<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as permitted by Rule
14a-6 (e)(2))
[ ] 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
PRELIMINARY COPY
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 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"). 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 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. 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.
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
<PAGE> 3
2
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,
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:
Proposal 1 Election of six trustees to serve as members of the Board of
Trustees of the Trust.
Proposal 2A Approval of an amended subadvisory agreement between NASL
Financial Services, Inc. (in such capacity, 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 2A.)
Proposal 2B 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
2B.)
Proposal 2C 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 2C.)
Proposal 2D 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 2D.)
Because subadvisory fees are payable by the Adviser
out of its advisory fee, approval of Proposals 2A-2D
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 3 Approval of a subadvisory agreement between 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 3.)
Proposal 4 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 4.)
Proposal 5 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 5.)
Proposal 6 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 6.)
<PAGE> 5
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.
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.
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,
. [insert signature]
James D. Gallagher
Secretary
November 15, 1996
Boston, Massachusetts
<PAGE> 6
PRELIMINARY COPY
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 attributable 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.
1
<PAGE> 7
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>
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio Number of Eligible Votes held by Votes held by Votes held by
Votes NASL* FNAL Manufacturers
Life of
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> 8
SUMMARY OF PROPOSALS
--------------------
<TABLE>
<CAPTION>
Proposal Shareholders of the Trust Who Will Vote on
-------- ------------------------------------------
Number Proposal the Proposal
------ -------- ------------
<S> <C> <C>
Proposal 1 Election of six trustees to serve as members of All shareholders of the Trust will vote on this
the Board of Trustees of the Trust proposal
Proposal 2A Approval of an amended subadvisory Shareholders of the Equity Trust will vote on
agreement between NASL Financial Services, this proposal
Inc. (in such capacity, the "Adviser" or
"NASL Financial") and Fidelity Management
Trust Company ("FMTC") increasing the
subadvisory fee with respect to the Equity
Trust
Proposal 2B Approval of an amended subadvisory Shareholders of the Aggressive Asset
agreement between the Adviser and FMTC Allocation Trust will vote on this proposal
increasing the subadvisory fee with respect to
the Aggressive Asset Allocation Trust
Proposal 2C Approval of an amended subadvisory Shareholders of the Moderate Asset Allocation
agreement between the Adviser and FMTC Trust will vote on this proposal
increasing the subadvisory fee with respect to
the Moderate Asset Allocation Trust
Proposal 2D Approval of an amended subadvisory Shareholders of the Conservative Asset
agreement between the Adviser and FMTC Allocation Trust will vote on this proposal
increasing the subadvisory fee with respect to
the Conservative Asset Allocation Trust
Proposal 3 Approval of a subadvisory agreement between Shareholders of the Global Equity Trust will
the Adviser and Morgan Stanley Asset vote on this proposal
Management Inc. ("Morgan Stanley") with
respect to the Global Equity Trust
Proposal 4 Approval of a subadvisory agreement between Shareholders of the Value Equity Trust will
the Adviser and T. Rowe Price Associates, vote on this proposal
Inc. ("T. Rowe Price") with respect to the
Value Equity Trust
Proposal 5 Approval of a subadvisory agreement between Shareholders of the Blue Chip Growth Trust
the Adviser and T. Rowe Price with respect to will vote on this proposal
the Blue Chip Growth Trust
Proposal 6 Approval of a subadvisory agreement between Shareholders of the Money Market Trust will
the Adviser and Manufacturers Adviser vote on this proposal
Corporation ("MAC") with respect to the
Money Market Trust
Proposal 7A Approval of a change to certain fundamental Shareholders of the Aggressive Asset
investment policies of the Aggressive Asset Allocation Trust will vote on this proposal
Allocation Trust
</TABLE>
3
<PAGE> 9
<TABLE>
<CAPTION>
<S> <C> <C>
Proposal 7B Approval of a change to certain fundamental Shareholders of the Moderate Asset Allocation
investment policies of the Moderate Asset Allocation Trust will vote on this proposal
Trust
Proposal 7C Approval of a change to certain fundamental Shareholders of the Conservative Asset
investment policies of the Conservative Asset Allocation Trust will vote on this
Allocation Trust proposal
Proposal 8 Approval of a change to the investment Shareholders of the Value Equity Trust will
objective of the Value Equity Trust vote on this proposal
Proposal 9 Approval of a change to the investment Shareholders of the Blue Chip Growth Trust
objective of the Blue Chip Growth Trust will vote on this proposal
Proposal 10 Approval of a proposal to permit the Adviser, Shareholders of the Trust will vote together,
in the future, to select and contract with and shareholders of each Portfolio will vote
subadvisers for the Portfolios after obtaining separately, on this proposal
separately, on this proposal the approval of the Board but
without obtaining shareholder approval
Proposal 11 Ratification of selection of Coopers & All shareholders of the Trust will vote on this
Lybrand L.L.P. as independent accountants for proposal
the Trust for its fiscal year ending December
31, 1996
</TABLE>
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 for approval. An adjourned
session may be held within a reasonable time after the adjournment and without
further notice.
