SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(c) OF THE SECURITIES
EXCHANGE ACT OF 1934
Check the appropriate box:
[ ] Preliminary information statement
[X] Definitive information statement
[ ] Confidential, for use of the Commission only (as permitted by Rule
14c-5(d)(2))
MANUFACTURERS INVESTMENT TRUST
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(not applicable)
[ ] 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.
(not applicable)
MANUFACTURERS INVESTMENT TRUST
73 Tremont Street
Boston, Massachusetts 02108
May 21, 2003
Dear Variable Annuity and Variable Life Contract Owners:
Although you are not a shareholder of Manufacturers Investment Trust
(the "Trust"), your purchase payments and the earnings on such purchase payments
under your variable annuity or variable life contracts issued by The
Manufacturers Life Insurance Company (U.S.A.) ("Manulife USA") and The
Manufacturers Life Insurance Company of New York ("Manulife New York") are
invested in shares of one or more of the portfolios of the Trust through
subaccounts of separate accounts established by Manulife USA and Manulife New
York for such purposes.
Enclosed please find the Trust's Information Statement regarding the
following subadviser changes:
====================================================================================================
Portfolio Current Subadviser New Subadviser
- ----------------------------------------------------------------------------------------------------
High Yield Trust Miller Anderson Salomon Brothers Asset
Management Inc ("SaBAM")
All Cap Value Trust The Dreyfus Corporation Lord, Abbett & Co.
("Lord Abbett")
International Small Cap Trust Founders Asset Management LLC Templeton Investment Counsel,
Inc. ("Templeton")
====================================================================================================
The investment advisory fee for the All Cap Value Trust has been
lowered as noted in the Information Statement. All other advisory fees remain
unchanged.
PLEASE NOTE THAT WE ARE NOT ASKING YOU FOR VOTING INSTRUCTIONS AND YOU
ARE REQUESTED NOT TO SEND US VOTING INSTRUCTIONS.
If you have any questions regarding any of the proposals, please call
one of the following numbers on any business day:
For Manulife USA variable annuity contracts: (800) 344-1029
For Manulife USA variable life contracts: (800) 827-4546
For Manulife New York variable annuity contracts: (800) 551-2078
For Manulife New York variable life contracts: (888) 267-7784
Sincerely,
/s/ James D. Gallagher
-----------------------
James D. Gallagher,
Secretary
Manufacturers Investment Trust
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MANUFACTURERS INVESTMENT TRUST
------------------------------
INFORMATION STATEMENT TO SHAREHOLDERS
REGARDING NEW SUBADVISORY AGREEMENTS FOR
THE HIGH YIELD TRUST
THE ALL CAP VALUE TRUST
THE INTERNATIONAL SMALL CAP TRUST
---------------------------------
MAY 21, 2003
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TABLE OF CONTENTS
PAGE
----
INFORMATION STATEMENT
Summary................................................................................. 4
New Subadvisory Agreement with Salomon Brothers Asset Management Inc (SaBAM)............ 5
New Subadvisory Agreement with Lord Abbett & Co (Lord Abbett)........................... 11
New Subadvisory Agreement with Templeton Investment Cousnel, Inc. (Templeton)........... 17
Additional Information.................................................................. 22
Other Matters........................................................................... 24
Exhibit A - Executive Officers and Directors of SaBAM................................... 25
Exhibit B - Executive Officers and Directors of Lord Abbett............................. 26
Exhibit C - Executive Officers and Directors of Templeton .............................. 27
Exhibit D - SaBAM Subadvisory Agreement................................................. 28
Exhibit E - Lord Abbett Subadvisory Agreement........................................... 33
Exhibit F - Templeton Subadvisory Agreement............................................. 39
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MANUFACTURERS INVESTMENT TRUST
73 Tremont Street, Boston, Massachusetts 02108
INFORMATION STATEMENT TO SHAREHOLDERS
REGARDING NEW SUBADVISORY AGREEMENTS FOR
THE HIGH YIELD TRUST
THE ALL CAP VALUETRUST
THE INTERNATIONAL SMALL CAP TRUST
MAY 21, 2003
SUMMARY
Manufacturers Investment Trust (the "Trust") is a no-load open-end
investment company, commonly known as a mutual fund, registered under the
Investment Company Act of 1940, as amended ("1940 Act"). The Trust currently
offers shares in 75 portfolios with one series of shares for each portfolio
("Portfolio"). As Adviser to the Trust, Manufacturers Securities Services, LLC
("Manulife Securities" or the "Adviser") selects, contracts with, compensates
and monitors subadvisers to manage the investment and reinvestment of the assets
of each of the Portfolios of the Trust. In addition, Manulife Securities
monitors the compliance of the subadvisers with the investment objectives and
related policies of each Portfolio and reviews the performance of the
subadvisers and reports periodically on such performance to the Board of
Trustees of the Trust ("Board" or the "Trustees"). Manulife Securities does not
currently manage any of the Portfolios' assets on a day-to-day basis. Manulife
Financial Securities, LLC ("MFS LLC"), an affiliate of the Trust and the
Adviser, is the principal underwriter for the Trust.
On April 2, 2003, the Board, including all of the Trustees who are not
"interested persons" (as defined in the 1940 Act) of any party to the Advisory
Agreement (the "Disinterested Trustees"), approved three new subadvisory
agreements which took effect on May 1, 2003. The first new subadvisory
agreements provide for the appointment of Salomon Brothers Asset Management Inc
("SaBAM") as subadviser to the High Yield Trust (formerly managed by Miller
Anderson). The second new subadvisory agreement provides for the appointment of
Lord Abbett & Co. ("Lord Abbett") as subadviser to the All Cap Value Trust
(formerly managed by The Dreyfus Corporation). The third new subadvisory
agreement provides for the appointment of Templeton Investment Counsel, Inc.
("Templeton") as subadviser to the International Small Cap Trust (formerly
managed by Founders Asset Management LLC). Neither SaBAM, Lord Abbett nor
Templeton is an affiliate of the Adviser (other than by reason of serving as a
subadviser to a Portfolio).
The Trust has received an order from the Securities and Exchange
Commission (the "Commission") permitting it to enter into subadvisory agreements
appointing subadvisers that are not affiliates of the Adviser (other than by
reason of serving as a subadviser to a Portfolio) and to change the terms of
such agreements without shareholder approval. The Trust, therefore, is able to
change subadvisers from time to time without the expense and delays associated
with obtaining shareholder approval of the change. However, a condition of this
order is that notice be sent to shareholders informing them of new agreements.
Therefore, this Information Statement is being supplied to shareholders to
inform them about the new subadvisory agreements described above and will be
mailed on or about May 21, 2003.
WE ARE NOT ASKING YOU FOR A PROXY, AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
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NEW SUBADVISORY AGREEMENT
WITH SALOMON BROTHERS ASSET MANAGEMENT INC ("SaBAM")
WITH RESPECT TO THE HIGH YIELD TRUST
APPROVAL OF NEW SUBADVISORY AGREEMENT
Prior to May 1, 2003, Miller Anderson, located at 1221 Avenue of the
Americas, New York, New York, was the subadviser to the High Yield Trust
pursuant to a subadvisory agreement with the Adviser dated December 31, 1996, as
amended December 31, 2001, which was assigned to Morgan Stanley Investments LP
on June 28, 2002 (the "Miller Anderson Agreement").
On April 3, 2003, the Board, including the Disinterested Trustees,
voted to accept the resignation of Miller Anderson as the subadviser for the
High Yield Trust and to approve a new subadvisory agreement between the Adviser
and SaBAM with respect to the High Yield Trust (the "SaBAM Subadvisory
Agreement"). Effective May 1, 2003, SaBAM succeeded Miller Anderson as
subadviser to that Portfolio. SaBAM is also subadviser to the U.S. Government
Securities Trust, Strategic Bond Trust and the Special Value Trust pursuant to
the terms of the SaBAM Subadvisory Agreement.
In connection with the approval of the SaBAM Subadvisory Agreement, the
Board also approved changing certain of the nonfundamental investment policies
of the portfolio to reflect the management style of SaBAM. The investment
policies were revised as follows:
The portfolio invests, under normal market conditions, at least 80% of
the portfolio's net assets (plus any borrowings for investment
purposes) in high yield securities, including corporate bonds,
preferred stocks, U.S. Government Securities, mortgage backed
securities, loan assignments or participations and convertible
securities which have the following ratings (or, if unrated, are
considered to be of equivalent quality):
CORPORATE BONDS, PREFERRED STOCKS AND
RATING AGENCY CONVERTIBLE SECURITIES
- -------------------------------------
Moody's Ba through C
Standard & Poor's BB through D
Securities rated less than "Baa" by Moody's or "BBB" by Standard &
Poor's are classified as non-investment grade securities and are
commonly referred to as "junk bonds." The Portfolio may also invest in
investment grade securities.
The High Yield Trust may invest in foreign bonds and other fixed
income securities denominated in foreign currencies, where, in the
opinion of the SaBAM, the combination of current yield and currency
value offer attractive expected returns. Foreign securities in which
the portfolio may invest include emerging market securities. SaBAM may
utilize futures, swaps and other derivatives in managing the portfolio.
The High Yield Trust may also invest in fixed-and floating-rate loans,
which investments generally will be in the form of loan participations
and assignments of such loans.
The significant differences between the old investment policies of the High
Yield Trust and the new investment policies described above are that the new
policies permit the High Yield Trust to invest in loan participations and
assignments and that High Yield Trust will not invest a significant amount of
its assets in mortgage-backed securities.
MANAGEMENT AND CONTROL OF SaBAM
Salomon Brothers Asset Management Inc has its principal offices at 399
Park Avenue, New York, New York 10022. Founded in 1987, Salomon Brothers Asset
Management Inc managed approximately
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$34.2 billion in assets under management as of December 31, 2002. Salomon
Brothers provides an array of investment services and products to a broad
spectrum of clients around the world, including individual and institutional
investors. Salomon Brothers has investment offices in 22 countries, research
centers in six cities worldwide and employs approximately 200 investment
professionals.
For information regarding the principal executive officers and
directors of SaBAM, see Exhibit A hereto.
DESCRIPTION OF NEW SaBAM AND OLD MILLER ANDERSON SUBADVISORY AGREEMENTS
The provisions of the new SaBAM Subadvisory Agreement are substantially
identical to the provisions of the old Miller Anderson Subadvisory Agreement.
