc.
4. BLUE CHIP GROWTH TRUST CONTRACTHOLDERS ONLY Approval of a subadvisory [ ] [ ] [ ]
agreement between the Adviser and T. Rowe Price Associates, Inc.
8. VALUE EQUITY TRUST CONTRACTHOLDERS ONLY Approval of a change to the [ ] [ ] [ ]
investment objective of the Trust.
9. BLUE CHIP GROWTH CONTRACTHOLDERS ONLY Approval of a change to the [ ] [ ] [ ]
investment objective of the Trust.
10. ALL PORTFOLIOS Approval of a proposal to permit the Adviser, in the [ ] [ ] [ ]
future, to select and contract with subadvisers for the Portfolio after
obtaining approval of the Board of Trustees but without obtaining
shareholder approval.
11. ALL PORTFOLIOS Ratification of the selection of Coopers & Lybrand LLP, [ ] [ ] [ ]
as the independent accountants for the Trust for its fiscal year
ending December 31, 1996, and
To transact such other business as may properly come before the meeting.
</TABLE>
<PAGE> 79
PLEASE NOTE
You will receive a separate Voting Instructions Form for each NASL Series
Trust Portfolio in which your contract values were invested as of October 23,
1996.
Whenever possible, we have included all of your Voting Instructions Forms
in a single proxy package to reduce the cost of postage and printed materials.
In certain instances, however, you may receive more than one proxy
package. These are not duplicates. Each proxy package contains different Voting
Instructions Forms.
PLEASE SIGN, DATE AND RETURN ALL VOTING INSTRUCTIONS FORMS RECEIVED
IN THE POSTAGE PAID ENVELOPE(S) PROVIDED.
