UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14C
INFORMATION STATEMENT PURSUANT TO SECTION 14(c) OF THE SECURITIES
EXCHANGE ACT OF 1934
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[ ] Preliminary Information Statement
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Rule 14c-5(d)(2))
[X] Definitive Information Statement
JOHN HANCOCK TRUST
(Name of Registrant as Specified In Its Charter)
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JOHN HANCOCK TRUST
601 Congress Street
Boston, Massachusetts 02210-2805
August 1, 2007
Dear Variable Annuity and Variable Life Contract Owners:
Enclosed is the Information Statement of John Hancock Trust (the "Trust")
regarding a new subadvisory agreement with UST Advisers, Inc. ("USTA"), for the
Value & Restructuring Trust, one of the separate series or portfolios (each, a
"Portfolio") of the Trust. The new agreement became effective on July 1, 2007.
Although you are not a shareholder of the Trust, your purchase payments and
the earnings on such payments under your variable annuity or variable life
insurance contracts issued by John Hancock Life Insurance Company (U.S.A.)
("JHLICO (U.S.A.)"), John Hancock Life Insurance Company of New York ("JHLICO
New York"), John Hancock Life Insurance Company ("JHLICO") or John Hancock
Variable Life Insurance Company ("JHVLICO") are invested in subaccounts of
separate accounts established by these insurance companies, and each subaccount
invests in shares of one of the Trust's Portfolios.
The Board of Trustees of the Trust approved the new subadvisory agreement
with USTA for the Value & Restructuring Trust in anticipation of the proposed
sale of USTA's parent company, U.S. Trust Corporation, to Bank of America
Corporation. That transaction - and the change in control of USTA - took place
on July 1, 2007 and resulted in the automatic termination of the old subadvisory
agreement with USTA for the Portfolio. USTA continues to serve as the subadviser
to the Value & Restructuring Trust under the new subadvisory agreement and,
other than the change in ownership, its operations are expected to remain
unchanged. The new subadvisory agreement with USTA has not resulted in any
change in the portfolio managers for, the level or quality of subadvisory
services provided to or the advisory or subadvisory fee rates for, the
Portfolio.
PLEASE NOTE THAT THE TRUST IS NOT REQUIRED TO OBTAIN SHAREHOLDER APPROVAL
OF, AND IS NOT REQUESTING THAT YOU GIVE VOTING INSTRUCTIONS WITH RESPECT TO, THE
NEW SUBADVISORY AGREEMENT. The enclosed Information Statement, however, provides
information about the new agreement and USTA.
If you have any questions regarding the Information Statement, please call
one of the following numbers:
--For JHLICO (U.S.A.) variable annuity contracts: (800) 344-1029
--For JHLICO (U.S.A.) variable life contracts: (800) 827-4546
--For JHLICO New York variable annuity contracts: (800) 551-2078
--For JHLICO New York variable life contracts: (888) 267-7784
--For JHLICO and JHVLICO contracts: (800) 576-2227
Sincerely,
/s/ JOHN D. DANELLO
John D. Danello
Secretary
John Hancock Trust
JOHN HANCOCK TRUST
601 Congress Street
Boston, Massachusetts 02210-2805
_______________
INFORMATION STATEMENT
NEW SUBADVISORY AGREEMENT
FOR THE VALUE & RESTRUCTURING TRUST
_______________
INTRODUCTION
This Information Statement provides notice of and information regarding a
new subadvisory agreement for the Value & Restructuring Trust, one of the
separate series or portfolios (each, a "Portfolio") of John Hancock Trust (the
"Trust"). It is first being mailed to shareholders of this Portfolio on or about
August 1, 2007.
The Trust. The Trust is an open-end management investment company, commonly
known as a mutual fund, registered under the Investment Company Act of 1940, as
amended (the "1940 Act"). The shares of the Trust, which are sold without a
sales charge, are divided into 109 separate series corresponding to the 109
Portfolios which the Trust currently offers. Shares of the Portfolios are sold
principally to separate accounts of insurance companies as the underlying
investment media for variable annuity and variable life insurance contracts
issued by such companies.