The rate of subadvisory fees payable under the new SaBAM Subadvisory Agreement
is the same as the rate of subadvisory fees payable under the old Miller
Anderson Subadvisory Agreement. The description of the SaBAM Subadvisory
Agreement is set forth below and is qualified in its entirety by reference to
the form of agreement attached hereto as Exhibit B.
Management Services. Under the terms of the old Miller Anderson
Subadvisory Agreement and the new SaBAM Subadvisory Agreement (collectively, the
"Subadvisory Agreements"), Miller Anderson managed, and SaBAM manages, the
investment of the assets of the High Yield Trust, subject to the supervision of
the Board of Trustees. The Subadviser formulates a continuous investment program
for the Portfolio consistent with the Portfolio's investment objectives and
policies. The Subadviser implements such programs by purchases and sales of
securities and regularly reports to the Adviser and the Trustees 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. The Subadviser also furnishes
administrative facilities, including bookkeeping, clerical personnel, and
equipment necessary for the conduct of the investment affairs of the Portfolio.
Advisory and Subadvisory Fees. As compensation for its services as the
Adviser, Manulife Securities receives an advisory fee computed separately for
each Portfolio of the Trust. The fee for each Portfolio is stated as an annual
percentage of the current value of the net assets of the Portfolio and is
accrued and paid daily. The daily fee for each Portfolio is computed by
multiplying the fraction of one over the number of calendar days in the year by
the applicable annual rate for the 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 High Yield Trust currently is obligated
to pay the Adviser an advisory fee of .625% for the first $500 million of
average annual net assets and 0.550% on the assets above $500 million.
As compensation for its services, the Subadviser receives a fee from
the Adviser computed separately for the High Yield Trust. The fee for the
Portfolio is stated as an annual percentage of the current value of the net
assets of the Portfolio and is accrued daily and paid monthly. The daily fee
accrual is computed by multiplying the fraction of one over the number of
calendar days in the year by the applicable annual rate for the 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 subadvisory fees that the Adviser was obligated to pay Miller
Anderson under the Miller Anderson Subadvisory Agreement and is obligated to pay
SaBAM under the SaBAM Subadvisory Agreement. THESE FEES ARE PAID BY THE ADVISER
OUT OF THE ADVISORY FEE IT RECEIVES FOR THE PORTFOLIO AND ARE NOT ADDITIONAL
CHARGES TO THE PORTFOLIO.
FIRST EXCESS OVER
HIGH YIELD TRUST $500 MILLION $500 MILLION
Old Miller Anderson
Subadvisory Agreement .275% .200%
New SaBAM Subadvisory
Agreement .275% .200%
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The following is a schedule of the fees and expenses that the High
Yield Trust paid for the fiscal year ended December 31, 2002 (as an annual
percentage of the current value of the net assets of that Portfolio):
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
FOR FISCAL YEAR ENDED DECEMBER 31, 2002
- ---------------------------------------------------------------------------------------------------------
TOTAL TRUST ANNUAL
TRUST PORTFOLIO MANAGEMENT FEES 12b-1 FEES OTHER EXPENSES* EXPENSES
- ---------------------------------------------------------------------------------------------------------
SERIES I SERIES II SERIES I & SERIES II SERIES I SERIES II
- ---------------------------------------------------------------------------------------------------------
High Yield 0.625% 0.150% 0.350% 0.065% 0.840% 1.040%
- ---------------------------------------------------------------------------------------------------------
*Other Expenses include underlying portfolio expenses, custody fees,
registration fees, legal fees, audit fees, trustees' fees, insurance fees and
other miscellaneous expenses.
Since there is no change to the advisory fee for the High Yield Trust,
it is not anticipated that the expenses of the portfolio would have been
materially different had SaBAM managed the portfolio during the fiscal year
ended December 31, 2002.
EXAMPLES: The following Examples illustrate the expenses of investing
in the High Yield Trust. The Examples assume that the shareholder invests
$10,000 in the High Yield Trust for the time periods indicated and then redeems
all of the shares at the end of those periods. The Examples also assume that a
shareholder's investment has a 5% return each year and that such Portfolio's
operating expense levels remain the same as set forth in the corresponding
expense table above. Although a shareholder's actual costs may be higher or
lower, based on these assumptions the shareholders costs would be:
SERIES I SHARES
(UNAUDITED)
Portfolio One Year Three Years Five Years Ten Years
- -------------------------------------------------------------------------------------
High Yield Trust $86 $268 $466 $1,037
SERIES II SHARES
(UNAUDITED)
Portfolio One Year Three Years Five Years Ten Years
- -------------------------------------------------------------------------------------
High Yield Trust $106 $331 $574 $1,271
THE EXAMPLES SET FORTH ABOVE ASSUME REINVESTMENT OF ALL DIVIDENDS AND
DISTRIBUTIONS. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES OR ANNUAL RETURN OF SHARES OF THE PORTFOLIO; ACTUAL EXPENSES AND ANNUAL
RETURN MAY BE GREATER OR LESS THAN THOSE SHOWN. The purpose of these tables is
to assist shareholders in understanding the expenses a shareholder in the
Portfolio will bear. Please note, however, that the variable contracts issued by
Manulife USA and Manulife New York provide for charges, including sales charges,
not reflected in the above tables.
Since there is no change to the advisory fee for the High Yield Trust,
it is not anticipated that the expenses of the portfolio would have been
materially different had SaBAM managed the portfolio during the fiscal year
ended December 31, 2002.
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Approval, Amendment and Termination. The Subadvisory Agreements require
approval of the agreements as to the Portfolio by the Board (including a
majority of the Disinterested Trustees) and will continue in effect as to the
Portfolio for a period more than two years from the date of their execution only
so long as such continuance is specifically approved at least annually either by
the Trustees or by the vote of a Majority of the Outstanding Voting Securities
of the Trust, provided that in either event such continuance will also be
approved by the vote of the majority of the Disinterested Trustees.
Definition of a Majority of Outstanding Voting Securities. As used in
this Information Statement, the vote of a "Majority of the Outstanding
Voting Securities" means the affirmative vote of the lesser of:
(1) 67% or more of the voting securities of the Trust or a Portfolio, as
applicable, present at a Meeting, if the holders of more than 50% of
the outstanding voting securities of the Trust or a Portfolio, as
applicable, are present in person or by proxy or
(2) more than 50% of the outstanding voting securities of the Trust or a
Portfolio, as applicable.
The Subadvisory Agreements may be amended by the Adviser and the
Subadviser provided such amendment is specifically approved by the vote of a
majority of the Trustees, including a majority of the Disinterested Trustees,
cast in person at a meeting called for the purpose of voting on such approval.
Any required shareholder approval of any continuance of or amendment to
the Subadvisory Agreements will be effective with respect to any Portfolio if a
Majority of the Outstanding Voting Securities of that Portfolio votes to approve
such continuance or amendment, even if such continuance or amendment 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 of the Portfolios of the
Trust.
The Subadvisory 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 Subadvisory Agreements and to the Trust by:
- the Trustees of the Trust;
- with respect to any Portfolio, a Majority of the Outstanding
Voting Securities of the Portfolio;
- the Adviser, or
- the Subadviser.
The Subadvisory Agreements will automatically terminate, without the payment of
any penalty, in the event of their assignment or in the event the Advisory
Agreement between the Trust and Manulife Securities terminates for any reason.
EVALUATION BY THE BOARD OF TRUSTEES
At its meeting held on April 2-3, 2003, the Board of Trustees,
including a majority of the Disinterested Trustees, approved the SaBAM
Subadvisory Agreement.
In evaluating the SaBAM Subadvisory Agreement, the Board considered
numerous factors, including:
(i) the nature and quality of the services to be provided by
SaBAM,
(ii) performance information regarding the High Yield Trust
relative to funds with similar objectives and policies,
(iii) the financial statements of SaBAM, and
(iv) whether the proposed subadvisory fee and the expense ratio of
the High Yield Trust would be consistent with the fees and
expense ratios of other comparable portfolios.
At the meeting held on April 2-3, 2003, the Board was provided with an
analysis of its fiduciary obligations, reviewed its fiduciary duties and
discussed the information provided regarding SaBAM. Representatives of SaBAM
gave a presentation and responded to questions from the Trustees. There was
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an extended discussion of, and questioning about, SaBAM's plans for the High
Yield Trust. Throughout the review process, the Disinterested Trustees had the
assistance of independent legal counsel.
In voting to accept the resignation of Miller Anderson as subadviser to the High
Yield Trust, the board focused primarily on the following information:
(a) that the High Yield Trust had underperformed in comparison to its peer
group for the past three years,
(b) that similarly managed portfolios of SaBAM had performed better in
comparison to their peer group for the past three years and
(c) that the scope and quality of the services to be provided by the SaBAM
would equal or exceed those provided by the Miller Anderson.
SUBADVISORY FEES PAID
For the year ended December 31, 2002, the Adviser paid Miller Anderson
subadvisory fees with respect to the High Yield Trust of $982,731 (.275% of
average net assets). If the SaBAM Subadvisory Agreement had been in effect for
the year ended December 31, 2002, the Adviser would have paid SaBAM the same
amount.
ADVISORY FEES PAID
For the year ended December 31, 2002, the High Yield Trust paid the
Adviser advisory fees of $2,233,481 (.625% of average net assets), of which
$1,250,750 (.350% of average net assets) was retained by the Adviser after
payment of the subadvisory fee for the High Yield Trust.
OWNERSHIP OF THE TRUST
For information regarding the shareholders and ownership of the Trust,
see "ADDITIONAL INFORMATION" below.
BROKERAGE TRANSACTIONS
A description of the portfolio brokerage policies applicable to the
High Yield Trust is set forth under "ADDITIONAL INFORMATION" below.