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.
4
<PAGE> 10
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 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.
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.
5
<PAGE> 11
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Year First
Name and Position with Became a Principle Occupations and Directorships during the
Trust Age Trustee Last Five Years
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DON B. ALLEN, 68 1988 Mr. Allen is a Senior Lecturer at University of
Trustee and Nominee Rochester - William Simon Graduate School of
Business Administration.
CHARLES L. BARDELIS, 55 1988 Mr. Bardelis is the President and Chief Executive
Trustee and Nominee 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 Mediator at Judicial
Trustee and Nominee 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. Moore has served as the
Chairman of the Board Executive Vice President, Canadian Insurance Trustee
of Trustees 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 Scudder AARP
Trustee and Nominee Investment Funds and a member of the Prospective
Payment Assessment Commission. He is also a self-
employed actuarial consultant.
JOHN D. RICHARDSON*, 58 Not Mr. Richardson is currently the Senior Vice
Nominee Applicable 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 President, Chairman and CEO
Nominee Applicable 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>
6
<PAGE> 12
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 Manufacturers Adviser Corporation ("MAC").
MAC currently serves as subadviser to the Money Market Trust. See Proposal 6
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.
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>
- ----------------------------------------------------------------------------------------------------------------------------
Name of Person, Aggregate Pension or Estimated Annual Total Compensation
Position Compensation From Retirement Benefits upon from Trust
Trust for Year Ended Benefits Accrued Retirement Complex for Year
December 31, 1995* as part of Trust Ended December
Expenses 31, 1995 * #
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Don B. Allen, $35,000 $0 $0 $42,500
Trustee
Charles L. Bardelis, $35,000 $0 $0 $42,500
Trustee
Samuel Hoar, $35,000 $0 $0 $42,500
Trustee
Brian L. Moore, $0 $0 $0 $0
Trustee
Robert J. Myers, $35,000 $0 $0 $42,500
Trustee
John D. Richardson, $0 $0 $0 $0
Nominee
F. David Rolwing, $0 $0 $0 $12,000
Nominee
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Compensation received for services as Trustee.
7
<PAGE> 13
# 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.
8
<PAGE> 14
PROPOSAL 2A
APPROVAL OF AN AMENDED SUBADVISORY AGREEMENT BETWEEN THE ADVISER AND FMTC
INCREASING THE SUBADVISORY FEE WITH RESPECT TO THE
EQUITY TRUST
PROPOSAL 2B
APPROVAL OF AN AMENDED SUBADVISORY AGREEMENT BETWEEN THE ADVISER AND FMTC
INCREASING THE SUBADVISORY FEE WITH RESPECT TO THE AGGRESSIVE ASSET ALLOCATION
TRUST
PROPOSAL 2C
APPROVAL OF AN AMENDED SUBADVISORY AGREEMENT BETWEEN THE ADVISER AND FMTC
INCREASING THE SUBADVISORY FEE WITH RESPECT TO THE MODERATE ASSET ALLOCATION
TRUST
PROPOSAL 2D
APPROVAL OF AN AMENDED SUBADVISORY AGREEMENT BETWEEN THE ADVISER AND FMTC
INCREASING THE SUBADVISORY FEE WITH RESPECT TO THE CONSERVATIVE ASSET
ALLOCATION TRUST
The Adviser, subject to the general supervision of the Board,
oversees the administration of all aspects of the business and affairs of the
Trust and selects, contracts with and compensates subadvisers to manage the
assets of the Portfolios. FMTC 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 Trustees who are not Interested Persons of NASL Financial, any of the
subadvisers to the Portfolios or the Trust (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 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
9
<PAGE> 15
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 C. 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>
FIRST BETWEEN BETWEEN
$50,000,000 $50,000,000 $200,000,000
----------- 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>
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>
FIRST BETWEEN BETWEEN
$50,000,000 $50,000,000 $200,000,000
----------- 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:
Equity Trust $1,628,673
Aggressive Asset Allocation Trust $ 560,019
Moderate Asset Allocation Trust $1,433,417
Conservative Asset Allocation Trust $ 616,971
10
<PAGE> 16
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:
Equity Trust $2,004,897*
Aggressive Asset Allocation Trust $707,930**
Moderate Asset Allocation Trust $1,744,550***
Conservative Asset Allocation Trust $671,634****
* 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 wholly-owned subsidiary of FMR Corp, a
Massachusetts 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
A list of other investment companies advised by FMTC or its
Affiliates having investment objectives similar to those of the FMTC Portfolios
is set forth in Exhibit B.