The Adviser. John Hancock Investment Management Services, LLC (the
"Adviser") serves as investment adviser for the Trust and for each Portfolio
that has an adviser. Pursuant to an investment advisory agreement with the
Trust, the Adviser administers the business and affairs of the Trust and
retains, compensates and monitors the performance of subadvisers that manage the
investment and reinvestment of the assets of the Portfolios pursuant to
subadvisory agreements with the Adviser. The Adviser and the subadviser named in
this Information Statement are registered as investment advisers under the
Investment Advisers Act of 1940, as amended (the "Advisers Act").
The Distributor. John Hancock Distributors, LLC ("JH Distributors") serves
as the Trust's distributor.
The offices of the Adviser and JH Distributors are located at 601 Congress
Street, Boston, MA 02210, and their ultimate parent entity is Manulife Financial
Corporation ("MFC"), a publicly traded company based in Toronto, Canada. MFC and
its subsidiaries operate as "Manulife Financial" in Canada and Asia and
primarily as "John Hancock" in the United States.
Pursuant to an order received by the Trust from the Securities and Exchange
Commission ("SEC"), the Adviser may, without obtaining shareholder approval,
enter into and change the terms (including subadvisory fees) of subadvisory
agreements with Portfolio subadvisers that are not affiliates of the Adviser.
Because the new subadvisory agreement described in this Information Statement
does not involve a subadviser which is affiliated with the Adviser for purposes
of the SEC order, THE TRUST IS NOT REQUIRED TO OBTAIN SHAREHOLDER APPROVAL OF
THE NEW SUBADVISORY AGREEMENT, AND SHAREHOLDERS ARE REQUESTED NOT TO SEND A
PROXY.
Annual and Semi-Annual Reports. The Trust will furnish, without charge, a
copy of the Trust's most recent annual report and semi-annual report to any
shareholder or variable contract owner upon request. To obtain a report, please
call the Trust at 1-800-344-1029 or write to the Trust at 601 Congress Street,
Boston, MA 02110: Attn.: Gordon Shone, Treasurer.
NEW SUBADVISORY AGREEMENT
FOR THE VALUE & RESTRUCTURING TRUST
At its meeting held on March 23, 2007, the Board of Trustees of the Trust
(the "Board" or "Trustees"), including all the Trustees who are not "interested
persons" (as defined in the 1940 Act) of the Trust or the Adviser (the
"Independent Trustees"), approved a new subadvisory agreement with UST Advisers,
Inc. ("USTA") as the subadviser for the Value & Restructuring Trust (sometimes
referred to hereinafter as the "Portfolio").
The new subadvisory agreement with USTA became effective, and the old
subadvisory agreement with USTA for the Portfolio terminated, on July 1, 2007.
The old subadvisory agreement, dated October 17, 2005 (and as assumed by USTA
from certain of its affiliates effective December 16, 2005), was most recently
approved by the Board (including a majority of the Independent Trustees) on June
8, 2007, in connection with its annual renewal and by the sole, initial
shareholder of the Value & Restructuring Trust on October 24, 2005, in
connection with the organization of the Portfolio.
The Transaction
Effective July 1, 2007, The Charles Schwab Corporation ("Schwab") sold its
wholly-owned subsidiary, U.S. Trust Corporation ("UST"), and UST's subsidiaries,
including USTA, to Bank of America Corporation ("BAC") (the "Transaction"). As a
result of the Transaction and the change in control of USTA, and pursuant to the
terms of the old subadvisory agreement with USTA and provisions of the 1940 Act,
the old subadvisory agreement with USTA for the Value & Restructuring Trust
automatically terminated. In anticipation of the Transaction, and taking into
account the Adviser's recommendation that a new subadvisory agreement with USTA
would be in the best interest of the Portfolio's shareholders (including
variable contract owners) by promoting continuity of the Portfolio's investment
strategies and management, the Board approved the new subadvisory agreement with
USTA. The new subadvisory agreement with USTA has not resulted in any change in
the portfolio managers for, the level or quality of subadvisory services
provided to, or the advisory or subadvisory fee rates for, the Portfolio.