OTHER INVESTMENT COMPANIES ADVISED BY SaBAM
SaBAM currently acts as adviser or subadviser to the following other
registered investment companies having similar investment objectives and
policies to those of the High Yield Trust. The size of each of these funds and
the rate of SaBAM's compensation for each fund are as follows:
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FUND ASSETS AS OF 12/31/02 FEE RATE
Salomon Brothers High Yield Bond Fund $ 565,657,843 .75%
Salomon Brothers Variable High Yield Bond Fund $ 20,850,679 .75%
Salomon Brothers Institutional High yield Bond $ 87,800,065 .50%
Fund
Salomon Brothers High Income Fund Inc $ 45,665,186 .70%
Salomon Brothers High Income Fund II Inc $ 673,370,510 1.00%
SUBADVISED MUTUAL FUNDS:
Salomon Brothers/JNL High Yield Bond Fund $17,098,045.22 .35% of average daily
net assets from $0 to
$50 Million)
.30% of average daily
net assets from $50 to
$100 Million)
.25% of average daily
net assets over $100
Million & above)
Heritage Income Trust - High Yield Bond Fund $25,898,119.00 .30%
PRIOR BOARD AND SHAREHOLDER APPROVAL OF COHEN & STEERS SUBADVISORY AGREEMENT
The Miller Anderson Subadvisory Agreement was most recently approved by
the Board of Trustees at a meeting held September 26-27, 2002 in connection with
the annual renewal of the agreement. Pursuant to the order of the Commission
received by the Trust which is discussed above under "SUMMARY," no shareholder
approval was required for the Miller Anderson Subadvisory Agreement.
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NEW SUBADVISORY AGREEMENT
WITH LORD ABBETT & CO.
WITH RESPECT TO THE ALL CAP VALUE TRUST
APPROVAL OF NEW SUBADVISORY AGREEMENT
Prior to May 1, 2003, The Dreyfus Corporation ("Dreyfus"), located at
200 Park Avenue, New York, New York 10166, was the subadviser to the All Cap
Value Trust pursuant to a subadvisory agreement with the Adviser dated April 30,
2001 (the "Dreyfus Subadvisory Agreement").
On April 2-3, 2003, the Board, including the Disinterested Trustees,
voted to accept the resignation of Dreyfus as subadviser to the All Cap Value
Trust and to approve a new subadvisory agreement between the Adviser and Lord
Abbett & Co. LLC ("Lord Abbett") with respect to the All Cap Value Trust (the
"Lord Abbett Subadvisory Agreement"). Effective May 1, 2003, Lord Abbett
succeeded Dreyfus as subadviser to that Portfolio. Lord Abbett is also
subadviser to the Mid Cap Value Trust pursuant to the terms of the Lord Abbett
Subadvisory Agreement.
In connection with the approval of the Lord Abbett Subadvisory
Agreement the Board also approved changing certain of the nonfundamental
investment policies of the portfolio to reflect the management style of Lord
Abbett. These policies were revised as follows:
The portfolio invests primarily in equity securities of U.S. and
multinational companies that Lord Abbett believes are undervalued in
all capitalization ranges. Under normal circumstances, the portfolio
will invest at least 50% of its net assets in equity securities of
large, seasoned companies with market capitalizations of at least $5
billion at the time of purchase. Equity securities may include common
stocks, preferred stock, convertible securities, warrants, and similar
instruments. These are companies that appear underpriced according to
certain financial measurements of their intrinsic worth or business
prospects (such as price-to-earnings or price to-book ratios).
The All Cap Value Trust may investment up to 10% of its net assets
in foreign equity securities. Lord Abbett does not consider ADRs and
securities of companies domiciled outside the U.S. but whose principal
trading market is in the U.S. to be "foreign securities." Accordingly,
such investments are not subject to the 10% limitation on foreign
securities.
The former investment policies were as noted below:
The All Cap Value Trust invested, under normal market conditions, at
least 65% of its total assets in the stocks of value companies of any
size although the portfolio invested primarily in mid-and
large-capitalization value stocks. The All Cap Value Trust was
permitted to invest in common stocks, preferred stocks and convertible
securities of both U.S. and foreign issuers. The All Cap Value Trust
could overweight or underweight certain economic sectors relative to
the Russell 1000 Value Index. Approximately 20% of total assets of the
All Cap Value Trust emphasized short-selling, hedging techniques,
overweighted industry and security positions, and investments in small
companies, high yield debt securities and private placements.
The All Cap Value Trust could invest in foreign securities (including
emerging market securities) and could have exposure to foreign
currencies through its investment in these securities, its direct
holdings of foreign currencies or through its use of foreign currency
exchange contracts for the purchase or sale of a fixed quantity of a
foreign currency at a future date. Investments in foreign securities
could include depositary receipts.
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MANAGEMENT AND CONTROL OF LORD ABBETT
Lord, Abbett & Co. LLC has its principal offices at 90 Hudson
Street, Jersey City, New Jersey 07302. Founded in 1929, Lord Abbett manages one
of the nation's oldest mutual fund complexes, with assets under management of
approximately $48.2 billion in more than 40 mutual funds and other advisory
accounts as of December 31, 2002. Lord Abbett is a Delaware limited liability
company. The Partners of Lord Abbett, all of whom are members of Lord Abbett and
are actively involved in the management of Lord Abbett, are listed in Exhibit B.
DESCRIPTION OF NEW LORD ABBETT AND OLD DREYFUS SUBADVISORY AGREEMENTS
The provisions of the new Lord Abbett Subadvisory Agreement are
substantially identical to the provisions of the old Dreyfus Subadvisory
Agreement, except as noted below. The rate of subadvisory fees payable under the
new Lord Abbett Subadvisory Agreement is lower than the rate of subadvisory fees
payable under the old Dreyfus Subadvisory Agreement. The description of the Lord
Abbett Subadvisory Agreement is set forth below and is qualified in its entirety
by reference to the form of agreement attached hereto as Exhibit E.
Management Services. Under the terms of the old Dreyfus Subadvisory
Agreement and the new Lord Abbett Subadvisory Agreement (collectively, the
"Subadvisory Agreements"), Dreyfus managed, and Lord Abbett manages, the
investment of the assets of the All Cap Value Trust, subject to the supervision
of the Board of Trustees. The Subadviser formulates a continuous investment
program for the Portfolio consistent with the Portfolio's investment objectives
and policies. The Subadviser implements such programs by purchases and sales of
securities and regularly reports to the Adviser and the Trustees 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. The Subadviser also furnishes
administrative facilities, including bookkeeping, clerical personnel, and
equipment necessary for the conduct of the investment affairs of the Portfolio.
Advisory and Subadvisory Fees. As compensation for its services as the
Adviser, Manulife Securities receives an advisory fee computed separately for
each Portfolio of the Trust. The fee for each Portfolio is stated as an annual
percentage of the current value of the net assets of the Portfolio and is
accrued and paid daily. The daily fee for each Portfolio is computed by
multiplying the fraction of one over the number of calendar days in the year by
the applicable annual rate for the 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. Prior to May 1, 2003, the All Cap Value
Trust was obligated to pay the Adviser an advisory fee of 0.800% on the first
$500 million in net assets and 0.750% on net assets in excess of $500 million.
Effective May 1, 2003, the advisory fee was reduced to 0.750% on the first $250
million in net assets, 0.700% on net assets between $250 million and $500
million and 0.650% on the excess of $500 million.
As compensation for its services, the Subadviser receives a fee from
the Adviser computed separately for the All Cap Value Trust. The fee for the
Portfolio is stated as an annual percentage of the current value of the net
assets of the Portfolio and is accrued daily and paid monthly. The daily fee
accrual is computed by multiplying the fraction of one over the number of
calendar days in the year by the applicable annual rate for the 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 subadvisory fees that the Adviser was obligated to pay Dreyfus
under the Dreyfus Subadvisory Agreement and is obligated to pay Lord Abbett
under the Lord Abbett Subadvisory Agreement. THESE FEES ARE PAID BY THE ADVISER
OUT OF THE ADVISORY FEE IT RECEIVES FOR THE PORTFOLIO AND ARE NOT ADDITIONAL
CHARGES TO THE PORTFOLIO. APPROVAL OF THE LORD ABBETT SUBADVISORY AGREEMENT HAS
RESULTED IN BOTH A DECREASE IN THE RATE OF THE ADVISORY FEES PAYABLE TO MANULIFE
SECURITIES AND THE SUBADVISORY FEES PAYABLE TO LORD ABBETT BY THE ADVISER.
13
FIRST EXCESS OVER
ALL CAP VALUE TRUST $500 MILLION $500 MILLION
Old Dreyfus
Subadvisory Agreement .450% .400%
Old Advisory Agreement .800% .750%
BETWEEN $250
FIRST MILLION AND EXCESS OVER
ALL CAP VALUE TRUST $250 MILLION $500 MILLION $500 MILLION
New Lord Abbett
Subadvisory Agreement .400% .350% .300%
New Advisory Agreement .750% .700% .650%
The following is a schedule of the fees and expenses that the All Cap
Value Trust paid for the fiscal year ended December 31, 2002 (as an annual
percentage of the current value of the net assets of that Portfolio):
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
FOR FISCAL YEAR ENDED DECEMBER 31, 2002
- ----------------------------------------------------------------------------------------------------------------
TRUST PORTFOLIO MANAGEMENT FEES 12b-1 FEES OTHER EXPENSES* TOTAL TRUST ANNUAL EXPENSES
- ----------------------------------------------------------------------------------------------------------------
SERIES I SERIES II SERIES I & SERIES II SERIES I SERIES II
- ----------------------------------------------------------------------------------------------------------------
All Cap Value Trust .800% 0.150% 0.350% 0.200% 1.150% 1.350%
- ----------------------------------------------------------------------------------------------------------------
*Other Expenses include underlying portfolio expenses, custody fees,
registration fees, legal fees, audit fees, trustees' fees, insurance fees and
other miscellaneous expenses.
The following is a schedule of the fees and expenses that the All Cap
Value Trust would have paid for the fiscal year ended December 31, 2002 (as an
annual percentage of the current value of the net assets of that Portfolio) had
the Lord Abbett Subadvisory Agreement been in effect and had the new, lower
advisory fee been in effect:
PRO FORMA ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
FOR FISCAL YEAR ENDED DECEMBER 31, 2002
- -----------------------------------------------------------------------------------------------------------------
TRUST PORTFOLIO MANAGEMENT FEES 12b-1 FEES OTHER EXPENSES* TOTAL TRUST ANNUAL EXPENSES
- -----------------------------------------------------------------------------------------------------------------
SERIES I SERIES II SERIES I & SERIES II SERIES I SERIES II
- -----------------------------------------------------------------------------------------------------------------
All Cap Value Trust 0.750% 0.150% 0.350% 0.200% 1.100% 1.300%
- -----------------------------------------------------------------------------------------------------------------
*Other Expenses include underlying portfolio expenses, custody fees,
registration fees, legal fees, audit fees, trustees' fees, insurance fees and
other miscellaneous expenses.