Advisory Agreement
For more information on the advisory agreement between the
Trust and NASL Financial, see "Additional Information--Advisory Arrangements"
below.
11
<PAGE> 17
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.
REQUIRED VOTE
Approval of the New FMTC Subadvisory Agreement with respect to
each FMTC Portfolio will require the affirmative vote of a "majority of the
outstanding voting securities" of such FMTC Portfolio, which for this purpose
means the affirmative vote of the lesser of (1) more than 50% of the outstanding
shares of the FMTC Portfolio or (2) 67% or more of the shares of the FMTC
Portfolio present at the Meeting or represented by proxy if more than 50% of the
outstanding shares of the FMTC Portfolio are represented at the Meeting in
person or by proxy (a "Majority Vote").
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES, RECOMMENDS THAT SHAREHOLDERS
OF THE EQUITY TRUST VOTE "FOR" PROPOSAL 2A
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES, RECOMMENDS THAT SHAREHOLDERS
OF THE AGGRESSIVE ASSET ALLOCATION TRUST VOTE "FOR" PROPOSAL 2B
12
<PAGE> 18
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES, RECOMMENDS THAT SHAREHOLDERS
OF THE MODERATE ASSET ALLOCATION TRUST VOTE "FOR" PROPOSAL 2C
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES, RECOMMENDS THAT SHAREHOLDERS
OF THE CONSERVATIVE ASSET ALLOCATION TRUST VOTE "FOR" PROPOSAL 2D
PROPOSAL 3
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
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 C.
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 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:
13
<PAGE> 19
.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.
Other Investment Companies Advised by Subadviser
A list of other investment companies advised by Morgan Stanley
having similar investment objectives to the Global Equity Trust is set forth in
Exhibit B.
Advisory Agreement
For more information on the advisory agreement between the
Trust and NASL Financial, see "Additional Information--Advisory Arrangements"
below.
14
<PAGE> 20
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.
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 3.
15
<PAGE> 21
PROPOSAL 4
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, except
for 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 C. For additional information regarding the Value Equity Subadvisory
Agreement, see "Additional 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.
16
<PAGE> 22
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.
Other Investment Companies Advised by Subadviser
A list of other investment companies advised by T. Rowe Price
having similar investment objectives to the Value Equity Trust (assuming that
Proposal 8 is approved by shareholders of the Value Equity Trust) is set forth
in Exhibit B.
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)
17
<PAGE> 23
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 the fact that the Portfolio had, for the prior year,
underperformed in comparison to its peer group and in comparison to 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 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 4.
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<PAGE> 24
PROPOSAL 5
APPROVAL OF A SUBADVISORY AGREEMENT BETWEEN THE ADVISOR 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
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 fee and the subadvisory fees
were 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.
19
<PAGE> 25
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 C. For additional information regarding the Blue Chip Growth Subadvisory
Agreement, see "Additional 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 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 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.
20
<PAGE> 26
<TABLE>
<CAPTION>
CURRENT PROPOSED
-------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
<S> <C> <C>
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 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.
21
<PAGE> 27
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 Subadvisers
A list of other investment companies advised by T. Rowe Price
having similar investment objectives to the Blue Chip Growth Trust (assuming
that shareholders of the Blue Chip Growth Trust approve Proposal 9) is set forth
in Exhibit B.
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 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.
22
<PAGE> 28
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.
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES, UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS OF THE BLUE CHIP GROWTH TRUST VOTE "FOR" PROPOSAL 5.
23
<PAGE> 29
PROPOSAL 6
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 C. For
additional information regarding the MAC Subadvisory Agreement, see "Additional
Information - Certain Provisions in the Advisory and Subadvisory Agreements"
below.
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.
24
<PAGE> 30
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 Subadviser
A list of other investment companies advised by MAC having
similar investment objectives to the Money Market Trust is set forth in Exhibit
B.
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 management of a
25
<PAGE> 31
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 6.
26
<PAGE> 32
PROPOSAL 7A
APPROVAL OF A CHANGE TO CERTAIN FUNDAMENTAL INVESTMENT POLICIES OF THE
AGGRESSIVE ASSET ALLOCATION TRUST
PROPOSAL 7B
APPROVAL OF A CHANGE TO CERTAIN FUNDAMENTAL INVESTMENT POLICIES OF 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 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
27
<PAGE> 33
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 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.