In carrying out the Transaction, Schwab and BAC intend to rely on Section
15(f) of the 1940 Act. Section 15(f) provides a non-exclusive safe harbor for an
investment adviser (including a subadviser) or any affiliated persons to receive
any amount or benefit in connection with a change in control of the investment
adviser to an investment company as long as two conditions are met. First, no
"unfair burden" may be imposed on the investment company as a result of the
transaction giving rise to the change in control or any express or implied
terms, conditions or understandings applicable thereto. An "unfair burden" would
include any arrangement during the two-year period following the change in
control whereby the adviser (or predecessor or successor adviser), or any
"interested person" of the adviser, receives or is entitled to receive any
compensation, directly or indirectly, from the investment company or its
shareholders (other than fees for bona fide investment advisory or other
services), or from any person in connection with the purchase or sale of
securities or other property to, from or on behalf of the investment company
(other than bona fide ordinary compensation as principal underwriter for the
investment company). The second condition of Section 15(f) is that, during the
three-year period following the change in control, at least 75% of the
investment company's board of trustees must not be "interested persons" of the
investment adviser or the predecessor investment adviser. The Trust currently
satisfies the second condition. With respect to the first condition, BAC has
agreed with Schwab to use reasonable best efforts, to the extent within its
control or that of its affiliates, to comply with that condition.
The offices of USTA are located at 225 High Ridge Road, Stamford, CT 06905.
USTA is a wholly-owned subsidiary of United States Trust Company, National
Association ("USTNA"), which in turn is a wholly-owned subsidiary of UST. The
offices of USTNA and UST are located at 114 W. 47th Street, New York, NY 10036.
As a result of the Transaction, the ultimate parent entity of each such company
is BAC, a financial services holding company headquartered at 100 N. Tryon
Street, Charlotte, NC 28255.
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New Subadvisory Agreement
Under the new subadvisory agreement with USTA for the Portfolio, as under
the old subadvisory agreement, the subadviser manages the day-to-day investment
and reinvestment of the assets of the Portfolio, subject to the supervision of
the Board and the Adviser, and formulates a continuous investment program for
the Portfolio consistent with its investment objective and policies. The
subadviser implements such program by purchases and sales of securities and
regularly reports thereon to the Board and the Adviser.
The terms of the old subadvisory agreement and the new subadvisory
agreement are substantially similar and are the same with respect to subadviser
compensation. The new agreement does differ from the old agreement, however, in
that the new agreement permits the subadviser, in its discretion, to provide its
services as described above through its own personnel or the personnel of one or
more affiliated companies that are qualified to act as investment adviser to the
Portfolio under applicable law provided that (i) all persons, when providing
such services, are functioning as part of an organized group of persons; (ii)
the use of an affiliate's personnel does not result in a change of actual
control or management of the subadviser under the 1940 Act; and (iii) the
subadviser notifies the Board of Trustees of any situation in which the
subadviser utilizes personnel from an affiliated entity to provide services to
the Portfolio. Similarly, the new subadvisory agreement provides that the
subadviser may delegate its duty to vote proxies received in connection with
securities held by the Portfolio to the personnel of one or more of the
subadviser's affiliates.
The terms of the agreements, including certain differences, are described
below under "Description of Old and New Subadvisory Agreements."
Subadviser Compensation. Under the agreements, the subadviser is paid a fee
by the Adviser out of the advisory fee it receives from the Portfolio. THE
SUBADVISORY FEE THUS IS NOT AN ADDITIONAL CHARGE TO THE PORTFOLIO.