EXAMPLES: The following Examples illustrate the expenses of investing
in the All Cap Value Trust. The Examples assume that the shareholder invests
$10,000 in the All Cap Value Trust for the time periods indicated and then
redeems all of the shares at the end of those periods. The Examples also assume
14
that a shareholder's investment has a 5% return each year and that such
Portfolio's operating expense levels remain the same as set forth in the
corresponding expense table above. Although a shareholder's actual costs may be
higher or lower, based on these assumptions the shareholders costs would be:
PRIOR ADVISORY FEE
SERIES I SHARES
(UNAUDITED)
Portfolio One Year Three Years Five Years Ten Years
- -----------------------------------------------------------------------------------
All Cap Value Trust $117 $365 $633 $1,398
SERIES II SHARES
(UNAUDITED)
Portfolio One Year Three Years Five Years Ten Years
- -----------------------------------------------------------------------------------
All Cap Value Trust $137 $428 $739 $1,624
CURRENT ADVISORY FEE
SERIES I SHARES
(UNAUDITED)
Portfolio One Year Three Years Five Years Ten Years
- -----------------------------------------------------------------------------------
All Cap Value Trust $112 $350 $606 $1,340
SERIES II SHARES
(UNAUDITED)
Portfolio One Year Three Years Five Years Ten Years
- -----------------------------------------------------------------------------------
All Cap Value Trust $132 $412 $713 $1,568
THE EXAMPLES SET FORTH ABOVE ASSUME REINVESTMENT OF ALL DIVIDENDS AND
DISTRIBUTIONS. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES OR ANNUAL RETURN OF SHARES OF THE PORTFOLIO; ACTUAL EXPENSES AND ANNUAL
RETURN MAY BE GREATER OR LESS THAN THOSE SHOWN. The purpose of these tables is
to assist shareholders in understanding the expenses a shareholder in the
Portfolio will bear. Please note, however, that the variable contracts issued by
Manulife USA and Manulife New York provide for charges, including sales charges,
not reflected in the above tables.
Approval, Amendment and Termination. The Subadvisory Agreements
require approval of the agreements as to the Portfolio by the Board (including a
majority of the Disinterested Trustees) and will continue in effect as to the
Portfolio for a period more than two years from the date of their execution only
so long as such continuance is specifically approved at least annually either by
the Trustees or by the vote of a Majority of the Outstanding Voting Securities
of the Trust, provided that in either event such continuance will also be
approved by the vote of the majority of the Disinterested Trustees.
15
The Subadvisory Agreements may be amended by the Adviser and the
Subadviser provided such amendment is specifically approved by the vote of a
majority of the Trustees, including a majority of the Disinterested Trustees,
cast in person at a meeting called for the purpose of voting on such approval.
Any required shareholder approval of any continuance of or amendment to
the Subadvisory Agreements will be effective with respect to any Portfolio if a
Majority of the Outstanding Voting Securities of that Portfolio votes to approve
such continuance or amendment, even if such continuance or amendment 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 of the Portfolios of the
Trust.
The Subadvisory 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 Subadvisory Agreements and to the Trust by:
- the Trustees of the Trust;
- with respect to any Portfolio, a Majority of the Outstanding
Voting Securities of the Portfolio;
- the Adviser, or
- the Subadviser.
The Subadvisory Agreements will automatically terminate, without the payment of
any penalty, in the event of their assignment or in the event the Advisory
Agreement between the Trust and Manulife Securities terminates for any reason.
Evaluation by the Board of Trustees
At its meeting held on April 2-3, 2003, the Board of Trustees,
including a majority of the Disinterested Trustees, approved the Lord Abbett
Subadvisory Agreement.
In evaluating the Lord Abbett Subadvisory Agreement, the Board
considered numerous factors, including:
(v) the nature and quality of the services to be provided by Lord
Abbett,
(vi) performance information regarding the All Cap Value Trust
relative to funds with similar objectives and policies,
(vii) the financial statements of Lord Abbett, and
(viii) whether the proposed subadvisory fee, including breakpoints,
and the expense ratio of the All Cap Value Trust would be
consistent with the fees and expense ratios of other
comparable portfolios.
At the meeting held on April 2-3, 2003, the Board was provided with an
analysis of its fiduciary obligations, reviewed its fiduciary duties and
discussed the information provided regarding Lord Abbett. Representatives of
Lord Abbett gave a presentation and responded to questions from the Trustees.
There was an extended discussion of, and questioning about, Lord Abbett's plans
for the All Cap Value Trust. Throughout the review process, the Disinterested
Trustees had the assistance of independent legal counsel.
In voting to accept the resignation of Dreyfus as subadviser to the All Cap
Value Trust, the board focused primarily on the following information:
(a) that the All Cap Value Trust had underperformed in comparison to its
peer group for the past three years,
(b) that similarly managed portfolios of Lord Abbett had performed better
in comparison to their peer group for the past three years and
(c) that the scope and quality of the services to be provided by the Lord
Abbett would equal or exceed those provided by the Dreyfus.
16
SUBADVISORY FEES PAID
For the year ended December 31, 2002, the Adviser paid Dreyfus
subadvisory fees with respect to the All Cap Value Trust of $148,334 (.450% of
average net assets). If the Lord Abbett Subadvisory Agreement had been in effect
for the year ended December 31, 2002, the Adviser would have paid Lord Abbett
subadvisory fees with respect to the All Cap Value Trust of $131,852 (.400% of
average net assets).
ADVISORY FEES PAID
For the year ended December 31, 2002, the All Cap Value Trust paid the
Adviser advisory fees of $263,705 (.800% of average net assets), of which
$115,371 (.350% of average net assets) was retained by the Adviser after payment
of the subadvisory fee for the All Cap Value Trust. If the new, lower advisory
fee for the All Cap Value Trust had been in effect for the year ended December
31, 2002, the Adviser would have paid advisory fees with respect to the All Cap
Value Trust of $247,223 (.750% of average net assets).
OWNERSHIP OF THE TRUST
For information regarding the shareholders and ownership of the Trust,
see "ADDITIONAL INFORMATION" below.
BROKERAGE TRANSACTIONS
A description of the portfolio brokerage policies applicable to the All
Cap Value Trust is set forth under "ADDITIONAL INFORMATION" below.
OTHER INVESTMENT COMPANIES ADVISED BY LORD ABBETT
Lord Abbett currently acts as adviser or subadviser to the following
other registered investment companies having similar investment objectives and
policies to those of the All Cap Value Trust.
The size of each of these funds and the rate of Lord Abbett's compensation for
each fund are as follows:
FUND ASSETS AS OF 12/31/02 FEE RATE
Lord Abbett Series Trust - Lord Abbett All Value Fund $364,438,586 0.71%
Lord Abbett Series Fund, Inc. - All Value Portfolio N/A* 0.75%
* Commencement of Operations for Lord Abbett Series Fund, Inc. - All Value
Portfolio is April 30, 2003.
PRIOR BOARD AND SHAREHOLDER APPROVAL OF DREYFUS SUBADVISORY AGREEMENT
The Dreyfus Subadvisory Agreement was most recently approved by the
Board of Trustees at a meeting held April 2-3, 2003 in connection with the
annual renewal of the agreement. Pursuant to the order of the Commission
received by the Trust which is discussed above under "SUMMARY," no shareholder
approval was required for the Dreyfus Subadvisory Agreement.
17
NEW SUBADVISORY AGREEMENT
WITH TEMPLETON INVESTMENT COUNSEL, INC.
WITH RESPECT TO THE INTERNATIONAL SMALL CAP TRUST
APPROVAL OF NEW SUBADVISORY AGREEMENT
Prior to May 1, 2003, Founders Asset Management LLC ("Founders"),
located at 2930 East Third Avenue, Denver, Colorado 80206, was the subadviser to
the International Small Cap Trust pursuant to a subadvisory agreement with the
Adviser dated April 1, 1998, as amended December 30, 2001 (the "Founders
Agreement").
On April 3, 2003, the Board, including the Disinterested Trustees,
voted to accept the resignation of Founders as subadviser to the International
Small Cap Trust and to approve a new subadvisory agreement between the Adviser
and Templeton Investment Counsel, Inc. ("Templeton") with respect to the
International Small Cap Trust (the "Templeton Subadvisory Agreement. Effective
May 1, 2003, Templeton succeeded Founders as subadviser to that Portfolio.
Templeton is also subadviser to the International Value Trust pursuant to the
terms of the Templeton Subadvisory Agreement.
In connection with the approval of the Templeton Subadvisory Agreement
the Board also approved changing certain of the nonfundamental investment
policies of the portfolio to reflect the management style of Templeton. These
policies were revised as follows:
Under normal market conditions, the portfolio will invest at
least 80% of its net assets (plus any borrowings for investment
purposes) in securities issued by foreign companies which have total
stock market capitalizations or annual revenues of $1.5 billion or less
($2 billion or less effective August 1, 2003) ("small company
securities").
The portfolio may invest in small company securities in
emerging markets. In some emerging markets, the portfolio may invest in
companies that qualify as smaller companies but that still are among
the largest in the market. The portfolio may also invest a portion of
its assets in the equity securities of larger foreign companies.
An equity security, or stock, represents a proportionate share
of the ownership of a company; its value is based on the success of the
company's business, any income paid to stockholders, the value of its
assets, and general market conditions. Common stocks, preferred stocks
and convertible securities are examples of equity securities.
Convertible securities have characteristics of both debt securities
(which is generally the form in which they are first issued) and equity
securities (which are what they can be converted into).
The portfolio may invest more than 25% of its assets in the securities
of issuers located in any one country. At least 65% of the portfolio's
total assets are normally invested in foreign securities representing a
minimum of three countries (other than the United States).
The significant difference between the old investment policies of the
International Small Cap Trust and the new investment policies described above
are that effective August 1, 2003 the definition of small company securities
will be changed to reflect a market capitalization/annual revenues of $2 billion
(as opposed to $1.5 billion).
MANAGEMENT AND CONTROL OF TEMPLETON
The management and control of Templeton is described above under
"Management and Control of Templeton."