28
<PAGE> 34
PROPOSAL 8
APPROVAL OF A CHANGE TO THE INVESTMENT OBJECTIVE OF THE VALUE EQUITY TRUST
As described in Proposal 4, 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.
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. 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 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.
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<PAGE> 35
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.
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.
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<PAGE> 36
PROPOSAL 9
APPROVAL OF A CHANGE TO THE INVESTMENT OBJECTIVE OF
THE BLUE CHIP GROWTH TRUST
As described in Proposal 5, 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. 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 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.
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<PAGE> 37
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 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. 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 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
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<PAGE> 38
(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.
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.
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<PAGE> 39
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 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.
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<PAGE> 40
****************
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 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 Act, each of the Agreements will
automatically terminate in the event of its assignment.
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<PAGE> 41
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>
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<PAGE> 42
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 Business
Name, Address and Age Appointment* NASL Financial* Experience
- --------------------- ------------ --------------- ----------
<S> <C> <C> <C>
Brian L. Moore Chairman Director and Chairman Executive Vice President,
200 Bloor Street 1989 Canadian Insurance Operations,
11th Floor of Manulife, January 1, 1996 to
North Tower date; Chief Executive Officer,
Toronto, Ontario North American Life Assurance
Canada M4W 1E5 Company, October 1993 to
Age: 52 December 1995; Executive Vice
President and Chief Financial
Officer, North American Life
Assurance Company, September
1988 to October 1993.
</TABLE>
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<PAGE> 43
<TABLE>
<CAPTION>
Position with
Trust and Year
Election Position with Business
Name, Address and Age Appointment* NASL Financial* Experience
- --------------------- ------------ --------------- ----------
<S> <C> <C> <C>
John D. DesPrez III President Director Vice President, Annuities, of
116 Huntington Avenue Manulife, September 1996 to
Boston, MA 02116 present; President and Director,
Age: 39 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 Financial
116 Huntington Avenue 1988 Officer, U.S. Operations, of
Boston, MA 02116 Manulife, January 1, 1996 to
Age: 41 date; Vice President and Chief
Actuary, NASL.
James D. Gallagher Secretary Not Applicable Vice President, Legal Services,
116 Huntington Avenue of Manulife, January 1, 1996 to
Boston, MA 02116 date; Vice President and
Age: 42 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 Financial
116 Huntington Avenue Treasurer Officer, Annuities and Mutual
Boston, MA 02116 Funds, of Manulife, January 1,
Age: 40 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.
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<PAGE> 44
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 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 $6,609,957,
including the following amounts in connection with the FMTC Portfolios, the
Global Equity Trust, the Value Equity Trust and the Blue Chip Growth Trust:
PORTFOLIO YEAR-
ENDED
12/31/95
Equity Trust .....................................................$ 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
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
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.
For the years ended December 31, 1995, brokerage commissions
were paid to Goldman, Sachs & Co. by the FMTC Portfolios, the Global Equity
Trust, the Value Equity Trust, the Blue Chip Growth Trust, and the Money Market
Trust as follows:
39
<PAGE> 45
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
% OF PORTFOLIO'S % OF AGGREGATE
BROKERAGE $ AMOUNT OF
COMMISSIONS REPRESENTED TRANSACTIONS
PORTFOLIO COMMISSIONS FOR THE 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, and 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.
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>
% OF PORTFOLIO'S % OF AGGREGATE
BROKERAGE $ AMOUNT OF
COMMISSIONS REPRESENTED TRANSACTIONS
PORTFOLIO COMMISSIONS FOR THE 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>
During such period, the Value Equity Trust, the Blue Chip
Growth Trust, and the Money Market Trust did not pay brokerage commissions to
Fidelity Capital Markets.
40
<PAGE> 46
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.