The subadvisory fee is determined by applying the daily equivalent of an
annual fee rate to the net assets of the Portfolio. The annual fee rate is
calculated each day by applying the annual percentage rates (including
breakpoints) in the table below to the applicable portions of Aggregate Net
Assets and dividing the sum so determined by Aggregate Net Assets. "Aggregate
Net Assets" include the net assets of the Portfolio and of a corresponding fund
of John Hancock Funds II ("JHF II"), the Value & Restructuring Fund, that is
managed by the same subadviser (but only for the period during which the
subadviser to the Portfolio also serves as the subadviser to the JHF II fund).
JHF II is also a mutual fund which is registered under the 1940 Act and for
which the Adviser is the investment adviser.
The following table sets forth the schedule of the annual percentage rates
of the subadvisory fee for the Portfolio under the old and new subadvisory
agreements. As indicated, the rates are the same under both agreements.
Subadvisory Fees - Old and New Subadvisory Agreements (1)
(Rates Applied to Aggregate Net Assets) (2)
First Next Excess Over
$500 million $500 million $1 billion
0.375% 0.350% 0.325%
__________________
(1) These rates became effective under the old subadvisory agreement on
June 30, 2006. Prior thereto, the rates under that agreement were 0.400% of
the first $500 million and 0.350% of the excess over $500 million.
(2) Aggregate Net Assets include the net assets of the Value &
Restructuring Trust and of the JHF II Value & Restructuring Fund. Their
respective net assets at December 31, 2006 were approximately $337,331,967
and $340,963,172.
For the fiscal year ended December 31, 2006, the Adviser paid USTA a
subadvisory fee of approximately $965,211 with respect to the Value &
Restructuring Trust.
3
Board Evaluation of the New Subadvisory Agreement
The Board, including the Independent Trustees, is responsible for selecting
the Trust's investment adviser, approving the Adviser's selection of Portfolio
subadvisers and approving the Trust's advisory and subadvisory agreements, their
periodic continuation and any amendments. Consistent with SEC rules, the Board
regularly evaluates the Trust's advisory and subadvisory arrangements, including
consideration of the factors listed below. The Board may also consider other
factors (including conditions and trends prevailing generally in the economy,
the securities markets and the industry) and does not treat any single factor as
determinative, and each Trustee may attribute different weights to different
factors. The Board is furnished with an analysis of its fiduciary obligations in
connection with its evaluation and, throughout the evaluation process, the Board
is assisted by counsel for the Trust and the Independent Trustees are also
separately assisted by independent legal counsel. The factors considered by the
Board are:
1. the nature, extent and quality of the services to be provided by the
Adviser to the Trust and by the subadviser to the Portfolio;
2. the investment performance of the Portfolio and its subadviser;
3. the extent to which economies of scale would be realized as the
Portfolio grows and whether fee levels reflect these economies of
scale for the benefit of Trust shareholders;
4. the costs of the services to be provided and the profits to be realized
by the Adviser (including any subadvisers affiliated with the Adviser)
and its affiliates from the Adviser's relationship with the Trust; and
5. comparative services rendered and comparative advisory and subadvisory
fee rates.
The Board believes that information relating to all these factors is
relevant to its evaluation of the Trust's advisory agreements. With respect to
its evaluation of subadvisory agreements with subadvisers not affiliated with
the Adviser, the Board believes that, in view of the Trust's
"manager-of-managers" advisory structure, the costs of the services to be
provided and the profits to be realized by those subadvisers that are not
affiliated with the Adviser from their relationship with the Trust, generally,
are not a material factor in the Board's consideration of these subadvisory
agreements, because such fees are paid to subadvisers by the Adviser and not by
the Portfolios and because the Board relies on the ability of the Adviser to
negotiate such subadvisory fees at arms-length.