DESCRIPTION OF NEW TEMPLETON AND OLD FOUNDERS SUBADVISORY AGREEMENTS
18
The provisions of the new Templeton Subadvisory Agreement are
substantially identical to the provisions of the old Founders Subadvisory
Agreement. In addition, the rate of subadvisory fees payable under the new
Templeton Subadvisory Agreement is the same as the rate of subadvisory fees
payable under the old Founders Subadvisory Agreement. The description of the
Templeton Subadvisory Agreement is set forth below and is qualified in its
entirety by reference to the form of agreement attached hereto as Exhibit B.
Management Services. Under the terms of the old Founders Subadvisory
Agreement and the new Templeton Subadvisory Agreement (collectively, the
"Subadvisory Agreements"), Founders managed, and Templeton manages, the
investment of the assets of the International Small Cap Trust, subject to the
supervision of the Board of Trustees. The Subadviser formulates a continuous
investment program for the Portfolio consistent with the Portfolio's investment
objectives and policies. The Subadviser implements such programs by purchases
and sales of securities and regularly reports to the Adviser and the Trustees
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. The Subadviser also
furnishes administrative facilities, including bookkeeping, clerical personnel,
and equipment necessary for the conduct of the investment affairs of the
Portfolio.
Advisory and Subadvisory Fees. As compensation for its services as the
Adviser, Manulife Securities receives an advisory fee computed separately for
each Portfolio of the Trust. The fee for each Portfolio is stated as an annual
percentage of the current value of the net assets of the Portfolio and is
accrued and paid daily. The daily fee for each Portfolio is computed by
multiplying the fraction of one over the number of calendar days in the year by
the applicable annual rate for the 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 International Small Cap Trust currently
is obligated to pay the Adviser an advisory fee of 0.950% of the first $200
million of net assets, 0.850% of the net assets between $200 million and $500
million and 0.750% of net assets in excess of $500 million.
As compensation for its services, the Subadviser receives a fee from
the Adviser computed separately for the International Small Cap Trust. The fee
for the Portfolio is stated as an annual percentage of the current value of the
net assets of the Portfolio and is accrued daily and paid monthly. The daily fee
accrual is computed by multiplying the fraction of one over the number of
calendar days in the year by the applicable annual rate for the 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 subadvisory fees that the Adviser was obligated to pay Founders
under the Founders Subadvisory Agreement and is obligated to pay Templeton under
the Templeton Subadvisory Agreement. THESE FEES ARE PAID BY THE ADVISER OUT OF
THE ADVISORY FEE IT RECEIVES FOR THE PORTFOLIO AND ARE NOT ADDITIONAL CHARGES TO
THE PORTFOLIO. APPROVAL OF THE TEMPLETON SUBADVISORY AGREEMENT HAS RESULTED IN
NO CHANGE IN EITHER THE RATE OF THE ADVISORY FEES PAYABLE TO MANULIFE SECURITIES
OR SUBADVISORY FEES PAYABLE TO TEMPLETON BY THE ADVISER.
BETWEEN
INTERNATIONAL SMALL CAP FIRST $200 MILLION AND EXCESS OVER
TRUST $200 MILLION $500 MILLION $500 MILLION
Old Founders Subadvisory
Agreement 0.600% 0.500% 0.400%
New Templeton Subadvisory
Agreement 0.600% 0.500% 0.400%
The following is a schedule of the fees and expenses that the
International Small Cap Trust paid for the fiscal year ended December 31, 2002
(as an annual percentage of the current value of the net assets of that
Portfolio):
19
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
FOR FISCAL YEAR ENDED DECEMBER 31, 2002
- ------------------------------------------------------------------------------------------------------------
MANAGEMENT TOTAL TRUST ANNUAL
TRUST PORTFOLIO FEES 12b-1 FEES OTHER EXPENSES* EXPENSES
- ------------------------------------------------------------------------------------------------------------
SERIES I SERIES II SERIES I & SERIES II SERIES SERIES II
- ------------------------------------------------------------------------------------------------------------
International Small Cap 0.950% 0.150% 0.350% 0.470% 1.570% 1.770%
- ------------------------------------------------------------------------------------------------------------
*Other Expenses include underlying portfolio expenses, custody fees,
registration fees, legal fees, audit fees, trustees' fees, insurance fees and
other miscellaneous expenses.
Since there is no change to the advisory fee for the International
Small Cap Trust, it is not anticipated that the expenses of the portfolio would
have been materially different had Templeton managed the portfolio during the
fiscal year ended December 31, 2002.
EXAMPLES: The following Examples illustrate the expenses of investing
in the International Small Cap Trust. The Examples assume that the shareholder
invests $10,000 in the International Small Cap Trust for the time periods
indicated and then redeems all of the shares at the end of those periods. The
Examples also assume that a shareholder's investment has a 5% return each year
and that such Portfolio's operating expense levels remain the same as set forth
in the corresponding expense table above. Although a shareholder's actual costs
may be higher or lower, based on these assumptions the shareholders costs would
be:
SERIES I SHARES
(UNAUDITED)
Portfolio One Year Three Years Five Years Ten Years
- ----------------------------------------------------------------------------------------------
International Small Cap Trust $160 $496 $855 $1,867
SERIES II SHARES
(UNAUDITED)
Portfolio One Year Three Years Five Years Ten Years
- ----------------------------------------------------------------------------------------------
International Small Cap Trust $180 $557 $959 $2,084
THE EXAMPLES SET FORTH ABOVE ASSUME REINVESTMENT OF ALL DIVIDENDS AND
DISTRIBUTIONS. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES OR ANNUAL RETURN OF SHARES OF THE PORTFOLIO; ACTUAL EXPENSES AND ANNUAL
RETURN MAY BE GREATER OR LESS THAN THOSE SHOWN. The purpose of these tables is
to assist shareholders in understanding the expenses a shareholder in the
Portfolio will bear. Please note, however, that the variable contracts issued by
Manulife USA and Manulife New York provide for charges, including sales charges,
not reflected in the above tables.
Since there is no change to the advisory fee for the International
Small Cap Trust, it is not anticipated that the expenses of the portfolio would
have been materially different had Templeton managed the portfolio during the
fiscal year ended December 31, 2002.
20
Approval, Amendment and Termination. The Subadvisory Agreements require
approval of the agreements as to the Portfolio by the Board (including a
majority of the Disinterested Trustees) and will continue in effect as to the
Portfolio for a period more than two years from the date of their execution only
so long as such continuance is specifically approved at least annually either by
the Trustees or by the vote of a Majority of the Outstanding Voting Securities
of the Trust, provided that in either event such continuance will also be
approved by the vote of the majority of the Disinterested Trustees.
The Subadvisory Agreements may be amended by the Adviser and the
Subadviser provided such amendment is specifically approved by the vote of a
majority of the Trustees, including a majority of the Disinterested Trustees,
cast in person at a meeting called for the purpose of voting on such approval.
Any required shareholder approval of any continuance of or amendment to
the Subadvisory Agreements will be effective with respect to any Portfolio if a
Majority of the Outstanding Voting Securities of that Portfolio votes to approve
such continuance or amendment, even if such continuance or amendment 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 of the Portfolios of the
Trust.
The Subadvisory 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 Subadvisory Agreements and to the Trust by:
- the Trustees of the Trust;
- with respect to any Portfolio, a Majority of the Outstanding
Voting Securities of the Portfolio;
- the Adviser, or
- the Subadviser.
The Subadvisory Agreements will automatically terminate, without the payment of
any penalty, in the event of their assignment or in the event the Advisory
Agreement between the Trust and Manulife Securities terminates for any reason.
EVALUATION BY THE BOARD OF TRUSTEES
At its meeting held on April 2-3, 2003, the Board of Trustees,
including a majority of the Disinterested Trustees, approved the Templeton
Subadvisory Agreement.
In evaluating the Templeton Subadvisory Agreement, the Board considered
numerous factors, including:
(ix) the nature and quality of the services to be provided by
Templeton,
(x) performance information regarding the International Small Cap
Trust relative to funds with similar objectives and policies,
(xi) the financial statements of Templeton, and
(xii) whether the proposed subadvisory fee, including breakpoints,
and the expense ratio of the International Small Cap Trust
would be consistent with the fees and expense ratios of other
comparable portfolios.
At the meeting held on April 2-3, 2003, the Board was provided with an
analysis of its fiduciary obligations, reviewed its fiduciary duties and
discussed the information provided regarding Templeton. Representatives of
Templeton gave a presentation and responded to questions from the Trustees.
There was an extended discussion of, and questioning about, Templeton's plans
for the International Small Cap Trust. Throughout the review process, the
Disinterested Trustees had the assistance of independent legal counsel.
In voting to accept the resignation of Founders as subadviser to the
International Small Cap Trust, the board focused primarily on the following
information:
(a) that the International Small Cap Trust had underperformed in comparison
to its peer group for the past three years,
21
(b) that similarly managed portfolios of Templeton had performed better in
comparison to their peer group for the past three years and
(c) that the scope and quality of the services to be provided by the
Templeton would equal or exceed those provided by the Founders.
SUBADVISORY FEES PAID
For the year ended December 31, 2002, the Adviser paid Founders
subadvisory fees with respect to the International Small Cap Trust of $793,451
(.600% of average net assets). If the Templeton Subadvisory Agreement had been
in effect for the year ended December 31, 2002, the Adviser would have paid
Templeton the same amount since there is no change in the subadvisory fee.
ADVISORY FEES PAID
For the year ended December 31, 2002, the International Small Cap Trust
paid the Adviser advisory fees of $1,256,297 (.950% of average net assets), of
which $462,846 (.350% of average net assets) was retained by the Adviser after
payment of the subadvisory fee for the International Small Cap Trust.
OWNERSHIP OF THE TRUST
For information regarding the shareholders and ownership of the Trust,
see "ADDITIONAL INFORMATION" below.
BROKERAGE TRANSACTIONS
A description of the portfolio brokerage policies applicable to the
International Small Cap Trust is set forth under "ADDITIONAL INFORMATION" below.
OTHER INVESTMENT COMPANIES ADVISED BY TEMPLETON
Templeton currently acts as adviser or subadviser to the following
other registered investment companies having similar investment objectives and
policies to those of the International Small Cap Trust.