41
<PAGE> 47
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, President and Interim President of FMTC
CEO
Edward E. Madden Vice Chairman of the Board Executive Vice President, Marketing
of FMTC
John P. O'Reilly Executive Vice President, Executive Vice President,
Administration, and Director Administration of FMTC
Cynthia Egan Executive Vice President Executive Vice President of FMTC
John Begley Senior Vice President, CFO, Senior Vice President, CFO, and
Treasurer, and Director Treasurer of FMTC
Walter Downey Senior Vice President, Investments Senior Vice President, Investments
(Equity) (Equity) of FMTC
Cesar Hernandez Senior Vice President, Investments Senior Vice President, Investments
(Equity) (Equity) of FMTC
Robert L. Macdonald Senior Vice President, Investments Senior Vice President, Investments
(Equity) (Equity) of FMTC
John McDowell Senior Vice President, Investments Senior Vice President, Investments
(Equity) (Equity) of FMTC
Neal Miller Senior Vice President, Investments Senior Vice President, Investments
(Equity) (Equity) of FMTC
Stephen Petersen Senior Vice President, Investments Senior Vice President, Investments
(Equity) (Equity) of FMTC
Kennedy Richardson Senior Vice President, Investments Senior Vice President, Investments
(Equity) (Equity) of FMTC
Scott Stewart Senior Vice President, Investments Senior Vice President, Investments
(Equity) (Equity) of FMTC
Beth Terrana Senior Vice President, Investments Senior Vice President, Investments
(Equity) (Equity) of FMTC
</TABLE>
42
<PAGE> 48
<TABLE>
<CAPTION>
Name Position with FMTC Principal Occupation
- ---- ------------------ --------------------
<S> <C> <C>
Dwight Churchill Senior Vice President, Investments Senior Vice President, Investments
(Fixed Income) (Fixed Income) of FMTC
Margaret Eagle Senior Vice President, Investments Senior Vice President, Investments
(Fixed Income) (Fixed Income) of FMTC
Boyce Greer Senior Vice President, Investments Senior Vice President, Investments
(Fixed Income) (Fixed Income) of FMTC
Robert Middlebrook Senior Vice President, Investments Senior Vice President, Investments
(Fixed Income) (Fixed Income) of FMTC
Robert Lawrence Senior Vice President, Investments Senior Vice President, Investments
(High Yield) (High Yield) of FMTC
John Appleton Senior Vice President, Investments Senior Vice President, Investments
(MIG) (MIG) of FMTC
Barry Greenfield Senior Vice President, Investments Senior Vice President, Investments
(Real Estate) (Real Estate) of FMTC
Michael E. Miles Senior Vice President, Investments Senior Vice President, Investments
(Real Estate) (Real Estate) of FMTC
Lee Sandwen Senior Vice President, Investments Senior Vice President, Investments
(Real Estate) (Real Estate) of FMTC
Jeffrey Lagarce Senior Vice President, Sales Senior Vice President, Sales
Management Management of FMTC
William A. Bagby Senior Vice President, Marketing Senior Vice President, Marketing of
FMTC
Dan H. Blanks Senior Vice President, Marketing Senior Vice President, Marketing of
FMTC
James E. Delisle, Jr. Senior Vice President, Marketing Senior Vice President, Marketing of
FMTC
William Fink Senior Vice President, Marketing Senior Vice President, Marketing of
FMTC
Michael Forrester Senior Vice President, Marketing Senior Vice President, Marketing of
FMTC
Oliver St. Clair Franklin Senior Vice President, Marketing Senior Vice President, Marketing of
FMTC
Arthur J. Greewood Senior Vice President, Marketing Senior Vice President, Marketing of
FMTC
Walter Lindsay Senior Vice President, Marketing Senior Vice President, Marketing of
FMTC
William Lynch Senior Vice President, Marketing Senior Vice President, Marketing of
</TABLE>
43
<PAGE> 49
<TABLE>
<CAPTION>
Name Position with FMTC Principal Occupation
- ---- ------------------ --------------------
<S> <C> <C>
R. Ruel Stanley Senior Vice President, Marketing Senior Vice President, Marketing of
FMTC
David Yearwood Senior Vice President, Marketing Senior Vice President, Marketing of
FMTC
Theresa M. Messina Senior Vice President, Operations Senior Vice President, Marketing of
FMTC
Ellen McCarthy Senior Vice President, Human Senior Vice President, Human
Resources Resources of FMTC
Andrew Hunter Senior Vice President, Personal Trust Senior Vice President, Personal
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>
Principal
Names and Address Positions with MSAM Occupation
- ----------------- ------------------- ----------
<S> <C> <C>
Barton M. Biggs Chairman, Director and Managing Managing Director of Morgan Stanley & Co.
Director Incorporated; Chairman of Morgan Stanley
Asset Management Limited
Peter A. Nadosy Vice Chairman, Director and Managing Director of Morgan Stanley & Co.
Managing Director Incorporated; Director of Morgan Stanley
Asset Management Limited
James M. Allwin President, Director and Managing Managing Director of Morgan Stanley & Co.
Director Incorporated; President of Morgan Stanley
Realty Inc.
Gordon S. Gray Director and Managing Director Managing Director of Morgan Stanley & Co.