In evaluating subadvisory arrangements, the Board also considers other
material business relationships that unaffiliated subadvisers and their
affiliates have with the Adviser or its affiliates, including the involvement by
certain affiliates of certain subadvisers in the distribution of financial
products, including shares of the Trust, offered by the Adviser and other
affiliates of the Adviser ("Material Relationships").
In making its determination with respect to the factors that its considers,
the Board reviews:
1. information relating to the subadviser's business, which may include
information such as: business performance, representative clients,
assets under management, financial stability, personnel and past
subadvisory services to the Trust;
2. the performance of the Portfolio;
3. the subadvisory fee for the Portfolio including any breakpoints; and
4. information relating to the nature and scope of Material Relationships
and their significance to the Trust's adviser and unaffiliated
subadvisers.
At the March 23, 2007 Board meeting, the Board also considered information
presented by the Adviser, BAC and USTA regarding the Transaction. Particular
considerations of the Board in approving the new subadvisory agreement with USTA
for the Value & Restructuring Trust at that meeting included the following:
1. The change in ownership of USTA resulting from the Transaction is not
expected to have any adverse impact on USTA's operations or financial
resources;
2. USTA is expected to manage the Portfolio with the same investment
objective, policies and portfolio managers under the new subadvisory
agreement as under the old subadvisory agreement, thus affording
shareholders continuity in investment strategies, and USTA may generally
be expected to provide at least the same level and quality of management
services under the new subadvisory agreement as under the old
subadvisory agreement;
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3. The Portfolio, which commenced operations in October 2005, has
outperformed its peer group for the one-year period ended December 31,
2006; and
4. The subadvisory fee under the new subadvisory agreement with USTA: (i)
is the product of arms-length negotiation between the Adviser and USTA;
(ii) is within industry norms; (iii) is the same as the fee under the
old subadvisory agreement, which was reduced effective June 30, 2006;
(iv) is paid by the Adviser and not by the Portfolio; (v) will not
result in any advisory fee increase with respect to the Portfolio; and
(vi) contains breakpoints which are reflected in the advisory fee for
the Portfolio thus permitting shareholders to benefit from economies of
scale.
Additional Information about USTA
Management of USTA. The names, addresses and principal occupations of the
directors and principal executive officers of USTA are set forth below.
Name Address Principal Occupation
- -------------------- ------------------------ ----------------------------------
Robert F. Aufenanger 225 High Ridge Road President and Director, USTA
Stamford, CT 06905
Evelyn Dilsaver 101 Montgomery Street President, Mutual Fund Division, USTA
San Francisco, CA 94104
Nicola Knight 114 W. 47th Street Chief Legal Officer, USTA
New York, New York 10036
Mary Martinez 114 W. 47th Street Director, USTA; Vice President, UST; Managing
New York, New York 10036 Director, USTNA
Jeffrey Osmun 225 High Ridge Road Director, USTA
Stamford, CT 06905
Ralph A. Pastore 225 High Ridge Road Treasurer And Chief Financial Officer, USTA
Stamford, CT 06905
George Pereira 101 Montgomery Street CFO, Mutual Fund Division, USTA
San Francisco, CA 94104
Other Investment Companies Advised or Subadvised by USTA. USTA currently
acts as adviser or subadviser to the following registered investment companies
or series thereof having similar investment objectives and policies to those of
the Value & Restructuring Trust. The table below also states the approximate
size of each such fund as of December 31, 2006, the current advisory or
subadvisory fee rate for each fund as a percentage of average daily net assets
and any applicable fee waivers or expense reimbursements.
Applicable Fee Waiver
Net Assets Advisory or or Expense
Fund as of 12/31/06 Subadvisory Fee Rate Reimbursement
- ---- -------------- -------------------- -------------
Excelsior Venture $75.5 million 1.00% of the fund's average quarterly net None
Partners III, LLC (1) assets.
An incentive carried interest of 20% of
the fund's realized capital gains on
direct investments.