The size of each of these funds and the rate of Templeton's compensation for
each fund are as follows:
FUND ASSETS AS OF 12/31/02 FEE RATE
TIFI Foreign Smaller Companies Series $11,066,087 0.95%
SUBADVISED MUTUAL FUNDS:
AXP Partners International Small Cap Fund $ 6,241,773 0.70% (tiered)
Templeton Foreign Smaller Companies Fund $89,577,783 1.00%
PRIOR BOARD AND SHAREHOLDER APPROVAL OF FOUNDERS SUBADVISORY AGREEMENT
The Founders Subadvisory Agreement was most recently approved by the
Board of Trustees at a meeting held June 27-28, 2002 in connection with the
annual approval of the agreement. Pursuant to the order of the Commission
received by the Trust which is discussed above under "SUMMARY," no shareholder
approval was required for the Founders Subadvisory Agreement.
22
ADDITIONAL INFORMATION
OWNERSHIP OF THE TRUST
The Trust does not sell its shares directly to the public, but sells
its shares generally only to insurance companies and their separate accounts as
the underlying investment medium for variable annuity and life contracts
("contracts"). As of December 31, 2002, the shares of the Trust, including the
shares of the High Yield Trust, All Cap Value Trust and the International Small
Cap Trust, were legally owned by: (i) The Manufacturers Life Insurance Company
(U.S.A) ("Manulife USA") and (ii) The Manufacturers Life Insurance Company of
New York ("Manulife New York"). The parent of both Manulife USA and Manulife New
York is The Manufacturers Life Insurance Company ("Manulife"), a Canadian stock
life insurance company. Manulife and its subsidiaries are wholly owned by
Manulife Financial Corporation, collectively known as Manulife Financial. The
principal offices of Manulife Financial are located at 200 Bloor Street East,
Toronto, Ontario, Canada M4W1E5.
Manulife U.S.A. Manulife U.S.A. is a stock life insurance company
originally organized under the laws of Maine and redomesticated under the laws
of Michigan in 1992 whose principal address is 38500 Woodward Avenue, Bloomfield
Hills, Michigan 48304. Its Insurance and Pension Service Office address is 200
Bloor Street East, Toronto, Ontario, Canada M4W 1E5. Its Annuity Service Office
address is 500 Boylston Street, Suite 400, Boston, Massachusetts 02116. Manulife
U.S.A. holds shares of the Trust directly and attributable to variable annuity
contracts in The Manufacturers Life Insurance Company (U.S.A.) Separate Account
H and variable life contracts in The Manufacturers Life Insurance Company
(U.S.A.) Separate Accounts A, I, L, and N, all of which are separate accounts
registered under the 1940 Act, as well as in an unregistered separate account.
Manulife USA also holds shares of the Trust in various unregistered separate
accounts that are made available exclusively to qualified plans.
Manulife New York. Manulife New York is a stock life insurance company
organized under the laws of New York whose principal address is 100 Summit Lake
Drive, Second Floor, Valhalla, New York 10595. Manulife New York holds shares of
the Trust directly and attributable to variable annuity contracts in The
Manufacturers Life Insurance Company of New York Separate Account A and variable
life contracts in The Manufacturers Life Insurance Company of New York Separate
Account B, both of which are separate accounts registered under the 1940 Act, as
well as in an unregistered separate account.
PORTFOLIO BROKERAGE
Pursuant to the subadvisory agreements for each of the Trust
Portfolios, 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; rather, they
place orders for the purchase and sale of securities with the primary objective
of obtaining the most favorable overall results for the applicable portfolio of
the Trust. The cost of securities transactions for each Portfolio will consist
primarily of brokerage commissions or dealer or underwriter spreads.
Fixed-income securities and money market instruments are generally traded on a
net basis and do not normally involve either brokerage commissions or transfer
taxes.
Occasionally, securities may be purchased directly from the issuer. For
securities traded primarily in the over-the-counter market, the subadvisers
will, where possible, deal directly with dealers who make a market in the
securities unless better prices and execution are available elsewhere. Such
dealers usually act as principals for their own account.
23
Selection of Brokers or Dealers to Effect Trades
In selecting broker/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,
- difficulty of execution, and
- brokerage and research services provided.
Consideration of these factors by a subadviser, either in terms of a
particular transaction or the subadviser's overall responsibilities with respect
to the Trust and any other accounts managed by the subadviser, could result in
the applicable portfolio of the Trust paying a commission or spread on a
transaction that is in excess of the amount of commission or spread another
broker/dealer might have charged for executing the same transaction.
Soft Dollar Considerations
In selecting brokers or 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. A subadviser may receive products or research that
are used for both research and other purposes, such as administration or
marketing. In such case, the subadviser will make a good faith determination as
to the position attributable to research. Only the portion attributable to
research will be paid through Trust brokerage. The portion not attributable to
research will be paid by the subadviser.
Brokerage and research services provided by brokers or dealers include
advice, either directly or through publications or writings, as to:
- the value of securities,
- the advisability of purchasing or selling securities,
- the availability of securities or purchasers or sellers of
securities, and
- analyses and reports concerning (a) issuers, (b) industries,
(c) securities, (d) economic, political and legal factors and
trends and (e) portfolio strategy.
Research services are received primarily in the form of written reports,
computer generated services, telephone contacts and personal meetings with
security analysts. In addition, such services may be provided in the form of
meetings arranged with corporate and industry spokespersons, economists,
academicians and government representatives. In some cases, research services
are generated by third parties but are provided to the subadviser by or through
a broker.
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/dealers executing transactions for the Trust will
be available also for the benefit of other portfolios managed by the
subadvisers.
24
Sales Volume Considerations
Consistent with the foregoing considerations and the Rules of Fair
Practice of the NASD, sales of contracts for which the broker or dealer or an
affiliate thereof is responsible may be considered as a factor in the selection
of such brokers or dealers. A higher cost broker or dealer will not be selected,
however, solely on the basis of sales volume, but will be selected in accordance
with the criteria set forth above.
"Step Out" Transactions. A subadviser may execute an entire transaction
with one broker to obtain best execution of the order and allocate a portion of
the transaction and related commission to another broker in connection with
provision of nonexecution services.
Brokerage Commissions Paid to Affiliated Brokers
For the year ended December 31, 2002, no commissions were paid to
affiliated brokers of the High Yield Trust, the All Cap Value Trust or the
International Small Cap Trust.
OTHER MATTERS
The Trust will furnish, without charge, a copy of the Trust's annual
report for the fiscal year ended December 31, 2002 to any shareholder upon
request. To obtain a report, please contact the Trust by calling (800) 344-1029
or by writing to the Trust at 73 Tremont Street, Boston, Massachusetts 02108,
Attn: Gordon Shone.
Manufacturers Securities Services, LLC ("Manulife Securities"), the
adviser to the Trust, is located at 73 Tremont Street, Boston, Massachusetts
02108. The principal underwriter of the Trust and of certain insurance contracts
issued by affiliate of the Trust is Manulife Financial Securities, LLC located
at 73 Tremont Street, Boston, Massachusetts 02108.
The Trust is not required to hold annual meetings of shareholders and,
therefore, it cannot be determined when the next meeting of shareholders will be
held. 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.
The cost of the preparation, printing and distribution of this
Information Statement is an expense of Manufacturers Investment Trust.
25
EXHIBIT A
EXECUTIVE OFFICERS AND DIRECTORS OF SUBADVISERS
SALOMON BROTHERS ASSET MANAGEMENT INC ("SaBAM")
NAME AND POSITION WITH SaBAM PRINCIPAL OCCUPATION
ADDRESS*
Peter Wilby Director Fixed Income Portfolio Manager
Virgil Cumming Director Chief Investment Officer
Even Merberg Director Chief Administrative Officer
Ross Margolies Managing Director Equity Portfolio Manager
Carol Epstein Secretary Legal
*The business address of each such person, unless otherwise noted, is 399 Park
Avenue, New York, NY, 10022.
26
EXHIBIT B
EXECUTIVE OFFICERS AND DIRECTORS OF SUBADVISERS
LORD, ABBETT & CO. LLC ("LORD ABBETT")
NAME AND ADDRESS* PRINCIPAL OCCUPATION
Tracie E. Ahern Director of Portfolio Accounting and Operations
Joan A. Binstock Chief Operations Officer
Michael Brooks Central Division Director
Zane E. Brown Director of Fixed Income
Patrick Browne Eastern Division Director
Daniel E. Carper Mutual Funds Sales and Marketing Director
John J. DiChiaro Senior Strategy Coordinator
Sholom Dinsky Portfolio Manager - Large Cap Value
Lesley-Jane Dixon Portfolio Manager/Senior Research Analyst
Robert S. Dow Managing Partner and Chief Investment Officer
Kevin P. Ferguson Portfolio Manager - Mid Cap Growth
Robert P. Fetch Portfolio Manager - Small Cap Value
Daria L. Foster Senior Marketing and Client Service Director
Daniel H. Frascarelli Portfolio Manager - Large Cap Value
Robert I. Gerber Director of Taxable Fixed Income
Michael S. Goldstein Portfolio Manager Fixed Income
Michael A. Grant Director of Institutional Marketing
Howard E. Hansen Portfolio Manager - Mid Cap Value
Paul A. Hilstad General Counsel
Charles Hofer Product Manager
Thomas W. Hudson Director of Equity Mutual Funds
Cinda Hughes Portfolio Manager - Small Cap Growth
Ellen G. Itskovitz Senior Research Analyst - High Yield/Convertible
Lawrence H. Kaplan Deputy General Counsel
Robert Lee Portfolio Manager - Fixed Income
Maren Lindstrom Portfolio Manager - Fixed Income
Gregory M. Macosko Senior Analyst
Thomas Malone Western Division Director
Charles Massare, Jr. Director of Quantitative Research & Risk Management
Stephen J. McGruder Senior Portfolio Manager -Small Cap Growth Fund
Paul McNamara Director of Defined Contributions Services
Robert G. Morris Director of Equity Investments
Robert J. Noelke National Sales Manager
A. Edward Oberhaus III Manager of Equity Trading
R. Mark Pennington Director of Private Advisory Services
Walter Prahl Director of Quantitative Research, Taxable Fixed Income
Michael Rose Director of Retirement Planning
Eli M. Salzmann Director of Institutional Equity Investments
Douglas B. Sieg Director of Marketing
Richard Sieling Managing Director - Lord Abbett Limited
Michael T. Smith Portfolio Manager - Small Cap Value/Small Cap Blend
Richard Smola Portfolio Manager - Municipals
Diane Tornejal Director of Human Resources
Christopher J. Towle Senior Portfolio Manager - Convertible and High Yield
Edward von der Linde Portfolio Manager - Mid Cap Value
Marion Zapolin Chief Financial Officer
*The business address of each such person, unless otherwise noted, is 90 Hudson
Street, Jersey City, NJ 07302. In addition to the Partners, Susan E. Lynch and
Johan M. McCarthy are non-executive members of members of Lord, Abbett & Co.