Incorporated; Director of Morgan Stanley
Asset Management Limited
</TABLE>
44
<PAGE> 50
<TABLE>
<CAPTION>
<S> <C> <C>
Dennis G. Sherva Director and Managing Director Managing Director of Morgan Stanley & Co.
Incorporated
</TABLE>
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 Principal
Name Price Occupation
- ---- --------------------- ----------
<S> <C> <C>
George J. Collins Chief Executive Officer, President Director of Rowe Price-Fleming
and Managing Director International, Inc. ("Price-Fleming")
James E. Halbkat, Jr. Director President of U.S. Monitor Corp.
P.O. Box 23109
Hilton Head Island, SC 29925
Richard L. Menschel Director Limited Partner of Goldman Sachs Group
85 Broad St., 2nd Floor L.P.
New York, NY 10004
John W. Rosenblum Director Tayloe Murphy Professor of the University
P.O. Box 6550 of Virginia; Director of: Chesapeake
Charlottesville, VA 22906 Corporation, Camdus Communications
Corp., Comdial Corp. and Cone Mills Corp.
Robert L. Strickland Director Chairman of Loew's Companies, Inc.;
604 Two Piedmont Plaza Bldg. Director of Hannaford Bros., Co.
Winston-Salem, NC 27104
Phillip C. Walsh Director Consultant to Cyprus Annex Minerals
200 East 66th Street, Company; Director of Piedmont Mining
Apt. A-1005 Company, Inc.
New York, NY 10021
Anne Marie Director Partner of the law firm of McGuire, Woods,
Whittemore One James Center Battle & Booth; Director of Owens and
Richmond, VA 23219 Minor, Inc., USF&G Corp. and James River
Corp.
George A. Roche Chief Financial Officer and Vice President and Director of Price-Fleming
Managing Director
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, Jr. Managing Director Secretary and Treasurer of Price-Fleming
Secretary and Treasurer
</TABLE>
45
<PAGE> 51
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 Principal
Name Adviser Corp. 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, Compliance; Vice Assistant Vice President and Controller, U.S.
President, Finance; Treasurer Individual, 1988-present; Vice President, Sun
Life Investment Management, 1993-1995
David Chia Vice President, Compliance Compliance Audit Officer, Manufacturers
(London Branch) Life Insurance 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)
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
</TABLE>
46
<PAGE> 52
<TABLE>
<CAPTION>
Position with Manufacturers Principal
Name Adviser Corp. Occupation
- ---- --------------------------- ----------
<S> <C> <C>
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 General Counsel Senior Counsel, 1990-present, Manufacturers
Life Insurance Co., Toronto
</TABLE>
47
<PAGE> 53
EXHIBIT B
FUNDS ADVISED BY A SUBADVISER HAVING SIMILAR INVESTMENT OBJECTIVES TO THE FMTC
PORTFOLIOS, VALUE EQUITY TRUST, BLUE CHIP GROWTH TRUST, AND MONEY MARKET TRUST
FIDELITY MANAGEMENT TRUST COMPANY
An affiliate of Fidelity Management Trust Company ("FMTC")
manages two investment company funds with investment objectives similar to the
Equity Trust:
<TABLE>
<CAPTION>
=============================================================================================================================
Fund Investment Objective Advisory Fee Net Assets
(9/30/96)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fidelity Advisor Equity Long term capital appreciation 0.61% of net $3,244,600,000
Portfolio--Growth assets
- -----------------------------------------------------------------------------------------------------------------------------
Growth Company Long-term capital appreciation 0.67% of net $8,924,800,000
assets
=============================================================================================================================
</TABLE>
An affiliate of FMTC manages one investment company fund with
an investment objective similar to that of the Aggressive Asset Allocation
Trust:
<TABLE>
<CAPTION>
=============================================================================================================================
Fund Investment objective Advisory Fee Net Assets
(9/30/96)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fidelity Asset Manager- Maximum total return 0.61% of net assets $3,101,800,000
- -Growth over the long term
=============================================================================================================================
</TABLE>
An affiliate of FMTC manages one investment company fund with
an investment objective similar to that of the Moderate Asset Allocation Trust:
<TABLE>
<CAPTION>
=============================================================================================================================
Fund Investment objective Advisory Fee Net Assets
(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>
48
<PAGE> 54
An affiliate of FMTC manages one investment company fund with
an investment objective similar to that of the Conservative Asset Allocation
Trust:
<TABLE>
<CAPTION>
=============================================================================================================================
Fund Investment objective Advisory Fee Net Assets
(9/30/96)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fidelity Asset Manager- High level of current 0.45% of net assets $566,000,000
Income income. In addition,
the fund considers the
potential for capital
appreciation.