5
Excelsior Venture $47.9 million 0.1% annually of fund net assets that are None
Investors III, LLC not represented by the fund's investment
in Excelsior Venture Partners III, LLC.
An incentive carried interest of the
fund's 20% of realized capital gains on
direct investments.
Excelsior Private $49.2 million 1.50% of the fund's net assets that are Operating expenses over 0.25% of
Equity Fund II, Inc. (1) invested or committed to be invested in the fund's net assets (excluding
private equity or venture capital the management/advisory fee), are
investments and 0.50% of the fund's net waived or reimbursed by the
assets that are invested in short-term adviser.
investments.
An incentive carried interest of 20% of
realized capital gains on direct
investments.
Excelsior Funds, Inc. - Value $7.797 billion 0.60% of the average daily net assets of Total Annual Fund Operating
and Restructuring Fund the fund Expenses are capped at 0.89% for
Institutional Shares, 1.14% for
Shares, and 1.64% for Retirement
Shares.
Excelsior Funds, Inc. - $640.7 million 0.75% of the average daily net assets of Total Annual Fund Operating
Small Cap Fund the fund Expenses are capped at 1.25% for
Shares and 1.75% for Retirement
Shares.
Excelsior Funds, Inc. - $1.134 billion 1.25% of the average daily net assets of Total Annual Fund Operating
Emerging Markets Fund the fund Expenses are capped at 1.60% for
Institutional Shares and 1.85%
for Shares.
JHF II Value & Restructuring $340.9 million 0.375% of the first $500 million; 0.350% None
Fund of the next $500 million and 0.325% of the
excess over $1 billion (2)
_________________
(1) A "business development company" as defined in Section 2(a)(48) of the 1940
Act.
(2) The subadvisory fee is determined on the basis of Aggregate Net Assets in
the same manner as for the Value & Restructuring Trust.
Description of Old and New Subadvisory Agreements
The terms of the old and new subadvisory agreements are substantially
similar and are described below. For convenience, and except when noting
differences between the agreements, the agreements are generally, collectively
referred to as the "subadvisory agreement."
Duties of the Subadviser. The subadviser manages the investment and
reinvestment of the assets of the Portfolio, subject to the supervision of the
Board and the Adviser, and formulates a continuous investment program for the
Portfolio consistent with its investment objective and policies as described in
the then current registration statement of the Trust. The subadviser implements
such program by purchases and sales of securities and regularly reports thereon
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to the Board and the Adviser. At its expense, the subadviser 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.
The new subadvisory agreement with USTA permits the subadviser, in its
discretion, to provide the services described above through its own personnel or
the personnel of one or more affiliated companies that are qualified to act as
investment adviser to the Portfolio under applicable law provided that (i) all
persons, when providing such services, are functioning as part of an organized
group of persons; (ii) the use of an affiliate's personnel does not result in a
change of actual control or management of the subadviser under the 1940 Act; and
(iii) the subadviser notifies the Board of Trustees of the Trust of any
situation in which the subadviser utilizes personnel from an affiliated entity
to provide services to the Portfolio.
Brokerage Transactions. The subadviser selects brokers and dealers to
effect all transactions, places all necessary orders with brokers, dealers, or
issuers, and negotiates brokerage commissions if applicable. 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 old subadvisory agreement with USTA permitted the subadviser to use for
the benefit of its other clients, or make available to companies affiliated with
it or to its directors for the benefit of its clients, any such brokerage and
research services that the subadviser obtained from brokers or dealers. Under
the new subadvisory agreement with USTA, in the event that the subadviser
delegates to one of its affiliates the discretion to select brokers and
determine the commissions, pricing and timing of transactions effected for the
Portfolio, the subadviser may share with such affiliate for the benefit of the
affiliate's other clients any such brokerage and research services that the
subadviser obtains from broker-dealers.