LLC.
27
EXHIBIT C
EXECUTIVE OFFICERS AND DIRECTORS OF SUBADVISERS
TEMPLETON INVESTMNET COUNSEL, LLC ("TEMPLETON")
NAME AND ADDRESS* POSITION WITH DeAM PRINCIPAL OCCUPATION
Donald F. Reed Chief Executive Officer He is also an officer and/or director of
various Franklin Templeton affiliates and
investment companies. Serves as
president, CEO and a Director of Franklin
Templeton Investments Corp., an affiliated
Canadian adviser; a Director and
Executive Vice President of Templeton
Worldwide, Inc.; and as a member of the
Executive Committee of Franklin
Resources, Inc.
Gary P. Motyl President He is also an officer and/or director of
various Franklin Templeton affiliates and
investment companies.
Martin L. Flanagan EVP & COO He is also a Director, Executive Vice
President and Chief Operating Officer of
TICL; President, Member - Office of the
President, CFO & COO of FRI; and serves
as an officer and/or director of various
Franklin Templeton affiliates, some of
which are investment advisers and/or
broker-dealers. He is also an officer of
several Franklin Templeton investment
companies.
Cindy L. Sweeting EVP, Director of Research Portfolio Manager/Research Analyst for
Registrant and Executive Vice President
for Fiduciary Trust International of the
South.
Edgerton(Tucker) SVP Portfolio Manager/Research Analyst and
Scott II Vice President of Fiduciary Trust
International of the South.
*The business address of each such person, unless otherwise noted, is 500 East
Broward Boulevard, Suite 2100, Fort Lauderdale, FL 33394.
28
EXHIBIT D
SALOMON BROTHERS ASSET MANAGEMENT INC
SUBADVISORY AGREEMENT
AGREEMENT made this 28th day of November, 1997, [as amended through May
1, 2003], between Manufacturers Securities Services, LLC, a Delaware limited
liability company ("MSS" or "Adviser"), and Salomon Brothers Asset Management,
Inc, a Delaware Corporation (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 Manufacturers Investment Trust
(the "Trust") and the terms of this Agreement, to manage the investment and
reinvestment of the assets of the portfolios of the Trust specified in Appendix
A to this Agreement as it shall be amended by the Adviser and the Subadviser
from time to time (the "Portfolio" or "Portfolios"). The Subadviser will be an
independent contractor and will have no authority to act for or represent the
Trust or Adviser in any way or otherwise be deemed an agent unless 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, the Subadviser will manage the investments and determine the
composition of the assets of the Portfolios. In fulfilling its
obligations to manage the investments and reinvestments of the assets
of the Portfolios, the Subadviser will:
i. obtain and evaluate pertinent economic, statistical, financial
and other information affecting the economy generally and
individual companies or industries the securities of which are
included in the Portfolios or are under consideration for
inclusion in the Portfolios;
ii. formulate and implement a continuous investment program for
each Portfolio consistent with the investment objectives and
related investment policies for each such portfolio as
described in the Trust's registration statement, as amended;
iii. take whatever steps are necessary to implement these
investment programs by the purchase and sale of securities
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 of the fair value of certain securities
when market quotations are not readily available for purposes
of calculating net asset value for the Trust's Custodian in
accordance with the procedures and methods established by the
Trustees of the Trust.
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).
29
c. The Subadviser will select brokers and dealers to effect all
transactions subject to the following conditions: The Subadviser will
place all necessary 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
provided research and brokerage services a higher commission for a
particular transaction than otherwise might have been charges by
another broker-dealer, if the Subadviser determines that the higher
commission is reasonable in relation to the value of the brokerage and
research services that such broker-dealer provides, viewed in terms of
either the particular transaction or the Subadviser's overall
responsibilities with respect to accounts managed by the subadviser.
The Subadviser may use for the benefit of the Subadviser's other
client's 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.
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 directors, officers or employees
shall be liable to the Adviser or Trust for any loss suffered by the Adviser or
Trust resulting from its acts or omissions as Subadviser to the Portfolios,
except for losses resulting from willful misfeasance, bad faith, or gross
negligence in the performance of, or from reckless disregard or, the duties of
the Subadviser or any of its directors, officers or employees.
5. SUPPLEMENTAL ARRANGEMENTS
The Subadviser may enter into arrangements with other persons
affiliated with the Subadviser 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,
stockholders or otherwise; that directors, officers, agents and stockholders 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 thereunder except as otherwise provided in the
Agreement and Declaration of Trust of the Trust and the Articles of
Incorporation of the Subadviser, respectively, or by specific provision of
applicable law.
7. REGULATION
The Subadviser shall submit to all regulatory and administrative bodies
having jurisdiction over the services provided pursuant to this Agreement any
information, reports or other material which any such body by reason of this
Agreement may request or require pursuant to applicable laws and regulations.
30
8. DURATION AND TERMINATION OF AGREEMENT
This Agreement shall become effective on the later of its execution or
its approval by the Board of Trustees of the Trust (as described below).
Thereafter, the 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. Any
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 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 any required shareholder approval of the Agreement or any
continuance of the Agreement is not obtained, 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, by the vote of a majority of the
outstanding voting securities of the Trust, or with respect to any Portfolio by
the vote of a majority of the outstanding voting securities of such Portfolio,
on sixty days' written notice to the Adviser and the Subadviser, or by the
Adviser or Subadviser on sixty days' written notice to the Trust and the other
party. This agreement will automatically terminate, without the payment of any
penalty, in the event of its assignment (as defined in the Investment Company
Act) or in the event the Advisory Agreement between the Adviser and the Trust
terminates for any reason.
9. PROVISION OF CERTAIN INFORMATION BY SUBADVISER
The Subadviser will promptly notify the Adviser in writing of the
occurrence of any of the following events:
a. The Subadviser fails to be registered as an investment adviser under
the Investment Adviser's 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. the chief executive officer or controlling stockholder of the
Subadviser or the portfolio manager of any Portfolio changes.
10. 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 Trustees of the Trust who
are not interested person of any party to this Agreement cast in person at a
meeting called for the purpose of voting on such approval. Any 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
31
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. ENTIRE AGREEMENT
This Agreement contains the entire understanding and agreement of the
parties with respect to the Portfolios listed in Appendix A.
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 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.
16. LIMITATION OF LIABILITY
The Declaration of Trust establishing the Trust, 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 "Manufacturers Investment 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.
32
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal by their duly authorized officers as of the dated first
mentioned above.
[SEAL] Manufacturers Securities Services, LLC
by: The Manufacturers Life Insurance Company
of North America*, its managing
member
by: _________________________________________
John D. DesPrez, III President
[SEAL] Salomon Brothers Asset Management Inc.
by: _________________________________________
*Effective January 1, 2002, The Manufacturers Life Insurance Company of North
America merged into The Manufacturers Life Insurance Company(U.S.A.)
APPENDIX A
The Subadviser shall serve as investment adviser for each of the
following portfolios of the Trust. The Adviser for each of the following
portfolios of the Trust. The adviser will pay the subadviser, as full
compensation for all services provided under the Agreement, the fee computed
separately for each such Portfolio at an annual rate as follows (the "Subadviser
Percentage Fee"):
FIRST EXCESS OVER
PORTFOLIO $500 MILLION $500 MILLION
High Yield Trust.......................... .275% .200%
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 shall 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 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.
33
EXHIBIT E
LORD ABBETT & CO.
SUBADVISORY AGREEMENT
AGREEMENT made this 30th day of April, 2001 [as amended May 1, 2003,]
between Manufacturers Securities Services, LLC, a Delaware limited liability
company (the "Adviser"), and Lord Abbett & Co., a LLC, a Delaware limited
liability company (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 Manufacturers Investment Trust
(the "Trust") and the terms of this Agreement, to manage the investment and
reinvestment of the assets of the Portfolios specified in Appendix A to this
Agreement as it shall be amended by the Adviser and the Subadviser from time to
time (the "Portfolios"). 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 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, the Subadviser will manage the investments and determine the
composition of the assets of the Portfolios in accordance with the
Portfolios' registration statement, as amended. In fulfilling its
obligations to manage the investments and reinvestments of the assets
of the Portfolios, the Subadviser will:
i. obtain and evaluate pertinent economic, statistical, financial
and other information affecting the economy generally and
individual companies or industries the securities of which are
included in the Portfolios or are under consideration for
inclusion in the Portfolios;
ii. formulate and implement a continuous investment program for
each Portfolio consistent with the investment objectives and
related investment policies for each such Portfolio as
described in the Trust's registration statement, as amended;
iii. take whatever steps are necessary to implement these
investment programs by the purchase and sale of securities
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 assistance to the Trust's Custodian regarding the fair
value of securities held by the Portfolios for which market
quotations are not readily available.
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 necessary 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
34
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 commission for a particular transaction than otherwise might
have been charged by another broker-dealer, if the Subadviser
determines that the higher spread or commission is reasonable in
relation to the value of the brokerage and research services that such
broker-dealer provides, viewed in terms of either the particular
transaction or the Subadviser's overall responsibilities with respect
to accounts managed by the Subadviser. The Subadviser may use for the
benefit of the Subadviser's other clients, or make available to
companies affiliated with the Subadviser or to its directors for the
benefit of its clients, any such brokerage and research services that
the Subadviser obtains from brokers or dealers.
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.
e. 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.
f. The Subadviser is prohibited from consulting with the entities listed
below concerning transactions for a Portfolio in securities or other
assets:
1. other subadvisers to a Portfolio;
2. other subadvisers to a Trust portfolio; and
3. other subadvisers to a portfolio under common control with the
Portfolio.
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 directors, officers or employees
shall be liable to the Adviser or the Trust for any error of judgment or mistake
of law or for any loss suffered by the Adviser or Trust in connection with the
matters to which this Agreement relates except for losses resulting from willful
misfeasance, bad faith or gross negligence in the performance of, or from the
reckless disregard of, the duties of the Subadviser or any of its directors.