=============================================================================================================================
</TABLE>
MORGAN STANLEY ASSET MANAGEMENT INC.
Morgan Stanley Asset Management Inc. manages two investment
company funds with objectives similar to the Global Equity Trust:
<TABLE>
<CAPTION>
=============================================================================================================================
Fund Investment Objective Advisory Fee Net Assets
(9/30/96)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Global Equity Portfolio (a Long-term capital appreciation 0.80% of net $84,850,857
series of the Morgan Stanley by investing primarily in equity assets
Institutional Fund, Inc.) securities of issuers throughout
the world, including U.S. issuers
- -----------------------------------------------------------------------------------------------------------------------------
Global Equity Allocation Long-term capital appreciation 1.00% of net $145,688,002
Fund (a series of Morgan by investing in equity securities assets
Stanley Fund, Inc.) of U.S. and non-U.S. issuers
=============================================================================================================================
</TABLE>
T. ROWE PRICE ASSOCIATES, INC.
T. Rowe Price Associates, Inc. manages two investment company
funds with objectives similar to proposed investment objective of Value Equity
Trust:
<TABLE>
<CAPTION>
============================================================================================================================
Fund Investment objective Advisory Fee Net Assets (8/31/96)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
T. Rowe Price Equity Dividend income and capital 0.25% of net $6,471,000,000
Income Fund growth assets*
- ----------------------------------------------------------------------------------------------------------------------------
T. Rowe Price Equity Dividend income and capital 0.85% of net $60,700,000
Income Portfolio growth assets
============================================================================================================================
</TABLE>
49
<PAGE> 55
* For its services to each 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 sub-advisor to several
registered investment companies ("Non-Price Funds") having similar investment
objectives to the proposed investment objectives of the Value Equity Trust. For
this purpose, the Non-Price Funds are mutual funds that are not sponsored by T.
Rowe Price.
These investment company funds are:
<TABLE>
<CAPTION>
=============================================================================================================================
Fund Investment Objective Subadvisory Fee Net assets
(8/31/96)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity Income Portfolio Dividend income and capital .40% of net assets $53,000,000
(a series of the growth
Endeavor Series Trust)
- -----------------------------------------------------------------------------------------------------------------------------
Large Cap Value (a Dividend income and capital .50% of net assets $10,900,000
series of John Hancock growth
Variable Series Trust 1)
- -----------------------------------------------------------------------------------------------------------------------------
Maxim T. Rowe Price Dividend income and capital .50% of the first $20 million $33,100,000
Equity/Income (a series 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 capital .50% of the first $20 million $44,500,000
Series) (a series of the 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 Growth and income .35% of net assets $116,800,000
Series (a series of the
Security First Trust)
=============================================================================================================================
</TABLE>
T. Rowe Price manages one Combined Price investment company
fund with an investment objective similar to that of proposed investment
objective of Blue Chip Growth Trust:
<TABLE>
<CAPTION>
=============================================================================================================================
Fund Investment objective Advisory Fee Net Assets
(9/30/96)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
T. Rowe Price Blue Long-Term Capital 0.35% of net assets* $292,300,000
Chip Growth Fund Growth. Income is
secondary
=============================================================================================================================
</TABLE>
50
<PAGE> 56
T. Rowe Price also manages one Non-Price Fund investment
company fund with an investment objective similar to that of proposed investment
objective of Blue Chip Growth Trust:
<TABLE>
<CAPTION>
=============================================================================================================================
Fund Investment objective Subadvisory Fee Net Assets
(9/30/96)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Blue Chip Stock Series Long-Term Capital 0.50% of first $100 million; $9,400,000
(a series of the Fortis Growth. Income is 0.45% for assets over $100
Series Fund, Inc.) secondary million
=============================================================================================================================
</TABLE>
MANUFACTURERS ADVISER CORPORATION
Manufacturers Adviser Corporation serves as adviser to the
Money Market Fund of the Manulife Series Fund, Inc. and as subadviser to the
Money Market Fund of North American Funds, both of which have investment
objectives similar to that of the Money Market Trust.
<TABLE>
<CAPTION>
=============================================================================================================================
Fund Investment Objective Advisory/ Subadvisory Fee Net Assets (9/30/96)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market Fund Maximize current income Advisory fee of 0.50% of $44,437,819
(a series of consistent with preservation net assets
Manulife Series of principal and liquidity
Fund, Inc.)