Term. The subadvisory agreement initially continues in effect for a period
of no more than two years from the later of the date of its execution or its
approval by the Board and thereafter only if such continuance is specifically
approved at least annually either: (a) by the Trustees, or (b) by the vote of a
majority of the outstanding voting securities of the Trust (as defined by the
1940 Act). In either event, such continuance must also be approved by the vote
of a majority of the Independent Trustees.
Any required shareholder approval of any continuance of the subadvisory
agreement is effective with respect to a Portfolio if a majority of the
outstanding voting securities of the Portfolio votes to approve such continuance
even if such 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 of the Portfolios of the Trust.
If the outstanding voting securities of a Portfolio fail to approve any
continuance of a subadvisory agreement for the Portfolio, the subadviser will
continue to act as subadviser with respect to the Portfolio pending the required
approval of the continuance of the agreement or a new agreement with either that
subadviser or a different subadviser, or other definitive action.
Termination. The subadvisory agreement provides that it 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 agreement and, as applicable, to the Trust. The
following parties or others may terminate the agreement:
o the Board of Trustees of the Trust;
o the holders of a majority of the outstanding voting securities of the
Portfolio;
o the Adviser; and
o the subadviser.
The subadvisory agreement automatically terminates in the event of its
assignment.
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Amendments. The subadvisory agreement may be amended by the parties to the
agreement provided the amendment is approved by the vote of a majority of the
outstanding voting securities of the Trust (except as noted below) and by the
vote of a majority of the Independent Trustees of the Trust. The required
shareholder approval of any amendment shall be effective with respect to a
Portfolio if a majority of the outstanding voting securities of the Portfolio
votes to approve the amendment, even if 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 of the Portfolios of the Trust.
Pursuant to an order received by the Trust from the SEC, the Adviser is
permitted to enter into subadvisory agreements appointing subadvisers, which are
not affiliates of the Adviser (other than by reason of serving as a subadviser
to a Portfolio), and to change the terms of subadvisory agreements, including
subadvisory fees, with respect to such subadvisers, without shareholder
approval. The Trust is therefore able to engage non-affiliated subadvisers from
time to time without the expense and delays associated with holding a meeting of
shareholders.
Liability of Subadviser. Neither the subadviser nor any of its directors,
officers or employees will 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
resulting from its acts or omissions as subadviser to the Portfolio, except for
losses resulting from willful misfeasance, bad faith, or gross negligence in the
performance of, or from reckless disregard of, the duties of the subadviser or
any of its directors.
Consultation with Subadvisers to the Portfolios. Consistent with Rule
17a-10 under the 1940 Act, the subadvisory agreement prohibits the subadviser
from consulting with the following entities concerning transactions for a
Portfolio in securities or other assets: (a) other subadvisers to the Portfolio,
(b) subadvisers to other Portfolios, and (c) subadvisers to portfolios under
common control with the Portfolio.
Proxy Voting. The subadviser agrees to vote all proxies received in
connection with securities held by the Portfolio in accordance with the Trust's
proxy voting policies and guidelines, which policies and guidelines incorporate
the subadviser's own internal proxy voting policies and guidelines.
Under the new subadvisory agreement, the subadviser may delegate its duty
to vote proxies received in connection with securities held by the Portfolio to
the personnel of one or more of the subadviser's affiliates
Confidentiality of Portfolio Holdings. The subadviser is required to treat
Trust portfolio holdings as confidential and to prohibit its employees from
trading on such confidential information.
Compliance Policies. The new subadvisory agreement specifically provides
that USTA will provide the Adviser with USTA's written policies and procedures
("Compliance Policies") as required by Rule 206(4)-7 under the Advisers Act and
that, throughout the term of the agreement, USTA will provide the Adviser with
information relating to various compliance matters including material changes in
the Compliance Policies and information and access to personnel and resources
that the Adviser may reasonably request to enable the Trust to comply with Rule
38a-1 under the 1940 Act.
8