5. 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 or otherwise; that employees, agents and partners 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 partnership of the Subadviser,
respectively, or by specific provision of applicable law.
35
6. 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.
7. DURATION AND TERMINATION OF AGREEMENT
This Agreement shall become effective with respect to each Portfolio on
the later of (i) its execution and (ii) the date of the meeting of the Board of
Trustees of the Trust, at which meeting this Agreement is approved as described
below. The 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. Any 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 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 any required shareholder approval of this Agreement or any
continuance of the Agreement is not obtained, 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 a new 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, by the vote of a majority of the
outstanding voting securities of the Trust, or with respect to any Portfolio by
the vote 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.
8. 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 change in actual control or management of the Subadviser or the
portfolio manager of any Portfolio.
36
9. 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 transactions for a
Portfolio in any security which the Subadviser, its partners, affiliates or
employees may purchase or sell for their own accounts or other clients.
10. 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 Trustees of the Trust 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. Any 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. ENTIRE AGREEMENT
This Agreement contains the entire understanding and agreement of the
parties.
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.
16. LIMITATION OF LIABILITY
The Agreement and Declaration of Trust 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 "Manufacturers Investment 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
37
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 respect to which such
obligation or claim arose, shall be liable.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal by their duly authorized officers as of the date first
mentioned above.
Manufacturers Securities Services, LLC
by: The Manufacturers Life Insurance Company of North
America, Managing Member*
by: ____________________________________________________
James R. Boyle, President
by: ____________________________________________________
James D. Gallagher, Vice President, Secretary
and General Counsel
Lord, Abbett & Co. LLC
by: ____________________________________________________
38
APPENDIX A
The Subadviser shall serve as investment subadviser for the following
portfolio 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"):
BETWEEN
$250,000,000
FIRST AND EXCESS OVER
PORTFOLIO $250,000,000 $500,000,000 $500,000,000
All Cap Value Trust....................... .400% .350% .300%
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.
*Effective January 1, 2002, The Manufacturers Life Insurance Company of North
America merged into The Manufacturers Life Insurance Company(U.S.A.)
39
EXHIBIT F
TEMPLETON INVESTMENT COUNSEL, INC.
SUBADVISORY AGREEMENT
MANUFACTURERS INVESTMENT TRUST
SUBADVISORY AGREEMENT
AGREEMENT made this 1st day of February, 1999 [as amended through May
1, 2003,] between Manufacturers Securities Services, LLC, a Delaware limited
liability company (the "Adviser"), and Templeton Investment Counsel, Inc, a
Florida Corporation (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 Manufacturers Investment Trust
(the "Trust") and the terms of this Agreement, to manage the investment and
reinvestment of the assets of the Portfolios specified in Appendix A to this
Agreement as it shall be amended by the Adviser and the Subadviser from time to
time (the "Portfolios"). 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 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, the Subadviser will manage the investments and determine the
composition of the assets of the Portfolios in accordance with the
Portfolios' registration statement, as amended. Prior to the effective
date of this Agreement, Adviser shall provide Subadviser with a current
copy of the Trust's Registration Statement. Thereafter, Adviser shall
promptly notify the Subadviser in writing of any changes to such
Registration Statement that relate to the Subadviser or the Portfolios.
In fulfilling its obligations to manage the investments and
reinvestments of the assets of the Portfolios, the Subadviser will:
i. obtain and evaluate pertinent economic, statistical, financial
and other information affecting the economy generally and
individual companies or industries the securities of which are
included in the Portfolios or are under consideration for
inclusion in the Portfolios;
ii. formulate and implement a continuous investment program for
each Portfolio consistent with the investment objectives and
related investment policies for each such Portfolio as
described in the Trust's registration statement, as amended;
iii. take whatever steps are necessary to implement these
investment programs by the purchase and sale of securities
including the placing of orders for such purchases and sales;
iv. periodically report to the Trustees of the Trust and the
Adviser with respect to the implementation of these investment
programs; and
v. provide assistance to the Trust's Custodian regarding the fair
value of securities held by the Portfolios for which market
quotations are not readily available.
vi. purchase, sell, exchange or convert foreign currency in the
spot or forward markets as necessary to facilitate
transactions in international securities for the Portfolios.
40
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,
proxy voting services 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 necessary 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 commission
for a particular transaction than otherwise might have been charged by
another broker-dealer, if the Subadviser determines that the higher
spread or commission is reasonable in relation to the value of the
brokerage and research services that such broker-dealer provides,
viewed in terms of either the particular transaction or the
Subadviser's overall responsibilities with respect to accounts managed
by the Subadviser. The Subadviser may use for the benefit of the
Subadviser's other clients, or make available to companies affiliated
with the Subadviser or to its directors for the benefit of its clients,
any such brokerage and research services that the Subadviser obtains
from brokers or dealers.
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.
e. 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.
f. Subadviser shall not be expected or required to take any action other
than the rendering of investment-related advice with respect to
lawsuits involving securities presently or formerly held in the
Portfolios, or the issuers thereof, including actions involving
bankruptcy. Should Subadviser desire to undertake litigation against an
issuer on behalf of a Portfolio, the Subadvisr shall obtain the prior
written consent of the Adviser to undertake such litigation. If the
Adviser consents to such litigation, the Adviser agrees to pay the
portion of any reasonable legal fees associated with the action (and
the Adviser may then receive reimbursement from the Portfolio for
payment of such legal fees) or the Portfolio will forfeit any claim to
any assets the Subadviser may recover on behalf of the Portfolio up to
the amount of such legal fees owed by the Adviser to the Subadviser. If
the Adviser does not consent to such litigation, the Adviser agrees to
hold Subadviser harmless for excluding the Portfolio from such action
and agrees to indemnify the Subadviser against any claims the Portfolio
may have against the Subadviser resulting from the Portfolio's
exclusion.
In the case of class action suits involving issuers held in the
Portfolios, Subadviser may include information about a Portfolio for
purposes of participating in any settlement with the prior written
permission of the Adviser which will not be unreasonably withheld.
3. COMPENSATION OF SUBADVISER
The Adviser will pay the Subadviser with respect to each Portfolio the
compensation specified in Appendix A to this Agreement.
41
4. LIABILITY OF SUBADVISER
Neither the Subadviser nor any of its directors, officers or employees
shall be liable to the Adviser or the Trust for any error of judgment or mistake
of law or for any loss suffered by the Adviser or Trust in connection with the
matters to which this Agreement relates except for losses resulting from willful
misfeasance, bad faith or gross negligence in the performance of, or from the
reckless disregard of, the duties of the Subadviser or any of its directors.
5. 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 or otherwise; that employees, agents and partners 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 partnerhsip agreement of the
Subadviser, respectively, or by specific provision of applicable law.
6. 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.
7. DURATION AND TERMINATION OF AGREEMENT
This Agreement shall become effective with respect to each Portfolio on
the later of (i) its execution and (ii) the date of the meeting of the Board of
Trustees of the Trust, at which meeting this Agreement is approved as described
below. The 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. Any 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 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 any required shareholder approval of this Agreement or any
continuance of the Agreement is not obtained, 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 a new 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, by the vote of a majority of the
outstanding voting securities of the Trust, or with respect to any Portfolio by
the vote 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
42
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.
8. 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 change in actual control or management of the Subadviser or the
portfolio manager of any Portfolio.
9. 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 transactions for a
Portfolio in any security which the Subadviser, its partners, affiliates or
employees may purchase or sell for their own accounts or other clients.
10. 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 Trustees of the Trust 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. Any 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.
43
11. ENTIRE AGREEMENT
This Agreement contains the entire understanding and agreement of the
parties.
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.
16. LIMITATION OF LIABILITY
The Agreement and Declaration of Trust 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 "Manufacturers Investment 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 respect to which such obligation or
claim arose, shall be liable.
44
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.
Manufacturers Securities Services, LLC
by: The Manufacturers Life Insurance Company of North
America, Managing Member*
by: ____________________________________________________
Ted Kilkuskie, President
by: ____________________________________________________
James D. Gallagher, Vice President, Secretary
and General Counsel
Templeton Investment Counsel, Inc.
by: ____________________________________________________
*Effective January 1, 2002, The Manufacturers Life Insurance Company of North
America merged into The Manufacturers Life Insurance Company(U.S.A.)
45
AMENDMENT TO SUBADVISORY AGREEMENT
AMENDMENT made as of this 1st day of May, 2003 to the Subadvisory
Agreement dated February 1, 1999 (the "Agreement"), between Manufacturer's
Securities Services, LLC, a Delaware limited partnership (the "Adviser"), and
Templeton Investment Counsel, LLC (formerly Templeton Investment Counsel, Inc.)
(the "Subadviser"). In consideration of the mutual covenants contained herein,
the parties agree as follows:
1. CHANGE IN APPENDIX A
Appendix A to the Agreement is hereby amended to add the subadvisory
fee for the International Small Cap Trust as set forth in the revised Appendix A
attached to this Amendment.
2. CONSULTATIONS WITH OTHER SUBADVISERS
The Subadviser is prohibited from consulting with the entities listed
below concerning transactions for a Portfolio in securities or other assets:
4. other subadvisers to a Portfolio;
5. other subadvisers to a Trust portfolio; and
6. other subadvisers to a portfolio under common control with the Portfolio.
3. EFECTIVE DATE
This Amendment shall become effective with respect to the International
Small Cap Trust on the later to occur of: (i) approval of the Amendment by the
Board of Trustees of Manufacturers Investment Trust, (ii) execution of the
Amendment and (iii) May 1, 2003.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed under seal by their duly authorized officers as of the date first
mentioned above.
MANUFACTURERS SECURITIES SERVICES, LLC
By: The Manufacturers Life Insurance Company (U.S.A.), its managing member
By: _____________________________________________
James D. Gallagher, Executive Vice President,
Secretary and General Counsel
TEMPLETON INVESTMENT COUNSEL, LLC
By: _____________________________________________
46
APPENDIX A
The Subadviser shall serve as investment subadviser for the following
portfolios 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"):
BETWEEN BETWEEN
$50,000,000 $200,000,000
FIRST AND AND EXCESS OVER
PORTFOLIO $50,000,000 $200,000,000 $500,000,000 $500,000,000
International Small Cap Trust............. .600% .600% .500% .400%
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.
47