- -----------------------------------------------------------------------------------------------------------------------------
Money Market Fund Maximize current income Subadvisory fee of .075% $19,510,769
(a series of North consistent with preservation of the first $500 million of
American Funds) of principal and liquidity net assets; .020% of net
assets above $500 million
=============================================================================================================================
</TABLE>
51
<PAGE> 57
EXHIBIT C
NASL SERIES TRUST
FORM OF SUBADVISORY AGREEMENT(1)
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
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 Portfolios(8) 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:
- --------
(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.
(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.
<PAGE> 58
2
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 securities(11)
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 of(13) securities [held by the Portfolios for
which](14) market quotations are 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 all(16) 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
- --------
(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.
(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.
<PAGE> 59
3
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)
[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 negligence(23) of,
or from reckless disregard of, the duties of the Subadviser or any
- --------
(18) Bracketed paragraph applies for Morgan Stanley agreement only.
(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.
<PAGE> 60
4
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 Subadviser(29) 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 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.
- --------
(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.
(32) FMTC agreement substitutes "Articles" for bracketed clause.
<PAGE> 61
5
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
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 Agreement(37), 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 Trust(38), 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.
- --------
(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.
(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.
<PAGE> 62
6
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
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.
<PAGE> 63
7
10.(47) AMENDMENTS 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.(48) ENTIRE AGREEMENT
This Agreement contains the entire understanding and agreement of the
parties(49)](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.
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.
- --------
(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.
<PAGE> 64
8
16. LIMITATION OF LIABILITY
The [Agreement and](51) Declaration of Trust(52) 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.
- --------
(51) FMTC agreement omits the bracketed clause.
(52) FMTC agreement adds "establishing the Trust" where indicated.
<PAGE> 65
9
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.
[SEAL] NASL Financial Services, Inc.
by: _______________________________
[SEAL] [Subadviser](53)
by: ______________________________
- --------
(53) Fidelity Management Trust Company;
Morgan Stanley Asset Management Inc.;
T. Rowe Price Associates, Inc.; or
Manufacturers Adviser Corporation.
<PAGE> 66
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% 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;
- --------
(54) FMTC and T. Rowe Price agreements substitutes "portfolios" for
bracketed clause.
<PAGE> 67
2
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.
<PAGE> 68
[NORTH AMERICAN SECURITY LIFE INSURANCE CORPORATION
FIRST NORTH AMERICAN LIFE ASSURANCE COMPANY
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA]
VOTING INSTRUCTIONS FORM
VOTING PURSUANT TO THESE INSTRUCTIONS WILL BE AS SPECIFIED. IF NO
SPECIFICATION IS MADE AS TO AN ITEM, VOTING WILL BE FOR SUCH ITEM. A SEPARATE
VOTING INSTRUCTION FORM IS PROVIDED FOR EACH NASL SERIES TRUST PORTFOLIO IN
WHICH YOUR CONTRACT VALUES WERE INVESTED AS OF OCTOBER 23, 1996. PLEASE SIGN,
DATE AND RETURN ALL VOTING INSTRUCTION FORMS RECEIVED IN THE ENCLOSED
POSTAGE-PAID ENVELOPE. 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, FIRST NORTH AMERICAN LIFE ASSURANCE COMPANY OR THE
MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA] IN CONNECTION WITH A
SOLICITATION OF PROXIES BY THE BOARD OF TRUSTEES OF NASL SERIES TRUST
The undersigned hereby instructs [North American Security Life
Insurance Corporation, First North American Life Assurance Company or The
Manufacturers Life Insurance Company of America] to vote the shares of NASL
Series Trust. (the "Trust") attributable to his or her variable annuity or
variable life 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 in his or her own name,
indicating that he or she is a "Trustee."
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Signature(s) Title(s), if applicable
<PAGE> 69
INDICATE YOUR VOTE BELOW BY FILLING IN THE APPROPRIATE BOXES IN THIS MANNER
[GRAPHIC] USING 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FOR WITHHOLD
1. Election of Don B. Allen, Charles L. Bardelis, Samuel Hoar, 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 for any
individual nominee's name above, strike a line
through the nominee's name.
FOR AGAINST ABSTAIN
2A. Approval of an amended subadvisory agreement between NASL Financial / / / / / /
Services, Inc. (in such capacity, 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 2A.)
2B. 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 2B.)
2C. 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 2C.)
2D. 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 2D.)
3. Approval of a subadvisory agreement between 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 3.)
4. 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 4.)
</TABLE>
<PAGE> 70
<TABLE>
<CAPTION>
<S> <C> <C> <C>
5. 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 5.)
6. 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 6.)
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.)
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.)
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.)
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.)
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.)
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.
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
To transact such other business as may properly come before the
meeting.
</TABLE>
- --------------------------------------------------------------------------------
PLEASE MARK YOUR VOTING INSTRUCTION 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.
